Case and Problems
1. Nagatomi is not under any legal obligation to deliver the machine to Inga before payment.
Furthermore, it is legally entitled to re-sell the machine to the buyer in Colorado and to charge any
resulting expenses to Inga. However, it does not make good sense to strictly enforce legal rights. This
appears to be one such situation.
Although not every business person would agree, Nagatomi has a moral obligation to agree to
Inga’s proposal. It knows that she has recently suffered a string of bad luck and that she may be
financially ruined if she is not allowed to use the harvester before making payment. Furthermore, the
facts suggest that her proposal entails little risk for the company. While more information is needed, it
appears that Inga’s crop is very good and that she would be able to pay the full price, with interest,
within a relatively short time.
Finally, it would appear to be commercially advantageous for Nagatomi to agree to Inga’s
proposal. If it strictly enforces its legal rights, it will make only one sale: the Colorado buyer will
purchase the machine that was initially built for Inga. However, if the company agrees to Inga’s
proposal, it will make two sales. First, Inga will pay for her harvester. And second, the Colorado buyer
will pay for the second harvester that the company will be able to manufacturer during the next year.
2. The risk management process involves three steps: identification, evaluation, and response.
Rabby has already identified the problem. Its software program will erase information from its
customers’ computers. Rabby also needs to evaluate the problem as accurately as possible with respect
to legal liability. Before it can formulate a sensible response, it needs to know the approximate number
and value of the claims that it may face. It also needs to determine the potential consequences of adverse
publicity. Finally, Rabby needs to formulate the response that best suits its needs. The company must
find a way to minimize its prospective losses in terms of legal liability and damage to its reputation.
There are four forms of risk management: risk avoidance, risk reduction, risk shifting, and risk
acceptance. At this point, risk avoidance is not entirely possible. Rabby might be able to prevent any
actual damage to its customers’ computers by recalling all the units that it shipped to the stores.
However, carries obvious costs in terms of refunds, replacements, and loss of reputation. There is
relatively little that can be done at this stage with respect to risk reduction. The company should,
however, consider whether it would be better in the long run to recall the products or to hope for the
best and simply deal with claims as they arise. Since the problem already exists, Rabby would
presumably find it most difficult to arrange insurance coverage. Even if such coverage was available,
the premiums might be prohibitively expensive. As another form of risk shifting, Rabby could consider
raising the prices of its other products. It might hope to shift the costs associated with the problem onto
its future customers. However, a small price increase might significantly hurt sales. Finally, Rabby
might simply accept the risk. It could do nothing at this point and hope for the best. And when it does
receive claims, it might settle those cases as quietly as possible to avoid adverse publicity.
3. This question raises the issue of paramountcy. When there is a conflict or tension between a
federal law and a provincial law, the doctrine of federal paramountcy resolves the dispute based on the
Constitution’s division of powers by stating that the federal law prevails.
Before discussing the issue of federal paramountcy, however, it is first necessary to recognize
that there is a conflict. The federal Canada Marine Act established the Vancouver Port Authority) to
ensure that shipping operates effectively in the Vancouver harbour. By granting approval to the
development proposal created by Lafarge Canada Inc, the VPA has indicated its belief that the project
is essential to the goals of the Canada Marine Act.
The tension arises in this case because a citizens’ group insists that the project also requires
approval from the city. Planning approval of that sort is a municipal matter. However, municipalities
operate based on subordinate legislation because of provincial legislation. Consequently, municipal
planning approval does entail provincial authority.
A question therefore arises as to whether land under control of the federally constituted VPA
must comply with the requirements of a municipal bylaw enacted under the authority of provincial
legislation. The Supreme Court of Canada invoked the doctrine of federal paramountcy and held that
the municipal/provincial laws could not impede the federally approved project. To hold otherwise
would deprive the VPA of its final decision-making power.
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