Business Law for Accountants: Overview of the Legal Scenario

Business Law for Accountants
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Abstract
Takem’s Appliances and Electronics is a firm that is operated and owned by Tommy Takem. Recently, a disgruntled client presented Tommy with a letter asserting that the whole deal is unconscionable and for this reason the deal/contract cannot be enforced by the courts. The business model used by the firm is lawful, but the practices utilized to increase business profits are against the law. The salespeople do not tell their customers all the fees and costs linked to the purchase of the company’s products, which is in contravention of the Truth-In-Lending Act that protects consumers when borrowing funds. The arguments presented by Sally Walker in the letter are valid, and are in agreement with the concept of unconscionability. The sort of behavior that Takem’s Appliances and Electronics engaged in is unethical because the company does not treat its customers fairly.

Business Law for Accountants
Contract law indicates that a contract refers to an expressed or written agreement between 2 different parties to offer a service/product. Intrinsically, all business organizations deal with contracts, even though they may be unwritten like most transactions that involve services and goods. When one of the parties to the contract breaks the terms specified in the contract, this act is considered a breach of contract (Stone, 2016). This paper focuses on a specific realistic, hypothetical legal scenario: a scenario involving the client named Takem’s Appliances and Electronics. This is a firm that is operated and owned by Tommy Takem. The paper addresses the questions and prompts presented by the scenario. This essay focuses on the concept of unconscionability, which is also known as the concept of unfairness, and other statutory legislations. The concept of unconscionability is an integral component of contract law. The essay examines the business model of Takem’s Appliances and Electronics from both a legal and moral/ethical perspective.
Overview of the Legal Scenario
Located in the rural region of Southwest Virginia, Takem’s Appliances and Electronics is a company that faces little competition. For this reason, the owner charges an estimated 10 to 20 percent more than many other retailers. The vast majority of its clientele is poor people who live in the Appalachian areas of Virginia, West Virginia, Kentucky and Tennessee (Sopeju, 2015). Of late, the firm started selling electronics and appliances door-to-door, and since Tommy is delivering a service to the people by bringing the products to their homes, he increases the costs by roughly thirty percent so that the customers pay more than they would have paid if they had visited the store to buy them (Sopeju, 2015).
Moreover, given that most of the firm’s clients are people who are unsophisticated, moderately untutored, economically underprivileged, and have poor credit, Takem’s Appliances and Electronics provides financing for most of their sales and charges the customers an application fee of 15%, plus the highest interest rate permitted by law (Sopeju, 2015). Not so long ago, the company’s owner was presented with a letter from Sally Walker, a disgruntled client who had fallen behind on her laptop payments and the company had initiated collection efforts. In the letter, this client asserts that the whole deal is unconscionable and for this reason the deal/contract cannot be enforced by the courts. The letter also argues that Sally Walker has paid an adequate amount of money for the laptop and would not pay any additional money. She also threatened to take legal action against Tommy for punitive damages if Tommy continues to push the matter (Sopeju, 2015).
Business Model is Legal but Practices of Increasing Profits are Illegal
An examination of this scenario demonstrates that the business model used by Takem’s Appliances and Electronics is, in fact, legal. The company’s methods of collecting payments consist of repossessions, collection process, hidden charges and fees, higher prices, and mark-ups. However, while the firm’s overall business model is lawful, the practices that the company uses to increase business profits are unlawful. The salespeople do not divulge all the fees and costs linked to the purchase of the company’s products. This is clearly in violation of the federal law Truth-In-Lending Act (TILA), which was passed for the purpose of protecting consumers whenever they borrow funds (Himert, 2015). Enacted in the year 1968, TILA ensures that businesses treat consumers fairly in the lending marketplace and that the company informs the consumer about the true cost of credit. It requires every lender to divulge the terms of credit in a manner that is easily understood so that the consumer could confidently comparison shop conditions and interest rates (Himert, 2015). By not disclosing the actual prices and charges, Takem’s Appliances and Electronics breaches TILA.
In addition, the Fair Debt Collection Practices Act (FDCPA) forbids abusive, unjust and deceptive practices during debt collection. This piece of legislation prohibits debt collectors from misrepresenting the legal rights of a customer and calling the customer at unreasonable hours or repeatedly. It also bans them from threatening violence, using profane/obscene language, using false pretenses to obtain information regarding a consumer, and divulging the personal affairs of a consumer to third parties. The deceptive and unjust practices used by Tommy’s firm contravene this law.
Threats in the Letter should be Taken Seriously
The arguments presented by Sally Walker in the letter are valid. Tommy has to take those arguments seriously as they are not frivolous. It is of note that whilst the basis of Sally Walker’s arguments might most probably be due to irritation by the company’s conduct and a desire for vindication, the arguments indeed have a legal merit that a court of law could uphold. Although the overall business model adopted by Takem’s Appliances and Electronics is legal, it is the excessive terms which justify the assertions made by the disgruntled customer. This matter could be explored closely through the concept of unconscionability.
Unconscionability is a doctrine in contract law. It spells out terms which are very unfair or which are overwhelmingly supportive of one party that has greater bargaining power, that they are against good conscience (Keren, 2016). In essence, unconscionability is a defense against the enforcement of a given contract or a specific portion of the contract. McCullough (2016) mentioned that if a contract is oppressive or unjust to one party in a manner that demonstrates abuses during the formation of that contract,...