Laurie and Ken were 50/50 partners in the operation of a hotel business which they sold to Shirley in July of 2006 for $1 million. One of the assets included in the sale was a boiler for heating the hotel. Laurie told Shirley that the boiler was only two years old and was in great condition and this was written in the contract as a warranty. Laurie knew, in fact the boiler was 10 years old and that her heating contractor had told her it needed to be replaced at a cost of $50,000 before winter. Ken was not aware of what Laurie has said or that there was a problem with the boiler, although he knew it was 10 years old. He signed the sale agreement but did not read the disclosure document containing the warranty. Shortly after Shirley purchased the hotel, the boiler had to be replaced as it broke down. Shirley sued Laurie and Ken in November 2006, seeking to set aside the purchase and alternately for damages for the cost of replacing the boiler.

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• 1. Identify the main legal issues? (2 marks) There are at least 3
• 2. What is the main legal test/rule of law governing each issue? (1 mark)
• 3. Develop arguments for the plaintiff Shirley, applying the rule of law for each issue to the facts. (1 mark)
• 4. Develop arguments for the defendant, applying the rule(s) of law for each issue to the facts. ( 1mark)