CASE 1

Central Apartments Ltd. borrowed $800,000 from the Exchange Bank and secured the loan by way of a five-year mortgage on the security of its apartment building. The bank required additional security for the loan, and Ebbers, the president of the corporation, personally guaranteed repayment of the loan. Ebbers was voted out of office as president along with most of the board of directors a few years later, and a new president and board of director's were selected by the shareholders. The new president and board of directors reorganized the corporation's operations. As a part of the reorganization, it was necessary for the corporation to rearrange its mortgage loan with the bank. The bank agreed to extend the loan for a new five-year term, but at a higher interest rate. Ebbers, who was still a shareholder of the corporation, was unaware of the new refinancing arrangement that the corporation had made with the Bank. The Corporation, unfortunately, ran into financial difficulties a year later. As a result of tenant problems and a high vacancy rate, the corporation was unable meet its mortgage payments, and the mortgage went into default. When the corporation failed to pay the mortgage, the bank turned to Ebbers and demanded payment under his personal guarantee of the loan. Discuss the rights of the parties in this case, and explain the possible outcome if the bank should take legal action against the corporation and the guarantor?

CASE 2

A general contractor invited subcontractors to submit bids for mechanical work in the construction of a large office building. Several written bids were received by the contractor. Just before bidding was to close, the general contractor received a telephone call from a subcontractor who submitted a bid about10 percent below the lowest bid price of the written submissions. All written bids were within two percent of each other.

The next day, the subcontractor who had submitted the telephone bid, checked his estimates. He discovered that he had made an error in his calculations and immediately called the contractor to withdraw his bid. The contractor, however, was out of town, and the subcontractor could not reach him at his office. He left a message with the contractor's secretary to the effect that his bid was in error and that his bid price for the contract would be 12 percent above the figure that he had quoted on the telephone to the general contractor. The general contractor, while out of town, prepared his contract price for the construction of the building, using the original telephone bid price for the mechanical work. He was awarded the construction contract. When he returned to the office, his secretary informed him of the subcontractor's error.

The subcontractor refused to enter into a written contract or to perform the mechanical work at the original price. The contractor then arranged to have the work done by the subcontractor who had submitted the next lowest bid. When the contract was fully performed, the contractor brought an action against the telephone bidder for the difference between the contract price quoted on the telephone and the actual cost incurred in having the work done.

Discuss the arguments that might be raised by the parties in this case. Render a decision?

CASE 3

A customer rented a motor vehicle from a car rental company. The customer was offered collision damage coverage in the written agreement, and he paid the additional premium for the coverage. The agreement stated that the coverage would not apply if he was in violate on of the agreement. The customer had rented vehicles on similar occasions where he was informed that he had "full damage coverage, "and so, he is gained the agreement without reading the fine print on the back of the form .On the back of the form in fine print, the agreement provided that damage coverage would not apply if the customer consumed any amount of alcohol. The customer was later involved in a minor accident that resulted in damage to the rental car. The customer admitted that he had a consumed a small amount of alcohol but was not intoxicated, and no drinking/driving charges were laid against him. The car rental agency sued the customer for the repair costs to the car on the basis that the Collison damage waiver did not apply, as he was in violation of a term of the agreement. Advise the parties of their rights. Render a decision?

CASE 4

Manufacturing Consultants Inc. offered to purchase the shares of Commercial Management Ltd. from its shareholders, Bernard and Corrick. Manufacturing

Consultants Inc. also agreed to lease office premises from shareholder Corrick under a long-term lease. Under the share purchase agreement, Manufacturing Consultants Inc. agreed to purchase all of the outstanding shares which were owned 50 percent by Bernard and 50 percent by Corrick. The total price payable for the shares was $100, being $50 for all of the shares of Bernard and $50 for all of the shares of Corrick. Manufacturing Consultants Inc. also agreed to repay to Bernard and Corrick loans that they had made to their corporation, Commercial Management Ltd., in the amount of $450,000. The purchase agreement provided that Commercial Management had accounts receivable outstanding in the amount of $350,000, which Bernard and Corrick warranted were all in good standing and could be collected by Commercial Management Ltd. From its customers within 60 days. Under the terms of the agreement, Manufacturing Consultants Inc. agreed to pay $100,000 as a deposit on the signing of the agreement and the balance of the money in 90 days. The shares of Commercial Management Ltd. were to be delivered at the time of signing on payment of the $50 to each shareholder. The agreement was signed on May 1 and the $100,000 paid. Bernard and Corrick signed over their shares on the same day, and each received $50 as payment in full. By June 30, Commercial Management Ltd. (now owned by Manufacturing Consultants Inc.) had collected only $225,000 of the accounts receivable, and the balance had to be considered uncollectable. At that time, they informed Bernard and Corrick that they expected them to provide the company with the remaining $125,000 that Bernard and Corrick had warranted were collectable accounts. Bernard and Corrick did not pay the balance owing. On July 31, the accountant at Manufacturing Consultants Inc. inadvertently sent Bernard and Corrick a cheque for the $350,000 balance owing under the agreement. When the error wets discovered, the company claimed repayment for the $125,000. Bernard and Corrick refused to do so, and Manufacturing Consultants Inc. instituted legal proceedings against Bernard and Corrick to recover the

$125,000 or, in the alternative, to set off rent owing to Corrick against the amount unpaid. Outline the nature and basis of the claim against the two former shareholders and any defences Bernard and Corrick might raise. Render a decision?

CASE 5

Winter Snowmobiles Inc. had two snowmobiles for sale at the end of the snow season. The company advertised them in a local newspaper. While both were current-year racing models, one was relatively new, being only used as a demonstrator. The second machine had been raced for most of the season and had seen some very hard use. At a local snow festival, the company had both machines on display. The racing machine was displayed on a raised platform with the numerous trophies that it had won. The other machine was displayed along with other models and equipment in the company display area. In response to the newspaper advertisement, a prospective purchaser called the company. He referred to the advertisement and asked if the advertised machines were still for sale. The company salesman said "yes" and added that one had seen some use as it had been raced during the season. The prospective purchaser then asked if the machine was the one that the company had in its display at the local winter festival. The salesman replied, "Yes." The prospective purchaser then offered to buy the machine for $8,000 and the salesman accepted his offer. The purchaser provided his credit card number to cover the purchase price. The company prepared the raced snowmobile for the customer and marked it with a "sold" label. Later that day, it sold the demonstrator model. The next day, the purchaser arrived to pick up the snowmobile, only to discover that it was the machine that had been raced, not the demonstrator. The purchaser demanded his money back, and when the company refused to do so, he instituted legal proceedings. Discuss the nature of the purchaser's claim and the arguments, of the parties. Render a decision?

Case 6

The Stonehouse Hotel Inc. was offered for sale, and several interested parties agreed to purchase the company by a share purchase. The agreement called for a mortgage to be placed on the hotel and the proceeds used to pay for the shares. The lawyers who acted for the purchasers arranged with a local trust company for the mortgage to be placed on the hotel. The trust company then asked the lawyers to act on behalf of the trust company to register the mortgage after examining the title to the property to ensure that the trust company had a good first mortgage. The lawyers did so and, after registering the mortgage, wrote a letter to the trust company in which they certified that the trust company had a good and valid first mortgage on the hotel property. A few years later, Stonehouse Hotel Inc. ran into financial difficulty, and the mortgage went into default. The trust company attempted to foreclose on the mortgage, at which time it discovered that the mortgage was void. Under the companies act of the province, a company was not allowed to mortgage its property for a share purchase and any mortgage used for this purpose was void. When the trust company made this discovery, it decided to look to its lawyer for compensation for their error in overlooking the restriction in the companies act. What would be the basis for their claim? What defences, if any, could the lawyers raise? How might the courts decide?

CASE 7

An industrial firm purchases a rivet-making machine from a distributor whose advertising materials claim that the machine will produce up to 300,000 rivets per day. After purchase and installation the firm discovers that the machine, at maximum settings, will produce only 100,000 rivets per day. After an exchange of e-mails, the distributor asked if the firm was running three 8-hour shifts, or just one. The firm was running only one production shift, and could not afford to consider 24-hour operations. Discuss the legal issues that apply here, and what factors might influence a judge to decide the case in favour of one party over the other?

CASE 8

Gavin is a real estate agent, and suggests to his dentist, Ravi, that he should invest $250,000 in commercial condominium real estate in a distant city. Gavin provides Ravi with legal papers to sign, but in the end the property address is not a commercial development, but rather a residential condominium. Ravi claims "non est factum." Discuss the nature of Ravi's claim against Gavin.