Business Cases

This paper analyses two cases and gives the legal considerations in each. The cases subject for discussion are A and B. In the first case, it involves John and Jay who are former roommates in college. Jay works as a finance officer with a bank while John has just completed studies in real estate. They have come up with an investment idea of starting a Real Estate Investment Trust. Jay has approached his bank for the funds but is unfortunately turned away since it is against the bank’s policy to lend to its employees. He agrees to such but requests that they lend to his friend John. His request is granted, John is awarded a loan of $ 200,000. This is the amount they want to purchase a building for which they are to use as the premises for their business.

These two investors should form a corporation. This is because the advantages of having a corporation are many and reasonable than other forms of business. Corporations are legal entities with rights and responsibilities. They can be sued, own property and be sued in their names. In cases of liability, they have limited liability. This protects the directors from loss of personal property in case the corporation runs bankrupt. They should therefore form a limited liability corporation.

John should own the building. This is because it is he who took up the loan to purchase it. Therefore, it is only reasonable that the person who contributes towards the purchase of the building owns it. If the corporation is to own it, then it ought to have borrowed the money from the bank. However, since the money was lent to John, he should then own the building since he would be held liable if he does not re-pay the loan. The appropriate decision would have been that they form the corporation and then it borrows the funds for the purchase of the property.

John and Jay should execute various agreements before opening the venture. The rights of control or decision-making should be agreed on. In case they differ, how do they sort that one out? Agreement on sharing of profits or losses ought to be decided also. The amount to be brought in as capital is too to be agreed upon and signed. These are the agreements that are necessary to be drawn so that they guide in any future scenarios.

If no one pays back the loan, the bank cannot sue Jay for the money. This is because the money was lent to John and not Jay. Therefore, in case of breach of the contract, John is the appropriate person to be sued for the recovery of the money. Jay only recommended John for the loan and the bank was at liberty to reject the proposal. However, since they approved the loan, they must follow it up with the person they granted the loan. In case he cannot be reached, then the building that he purchased with the use of the funds from the loan can be attached for recovery of the sum. This would serve to deliver justice; Jay never borrowed money from the bank.

B. This case involves Bill who was diagnosed with cancer on 1st January 2010. At the time of diagnosis, he owed $30,000 in credit card debt. He however owned his house outright with no mortgage. The house was appraised at $ 250,000. After realizing, he had cancer and this would cost his family a substantial amount after his insurance runs out, he transferred the house to Ellen at no cost. Bill’s condition deteriorated further. Ellen, after realizing this, transferred the house to her friend John at no cost also. Bill passed away on 1st May 2010 after accumulating $60,000 of bills to the hospice center. When Ellen was approached to pay the bill, she claimed not to have any obligation and that she no longer owned the house.

The legal issues in this case involve a conspiracy by Bill to avoid paying for his medical bill. He wanted to protect his property from being attached in case he was unable to meet his debts. He is under duty to pay for his medical bills. Instead plans to avoid them by transferring his house with an aim of protecting it from being attached to recover his debts. The transfers purportedly done are irregular since there was no contract for such. The aim was malicious, aimed at conspiring to avoid paying for service rendered. The subsequent persons, to whom the building was transferred to, never acquired a good title and therefore the transfers were irregular and illegal.

The Hospice Center can recover their debt from the estate of Bill. This is because after his death, his estate must be held to pay for his debts. The other parties like Ellen and John cannot be sued for the debts since they do not own the building. Bill owns it since Ellen and John never acquired good titles. Ellen and John need not sign the Building to the Hospice Center since they do not own it. The house should revert to Bill’s estate that would then have the right to sign it to the Hospice Center. In case John claims to have acquired a good title, then the courts should decide. The fact however remains that no good title was acquired and therefore the alleged transfer be nullified. No consideration was made. Therefore no contract in place. Consideration is something of value that passes from one party to the other in a contract. In this case, no such was done, thereby the illegality of the transfers.