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Unformatted text preview: ed. 30 SECTION B – LAW
Question 7 (7 marks) (13 minutes)
In January 2001, Terrance Taxmiser incorporated a new corporation called Tiny Productions Inc.
(“TPI”). When organizing the company to reduce the overall tax burden for his family, Terrance
made his three children, Telly, Tizzy and Tuuny the shareholders of TPI. Tuuny, age 12, the
oldest, was responsible for signing all applicable documents. The children elected their father as
sole director and president of TPI.
In February 2001, Terrance, acting in his capacity as president of TPI met Rocco Rocky for
lunch. After several drinks, Terrance asked Rocky if $240,000 would be a reasonable amount to
pay for a vacant piece of land and a piece of excavation equipment that Rocky owned. Rocky,
who at this point was feeling very ill, told Terrance that “it was a go”. Later that evening, Rocky
was admitted to the hospital suffering from alcohol poisoning.
On the basis of Rocky’s words, Terrance retained an architect to design a new shopping plaza.
Rocky is now refusing to close the transaction and has indicated to Terrance that he is quite
confident about his position from a legal perspective. Terrance has advised Rocky that he has 20
days to close the transaction, after which, he would commence an action naming, Telly, Tizzy
and Tuuny as plaintiffs and suing Rocky for breach of contract and fraudulent misrepresentation.
Prepare a memo that analyzes in detail the potential parties involved and the possible claims to
be made and the nature of the defence(s) that could be put forward by Rocky. The memorandum
should discuss any other legal issues identified, as well as any advice for any of the parties. 31 Question 8 (5 marks) (9 minutes)
Richard Norco and Thomas Raleigh are considering starting a business as bicycle couriers. They
live close to the downtown core and their plan is to deliver packages between law offices and the
land registry office. They are both still young and are planning to return to university in about
one year’s time.
Richard and Thomas would like your advice as to which form of legal entity their business
should take. Thomas has heard that a limited partnership may be beneficial. Richard thought
that forming an LLP (Limited Liability Partnership) like many of their anticipated law firm
clients may be the way to go.
Prepare a memorandum that reviews the advantages and disadvantages of the key business
entities that the proposed entity could take and your recommendation of how they should
proceed. Do not consider nor discuss tax considerations. 32 Question 9 (8 marks) (14 minutes)
Trilaws Inc. operates several grocery stores in Big City. On July 4, 2002, one of their employees
working in the produce (fruits and vegetables) department of their largest store became very ill
and was subsequently diagnosed with Hepatitis A – a potentially fatal liver disease. Hepatitis A
is transmitted through contact with bodily fluids and waste.
It is common in the food industry for employers to require employees to receive a Hepatitis
vaccine to reduce the risk of their developing the disease. Trilaws had no such policy. It is also
common for food retailers to have strict policies with respect to personal hygiene and the
wearing of gloves. Such policies are not mandated by Health Canada.
Upon the employee being diagnosed with Hepatitis A, Trilaws officials met with municipal
officials of the Big City Public Health department. At this meeting, Trilaws expressed their
concern about adverse publicity and the effect it might have on their ability to run stores and
provide continuing employment for so many workers. Health officials were concerned with the
possibility of widespread panic, as well as by the fact that they did not have large quantities of
vaccination in stock. As a result of the meeting, the parties agreed that “doing nothing” would be
the appropriate course of action.
Since this time, around 50 people have contracted Hepatitis A. Approximately 8 of the 50 have
suffered serious liver damage that will likely impact their life expectancy. The people that have
become ill are considering suing individually or through a class action lawsuit.
Part A (5 marks)
Prepare a memorandum that discusses the nature of the claim that can be made by the people that
have become ill, what they will have to prove, the parties involved and the possible defences that
could be put forward.
Part B (3 marks)
Assume that the fiscal year end of Trilaws is August 31, 2002. When the financial statements of
Trilaws were prepared, no mention is made of this contingency in their financial statements. The
auditor of Trilaws, although aware of this situation is convinced by management that the matter
is “frivolous”. When the legal letter for the audit is prepared, management and the auditor agree
to not make reference to it. Assume that this subsequently becomes a serious reporting matter
and eventually the bank that has provided a line of credit to Trilaws incurs a significan...
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This note was uploaded on 10/27/2013 for the course LAW 10-100 taught by Professor Parsons during the One '10 term at Bond College.
- One '10