3.1 Outline of Possible Agreements
We will take into consideration that we have recommended A&B to form a General Partnership and presume they have acted in accordance with this recommendation. In the following we thus treat A&B as a General Partnership. From the prior text it follows that, though A&B and DF are friends, we expect both parties to be ambitious, for which reason they should make a formal agreement and not just a ‘liberal, jovial and loose friends-to-friends agreement’.
We will discuss two different scenarios that can fulfil the above stated requests from A&B: 1) An employment contract between A&B and DF and 2) A Copyright License Agreement granting exclusive production- and commercialization rights to A&B upon a lump-sum payment or Royalty agreement with DF.
The semantics of a Copyright Assignment Agreement vs. a Copyright License Agreement
As Copyrights are property rights, they can be assigned full or in part, cf. s. 53(1). Partial assignment will normally refer to a license agreement granting certain rights to the licensee, whereas a copyright assignment agreement will refer to a full transfer of copyrights from the assignor to the assignee, though never moral rights cf. ss. 3 & 38.
However, in this case A&B are only interested in the exclusive rights to use the work of DF for their business, i.e. a full assignment of copyrights related to commercialisation. Therefore, when we refer to a license agreement in the following, we intend a full assignment of copyrights to A&B via this agreement.
Essentially, what is important is what is actually stated in the agreement (contract), especially as we only propose a license agreement granting exclusive rights to A&B, we have not found it necessary to distinguish any further between an assignment agreement and license agreement since the proposed license agreement, in fact, will imply a full assignment of copyright to A&B. Only the issue of the period of validity would still differentiate the two agreements, nonetheless since we propose a perpetual license agreement we hereby omit this issue.
Finally, when answering the question about whether A&B can claim recourse from DF (covered later in this paper), we will consider the full assignment via the license agreement equal to an actual ‘purchase’ copyrights.
We will now discuss the two scenarios.
3.1.1 Employment Contract
A&B would have the opportunity to employ DF through the making of an employment contract, which will constitute the relationship between the two parties. In the situation where A&B has just started and would like to use DF to produce a ‘pilot-project’ design for their T-shirts, we would recommend A&B to make an employment contract with DF for a fixed term, which will terminate after the performance of a special task – in this case the production of the design for the T-shirts (The Fixed-term Appointment Act). A&B, the Undertaking, will in this formation function as ‘employer’ and DF will be ‘the employees’. Furthermore, with regards to question 2 in the second part of the exam case, we recommend A&B to set a final date for the completion of the design, hence also the date of employment contract termination per se.
It should also be noted that A&B could employ the designers on a part-time basis. Nevertheless, with the current scope of A&B’s proposed business endeavours, this would seem to constitute an overcomplicated agreement. Especially since A&B is this case would have to consider issues such as holiday allowance as well. With regards to a fixed-term employment contract between the two parties, there are two major issues to consider: Pay/remuneration & Copyrights.
Payment
The remuneration to which the employee is entitled as payment is normally specified in the employment contract. A&B will have several options to compensate the employee through either times wages, performance related wages or commission and commission on profits. In this case we would recommend A&B to form a contract that combines times wages with a commission on profits, meaning that DF will receive a fixed payment for an agreed number of hours that DF will spend on creating the design plus, potentially, commission on the profits earned by A&B through the sales of T-shirts.
Copyrights
An employment contract will, nevertheless, not automatically assign the copyright of the designs to A&B. If the employer wants to ensure that he is assigned the copyright to works created by his employees, he should generally – with the exemption of computer programmes, cf. s. 59 - specify this in the employment contract. Since Anders & Birgitte would like to make sure that DF do not use the design for their own external commercial benefit, they would thus need to specify in the employment contract that the copyright for designs produced in the period of employment should be assigned and transferred to A&B, the employer. This would also enable A&B to register for Design Rights of the particular design, given that it is considered ‘novel’, cf. s. 3(1) of the Design Act.
Although it is stated in the text that the undertaking, regarding the works created by employees, is normally granted the rights to use the work within limits defined to meet organizational needs. An interpretation that ‘organizational needs’ can be classified as the ‘need’ to print the design on T-shirts in large scale will not make it necessary for A&B to secure copyright through contract. In this case, DF would however be allowed to use their
produced designs for own purposes as well. Since the case states that Anders and Birgitte would like to use the designs in ‘any way they see fit’ we would recommend them to obtain exclusive copyright of the design through the employment contract. Moral copyright will remain with the author (DF), cf. s. 3.
Since DF will be afforded copyright if not stated otherwise in the contract they will naturally demand favourable conditions for payment within the scope of the contract when negotiating with A&B.
3.1.2 License Agreement
A&B also has the opportunity to enter into a license agreement with DF. In this case, we assume DF to be organized as an independent company (freelance designers). According to Danish law there are no specific rules concerning what is contained in license agreements, for which reason they will need to be thorough and explicit.
In a potential license agreement, A&B would be referred to as the ‘licensee’ and DF as the ‘licensor’. Again, we keep in mind A&B’s above mentioned objectives to 1) be able to use the designs in anyway they see fit and 2) to avoid a commercial adventure of DF. The object of a license agreement would thus be for the licensor to grant exclusive rights to the licensee to produce, distribute and sell T-shirts and other articles that carry the design of the licensor.
In this case an agreement would entail an obligation from the licensor that the copyright in terms of production and commercialisation rights, object of the contract, are granted exclusively to the licensee.
The moral intellectual property rights will, as in any case, remain with the author, cf. s. 3(3).
This license agreement should clearly specify the following: terms of agreement (the period of validity and rules of termination of the agreement, cf. ss. 54-59), territorial limitation (if any) and potential sublicenses, cf. s 56(2). We recommend the license agreement between A&B and DF to be perpetual, since we have no rationale for assigning a certain limit time period, e.g. 30 years.
In the case discussed, two aspects are of major importance: obligations of the licensee cf. ss. 54-59, especially utilization possibilities allowed, cf. s. 55, plus the fact that A&B cannot make changes to the designs unless the changes are usual or evidently presumed, cf. s. 3(2) and 56(1). In essence, it is crucial that A&B and DF will negotiate an explicit and comprehensive agreement about how A&B can use the design and also what A&B as the licensee commits to, as s. 54 lays down that the licensee undertakes a duty the use the work, if nothing else is agreed in contract. It follows that if no specific agreement has been made and that if the licensee does not use the work within a reasonable period, the licensor will then be able to rescind the contract, i.e. they require certain reversionary rights. In the case of A&B we will though expect them to utilize the designs within this period of time with regards to their ‘February Campaign’.
Copyright
Copyright will be licensed to the A&B with the exclusive right to utilize the design for production and commercialization. Moral rights remain with the licensor.
Payment
We recommend a Royalty Agreement, comprised in the license agreement, between A&B and DF. An example of a Royalty Scheme could be: The licensor is entitled to royalties, equal to:
- 10%: for the first 1.000 pieces sold;
- 5%: for the next 2.000 pieces;
- 4%: for the next 5.000 pieces.
- 2.5% for the next pieces.
Royalties paid out should naturally be subject to the judgement of A&B based on how much the design will be worth if purchased through a simple sale, discussed more below.
Another possibility would be a lump-sum payment to DF upon the acquisition of the exclusive rights. However, we must assume that DF will demand a relative high lump-sum payment, since they at the start of negotiations possess all rights, and since they (naturally) assume the design to be popular. As students forming a General Partnership this could be a substantial economic burden for A&B. Hence, we recommend a Royalty-only agreement which is to be negotiated between the two parties.
3.2. Recommendation of Agreement
The formation of a fixed-term or part-time employment contract could be rather complicated and most likely expensive. Moreover, it does not contain general provisions on copyright, so these would have to be negotiated within the contract. According to A&B’s current needs and situation, entering into employment contract with DF may not be an optimal choice.
If A&B ensures they make the terms of agreement in the license agreement explicit, we would recommend this option as it would still satisfy A&B’s desires with regards to how they and DF, can use the designs produced. Moreover, with payments through a royalty agreement, this option would also suit their financial situation better, whereas employment, lump-sum payment for the copyright license could require a more extensive, initial investment during their start-up phase. In sum, we find that a license agreement will fit the needs of A&B and DF, since a royalty agreement will provide them with generous compensation if T-shirts become a success.
4. The Events taking place between February 1 and February 14
The second part of the paper will discuss the incidents taking place between February 1 and February 14 (potentially, refer to the timeline on p. 3). As mentioned in the introduction, we will not introduce the case any further as the specific issues will be introduced and discussed in the respective sections. We will conclude each section with a closing statement.
4.1. Recourse against Designers
In this question we will discuss is whether A&B can claim any recourse from DF for the additional costs related to the production of Valentine’s T-shirts due to the late deliverance of the Valentine’s Design from DF. For the purpose of this discussion, we will make a distinction between two different circumstances: 1) A&B purchased the design from DF, i.e. the scenario of a license agreement, or 2) DF was employed at the time of the incident.
4.1.1. A&B purchases the design
The case states that “their designer friends had promised to deliver their Valentine’s design to them by midday on February 7”. We can therefore assume that there has been made a binding sales agreement between DF, viz. the sellers (S) and A&B, viz. the buyers (B) on transfer of a Valentines Design which S has agreed to deliver by midday the 7th of February to B’s place of business, cf. s. 11 of the Sales of Goods Act (SGA).
The contract entered into by S and B qualifies as a commercial sale, as both parties are trading on behalf of their businesses, cf. s.4 (1) in the SGA.
The good traded, viz. the Valentine’s Design is a specific good, as S can only perform according to the sales agreement by delivering the object appointed in the contract, i.e. no alternative design other than the unique Valentine’s design can be traded. Similarly, B will not be able to claim another good than the specific good agreed on in the contract
We have not specified a purchase price, but expect a compensation agreement to be negotiated in advance and that this payment will be in accordance with ss. 6 & 7.
We assume that S’s duty is to deliver the Valentines design in due time at the right place and in a contractual state as agreed on in the contract, i.e. February 7th by midday. Therefore, the delivery and the passing of risk will in the case of a delivery buy; occur when the good traded has come into B’s possession, cf. s. 11.
Seller’s Breach
S failed to deliver the Valentines design in due time on midday 7th of February, i.e. S did not fulfil his duty as a seller and hence did not meet the sales contract entered with B. Thus a seller’s breach has occurred affording special remedies to B.
The SGA distinguishes between three types of seller’s breach, a) defective goods, b) defective title and c) delay, which is described as anything ranging from late delivery to non-delivery.
In this case S postponed the delivery date and thus this breach qualifies as a delay, cf. s. 21. Due to this seller’s breach, B are entitled to remedies, which are; a) affirm the contract, i.e. still claim delivery, b) avoid the contract, i.e. cancel the contract. In both cases, B can claim damages. However, in order for B to avoid the contract, the delay must be considered as of material importance to B, cf. s. 21 (2). S could potentially argue that the delay in this case is not of substantial material importance to B as no one at midday 7th had placed an order for Valentine’s T-shirts, for which reason B would not need it anyway.
However, in accordance with s. 21(3) any delay is of material importance in a commercial sale. Hence B can choose the best suitable remedy together with claiming damages, based on culpa in contract.
Affirming the Contract
In this case B did choose to affirm the contract and claim delivery of the Valentines Design, even though S had postponed the delivery date until the 10th of February, i.e. the delivery and passing of risk will now happen by the 10th of February.
The interests of the parties must be balanced, indicating that B is not allowed to speculate in the price developments for a very long time. B has a duty to give notice to S in order to keep the right to claim delivery and damages. In this case where the delivery did not take place, B must without undue delay following the inquiry concerning the postponement of date of delivery from S give notice whether he wants to affirm the contract and thus rely on the delay. B must also make S aware of the fact that B will claim damages, only if the damages of the delay have been inflicted can they be calculated. If B does not fulfil this duty he will lose the right to claim delivery as well as to claim damages, cf. ss.26 & 27. Due to lack of information from the case, it cannot be stated whether Birgitte actually acted in accordance with s. 26 when DF makes the inquiry on the 7th, but we expect this to be the case, hence affirming the contract and becoming able to claim damages upon later calculations of these.
The liability basis
The seller’s breach has caused B to suffer a loss, in this case where the good traded, viz. the Valentines Design, qualifies as a specific good, s. 23 of the SGA finds its use under which B will claim coverage of loss from S.
According to s. 23, S will be considered liable in damages “unless he can show that the delay is not attributed to him”, i.e. s. 23 expresses a fault liability or culpa rule. Hence S is prima facie liable in damages since the burden of proof lies with him, i.e. reversed burden of proof.
Since S in this case did in fact give an inquiry concerning the delay, i.e. a seller’s breach, S cannot prove that the delay was not attributed to him as S by the inquiry did in fact “admit” the delay, i.e. B can claim coverage of loss from S.
The measure of damages
In this case, B have chosen to affirm the contract, thus in relation to claiming damages B are entitled to claim in accordance with the so called “time interest” rule, i.e. loss suffered on account of the delay, cf. s. 25.
Firstly, on February 10, B had to buy 50 additional T-shirt at a price of 50DKK more than B would normally have had to pay. We here assume that had B in fact received the Valentines design in due time on the 7th of February, B would not have handed all the 200 T-shirts in from their inventory to the print shop to get the regular print, as B already had 100 of this regular type in inventory and since there was only placed 200 orders for regular T-shirts.. Hence, it might not have been necessary to buy the additional 50 T-shirts. But then one could at the same time argue, that B could have chosen not to hand in all 200 unprinted T-shirts on the 7th of February regardless of having the Valentines Design or not, since there was no order for Valentine’s T-shirt. Nonetheless, since the delay affects Birgitte’s decision we find it reasonable to claim compensation for some or all of these incurred expenses.
Secondly, the print shop charged B with a price, which was 50% higher than the normal retail price, when she came to have printed the T-shirts with the delayed Design, which is clearly an extra expense incurred due to the delay.
Closing statement
Based on the above we can conclude that B, as long as she complied with conduct according to s. 26, does have recourses against S. B can choose both to affirm the contract and avoid the contract while in both cases claiming damages. B does in fact choose to affirm the contract and the question is whether B have recourses and as already mentioned, B has the full remedy to claim damages, since S in accordance with s. 23, is liable for the delay.
As written above in “the measure of damages” section, B is entitled to claim in accordance with the so called “time interest” rule, i.e. loss suffered on account of the delay, cf. s. 25.
Since B affirmed the contract and received the good later on the 10th of February, B can claim in accordance with loss suffered between the actual delivery day the 7th of February and until the day when the good is actually delivered i.e. the 10th of February. Thus B can claim coverage of damages corresponding to all additional cost incurred during this time period, which was caused by the delay, i.e. B claims in accordance with the “time interest” rule like s.25 implies, in the case the expenses related to additional purchase of T-shirts and 50 percent mark-up price by the print shop.
4.1.2. DF are employees of A&B
With this condition we are to assess whether DF as employees, are liable and thus whether A&B can claim recourse. We will firstly refer to the Tort Liability Act, s. 23(1), which states that an employer can claim recourse with due regard to the fault displayed, the employee’s position and the circumstances of the case. Additionally, we learn that according to s. 19(3) even though a potential loss for the employer is covered by a property or consequential loss insurance, an employee can be held liable if he acts beyond ordinary negligence, i.e. gross negligent or intentionally.
Conduct of DF
Acknowledging the friendly relationship of A&B and DF, we have no reason to believe that DF in any way would intentionally delay the making of the design for A&B to hurt them financially and reputation-wise. Thus, we can look away from this option. Furthermore, as designers in general, work under pressure and cannot simply ‘schedule’ their creative processes and stimulation, it must be found reasonable that a delay in the creation of a design will happen occasionally. This means that a delay of the design cannot be considered gross negligent. For these reasons we find the basis of liability not to be present.
DF did, though, have the option to inform the employer, A&B, that the design would be delayed in better time than at the very morning of the deadline, and this could constitute an assessment that considers their conduct simple negligent.
Optimally, A&B – since they had an offer standing for Valentine’s T-shirts – could ensure in the employment contract that deadlines must be kept at all times and if this does not happen, the designer employees could be held liable for potential extra expenses.
From DF's point of view, we would however not expect them to accept such terms in an employment contract, since making of designs demand certain creative processes that cannot simply happen ‘upon request’. DF would probably know that occasionally they would fail to meet tight deadlines and therefore make sure they would not be held liable in such instances.
Closing statement
We do not find that DF could be held liable for the extra expenses if employed by A&B.
4.2. Birgitte’s Liability
This section discusses whether Birgitte can be held personally liable for the additional expenses or whether Anders should account for half. There are two actions that Birgitte can be potentially be held liable for: 1) The decision of printing the 200 T-shirts with regular design and 2) to purchase the 50 additional T-shirts at retail price and have them printed at a higher price.
When discussing the respective liabilities of Anders and Birgitte we will have to insinuate that they have formed the General Partnership we recommended in part one of this paper. We will briefly outline some issues regarding the conduct of a general partnership and subsequently discuss how to classify the conduct of Birgitte, accordingly.
Managing the General Partnership
It is stated that on account of the close cooperation and the joint liability, the non-mandatory rule must be that partners must concur in all decisions, apart from trivial or absolutely necessary.
The Partnership Agreement
Moreover, we must take into consideration how A&B has designed the partnership agreement between them, since an agreement may spell out which decisions can be made by an individual partner. If their agreement states that in the absence of one partner the other is free to make decisions on all operational levels without having to be held liable for the causes of these decisions, then Anders would naturally be liable for 50 percent of the extra expenses. For now, we will assume that the partnership agreement does not state explicitly how to act under the circumstances mentioned in the case.
Classification of Birgitte’s decisions
The decisions made by Birgitte can fall under three categories: 1) Trivial 2) Absolutely necessary decisions or 3) None of the two first, making Birgitte’s actions subject to interpretation of whether she acted in good faith an in accordance with the best interest of the partnership, or whether she can be said to have acted negligent. We will briefly assess the three options:
Trivial decisions (Day-to-Day operations)
If Birgitte’s decisions are classified as ‘trivial’, Anders must again contribute equally to the extra expenses, unless Birgitte would know that Anders would not agree with her decisions.
However, the circumstances leading to Birgitte’s decisions - designers failing to meet the deadline and a special Valentine’s offer - do not point in the direction of ‘trivial’ decisions in this case. We will therefore not discuss this classification further.
Absolutely necessary decisions
Again, if the decisions are classified as ‘absolutely necessary decisions’, Anders will be liable for 50 percent. During the time of the decisions made by Birgitte, Anders is on ski vacation and we cannot learn from the case if there has been any correspondence between the two during Anders’ absence, so we assume this not to be the case. As a result, we cannot know if Anders’ would in fact support Birgitte’s decision. Nonetheless, in his absence, she has authority to make absolutely necessary decisions.
Alas, if we knew for certain that Anders’ had informed Birgitte that had he would not agree with her decisions, we should consider holding Birgitte personally liable for negligent behaviour.
None of the above
If Birgitte’s actions are classified as neither trivial nor absolutely necessary, we will have to assess whether Birgitte acted in good faith and in the best interest of the partnership.
Assessment of her decisions
200 T-shirts printed on Feb. 7
Firstly, we will look at the decision to print 200 T-shirts will regular design on the 7th at 5 p.m.
At this time there has been placed 200 orders for regular T-shirts and none for Valentine’s T-shirts. A&B has a stock of 100 regular T-shirts in inventory at this stage already.
One could argue that Birgitte could have anticipated a latent demand for Valentine’s T-shirts, which would awaken close to Valentine’s Day and thus have kept some T-shirts for later print of Valentine’s Design. However, 200 orders placed for regular T-shirts a week before the offer expires can certainly lead one to expect that total demand could reach 300 on the 14th.
In essence, we believe this decision by Birgitte to qualify as an ‘absolutely necessary decision’. However, even though it would be considered ‘none of the above’, we find Birgitte’s assessment of the situation and her subsequent decision to print all 200 T-shirt reasonable and in good faith. A&B are jointly liable.
Purchase of 50 T-shirts to be printed with Valentine’s Design
When Birgitte receives the design on February 10 she decides to buys 50 additional T-shirts at a retail price and brings them to the print shop who charges an extra fee for the work performed. Assuming that the print shop acts in good faith, cf. s. 11 of the Contract act, we need to discuss if Birgitte has acted negligently and thus can be held liable.
At this point in time 25 orders for Valentine’s T-shirts have been placed and the offer is still valid for 3 more days. Naturally, Birgitte could have purchased 25 T-shirts and have had these prints in accordance with the current demand. Optimally, she could have put up a notice at stating that ‘Valentine’s T-shirts are sold out’. This could furthermore alleviate other unfortunate incidents to be discussed in later sections. Nevertheless, we assume that correcting the Web page is not an option, for which reason we Birgitte’s decision to purchase 50 extra T-shirts is highly understandable. She might have been caught unguarded by the sudden demand for Valentine’s T-shirts and in order to ensure a positive reputation at the school in the future she makes sure that A&B will have enough Valentine’s T-shirts to meet demand (even though 50 T-shirts in fact prove to be insufficient at a later stage).
Again, we would classify this decision as ‘absolutely necessary’ and since Anders is still on vacation, Birgitte is in authority to make the decision. Plus, even though the decision would qualify as ‘none of the above’, we find that Birgitte acts in the interest of the partnership and that her purchase-and-print decision cannot be related to negligence in any way. A&B are jointly liable.
Closing statement
Birgitte acts in good faith and on behalf of the interest of the partnership and cannot be held personally responsible for the extra expenses occurred i.e. Anders is equally liable as Birgitte and should be responsible for covering 50 percent of the additional expenses.
4.3. Injured Costumer
The following section will examine the legal position of the injured party (IP), who broke his arm after slipping in spilt coffee when entering Café Nexus on the 7th of February. The broken arm can be classified as a personal injury, cf. §1 in the Tort Liability Act (TLA). The possible tortfeasors are the owner of Café Nexus (CN), Anders (A) personally, or Anders & Birgitte (A&B) as a company. The TLA is used to determine if injured party is entitled to compensation or if he is liable for his own injuries.
The Basis of Liability
The claim of IP is not based on a contractual relationship between the parties; hence the tort liability in this case is the fault liability rule or culpa rule.
Furthermore, since the action which caused the injury to happen while A was working, vicarious liability also finds its use. Vicarious liability is classified as an extension of the normal fault or culpa liability rule.
Vicarious liability implies that A&B (employer) is liable for acts and omissions committed by A (employee, employee also includes manager/owner) in his course of employment. A&B cannot be liable if the act is absolutely unforeseeable or abnormal conduct by A; cf. Danish Code 3-19-2.
Furthermore according to s. 23(1) of the TLA, A&B can seek recourse against A if his act or omission is being considered tortuous or attributed to him as negligent or intentional. The main rule is, however, that the employer has no right to recourse against the employee. In this case where A is part owner of the company A&B, B might if possible seek recourse against A if he is negligent.
The Liability of Café Nexus
It is CN’s responsibility to keep the café a safe area. However, we assume that A&B had a leasing arrangement with CN to do business at the café on the day of the injury. The responsibility for keeping the area of business safe is thus A&B’s. Though, it can also be argued that CN is partly liable due to the fact that they sold the coffee to A, thus making A customer of the establishment (CN). Though, since we assume that A&B in fact did lease part of the area of CN to do business, you can argue that CN is only provider of the coffee, which A bought and took with him to his own place of business, i.e. the leased area of CN. Thus in reality A could have bought the coffee any place, as the important point is that after having bought the coffee took it to his own place of business, i.e. A then becomes responsible for his own coffee and the cleaning. Lastly, we assume that no employee of CN was contributing to the action causing the injury and hence CN cannot be held liable in this matter.
The Liability of Anders (A)
As mentioned above, the injury occurred due to the spilled coffee. In accordance with the culpa rule, A will be liable in damages if his act can be classified as tortuous or if he has acted negligent or intentional. Unless A did not act as a bonus pater familias, i.e. a reasonable prudent man, A will be held liable in committing the tort of a certain degree of negligence. The liability of A is limited to whether the action, which caused the injury, could have been foreseen and avoided if A had acted differently. This issue will be addressed in the section about precautions.
The Liability of A&B
Since it has been assumed that the ‘T-shirt collection area’ at CN on the day the injury occurs was A&B’s place of business, we also assume that it is A&B’s responsibility to keep the area of business safe. Vicarious liability (Danish Code 3-19-2) implies that the company is liable for acts and omissions committed by A in his course of employment. The company, A&B, is therefore liable for A’s acts and consequently can be held responsible for the compensation to IP unless A’s behaviour can be classified as absolutely unforeseeable or abnormal, cf. Danish Code 3-19-2. Furthermore according to s. 23(1) of the TLA, A&B, in this case B as the other owner can seek recourse against A if he is held liable.
The Liability of the Injured Party
We need to investigate whether IP actually contributed significantly to the injury. If this proves to be the case, then the claim for compensation may lapse or be reduced when comparing the negligence of the tortfeasor and IP, in accordance with the regulations concerning contributory negligence, cf. s.24. However, it is stated in the exam case “By 10, a large crowd of students had gathered and in all the commotion, Anders spilled his coffee on the floor, and one of their customers slipped and fell, breaking his arm in the process.” Based on these facts, we assume that IP was part of the large crowd and as a result of the commotion IP slipping in the coffee must be considered accidental. In this case it could have been any customer slipping and hence it is not IP’s own fault i.e. IP can not be held liable for his actions. This implies that it was A’s action, spilling the coffee, which alone caused the injury to happen, i.e. the responsibility will consequently be placed with one or more of the aforementioned tortfeasors.
Causality and Proximity
In order for IP to obtain compensation, causation and a high degree of proximity must exist between the act of A and IP. The link of causality between the acts/omissions of A and the injury are therefore obvious. The fact that A spills his coffee leads to the event that IP falls in the coffee causing injury. There is also a high degree of proximity because there are only very few phases between drinking the coffee, spilling it on the floor and eventually to a person falling and injuring themselves. The basis of causality and proximity are therefore established and thus a liability for damages exists.
Degree of Danger, Capability of Damage and Precautions
In order to determine if culpa (fault) is present and that IP can seek compensation from A&B, it is necessary to define the degree of danger, capability of damage, and precautions that could have been taken. A pool of spilled coffee on the floor was defined above as a very likely event in any café. The degree of danger is high as it is easy to slip on a wet floor especially because of the large crowd it is easy to oversee the spillage. The capability of damage is obviously significant as the situation is somewhat hazardous.
We believe the precautions that could have been implemented were not taken. We must assume that A was immediately aware of the coffee spillage as it happened. A&B’s customers entered the establishment CN and it could have been fairly assumed that someone would slip in the puddle of coffee. To prevent the injury from occurring, a caution sign could have been positioned over the spillage in order to block any access to the spillage area whilst in the process of informing a CN’s staff, to retrieve a mop or a cloth. A could also have made people around him aware of the spilled coffee by shouting it out or something similar or he could have asked someone to watch the spillage while he would go and get someone or something to clean it up. However, from analysing the case text, none of these precautionary measures were taken.
From the actual time of purchasing the coffee at 9am until the assumed time of injury around 10am (timeline) when the large crowd had appeared, we assume that A had enough time to dispose of the coffee sufficiently i.e. out of harms way. It is fair to assume that by 10am, a coffee bought at 9am would be cold and the cup was now sitting idle with the remaining contents. It is then fair to suggest that A should have had the foresight to place the cup in the bin, thus preventing the spillage. Due to the commotion and number of customers present, it is obvious that customers are less likely to pay attention to the spillage. Based on these observations, we strongly assume that this injury could have been avoided if A had acted in accordance with bonus pater seller.
Part Conclusion
Based on the facts and assumptions presented above concerning the degree of danger, capability of damage and precautions, we believe that culpa (fault) is present. Under the culpa rule ordinary negligence is enough for IP to get compensation from the tortfeasor. It can be seen that simple negligence was present due to the lack of precautions, degree of danger and possibility of damage to IP i.e. IP is entitled to compensation with certain prerequisites to be fulfilled. The evaluation of A&B’s liability in the injury of IP must include the damages caused by the acts and omissions of A. It is not likely that the company, i.e. Birgitte can claim recourse from Anders, because he was only acting in ordinary negligence, cf. s.23. Finally, we can fairly assume that any compensation paid to the IP will be paid for by A&B’s insurance company.
Compensation
In order to recover compensation from A&B; IP must have suffered a loss and be able to pin-point that A&B was held responsible on a liability basis. Damages are measured on a principle of restitution i.e. injury incurred to IP must be compensated in full. IP should not gain excessive financial enrichment higher than what the actual injury cost and IP is obligated to mitigate his loss. These principles will determine the compensation claim from the tortfeasor and the basis of liability.
We assume IP may have suffered a loss in terms of earnings, cf. ss.1-2, and health recovery expenses, cf. ss.1-1(a), which is to be reimbursed in full. Pain and suffering is compensated to patients at 160kr per day for non-ambulant patients and DKK 80kr for ambulant, cf. s.1 & 3 of the TLA. Injury of a permanent character, cf. s.1(2) and s.4, the loss of capability to work, cf. s. 4 and ss.5-9, and loss of breadwinner, cf. ss.12–14(a), are covered in full amounts. The principals mentioned above are the amount of compensation given depending on the degree of the injury, the loss of capability to work and loss of breadwinner and the age of the injured person.
4.3.1 Insurance
Since the damage to the injured party took place while the tortfeasor was at work, A&B as a company is liable. Danish companies more often than not have liability insurance in case of an accident occurring. Such insurance would cover claims from accidents, which are related to the company’s employees and work. However, this insurance is not mandatory. If A&B’s company is keeping such insurance, the insurance company will cover the claim from the injured party and or his insurance company. In the case of A&B not holding liability insurance, the company is required to pay the compensation. Since they have formed a general partnership A&B can personally be held responsible to cover the claim if the company assets cannot cover it. It is not given if A&B has liability insurance, so we assume that since they have form the company and are serious about their business that they have liability insurance that will cover the compensation.
Closing Statement
In the above sections a number of issues have been examined to place liability, to determine whether compensation is required as well as the amount and who must cover the claim.
It can be concluded from the above that A did act with simple negligence according to the culpa (fault) and could have prevented the incident from happening. We presume that IP could not have avoided the injury from occurring, although the burden of proof lies with IP. It is also a factor that A did not act as a bonus pater seller. However, taking into account that A was in the process of undertaking business, both A & B should be held liable. In sum, compensation would need to be payed by A&B’s insurance company
4.4. Assumptions made for 4.5, 4.6 & 4.7
Related to questions 4.5, 4.6 and 4.7, we will make the following assumptions concerning the advert posted in Kræmmerhuset on February 1 by A&B and the text on the Web page:
We find the advert in Kræmmerhuset to be an invitation to treat, suggesting that any interested and possible buyer cannot accept the advert as an offer. This is due to the fact that A&B has no possibility of changing the specific wording in the text should it occur, even if they had to do so for various reasons. On the other hand we consider the text on the Web page to be an offer, at the time of the order, as the text can be seen as a contract between the offeror and the offerees.
The advert, i.e. the invitation to treat, refers to A&B’s Web page; as the place where the buyer needs to place his order. Thus we assume that the text from the invitation to treat is equal to the one posted on their Web page as nothing else is stated in the case text, i.e. it qualifies as an actual offer. Furthermore, according to the E-trade Act, any information regarding written text on a merchant’s Web page can be associated to the rules applying to a physical store. This text can be changed with short notice, emphasising that the text on the Web page can be seen as an offer. Thus, the buyer accepts the offer when placing his order. Consequently, A&B will be classified as the offeror, and the students accepting the offer posted on the Web page are classified as the offerees.
4.5. A&B’s Obligations towards the buyers
This section discusses the situation in which A&B are not able to meet the full demand for Valentine’s T-shirts, leaving 25 buyers dissatisfied.
A&B, viz. the sellers (S) have made a sales agreement with the 25 unsatisfied costumers, viz. the buyers (B) concerning a buy of a Valentines T-shirt. The sales agreement is made based on the offer found on S’s Web page, cf. assumptions in 4.3, where it is stated that the delivery will take place on February 14. The contract entered into by S and B qualifies as a consumer sale as S is acting in their course of business whereas B is acting outside his course of business, cf. s. 4a (1).
The Valentines T-shirt in itself qualifies as a generic good as the subject matter is classified on the basis of “genus”, cf. s.3. Though, due to the limited quantity of 50 Valentines T-shirts, they should be considered as semi-generic goods, cf. s.3, as it is a specific amount. However, semi-generic goods are treated as generic goods.
According to the sales contract, the sale qualifies as a cash sale, cf. s.14, which implies that S and B are prima facie to perform at the same time, i.e. performance against performance basis. The cash principle implies that S is not bound to deliver the Valentines T-shirt unless the price, in this case DKK 150, has been paid at the same time and visa versa, i.e. B is not bound to pay S unless they get the T-shirt at the same time.
As mentioned above the delivery will take place at Café Nexus on February 14. Even though the wording used in the sales contract is “we will deliver”, the T-shirts are neither being delivered nor sent to B’s address i.e. the sale does not qualify as a delivery buy, cf.s.73 for consumer sale (s.11 in the case of commercial sale).
Thus we assume that Café Nexus on the day of delivery is classified as S’s place of residence and hence place of delivery. According to the sales contract, B must collect the Valentines T-shirt at S’s place of business. Hence, this sale qualifies as a collection sale, cf. s.9, where the delivery as well as the passing of risk will take place when S and B have performed their duty prima facie, cf. s.14, at S’s place of business.
Seller’s Breach
As mentioned earlier in 4.1 of this paper, if S fails to meet his duty as a seller to deliver the good in due time, at the right place and in contractual state a seller’s breach has occurred. In this case the breach qualifies as a delay, cf. s. 21, as the non-performance by S can be classified as a delay. This breach enables B to certain remedies, which as also mentioned in part 4.1 are the following; a) affirm the contract, i.e. still claim delivery, b) avoid the contract, i.e. cancel the contract and in both cases B can claim damages, still cf. s. 21.
Affirming the Contract
Due to the seller’s breach, B has the remedy to claim delivery i.e. B can enforce S to fulfil their duty to deliver, cf. s.21. However, B is incapable of affirming the contract if there is an impossibility of genus.
The interests of the parties needs to be balanced, indicating that the buyer is not allowed to speculate in the price developments, cf. s.26, which underlines this by stating that when the date of delivery has expired and after non-performance has been recorded, B is obligated, without undue delay, on inquiry from S (also in the case where no inquiry is given) to give notice whether they want to affirm the contract. If they fail to do so, they will not be entitled to their remedy of demanding delivery, cf. s.26.
Avoidance of contract
In this case, where we are dealing with a consumer sale, the rule granting B the remedy to avoid the contract due to material delay cannot be taken away from B by agreement, cf. s.74. Since the good in this case is a Valentine’s T-shirt and the delivery is due on Valentine’s Day, S must be aware of the fact that the T-shirt will be of less worth or completely worthless to B if S does not meet their duty concerning delivery in due time. Hence, because the delay is of great importance to B, B is entitled to avoid the contract cf. s.74(2) ,. B will have the remedy of cancelling the sale whether or not the delay can be attributed to S. B does not have to notify or admonish S in advance about the avoidance.
The liability basis
According to s. 24, when the purchase concerns a generic good, S is liable to pay damages even if the delay is not attributable to them. Thus S’s liability in cases concerning generic goods is stricter than that of a seller of specific goods, cf. s.23. Though, s.24 has an exemption, in which case S can not be held liable. This exemption implies that in the case where S has limited his liability for failure to deliver in concrete circumstances, he can not be held liable. In the offer posted on S’s Web page, it says “we will be selling a limited number of specially designed Valentine’s T-shirts through February 14”, i.e. in this case S did in fact limit his liability and reserved exemption in this respect. Based on this fact we conclude that S cannot be held liable for the non-performance, i.e. the delay.
Closing Statement
From the above it can be concluded that S has no obligations towards B, since S in the offer posted on S’s Web page limited his liability for failure to deliver, i.e. S can not be held liable in accordance with s.24. In the case presented, B refuses to accept another T-shirt than the Valentine’s T-shirt and claims delivery together with a further discounted price. Though, as mentioned above S cannot be held liable in accordance with the exemption laid down in s.24. Therefore, we find that B has no remedies to neither affirm the contract nor claim damages, i.e. the only thing B can do is to avoid contract. That is, unless he chooses to accept the new offer given by S to purchase the other type of T-shirt instead.
4.6. Price of T-shirts claimed on February 15
This section discusses the situation in which 5 students, each claiming 5 regular T-shirts, failed to show up at Cafè Nexus and whether A&B will have to deliver the T-shirts at the offer price.
A&B, the sellers (S) have made a sales agreement with the 5 costumers, the buyers (B) concerning the purchase of 25 regular T-shirts. As with the situation discussed in the prior question the sales agreement is made based on the offer posted on S’s Web page. The contract entered into by S and B again qualifies as a consumer sale as S is acting in their course of business whereas B is acting outside his course of business, cf. s. 4a (1).
The regular T-shirt qualifies as a generic good as the subject matter is classified on the basis of “genus”, cf. s.3. The regular T-shirt is considered an unascertained good, i.e. a generic good.
According to the sales contract, viz. the offer posted on S’s Web page, the sales qualifies as a cash sale, cf. s.14. Thus, the same conditions apply for delivery and collection requirements, cf. s.9., and as in the previous question.
As previously mentioned S’s duty is to deliver the good in the contractual state, in the due time and at the right place. Since, we know from the case presented that S went to the Café Nexus with the 350 T-shirts, including 300 regular T-shirts, on the day of delivery in accordance with the sales contract. Hence it is clear that S has fulfilled his obligations as a seller in this sale and S’s duties are discharged and thus the passing of risk has occurred.
Buyer’s breach
We expect B to be fully aware of his obligation to pay for the t-shirt and show identification upon delivery in Café Nexus on February 14.
Since this sale qualifies as a cash sale, B’s duty is to pay the agreed amount in cash to S at due time and at the right place.
The case states that B came to claim the regular T-shirts on February 15, i.e. B failed to fulfil his before mentioned obligations as buyer, i.e. a buyer’s breach has occurred. There is only one buyer’s breach, which is delay of payment, cf. s. 28 and since B in this case failed to pay S in accordance with the contract, this non-performance also qualifies as a delay.
This breach enables S to certain remedies, which are the following; a) affirm the contract, i.e. still claim delivery, b) avoid the contract, i.e. cancel the contract and in both cases B can claim damages, still cf. s. 28.
Affirming the contract
The remedy of affirming the sale means that S is entitled to claim the agreed purchase price. In case the delay causes additional cost for S, B must cover these costs, cf. s. 36. Though, if S in fact chooses to affirm the contract in this case, we assume that the only additional cost S could get would be for storage of the T-shirts. Though, since S already has 75 regular T-shirts left, we must assume that S would have incurred these costs for storage anyway, i.e. no additional costs will occur.
Avoid the contract
S may elect to cancel the sale, however, it is notable that according to s. 28, S can only avoid contract in case the delay has been of material importance to S.
Though, since it is stated in the exam case that “they delivered all 200 regular T-shirts”, it follows that that S on February 14 had 100 T-shirt in excess supply, including the 25 T-shirts not claimed on by B. Thus, we have intention to believe that S did not suffer any loss of material importance, hence S does not have the remedy to avoid contract, cf. 28(2).
Claims for damages
S has the remedy to claim damages in both the case of avoidance of contract and in the case of affirming the contract. Though, since we have concluded above S not entitled to the remedy to avoid contract, cf. 28(2), S will not be entitled to claim for damages, cf. 30 and in accordance with s. 24
Closing Statement
S will have to deliver the 25 T-shirts at the discounted price based on the premise that the delay cannot be proven to be of material importance. From our analysis of facts presented in the case, we find that S held 100 excess regular T-shirts on February 15 and we moreover find no indication of the fact that some or all of these 100 regular T-shirts were sold on February 14. Thus, the loss in sales of 25 T-shirts for one day cannot be construed as material as in accordance with s. 28 (1) as S held sufficient excess supply if they for various reasons needed to sell more T-shirts outside the original offer.
4.7. Discount for students ordering after Midnight
This final section will discuss the 10 orders for the regular T-shirts placed after 12 p.m. on Thursday February 13 (cf. timeline). The 10 students refused to pay full price and A&B refused to sell the T-shirts at the discounted price.
We assume, as noted in part 4.4, the offer on A&B’s Web page in fact qualifies as an actual offer in accordance with the Contracts Act (CA).
The subject matter of this question relates to the contract made between A&B, i.e. the offeror (O) and the 10 students, i.e. the offerees (OE). The contract entered into by O and OE qualifies as a standard contract, since the terms of the contract are equal for each OE. Here we point out that in this case we are dealing with the offer concerning the regular T-shirts.
Acceptance
In the offer posted on O’s Web page it said: “You can…place orders for them from today, February 1, until February 14. All orders received by February 14 will qualify for a 25% discount from the normal price of DKK 200”. Since O has stated the period for acceptance in the offer, OE’s acceptance will only qualify as a valid acceptance if it has reached O before the expiry of the period, cf. s. 2(1). In this case the acceptance period is valid from February 1 until February 14 and in order to get the discount the acceptance needs to be received by O by February 14. Thus, only orders, i.e. acceptance, placed before 12 p.m. on February 13 will qualify for a discount.
Since O is acting on behalf of his business and OE must be assumed to act outside of the course of his business, this case will be considered a consumer sale, cf. s. 1(2) of Consumer Contracts Act (CCA). In relation to this, O must in accordance with s. 38b(2) post an offer, which needs to be clear and understandable to OE.
In order to proceed we will have to make some further assumptions. In the exam case it is stated that 10 orders came in after midnight and that all 10 students refused to pay the full price when they showed up at Café Nexus. It here is important to investigate whether these students acted in good or bad faith, i.e. if they were completely aware of the fact that their orders were placed too late. This makes us turn to the wording on the Web page:
It is stated early in the advert, hence also on the Web page in accordance with our assumptions in part 4.4, that “orders can be placed until February 14”. Later it states, though, that “all orders received by February 14 will qualify for a 25% discount”. These expressions could be considered rather vague and ambiguous, i.e. – does the offer include the 14th?
Students are in good faith
If we expect the 10 students to be in good faith when refusing to pay full price, there can be two scenarios: 1) the 10 orders were placed just after midnight which might have led the 10 students to believe they managed to place their order in the very last minute, since the delivery was still to be made the following day or 2) the orders arrived later during the night by students who had misinterpreted the message on the Web page, believing that the offer included orders placed on the 14th. This could naturally also apply to scenario 1.
These scenarios would mean that the 10 students hold a reasonably justified belief that their acceptance was in fact received by O in due time. If O has reason to believe that the students were acting in good faith, it is O’s duty to notify OE without undue delay that his acceptance was delayed, cf. 4(2), and if O fails to do so, the offer will be considered accepted. This would in turn imply that OE would qualify for the discount even though he placed the offer after midnight.
Students are in bad faith
Here it is firstly important to assume that each order made by the students will be registered with exact time of when it was placed, i.e. there can be no doubt concerning when the acceptance was made by them.
So, if we believe the 10 students to be in bad faith, both when placing the order and when collecting the T-shirts, we could argue that the message of the Web page was actually clear and understandable. E.g. we could argue that “until” and “by” are in harmony and that until insinuates very strongly that orders placed after midnight could not be treated as an acceptance in due time. In this case the 10 students would merely try to get the discount from O anyway, assuming that O could potentially be very stressed at Nexus and therefore accepting their demands.
This situation, in which we find that the offer on the Web page in fact does comply with s. 38b(2), would mean that the late orders should be treated as a delayed acceptance, cf. 2(1), which in adherence to s. 4(1) is then treated as new offer, which O may treat like he wishes. Hence, the students would not qualify for the discount.
Part Conclusion
As all 10 students show up the next day to claim their T-shirts, we must assume that these were not informed about the fact that their acceptance was delayed. Furthermore, we find it hard to believe that 10 out of 10 students would actually attempt to claim the discount in bad faith. Since all 10 students still refuse to pay full-price after O has denied granting the discount, we believe that the students were actually in good faith when placing the order and subsequently coming to Café Nexus. With regards to the claim that students are acting in good faith, we find scenario 2 to be the most obvious reasons, since students in scenario 1 who were aware of the fact that their acceptance was made just after midnight probably would agree to paying full-price when O will argue that the acceptance was in fact delayed according to the Web page. However, since none of the 10 students agrees to pay full price we must expect them to really have believed that acceptance, according to the Web page, could be made on the 14th as well.
Closing statement
We believe that O was totally unaware of the ambiguity of the wording use, for which reason O would have no reason to expect that the 10 students placing orders after midnight would believe these to be in due time. Hence, we do not find that O was obligated to give notice, cf. 4(2), which in turn will imply that the later offers will not be considered as qualified for discount.
Nonetheless, since we believe that all 10 students acted in good faith due to the ambiguity of the message in the offer regarding the deadline for accepting, we conclude that O (A&B) should in fact agree to sell the T-shirts for the discounted price due to s. 38 b(2) and 38 b (1). That is, as the offer qualifies as a standard contract, we do not find that it fulfils the requirement of being clear and understandable to the individual consumer, cf. 38(b). Hence, we can use s. 38 b (1) to support that this particular dispute should be solved in favour of the consumer, i.e. in the case the 10 students.
5. List of references
Textbooks
Christensen, Stine; Færch, Thomas & Lyager, Mikkel (2004) Kompendium i formueret (2. edition), Forlaget SB
Iversen, Bent; Petersen, Lars Lindecrone & Wegener, Morten (2004) Danish Business Law (3. edition), DJØF Publishing
Krarup, Peter (2002) Complet Kompendium i Erhvervsret (5. Edition), Complet A/S
Lookofsky, Joseph (2001). Køb – dansk indenlandsk købsret. Denmark: Jurist- og Økonomforbundets Forlag.
Lovsamlingen (2004), Jurist og Økonomiforbundets Forlag (Edited by Jens Møller)
Mehlsen, Jens Erik (1999) Juridisk Ordbog (4. Edition)
Lectures
All Class lectures with relevance to the topics touched upon in the project
Appendix A: Business Organisation
Copenhagen Business School Page
Since no specific year is mentioned in the case, we have assumed this to be 2005
Arguments presented in this section have mainly been derived from the textbook, chapter 21, and the lecture on “Business Organization and Company Law” by Anders Kildsgaard.
Other potential company forms have been considered irrelevant with regards to the case presented
Salary paid out would have to match the Sole Proprietorships Revenue minus all costs, divided by two. Furthermore, as an employee and a company is taxed different, it would become even more complicated
If not stated otherwise, all sections referred to in parts 3, 3.1 & 3.2 are from the Copyright Act
A Royalty or Bonus agreement could also be created instead
Iversen et. al here use the terms ”assignor” and ”assignee”
Quoted from Iversen, p. 278
Potentially, refer to our section about the semantics of copyright on p. X
We assume that DF have formed a company as in section 3 of the paper, if this is not the case, we would use s. 4(2) to justify that we are still dealing with a commercial sale and refer to the Danish School of Design.
Joseph Lookofsky, Køb – Dansk Indenlandsk Købsret, pp.154
Quoted from Iversen et al. , p.105
Normal price DKK 200 minus the 25% discount= DKK 150.
In this case we could also potentially refer to s. 17 of the Consumer Contracts Act regarding cooling-off periods.
We keep in mind that Birgitte prints 200 regular T-shirts when having already 100 in inventory plus printing 50 Valentine’s T-shirts on the 10th, yielding 350 T-shirts in total.
We will habitually go back to using ”students” instead of OE
![This paper discusses the start-up, organisation and conduct of the company "Anders & Birgitte" (A&B) from a legal perspective. The case presented addresses a series of events taking place between February 1, 2005[1] and February 14, 2005](https://mbt-essays-prod-public.s3.eu-west-1.amazonaws.com/81057/listing/81057_1.jpg)
