Susan, the owner and president of Frosty Dairy Treats (Graded A+) - use as a guide only - 35821

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Discussion Question Part 1

Select ONE of the scenarios below and explain the best solution.  Include comments related to any ethical issues that arise.

Scenario 1

Susan, the owner and president of Frosty Dairy Treats (Frosty’s), wanted to sell the business to Delilah’s Frozen Delights, Inc. (Delilah’s). To provide a basis for the transaction, Susan retained Franklin, an accountant, to perform an audit of Frosty Dairy Treats. Franklin knew that Delilah would use the audit report in making the purchase of Frosty’s. Franklin’s audit report showed Frosty’s to be profitable. Delilah relied on this report in agreeing to purchase Frosty’s and agreeing to the terms of the purchase. Sometime later, it was discovered that the accountant had made a number of mistakes and that the business that was sold was actually insolvent. Delilah sued Franklin and his firm for damages. The suit claimed that Franklin had negligently misrepresented the facts. 

Provide legal arguments for each side and determine a winner.  Does it make any difference whether Frosty’s or Delilah’s was a publicly traded company?

Scenario 2

Magic Suzy, an expert balloon artist, rented two helium tanks from Party Products.  Magic Suzy had a booth at the city fair that was in town from Friday until Sunday night. She was going to give out helium-filled balloons, as well as the little animals she made from twisting the balloons. The rental contract required Suzy to return the used tanks by Monday.   She left the tanks inside her booth at the fairgrounds on Sunday evening after the fair closed. Suzy planned to come back early Monday to clean and pick up the tanks.

Oscar, aged 15, attended the fair with some friends.  After the fair was closed, they jumped over the fence and discovered the tanks. The tanks carried printed warnings stating:


Despite these warnings, Oscar opened the valve and inhaled some helium from one of the tanks, collapsed, and died. Oscar’s father sued Magic Suzy and Party Products for product liability and negligence.

Will Oscar’s father win his suit? Explain why or why not.

Does the rental contract between Magic Suzy and Party Products influence the case in any way? If yes, how? If not, explain why.

Discussion Question Part II

In two to three paragraphs, provide the following information about the business you created in Week 1.

  1. Based on the type of product your business will offer, discuss potential 
    product liability issues and how your company can avoid these potential risks.
  2. Explain your plans to handle sales contracts and warranties.
    1. What are the advantages and disadvantages to contracts: 

      1. including FOB Shipment terms
      2. including FOB Destination terms
    2. Will your contracts include FOB Shipment or FOB Destination terms? 
  4. If you hire an accountant to audit your business, what standards should you expect from the accounting firm?
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