In the spring, Bora was looking to purchase some wood to build a deck. He went to a store owned by a company called "The Woods Ltd." There he chatted with a salesperson, Malcolm. Malcolm was authorized by The Woods Ltd. to negotiate with customers but was not authorized to sell lumber at less than $1,000 per board-foot. After some discussion, Malcolm, keen to close the deal, agreed to sell Bora the lumber he needs at a price of $990 per board-foot. Bora did not mention what he was using the lumber for.

(a) Will The Woods Ltd. be bound by the contract entered into by Malcolm? Why or why not? [3 points]

Bora then used the wood to build the deck around the front of his house. By the fall, however, he found that the wood was starting to rot, and it appeared that the stain used to treat the wood was peeling away. Bora contacted the salesman who sold him the wood, who agreed that the wood appeared to be defective.

(b) Discuss what action Bora could take against The Woods Ltd. and Bora's chances of success in that action. [3 points]

Bora has heard around town that The Woods Ltd. is in severe financial difficulty. It turns out the rumours are true. The Woods Ltd. owes $900,000 to its creditors and it only has assets amounting to $500,000. It has failed to pay the bank the last mortgage payment on its store. Despite this failed venture, The Woods Ltd.'s two shareholders, Sheilah and Morris, are still doing quite well for themselves.