Winter 2014 - FINAL EXAM REVIEW CASE & Related Materials 1 ...
Winter 2014 - FINAL EXAM REVIEW CASE & Related Materials 1. Case: Bang Up Car Repair Inc. is a closely held corporation. Howard, Penny, Leonard and Sheldon are the shareholders. Howard owns 70% of the shares and the other three each hold 10% of the shares. Howard, Penny and Wil (a local accountant) sit on the board of directors. Leonard and Penny operate the business. Leonard deals with the actual repair work and manages the repair shop, while Penny oversees the entire business. Answer the following questions. Make sure you identify the area of law or legal principles that are relevant to each situation, define the applicable law and apply it to Bang Up’s circumstances. Include remedies and defences for each situation. 1) Bernadette brings her car in for repairs and Penny has her sign a contract for repairs estimating the cost at $1,500.00 payable upon completion of the repairs. Leonard and his staff work on the car for a couple of days before it is repaired. Penny contacts Bernadette to let her know her car is ready for pick up, but Bernadette tells Penny that she is unable to pay for the repairs. What legal remedies are available to Bang Up Car Repair Inc.? Bailment: a transfer of possession of a property w/o the ownership ! Parties: Who is bailor (owner) and who is bailee? ! contractual B: benefit both parties, B for Value Repair: undertaking by repairer to effect repair by competent manner and using due care and skill. They signed the K which means unable to pay is a B of K by Bailor. Right of Bailee: 1. Remedy for bailee for the value of service rendered a. contractual remedies for B by Bailor. b. Could sue for $, also c. Quantum Meruit for partial performance. 2. lien by common law: if Bailor couldn't still offer the money after the due date, to retain the possession of the goods. 3. Sale: sell the goods to cover the cost. By statue, and follow the formula. 2) Leonard has been storing the used oil collected from various oil changes at the garage in large drums. The drums are old and starting to rust out at the bottoms. Penny considers the oil drums unsightly, and insists that Leonard deal with them. Leonard feels that this is not a priority and so asks one of his employees at the garage to place the drums outside at the back of the parking lot and the far edge of Bang Up’s property. The oil drums leak out old oil into the wildlife sanctuary located next door causing extensive environmental damage. What are Bang Up’s liabilities with respect to the damage? Liability for environmental offences: tort law-duty of care - Regulatory offence for breach the act and regulation - Standard of care during hazardous activity of director and officers o Need for expertise: employing the necessary expertise if they don't have it themselves - Who: the actor/ directors can held personally liable enven they are not the actor - Factors to be considered: nature of enviro., extent of damage/ attitude of defendant/ deliberateness of the offence/ attempts to comply with the law - Sentence reason: protect the public/ express their disapprove/ deter the offenders/ promote the compliance with the law Defense by Corp. : due diligence • Effective system to prevent offences • Monitoring / Implement improvement of system
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Keep up to date of tech -
Corp’s Criminal liabilities which can be fines and/or jail times o Standard: o Corp is a party due to negligence if…/ or due to fault if… Director’s duty of care and skill: o Not to be negligence o Not willingly blind in the information o Personally liable if: ! Close eyes to miscondunt ! Votes "loss and insolvent ! Tax not paid o Defense: due diligence/ rely on auduited statement
3) Howard decides that car repairs are not enough to keep the business afloat and decides to institute car sales as well, even though this is not part of the Corporation’s business. He brings it up at the board meeting and all vote in favour of the change. Sheldon is not happy with this decision as he believes it is too risky. What options does Sheldon have? Would it matter if Howard owned shares in another corporation that sold cars to distributers? • Protection of Minor Shareholders of internal responsibility of corporation • What’s opinions he have? • Minor SH: Frozen out of decision making because he is minor and locked in because it's a closely held corporation- cant sell shares • Remedies o Appraisal: buy back shares at fair price because he disagree with the changers, restrict to certain type of actions. have to abide by all requirement, could be cumbersome o Winding up: dissolution for liquidation of Corp. o Oppression Remedy: personal remedy for unfairly treaded o Derivation Action: lawsuit by SH in the name of Corp. related to the wrong done of the Corp •
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H: conflict of interest violates the fiduciary duty of a director: honestly and in good faith, o Put cop’s ahead o Avoid and Declare the conflicts of interest, and cant vote o Cant intercept business oppo o Cant competition o Defense: Due diligently and rely on audited financial statement / Business judgment rule o Liability: hold liable for B, property, 3rd party o Other duties of a director: o Exercise Care and skill ! Not negligence ! Not willingly blind ! Could be personal liable if • Vote->loss • Tax not pay • close eyes to misconduct o
Comply with CBCA/regulations/articles/ by-laws…
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4) One of Leonard’s supplier’s, Raj approaches Leonard about purchasing car parts. Leonard agrees to purchase all of his parts from Raj and signs a contract stating that Raj will be the sole supplier of car parts to Bang Up. Later, Penny learns of Leonard’s action and disagrees with the decision. She thinks Raj’s parts are too expensive. What are Bang Up’s obligations under the contract? Corporation’s Civil Liability: Contractual Liability: Obligation: K continue bind Cop. If they break the k, they have the contractual liability of civil liability for B of K. The rule of agency law apply here which is indoor management rule: in the absence of suspicious circumstances, the outsider could relay upon everything that appears to be normal and the K still bind the Corporation as long as the 3rd party didn't notice the By-laws in the other Corp.
5) Penny is upset about Leonard’s decision regarding the car parts and believes he has overstepped his bounds. She visits the repair shop and starts screaming at Leonard, calling him names and finally ends by shouting out loud “you are an idiot and should avoid making decisions that require any thought as you have no brain. Pack up your stuff and get out. You’re fired!” What rights does Leonard have?
Termination of the K: reasonable notice or Dismissal for a cause: So this is a wrongful dismissal, Remedies: damages / reinstatement
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2. Corp’s liability for external responsibility: 1.Corp. owes Civil Lia if they committed tort or B of K: 1. Lia in Tort: principle of vicarious lia. - Negligence and Tort committed by employees, or officers. 2. Contractual Liability: a. Break of K: b. Rules of agency law apply: indoor management rule: i. In the absence of suspicious circumstances, the outsiders may rely everything that appears normal upon, and the K will still bind the Corp. An innocent 3rd party could rely upon the kind of apparent authority as long as it’s reasonable to do so. c. Adoption of the pre-incorporation K 2. Criminal Liability: can be fines or jail times 1. Standard: beyond a reasonable doubt with a. The guilty act or b. The guilty mind could be found in the directing mind: who has the policy making authority and therefore fulfill the mens rea requirement for the Corp. to be convicted. 2. Corp. is a party to the offence and therefore owes Criminal Liability a. Due to negligence if: i. Representatives, authority, is a party and ii. Senior officers, responsible for this act, below care to prevent b. Due to fault if its senior officers: i. with authority and intent to benefit the org, is a party or ii. with intent direct the rep. to commit the act or iii. knowing but not stop
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3. E-commerce: Liability: 1. K law: a. K- web-wrap Agreement: web doc. Contractual terms, icon"acceptance, clear b. Jurisdiction: Time and where of acceptance; by K, by proper law of K c. Formal requirement: E-signature and E-document=writing 2. Tort Law a. Computer malfunction: negligence because the reliance on the server b. Defamation: to punish the defamatory information without the consent in the internet i. Jurisdiction: sue in place where the tort committed/ the location at which the deformation has been punished c. Intellectual Property infringement: i. The right owned by the person who have sole right to license the use of the property ii. Copy right 1. Right to copy the artistic work/literacy/computer program 2. Last: life of author+50yrs 3. Publishing is not “public domain” 4. Citing needed if reproduction: fair dealing iii. Trade mark: the feature to distinguish a person’s/org’s goods and services from others 1. Contains: passing off. Cybersquatting of domain names. 2. Last: 15yrs after registration. 3. Jurisdiction a. Need: internet retailer to comply laws of multiple jurisdictions b. Set J by: i. There is a “real and substantial connection” or, ii. Where is the plaintiff resides (not the place where tort committed) iii. According to 1. On the Internet, where is the plaintiff located? 2. Where are the assets of plaintiff? in J? 3. Judgment enforceable?
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4. Employment law: employment Agreement between 2 parties: employee and.. Duty of employees: obey/ exercise skill and care/ act honestly to fulfill fiduciary duties 1. Contractual relationships that authorize…. This relations carries the responsibilities of: a. Liability to 3rd party: i. From tort: vicarious lia./ negligence hiring / wrongful referral ii. From K: Vicarious performance b. Notice required to terminate relationship: i. Notice = $ = time period ii. In the absence of the term about the notice in the K, should give “reasonable notice”. Factors to consider contains: ! Trade practice ! Level of position, duration, frequency of pay ! Intention at time K formation iii. No notice required if: dangerous work condition or illegal acts required c. Limited reason for termination of employment without notice: - When employee’s conduct=B of the K - When employer: give warning/oppo. to improve; training & assistance; document activities of both parties i. Misconduct ! Crimes: theft ! Bad behavior: affected reputation/cause loss/effect other employee ii. Disobedience ! Willingfully disobey the reasonable and lawful request iii. Illness= frustrations make the K meaningless ! E.g.: Permanent disability iv. Incompetency ! Needs for implied (requirement of the job)/expressed terms (resume) of the competence ! If employer allowed the incompetence always, would be difficult to sue for incompetence of employee d. Assessment for wrongful dismissal claimed by employee: i. Employer’s defense: adequate notice provided/ dismissal for cause ! Even the cause discovered after the dismissal ii. Is notice adequate? ! Employee situation: age, education, qualification, length of service ! Expense of seeking another job ! Bad faith of employer 2. Remedied for Wrongful dismissal: a. Damage: i. Assessment by court: ! Place the injured party in the position she would’ve been had the K been performed ! Determine the time-frame to fulfill this requirement ! = (pay rate + benefit) * Notice ii. Requirement by court: mitigation: act reasonably to reduce loss ! Should try to find another job during dismissal 6
! If failure to mitigate: reduce the damage awarded ! If successful: damage=notice-income iii. Mental anguish if suffering “pain and humiliation” b. Reinstatement: equitable remedy; hiring back but impersonal of large corp.
5. Agency A person acting for anther person in contractual relationship with the 3rd party = the agency acting on behalf of its principle to bring 3rd party in contractual relationship with principle. K1: Agency Agreement: between… and Agency on behalf of the principle ! If > 1yr: must in writing ! Should set out the limits to A’s authority Agency Authority: 1. Actual authority: such as Power of Attorney: authorizing the A to sign document 2. Apparent Authority: a. Not real, but is required from the past manner of transaction/custom b. From holding out: i. Even an act falls outside of usual authority ii. Representing by words/ conduct that a person is one’s A to has certain authority c. Test: should the 3rd party be aware/ suspicious of A’s lack of authority or should they reasonable assume, from the business type, that the A has the authority in question? If no, then A has. d. Suspicious should arises when some type of authority is uncommon, but is not practical for business to constantly check up e. If principle chooses to restrict normal authority, and the 3rd party is unaware of it, then she is estopped from denying liability under the K signed by A. 3. Ratification: a. When exceeding her authority, principal needs ratify the K. b. Subsequent adoption by A acting w/o authority c. Must be timely/ of entire K d. Can be done by conduct e. Principle must have been capable of entering the K Agency Duties: 1. Comply with K: should a. Behave under authority b. Keep principle informed of everything 2. Duty of care: a. At minimum reasonable care, diligence and skills in transaction of business b. Also depends on the nature of the tasks 3. Duty of personal performance: a. Can use sub-contractor when agreed and by trade custom, but no privity of K between… 4. Duty of good faith: a. Fiduciary relationship, must put principle’s interest ahead b. Disclose any information c. Cant make secret profit 7
d. If 2 principles: B of good faith and there is conflict of interest e. If acting as the contractual party: must gain approval before the transaction K2 (Principal&3rd party)? Who is responsible for the liability? Three situations: 1. Principle alone is liable: a. Agent acting with real/apparent authority; Agent make clear to the 3rd party: I am acting for my principal. b. Payment delivered to 3rd party rather than agent. 2. Agent alone is liable: when agent represent herself to be the principal 3. Either..or.., but not both a. Where A didn’t disclose status as A b. If sue A successfully, then P has no liability c. If existence of P become clear, could… 4. Right of undisclosed principal to enforce a. To enforce the K was made with his real/ apparent authority b. 3rd party can’t hold undisclosed P liable if the agent acted w/o real authority Liability of K2 1. Liability for Tort: Fraudulent Misrepresentation ! 3rd party could rescind the K or sue both A and P ! P could sue A for deceit ! If A within real/apparent authority, P is liable for it 2. Liability for breach of Warranty of Authority if ! A has no real/apparent authority-no K ! 3rd party will have an action in deceit against A-no K ! 3rd party will have an action in negligence misrepresentation against A-no K ! If A innocently exceed authority-no K 6. Bailment of common carriers: They open to everyone, limited by their ability. Standard of care: ! insurer and bailee, highest standard ! Undertakes to insure the shipper against loss regardless of the negligence to fault ! If not: o Sue by shippers for fail to perform if they can show ! Fail to deliver to the destination ! Deliver in bad condition o Liability: full value of the good unless limited by Bill of Lading o Defense: ! Act of God ! Inherent vice of goods ! Default by shipper ! If shipper defaults, remedies o Common carriers: lien by common law, sell by K 8
o Private: lien by K
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Keep up to date of tech -
Corp’s Criminal liabilities which can be fines and/or jail times o Standard: o Corp is a party due to negligence if…/ or due to fault if… Director’s duty of care and skill: o Not to be negligence o Not willingly blind in the information o Personally liable if: ! Close eyes to miscondunt ! Votes "loss and insolvent ! Tax not paid o Defense: due diligence/ rely on auduited statement
3) Howard decides that car repairs are not enough to keep the business afloat and decides to institute car sales as well, even though this is not part of the Corporation’s business. He brings it up at the board meeting and all vote in favour of the change. Sheldon is not happy with this decision as he believes it is too risky. What options does Sheldon have? Would it matter if Howard owned shares in another corporation that sold cars to distributers? • Protection of Minor Shareholders of internal responsibility of corporation • What’s opinions he have? • Minor SH: Frozen out of decision making because he is minor and locked in because it's a closely held corporation- cant sell shares • Remedies o Appraisal: buy back shares at fair price because he disagree with the changers, restrict to certain type of actions. have to abide by all requirement, could be cumbersome o Winding up: dissolution for liquidation of Corp. o Oppression Remedy: personal remedy for unfairly treaded o Derivation Action: lawsuit by SH in the name of Corp. related to the wrong done of the Corp •
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H: conflict of interest violates the fiduciary duty of a director: honestly and in good faith, o Put cop’s ahead o Avoid and Declare the conflicts of interest, and cant vote o Cant intercept business oppo o Cant competition o Defense: Due diligently and rely on audited financial statement / Business judgment rule o Liability: hold liable for B, property, 3rd party o Other duties of a director: o Exercise Care and skill ! Not negligence ! Not willingly blind ! Could be personal liable if • Vote->loss • Tax not pay • close eyes to misconduct o
Comply with CBCA/regulations/articles/ by-laws…
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4) One of Leonard’s supplier’s, Raj approaches Leonard about purchasing car parts. Leonard agrees to purchase all of his parts from Raj and signs a contract stating that Raj will be the sole supplier of car parts to Bang Up. Later, Penny learns of Leonard’s action and disagrees with the decision. She thinks Raj’s parts are too expensive. What are Bang Up’s obligations under the contract? Corporation’s Civil Liability: Contractual Liability: Obligation: K continue bind Cop. If they break the k, they have the contractual liability of civil liability for B of K. The rule of agency law apply here which is indoor management rule: in the absence of suspicious circumstances, the outsider could relay upon everything that appears to be normal and the K still bind the Corporation as long as the 3rd party didn't notice the By-laws in the other Corp.
5) Penny is upset about Leonard’s decision regarding the car parts and believes he has overstepped his bounds. She visits the repair shop and starts screaming at Leonard, calling him names and finally ends by shouting out loud “you are an idiot and should avoid making decisions that require any thought as you have no brain. Pack up your stuff and get out. You’re fired!” What rights does Leonard have?
Termination of the K: reasonable notice or Dismissal for a cause: So this is a wrongful dismissal, Remedies: damages / reinstatement
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2. Corp’s liability for external responsibility: 1.Corp. owes Civil Lia if they committed tort or B of K: 1. Lia in Tort: principle of vicarious lia. - Negligence and Tort committed by employees, or officers. 2. Contractual Liability: a. Break of K: b. Rules of agency law apply: indoor management rule: i. In the absence of suspicious circumstances, the outsiders may rely everything that appears normal upon, and the K will still bind the Corp. An innocent 3rd party could rely upon the kind of apparent authority as long as it’s reasonable to do so. c. Adoption of the pre-incorporation K 2. Criminal Liability: can be fines or jail times 1. Standard: beyond a reasonable doubt with a. The guilty act or b. The guilty mind could be found in the directing mind: who has the policy making authority and therefore fulfill the mens rea requirement for the Corp. to be convicted. 2. Corp. is a party to the offence and therefore owes Criminal Liability a. Due to negligence if: i. Representatives, authority, is a party and ii. Senior officers, responsible for this act, below care to prevent b. Due to fault if its senior officers: i. with authority and intent to benefit the org, is a party or ii. with intent direct the rep. to commit the act or iii. knowing but not stop
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3. E-commerce: Liability: 1. K law: a. K- web-wrap Agreement: web doc. Contractual terms, icon"acceptance, clear b. Jurisdiction: Time and where of acceptance; by K, by proper law of K c. Formal requirement: E-signature and E-document=writing 2. Tort Law a. Computer malfunction: negligence because the reliance on the server b. Defamation: to punish the defamatory information without the consent in the internet i. Jurisdiction: sue in place where the tort committed/ the location at which the deformation has been punished c. Intellectual Property infringement: i. The right owned by the person who have sole right to license the use of the property ii. Copy right 1. Right to copy the artistic work/literacy/computer program 2. Last: life of author+50yrs 3. Publishing is not “public domain” 4. Citing needed if reproduction: fair dealing iii. Trade mark: the feature to distinguish a person’s/org’s goods and services from others 1. Contains: passing off. Cybersquatting of domain names. 2. Last: 15yrs after registration. 3. Jurisdiction a. Need: internet retailer to comply laws of multiple jurisdictions b. Set J by: i. There is a “real and substantial connection” or, ii. Where is the plaintiff resides (not the place where tort committed) iii. According to 1. On the Internet, where is the plaintiff located? 2. Where are the assets of plaintiff? in J? 3. Judgment enforceable?
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4. Employment law: employment Agreement between 2 parties: employee and.. Duty of employees: obey/ exercise skill and care/ act honestly to fulfill fiduciary duties 1. Contractual relationships that authorize…. This relations carries the responsibilities of: a. Liability to 3rd party: i. From tort: vicarious lia./ negligence hiring / wrongful referral ii. From K: Vicarious performance b. Notice required to terminate relationship: i. Notice = $ = time period ii. In the absence of the term about the notice in the K, should give “reasonable notice”. Factors to consider contains: ! Trade practice ! Level of position, duration, frequency of pay ! Intention at time K formation iii. No notice required if: dangerous work condition or illegal acts required c. Limited reason for termination of employment without notice: - When employee’s conduct=B of the K - When employer: give warning/oppo. to improve; training & assistance; document activities of both parties i. Misconduct ! Crimes: theft ! Bad behavior: affected reputation/cause loss/effect other employee ii. Disobedience ! Willingfully disobey the reasonable and lawful request iii. Illness= frustrations make the K meaningless ! E.g.: Permanent disability iv. Incompetency ! Needs for implied (requirement of the job)/expressed terms (resume) of the competence ! If employer allowed the incompetence always, would be difficult to sue for incompetence of employee d. Assessment for wrongful dismissal claimed by employee: i. Employer’s defense: adequate notice provided/ dismissal for cause ! Even the cause discovered after the dismissal ii. Is notice adequate? ! Employee situation: age, education, qualification, length of service ! Expense of seeking another job ! Bad faith of employer 2. Remedied for Wrongful dismissal: a. Damage: i. Assessment by court: ! Place the injured party in the position she would’ve been had the K been performed ! Determine the time-frame to fulfill this requirement ! = (pay rate + benefit) * Notice ii. Requirement by court: mitigation: act reasonably to reduce loss ! Should try to find another job during dismissal 6
! If failure to mitigate: reduce the damage awarded ! If successful: damage=notice-income iii. Mental anguish if suffering “pain and humiliation” b. Reinstatement: equitable remedy; hiring back but impersonal of large corp.
5. Agency A person acting for anther person in contractual relationship with the 3rd party = the agency acting on behalf of its principle to bring 3rd party in contractual relationship with principle. K1: Agency Agreement: between… and Agency on behalf of the principle ! If > 1yr: must in writing ! Should set out the limits to A’s authority Agency Authority: 1. Actual authority: such as Power of Attorney: authorizing the A to sign document 2. Apparent Authority: a. Not real, but is required from the past manner of transaction/custom b. From holding out: i. Even an act falls outside of usual authority ii. Representing by words/ conduct that a person is one’s A to has certain authority c. Test: should the 3rd party be aware/ suspicious of A’s lack of authority or should they reasonable assume, from the business type, that the A has the authority in question? If no, then A has. d. Suspicious should arises when some type of authority is uncommon, but is not practical for business to constantly check up e. If principle chooses to restrict normal authority, and the 3rd party is unaware of it, then she is estopped from denying liability under the K signed by A. 3. Ratification: a. When exceeding her authority, principal needs ratify the K. b. Subsequent adoption by A acting w/o authority c. Must be timely/ of entire K d. Can be done by conduct e. Principle must have been capable of entering the K Agency Duties: 1. Comply with K: should a. Behave under authority b. Keep principle informed of everything 2. Duty of care: a. At minimum reasonable care, diligence and skills in transaction of business b. Also depends on the nature of the tasks 3. Duty of personal performance: a. Can use sub-contractor when agreed and by trade custom, but no privity of K between… 4. Duty of good faith: a. Fiduciary relationship, must put principle’s interest ahead b. Disclose any information c. Cant make secret profit 7
d. If 2 principles: B of good faith and there is conflict of interest e. If acting as the contractual party: must gain approval before the transaction K2 (Principal&3rd party)? Who is responsible for the liability? Three situations: 1. Principle alone is liable: a. Agent acting with real/apparent authority; Agent make clear to the 3rd party: I am acting for my principal. b. Payment delivered to 3rd party rather than agent. 2. Agent alone is liable: when agent represent herself to be the principal 3. Either..or.., but not both a. Where A didn’t disclose status as A b. If sue A successfully, then P has no liability c. If existence of P become clear, could… 4. Right of undisclosed principal to enforce a. To enforce the K was made with his real/ apparent authority b. 3rd party can’t hold undisclosed P liable if the agent acted w/o real authority Liability of K2 1. Liability for Tort: Fraudulent Misrepresentation ! 3rd party could rescind the K or sue both A and P ! P could sue A for deceit ! If A within real/apparent authority, P is liable for it 2. Liability for breach of Warranty of Authority if ! A has no real/apparent authority-no K ! 3rd party will have an action in deceit against A-no K ! 3rd party will have an action in negligence misrepresentation against A-no K ! If A innocently exceed authority-no K 6. Bailment of common carriers: They open to everyone, limited by their ability. Standard of care: ! insurer and bailee, highest standard ! Undertakes to insure the shipper against loss regardless of the negligence to fault ! If not: o Sue by shippers for fail to perform if they can show ! Fail to deliver to the destination ! Deliver in bad condition o Liability: full value of the good unless limited by Bill of Lading o Defense: ! Act of God ! Inherent vice of goods ! Default by shipper ! If shipper defaults, remedies o Common carriers: lien by common law, sell by K 8
o Private: lien by K
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