business law case studies 1

Part A: Each question may be answered in approximately 100 to 150 words or one short paragraph. Each question carries 2 marks.

(1) A school board suspended a teacher for allegedly harassing a student, but no formal complaint was made against the teacher. The teacher objected to the suspension, and requested the teacher’s union ‘to do something’. What are the obligations of the union? How might the dispute be resolved?

(2) The general thrust of consumer protection legislation has been to provide accurate information or disclosure of essential terms to the buyer. Has consumer protection legislation generally met this goal?

(3) In what way (or ways) does bankruptcy affect the rights of secured creditors? How would they recover their debts if the security they held was insufficient to cover the amount owing?

(4) The owner of a condominium unit also owned an exclusive use parking space on a surface lot facing a sidewalk and street. The owner rented the space to his friend, who parked her chip wagon in the space. She sold french fries and soft drinks to the public from the location. The other residents of the condominium objected. Advise the unit owner of his rights (if any), and the rights of the other residents.

(5) What restrictions are usually placed on a franchisee carrying on other business activities?

Part B: Each question may be answered in approximately 150 to 200 words or one to two short paragraphs.

CASE 1 After finishing university, Mariette is looking for a job. She checks for job advertisements on several large, well‐known, and reputable online sources, and pursues a few lesser‐known sources on the recommendation of several of her former professors. After submitting what seemed like endless resumes, Mariette received several interview offers, one of which was particularly appealing to her, since it was for an entry‐level position in a company she had always wanted to work for. The interview process went well, and she received several job offers, including one from the company she wanted to work for. During that interview, Mariette was promised that the job would involve a lot of independent work and responsibility for projects after an initial training period of three months. This statement, combined with the fact that she had wanted to work for the company for a long time, led Mariette to accept the job offer. Once she had signed the employment contract and had begun work, she went through the initial training period, but her responsibilities didn’t change, and she began to find her work limiting. She also began to notice that some of the employees at her level who had started around the same time she had started were being promoted ahead of her. Several were not as qualified as Mariette. She noticed that all of the employees receiving promotions were men. While this was occurring, the office support staff, all of whom were unionized, were trying to renegotiate their contract. The bargaining went badly, and there was a short strike lasting three days. The situation was resolved, but things were tense for a little while, especially since the support staff had been picketing directly outside of the entrance to the office. By this time, Mariette had worked for her company for a little over two years. One day, she was called into her supervisor’s office and was told she was being let go. She was also told that this was effective as of the end of the work day on that day. No cause was given. Mariette was very surprised, and angry. After discovering that she would get no further pay after the day of her termination, Mariette decided to take legal action. Question (6): Analyze the situation and advise Mariette on how she should proceed?

CASE 2 Able bought a number of books from The Book Box Store Limited in a single mail order, and enclosed a cheque for $240 with the order, drawn on the Big City Bank. In the interval between mailing the order and the arrival of the products, Able noticed a number of the books (totaling $120) were available at a lower price at a local book store. On the day the books arrived, he visited the bank and was pleased to see that his cheque had not yet been cashed. He placed a stop payment order on the cheque, and in filling out the request slip, placed the words “goods unsatisfactory” in the box allotted for the reason for the request. Able sent back the part of the order that he had now bought more cheaply elsewhere, and assumed that The Book Box Store Limited. would send him a new invoice for $120. The Big City Bank failed to immediately enter the request into its computer system, and as a result, on the arrival of the cheque a day later, it paid Able’s cheque out of his account in the normal manner. Able discovered this error in the course of using an automated cash machine a few days later, and asked the bank to correct the error. The bank put $240 back into Able’s account and told him that they would collect back the $240 that they had paid The Book Box Store Limited ‘s bank, The Business Bank. The Big City Bank returned the cheque in the clearing system, now marked “Payment Stopped,” and demanded $240 from The Business Bank. The Business Bank refused the stopped cheque and would not make payment back, stating that by accepted banking convention, too much time had elapsed between acceptance by the Big City Bank and the return of the item. While this had been going on, The Book Box Store Limited had received the goods returned by Able and had mailed him a refund cheque for $120, for as far as they knew, they had been paid in full. Able was pleased. Clearly a computer error had sent him a $120 cheque rather than a $120 invoice, and he ignored the whole matter. Question (7): Assume another week passes. Discuss the events that follow, and the positions of the parties, with respect to the law and standard practices of negotiable instruments. In advising the banks and the parties involved, what would you suggest?

CASE 3 A group of music lovers in a large urban area incorporate a company, Mozart Holdings Ltd., in order to purchase land and build a music hall that they claim will be “a glittering jewel in the cultural crown” of the city. The corporation selects an architectural firm that will design the building, a construction company that will construct the music hall, and chooses other suppliers who will provide goods and services necessary to the planning and development of a unique structure. One of the contracts that Mozart enters into is with an artist, Paige Presley, who is commissioned to produce an artistic work for the main lobby of the music hall. Presley is to be paid the sum of $50 000 for the work, and Mozart stipulates that the work is to be in any medium, but it must be permanently affixed to the north wall of the lobby, and must be of a size no less than 10 metres by 15 metres. The artist and the corporation enter into a written contract whereby the artist agrees to create the artistic work, warrants that it is her original work, and transfers the work to Mozart Holdings Ltd., in consideration of payment of the agreed‐upon contract price. No mention is made of moral rights. Presley designs and creates an artistic work that is an abstracted representation of musicians, musical instruments and musical notes on a scale. The work is created out of a series of more than two hundred 30 cm by 30 cm ceramic tiles that are made by the artist by hand and fired in her kiln in her studio. The artist and two assistants install the work on the north wall of the lobby, in time for the official opening of the music hall. The work is titled “The Song of Ages.” Presley attends the official opening for the music hall, at which many dignitaries are present. Media representatives are present, and photographers take pictures of the lobby, the people present, and Presley’s artistic work. At a table in the lobby, Presley notices a brochure that solicits funds from donors, asking them to contribute to the operation of the music hall. Donors are promised various “gifts” for donations at different levels of giving, ranging from music CDs for donations of $50 to $100, up to the “benefactor” level. Those who make a donation at the benefactor level will have their name inscribed in one of the tiles that form the work “The Song of Ages.” Question (8): Presley is incensed and embarrassed that her art would be defaced in this fashion. She considers commencing a court action, seeking an injunction. Evaluate the situation and advise what chances of success she has and on what grounds?

CASE 4 The Happy Times Bar and Restaurant was located on a busy downtown street. The front part of the premises consisted of the bar and a few small tables where patrons were served drinks. The rear part of the building housed the restaurant, and a patron who wished to obtain a meal at the restaurant was required to pass through the bar room to reach the restaurant. On the wall of the short passageway separating the two rooms the owner had installed a number of coat hooks where employees could place their coats or jackets. Jacobs, a stranger to the community, entered the establishment for the purpose of obtaining lunch, and as he passed through the passageway connecting the bar to the restaurant, noticed the coat hooks. He removed his overcoat, hung it on one of the hooks, and proceeded into the restaurant where he was escorted to a table for his lunch. After lunch, Jacobs proceeded to the passageway to retrieve his overcoat, only to find that it was missing. He immediately spoke with the owner, who denied responsibility for the loss. Jacobs had just purchased the overcoat the previous day at a cost of $2,200. Since the overcoat was expensive, Jacobs contemplates legal action against the establishment to recover his loss. Question (9): Advise Jacobs. How should he proceed to recover his loss? What arguments are likely to be raised by the restaurant owner?

CASE 5 Snow Products Ltd. manufactures a line of shovels, ice scrapers, and similar products designed to remove snow and ice. One of its products is a snow and ice remover used for cleaning the ice or snow from automobile windshields. The manufacturer called the tool “The Snow Plow”, and it was sold under that name for many years to automotive wholesalers and retail chain stores. One of its retail chain customers approached a competitor of Snow Products Ltd. with a request to have it manufacture a windshield snow and ice remover similar to ‘The Snow Plow” and its colour scheme. The competitor agreed to do so, and produced an ice scraper similar in appearance to the snow plow that the retail chain sold through its retail outlets. The loss of the retail chain as a customer resulted in 20% drop in sales for The Snow Plow during the next winter season, and Snow Products Ltd. took legal action against the competitor. Question (10): Discuss the nature of the claim in this case and the arguments of the parties.

CASE 6 As part of federal anti-terrorism initiative, the federal government enacted the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Under the federal legislation, professionals and financial institutions are required to report suspicious transactions or large cash payments of $10,000 or more. An independent government agency (FINTRAC) investigates and analyzes reports and tracks cross-border movements of currency. Lawyers were among the professionals covered by the Act, and real estate lawyers were particularly affected since their work involves receiving large sums of money from their clients. The Federation of Law Societies of Canada launched a successful court challenge of the law. It argued that requiring lawyers to report on their clients was a violation of solicitor-client privilege and a breach of the constitutional right to independent counsel. The courts agreed with the Federation’s position and restricted the application of the new law. As a result, the Minister of Finance introduced amendments to the Act exempting lawyers from its reporting requirements. In recognition of the fact that preventing money laundering is a worthy goal, the Federation developed model rules for lawyers’ codes of professional conduct. The model “know your client” rule requires lawyers to confirm their clients’ identities with independent documents and collect information such as addresses and occupations. The model “no cash” rule prohibits lawyers from accepting cash payments of $7,500 or more. Question (11): Do you think law societies are in a better position to deal with money laundering than FINTRAC? Question (12): This is another example of a conflict between two worthy goals. What are the arguments that justify the priority of solicitor-client privilege?

CASE 7 A bank embarked on a recruitment campaign of university graduates, and Francis, a recent graduate applied for a position. Francis was interviewed by the bank, and following the interview, the bank offered Francis a position by letter which set out a salary, and a starting date. Francis accepted the position by return mail. A few days after Francis began work for the bank, he was called into the Manager’s office and presented with an employment contract that contained a confidentiality clause, and a proviso that either party could terminate the contract on three month’s notice, or in the case of the bank, payment of three month’s salary and accrued benefits. Francis signed the agreement. Francis worked for the bank for almost fifteen years, moving from the position of trainee through various promotions to the position of Branch Manager of a small branch of the bank. Some month’s later, he had a disagreement with the Regional office of the bank over the quality of certain loans he had made to local businesses, and his employment was terminated. On termination, he was paid three month’s salary and his accrued benefits. A week later, Francis instituted legal proceedings against the bank for wrongful dismissal. Question (13): What might be the basis of the claim for wrongful dismissal? What likely response would the bank make to his claim?

CASE 8 Chang was employed as a Material handler at a large manufacturing plant. The employees at the plant were represented by the Manufacturing Employees Union, and worked under a collective agreement. One evening after work, Chang went to a local bar to watch a soccer game on a large screen TV. During the course of the game, Chang and Zak, his work supervisor, who was also at the bar, became involved in a heated discussion over the game. Eventually, the supervisor called Chang ‘an idiot’. Chang responded to the remark with a right hook to the supervisor’s jaw, knocking the supervisor down. Bar employees stopped the fight immediately, and both Chang and Zak were escorted out of the bar. At work the next day, Zak said nothing to Chang about their previous night’s dispute. However, he ordered Chang to clean a large chemical storage tank, a task usually done only by a crew of two workers wearing protective gear due to the danger associated with chemical fumes generated by the cleaning process. Chang was not prepared to do so without a second employee to assist him, and when his request for assistance was refused by the supervisor, Chang refused to do the work. He was suspended for the rest of the day by the supervisor for his refusal to obey the order. When Chang returned to work the next day, he met with his union representative, and complained about his suspension. Question (14): Identify and outline the process that would follow to resolve this complaint. What arguments might be raised by each side, and what might be the outcome?

CASE 9 Anderson, Burton and Cummings are partners in an import partnership, which carries on business by importing manufactured products from various areas of the world, mostly Southeast Asia, and then selling them to numerous retailers in Ontario. They have been in partnership for less than a year. They have a very short written Partnership Agreement, which sets out a few of the terms regarding their relationship—for example, the ratio of profit sharing (each receives one‐third) and the prohibition of personal use by partners of any of the partnership assets. The written agreement also states that a partner may not negotiate a contract on behalf of the partnership in an amount greater than $10 000 without the approval of the two other partners. The three partners develop plans for expanding their business operations and explore ways of obtaining a loan of capital that will permit them to increase imports by a significant amount. Dilbert and Evans advance a loan to the partnership of a significant amount. Under the loan contract, it is agreed that the creditors, Dilbert and Evans are to be paid a share of the profits of the firm based on the proportion of the capital they provide. Also, the loan incorporates the Partnership Agreement by reference and states that Dilbert and Evans must observe that agreement. The lenders have some control on how their loan of capital is to be used in the business. Dilbert and Evans never refer to themselves as partners in the firm. They consider their loan an investment in the business and expect to recover a good return on their investment. Cummings meets Foster, a clothing manufacturer, and enters into a contract to import $50 000 worth of goods. Cummings signs the contract on behalf of the firm, and Foster is unaware of the limitation on Cummings’ authority. The partnership is experiencing serious financial difficulty and defaults in payment to Foster, as well as other creditors. Foster sues everyone on the debt. He commences an action against Anderson, Burton and Cummings (A, B and C) and includes the lenders, Dilbert and Evans (D and E), claiming that they were dormant partners, liable for the firm’s debts. Question (15): Analyze the legal implications of this situation and advise the parties involved.

Case 10 Ashley arranged for a week long ski vacation at an exclusive ski resort. She then visited a local merchant that specialized in ski equipment and ski wear. She sought the advice of a clerk who appeared to be quite knowledgeable about ski equipment, and purchased a new pair of skis, poles, and boots. As she was about to leave the store, she noticed an attractive ski jacket, and asked the clerk if would be suitable for the cold weather she might encounter on her vacation. The clerk suggested that it would be ideal for her ski vacation, and Ashley bought the jacket. Ashley did not use the jacket until she arrived at the ski resort, at which time she immediately went out to the slopes. Within the first hour, she noticed that her wrists had become swollen and irritated where the knitted cuffs of the jacket contacted her skin. She wore the jacket the second day, but found that after skiing for a short time, she had to return to the lodge because her wrists had again become badly irritated and had blistered. Ashley required medical treatment for the injury to her wrists, at which time the injury was determined to be a corrosive chemical that had been used to bleach the knitted cuffs of her jacket. The chemical was one that was normally used to bleach fabric. However, from the evidence, the chemical had not been removed from the material before the cloth was shipped to the manufacturer of the jacket. Neither the manufacturer nor the retailer were aware of the chemical in the cloth, and its existence could not be detected by ordinary inspection. The injury to Ashley’s wrists ruined her holiday and prevented her return to work for a week following her vacation. Question (16): Discuss the rights (if any) and liability (if any) of Ashley, the sports clothing merchant, the manufacturer of the jacket, and the manufacturer of the cloth.

CASE 11 Sharon parked her automobile in a parking lot owned by the Parking Corporation. At the request of the parking lot attendant, she left her keys at the attendant’s office and received a numbered ticket as her receipt for the payment of the parking fee. The ticket had the following words written on the back: “Rental of space only. Not responsible for loss or damage to car or contents however caused.” A 50 cm. Square sign on the side of the attendant’s office contained a similar message. Before leaving her keys with the attendant, she made certain that the doors of the vehicle were securely locked, as she had left a box containing her camcorder and computer in the trunk of the car. Sharon was not aware that the attendant closed his ticket booth at midnight, at which time he delivered the keys to the cars on the lot to the attendant of the parking lot across the street. The adjacent lot was also owned by the Corporation, but it remained open until 2 a.m. Sharon returned to the parking lot to retrieve her automobile shortly after midnight, at which time she discovered no attendant in charge, and her vehicle missing. By chance, she noticed an attendant on duty at the parking lot across the street, and reported the missing vehicle to him, only to find the attendant in possession of her keys. The police discovered Sharon’s automobile a few days later in another part of the city. The vehicle had been damaged and stripped of its contents, including her camcorder and computer. Sharon brought an action against the Parking Corporation for her loss. Question (17): Identify the issues in this case and prepare the arguments that Sharon and the Parking Corporation might use in their respective claim and defence.

CASE 12 A common complaint about leasing contracts is that the consumer lessee rarely understands the terms of the contract – how much is she really paying and what happens if she wishes to terminate the lease? According to one recent report, People sometimes confuse leasing with renting – when they don’t want the car anymore, they think they can just walk away from their monthly payments… in fact, they cannot, without incurring adjustment costs. During the term of the lease, circumstances may change. The lessee may lose her job and be unable to keep up the payments, or may move and find that the leased article is no longer suited to her needs. It is then that she discovers that she cannot just stop payments and return the article. In the majority of cases, the leased terms are quite fair – it is simply that the terms were never properly explained to the lessee. But in some cases, the terms that apply on early termination can be quite harsh. Some provincial consumer protection legislation (including that of Ontario, British Columbia, Alberta, and Manitoba) specifically addresses the harshness of consumer leasing contracts through the following requirements and limitations: ï‚· a written disclosure statement showing the itemized costs of the lease, including the financed amount, interest rates and calculations, and implicit financing charges ï‚· caps on termination penalties equal to three months of average payments (British Columbia and Alberta cap this amount if the goods have been returned) ï‚· disclosure and restrictions on form and content of advertising (not in the B.C. statute) Question (18): Does capping the termination penalties unfairly penalize lessors? Why is leasing less popular with the auto industry since the 2008 economic crisis?

Case 13 Ibrahim was the registered owner of several adjoining parcels of vacant land that he had purchased some 12 years earlier. During that period of time, the property had appreciated substantially in value. Recently, Ibrahim was approached by a real-estate agent who suggested that the property might be of interest to a number of developers who had just begun construction in the immediate area. After some discussion, Ibrahim entered into a listing agreement with the agent, and the agent agreed to seek out prospective purchasers for the property. Ibrahim established $200,000 as the selling price he would accept for the land. For several months, the agent attempted to find a buyer for the property, but without success. When the developers in the area were not interested in the property, the agent returned to Ibrahim and suggested that a corporation in which he had an interest might be willing to purchase the land. To this suggestion Ibrahim replied that it did not matter to him who the purchaser was, so long as the purchaser was prepared to pay his price for the land. A week later, the agent returned with an offer to purchase from the corporation in which he had an interest. The offer price was $200,000, and was described by the agent as a “clean deal — all cash.” The offer was prepared on a standard real-estate offer-to-purchase form and contained a clause that read: “Any severance or impost fee plus any expenses for water and sewer connections to be included in the purchase price.” Ibrahim queried the clause, and the agent explained that it meant that the cost of obtaining permission to use the three parcels of land as separate building lots, and the hook-up costs of water and sewer lines to them, would be deducted from the purchase price. He added that this “usually did not cost much.” At the agent’s urging, Ibrahim signed the offer. Some weeks later, Ibrahim discovered to his sorrow that the severance fees and the water and sewer connections would cost close to 10 percent of the sale price. The municipality required the payment of 5 percent of the value of the property as part of the severance fee, and the water and sewer connections accounted for the remainder. When Ibrahim refused to proceed with the transaction, the purchaser instituted legal proceedings for specific performance, and Ibrahim, on the advice of his solicitor, settled the action. As a result, he received only $180,000 for the property, from which the real-estate agent demanded a selling commission of 5 percent based upon the $200,000 selling price. Ibrahim refused to pay the agent and demanded that the agent compensate him for the $20,000 loss that he had suffered. Eventually, the agent brought an action against Ibrahim for the commission that he claimed was due and owing. Ibrahim, in turn, filed a counterclaim for payment of the $20,000 loss that he had suffered. Question (19): Discuss the arguments that might be raised by the parties in this case. Render a decision.

Case 14 For several years, the residents of Smallville had been served by one prominent pizza franchise, Lotza Pizza, which had operated in Smallville with the telephone number 456- 1010. This telephone number corresponded to that of the parent company, which was 123- 1010 and was a registered trademark of the company. The telephone number figured prominently in the company’s advertising and jingles. A rival franchise of a competing pizza company then moved into Smallville and established a similar operation. That company, Better Pizza, also had a trademarked telephone number, which was 222-0234. Just like Lotza Pizza, the telephone number played a large role in the company’s promotions and was one of the major factors of customer recognition. In Smallville, Better Pizza had obtained the number 457-0234. Smallville had only two exchanges, 456 and 457. Quon, a resident of Smallville, who had the telephone number 456-0234 for almost 15 years, began to receive a large number of inadvertent calls intended for Better Pizza. Quon soon tired of receiving these calls and approached the local Lotza Pizza franchise. He told the manager about his telephone number and the recurring problem. Shortly thereafter, the Smallville Lotza Pizza franchise acquired Quons’ telephone number 456-0234 and used it in its business. The local franchise of Better Pizza, upon discovering the use by Lotza Pizza of the number 456-0234, brought legal action against both the Smallville Lotza Pizza franchise and its parent company. Question (20): Discuss the nature of the action and the rights and liabilities, if any, of the various parties involved. What arguments and/or defences may be used, and what would be the likely outcome?. Refer to the relevant chapters from your textbook. Do additional research. Your answers must be neatly typed, with single-spacing and standard 12 Font-size. Quality of your answer is of critical importance, not the number of words used. The test should be carefully worded and professionally presented to the Professor by the due date. You must understand that plagiarism is an offence and will be seriously dealt with. Develop the answers using your own words. Therefore, any reference materials or sources of information used should be properly referenced in your test. Do not copy from the Internet or other resources.