Test Bank for Canadian Business and Society: Ethics, Responsibilities, and Sustainability, 4th Edition

Chapter 3 PROBLEMS uncommon for one to call in the other, while a client was present, to get informal advice on a design question. 1. A and B were partners in an architectural firm. B’s brother C was a struggling young architect, hardly able to pay his bills. B was approached by a prospective client to build a $500,000 residence at a $50,000 commission. B suggested that the client go to C because C needed the business much more than A and B. A is unhappy with this. Does he have any legal recourse against B? a. Jones ordered a computer that cost $20,000. The order was places in the name of Smith and Jones. Jones did not pay for the machine, and the seller claims he has a legal right to collect from Smith as well as from Jones. Do you agree? Give your reasons. Would your answer depend in any way on whether the computer company knew of Smith’s wealth and supplied the computer based on his good credit? 2. Smith and Jones were young architects who decided to share expenses and office space. Smith was wealthy, while Jones was barely able to make ends meet. Their offices were in the Atlas Building, and the door was painted with the inscription “Smith and Jones, Architects.” This was also the listing in the telephone directory and in the office directory of the Atlas Building. b. Jones designed an exclusive residence for a client. His negligence in design required that certain work be redone at an expense of $10,000 to the client. The client’s lawyer ascertained that Jones had no assets or professional liability insurance and that no judgment against him would be collectible. The client’s lawyer now asserts he has the right to recover from Smith because Jones and Smith appear to the world as a partnership. Is he correct? Would your conclusion be changed or reinforced if it could be shown that during a conference between Jones and his client, Jones called in Smith to offer some suggestions relating to design? (Assume that the suggestions did not relate to matters that ultimately were the basis for the claim and that Smith was not negligent in any way.) Actually, each had his own clients, and neither did any work for the other. Together they hired a secretary, who also acted as a bookkeeper. Each income item was allocated to the person who had performed the services, and expenses were allocated based on who used the services or supplies. Each had a separate checking account, and there was a third account in the name of Smith and Jones. The third account was used to pay rent, the cost of the secretary, and other office expenses. On occasion each consulted the other on professional design matters. It was not 17 © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 1. This anticipates some of the agency problems set forth in Chapter 4, and it might be useful to discuss these problems together. It raises the question of B’s fiduciary obligation to A. Business opportunities which come to the attention of either partner which could be profitable to the partnership should not be diverted. B would have a better case if he could establish that the partnership did not do this type of work or would not have been interested in doing so. Obviously it would have been better for B to have gone to A and discussed the matter. 2. Architects and engineers often use office sharing arrangements. Problem (a) is similar to the problem at the end of Chapter 4 dealing with agency. Our inclination would be to vote for the seller. When persons associate in such a manner, they may give an impression to the outside world that they are partners. If the seller establishes that it was relying on the credit of the partnership, especially that of Smith, rather than the credit of Jones, the seller would have a good claim. Even if this were not done we would still vote for the seller. If Smith does have to pay for the computer, he will have a valid claim against Jones and the right to reimburse himself from any funds in the association “treasury” contributed by Jones. Problem (b) raises a similar question in a slightly different context. If it appears to the world that they are partners, Smith would be responsible for Jones’ negligence. This would be reinforced if Smith had been called in and had made suggestions. This would be added evidence that the client was relying upon the apparent partnership. 18 © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.