Background Information Charles, at the end of 2013, came to the conclusion that if his business is to be successful he would require more money. He also realized that although he had carpentry skills he knew very little about marketing, accounting and architecture. In January 2014, therefore, he approached three employees of his former employer who had been laid off: Mary, an architect, Bob, an accountant and Jane, a marketing manager and suggested that they form a general partnership. Everyone felt this was a great opportunity and a simple partnership agreement was entered into. Under the terms of the partnership agreement, each agreed to make the following financial contributions to the partnership:

Mary $25,000 cash Bob $25,000 cash Jane $50,000 cash Charles $50,000 assets from sole proprietorship

They also agreed that no partner would enter into any contract over $1,000 without the consent of all other partners.

The partnership has only been operating for a short time but problems are already beginning. Jane, without the knowledge of her partners, has entered into a $5,000 advertising contract with a local newspaper. Charles has caused some serious fire damage to the home of a customer when rags he used to stain some hardwood floors ignited through spontaneous combustion. Mary has been using money paid by customers as deposits on renovation work to gamble at Casino Niagara.

In addition, there have been some disputes on how the profits of business are to be shared. Charles and Jane are claiming that they are entitled to draw twice as much of the profits as Bob and Mary since they contributed twice the amount of capital. It has also been discovered that Charles has been doing some renovation work on the side for some of his old customers and pocketing the money.

Assignment Question:

1. Who is legally responsible to the newspaper for the advertising contract? Why?

2. Who is legally responsible to the homeowner for the fire damage? Why?

3.Who is legally responsible to the customers for the deposits? Why? 4. Are Charles and Jane correct? (explain your answer)

5. Is Charles allowed to do this outside work? (explain your answer)