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...

Their contract is not set to expire until the end of 2014, and the guesthouses have provided Nib Corp with a notice to terminate the contract. In general, the remedy for a breach of contract, such as the late deliveries, is not termination. Moreover, the food poisoning may or may not be considered a breach of contract, depending on the terms of the contract. If the food poisoning is considered negligence, a tort, it would not provide a reason to terminate the contract. Therefore, it would be imperative to investigate the terms of the contract between the parties, including any termination clauses, to determine whether Nib Corp could sue the guesthouses for breach on the basis of the guesthouses intent to terminate the contract.
There is another relationship between Nib Corp and each of the Saukar sisters, that of employer and employee. Both sisters have been absent from work on a number of occasions, which has resulted in a deterioration of services to the guesthouses. On its own, these absences are not sufficient to establish a cause of action. The appropriate remedy for Nib Crop would be to terminate their employment. However, one must consider that the Saukar sisters are beginning a company that will serve as a rival to Nib Corp. If this failure to provide adequate service is part of a plan to steal the guesthouses as customers from Nib Corp, Nib Corp may have a viable lawsuit against the Saukars for tortious interference in their contract relationship.

The guests, guesthouses, and Nib Corp may all have claims against Jennifer Saukar based on her negligence in food preparation, which led to the contamination that caused the food poisoning. The factual scenario establishes that, though the conditions were unsanitary, they would not lead to food contamination in the presence of reasonable care. Nib Corp had a reasonable expectation that Jennifer Saukar would exercise such care in her food preparation and her failure to do so is evidence of negligence. Furthermore, to determine negligence it is important that one keep in mind the reasonable man standard. Whether Jennifer was negligent is based upon examining whether a reasonable person, in her position, would have behaved as she did. Saukar is a long-time food service professional; therefore, she may be held to a higher standard of care than a member of the general public. Presumably, in the course of her employment, she has been made aware of food safety standards that are critical in preventing food contamination and food poisoning. Her failure to observe those standards would then be prima facie evidence of contamination. Moreover, the fact that a supervisor did not inspect her work does not relieve her of her standard of care; Jennifer was a senior employee and a food service professional. Nib Corp had the right to rely upon her to observe food safety standards, and the guesthouses were entitled to rely upon Nib Corp to provide safe food Furthermore, the fact that some of the guests were aware of the inspection and the possibility of food poisoning does not relieve Saukar (or Nibs Corp or the guesthouses) of responsibility for the food poisoning because failure to comply with city food safety standards is evidence of negligence and eating a meal prepared by a professional food vendor is not the type of high-risk activity that is associated with assumption of risk. Therefore, all of the injured parties could file suit against her as a result of the food poisoning. The guests could recover for their $430 each in damages as well as possible damages for pain and suffering. The guesthouses could recover their $1,500 a month in lost profits traceable to the food poisoning. Nib Corp would be able to recover from Saukar if it had paid either of the other two parties or was being held responsible by a court for those damages.

The Saukars have also used private business information that they would not have, but for their business relationship with Nib Corp to provide them with a business advantage in contract negotiations with the guesthouses. This information includes the amount of the contract between the guesthouses and Nib Corp as well as knowledge of late deliveries. They have also established their business relationship with the guesthouses while employees of Nib Corp. To examine the claims that Nib Corp may have against the Saukars and Saukar Inc. For the use of this information it is important to look to the terms of the contract between the parties. The hypothetical does not give sufficient information about the contract to draw…