Scarlett and Sofia are twin sisters, and both finish their hairdressing apprenticeship at the same time. They decide to go into business together and, after extensive market research they write up a business plan for a hairdressing salon named 'Clipped Wings'. They register an ABN. Sofia had saved $50,000 from her work which she contributes as start-up capital. Scarlett doesn't have any savings but contributes her van, clippers, music, and chairs, and paintings of chickens for display purposes. They agree to lease a small shop in their local area from which to operate the business. The pair agree that both:

The salon will operate 6 days per week,

Scarlett works in the salon Tuesday - Thursday, & Sofia Friday - Sunday,

They also employ other hairdressers as casuals assist them,

Sofia is responsible for staffing, rostering, and managing all staff and finances,

Scarlett is responsible for all ordering and her specialty: purple perms, and

All profits will be split equally.

After the first three months of operations, Clipped Wings is struggling to keep up with business.

People are unable to get enough of their special way of making people beautiful with their special cuts. They decide to hire Terry a hairdresser specialising in exotic cuts.

Over the next month the following events unfold:

a) Without discussing it with Sofia, Scarlett orders a new hair clippers and a new machine for perms, the 'Terminator 2000' from Andrew's Hair products. However, Sofia says she never would have agreed to this if she had been asked. Andrew's Hair products has demanded payment of the outstanding invoice of $5,000 from Sofia.

b) One afternoon, a customer Willow attends the Salon for a Perm and Terry attends to her. Using the Terminator 2000, she leaves the machine on her head too long and all her hair falls out. This causes damage to Willow for the amount of $10,000 damage.

c) Without consulting Sofia, Scarlett has started a separate mobile hairdressing van business operating on the days she is not working. As yet, they have not started a mobile van as it would increase their costs, however, Scarlett and Sofia have previously discussed expanding this part of the business.

Discuss Sofia's potential rights and liabilities. Support your response with relevant legal (case and or legislation) authorities.

Remember: Think about the business entity that exists and the obligations on each of the parties mentioned.

Students MUST use the IRAC method (Issue, Rules, Application, Conclusion) to answer.