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ADMS 2610 (72)
Midterm

Midterm Answer Key

4 Pages
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Department
Administrative Studies
Course Code
ADMS 2610
Professor
Richard Gasparini

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ADMS2610CFall2008 Mid-termAnswerKey-30Marks Question 1: a) Nadal and Roger have a contract. (Students should provide the elements that comprise a contract). The mailbox rule is in effect (define mailbox rule) and the contract was formed when Nadal put the letter of acceptance in the mail on October 6th. The revocation was ineffective because it was not communicated to Nadal until October 7th, which was too late (define revocation rule.) b) Roger's offer contains a term that avoids the application of the mailbox rule. There can be no deemed acceptance when Nadal mails his acceptance since the terms of the offer are that acceptance is effective only when the cheque is received. Since the revocation is received by Nadal on October 7th, but the certified cheque does not reach Roger until October 12th, the revocation is effective and there is no contract. Question 2: 2a. Contingency fees are a good thing as it eases access to lawyers by people who cannot afford it. A contingency fee occurs when a plaintiff will pay a lawyer up to a third of the settlement amount (outside of disbursements) but only after the case settles. This way, a plaintiff with a good case need not pay the lawyer up to settlement. There are no contingency fees in family or criminal law cases. For other civil cases, a contingency fee may improve access to justice but it can be said that such fees may encourage frivolous litigation. However, the lawyer bears the risk and financing of the case, so presumably the lawyer would not launch a case without a realistic belief in prevailing. For the most part, contingency fees are widely accepted in all provinces and US states, and thought to improve access to the court system by people of lower economic means. 2b. For this question, the most common mistake students make is to just assume that arbitration is necessarily less adversarial, when it may not be. Arbitration has become an increasingly common dispute-resolution process only because it is the preferred alternative to avoid the slow, costly and formal court system. Whereas successful mediation can be seen as less adversarial as it attempts to move back and forth between the parties with suggestions for settlement in an effort to resolve issues, arbitration usually only takes place when such negotiation efforts are unsuccessful. Under such circumstances, arbitration is no less adversarial than bringing the dispute to court because frequently, arbitration is only used where mediation has failed to negotiate settlement. The court system may not be adversarial, for a simple case that is stream-lined, and given cost disincentives to litigate, and arbitration may be adversarial, e.g., for complex disputes, multiple arbitrators and other factors, although for the most part it is correct that arbitration is commonly perceived to be less adversarial. Arbitration could involve some rules of evidence, the selection of the arbitrator, calling of witnesses, for example. Ultimately, the binding decision resulting from arbitration differs from a court settlement only because of the speed at which hearings may be held, the informality and confidentiality of the proceedings, and the lower cost of obtaining a decision. Also, there may not be a right to appeal, and generally, the arbitrator’s decision is final and binding which may incent parties to prolong the dispute. However, parties can take the dispute to court to review the arbitrator’s decision if he or she has made a significant error of law, or has completely misapprehended the facts. Question 3: The relevant principles of contract in this case are centred around legality at common law and public policy issues of contracts which may be in restraint of trade. In particular, we are concerned with the legality of restrictive covenants concerning the sale of a business. The central business issue to be discussed by students is the nature of goodwill as an asset being sold under contract amongst the other physical assets of the business. There are two levels of analysis which may be applied to a restrictive covenant of this nature. The first is a question of public policy with respect to the validity of the covenant. With respect to the restriction of not carrying on business in manufacturing valves, given Isa's stature in the field, a ten year world wide restriction may well be reasonable. On the other hand, the prohibition against engaging in any other business which may compete with the investors would be considered prima facie void as a restraint of trade, as it effectively prevents Isa from earning a living in the field in which she has been trained. This would be unreasonable and, as stated prima facie void. The court would strike it out of the contract leaving the remainder intact within its four corners. Given this, Isa has violated her contract in the manufacturing of the valves, but we must turn to the second level of analysis, being the quantum of damages. We then turn to the value of the goodwill which Isa had developed in her business, and sold to the investors. In this instance, Isa sold a firm which was engaged in, and had goodwill in, the field of valves for CANDU reactors world-wide. If Isa had been engaged in the manufacturing and sale of such an item there would be no question that significant damages would flow from this breach. She is, however, engaged in the manufacture of a valve sufficiently distinct as to be patentable itself, and in a geography and application which is not in direct competition with the investors manufacture for CANDU Reactors. Clearly, the question is whether the firm now owned by the investors would likely have obtained the contract to sup
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