RCD Ltd. sells household appliances, including washers, dryers, dishwashers, stoves, and refrigerators. Most of RCD's customers are developers of apartment buildings and condominium complexes. RCD's sales representative is Alastair Du. He is authorized to make contracts with buyers, provided the value of each contract does not exceed $100 000. Alastair ignored the restriction on his authority and concluded a contract to sell 50 sets of washers and dryers to BES Developers at a price of $500 000. BES placed its order on RCD's application form, which states that contracts over $100 000 require written approval of RCD's vice president of sales, and Alastair on behalf of RCD accepted the order. RCD delivered the 50 sets of washer and dryers, and received payment from BES. Within a month of delivery of the washers and dryers, BES complained that the washers vibrate excessively and the dryers overheat, and they have caused damage to the apartments in which they were installed. RCD claimed to be protected from any liability for the faulty machines because Alastair had no authority to bind RCD to this contract. Does RCD's argument constitute a valid legal defence to a claim against RCD by BES? Explain.

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CHAPTER SUMMARY Most businesses are carried on using one of the basic forms-sole proprietorship, partnership (or one of its variations), or corporation. These forms have varying characteristics, most notably with respect to the exposure to liability. Sole pro- prietorships and partnerships expose their owners to personal liability for the business's obligations. A corporation, on the other hand, has the attraction of limited liability for the owners-their liability is limited to the amount of their investment. This characteristic, however, can be neutralized. For example, a sole proprietor can escape the effects of unlimited liability by transferring assets to a relative prior to commending business. As well, the advantage of limited liability in the corporate form can become meaningless if creditors insist on a personal guarantee from the owners of the corporation. Each form has other advantages and disadvantages. The form chosen for a business enterprise depends on an evaluation of numerous factors, such as inves- tors' aversion to risk, their desire to earn profits, and their wish to participate in decision making. In short, the best form for a particular situation depends on all the circumstances. HEL 373 A partnership is the form most often found in the professions. This is due, in part, to prohibitions against some professionals incorporating. A partnership subjects the partners to unlimited liability, The other defining feature of a part nership is agency a partner is an agent for other partners and for the partner- ship. The effects of agency between the partners can be modified by a partnership agreement; however, the effects of agency in relation to outsiders cannot, and are governed by the Partnership Act. A business may also at some point enter into an arrangement with another entity for carrying out business activities. The various arrangements are all based on a contract negotiated between the parties. Regardless of the arrangement entered into, the business still needs to be carried on using one of the basic busi- ness forms. It is important to remember that it is the viability of the business itself that is critical, not necessarily the form of the business or the particular arrangements made. Put another way, a business does not succeed because it chooses a franchise arrangement over a distributorship. The key to a successful business is having a solid business plan that is well executed.