Purpose

The purpose of this assignment is to give you an opportunity to demonstrate your ability to analyze business scenarios, and to demonstrate your knowledge of contract law, Intellectual Property (IP) law, and E-Commerce law from a business' perspective, including in relation to intellectual property rights, privacy legislation, and various contracting best practices.

How to Proceed

Read Chapter 4: Understanding Contracts & Chapter 11: Intellectual Property and Business Law in the Digital Age (Canadian Business Law, 3rd ed.) and Unit 4 and 12 notes.

Review the draft contract and provide suggested edits to the contract in accordance with the fact pattern.

Please answer the questions succinctly. Some answers may be longer or shorter than others.

Fact Pattern 3

You work as a sales executive for a company called Karl's Crafts Inc. Karl's Crafts Inc. manufactures and sells various small crafts and sells them to large craft stores across Canada. BigBox Crafts Ltd. operates several large craft and craft supply stores across Canada. You are approached by Larry Box, the CEO of BigBox Crafts Ltd., who wants to buy products from Karl's Crafts Inc. BigBox Crafts Ltd. tells you that they would like to buy a standard set of goods on the 15th of each month: 10,000 Christmas snow globes; 10,000 piggy banks; and 5,000 stuffed giraffes. Karl's Crafts Inc. sells its snow globes for $10.00 each; its piggy banks for $5.00 each; and its stuffed giraffes for $15.00 each. These prices do not include GST and PST (or HST). However, Karl's Crafts Inc. provides a 10% discount on bulk orders over 10,000 units. Karl's Crafts Inc. usually makes its products available for pickup from its factory (often referred to as Ex Works; meaning the buyer is responsible for all shipping, taxes, insurance, and other costs). Karl's Crafts Inc. usually send invoices to buyers at the end of the month and expects payment within 15 days. BigBox Crafts Ltd. tells you that they have a standard form agreement that they require sellers to use when buying products. They provide it to you and ask you to review it and provide any concerns. They also tell you that they would like the goods delivered to their processing center at 1234 Anywhere Blvd, Mississauga, ON.

The CEO of Karl's Crafts Inc. asks you about the standard form contract provided by BigBox Crafts Ltd. Karl's Crafts Inc. usually sells its products based on oral agreements with purchasers. What would you tell the CEO about the advantages of written contracts and the issues with standard form contracts?

The CEO of Karl's Crafts Inc. asks you to complete the contract that BigBox Crafts Ltd. provided, to suggest any changes or clauses that may need to be included, and to highlight any clauses that need to be kept in mind to avoid liability in the contractual relationship.

Review the contract and update it with the appropriate information (in red font). If you make any changes to the wording of the contract, strike out (but don't delete/remove) the language that should be removed and replace it with red font.

List matters that aren't addressed, but should be considered before entering into the agreement (in blue font) at the end of the contract and explain why they should be included (include at least 4, but not more than 8).

Highlight parts of clauses that should be kept in mind to avoid potential risk of liability and provide an explanation for these highlights (in red font after the highlighted section) (at least 3, but not more than 6).

Sales Agreement

This Sale of Goods Agreement, dated as of [DATE] (this "Agreement"), is entered into between [BUYER NAME] ("Buyer") and [SELLER NAME] ("Seller", and together with Buyer, the "Parties", and each, a "Party").

WHEREAS, Buyer is in the business of [DESCRIPTION OF BUSINESS];

WHEREAS, Seller is in the business of selling [DESCRIPTION OF GOODS]; and

WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer the Goods.

NOW THEREFORE the parties hereto agree as follows:

Sale of Goods Seller shall sell to Buyer, and Buyer shall purchase from Seller the goods set forth on Exhibit A (the "Goods") in the quantities and at the prices and upon the terms and conditions set forth in this Agreement.

Delivery Date Seller shall deliver the Goods in the quantities and on the date(s) specified in Exhibit A (the "Delivery Date"). Seller fails to deliver the Goods in full on the Delivery Date, Buyer may terminate this Agreement immediately by providing written notice to Seller, and Seller shall indemnify Buyer against any losses, claims, damages, and reasonable costs and expenses directly attributable to Seller's failure to deliver the Goods on the Delivery Date.

Quantity Seller shall deliver the quantities of the Goods specified in Exhibit A. If Seller delivers more than or less than the quantity of Goods specified in Exhibit A, Buyer may reject all or any excess Goods. Any such rejected Goods shall be returned to Seller at Seller's risk and expense. If Buyer does not reject the Goods and instead accepts the delivery of Goods at the increased or reduced quantity, the Price for the Goods shall be adjusted on a pro-rata basis.

Delivery Location All Goods shall be delivered to the address specified in Exhibit A (the "Delivery Location") during Buyer's normal business hours.

Shipping Terms Delivery shall be made in accordance with the terms set forth in Exhibit A. Seller shall give written notice of shipment to Buyer when the Goods are delivered to a carrier for transportation. Seller shall provide Buyer all shipping documents, including the commercial invoice, packing list, and any other documents necessary to release the Goods to Buyer within five (5) business days after Seller delivers the Goods to the transportation carrier.

Title and Risk of Loss Title passes to Buyer upon delivery of the Goods to the Delivery Location. Seller bears all risk of loss or damage to the Goods until delivery of the Goods to the Delivery Location.

Packaging Seller shall properly pack, mark, and ship Goods as instructed by Buyer and otherwise in accordance with applicable law and industry standards and shall provide Buyer with shipment documentation showing the quantity of pieces in shipment, the number of cartons or containers in shipment, Seller's name, the bill of lading number, and the country of origin.

Inspection and Rejection of Non-Conforming Goods Buyer has the right to inspect the Goods on or after the Delivery Date. Buyer, at its sole option, may inspect all or a sample of the Goods, and may reject all or any portion of the Goods if it determines the Goods are non-conforming or defective. If Buyer rejects any portion of the Goods, Buyer has the right, effective upon written notice to Seller, to: (a) rescind this Agreement in its entirety; or (b) reject the Goods and require replacement of the rejected Goods. If Buyer requires replacement of the Goods, Seller shall, at its expense, promptly replace the non-conforming Goods and pay for all related expenses, including, but not limited to, transportation charges for the return of the defective goods and the delivery of replacement Goods.

Price Buyer shall purchase the Goods from Seller at the prices set forth in Exhibit A, as may be modified from time to time by agreement of the Parties (the "Price(s)"). The Prices include all packaging, transportation costs to the Delivery Location, insurance, customs duties, and fees and applicable taxes, including, but not limited to, all use or excise taxes, but excludes all harmonized sales tax, goods and services tax, or provincial sales tax. No increase in the Price is effective, whether due to increased material, labour, or transportation costs or otherwise, without the prior written consent of Buyer.

Payment Terms Seller shall issue an invoice to Buyer within five (5) days after the completion of delivery of the Goods. Buyer shall pay all properly invoiced amounts due to Seller within five (5) days after Buyer's receipt of such invoice, except for any amounts disputed by Buyer in good faith. All payments hereunder must be in Canadian dollars and made by electronic transfer.

Warranties Seller warrants to Buyer that for a period of twelve (12) months from the Delivery Date, all Goods will: (a) be free from any defects in workmanship, material, and design; (b) conform to applicable specifications, drawings, designs, samples, and other requirements specified by Buyer; (c) be fit for their intended purpose and operate as intended; (d) be merchantable; (e) be free and clear of all liens, security interests, or other encumbrances; and (f) not infringe or misappropriate any third party's patent or other intellectual property rights. These warranties survive any delivery, inspection, acceptance, or payment of or for the Goods by Buyer.

Compliance with Law Seller is in compliance with and shall comply with all applicable laws, regulations, and ordinances. Seller has and shall maintain in effect all the licences, permissions, authorizations, consents, and permits that it needs to carry out its obligations under this Agreement.

Termination In addition to any remedies that may be provided under this Agreement, Buyer may terminate this Agreement with immediate effect upon written notice to Seller, either before or after the acceptance of the Goods, if Seller has not performed or complied with any of the terms and conditions of this Agreement, in whole or in part. If Seller becomes insolvent, is generally unable to pay, or fails to pay, its debts as they become due, files an assignment into bankruptcy, or commences or has commenced against its proceedings relating to bankruptcy, receivership, reorganization, arrangement, or assignment for the benefit of creditors, then Buyer may terminate this Agreement upon written notice to Seller. If Buyer terminates this Agreement for any reason, Seller's sole and exclusive remedy is payment for the Goods received and accepted by Buyer before the termination.

Entire Agreement This Agreement, including and together with any related exhibits, schedules, attachments, and appendices, constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations, conditions, and warranties, both written and oral, regarding such subject matter.

Severability If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction.

Amendments and Modifications No amendment to or modification of this Agreement is effective, unless it is in writing, identified as an amendment this Agreement and signed by each Party.

Waiver No waiver by any party of any of the provisions of this Agreement shall be effective, unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power, or privilege arising from this Agreement shall operate or be construed as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power, or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege.

Assignment Seller shall not assign, transfer, delegate, or subcontract any of its rights or obligations under this Agreement without the prior written consent of Buyer. Any purported assignment or delegation in violation of this Section 26 shall be null and void. No assignment or delegation shall relieve Seller of any of its obligations hereunder. Buyer may at any time assign, transfer, or subcontract any or all of its rights or obligations under this Agreement without Seller's prior written consent.

Governing Law This Agreement, including all exhibits, schedules, attachments, and appendices attached to this Agreement are governed by and construed in accordance with the laws of Canada.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

[BUYER NAME]

By_____________________

[SELLER NAME]

By_____________________

EXHIBIT A

[DESCRIPTION OF GOODS]

[PRICES]

[QUANTITY]

[DELIVERY DATE]

[DELIVERY LOCATION]

[SHIPPING TERMS]