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Final Exam - Cases to be familiar with.docx

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Shelley Mc Gill

Case and Purpose Salomon’s Case – The Nature of a Corporation: Separate Corporate Personality Salomon owned a successful shoe business. Later on, he decided to start a corporation in which he owned 20001 of 20007 shares. His family members owned the remaining 6 shares in order to fulfill the statutory requirement. His shoe business was sold to the corporation but a downturn in the shoe industry caused by loss of government contracts and strikes drove the corporation into insolvency. There are still debts owed to his debtors. A trustee claimed that the corporation did not exist, and that Salomon was the true owner of the business and was also the real debtor. The House of Lords supported Salomon’s side since there was no fraud or any intention to deceive. The corporation was properly created and was solely responsible for it’s own debt, since it is it’s own ‘natural person’. The Canadian Business Corporations Act. Peoples vs. Wise – Corporate Governance: Directors’ and Officers’ Duties Wise bought Peoples. The three brothers were the majority shareholders, officers, and directors of Wise. They also became the sole directors of Peoples. The integration of the two operations did not go smoothly, especially in the areas of inventory control and bookkeeping. The inventory system was soon in total chaos; suppliers went unpaid. Both Wise and Peoples declared bankruptcy. Peoples’ bankruptcy trustee sued the Wise brothers personally, claiming they breached the duties owed to Peoples’ creditors. The Supreme Court of Canada held that there was no fiduciary duty owing to the creditors or other stakeholders. The interests of the corporation are NOT to be confused with the interests of the creditors or those of any stakeholders However, duty of skill and care was not limited to the corporation. The Court held that the Wise brothers met the required objective standard of skill and care by acting prudently and on a reasonably informed basis. The creditors were denied a remedy. S.122 Kanitz vs. Rogers – Leading Canadian decision on website service contracts A number of Rogers Cable customers started a class action to challenge rogers amending of the arbitration provision in their user agreement (resolutions of disputes can only take place outside of courts). The claim was that customers were not given sufficient notice of the amendments to make it valid. Rogers should have emailed all its customers to properly notify them. The Court held that the notice given was sufficient and that an email was not necessary. It was determined that it is the obligation of the customer to check for changes in the user agreement. Also, the Courts upheld the arbitration agreement as well as a “no class actions” clause. Parts of the contract that forbade customers from going to a regular court and suing as a class action were deemed valid. The exemption clauses shifted liability settlement away from court to an arbitration process.
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