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Business Law
B LAW402
Elaine Geddes

BUSINESS LAW 402 MIDTERM EXAMINATION FEBRUARY 2006 This is your midterm examination. It is worth 25% of your final mark. There are two (2) questions. You must do them both. Each question is of equal value. There is one bonus point available for writing your name on the examination booklet. All questions are to be answered in the examination booklet. You may use any form of answer you choose, i.e. essay style, point form etc. You may use any writing implement of your choice. 1. Basil and Sybil are the owners of Fawlty Realty. They are both licensed real estate agents. They have one employee, Polly, who is also a licensed agent. They have another employee, Manual, who is not a licensed agent and works only taking care of the records and bookkeeping. They rent out one of the offices in their suite to Mick, who is an independent licensed real estate agent. Mick handles nothing but condominium sales and his business activities are kept entirely separate from those of Fawlty Realty. Fawlty Realty also carries its own insurance, standard business insurance including errors and omissions insurance to cover any liabilities of the company. Friday, October 13th, turns out to be a very bad day for Basil and Sybil. The first thing to happen was that they noticed that Mick seemed to have disappeared and cleared out his office in the middle of the night. Several of his clients come looking for him and for money they say he has that belongs to them. It turns out that Mick has sold the same condominium property ten times and accepted deposit cheques from ten different people. He has now disappeared, as has the money. The current owner of the condominium did retain Mick as an agent to sell the property, but has never signed any deals or received any money from anyone. He refuses to give the prospective buyers any money saying he never received anything himself. The clients want Basil and Sybil to refund their money. Basil and Sybil say this is nothing to do with them. Fred, comes in furious because Polly has negotiated a deal for his property which is well below its value. Polly admits that she did promise him to sell for no less than $245,000.00. The actual selling price is $150,000.00. But she tells Basil that the client is crazy because the amount he wanted for his property was almost twice what it was worth and she had been trying to sell it for two months before she had to lower the price.. The client insists that Basil make up the difference and pay him the amount he says Polly agreed to get for him. Meanwhile, Sybil is getting into an argument with Marianne, who insists that she gave Fawlty a deposit cheque as a downpayment on a property. Manuel says there is no record of having received a cheque. Marianne insists she gave it to Manuel himself. Sybil says that Manuel is not authorized to deal with customers or money so she must be mistaken. Marianne then goes to her bank and comes back with a photocopy of the back of the cheque. It has been signed by Manuel, endorsed over to himself and deposited in his bank account. When Sybil turns around, Manuel is gone. Sybil tells Marianne she is not responsible for anything Manuel does because he is not a real estate agent. Keith comes in to complain about the deal that he has made. It turns out that Basil failed to do an adequate property search on the title to the land and Keith has now discovered that there is a long-term tenant in the property and that he
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