Case Study Questions - 5 Marks Each (Total 20 Marks)

Question 1

Sonny Chu is a university student majoring in entrepreneurship and international business. Two years ago, while on a student exchange program in China, Sonny came up with an idea for an Internet business. In China, Sonny had been able to purchase tailor-made silk suits for $250 to $400. The equivalent suits cost $1500 to $1800 in Canada. Sonny believed that he could offer the tailor-made silk suits to Canadians at close to the same price that he had paid for the suits if he could solve the difficulty of having customers take their own suit measurement.

Back in Canada, Sonny worked with a design student, and together they were able to develop a simplified method of taking suit measurements. With this problem solved, Sonny set up a website for his business called This Suits Me. The website featured several suit styles, a range of silk fabric swatches, and instructions for taking measurements. Customers could easily order suits by clicking on the style and fabric and sending in their measurements by following the simplified instructions provided.

To handle the Chinese end of the business, Sonny employed Dong Lee, a student he had met on exchange trip. Dong was born in China and is very familiar with the fabric industry, as both his mother and father are dressmakers. His job for Sonny involves purchasing silk fabric, engaging the services of Chinese tailors. The arrangement proved to be very profitable, and, within six months of establishing the website, Sonny was meeting all his sales targets. However, a couple of recent developments threaten the success of Sonnys business.

Dong agreed to pay $100000 to a Chinese supplier for several bolts of silk fabric. Although the fabric is beautiful and will make wonderful suits, Sonny believes that Dong has agreed to pay too much for the fabric and, further, he does not think that his business can afford the purchase at this time. Sonny wants to cancel or renegotiate the contract. He is also very angry with Dong because Sonny had expressly told Dong he could not enter into any contracts on his behalf in excess of $25000 without getting his permission first.

Sonny has also discovered that Dong has been purchasing fabric and engaging tailors on behalf of some of Sonnys competitors. When confronted with this information, Dong stated that he did not see any problem with his actions as he had not signed any exclusive representation contract with Sonny.

a) Applying the relevant principle of agency law, identify and discuss the nature of the legal relationship between Sonny and Dong. Discuss whether there has been any breach of duty. (5 marks)

b) Applying the relevant principles of agency law, discuss whether Sonny is bound by the expensive fabric contract Dong entered into with the Chinese supplier. (5 marks)

Question 2

Joe entered into partnership with two others in the establishment of a real estate sales agency. The other two, Sam and Harry, had considerable experience in the real estate business but no money. Joe, on the other hand, had his own home and several significant assets, and although he didn't have any experience in the real estate business, his monetary contribution made him an equal partner with Sam and Harry. Unfortunately, Harry misused some trust funds that had come into his care as a result of business, investing it in the business of one of his sons rather than an interest-bearing account. The business of the son went sour and the money was lost. The client sued Harry, Sam, and Joe.

a) Applying the legal principles of law, identify and explain in details the type of partnership involved. Discuss the liabilities of Harry, Sam, and Joe based on the relevant legal principles. (5 marks)

Amanda and Florence decided to form a partnership for selling gourmet picnic baskets. To raise sufficient capital, they convinced their mothers to invest $5000 each as limited partners. Amanda's mother was an experienced restaurateur and watched the business with great interest. On several occasions, she advised them on the business and contacted old business associates to buy surplus stock. She even filled in taking orders in the office when needed. A customer who was made ill by contaminated food from a tin can supplied in one basket sued.

b) Identify and explain in details the nature of the partnership as well as the liability, if any, of the mothers? (5 marks).

Short Answer Questions - 3 marks each (Total 30 marks)

1. Explain how a person's status as a limited partner could be lost. (3 marks)

2. What is the effect of a partnership agreement with a term making it clear that each partner will only be responsible for 1/3 of the debts and obligations? (3 marks)

3. The Sale of Goods Act places certain obligations/warranties on the seller with respect to conveying good title. Explain three warranties/requirements? (3 marks)

4. Explain the importance and the three key role of the Competition Act as a consumer protection law/legislation. (3 marks)

5. Securing a debt under the Personal Property Security Act (PPSA) requires going through several stages. Explain the three stages involved. (3 marks)

6."The main purpose of security in a secured transaction is to provide some recourse to the person claiming to be paid if some dispute arises about the quality of the performance of the contract." Discuss the accuracy of this statement.

7. In a secured transaction pursuant to the Personal Property Security Act, etc., what is the purpose of a registration? (3 marks)

8. Explain the purpose of the bankruptcy process. (3 marks)

9. Joe left his car at Harry's tire store, asking Harry to put a particular model of tire from his stock onto the vehicle while Joe went into his office in town. During the day, the tires were installed on the car, and Joe returned that evening to pick up the car. At what point did title on the tires transfer? (3 marks)

10. In relation to each of the following statements, identify and explain the way in which the agency relationship has been established.

a. X consigned his automobile to Z with instructions to sell same immediately. Z was a mercantile agent. Z used the vehicle as security for a loan from Y, who knew nothing about X or his instructions to Z.

b. Z, a common carrier, transported perishable goods for X. The goods started to spoil, and Z was unable to contact X, who had left the country on an extended vacation. Z sold the goods to Y and received a reasonable price with regard to the condition of the goods.

c. X executes a power of attorney in favour of Z, authorizing Z to sell specific land described in the power of attorney.

d. X, without the authority of Z, sells certain of Z's furniture at a garage sale. Shortly after the sale, Z learns of it and approves of X's actions