Business Law: Saukars, Nib Corp, and Guesthouses.
In order to examine the potential legal issues between the parties, it is important to look at the contractual relationships between those parties. First is the relationship between the guesthouses and their customers. Food service is part of that relationship. Customers at the guesthouses may have a claim against the guesthouses stemming from them contracting food poisoning from the food served to them at the guesthouses. Because the customers' contractual relationship is with the guesthouses, they would be an appropriate object of suit, but the guesthouses may be able to enjoin or seek indemnification from other parties for those damages. Tort liability for food poisoning is relatively straightforward. Most states have strict product liability laws covering food safety, so that the supplier of contaminated food products is assumed to have been negligent. As long as the customers can demonstrate that the food that was eaten was contaminated and that such contamination caused their illness, they should be able to recover. If the state is not a strict liability state, then the customers may need to demonstrate negligence. The contaminated food was traced back to food prepared by Jennifer Saukar. The unsanitary conditions at Nib Corp meant that food poisoning was possible in the absence of reasonable care, which suggests negligence. Under the theory of respondeat superior, the guesthouses may be liable to their guests for those damages, but would then be able to recover from either Nib Corp or Saukar.
Next, there is a contractual relationship between Nib Corp and the chain of guesthouses. The contract between the guesthouses began in 1977 and is renewed on October 1 to take effect January of the following year, and each contract is three years in duration. The current contract is set to expire at the end of 2014. The contract requires Nib Corp to provide four deliveries per day to the guesthouses. Nib Corp has made late deliveries, which is in violation of their agreement terms. The guesthouses could bring a lawsuit for breach of contract against Nib Corp for failure to provide the meals in a timely manner. However, this would be a difficult lawsuit in terms of establishing damages because the guesthouses have not lost any businesses due to late deliveries; without a loss of profit, it is difficult to prove damages. Furthermore, Nib Corp provided contaminated food to the guesthouses. Nib Corp was aware of unsanitary conditions in their kitchen and did not remedy them appropriately. These unsanitary conditions could lead to food poisoning in the absence of reasonable care. Nib Corp's employee, Jennifer Saukar failed to exercise such reasonable care, leading to food poisoning and food contamination. Under the theory of respondeat superior, Nib Corp is responsible for Saukar's negligence, even if Nib Corp had the reasonable expectation that its employees would exercise safety in food preparation. The guesthouses could sue to recover for the value of the contaminated food and any expenses they incurred in compensating their guests, as well as the $1,500 a month in lost business that is directly attributable to the food poisoning cases. In addition, if the guesthouses are sued by their guests because of the food poisoning, they could seek indemnification from Nib Corp for those damages. If Nib Corp is sued by either the guests or the guesthouses for the food poisoning, then they may face a punitive damages claim. The city inspection reveals that Nib Corp was aware of unsanitary conditions in its kitchen that exacerbated the risk of contamination in food preparation. These unsanitary conditions were one cause of the food poisoning experienced by the guests. Moreover, although the contamination could have been avoided through appropriate food preparation techniques, it was Nib Corp's employee who failed to observe those techniques. As a result, the guests and the guesthouses may be able to seek punitive damages from Nib Corp based on its failure to remedy unsanitary conditions after receiving its negative city inspection report. Providing punitive damages in that scenario would be efficient because Nib Corp may have made a financial decision not to remedy the unsanitary conditions based on a calculation of potential financial risk due to food poisoning. Punitive damages can provide extra incentive to act appropriately in the absence of a party facing significant financial exposure due to bad acts.
The contractual relationship between Nib Corp and the guesthouses also provides Nib Corp with a potential lawsuit...
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