Winter 2014 - FINAL EXAM REVIEW CASE & Related Materials
Bang Up Car Repair Inc. is a closely held corporation. Howard, Penny, Leonard and Sheldon are the shareholders.
Howard owns 70% of the shares and the other three each hold 10% of the sha res. Howard, Penny and Wil (a local
accountant) sit on the board of directors. Leonard and Penny operate the business. Leonard de als with the actual repair
work and manages the repair shop, while Penny oversees the entire business .
Answer the following questions. Make sure you identify the area of law or legal principles that are relevant to each
situation, define the applicable law and apply it to Bang Up’s circumstances. Include remedies and defences for each
1) Bernadette brings her car in f or repairs and Penny has her sign a contract for repairs estimating the cost at
$1,500.00 payable upon completion of the repairs. Leonard and his staff work on the car for a couple of days
before it is repaired. Penny contacts Bernadette to let her know her car is ready for pick up, but Bernadette tells
Penny that she is unable to pay for the repairs. What legal remedies are available to Bang Up Car Repair Inc.?
Bailment: a transfer of possession of a property w/o the ownership
▯ Parties: Who is bailor (owner) and who is bailee?
▯ contractual B: benefit both parties, B for Value
Repair: undertaking by repairer to effect repair by competent manner and using due care and skill. They signed
the K which means unable to pay is a B of K by Bailor.
Right of Bailee:
1. Remedy for bailee for the value of ser vice rendered
a. contractual remedies for B by Bailor.
b. Could sue for $, also
c. Quantum Meruit for partial performance.
2. lien by common law: if Bailor couldn't still offer the money after the due date, to retain the p ossession of
3. Sale: sell the goods to cover the cost. By statue, and follow the formula.
2) Leonard has been storing the used oil collected from various oil changes at the garage in large drums. The drums
are old and starting to rust out at the bo ttoms. Penny considers the oil drums unsightly, and insists that Leonard
deal with them. Leonard feels that this is not a priority and so asks one of his employees at the garage to place the
drums outside at the back of the parking lot and the far edge of Bang Up’s property. The oil drums leak out old
oil into the wildlife sanctuary located next door causing extensive environmental damage. What are Bang Up’s
liabilities with respect to the damage?
Liability for environmental offences: tort law-duty of care
- Regulatory offence for breach the act and regulation
- Standard of care during hazardous activity of director and officers
o Need for expertise: employing the necessary expertise if they don't have it themselves
- Who: the actor/ directors can held personally liable enven they are not the actor
- Factors to be considered : nature of enviro., extent of damage/ attitude of defendant/ deliberateness of
the offence/ attempts to comply with the law
- Sentence reason: protect the public/ express their disapprove/ deter t he offenders/ promote the
compliance with the law
Defense by Corp. : due diligence
• Effective system to prevent offences
• Monitoring / Implement improvement of system
1 • Keep up to date of tech
- Corp’s Criminal liabilities which can be fines and/ or jail times
o Corp is a party due to negligence if…/ or due to fault if…
- Director’s duty of care and skill :
o Not to be negligence
o Not willingly blind in the information
o Personally liable if:
▯ Close eyes to miscondunt
▯ Votes ▯loss and insolvent
▯ Tax not paid
o Defense: due diligence/ rely on auduited statement
3) Howard decides that car repairs are not enough to keep the business afloat and decides to institute car sales as
well, even though this is not part of the Corporation’s business. He brings it up atmeeting and all vote
in favour of the change. Sheldon is not happy with this decision as he believes it is too risky. What options does
Sheldon have? Would it matter if Howard owned shares in another corporation that sold to distributers?
• Protection of Minor Shareholders of internal responsibility of corporation
• What’s opinions he have?
• Minor SH: Frozen out of decision making because he is minor and locked in because it's a closely held
corporation- cant sell shares
o Appraisal: buy back shares at fair price because he disagree with the changers, restrict to certain
type of actions. have to abide by all requirement, could be cumbersome
o Winding up: dissolution for liquidation of Corp.
o Oppression Remedy : personal remedy for unfairly treaded
o Derivation Action: lawsuit by SH in the name of Corp. related to the wrong done of the Corp
• H: conflict of interest violates the fiduciary duty of a director: honestly and in good faith,
o Put cop’s ahead
o Avoid and Declare the conflicts of interest, and cant vote
o Cant intercept business oppo
o Cant competition
o Defense: Due diligently and rely on audited financial statement / Business judgment rule
o Liability: hold liable for B, property, 3rd party
• Other duties of a director:
o Exercise Care and skill
▯ Not negligence
▯ Not willingly blind
▯ Could be personal liable if
• Tax not pay
• close eyes to misconduct
o Comply with CBCA/regulations/articles/ by-laws…
2 4) One of Leonard’s supplier’s, Raj approaches Leonard ab out purchasing car parts. Leonard agrees to purc hase all
of his parts from Raj and signs a contract stating that Raj will be the sole supplier of car parts to Bang Up. Later,
Penny learns of Leonard’s action and disagrees with the decision. She thinks Raj’s parts are too expensive. What
are Bang Up’s obligations under the contract?
Corporation’s Civil Liability : Contractual Liability: Obligation: K continue bind Cop.
If they break the k, they have the contractual liability of civil liability for B of K. The rule of agency law apply
here which is indoor management rule: in the absence of suspicious circumstances, the outsider could relay
upon everything that appears to be normal and the K still bind the Corporation as long as the 3rd party didn't
notice the By-laws in the other Corp.
5) Penny is upset about Leonard’s decision regarding the car parts and believes he has overstepped his bounds. She
visits the repair shop and starts screaming at Leonard, calling him names and finally ends by shouting out loud
“you are an idiot and should avoid making deci sions that require any thought as you have no brain. Pack up your
stuff and get out. You’re fired!” What rights does Leonard have?
Termination of the K: reasonable notice or Dismissal for a cause:
So this is a wrongful dismissal, Remedies: damages / reinstatement
3 2. Corp’s liability for external responsibility:
1.Corp. owes Civil Lia if they committed tort or B of K:
1. Lia in Tort: principle of vicarious lia.
- Negligence and Tort committed by employees, or officers.
2. Contractual Liability:
a. Break of K:
b. Rules of agency law apply: indoor management rule:
i. In the absence of suspicious circumstances, the outsiders may rely everything that
appears normal upon, and the K will still bind the Corp. An innocent 3rd party
could rely upon the kind of apparent authority as long as it’s reasonable to do so.
c. Adoption of the pre-incorporation K
2. Criminal Liability: can be fines or jail times
1. Standard: beyond a reasonable doubt with
a. The guilty act or
b. The guilty mind could be found in the directing mind: who has the policy making
authority and therefore fulfill the mens rea requirement for the Corp. to be convicted.
2. Corp. is a party to the offence and therefore owes Criminal Liability
a. Due to negligence if:
i. Representatives, authority, is a party and
ii. Senior officers, responsible for this act, below care to prevent
b. Due to fault if its senior officers:
i. with authority and intent to benefit the org, is a party or
ii. with intent direct the rep. to commit the act or
iii. knowing but not stop
4 3. E-commerce:
1. K law:
a. K- web-wrap Agreement: web doc. Contractual terms, icon▯acceptance, clear