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5-1 Final Project Milestone Two
BUS 307
SNHU
April 3,2022
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Subject – Probable legal issues relating to Miracle Cough Syrup
I am sincerely sorry to hear all the issues that you have encountered during the past few
months relating to the Miracle Cough Syrup business. I will use my knowledge and skills to help
you arrive at the most suitable solutions to address your concerns. I have incorporated a broad
range of details in the memo relating to legal defenses, civil claims, implications of bankruptcy on
business assets and assets of individual family members and intellectual property rights.
Legal Defenses
While performing the commercial loan accounting review process, it was determined that
Jane, Sam’s wife, had been siphoning off a large sum of corporate money and manipulating the
books of accounts so that her actions would not be revealed. She had also forged your signatures a
number of times while giving checks to Don, a local loan shark, so that she could clear her
gambling debts. According to the general rule, when an unauthorized individual does a signature
on a negotiable instrument, the legitimate party will not be held liable or accountable. So, in the
specific scenario, Jane would be personally held liable for her actions relating to forging the
signature unless you make the decision to ratify the signature and become liable for the specific
transactions.
The Universal Commercial Code (UCC) is responsible for governing the determination of
liabilities pertaining to customers and banks for the losses that have been incurred as a result of
fraudulent transactions. Generally, UCC places the loss on the party that it deems ideal so that the
situation can be avoided, so it is typically a business entity (Uniform commercial code. Uniform
Law Commission, 2021). However, in the situation, the check has not been authorized by the
business, and so it cannot be charged to the corporate account. Additionally, UCC also has the
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‘Read your statement’ provision, which enables account holders to review their regular account
statements to identify unauthorized charges. In case an account holder fails to identify any
fraudulent transactions within 30 days of the statement mail date, he may be liable for the
unauthorized checks. You must note that you have limited rights to recover the funds, and you
must identify and report the unauthorized signature by Jane to the bank within one year. There is a
chance that your business will be held liable for the transactions and not Jane. The bank can
determine whether the business must incur the losses for the fraudulent transactions, and it could
force Miracle Cough Syrup to accept the financial liability. The signature by Jane must be
compared with your actual signatures so that differences can be identified and Jane can be held
accountable for her actions.
Legal Defenses in relation to the church
It has been ascertained that Jane had converted a check into equivalent cash and slipped it
into the collection box at a church so that she could feel less guilty about her actions. Regarding
this matter, the same legal defense can be applied, and the onus of the actions can fall on Jane.
Even though the act of giving money to the church can be considered to be a good action but the
money that she was using did not belong to her. On the contrary, it was the money of the Miracle
Cough Syrup business that she had acquired due to forgery of signatures. The handwriting
comparison can also be done in the context of the church to ensure that the financial obligation
can be successfully transferred to Jane and not the syrup business. a
Civil Claims
In the specific situation, you have the option to bring civil charges against Jane so that it
would be possible to recoup the costs relating to the fraudulent checks. You must prove that there
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were no red flags, that the business entity exercised ordinary care, and it had no role to lay in the
entire forgery episode. By proving integrity on the part of the business, it is possible to make sure
that the liability successfully falls on Jane, who was actually responsible for the fraudulent
activities. Thus, you have the option to use civil charges to ensure that Jane will be subjected to
punishment and prosecutions for the fraudulent actions that she has committed while acting as the
bookkeeper of the Miracle Cough Syrup business. It can help the business to get reimbursement
for the fraudulent checks that have been drawn in its names.
Available forms of bankruptcy
Different forms of bankruptcy can be applied to a business in such a situation, depending
on the specific type of business. The diverse forms of bankruptcy are different for sole
proprietorships, partnerships and corporations. Since Miracle Cough Syrup is a Limited Liability
Corporation (LLC), the ideal form of bankruptcy will belong to the corporation category. The two
main forms of bankruptcy that can be considered by the LLC business include Chapter 7
(liquidation) and Chapter 11 (reorganization). Chapter 7 will lead to liquidation, and the business
will cease to exist and carry out the usual business transactions. On the other hand, Chapter 11 can
lead to restructuring. Chapter 7 option can be chosen when a business is not worth saving,
whereas Chapter 11 can be adopted if a business has the potential to survive, sustain and
effectively carry out the business operations. I believe that Miracle Cough Syrup has the potential
to recover since it has been performing exceptionally well in the market setting, and the customers
have responded positively to the offerings of the business. Thus, the business reorganization
(Chapter 11) bankruptcy is ideal for the scenario since it would enable the business to carry on
with its operational activities. This form of bankruptcy will aid in the continuation of the Miracle
Cough Syrup business in spite of facing legal complexities. a a a
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Implications of bankruptcy on the business assets
When a case is filed under the business reorganization bankruptcy category (Chapter 11)
of the United States Bankruptcy Code, the owners (or debtors) will have to be the trustees of the
company. So, this bankruptcy option will make sure that you still have possession of the business
assets and you have the duties as well as the power of the trustee. You can operate the business
even in such a difficult situation, and if the court gives the necessary approval, you can borrow
new money to carry on with the business operations of Miracle Cough Syrup (Chapter 11 -
Bankruptcy Basics. United States Courts, 2021). By filing Chapter 11 bankruptcy, you would act
as the ‘debtor in possession,’ and hence you can have access to business assets even when the
reorganization is taking place. By choosing the bankruptcy option, you will be able to pay the
creditors a section of debt that is owed to them over a period of time. The business assets may
serve as security that would help to pay off the debt of the business. One of the main advantages
of the business reorganization bankruptcy is that your personal assets would not be at risk.
Implications of bankruptcy on the assets of individual family members
The selection of the business reorganization bankruptcy can give rise to implications
relating to the assets that are owned by the individual family members of the household. While the
assets of the business would be used as security, the assets of the individual family members
would be free from any kind of risk. Thus, even if the reorganization bankruptcy may lead to the
forfeiture of certain business assets, the family assets cannot be used to meet the liability and
financial obligations of the Miracle Cough Syrup business.
Legal Resources for the infringement of intellectual property rights by Bob
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Bob has reverse engineered the recipe of the Miracle Cough Syrup and posted it online
since Sam was not willing to enter into an exclusive distribution deal. In the specific situation, you
have the option to take relevant legal recourse since Fred’s Miracle Cough Syrup had been
patented. As you have already been issued a patent for your syrup, you have the option to file a
case against Bob relating to patent infringement. You are in a position to take legal action against
him based on your intellectual property rights relating to your cough syrup. Since Bob has been
involved in using, selling or manufacturing the cough syrup without your necessary permission
and approval, you are protected by common law. After the filing of an infringement suit for the
unauthorized use of the syrup recipe by Bob, you may have to prove that he unlawfully got hold of
the recipe, which acts as your trade secret. I believe you have a good chance of recovering
damages and losses because of the vengeful actions of Bob.
References
Chapter 11 - Bankruptcy Basics. United States Courts. (2021). Retrieved April 1, 2022, from
https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-
bankruptcy-
basics#:~:text=A%20case%20filed%20under%20chapter,court%20approval%2C%20borro
w%20new%20money.
Uniform commercial code. Uniform Law Commission. (2021). Retrieved April 1, 2022, from
https://www.uniformlaws.org/acts/ucc
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