Business Organizations

Business Organizations - Business Organizations Jennifer...

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Business Organizations Jennifer Brewer
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I. Agents and Employees a. An Introduction to the Organization of Business i. Fowler v. Pennsylvania Tire Company : 1. a tire distributor, Martin, became bankrupt Martin’s business was taken over by a bankruptcy trustee-an individual appointed by the court, in this case, to liquidate the assets of the business and distribute among the creditors the cash realized by the liquidation. Penn Tire was the manufacturer and supplier of the certain tires held by Martin at the time the bankruptcy trustee took possession of the business. The question is whether Penn Tire had retained title to the tires (under a consignment), in which case it can retrieve the tires, or had transferred title to Martin (under a conditional sales contract), in which case (because Penn Tire failed to perfect any security interest) the tires are an asset of Martin, to be sold for the benefit of all creditors. The majority concluded that Penn Tire retained title to the tires and that consequently the tires did not become assets of the bankrupt, Martin, that could be sold for the benefit of all the creditor. If Penn Tire had lost, it would have been entitled, along with other general creditors, to its pro rata share of the assets (ultimately cash) available for distribution. The majority reasoned as follows: The transaction took the form of a consignment; the contract was cast in terms of consignment. Therefore Penn Tire retained title to the tires. Therefore Martin’s other creditors have no claim to them; the tires simply do not belong to Martin. The dissent argued that regardless of form, the transaction in practice had the indicia of a sale and should be treated as a sale. 2. Today, under the UCC §2-236, Penn Tire would lose without regard to whether it had retained title to the tires. 3. UCC §2-236(3) provides, “Where goods are delivered to a person [Martin] for sale and such person maintains a place of business at which he deals in goods of the kind involved, under a name other the name of the person making delivery [Penn Tire], then with respect to the claims of creditors of the person conducting the business the goods are deemed to be on sale or return,” and under UCC §2-236(2) are “subject to the claims of the buyer’s [Martin’s] creditors… while in the buyers possession. 4. Business Settings and Alternatives: Suppose owners of Penn Tire think of themselves first as tire makers, then begin to think about how to sell the tires. Consider the various ways they might do so
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a. The selling process could be organized “within the firm.” Penn Tire could establish its own sales outlets, hire managers and sales people, etc. b. The selling process might be organized “across market.” Penn Tire could sell its tires to independent distributors. b. Employee Versus Independent Contractor
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This note was uploaded on 02/15/2008 for the course LAW 3000 taught by Professor Baynes during the Spring '03 term at St. Johns Duplicate.

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Business Organizations - Business Organizations Jennifer...

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