W2A1: Select one of the questions for Part 1 Select one of the scenarios listed

Question

W2A1:

Select one of the questions for Part 1

Select one of the scenarios listed below and explain the best solution for each. Include comments related to any ethical issues that arise.

Scenario 1 - Warranties

Michael, a mechanic, needs to install a 2,000-pound machine in his shop. The installation will require lifting the equipment to the second story. Michael goes to Home Depot and tells Brett, the manager, that he needs some heavy-duty chain to be used in his auto repair shop. Brett recommends a half-ton chain, which Michael purchases. Michael attached the chain around the piece of equipment and attempted to lift the equipment off the ground. Suddenly, the chain breaks. The equipment crashes to the ground and is severely damaged. Michael learned that he needed at least a one-ton chain for the job. Michael files a suit against Brett and Home Depot for breach of the implied warranty of fitness for a particular purpose.

Will Michael be successful in his lawsuit? Explain the options and the likely outcome.

Scenario 2 – Accountant’s Liability

Walker, the CEO of Memphis Mini Golf and Go Carts (MMGGC), wanted to sell the business to Go Carts, Golf & Games. To provide a basis for the transaction, Walker retained Blanchard, an accountant, to conduct an audit of MMGGC. Blanchard was aware that Go Carts, Golf & Games would likely use the audit report in consideration of the purchase of the business from MMGGC. Blanchard's audit report showed that MMGGC’s business was profitable. William, Go Cart’s president, relied on this report in agreeing to purchase the business of MMGGC and in agreeing to the terms of the purchase. Sometime later, it was discovered that the accountant made a number of mistakes and that the business that was sold was actually insolvent. William and Go Carts sued Walker and Blanchard for damages. The suit claimed that the accountant had negligently misrepresented the facts.

Discuss the arguments for each party, determine which party should win, and provide legal support for your decision.

Explanation / Answer

Scenario - 1: Warranties

An implied warranty means that a warranty is inherent within the transaction that occurs within a buyer and a seller. For example when a buyer goes to a seller and enquires about a product and the seller advises the buyer to buy a certain product, a warranty regarding the suggested product is implied which also suggest the fitness of the product towards a certain usage of the product.

Since in this case the buyer had gone to the seller and asked for his advice on the product and purchased the product based on the advice, there is an implied warranty involved and any violation of the implied warranty shifts the liability to the seller which provides the buyer with a right to claim compensation.

So this means Michael have a right to compensation and should be successful in his lawsuits. So Michael can definitely file a claim in the form of a lawsuit for violation of implied warranties against Home Depot and given the legal recourse available to him he should be awarded with a fair and equitable compensation.

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