MAJOR CASE STUDY Kathryn Kennedy was hired after College by her Co-Op placement, JG Jones Marketing Inc. ("IG Jones") in Cambridge. Kathryn has worked for JG Jones for nearly 5 years. Kathryn has an employment contract with JG Jones which outlines her hours, her position, her salary and the required notice for leaving, which is two weeks. At the time she was hired, Kathryn was told that there was opportunities to advance and to do freelance work. During the last five years, Kathryn has learned that since JG Jones is a family-owned company and Kathryn isn't family, opportunities for management positions are limited. Lately Kathryn has been dissatisfied with her job. Kathryn has, on her own time, developed marketing strategies for some of the clients of JG Jones. Kathryn presented these strategies to the Senior Marketing Development Manager, Susan Jones, Susan abruptly rejected them without giving them any sincere consideration. While Kathryn has been paid relatively well, she wants to advance and be able to set her own schedule and establish a client base of smaller businesses. Kathryn has spoken with Susan on several occasions about updating JG Jones' computers and the software. Kathryn has tried to introduce smaller clients to JG Jones, but Susan advised Kathryn she couldn't work for them. Susan does not listen to Kathryn's suggestions and has never taken Kathryn's ideas to senior management. Recently, a frustrated Kathryn concluded that JG Jones has become stagnant and unimaginative. Her dream is to start her own marketing business. Kathryn wants to approach the clients of JG Jones with her plans. Kathryn also has some great ideas for developing a marketing business serving small businesses that can't afford a full-time marketing person. After talking with friends and family, Kathryn has decided to quit her job when her contract expires in six (6) months. Since Kathryn has Recently, a frustrated Kathryn concluded that JG Jones has become stagnant and unimaginative. Her dream is to start her own marketing business. Kathryn wants to approach the clients of IG Jones with her plans. Kathryn also has some great ideas for developing a marketing business serving small businesses that can't afford a full-time marketing person. After talking with friends and family, Kathryn has decided to quit her job when her contract expires in six (6) months. Since Kathryn has been considering this move for some time, she has been saving money to pay the expenses to start up the business. Before Kathryn gave notice she decided to get some things started to open her own business. Her first step was education. She decided to attend a seminar at Conestoga College for new business owners. After the seminar, Kathryn reviewed her employment contract and discovered that it did not contain non-competition or non-solicitation clauses. Kathryn owns a small bungalow that she bought about 2 years ago that has a huge unfinished basement. She decided the basement would be an excellent location to start her business, at least until it grows and requires more space. There are two issues that needed to be dealt with about the basement choice. First, Kathryn needs to find out if she can carry on business out of her home; and second, the basement needed major work to make it a usable space. Kathryn doesn't fully understand zoning issues so she decided to find a professional renovatibn company who could prepare the plans for the basement as well as obtain all the necessary permits. After consulting with three businesses recommended by a friend and receiving their plans for her basement renovation, Kathryn decided to use RENOS R Us Ltd. ("RENOS"). RENOS provided the plan that best suited the needs of her business. Tom, the owner of RENOS assured Kathryn that RENOS would get the building permit quite easily. Tom said that the price quoted for the renovation included costs for obtaining all the necessary permits for the work. Kathryn negotiated back and included costs for obtaining all the necessary permits for the work. Kathryn negotiated back and forth about the deadline and the cost and they came to an agreement on all those issues. Kathryn 1 signed a contract prepared by RENOS that outlined the work to be done, the plans for the work, the timeline for completion (which was to be shortly before Kathryn stopped working at JG Jones) and the total cost of the project. A couple of days after Kathryn signed the contract, she realized there was no mention of the building permit. When Kathryn called Tom, he assured her that he would cover any costs associated with obtaining the permit. Also, the contract did not provide for any late penalties if RENOS did not complete the work on time. When Kathryn asked about this issue, Tom assured her that RENOS had never been late so there was no need for a penalty clause. RENOS was to start the 15th of the month. The 15th passed and Kathryn hadn't heard from Tom or RENOS, so Kathryn called him. Tom advised that there has been an issue with her building permit. The age of her home renuired the renovations to include Building Code modifications as well as a RENOS was to start the 15th of the month. The 15th passed and Kathryn hadn't heard from Tomor RENOS, so Kathryn called him. Tom advised that there has been an issue with her building permit. The age of her home required the renovations to include Building Code modifications as well as a rezoning of the property to allow for commercial business to be run out of the home. Kathryn was distressed by this news, but Tom reassured Kathryn that he would take care of it at no extra cost to Kathryn. Tom advised Kathryn that it would be a few weeks. As expected, Tom called Kathryn at work to advise Kathryn that the rezoning had been approved and the modifications to the home required for the building permit had been made and RENOS was now ready to start the renovations in the basement. They were already behind schedule, but Tom reassured Kathryn that RENOS would complete the work on time. Kathryn wanted a catchy name for her business. Many marketing companies use the name of the person who started the business, but Kathryn wanted something different that will distinguish her business out in the marketing industry. After long hours of searching and brainstorming, she decided on "Plant for your Future" with a tag line "Help us help you Grow". As the renovations progressed, Kathryn became more excited. The seminar materials recommended searching for the office materials that would be needed and offered some websites as resources. Kathryn heard from one of her Conestoga classmates about a business that was going out of business and selling furniture for a fraction of its cost. She was advised to call Joey Johnson, who was selling the furniture, and provided his telephone number. Kathryn called Joey and agreed to meet with him at his office after hours. There was a sign in the window of the business announcing that it was going bankrupt. Kathryn doesn't ask about it as she doesn't want to embarrass the man. He ronden en the furniture which Innled hendinniVathrunan fenntinn ofthe rien.hehe As the renovations progressed, Kathryn became more excited. The seminar materials recommended searching for the office materials that would be needed and offered some websites as resources. Kathryn heard from one of her Conestoga classmates about a business that was going out of business and selling furniture for a fraction of its cost. She was advised to call Joey Johnson, who was selling the furniture, and provided his telephone number. Kathryn called Joey and agreed to meet with him at his office after hours. There was a sign in the window of the business announcing that it was going bankrupt. Kathryn doesn't ask about it as she doesn't want to embarrass the man. He agreed to sell the furniture, which looked brand new to Kathryn, at a fraction of the price she has seen it selling for online. Kathryn paid cash and picked up the furniture herself within 24 hours. The final equipment Kathryn needed was computers, printers and photocopiers. Kathryn was fine with getting used printers and photocopiers, but she knew that the computer must be up-to-date to ensure she could use the necessary software to produce quality marketing materials for other businesses. Finding printers and photocopiers was relatively simple as many businesses change their photocopiers often. Kathryn posted an ad on Kijiji listing the types of printers and photocopier she needed. After a few days, Kathryn had several responses to her ad. One response that caught her attention was from a co-worker at JG Jones. This co-worker was offering to sell Kathryn the exact printers and photocopier she needed at a reasonable price. The co-worker assured Kathryn that they worked fine but were old machines, so may need some work in the future. After a few messages of negotiations back and forth, Kathryn and her co-worker reached an agreement on which machines Kathryn wanted and the price. Kathryn did not put any of it in writing as she had known her co- worker for at least 4 years and Kathryn trusted her word. Kathryn advised that she couldn't pick up the printers and photocopier for a while as the renovations were making her house too dirty and the machines might be damaged. Her co-worker agreed to hold the machines for a couple more months. As it seemed like everything was ready to go for her business, Kathryn put her notice in at JG Jones. They were surprised but happy for Kathryn and even suggested they would send Kathryn small businesses that couldn't afford JG Jones' prices. Kathryn was greatly relieved that there was no awkwardness and no problems with JG Jones. Now Kathryn could really start marketing her business. Throughout her years at JG Jones, Kathryn developed a list of businesses that she thought could use some updating or rebranding of their business, name, look, etc. Kathryn repeatedly presented these names to Susan Jones, but she decided those businesses weren't worth pursuing. Kathryn had a list of those businesses on her computer and at work. She downloaded them and deleted them from her work computer. Kathryn had also developed many templates and precedents for various marketing plans. Kathryn downloaded those precedents to keep for reference and use. Two weeks before Kathryn was finished at JG Jones, Susan Jones asked Kathryn to turn over all the projects Kathryn was working on and to provide a summary of the status of the projects. Ms. Jones also asked Kathryn to turn in all work product that she has produced while working at JG Jones. When Kathryn asked her supervisor what she means by "work product", she replied that it meant all templates, precedents and other materials Kathryn created during her work at JG Jones. Kathryn provided her with copies of all the materials she already copied to take home. Kathryn came home one evening to learn that there was a significant delay in the renovations because the sub-contractor RENOS hired had a personal emergency and was not able to come to the property to complete the plumbing work which prevented RENOS from being able to lay the flooring and do the drywall. Kathryn immediately contacted Tom Thompson to discuss the delays and her concerns. He advised Kathryn that he had another subcontractor that was going to do the work the following day and that the delay would not be as long as anticipated. Kathryn advised Tom that she needed the work to be on time or she was going to incur expenses including the delay of the opening party and the lost revenue from not being able to get the business started. Kathryn told Tom that she would expect some compensation for the delay in completing the contract. Tom responded that he would do everything he could even if it meant the workers showed up on evenings and weekends to get the work completed on time. With respect to some compensation, Tom said they could discuss it later if there was a delay. Based on his assurance, Kathryn agreed to the workers coming into her home after regular hours to get the work done. Kathryn's final day of work at JG Jones arrived. Over the course of the day, Kathryn turned over all client account information and cleaned out her workspace. At 5:00 p.m. Kathryn left JG Jones for the last time. Finally, after weeks of delay and frustrations with RENOS, the renovation work was finished. Kathryn got her office set up. She received a few calls from potential clients but due to the delays, she wasn't able to provide any quotes. Kathryn got the furniture, the computers, printers, and photocopiers in 3 place and got the business started. She printed her advertising materials to announce the opening of her business. However, "PLANT FOR YOUR FUTURE", the name Kathryn chose for her business was similar to another company's name, "Planting the Future", which was a greenhouse and gardening store. But because the other company did not carry-on business in Waterloo and their lines of business was not the same, Kathryn didn't think there would be an issue. To advertise her business, Kathryn contacted the small companies she wanted to provide services for when Kathryn worked for JG Jones. Kathryn sent out mailings to some of her former clients as well as various other large businesses in the area. She was contacted by Sally Sweet, the VP of sales at ACME Manufacturing Inc., one of IG Jones' largest clients. Sally told Kathryn that she was very interested in hearing her ideas for a marketing and advertising plan for ACME. She told Kathryn that she did not like the person JG Jones hired to replace Kathryn and ACME was looking for another marketing company. Kathryn told Sally that JG Jones was using outdated technology and was very traditional in their marketing ideas. Shortly after their meeting, Sally called Kathryn to advise her that she was impressed by Kathryn's presentation and ACME wants to retain her services. Sally had terminated the contract with JG Jones. Shortly after being retained by ACME, Kathryn received a letter from JG Jones' lawyer warning her to stop defaming JG Jones and their services and soliciting their clients failing which it would commence legal action for defamation and inducement to breach contract. Kathryn is worried about these issues as she had approached many other clients of JG Jones. After a few months, Kathryn realized that she was overwhelmed with work. She realized she can't do e all the work herself. A former professor at Conestoga recommended a student, Davinder Brar to After a few months, Kathryn realized that she was overwhelmed with work. She realized she can't do all the work herself. A former professor at Conestoga recommended a student, Davinder Brar to Kathryn as someone who had exceptional skills and work ethic. The professor said that Davinder was young, only in his first semester at College, but he would be a great employee for Kathryn. After meeting Davinder, Kathryn realized how young he really was. His portfolio was impeccable, but his age caused Kathryn to hesitate to offer him the position. Kathryn later relented and offered Davinder a position with her business. He would be a part time employee working 15-25 hours per week earning $17.00 per hour with a possibility of an annual bonus depending on the success of the business. Davinder accepted the offer and signed the contract, which included non-solicitation and non-competition clauses. Kathryn primarily met with clients at their offices as it was easier for them and allowed her to see their business in action. One new client, Casey Clutzy, wanted to meet with Kathryn at her office. Her appointment was at 10 a.m. but at 9 a.m. Kathryn discovered that there was a problem with the flooring. One section had lifted and caused a trip hazard. In fact, both Kathryn and Davinder tripped several times that morning. Kathryn thought about putting up a sign but forgot to do it. When Cathy came for her meeting, she tripped and fell, breaking her arm. Kathryn is very worried about whether she is liable for Casey's injuries. Kathryn went to some seminars designed to help her stay up-to-date with new software and implement new ideas for using the internet for marketing. During the next 6 months, Planting for your Future grew rapidly, and Kathryn needed to help beyond a part time student. She needed more 4 help and money to help expand the business. She realized that keeping up with the latest software for marketing would require significant capital, and Kathryn needed to decide how to get the money for this purchase. At one of the seminars on "How to expand your Business", Kathryn met a woman, Joanne Kirk, who wanted to leave her employment and start her own business. She had money to invest and about 10 years of experience in marketing and advertising. Joanne did not have many contacts as her employment contract prohibited her from soliciting any clients of her current employer. Kathryn gave Joanne her card and suggested they meet to discuss a possible business arrangement between them. After the seminar, Kathryn called Joanne and the two met for lunch a few times. During those meetings, Kathryn discussed the possibility of Joanne quitting her job and the two of them creating their own business. Their meetings and discussion continued for a few months while Joanne was deciding what she wanted to do. As her discussions with Kathryn progressed, Joanne decided she would quit her job and come to work with Kathryn at Planting for your Future. She didn't want to be an employee. They needed to consider what form of business relationship to create. Kathryn remembered her Business Law class and that there are a few options but decided to contact a lawyer about which business model best suited Kathryn and Joanne. Questions for Part 1 1. Is there a valid renovation contract between Kathryn and RENOS? Provide an explanation with reference to the elements for a valid contract (9 marks). 2. Did RENOS breach the contract with Kathryn? If so, how was the contract breached? (4 marks) 3. Assuming there was a breach of contract by RENOS, what remedies are available to the Kathryn in this case? (4 marks) 4. Kathryn received an invoice from RENOS which was in excess of the amount provided for in the contract because despite Tom's verbal assurances that the costs for obtaining the permits and re- zoning of Kathryn's home were included in the contract, the invoice contains additional charges for these items. (i) Is Kathryn required to pay this additional amount? What arguments can Kathryn make to prove that she is not liable for this additional amount? (4 marks) (ii) What problems or obstacles does Kathryn have with her argument? Provide a full explanation of the problems (4 marks) (iii) Who would be the plaintiff and who would be the defendant in such a case?(2 marks) (iv) Who would be successful in the case and why? Be sure to cite any cases that may apply (3 marks) 5. Is the contract between Kathryn and Davinder valid and enforceable? What, if any, arguments! would be made against enforcement? (4 marks)