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Unformatted text preview: Commerce 393 Sample Question — Part I
Question #1 Biff owns and operates an advertising ﬁrm in Vancouver. Muffy’s Mufﬁns, a client for whom
Biff had done advertising work in the past, sent a letter to Biff, which Biff received on
February 9. In the letter, Muffy’s Muffins outlined details of the advertising services it
required. The letter gave Biff speciﬁc information on details of the type of media to be used,
how often, and a suggested theme. The letter ﬁnished by saying: “Muffy’s Mufﬁns is grateful for the excellent services you have provided in the past. If, by
March 15, you can deliver to our ofﬁce a proposal conforming to our requirements at a cost not
to exceed $10,000, we will award you the contract.” On March 10, Biff mailed a proposal to Muffy’s which met its requirements in every detail.
The price quoted was $9,800. On March 14, Biff learned through its competitor Skip that on March 8, Muffy’s contract had
been awarded to Skip’s ﬁrm. The chief reason for awarding the contract to Skip was that
Muffy’s daughter-in—law worked for Skip. On March 17 Biff phoned Muffy’s manager and
asked if Muffy’s had in fact awarded the contract to Skip. The manager conﬁrmed that Biff’ s
proposal, which was received on March 13, met its requirements and was suitable in every
respect. Muffy’s had decided to give its business to Skip as he appeared to have more
experience in the ﬁeld. Does Muffy’s have a contract with Skip? Does Muffy’s have a contract with Biff?
Assess remedies if there is a contract and Muffy’s does not honour it. Question #2
One Commerce students was overheard remarking to another: “According to the Bank of Hong Kong v. New Age Graphics case no
consideration is necessary in order to make a guarantee enforceable.” l"\
(\y Is this an accurate statement of law? Give full reasons.
One Commerce students was overheard remarking to another: “Under the Canadian Charter of Rights and Freedoms discrimination on the basis of citizenship
is prohibited.” Is this statement accurate? Would you modify it in any way? Give full reasons. .
. Question #4 Megan bought a used pickup truck from Alf. Two months after she bought the truck, it was
seized by Humungous bank. Humungous Bank was owed $6000 under a chattel mortgage.
The chattel mortgage had been registered in the appropriate registry. Megan had to pay the
Humungous Bank $6000 to pay off the amount owing under the chattel mortgage and regain
possession of the vehicle. Megan has sought compensation from Alf, but he says he did not know that there was a chattel
mortgage on the truck. Unbeknownst to Alf, the chattel mortgage had been placed on the
vehicle by David, a previous owner, who had sold the truck to Alf about a year before the sale
to Megan. 3)
Assess the legal right of Megan and Alf in this situation. Give full reasons.
b) Assume that Megan was 18 years old when she made the contract with Alf. Would this fact
alter her legal rights in any way? Explain. Question #5 Ann’s Enterprises Ltd. was a tenant in a building owned by Tuna Holdings Inc. Its lease was
for a 3 year term from May 1, 2000 to April 30, 2003. The lease included a right to renew the
lease for a further 2 year term “on the same terms and conditions as the current lease and at a
rent to be agreed upon.” In order to exercise the right of renewal the lease said that the tenant
had to give the landlord notice in writing on or before December 31, 2002. In July of 2002, Ann’s president contacted Tuna Holding’s property manager in order to obtain
larger premises at the end of the term of the lease. The property manager indicated that she
would be pleased to provide larger premises if she could possibly do so, but that she would
probably not be able to let Ann’s know until sometime in October whether larger premises
would come available. Ann’s president spoke to the property manager again at the end of
October, but she said that she could not answer the request until the new year. When Ann’s president reached Tuna’s property manager in late January to see whether the
larger premises would be available, she told Ann’s that unfortunately Ann’s had not given notice as required under the lease and therefore would be expected to vacate the premises at the
end of April 2003. Do you think that Tuna Holdings could require Ann’s to leave at the end of the term of the
lease? Give full reasons for your answer. Question #6 Gregor wanted to construct a small ofﬁce building, and so obtained recommendations for
builders who would do a reliable job. He decided to approach Fast Builders Inc. and Quality Contracts ltd. He wrote up a proposal that he sent by mail on September 25‘“ to each of them,
asking each to send its bid. On October 15‘, Fast Builders responded by mail, offering to
complete the project for $430,000. On October 3‘“, Quality Contract responded by mail,
offering to do the work for $420,000. On October 5‘“, Gregor sent a letter to each of Fast Builders and Quality Contracts, telling each
that he was prepared to accept a price of $415,000, and promising to keep this offer open until
October 15‘“. Fast Builders and Quality Contracts received Gregor’s letter on October 8‘“. On October 10‘“, Fast Builders sent Gregor a letter accepting the terms contained in Gregor’s
letter of October 5‘“. On October 14‘“, Quality Contracts phoned Gregor to say that it was
accepting the terms contained in Gregor’s letter of October 5‘“. On October 14‘“, after his
phone conversation with Quality contracts, Gregor phoned fast Builders to say that his offer in
fact was no longer open, as he had already contracted with Quality. On October 16‘“, Gregor
received Fast Builders’ letter of October 10‘“. Both Fast Builders and Quality Contracts insist that they have contracts with Gregor.
a) Assess Gregor’s legal obligations in this situation, giving full reasons. b) On November 8‘“ the provincial government decided to expropriate Gregor’s property to use as
a school. (Government, by expropriation, can take private property for its own purposes. The
owner is usually compensated at fair market value.) Would this fact affect Gregor’s obligations
under part a)? Give full reasons. Question #7 3) Andy offers to sell his outboard engine to Bill, telling Bill the engine is in “very good
mechanical condition”. Bill buys the engine. The next day he hears a grinding sound while
operating the engine and takes it to a mechanic who tells him the transmission is defective and
will require major repairs. Two weeks later, after Bill has completed his university exams, he
returns the engine to Andy and demands his money back. Assess Bill’s right and remedies in
this situation. b) Assume the same facts as in part a) with the exception that Bill signs a contract of sale that is
silent as to the mechanical condition of the engine and that contains the following term: “There is no representation, warranty, collateral agreement or condition affecting the sale other
than as expressed herein in writing.” Would this change your answer to part a)? Explain. l
l Question #8 Sally owned and operated a Vancouver public relations business under the name Mega
Relations Ltd. In August she negotiated a sale of the business to Tom at a price of $30,000.
Terms were agreed to and both Tom and Sally signed a written agreement of purchase and sale. After the agreement had been signed, Tom consulted a lawyer. The lawyer told Tom that he
should have included, as part of the contract, a restrictive covenant preventing Sally from
competing with him for a certain length of time. The lawyer drafted the following clause: “In recognition for the necessity of protection of the goodwill of the business, Sally agrees for a
period of 5 years following the date of the sale, not to perform public relations services for any
person or ﬁrms that were clients of Mega Relations at the time of the sale.” In return for signing the covenant, Tom promised to pay Sally $3000 within one year’s time.
Sally agreed and signed the covenant. Three months after she sold the business to Tom, Sally became an employee of one of Mega’s
competitors and Sally contacted all the clients she did business with at Mega to let them know
where her services were available. Some of those clients have contacted Sally and want her to
do work for them. Sally thinks she is not bound to honour her agreement with Tom. One
reason she gives is that Tom has paid no consideration. Assess Tom’s legal rights in this situation.
Question #9 Dan was a janitor with limited education who worked for Jim’s Janitors Ltd. Dan had recently
immigrated to Canada from Bosnia. He has accumulated some savings that he wanted to invest
in a secure project that would give him a good rate of return. One of Dan’s janitorial jobs was at the ofﬁces of Glo-Tech Inc., a company that has no business
assets, but that had been formed in the hope that it could obtain marketing rights for computer
software. Glo-Tech’s president, Rick, met Dan one evening and encouraged Dan to invest his
savings in Glo-Tech, saying the following: “You should think about buying shares in my company. It is a private company right now
and so there really is not market for the shares. I intend to have the company listed on the
Vancouver Stock exchange and when that happens it will become a publicly traded company.
A publicly traded company has a wider market for its shares. Lots of investors make large
proﬁts by buying shares in privately traded companies, and then selling the shares after the
company is listed as a publicly traded company.” As a result of Rick’s encouragement, Dan proceeded in January to invest his savings of
$20,000 in shares of Glo-Tech Inc. Before accepting Dan’s cheque, Rick and Dan both
signed a document that stated: l
l “This is to conﬁrm that Rick hereby agrees to sell 20,000 shares of Glo-Tech to Dan for the
sum of $20,000 cash. Rick hereby acknowledges receipt of payment of $20,000 and Dan
hereby acknowledges receipt of 20,000 shares of Glo-Tech Inc. This agreement constitutes a
complete and exclusive statement of the agreement between Dan and Rick with respect to the
sale of 20,000 shares of Glo-Tech Inc., and no representation or agreement not contained in
their agreement shall be binding on Dan or Rick.” In February Rick prepared the necessary documentation to have Glo—Tech listed on the
Vancouver Stock exchange. Rick had been unaware that the application was likely to be
rejected because the company did not have the minimum level of capitalization required for a
publicly traded company. In March the application was rejected by the Vancouver Stock
exchange. When Dan found out that the application to list the shares had been rejected, he
asked Rick for his money back on the ground that he was misled by Rick, but Rick refuses to
give him a refund. When Rick referred to the contract he signed with Dan, Dan said he did
not read it. Advise Dan fully as to any legal rights and remedies he might have in this situation. ...
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This note was uploaded on 05/31/2011 for the course COMM 393 taught by Professor Elaine during the Fall '10 term at UBC.
- Fall '10