1. Identify the legal issues
2. What arguments will Canuck have against Wonder and vice versa?
3. What about the distributor in Spain?

Wonder Machines Inc. ("Wonder") is a corporation located in Boston

Massachusetts. It manufacturers a wide variety of medical devices.

It decides to sell off one of its many business lines. It indicates in material

posted online and given to prospective purchasers that the reason for this

decision is that it wants to focus its efforts on manufacturing test kits for

viruses. The business line it wants to sell manufactures medical devices

that deliver radiation therapy to cancer patients, and this is too far removed

from the are on which it wished to concentrate its effort. It sells these units

directly to hospitals in the USA and depends on a network of distributors

and agents to sell these devices outside of the USA.

Initial Contact

A company located in Ottawa, Canada called Canuck Medical Devices Ltd.

approaches Wonder directly and sends the following email to the President,

of Wonder:

"Dear Jamie:

We understand that your cancer therapy product line is for sale. We are

interested in making an offer to purchase the product line provided we can

negotiate mutually agreeable terms and are satisfied that your product line

is of high quality and state of the art."

Jamie, the President responds by email and invites Canuck to inspect the

premises. Jamie says in the responding email "I can assure you that our

products are of the finest quality and reliability". Canuck visits the

manufacturing facility and are impressed.

Key Terms of the Sale Agreement

The parties sign a sale agreement on January 31, 2021, that contains, in

part, the following clauses:

"Wonder Machines Inc. (hereinafter the Vendor) agrees to sell to Canuck

Medical Devices (hereinafter the Purchaser) all those assets listed in

Schedule "A" of this Agreement for the sum of $121 million US. The closing

date of this transaction shall be April 30, 2021."

Schedule "A" includes 42 manufactured units, patents on the design filed in

Canada, the USA and the EU which each have another 12 years to run

before expiration, title to a small building in Boston owned by the Vendor in

which the product line is manufactured and which also includes all of the

equipment used to manufacture the units.

"The Vendor represents and warrants that there is no litigation related to or

in connection with its cancer therapy units. No other representations or

warranties are made by the Vendor to the Purchaser."

"The Vendor shall indemnify and hold the Purchaser harmless in

connection with any liabilities arising out of or in connection with any sale of

units finalized before the closing date of April 30, 2021."

"This Agreement is the entire agreement between the parties and

supersedes all prior understandings, agreements, and communications

whether written or verbal."

"This Agreement is governed by the laws of Ontario and the courts of

Ontario shall have exclusive jurisdiction over any dispute related to this

Agreement."

Events After the Deal Closes

The transaction closes on schedule on April 30, 2021. Wonder gets is

payment of $121 million US and Canuck gets title to all of the assets listed

in Schedule "A" and all relevant distributor and agency agreements are

assigned to it.

Canuck is served with a class action in Ontario filed on behalf of 300

patients who received too much radiation from units between May 15 2021,

and June 30 2021 in Spain and which were sold to hospitals in Spain

between March 1, 2021 and June 15, 2021. Both Canuck and Wonder are

Defendants. The claim is for over $400 million US. The claim asserts that

Wonder knew there were manufacturing defects in the units and sold the product line for that very reason. Wonder denies all of this and states that

the problem arose because their distributor in Spain made a mistake in

translating the user instructions and this caused the 300 deaths.