Business Law Case Study

1
Commercial Law
Author
Affiliation
Course
Instructor
Due Date
2
Commercial Law
The case presents an instance of the government implementing its regulatory authority
over corporations. The legal issues highlighted in the case include the government’s rights to
recall products developed by corporations and the government’s rights to regulate corporations
through regulation of commerce operations, licenses, and mandatory liability insurance. One of
the leading legal issues addressed in the case is the recall of Ford’s TCFBs. Ford presented the
litigation at the Supreme Court against President Johnson’s executive order that recalled and
criminalized flying the TCFB. Ford believed that the President was using unfair tactics to disrupt
the company’s commerce operations. The US law that applies in the case is the Consumer
Product Safety Act. According to this law, the government has the authority to recall and
confiscate company products that present a threat to the safety of the consumer (Rubel & Wang,
2018). Ford’s flying car presented a danger to consumer safety as it increased the risk for aviation
accidents that may result in severe physical injury or deaths of consumers. Therefore, CPSA laws
justify and support President Johnson’s decision to recall Ford TCFB.
Another legal issue is the government’s right to regulate corporations through regulation
of commerce operations, licenses, and mandatory liability insurance. In this case, the Supreme
Court decided on a settlement that required Ford to sell to consumers with valid Flying car
licenses and $ 1 million liability insurance. It also prohibited Ford from selling more than 1
million units a year. The US law that applies in the case is the First Amendment, Commerce
Clause. The law allows the government the authority to regulate commerce operations conducted
by businesses within the country (Carter & Scheitrum, 2021). Therefore, the government can
limit the number of products produced by an organization. The law also allows the government
to mandate licenses and liability insurance for commercial activity conducted by corporations.
3
The Commerce Clause justifies the President’s decision to mandate licenses, liability insurance,
and limits to the number of vehicles sold by Ford.
The resolution developed in the case is the legal settlement issued by the Supreme Court.
The resolution presents a win-win solution for both parties as Ford continues selling TCFBs
while following specific guidelines. The government benefits by protecting the safety of its
citizens. Ford is to sell Flying cars exclusive to consumers with valid Flying car licenses and $ 1
million liability insurance. The company is also required to limit sales output to $ 1million car a
year. These regulations protect citizens by restricting the number of individuals owning and
flying the TCFBs.
Racial and sex discrimination is prohibited under the United States law. Unfortunately,
President Johnson’s government made these mistakes by introducing expensive flying classes
and banning women from flying. In this case, the government charges $ 100,000 for flying
classes which discriminates against people of color. Most people of color come from low socioeconomic backgrounds and cannot afford to pay the flying car class charges. Prohibiting women
from flying based on their fertility is also discriminative against women unless there is an
existing health concern. In this case, US law would recommend the government to apply its
authority under the commerce clause to subsidize the charges for flying classes (Carter &
Scheitrum, 2021). The US law under the Civil Rights Act of 1964 would recommend that the
government lift the prohibition and allow women to fly the TCFBs.
4
References
Carter, C. A., Schaefer, K. A., & Scheitrum, D. (2021). Piecemeal Farm Regulation and the US
Commerce Clause. American Journal of Agricultural Economics, 103(3), 1141-1163.
Rubel, E. A., Gillice, M. F., Karmonick, J. A., & Wang, J. L. (2018). CPSC DESK
REFERENCE: SECTION 15 OF THE CONSUMER PRODUCT SAFETY ACT.
SAMPLE FACT PATTERN
Consider the following scenario:
Pat and Pam are married and have three children – Sally, Sarah, and Jason. Jason is
married to Carly. Carly and Jason have three children (Alex, John, and Pete). Sally is
unmarried, but she has six cats that she claims are her children (Tiddlywinks, Admiral
Puff Puff, Princess Sparkles, Jazzybelle, The Rev. Hissypants, and Tim). Sarah is
unmarried, but has two children from a previous marriage (Grace and Aaron). Pat and
Pam love their children, grandchildren and grandcats. They handwrite a will and have
Sally and Jason sign it is as witnesses. They do not have an attorney review the will.
Pat and Pam have an estate that consists of the family home in Indianapolis, held in fee
simple absolute, valued at $800,000, $1.2 million is liquid assets, two BMW’s (valued at
$35,000 each), and Pat’s collection of rare and valuable rodent skulls, valued at
upwards of $200,000. In the will, Pat and Pam leave the family estate to Sally, her
current cats, and any subsequent animals (feline or other) adopted by Sally (as a life
estate, until the last animal dies). Jason receives the collection of rodent skulls, so as to
continue the collection and passion carried by his father. Sarah is left one BMW and her
favorite rodent skull, that of a capybara. The residuary is to be split amongst the
remaining children, grandchildren, and grandcats per stirpes.
Sally takes out a massive loan to buy a 1967 mustang fastback car. She is
overwhelmed by the power of the car and crashes it within 2 hours of purchase. She is
killed in the accident. Her cats, per her legally created will, are given to her best friend
Julia, along with all of her assets in trust for the cats. In his grief, Pat goes on a very
dangerous expedition he has been putting for decades. He goes to Antarctica to find the
wild “Ratguin” – a large and ferocious bird rodent hybrid, so that he can collect it’s skull.
Pat never returns, and Pam, in her grief, jumps out of the top floor of the Salesforce
Tower at the annual Cranial Collector’s Club fundraiser – “It’s Skull Good”.
At the probate hearing, Judge Whitey determines that the will written by Pat and Pam is
valid and distributes the assets accordingly, with the estate to be held in trust for the
cats with Julia as the sole trustee. Julia begins the process of selling the house
immediately. Jason begins the process of selling off all the rare rodent skulls in order to
make a hefty profit. Sarah contests the will.
SAMPLE ANSWER
Requirements and validity of the will:
To begin, it is important to define what a will is and its requirements to be valid. As
defined by the textbook, a will is a document executed with specific legal formalities by a
testator that contains instructions about the way property will be disposed of at death. In
addition, it is important to define the requirements of a will to determine its validity. The five
requirements include that the will be in writing, witnessed by 2 or 3 disinterested witnesses,
signed by the testator, signatures must be witnessed, and testator must publish his will. Because
the will was witnessed by two beneficiaries, Sally and Jason, the validity of the will could be
questioned because they are not disinterested witnesses. Because they contributed to the legal
process in establishing the will, would they be able to receive any of the assets included in the
estate?
In addition, the prompt doesn’t mention if the will was published or how the signatures
for the will were witnessed which could also impact the validity of the will. Overall, there seems
to be a few elements of the will in question that could impact whether the will is valid or if the
parents’ died intestacy. To ensure that the will is valid, the parents should have had the will
witnessed by two disinterested individuals, not their children, and an attorney could have
performed this task.
If the will is not valid and the parents died intestate, then there could be a potential issue
with the trust established with Sally and her best friend Julia. If someone dies intestate, then you
have to look at the distribution scheme under intestacy statutes. Because both Pat and Pam died,
the distribution of the estate would go to the lineal descendants. As mentioned in the book,
“under intestacy statues, a person must have a relationship to the deceased person through blood
or marriage in order to inherit any part of the deceased person’s property.”
Could the property technically go to the cats if under intestacy? Another potential issue
that could arise would be if the will is determined invalid, then the typical order for passing
down property would be: spouse, children, grandchildren, parents, siblings, niblings,
grandparents, aunts/uncles, cousins, and then goes to the state (escheat). Unfortunately for the
cats, they would not technically be labeled as grandchildren seeing as they are pets (property).
However, if the will is determined to be valid they might be able to leave the property to Sally
and the cats.
Difference between per stirpes and per capita, as well as the distribution of the estate
As mentioned in the prompt, the will is supposed to be divided per stirpes. Per stirpes means to
split up based on direct descendants regardless of whether they are living or dead. With the will
being per stripes, the assets would be divided up between the two living siblings and would be
divided to Sally’s cats for whatever her portion would be. However, if the will was changed to
per capita, the more modern approach, the group of persons would share the estate equally.
Because Sally’s death preceded her parents, the remaining children- Sarah and Jason, would
evenly divide the property 50% each. So, with this change, Julia and the cats would not receive a
portion of the estate from the parents and just whatever Sally had in her own will. However, with
the will being divided per stirpes, the children would each receive 33.33% of the assets. Because
Sally died first, her portion would be divided among the cats if this is allowed with them also
being property.
However, one potential issue found would be the distribution of the estate. As described in the
prompt, it seems as though Sally is receiving the family estate worth $800,000 for her and the
cats. Jason is receiving the collection of rodent skulls worth $200,000, while Sarah only receives
a BMW worth $35,000 and a skull whose value isn’t mentioned. The remainder of the estate,
including the liquid assets of $1.2 million and a BMW are supposed to be distributed per stripes
to children, grandchildren, and cats. Because of this, the distribution of the property included in
the will is questionable regarding the overall fairness per stirpes.
Sally took massive debt out on the Ford Mustang- would this debt be passed down?
As indicated in the book, there can potentially be limitations on property disposed in a will. “A
person who takes property by will takes it subject to all outstanding claims against the property.”
Because Sally took out massive debt on the Ford Mustang before she passed, Julia/cats could be
subject to the debt on this car as it was distributed down. If for whatever reason Sally’s liabilities
and debt exceeded what she had in assets, the creditors would have claim over the property. But
if Sally didn’t take the debt out on the car, this wouldn’t pose a particular issue with the trust or
potentially create issues for Julia, the trustee for the cats. Although maybe not a significant issue
as compared to the entire validity of the will set up by Pam and Pat, it could be something that
affects her distribution of assets.
Was a personal representative indicated for the will?
Another piece of information not specifically included in the prompt was whether a personal
representative was designated for the estate. Was this piece of information included in Pam and
Pat’s will? If so, the personal representative they selected would have served as the executor
which could have been one of their kids or an attorney. However, if the will is determined to be
invalid then the personal representative would actually be called an administrator. The personal
representative would need to take inventory of the assets, must notify any potential claimants to
the property, and pay any necessary taxes. In addition, did Sally also appoint an executor to take
care of her assets and what she would have been given from her parents? With Julia acting as a
trustee was she also deemed to be the executor to determine what should be done with the estate
and assets? Having a personal representative can ensure that the distribution of assets goes
according to the will, or what is set straight by per stripes. Because the initial will had a vastly
different distribution of the assets to the various beneficiaries, would this be something that a
personal representative could rectify or would probate court ensure the correct distribution?
How is the trust set up and is it legal?
Sally also created a trust for the cats upon her death, with Julia acting as the sole trustee. Overall,
a trust is a legal relationship in which a person who has legal title to the property has the duty to
hold it for the use or benefit of another person. In this case, Sally is the settlor while Julia is the
trustee, who holds the property for the benefits of the cats (beneficiaries). This particular trust
seems to be a testamentary trust as it took effect upon the death of Sally. There are also five basic
requirements to create an express trust such as capacity, intent and formalities, conveyance of
specific property, proper purpose, and identity of beneficiaries. In terms of these criteria, it seems
as though Sally meets the requirements needed for the creation of the trust. However, one
specific factor that may be an issue would be the conveyance of specific property. Because Pat
and Pam’s will has the potential to be declared invalid or may have a different distribution of
assets, the property listed in Sally’s trust and will could be subject to change or she wouldn’t
have the right to convey said property. As alluded to earlier, the distribution of assets seems
disproportionate between the stated beneficiaries which could pose problems with the trust.
In addition, Julia would have specific duties as the trustee to act in a manner that benefits the
beneficiaries. For a trustee, they have the duty to act in a manner with a “reasonable degree of
skill, judgment, and care.” Julia would also have the duty of loyalty in that she must administer
the trust for the benefit of the cats and avoid any personal interests. As mentioned in the prompt,
Julia began the process of trying to sell the estate, one might question if she is acting in a way
that benefits the beneficiaries and if she has the ability to do so. Julia also has the duty to
distribute the principal and income from the trust to the beneficiaries in how it was specified in
the trust. Was selling the estate the intended purpose behind the creation of the trust? Does she
have the authority to do so even though she wasn’t a listed beneficiary of the estate, only acting
in a way that benefits the cats? Lastly, another issue that could arise would be that the cats
themselves are also considered property. If Sally had a child of her own, the passing down of the
property would be far less complicated. However, probate court may find issues passing down
the estate to the cats if the will was determined invalid due to the intestacy statues mentioned
prior. Cats are not listed as a potential party that could receive part of the estate, which could
simply have the property pass to Sally’s siblings.
Life estate for cats?
As indicated in the prompt, Pat and Pam’s estate was held in fee simple absolute, meaning that
they had full ownership of the land and could possess for an unlimited time and could dispose of
all or some rights. Pat and Pam left the family estate to Sally as a life estate or until the last
animal dies. As defined in the text, a life estate “gives a person exclusive rights to possess and
use property for a time measured by that or another person’s lifetime.” The text also explains that
after death, the property will revert to the person who gave the estate or some other designated
person. Because Sally died before her parents and as well as her pets, was the estate deemed to
go somewhere else after the passing of the cats? And could the life estate simply exist for the
pets even with Sally’s untimely death? If Sally would have lived after the death of her parents,
the issue of the life estate wouldn’t be a problem as she could have continued to use the family
home. However, her passing can create potential issues with it being left to the cats or sold by
Julia as the trustee for the pets.
Conclusion
In this discussion, I mainly focused on the various problems associated with the prompt such as
the equal distribution of the assets, per stripes vs per capita, what constitutes a valid will as well
as a trust, personal representatives, and associated problems with debt. However, in terms of the
will contest, I believe the validity of the will and the distribution of assets are the most important
factors for determining how the will contest will go.
Overall, I believe Sarah has a valid will contest that could potentially go her way. Because the
will was witnessed by two beneficiaries and not disinterested witnesses, the overall validity of
the will could be questioned. The prompt itself doesn’t mention if the will was actually
published, or if the signatures were properly witnessed as an attorney was not present. In
addition, there were several potential factors mentioned above that could demonstrate how the
current distribution, per stirpes, did not equally result in assets being distributed to the various
beneficiaries. The addition of the cats having a life estate being put in a trust also creates an
additional wrench as one may question the ability to leave an estate, money and assets, to pets
who are also property. Sally left Julia as a trustee but only left her cats as beneficiaries, posing a
potential problem as well. I believe the will contest will go in favor of Sarah due to the several
outlying factors.
Lastly, if the will is not determined to be valid, I believe that the distribution of property will
more than likely go with Jason and Sarah. While the assets could potentially go to the grandcats,
there is the question of whether these cats would actually “receive” the assets in a trust as they
are also property. If Sally’s trust and will is determined to be invalid, I believe her property
would transfer to her siblings as she doesn’t have any have any of the following: spouse,
children, grandchildren, parents. I think the distribution of both personal and real property would
be on a more fair basis with the siblings getting an equal share instead of the vastly ranging
distributions. I think Sarah would be distributed more of the estate than what she currently was
getting and Sally would have received less than the original share. Overall, I think the assets and
property would be passed down equally and then would continue down to the grandkids with the
will being per stirpes.