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Chapter 6

BU227 chapter 6, 9 review

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FALL 2012 - FINAL EXAM REVIEW 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 shares. Howard, Penny and Wil (a local accountant) sit on the board of directors. Leonard and Penny operate the business. Leonard deals with the actual repair work and manages the repair shop, while Penny manages the office. 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 situation. 1) Bernadette brings her car in for 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 is unable to pay for the repairs. What legal remedies are available to Bang Up Car Repair Inc.? • Issue: Breach of Contract & Bailment – define each • Total failure to perform  major breach of an essential term of a contract • Bang up has already performed so they will sue for damages  can define damages (potential remedy) the remedies available are specific to bailment • Bailment is a transfer of possession of personal property, without a transfer of ownership • Parties include Bernadette- bailor, and Bang Up- bailee • A sale is only made through contract or through act • Right of sale includes: advertise, public auction, last chance to pay, and notice that their putting it up for sale 2) 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 at the board meeting 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 cars to distributers? • Protection of Minority Shareholder rights • Statutory remedies available • There are three relevant remedies: 1. Appraisal remedies 2. Oppression – most popular, shareholders must demonstrate that it was unfair or oppressive to the shareholders 3. Winding up – court allows for the dissolution of the corporation, etc  courts dislike doing this • Sheldon would have the appraisal remedy available to him but would prefer the oppression remedy • If Howard owned shares in another corporation that sold cars to distributers • Issue is duties of directors • Directors owe a duty of care* • Fiduciary relationship with the corporation, duty of good faith, etc. • Howard has a conflict of interest and should not have voted 1 • Derivative action – statutory right 3) 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 bottoms. Penny considers
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