Edie, Alma, and Tim established a restaurant called EATs. Edie, a retired teacher, invested $20 000.

Edie, Alma, and Tim established a restaurant called EATs. Edie, a retired teacher, invested $20 000 in the venture and Alma and Tim each invested $10 000. Edie, Alma and Tim do not have a formal agreement concerning the allocation of responsibilities, but they each take turns doing the cooking. The serving and clean-up tasks are done by staff. One day, while Edie was doing the cooking, Juan got food poisoning from the food. Juan intends to sue Eats, Edie, Alma, and Tim for damages of $100 000. If Juan is successful, how will the damages be allocated among the parties? If the restaurant were incorporated under Eats Inc. and Edie owns 50 percent of the shares, Alma owns 25 percent, and Tim owns 25 percent, how would the damages be allocated? What do these two situations illustrate about risk?

 

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