App-1-3 Recommendations for Teaching Business Law in Canada – Business Law in Canada : Chapter Notes

This Document Contains Chapters Appendix 1 to 3 APPENDICES Introductory Comments The article set out in Appendix 1 was written during a period of educational leave and completed in 1996. It is considerably out of date and was never submitted for publication. This means that it has never been academically reviewed and so with that caution I offer it to stimulate thinking about not only what is taught to business students about law but also how that learning process should take place. As part of this project I developed what I call the Yates Cases. These are an attempt, unlike the judicially decided cases we normally use, to develop more open-ended business case studies where both business and legal issues are introduced leading to several different methods of approaching the problem. These cases are now included as Appendix 2. I have also included commentary on the individual cases in Appendix 3. Appendix 1 Recommendations for Teaching Business Law in Canada “........business law faculty need to keep in mind that the goal of business law courses is to teach the law to business students, not law students. Business students should not be trained to be mini-lawyers, but to be informed and aware business managers, capable of providing direction to the attorneys they hire and to understand and evaluate the legal advice they receive.” This paper has two objectives. The first is to determine what should be included in a general business law course taught at the college or university level in Canada, and the second, to examine how such material should be presented to provide a better education for students and a better integration of the study of law into the business school curriculum. Most of the research has been conducted from sources in the United States since they have a vital, organized body of professionals teaching the subject and a considerable body of literature available. This stands in stark contrast to Canada and other jurisdictions where publications on legal education are largely directed to the teaching of lawyers as opposed to teaching business people about the law. Part 1 In the last 35 years a great change has taken place in the way business law is taught in American business schools. Prior to 1959 business law was taught using a structure similar to what is used in much of Canada today. Those traditional courses concentrated on contract law and a more cursory examination of other topics such as torts, agency, employment and methods of carrying on business. The great change involved a shift away from these traditional topics to a concentration on the legal environment in which business functions and an examination on government regulation of modern businesses both directly and indirectly. In “regulatory environment” courses, topics such as contracts and agency are dealt with incidentally and only to the extent necessary to understand how the legal environment works. To understand these developments in the United States it is necessary first to appreciate the impact of two reports published in late 1959. Both of them criticized the narrow rule-based approach to management legal education that prevailed in the United States at the time. Pierson recommended that the more traditional business law topics such as contracts, agency and employment be dealt with only “.... to the extent necessary to show some of the ways the living law enters into specific business situations.” A considerable amount of debate followed. The American Assembly of Collegiate Schools of Business (AACSB) is an accrediting body for American business schools and in 1969 that body added to the debate by responding to these two reports. In that year the AACSB changed its requirement that there be at least one course in business law to the requirement that business students be exposed to a “background of the economic and legal environment of business enterprise along with consideration of the social and political influence on business.” Later amended to... “a background of the economic and legal environment as it pertains to profit and/or non profit organizations along with ethical considerations and social and political influences as they affect such organizations.” The AACSB effectively determines the curriculum of accredited business schools and so this change and resulting new standard has had a great impact. As a result many schools abandoned the traditional approach altogether, some doing completely away with subjects such as contracts, agency and employment and opting instead for a more open ended “liberal arts” approach to the examination of legal concepts. Over the years the debate between those advocating a more traditional approach on the one hand, and those supporting a more liberal approach on the other has continued with most schools trying to settle on some middle ground. The middle ground that has emerged was the “environmental” business law courses that are prevalent in most American business schools today. These courses examine the legal/regulatory environment within which modern business must function concentrating on business relationships with government or its relationship with others as controlled or affected by government. This forces a focus on government regulatory bodies and the statutes and regulations passed by government controlling business, but it also requires at least a limited examination of the traditional common law topics as the source of the body of rules that helped to form that legal environment. The debate today centers on how much of the traditional business law course topics such as contracts, agency, and employment can be retained in such an “environmental” approach to the study of business law. Some schools solve this problem by requiring two courses, the first usually being the more traditional business law course with a concentration on subjects such as contracts, and the second concentrating on the government regulation of business. Many schools find that having two business law courses does not fit their overall business curriculum requirements and so are left with the dilemma of what to include in the single, required business law course, usually resulting in the compromise discussed above. This begs the question of what we should do in Canada. Should we follow the American example and move to a legal environment of business type course with more of a concentration on government regulation or should we stay with the more traditional common law centered approach that is now in place. We must be careful not to be seduced by the American debate and assume that the basic premise is correct or that it automatically applies to us. It is clear that American business law instructors have responded, first to the Pierson and the Gordon and Howell reports, and to a much greater extent to the introduction of the AACSB standard requiring that an environmental approach to business law be adopted. In the United States, the debate seems to have been reduced to an examination of how to implement the new standard while preserving as much of what they can of the traditional approach to business law. What we must ask is whether the “environmental” approach to business law is a valid direction for us to go and if so how much of the traditional approach to business law which now predominates in Canadian business schools do we wish to sacrifice. Although we don’t experience the same pressure that forced American business law teachers to change their direction so dramatically, the standards established by the AACSB and the change of direction that resulted deserve to be acknowledged and require examination in terms of our current practices. In the United States a considerable amount of research has been done to determine what the customers think should be included in business law courses. Gary A. More and Stephen E Gilled surveyed corporate legal counsel thinking that it would be valuable to determine their opinion of what the managers with whom they work should be taught. Two of their conclusions are helpful to us. First they found that the respondent lawyers had little respect for the legal knowledge of the managers and executives for whom they worked and secondly they found that corporate counsel wanted to included topics that would move the courses more to a “legal environment of business” characterization. Of course, when asked, they wanted their people to know about all of the topics listed, but when forced to rank these topics, seven of the top ten were what would be characterized as regulatory or environmental topics, such as antitrust (in Canada, competition law), labour, and consumer protection. Based on these findings, the authors set out a model business law course consisting of 25% introductory materials, 25% private law matters and 50% the regulatory environment of business. They concluded that the trend in the United States was toward the environmentalization of business law courses and that the legal counsels surveyed wanted that trend to continue In their introductory remarks the authors referred to other surveys which had found that business people when asked about the types of problems they encounter in their business, rank highest in importance topics of the “environmental/regulatory” type. They also noted in passing, however, that business law students themselves found the traditional topics more interesting Klayman and Nesser conducted two surveys that support this conclusion. They surveyed business school graduates of Ohio State University and looked at what other business schools were teaching in their courses. They too concluded that more emphasis should be placed on the environmental/regulatory topics and less on some of the more traditional ones. They also set out a model course that corresponds generally to one set out by Moore and Gillen. These articles are typical and illustrate the general conclusions reached in the 1980’s that business schools should adopt the legal environment approach to business law and move away from the more traditional topics. This is what the accrediting bodies wanted. This was what the business people wanted, and this was what the business schools were doing. Note that these conclusions applied to graduate as well as undergraduate courses in business law. This general approach has now become set in the American system. The only question is how much of the traditional subject matter should be retained. Subsequent surveys and articles while supporting a concentration on environmental/regulatory subject matter have argued for a step backward towards the inclusion of more of the traditional material such as agency, contracts, and corporations. The problem of how much attention to devote to contracts seems to be at the center of the present debate. In the fall 1990 volume of The Journal of Legal Studies Education, Reed concluded that contract law ought to be de-emphasized from its traditional standing where it dominates the content of the business law course to a role of much less significance. That same volume records a panel discussion considering the role of contracts in an introductory business law course. While the panelists took various positions, most agreed that contract law was important and should be included in such a course but only as one of many other important topics. Contracts could even be looked at in some depth to illustrate how the law works but not at the expense of other important topics of the environmental/regulatory type. Certainly contract law should not receive the concentrated attention it has in the past. Other articles argue for at least some retention of the study of contract law in business law courses. Yeargain and Tanner on the basis of a survey done on South Eastern Louisiana University alumni found that the respondents considered contracts an important element of the business law course and concluded that it ought to be retained as a subject. And Little and Daugherty observed that the business executives they surveyed reported that a basic understanding of contract and corporate law was vital and the most important topic listed. Natural environment concerns ranked second. They also pointed out that many of the newer textbooks that have been designed for “legal environment” courses have taken a step back and included at least one chapter on contract law. This look at contract law is important since many of the changes that occurred in the movement towards what we have characterized as “legal environment” type courses involved the de-emphasis and in many cases the complete abandonment of contracts and other similar topics. While the retention of some examination of contract law is important, it’s de-emphasis can also be supported on the basis that contract law itself has become of lessened importance in the commercial world. K.A. Strasser stated that “the courts are no longer the primary molders of commercial policy, and perhaps not even an important factor in the making of that policy.” He observed that because businesses have moved away from the courts and adopted other methods of resolving conflicts between them, most contract disputes are no longer dealt with in court and are often resolved, without reference to contract law at all. For our purposes these articles show that in the United States, the role of contracts as the dominant part of the introductory business law course can no longer be supported, but that contracts still should have a place as one of the important topics covered in such a course. The consensus that has developed seems to be a settling somewhere between the initial reaction to the Gordon and Howell, and Pierson reports as well as the adoptions of the AACSB standards where the traditional subject mater of business law was abandoned in favor of an environmental/regulatory issues approach, to an approach where a balance has been struck between these basic traditional topics and an examination of the environmental/regulatory issues. This compromise seems to be supported by a survey done of chief executive officers of Fortune 500 companies. The author concluded as a result of his survey that “- an ideal curriculum would be composed of a judicious combination of the two approaches.” To further confuse this discussion I must point out that in 1991 the AACSB accrediting body has again changed their standards or guidelines. The new guidelines generally encourage course offerings “that reflect the visions, goals and objectives determined in view of the business constituents that a particular school serves.” And as far as business law is concerned the schools should teach “the influence of political, social, legal and regulatory environmental and technological issues.” This seems to be an acknowledgment that the compromise between the “environmental/ regulatory” approach and the more traditional approach reached by most business schools is appropriate. But it also allows for more flexibility in what the various business schools offer in the area of business law and so it is likely that there will be a move away from the standardization of the legal environment of business courses we have witnessed over the last decade. For my purposes I am attracted to the approach advocated by McGuire where he suggests that the subject matter covered in a business law course should be based on a framework of logic rather than reaction to outside influences. He refers to Donnell’s observation that there are four basic sources we can turn to in determining what should be taught: what business people think ought to be included; what other business instructors want included; what students would like to see included; and what other schools already teach. To this I would add a fifth source, the standards or guidelines set by the AACSB accrediting body. It is clear in the United States that all of these factors had an influence in moving the American business law educators towards the “Legal Environment of Business” type of courses that have been discussed above. While these influences have value as a check or test against which we can evaluate, they cannot be relied on as the source of what we should teach in business law. To rely on them as such would be to abrogate our responsibility in designing the law course. No one is in a better position to determine what should go into a business law course than the business law instructors themselves. They are the ones with the training and experience. Donnell said “I would argue that the law instructors in business schools are the experts in curriculum design in our field.”26 Curriculum must be determined not by the design of others but by the law faculty itself. Feedback from business people who are graduates may be skewed by their own experience and may only show a preference for what they know and have taken in the past. The students themselves don’t know what they need to know, and if we respond only to what other business faculty want we will be forever in a service mode. As far as copying other schools is concerned we run the danger of simply perpetuating their mistakes. The development of curriculum is a logical and a conceptual process and McGuire suggests an approach be developed based on a conceptual framework. He also suggests that the idea of the legal environment of business is an appropriate framework to work from. This seems to require a concentration on the function of the business person working within the firm or business. The legal environment of that firm can be looked on as a series of relationships between: the firm and customers; the firm and creditors; the firm and employees; the firm and government; the firm and the public; the firm and investors; and the firm and suppliers. When we use this structure as a framework the topics logically follow. Using McGuire’s approach the following structure and content would be required in an introductory business law course for use in Canada. The legal system itself must be introduced and so history, constitutional law, the charter, the court system, the legal structure and procedure should all be included. Traditional topics such as contracts, torts, agency, corporations and real property should also be included as the source of the duties and obligations found in such relationships, as should “legal/regulatory” subjects such as human rights, management relations, consumer protection, competition law, environmental law and employment standards. The traditional as well as the “legal/regulatory” topics could all be taught within the structure of those listed relationships with the firm but I think a better approach would be to divide the course into three parts. The first part would be an introduction to the legal system, the second a summary of some basic principles of law (the traditional topics of contracts, corporations, agency etc.) and the third an examination of the “legal environment of business” topics which would be dealt with by concentrating on those eight legal relationships listed. Of course there would be considerable overlap and all of the “traditional topics” would apply to these relationships as well, but I think that there would be an advantage to laying down some fundamentals first. If this three-division recommendation were adopted, the students would have the advantage of already having a basic foundation of legal principles when these relationships were discussed. Using this three-part approach then, the firm/customer relationship could be the basis for studying acts regulating the sale of goods, product liability, advertising regulations, credit regulations, consumer protection act, trade practices act, secured transactions and human rights legislation. The firm/creditor relationship–sale of goods, secured transactions, bankruptcy, security regulations, and corporate bail-outs. The firm/suppliers relationship–sale of goods, secured transactions, bankruptcy, competition law, etc. Note that these first three relationships could be looked at together as private outside relationships. The firm employee/relationship would be the basis for looking at labour codes, employment standards, unemployment insurance, human rights and workers compensation. The firm/investor relationship–partnerships, corporations societies, and securities regulation. The firm/competitor relationship–competitor torts, competition laws, and intellectual property. The firm/government relationship–taxation, close regulations of some industries such as broadcasting, banks, public utilities, transportation and administrative law. Finally the relationship between the firm and the public–tort liability, environmental protection, product liability, the breakdown of the rules of privity, human rights law and this generally will lead to a discussion of social responsibility and business ethics. The following is presented as a model Canadian business law course to be taught at the college or university level. It would be divided into three parts, an introduction, common law principles or fundamentals, and the legal environment of business. Assuming 3 hours per week for 14 weeks, such a 42-hour course would be divided as follows. The first ten hours would be devoted to an introduction to the legal system, the next twelve hours to fundamentals and the remaining time to the legal environment of business which would be structured around an examination of the eight business relationships discussed above and so it would seem logical that some common law areas be dealt with in this final section as well (such as methods of carrying on business and to some extent tort law). Part 2 Thus far I have looked at “what” we should be teaching in the general business law course. The next question and the subject matter of part two of this paper relates to “how” that content ought to be taught. This question is to be answered within the context of a desire to better integrate the study of business law into the business curriculum. There is little debate today that business law is a very important subject to be dealt with in business schools. Certainly business executives rank the subject of business law as very important and, if anything, teaching this subject as part of the modern business curriculum has become more important as we become a more litigious society. “A decade of growth in the scope nature and complexity of government regulation has catapulted attorneys into the daily business operations of corporations to an unprecedented degree. The equally rapid rise in consumer shareholder employee and competitor litigation has forced prudent managers to include legal advice as an essential element of business planning and decision making.” John R. Allison pointed out the danger of business people not having a basic understanding of legal concepts. “Without a working knowledge of both fundamental legal concepts and the legal principles pertinent to their particular enterprise, business people run the risk of making mistakes that may have grave consequences for their personal careers and for individuals and firms that depend on their judgment.” He also said, “Of the various external constraints on business decision-making, law is the most pervasive. Every business entity must operate constantly within a domestic and international legal framework. Few business decisions of any consequence are without legal implications. Law is thus a vital component of professional business education, whether at the undergraduate or MBA level.” The importance of a course in business law is generally acknowledged, but business law instructors often find themselves cut off from the rest of the business school. One reason for this may be that most business law instructors have little or no formal business training, the appropriate degree for a law instructor being a LL.B. or LL.M rather than a graduate business degree. Also, the approach used in business law usually does not follow the common model of other business courses. Even the way cases are used in law courses is foreign to the case study method as developed for the business schools as will be discussed below. Our business colleagues generally seem content to let us go about our business so long as it does not interfere with theirs. In short business law instructors often find themselves in a world of their own with their business school colleagues not concerned with, or particularly appreciating what they do. Under these circumstances it is not surprising that when pressures come for downsizing, or otherwise accommodating program changes, business law is particularly vulnerable. The object then is to not only improve the teaching methodology in the course itself but in the process tie business law closer to the rest of the business curriculum; to integrate it. Siedel stated, “In a classic essay that has been reprinted in a recent catalogs describing the anniversary of the University of Chicago MBA program, Professor James Lorie argued that a University has its greatest comparative advantage in teaching basic disciplines such as ‘Mathematics, statistics, accounting, economics, law, psychology and sociology; it has least competence in teaching the current practice, techniques and language of business.’ Consequently he concluded, business school faculty representing these disciplines ‘are mathematicians, statisticians, economists, psychologists, lawyers and sociologists.’ Law is undoubtedly, as Lorie asserts a discipline that should to be taught in business schools.... The problem is that despite its centrality to American culture and business, law is too often perceived in business schools as a stand-alone discipline that has few links with other disciplines and functions. This perception is clearly wrong. ... But the question remains: How can the traditional business law image be changed? The answer ...Is to link law teaching more explicitly to other areas within the business school.” In looking at the American sources, one thing that seems generally agreed upon is that the too common rule-oriented approach to teaching business law is inappropriate. Rather than simply conveying rules, facts and other information the key to a successful business law course is to deal conceptually with the ideas and principles behind those rules. Peter C. Ward laments how often we encourage students to amass trivia, spoon-feeding information to them and neglecting to teach concepts and principles. “The result is that too much of the teaching of business law has deviated from the business of education to the force-feeding of objective information. Those students who receive high marks emulate trivial pursuit winners rather than the recipients of an educational experience that has encouraged the development of understanding.” That is not to say that the students should not be exposed to such rules and information at all. Donnell states that the course he would design would not be rule-oriented although there would be considerable examination of the rules “because the students need them to hold onto...” But the emphasis would be on the underlying principles and concepts. Quite often we fall into the trap of having to give the students masses of information because we have to “get through the material,” in fact we do them a disservice by submerging them in vast bodies of rules and information drowning them in the process. And they are so concerned with staying afloat that they miss the objective of the process that is to understand the concepts and principles that form the structure behind that vast body of rules and information. Donnell also pointed out that we have to be careful not to do too much. There is a fine line between creating a challenging course and inundating students with information that will be useless to them in the long run. “...the notion that less is more should be kept firmly in mind. ...Aim to build a solid foundation, and let the student build the superstructure in additional courses or on his or her own.” The methods used to teach business law, vary between institutions. Some only use large lectures, and some just small seminars. The more common approach is to use intermediate size classes of 25–50 students or to use a combination where students are brought together in large groups for lectures and then they are split into much smaller groups for seminars. A strong argument can be made for the abandonment of the lecture format, where the instructor talks and the students write, in favor of smaller class sizes where more student involvement can take place. Unfortunately in this time of constraint and cutback, it is very unlikely that such an expensive reform would be adopted. Still the lecture format does have some advantages if a degree of flexibility is adopted. In determining whether the lecture format should be used, we must first look at what we are teaching. If the objective is to convey information, even principles and concepts, then the lecture method, with some modification, may be used effectively. If a skill is to be taught, then a participatory method such as the case study method, simulations, presentations or other types of student involvement where the student takes the initiative in the learning process would be much better and smaller classes are required. In business law what we are being asked to do falls somewhere in between. There is a considerable amount of information that we are expected to convey to our students. We expect them at the end of a business law course to know to some extent what the rules are that govern their conduct in the business world and hopefully to understand some of the whys and wherefores behind those rules. But we also like to think that we are helping our students to gain the skill of being able to grapple and deal with or to manage legal problems. We usually say that we want our students to at least gain an insight into how lawyers think, and why they think the way they do. We strive to equip our students to identify issues and problems and to learn how to work with those problems and some would argue to find solutions for them. We are in the business of conveying skills and techniques to our students, but we are also in the business of teaching a considerable amount of information in the form of rules, concepts and principles. It may be that the retention of the lecture format can be justified even if it is not the ideal, but there is no question that we should do all we can to make these lectures a better experience for the students. Emerson in commenting on lecturing to large classes said. “Classroom presentations require the professor to reach the students in ways far beyond simple lecturing—that is, the class should be about much more than simply “covering” a body of material. Classes can sparkle, with audio and visual tools, as the instructor puts a human face on as many rules, doctrines, and principles as possible” Solberg, said “Dullness in teaching should be looked at for what it is and for its effect before it is defended. There is something awful, sinful in the extreme, in inflicting one’s dull self upon another for an extended period of time from which the other has little chance to escape... No ordinary citizen is permitted to hold another in bondage for even 50 minutes a day, subjecting such person to physical assault and extracting a fee for the privilege.” If we are going to lecture we must make sure that we do a good job of it. We must not bore our students. Solberg’s article is intended to encourage lecturers to spice up their lectures with newspaper accounts, humor and the like and to tie the materials being taught to practical situations to which the students can relate. There are many ways that we can make these lectures more interesting for the students and more effective as a teaching tool. Problems or case studies, even war stories can be used as the basis of the lecture discussion. Flowcharting of legal relationships has been suggested as a method of making the presentation of those relationships clearer and more interesting and this too can be used to spice up a lecture format. MacDonald discusses the use of the Socratic method commonly used in law lectures. When the case study method was introduced and captivated legal studies in North America, the Socratic method (as adopted for those law schools) was thought to be a necessary adjunct to that case study method and became inseparably associated with it. Together they made large lectures possible and made law schools economically viable. The adoption of the Socratic method was justified because for law students it was necessary that, “The student judge all material for himself, scrutinize instances closely, accept no other man’s judgment until he had judged its logic for himself...” This follows a process of inductive reasoning whereby through a series of pre-planned questions the student is lead, to a conclusion, from the particular to the general. Although this involves student participation it can still be used in large classes. But this involves singling students out, requiring observations and conclusions from the student and then often demolishing the student’s contribution. This can be a very intimidating process. The “Socratic” method of dialogue is found extensively not only in law schools but in business law courses as well. Those of us who have been trained in law have likely been exposed to the “Socratic” method in first year law and many of us have adopted this as a teaching style. Even the proponents and defenders of the Socratic method have to admit some drawbacks “That the Socratic method can be forceful, scathing, and aggressive is obvious.” “Lawteach” is a British development of the Socratic method that involves a modification of the legal case study method. The students after being given common source materials are, through a series of pre-planned questions, taken to ever increasing levels of conceptual sophistication by being forced to deal with hypotheticals based on those initial readings. The object here is to help the students deal with the concepts and principles behind the rules rather than rote memorization. The object is to educate rather than simply convey information. Even the introduction of the case study method in law schools was intended to overcome the limitations of the traditional lecture format and involve the student more in the problem identification and solving process rather than being “passive recipients of teacher made solutions.” Such a structured interchange of question and answer with the students even in a large lecture can be electrifying, and it should be possible to accomplish this without the negative aspects of intimidation and aggression associated with the Socratic method. Smaller classes or seminars are ideal to develop the skill development objectives of business law courses. The key to getting the most out of these seminars is to have the students teach themselves. This involves student participation in the educational process, not passivity. In these circumstances the more successful instructor would be the one least heard from in the classes. This does not mean that the instructor abrogates his/her responsibility for directing and controlling the class, rather he/she functions more like a shepherd, a much more difficult and demanding role to do successfully. There are several different ways that student participation can be structured into the business law course. Student involvement through simulation can be achieved by students role-playing as clients or other parties in the process of a law suit and through mock trials, moot appeals, and games. Arthur Schaefer recommended a modified “mock trial” approach as an alternative to the lecture or case study approaches normally used in business law courses. “The mock trial is an attempt to provide the students with an opportunity to apply their newly acquired skills in a “real life” situation requiring the preparation of legal papers and presentation of arguments before a group of legal experts.” He goes on to caution that because of the time constraints on business students and their limited exposure to legal concepts “... the undergraduate mock trial will normally not be as sophisticated and will not attempt to fully mirror an actual trial.” In an article advocating the transformation of the business law curriculum, Elaine Ingulli advocates role playing as an effective method of making students and faculty alike more sensitive to minority and gender issues. She suggests that the participant can be asked to role-play an interview situation where the other parties usually playing dominant roles are asked to behave in a harassing or discriminatory way or they might be asked to role play testifying before a parliamentary committee or in a royal commission or inquiry. Lawton and Oswald give several examples and comment on the value of simulations “... a well-constructed simulation can illustrate to the student the interrelationships of legal rules and practical constraints imposed upon lawyers in resolving business disputes far better than any lecture or textbook reading can do.” They go on to give this caution which applies not only to the use of simulations but should be a guide for all we try to do in a business law class. “In using trialtype hearings however, business law faculty need to keep in mind that the goal of business law courses is to teach the law to business students, not law students. Business students should not be trained to be mini-lawyers, but to be informed and aware business managers, capable of providing direction to the attorneys they hire and to understand and evaluate the legal advice they receive.” Instead of trials and hearings, Shrage advocates the use of simulations that involve students in the parts of the process of a law suit that they as managers would most likely be exposed to–the beginning stages, concentrating on the discovery. He said, “Evidence indicates that students understand and retain more when they have an opportunity to investigate facts, ask questions and then apply principles to those facts. A recent study conducted by the Harvard Graduate School of Education and Kennedy School of Government found that college students do their best when some of their study is done in small groups and where courses include frequent opportunities for regular assignments. [R. Light, The Harvard Assessment Seminars (1990).] If business law faculty can supplement traditional teaching methodology with a simulation that provides students with an opportunity to take a more active role in the learning process, business law courses will be more successful and more useful, and will provide an opportunity to achieve the broader objective of improving students basic oral, written and analytical skills.” Another method of generating student involvement is through the assignment of team reports or group projects which require the students to work together. The students may be given a fact pattern or problem where they are required to write a short paper supporting one side or the other, or the students could be assigned opposing sides of an important issue or controversial proposition, give an oral presentation and defend their positions before the other students who will be invited to criticize and ask questions. After the oral presentation an informal debate could take place. This approach has the advantage of requiring the students to work together as a participant in the group, generating a group mark but also retains an element of competition where that group must present and defend their position. Often such group activity generates passionate involvement on the part of the students and creates an exciting learning environment. Brenda Knowles assigned a research paper to her senior students requiring them to “... look at a particular industry, usually one that the student had some experience with, describe that industry; show past and present governmental regulation activities; and forecast based on past trends whether governmental regulatory efforts would be accelerated or curtailed in the future.” Even in such an individual effort as a research paper, the teacher had the students involved as a “resource persons” for their industry, reporting to the class on ongoing developments as reported in various media sources, giving updates as appropriate. As an alternative, a student could be required to “teach” the class the subject mater of the assignment. Students usually put considerable effort into such presentations and in the process gain an insight that otherwise might be missed. As a final part of the assignment the students were required to create their own three page case study which “...used the actual factual setting based on the students’ chosen industry as a mechanism for integrating as many antitrust and government regulation issues as possible into the respective situations.”53 Such case studies have proven to be an extremely effective method of involving students in the learning process in business schools and other subject areas and are very flexible in their usefulness. “A case may be used to supplement class instruction or as an independent study problem covering areas of law that receive little or no classroom treatment. Cases may be the basis of class discussions, small group discussions, written projects, or team presentations.” I feel that the adoption of the case study method would have a great positive impact on the business law curriculum and if adopted this single modification would go a long way to improve how business law courses are taught. This idea is not new. The former dean of the Harvard Law School, Griswald, recommended that the Harvard Business School developed case study method be adopted by the law school in 1956. He thought that by so doing the law students would then be exposed to the important non-legal factors (physiological, human relations skills, etc.) that have such an important role to play in dealing with legal problems, Although his recommendation was not acted upon by the law schools, it does have great merit especially for the business law curriculum where the object is not to teach lawyers but to develop the skills of management. The case study method as recommended here must be carefully distinguished from the cases as used in law school and in business law courses in business faculties. Legal case studies have been a tradition in law schools since this method of teaching law was introduced at the turn of the century. Probably because of the legal training of those teaching business law, the same general approach has been and is now used in the teaching of business law at most Canadian and American business schools. A somewhat similar case study method has become the standard used in most business faculties at the university and college level in both Canada and the US. There are, however, important differences in how the two methods of studying cases are used. In the law schools the cases used are the actual reported decisions of judges which are published and made available to the legal community primarily to determine the law. Students are encouraged to learn the law by analyzing these cases. The process involves reviewing the judge’s summary of the facts, identifying the issue or legal problem the judge has to decide, noting the decision and analyzing the judge’s reasons for that decision. All factors not necessary for the judge to reach a decision in law are considered irrelevant and if they have not been eliminated in the judge’s summary, must be eliminated by the student as they summarize the relevant facts of the case. In effect, what the student is given is a sanitized version of what happened with only those elements remaining that are important from a legal point of view to the lawyers and judges who are trying the case. There is only one right answer, that of the judge, and the purpose of studying the case is to learn the legal principle involved by examining what the judge decided and why. In the law schools the students may go on to criticize the decision itself in light of other cases but the focus is on understanding the legal principles involved. “Law cases focus on a particular problem and the legal principles involved in the dispute. These cases provide the outcome and rules used to reach a particular holding. Students are asked to analyze the rules used and to explain why these rules were applied in the situation.” The business school approach to the case study method, however, involves important differences. In business schools cases are used to create problem solving simulations. The student applies information and principles learned in the program and in the process gains hand-on experience and decision making skills in a lifelike business situation. The cases used are usually, although not necessarily, based on some actual occurrence or experience of the author. “Business cases...do not have guidelines controlling the outcomes of the cases. The business case is usually open ended, allowing for a different type of student analysis and problem solving... Business cases enlist students as decision makers, not decision followers.” Serious limitations to the use of the legal case study method have been identified even as used in the law schools. “First, there is no well defined or elaborated technique for case review. Analysis proceeds through repetitions of case briefs (facts, issues, ratio decidendi, reasons for judgment, holding and, possibly critiques) or on the basis of more or less idiosyncratically directed teacher-led discussions. Students must await the instructor’s lead without knowing how to prepare for it. Further, cases are often narrow reconstructions of actual happenings, denuded of the realities of their backgrounds in fact and the processes and events which gave rise to the court’s judgment. Case study is limited to inquiries based on the court’s selection of relevant information and its processing.” It may well be that the law students who read these actual judges decisions are effectively introduced to the workings of the law and legal system. But in business law we are teaching potential managers and entrepreneurs about the law who must look at the law as only one of the factors to be considered in any decision making situation. When we use the legal case study approach in our classes, we do our students a disservice in two ways. First we don’t teach them how to deal with legal problems in a business like way where the legal implications must be factored into the process along with economic, political, ethical and other factors. Secondly, the cases we assign have all of these nonlegal factors eliminated from the deliberation and if they haven’t, we take pains to teach the student how to eliminate these extraneous or irrelevant factors. Our students are training to be managers and must take into consideration the business variables that they will face in dealing with all such legal problems. Case teaching has become the leading method of teaching in graduate business schools because it helps students acquire cognitive skills, enhances managerial abilities, and gives students practice in decision making by simulating managerial predicaments. The case method is generally praised as being able to simulate learning more than teaching through lectures. It is designed to develop competence in identifying opportunities, defining problems, gathering and interpreting relevant data, formulating strategies, and making and implementing decisions. Case study requires students to learn by discovery through the interpretation of information and interchange. Students sharpen their analytical abilities through skillful probing and incisive thinking practiced extensively and continually over several semesters. Thus, they develop a broader conceptualization of problems by comparing and contrasting different situations and approaches. Students must define the problem(s) considering the relevant information, identify alternatives, and implement a plan for effectuating the best alternative, always remaining cognizant of the ramifications that necessarily flow from this decision tree. In such a way, the case study method approach to learning attempts to prepare students for tough “real world” decision making in a macro environment. We would do better to adapt the business school approach to case studies for use in business law courses. Students would approach the cases with the idea that the legal component is only one of the factors to be considered in the problem solving process. The emphasis would be on developing problem solving skills when faced with legal problems in the business place. “A case study approach remedies what may be called the context problem: putting law into perspective in the business world context. Such a case law approach involves not the traditional court case of law school but the type of problem solving case study used in other business disciplines... Structuring a law class using a case study framework forces students to take a broader and more complete approach to incorporating legal issues into the decision making process.” This shift in approach also provides a better vehicle for teaching risk avoidance strategies where a considerable amount of discussion could be directed to an examination of just what steps should have been taken to avoid the problem arising in the first place. “The best cases are those where the “right answer” is not a single answer but one of several acceptable alternatives. Discussion should focus on the consequences that flow from each choice including the legal and business risks and how those risks may be minimized, if not eliminated” Another advantage of adopting the case method would be to retain a cohesiveness with the rest of the business school. “In order to maintain pedagogical uniformity in business schools, it is important for business law professors to understand the case method of teaching and how it can be applied to business law. If cases were at least partially employed to teach business law, faculty colleagues in business schools would understand the required instruction in this field more clearly, and also would accept the significance, legitimacy, and utility of a business law course.” In all of these situations whether group projects and presentations, simulations, mock trials or cases are involved, the students are in a collaborative or cooperative learning situation. They are teaching each other as they work together in teams, as they give their presentations, as they debate with each other, as they ask and answer questions and as they criticize. The role the instructor once the assignments have been made is to prod or judiciously encourage; to subtly direct and control the flow. Whatever the specific technique adopted, it is clear that such student centered learning is the most effective way to develop the skills desired; to develop in the student the technique of identifying and solving problems and otherwise generally managing the legal disputes they will encounter in business. One of the great advantages of adopting the case study method as recommended is that it allows a shift away from a concentration on the legal rules and concepts themselves to an emphasis on the examination of those legal concepts as part of a larger management process. This contributes to the very important purpose of rationalizing and integrating the study of law into the general curriculum of the business school. Just as the students are required to know the political, social and economic factors that may affect a business decision, they would also be required to know and consider the legal factors that may affect that decision. And so the general goal of the business law course to teach legal principles in a broader management context is realized. The choice and design of the case assigned will help determine how much emphasis is placed on the law. But it will be up to the instructor to create an atmosphere where gaining managerial skills is emphasized and the learning of the legal principles is but a part of this broader objective. As discussed above, a major problem experienced in most business schools is the general isolation of the business law course and law instructors. Consideration then, must be given to better integrating law into the business school curriculum. The use of case studies as advocated above will go some distance in accomplishing this goal, but there are other factors that can also be considered. In the business law course, we have a tendency to concentrate on failures where the parties have failed to resolve their conflict and the matter has gone to court. Perhaps we would do better to use examples of how to create a successful contract or simulate successful negotiations leading to a satisfactory resolution of a mater in dispute. Most think of the legal problems as an exercise in confrontation. In fact it has been estimated that “fewer than 10% of all docketed cases are concluded by judicial decision.” In fact these disputes are typically settled through a process of negotiation between the parties often with the assistance of lawyers. As our society becomes more litigious, managers spend more of their time dealing with conflict and in negotiations. “Studies show that managers spend 20% to 25% of their time managing conflict.” One of the things we can do in business law courses is to concentrate more on dispute resolution and negotiation. Specifically we could give more emphasis to alternate dispute resolution (ADR) and look at mediation and arbitration in more depth. Since a great deal of the management function is dealing with conflict, negotiating, entering into new deals or supervising proper performance of existing arrangements both internally and externally, the revamped business law course as set out above could be treated more like another capstone business course, where all of the skills learned in the business curriculum could be brought to bear. For this to work, however, we must relate the specific legal topics we cover clearly to other business school disciplines. For convenience we set out our course based on legal topics such as offer and acceptance or negotiable instruments. These don’t relate to other business subjects that the students have been exposed to. We hope that the students will be able to relate what they learn from us to their business activities on their own. When we look at offer and acceptance as a topic in contract law we might do better to look at an order form, a tender for bids, a letter of intent or the interim agreement in a real estate transaction and structure an examination of the rules and concepts associated with the creation of a contract around an examination of those documents. When we teach remedies for breach of contract we might do better to tie it in with economics looking at concepts of value. An examination of a contract of employment might serve well as a vehicle for a discussion of illegal terms, misrepresentation, mistake and the like. When we look at professional liability we can use accounting examples. Our examination of the Trade Practices Act and the Consumer Protection Act should be tied closely to marketing. Where possible we should give more consideration to those we are teaching. The business law course could be taught more successfully by tying it to the majors of the students. Where possible students could be assigned to sections on the basis of their majors. Thus marketing students would be given a business law course slanted towards marketing. Accounting students would receive a course designed to fulfill their specific needs. Where this is not possible cases should be assigned that relate to the area of specialization or writing and project assignments should be made where the students are required to choose from topics relating to their major area. In business law now, at best, we concentrate on teaching legal rules, concepts and principles so that we can predict what will happen if the matter goes to court. We would do better to look at “dispute prevention, dispute resolution and dispute management.” Predicting judge’s decisions is only one small aspect of this much broader approach to business law. In doing this, however, we have to be careful to remember that the subject is business law and that we are not teaching the business policy course which is better left to others more skilled in that area. But we must at least show students “...how various legal concepts are needed for the furthering of various business strategies, the resolution of business problems and the making of business decisions in ways calculated to minimize legal and regulatory exposure.” A great area of contribution for the lawyers may be outside of the traditional business law course. The relationship between law and economics has long been appreciated in both disciplines and there are several journals devoted to the topic. The input of lawyers may be valuable in institutions where economic issues courses are taught. The involvement of a lawyer where these issues overlap into the legal area could be very productive. Capstone courses where many business subjects are brought together in an interdisciplinary way are another area where the involvement of a lawyer may be helpful. In some areas where a full blown business law course could not be justified, the model of the economics issues courses could be followed and a legal issues course created concentrating on legal issues related to the program discipline. This could be done in not only business areas, but other disciplines such as computers, forestry, mining, nursing, electronics and engineering. Discussion There are many different opinions as to what a legal environment of business course should look like but most agree that a balance must be struck between an introduction to the legal system, common law subjects and statute/regulatory topics. In most Canadian business law courses, this requires more of an emphasis on competition law, intellectual property, secured transactions, bankruptcy and regulated industries. Also in the field of torts, more emphasis should be put on product liability and professional malpractice. It is strongly recommended that this statute/ regulatory section of the course be structured around an examination of the relationships between the firm and the various parties the firm deals with as outlined above. A more significant recommendation would be the move away from a rule-oriented information type of course to an emphasis more on principles and concepts. Where lectures are used, it is recommended that all effort should be expended to liven up these lectures as much as possible. In all classes, however, the recommendation is for a movement toward more student participation in classes where the students themselves are responsible for their own learning. This may be done through mock trials, simulations, group writing assignments or other projects involving presentations, but it is strongly recommended that the business case method be adopted in these seminars. In addition to greater student participation, this approach could be used to place an emphasis on the business management aspect of dealing with legal problems. One of the key recommendations of this paper is to integrate business law courses more with the general business curriculum. The approach to business case studies as recommended above serves this purpose, providing students with the skills to manage the legal problems faced by their businesses. Finally it is recommended that the lawyers become more involved with the non-legal aspects of business education. The legal faculty should find themselves joining with their colleagues teaching human relations, economics, finance etc. as those instructors deal with topics having legal implications. They should also make themselves available to play a more significant role in dealing with the legal issues that arise in the capstone business policy course. There follows a series of appendices where materials are presented that have been collected that may be helpful in attaining these goals. Note as well that many of the footnoted articles referred to in this article are not repeated below and they too can be of great assistance to business law instructors From The Journal of Legal Studies Education The following are presented as resource materials for use in a business law course. They are divided into categories with an explanation of their use. While they are designed for American schools, most can be easily modified for use in a Canadian business law course. Cases The Accountant Liability Seminar: A Joint Venture, A. Massa and G. Seaquist, The Journal of Legal Studies Education, Vol. 7, 1/2, Fall 1988/Spring 1989, p. 85. The authors distributed a survey to determine the students understanding of several hypothetical situations dealings with the liability of accountants. The results showed how much the students didn’t know and this was used to stimulate the students need for, and commitment to the course. The Application of Case Method Teaching to Graduate Business Law courses, D. Dobray and D. Steinman. The Journal of Legal Studies Education, Vol. 11, 1/2, Winter/Spring 1993, p. 81. The authors advocate the adoption of the business case study method to the teaching of business law courses. Several sample cases are provided in the Appendix. In Defense of the Legal Case Method and the Use of Integrative Multi-Issue Cases in Graduate Business Law Courses. J. Leibman, The Journal of Legal Studies Education, Vol. 12, 2, Summer/Fall 1994, p. 171 The author argues against the adoption of the business case method in business courses and instead argues in favor of the use of the traditional legal case approach. The Appendix provides samples of how such cases can be effectively used. Turning War Stories into Case Studies, D. MacDonald, The Journal of Legal Studies Education, Vol. 9, 3, Fall 1991, p. 80 The author advocates the use of the business case study method and advocates that law instructors create such cases based on their own experiences. A sample case is presented in the Appendix. Mock Trials Mock Trials: A Valuable Teaching Tool. H. Schaefer, The Journal of Legal Studies Education, Vol. 8, 1/2, Fall 1989/Spring 1990, p. 199 The author advocates the use of simulations in the form of mock trials as an effective teaching tool. Materials are included to do such a mock trial Mock Jury Trial: A Model for Business Law 1 Courses. C. Miller. The Journal of Legal Studies Education, Vol. 6, 1, Fall 1987, p. 91 This is an example of a successful mock trial simulation used by the author in her classes. Needed materials are included. Simulations Morrow v. Johnson: Fact or Fiction, S. Vance, The Journal of Legal Studies Education, Vol. 2, Spring 1984, p. 57 A trial simulation was established by the author based on an actual case. The students didn’t know the outcome. The materials given to the students are included. Bridging the Gap: Using Contract Simulations as an experiential Teaching Method. L. Jones, The Journal of Legal Studies Education, Vol. 6, 1, Fall 1987, p. 71 The author advocates learning by experience and has created a simulation that involves the students in contract making situations. Information and materials needed are reproduced in the article. The Use of Simulated Hearings in Business Law Courses., A. Lawton and L. Oswald, The Journal of Legal Studies Education, Vol. 11, 1, Winter/Spring 1993, p. 103 The authors advocate a modified hearing simulation rather than the simulations of a real trial for the students. The materials and instructions for holding such a simulation are provided. Groups Comparative Learning groups in Undergraduate and Graduate Contexts, R. Adler and E. Neal, The Journal of Legal Studies Education, Vol. 9, 3, fall 1991, p. 427 The authors advocate promoting student involvement through cooperative learning group exercises as an alternative method of classroom interaction in business law courses. Several problems used as the basis for such exercises are presented as examples in the Appendix. Utilizing the Team Report in a Business Law Curriculum. F. Powell, The Journal of Legal Studies Education, Vol. 11, 1, Winter/Spring 1993, p. 127 The author advocates the use of team cooperative learning by creating student teams and assigning them problems requiring a report to be presented to the class by the team. Several problems are reproduced in the Appendix that were used in the class. Integrating Contract and Property fundamentals with Negotiations Skills: a Teaching Methodology. M. Barken. The Journal of Legal Studies Education, Vol. 9, 1, Fall 1991, p. 73 The author provided students with an assignment to be done out of class requiring them to work together and negotiate a purchase agreement for residential real estate. In the appendix materials to be given to the students are reproduced. This includes information about the assignment to be given to both sides, then separate information is given to the seller and the buyer. Collaborative Learning and the Study of the Legal Environment. G. Spiro, The Journal of Legal Studies Education, Vol. 10, 1, Winter/Spring 1992, p. 54. The author discusses the advantages of collaborative and cooperative leaning environments in our business law courses advocating that structured team learning situations be created in the classroom. Materials are provided in the appendices to support this process. Assignments The Use of Student Projects in Business Law Courses, F. Franke The Journal of Legal Studies Education, Vol. 10, 1, Winter/Spring 1992, p. 71. As a method to generate student involvement based on their experience, projects involving Materials used in the process are reproduced, including the propositions used in the debates in the body of the article and project suggestions used in the undergraduate course in the appendix. The Jungle: Insights into the Origins and Objectives of Regulatory Process. J. Dyer, The Journal of Legal Studies Education, Vol. 9, 3, Fall 1991, p. 461. The author assigns the Upton Sinclair Novel, The Jungle as a method of generating a more positive attitude towards government regulation on the part of students. The specific assignment given is set out in the appendix and requires a book report from the students. Research Assignments and Case Studies as Teaching/Learning Devices in a Governmental Regulation course. B. Knowles, The Journal of Legal Studies Education, Vol. 4, Spring 1986, p. 78 The decision making and critical reasoning skills of the students are enhanced by the authors assignment of creating their own case studies. The specific assignment is reproduced in the appendix. Practical Understanding of Legal Concepts, C. Miller, The Journal of Legal Studies Education, Vol. 1, Spring 1983, p. 50 The author has developed specific outside research assignments that are designed to promote a “practical understanding of our legal process and how legal concepts interrelate.” This was done through the assignment of individual fact situations for student response. The specific assignments are set out in the body of the article. Interdisciplinary approaches to Alternate Dispute Resolution, G. Siedel, The Journal of Legal Studies Education, Vol. 10, 2, Summer/Fall 1992, p. 141. The author advocates the promotion of more interdisciplinary work between the lawyers and other business faculty. Specific methods for doing this in the field of Alternate Dispute Resolution are provided in the form of student assignments in the appendices. Two legal environment Writing Exercises Following the Perry Scheme of Cognitive Development, P. Ward, The Journal of Legal Studies Education, Vol. 10, 1, Winter/Spring 1992, p. 87. The author advocates the need to develop students’ cognitive abilities. This should be done through writing assignments that conform to Perry’s Scheme and concentrate on the development of the thought processes. The specific assignments given are reproduced in the appendices Other An Alternative to the Traditional Objective and Essay Examination Formats in Business Law. G. Cameron III and C. Schipani, The Journal of Legal Studies Education, Vol. 9, 1, Fall 1990, p. 106. The author recommends the use of open ended short answer essay exam questions requiring very specific responses that are relatively easy to mark. Examples of such questions are reproduced in the body of the article and the appendix. Putting Business into the Business Law: the integration of Law and Business Strategy, K. Petty and R. Mandel. The Journal of Legal Studies Education, Vol. 10, 2, Winter/ Spring 1992, p. 205. The author advocates the better integration of the business law course into the business curriculum through organizing the course around business topics and transactions and the use of business readings and cases. A sample syllabus as well as a number of business cases involving legal issues from the Harvard case series are listed the appendices. Post-Examination Review: Competition that creates concentration! C. Stowe, The Journal of Legal Studies Education, Vol. 2, Spring 1984, p. 47. Before returning exams, the author advocates a better post examination review by having students, redo the exam in groups, offering rewards for the best group results. The Contractor’s Contract: A Tool for Developing Critical Thinking Skills. M. Nixon and E. Brayton. The Journal of Legal Studies Education, Vol. 12, 2, Summer/Fall 1994, p. 219. The author advocates the development of a students higher level thinking skills through the use of a problem situation involving contract law where the students are asked to apply what they have learned to a real life situation of the building of a house. The appendices reproduce specific material used in the writing assignment. The Professor as Performer: Teaching Legal Studies Mega Sections. E. Emerson The Journal of Legal Studies Education, Vol. 12, 2, Summer/Fall 1994, p. 261, The author makes several suggestions on how to liven up and enhance the quality of teaching where large classes are involved. Some specific tools are set out in the appendices. Other Resource Materials Note that Appendix 4 of Solving the Mystery of Legal Research: A Legal Research Exercise, by C. Haselden found in The Journal of Legal Studies Education, Vol. 9, 3, Fall 1991, p. 452 at p. 460 lists the following resource materials related to games, their use and their creation. The Educational Effectiveness of Simulation Games: A Synthesis of Findings. M. E. Bredemeir and C. S. Greenblat, 12 Simulation and Games pp 307-332 (1981) Building Instructional games. D. E. Hitchcock, 25 Training pp. 33-39 (March 1988) The Holmesian Paradigm of Problem Solving. R. L. Kellog, 1. Lifelong Learning PP. 4-7 (March 1978) Playful Gaming. A. Makedon, 15 Simulation and Games, PP. 25-64 (1984) Writing for Fun: Creating a Mystery Game. L. Melin. Writer’s Digest PP. 37-39 Human Communication Handbook: Simulations and Games. Vol. 2 (1978) B. D. Ruben Human Communication Handbook: Simulations and Games. Vol. 1 (1975) B. D. Ruben and R. W. Budd. The following articles are from the Journal of Legal Education although this publication is intended for instruction at law schools many of the ideas and suggestions are directly applicable to the teaching of law to business students. Developing Legal Problem-Solving Skills, S. Nathanson, Journal of Legal Education, vol. 43, 1993, p.215, In this article the author gives a methodology to teach law students problem solving skills. Since this is also vital in business law, many of the recommendations given are directly applicable to business law classes All I Ever Needed to Know About Teaching Law School I Learned in Teaching Kindergarten: Introducing Games Techniques into the Law Classroom, J. Rosato, Journal of Legal Education vol. 45, 1995, p.568. The author’s recommendations here on the use of games to teach law are just as applicable to a business law course as law school courses. Joining Hands and Smarts: Teaching Manual Legal Research Through Collaborative Learning Groups, T. M. McDonnell. Journal of Legal Education vol. 40, 1990, p.363 The author discusses his positive experience using collaborative learning groups. The Role of Legal Problem Solving in Legal Education. S. Nathanson, Journal of Legal Education vol. 39, 1989, p.167. The author adapts the problem solving approach so successful in other disciplines to the study of law. Fun and Games in the First Year Contracts by Role-play, K. Hegland, Journal of Legal Education vol. 31, 1981, p.534. In this article the author advocates that the students role-play a conflict in a contractual relationship (dispute) from the point of view of the participants (among others). Skills Training in the Torts Course, J.W. Little, Journal of Legal Education vol. 31, 1981, p. 614. The author advocates the use of role playing and simulation techniques to teach a torts course. This can be easily adapted for use in an undergraduate business law course. Simulation materials are provided in appendices Research on American Law Teaching: Is There a Case Against the Case System, P.F. Teich, Journal of Legal Education vol. 36, 1986, p.167. Although directed to the use of the case study method as used in law schools, this examination is also applicable to the use of legal case studies as used in business law courses. The author examines the value of the case study method, looks at alternatives, and suggests more research has to be done. An Analysis of Legal Education and Business Education Within the Context of a J.D./MBA Program, J.W. Kindt, Journal of Legal Education vol. 31, 1981, p 512. This is a good discussion of the role of law in business education generally and worth reading. Symposium on Simulations. Journal of Legal Education vol. 45, (1995) In this volume of the Journal of Legal Education a number of articles are presented on the value and use of simulations in law classes. All of the following articles have value and contain ideas that can be adapted to business law, but L. Dallas article has the most direct application. Simulations: An Introduction, J. Feinman, p.469 Use of Simulations in a First-Year Civil Procedure Class, R. Vaughn, p.480 Limited-Time Simulations in Business Law Classes, L. Dallas, p.487 Learning and Learning To Learn by Doing: Simulating Corporate Practice in Law School, K. Okamoto, p.498 Teaching Students How to Practice Law: a Simulation Course in Pretrial Practice, L. Snyder, p.513 In Journal of Legal Education 40 (1990) pp. 1-250, is reported a symposium on the pedagogy of narrative. There are 14 articles on the use of story telling in legal education and they are as useful to those teaching business law as to those teaching in law schools. Note the book, The Quiet (R)evolution: Improving Student Learning in Law, Sydney, Australia: Law Book Company 1994, by M. Lebrun and R. Johnstone. Although written for Australia this text provides many suggestions on how to improve the teaching of law that will be helpful to those teaching business law (reviewed by A. Zariski, in Journal of Legal Education vol. 45, 1995, p. 309. Appendix 2 The Yates Cases These cases are not primarily business cases with a legal twist; rather, they are law cases with a focus on legal issues that can be approached from a business point of view. The focus is on the legal issues. One recommended methodology is to take a team of managers from the particular business involved (to be role played by selected students) and ask them to solve the problem or deal with the dispute from the business’ point of view. An essential part of this process is for that management team to determine the nature and significance of the problem and in the process, to assess the legal issues involved. It is only with a good understanding of the legalities surrounding the problem that the team can recommend a business solution. In the examination of any of these cases a solution that ignores the legal issues will not be acceptable under any circumstances. It is suggested that the team should first get a clear grasp of the facts, determining precisely what happened. In the process it may also be important to predict what is likely to happen. Next, based on that examination of the facts, and predictions as to the future, the team must determine the legal issues involved. Depending on the case, the law surrounding the facts may be clear or ambiguous (uncertain, one of those areas of the law where a court’s decision could go either way). This should form part of the evaluation and be taken into consideration in assessing the risk. The next stage is to assess the impact or likely impact on the firm. This means to look at what would likely to happen if the matter were to go to court; what decision is likely to take place and what the damages or other remedy might be. Risk must be assessed. For example, it is likely that when the Loewen Group entered into their agreement with the Mississippi funeral business, they never dreamed a court might award punitive damages of $500,000,000 for their dealings over an $8,000,000 dispute. Ford, on the other hand, likely did anticipate that even if the jury were to award a huge judgment in a Pinto disaster, it would be reduced on appeal to something they could manage, as it was. The team should consider the business risk involved, not just in terms of this one case, but also what the decision and attendant publicity would mean to the rest of the business. Ford failed to anticipate this in the Pinto case. The following questions should be considered when approaching all of these cases. In addition there may be other specific questions that are attached to the individual case. What are the legal issues that arise in this problem? Why are they important? What are the applicable legal rules? Is there a clear answer as to the operation of the law? If not, what are the potential legal outcomes and which is most likely? What is the objective or purpose behind the rules being applied? Will the purpose or objective behind the rule being applied likely affect the outcome of a court action? What effect can these outcomes have on the business involved? What is the best course of action for the business? (Why?) Discuss the potential impact of the various possible courses of action that can be taken on the business. What should have been done (if anything) to avoid this problem in the first place? (risk analysis) What steps (if any) should be taken to avoid similar problems in the future? (risk avoidance) Organization To conduct a case study in a class of 30 students I divide them into 6 or 7 groups of 3-5 students each. Each group chooses a different case to present to the class. Once one group has chosen a case, another group will be assigned the task of critiquing the presentation. The critiquing group will be expected to look at the content of the presentation, the thoroughness of its examination of the legal and management issues and recommendations, not the style or skill of the presenters. This ensures that two groups have prepared for the presentation of each case. All students are required to read the case in preparation for the class. Where several positions are present in a case (for example, a manager, the employee and the firm in a wrongful dismissal action), I recommend that each student in the presenting group look at the problem from the point of view of one of those positions, but that is only one approach and I leave the method used to the students. Assuming a 50 minute class, there would be one presentation per class. The presenters would have a maximum of 25 minutes and the other group a maximum of 10 minutes to critique. The rest of the time would be for class discussion and debate. I usually make the presentation worth about 25% of the course mark, thus placing a considerable amount of pressure on the students to take it seriously. The critique would be worth about 10%. Unfortunately, I usually only have time for one presentation and critique per group in my class. I would prefer to do more. I may also direct some groups to give presentations on specific topics that relate to their area of specialization. They are assigned to teach the class about that topic or to develop some other way to present the concepts such as by role play or simulation. For example, instead of a case I might ask one group to give a presentation on harassment in the workplace. Instead of critiquing another group’s case, this group would hand in a paper on their topic for the added 10%. Note that this is just one of the methods of using cases or problems in a business law course. A more effective method requires all of the students in a class to examine a carefully selected case and participate in a discussion of that case usually over several class periods. This allows the instructor to guide the students to ever higher levels of analysis as shallow ideas and simplistic solutions are presented by the group and rejected. This provides opportunity for the development of critical thinking skills, but it is time consuming. Where the objectives of the course require conveying significant amounts of information and teaching numerous rules and concepts as is usually the case where there is only one business law course, this more intensive approach is not possible. The result is a trade off between developing analytical skills and learning about the law. The case presentation strategy described above is a compromise that does not usually generate this higher level of discussion. When there is enough time or where there is more than one course available, I suggest that the case method approach described and recommended in Selma Wasserman’s Introduction to Case Method Teaching: A Guide to the Galaxy (Teachers College Press, New York, 1994) be adopted. There are 8 case studies set out in Appendix below: Adams v. The Royal Vancouver Hospital Valley Homes v. Ace Minerals Corp. Busy Bee v. Joe Student et al O. Mann v. The Builder’s Friend et al (Torts) Joe v. Everybody I’m a Lumberjack and I’m O.K. Something Fishy Software the Hard Way 1. Adams v. The Royal Vancouver Hospital The Royal Vancouver Hospital (RVH) needed a givings officer. This is a person who seeks donations on behalf of the hospital from private donors. Their old givings officer was retiring on June 1 and with government cutbacks private donations promised to be much more important in the future. A perfect candidate is brought to their attention, Mr. Adams. He has worked very successfully for a large American hospital for 10 years. This was a private institution largely dependent on donations from business and so the role of the givings officer was much more significant than was presently the case at RVH which relied largely on government funding and only to a very small extent on private donations. But times are changing. RVH like all such federal and provincial institutions are currently facing huge cutbacks in government funding and so they need people like Mr. Adams with his American experience. Mr. Adams came to Canada 2 years previously at a time when the federal government was encouraging research and development projects by giving substantial tax credits for funds spent on those projects. Mr. Adams and several other people from the US came here to take advantage of this favorable research climate. Mr. Adams has been involved for the last two years in developing a successful containment system for fighting oil spills. That project came to an end because changes in the Canadian tax laws ended the tax credits for such projects and because there were no oil spills where the newly developed technology could be put into practice. In February it came to the attention of one of the assistants in the personal office at RVH that at the end of March Mr. Adams’ job would end and that he intended to return to the US to find employment. The assistant brought this to the attention of the personal manager who brought it to the attention of the president and those two, with the approval of the chairman of the Board of governors, decided to explore the possibility of hiring Mr. Adams. After several interviews it was decided that Mr. Adams should come to work for RVH on a contract basis for the months of April and May and that on June first he would take over the permanent position of givings officer for the hospital, which would then be vacant because of the former officer’s retirement. Mr. Adams agreed to this and had been working for the hospital quite competently in his position for a month and a half when in mid April an article appeared in the Chronicle, a very influential national paper directed primarily at the business community. The topic of the article was the shameful abuse by some parts of the business community of the special tax advantages given for research and development in Canada. The article not only pointed out that the reason the program was stopped was because of the abuses that had taken place but went on to outline some examples of not only abuses but of outright fraud. The article referred to several people by name who had come to Canada from the US and set up phony research projects but never did any research; however, on the basis of falsified claims they still obtained the tax credits. The article speculated on the likelihood that these people would be prosecuted. Unfortunately Mr. Adams was specifically named and described along with 5 others as one of these “carpetbaggers from the US, fraudulently taking advantage of the Canadian tax system.” Because the article was published and distributed across Canada and was specifically directed at the business people that Mr. Adams would have to approach for donations in his new position of givings officer for the hospital, it was clearly very damaging to him. In a discussion with Mr. Adams shortly after the article appeared he made it clear to the Vice President of Finance of the hospital that the allegations referring to him in the article were false, that he had proof of that and that he intended to sue the Chronicle for defamation. The VP of Finance conveyed this to the President, Chairman and Board of Governors. The matter was then handed back to the personnel office to make recommendations. Under these circumstances what should the hospital do with Mr. Adams and the full-time position that he had been promised, which would start in 2 weeks? From the point of view of the Chronicle, after Mr. Adams complained and threatened to sue, the reporter who did the article was questioned about it. She made further inquires and concluded that the facts were all correct and there was no question about the accuracy of the allegations as far as the other 5 men specified in the article and that if they were prosecuted they would likely be convicted of fraud. It was also clear that Mr. Adams was associated with them in the US and came to Canada as part of that group intending to take advantage of the friendly Canadian tax environment for research and development, which explains why the mistake was made. However, Mr. Adams in fact did do the research and development claimed and obtained from the Canadian taxation department a letter stating that they are entirely satisfied with the validity of the project with which he was associated and that Mr. Adams was in no way in any difficulties with the department and that there were no outstanding complaints against him. The taxation department has only rarely supplied such a letter. In a meeting with the Editor of the paper the reporter submitted copies of this letter as well as documents detailing the nature of the oil containment system developed by Mr. Adams and acknowledged her mistake with respect to Mr. Adams. What should the Chronicle do in these circumstances? From Mr. Adams’ point of view, he has presented proof to RVH of the inaccuracy of the report and they still fired him. He has presented proof to the Chronicle of the falsehoods in the article, and the untold loss suffered (the loss of his job and ultimate damage to his career). He has requested a retraction and an apology and neither have come. What courses of action are available and what should be taken into consideration before choosing what course of action to take. 2. Valley Homes v. Ace Minerals Corp. Jones is a young, recently hired salesperson working for Valley Homes, a small company manufacturing and selling prefabricated dwellings. They sell primarily to people wanting to build their own cabins and summer homes. Jones’ job consists of working out the designs with the customers, pricing that design and then working out the specifics with the engineering section, which develops plans and sets out the exact specifications for the productions of the dwelling. She then follows up with the customer, even providing a contractor to build the dwelling if needed. A large mining company, Ace Minerals Corp., as part of the development of a huge mineral deposit in northern Manitoba, had to build a townsite for the miners and their families consisting of some 50 dwellings as well as a sports and recreation complex. Under the supervision of the vice president of finance, Brown, Ace Minerals published a request for tenders for the supply and erection of these 50 homes and recreation centre. Upon request Ace provided the specifications and the other details of the tendering process including a statement that once submitted the bid could not be withdrawn before the formal opening of all the bids, and that the lowest bid would be accepted following the standard practice in the industry. Jones obtained these details and brought them to the attention of the Valley Homes executive arguing that the company had to change their method of doing business from just servicing the residential retail market and get more into the growing industrial sector. This was consistent with conversations that had recently taken place between the president of the company and major shareholders and so it was decided to submit a bid on the Ace Minerals project. Jones and Smith, the sales manager, were designated as the team to develop Valley Homes’ bid. They worked for several days enlisting the help of the engineering department completing and submitting the bid on the day specified as the deadline for the submission of the bids by Ace. That evening Jones was reviewing the bid and to her horror discovered a significant error in the calculations prepared by Smith. Jones quickly redid the calculations and found to her added horror that instead of making a 15% profit on the deal they would suffer a 20% loss. On such a huge order this could be enough to bankrupt the company. On further examination it became clear that Smith had intentionally structured the error and cleverly hid it in a way that made it very difficult to find. It was only by chance that Jones had discovered the error at all. It was later learned that Smith as sales manager felt threatened by this business brought in by the upstart Jones and set out to sabotage the project to make sure things stayed the way they were. He felt that when the deal lost money Jones would be blamed and he could then get rid of Jones with the blessing of the president. Jones brought the miscalculations and conduct of Smith to the attention of the president of the company. The president called Smith into the office and confronted him with what he had done. It was at this point that Smith broke down, confessed his misconduct and explained that because of his age he felt threatened by Jones and worried that he would lose his position to her. The president fired Smith outright, and then went to the offices of the mining company. He met with Brown and presented him with a letter explaining the mistake and in a formal way revoking the bid that had been submitted the day before. Although the bids had not yet been opened, Brown declared that even though he was very sympathetic to the problems of Valley Homes, he could not interfere with the integrity of the bidding process once the bid had been accepted by the company for consideration. He said that they would simply have to wait until that afternoon when the bids would be opened to determine their fate. When the bids were opened not surprisingly, Valley Homes was the lowest bidder and their bid was then automatically accepted by Ace. The next day the president of Valley Homes and Jones met an Ace management team headed Brown, where the problem was discussed. The Ace group confirmed their position but did indicate an understanding of the difficult position that Valley Homes found themselves in. They also pointed out that they realized that it was not in their interests to see Valley Homes fail and not be able to finish the job. They therefore agreed that if the project was satisfactorily completed on time, a bonus of would be paid to Valley Homes of 1/2 the difference between their price and the next lowest bid. This would allow Valley Homes to do just a little better than break even on the job, thus avoiding bankruptcy. It was also understood that there would likely be future dealings between these two companies and because of the good relations created in this meeting Valley Homes would give Ace Minerals an especially good deal on the next project. As the project proceeded, a series of payments were made to Valley Homes all 59 days after the date specified in the contract. As is normally the case with these kinds of projects there was a clause in the contract whereby Ace would not have to pay interest on any late payments so long as payment was received by Valley within 60 days of the day payable. Eventually the project was finished on time to the satisfaction of all parities but the bonus was not paid. Valley Homes waited the specified 60 days and when the bonus was still not paid, they went to Brown’s office for an explanation. They learned at this time that Brown had been replaced and they were invited to meet with the new Vice President of Finance Mr. Grey. He explained that over the months Ace had carefully monitored the project and the health of Valley Homes and had decided that they were in better financial shape than either party had anticipated. Bankruptcy was not a threat and therefore the mining company had decided not to pay the bonus. Mr. Grey went on to explain that they were entirely satisfied with the work that had been done and that Valley Homes should in no way take this failure to pay the bonus as an indication of dissatisfaction on their part with the their company, the personal, or the quality or timeliness of the work performed. In fact Grey’s final comment was that he hoped that the two companies would have many years of cooperative ventures in the future. Discuss the options available to Valley homes in these circumstances. 3. Busy Bee v. Joe Student et al (Secured Transactions) After graduation as a business student at SFU and taking a year off to travel, Joe Student decided that he wanted to go into business for himself. He was attracted to the franchise business and chose one that requires very little initial outlay. This involved the opening of a hot dog stand to be set up in front of a major sports retailing outlet recently opened in Burnaby. The franchising company, Ace, arranged for the site and supplied the cart itself, with a cooler, stove and storage area. It also supplied jumbo and regular wieners, buns, and condiments as well as soft drinks for a fee only slightly higher than would be available through normal wholesale outlets. Although Joe has no choice but to get his supplies from Ace, he considered this slightly higher cost was well compensated for by the convenience of getting them all from the same source of a consistent and known quality, and because of the other services supplied by Ace. Ace insisted on supplying the food inventory as a matter of quality control and to ensure product consistency between all of their franchised carts at various locations around the lower mainland. The franchise fee to be paid by Joe to start the business was $20,000 and for this in addition to the cart and an initial supply of buns and wieners, Ace would supply a limited amount of advertising and other services such as bookkeeping and tax preparation. Ace also was entitled to a set percentage of Joe’s sales to pay for this service. Joe’s initial problem was to raise the $20,000. He had no money himself, having just finished his bushiness program and travels and in fact owed about $15,000 in government student loans. He did however have a relatively new sports car worth in his estimation about $13,000. He also had an older cabin cruiser given to him by his grandparents, which he estimated to be of about $10,000 value. His mother had recently passed away and his father was a successful teacher in the Vancouver area. Although his father was encouraging in the business venture, he was not in a position to lend Joe any money. He did suggest, however, that Joe use a sound business approach to the problem and arrange financing through a company recommended by a friend, the Busy Bee Trust Company. Joe took this advice and made an appointment to see June, a recently hired loans officer working for Busy Bee. When Joe showed up for his appointment she recognized him as one of her fellow students in the business program at SFU. She remembered him as an adequate student if not particularly a bright light. Joe did think to prepare a business plan and after some pleasantries presented it to June with a request for the loan. June could see that the business plan was quite optimistic, but recognized that there was a clear potential for success and leaned towards making the loan if she could be satisfied that the risk to Busy Bee was minimized. It was clear that the assets of the hot dog stand itself including the cart was of little value and that the $20,000 being paid by Joe was for the franchising services provided by Ace. What steps should June take in these circumstances to make the loan and also minimize the risk of loss to Busy Bee? Part 2 June made the loan to Joe, taking a chattel mortgage against the car and boat and getting Joe’s father to guaranty the $20,000 loan. Unfortunately when the chattel mortgage against the boat was registered (using the Finance statement under the PPSA) two numbers were inadvertently reversed and the security was registered under the wrong serial number. Joe continued in the business for some six months and by that time it became clear that the business was not as profitable as he hoped it would be. He needed more money to operate and wanted to sell the boat to generate more working capital. He approached his friend June at Busy Bee to get permission to do so and after reviewing the file she determined that the guaranty and the remaining chattel mortgage against the car satisfied Busy Bee’s minimum requirements for security, and gave permission for the boat to be sold and the funds to be used by Joe in his business. About four months later, with the business still not doing as well as he hoped, Joe got bored and decided to go back to school and get a masters degree. He had also heard a rumor that the health departments in the various municipalities were planning a coordinated crack down on these road side food vendors. Without informing Busy Bee he sold the car to Mary for $10,000, abandoned the cart in front of the sports complex and caught a plane for Ireland where he has been admitted to pursue his further education. Mary quickly resold the car to her friend George for $10,500 who used it for the 3 summer months and resold it to Sam for $9,500. By this time June at Busy Bee found Joe in arrears, checked and upon some investigation found that he had abandoned his business and left the country. When they took steps to repossess the car, they discovered their error, corrected it and reregistered the Loan. This re-registration took place while the car was in the hands of George. After the correction and changes to the registration were made, George resold the car to Sam for $9,500. Neither George nor Sam knew of the claim against the car by Busy Bee at the time of the sale, but had Sam checked with the registry, the corrected information would have made it clear that busy Bee claimed a charge or lien against the car. Busy Bee repossessed the car from Sam and demanded payment of the remainder of the $20,000 loan from Joe’s father on the guaranty. Discuss the legal position of the various parties. 4. O. Mann v. The Builder’s Friend et al (Torts) Joe had been recently promoted to the position of manager at one of the Lower Mainland outlets of a retail sales business selling home and garden supplies called The Builder’s Friend. This business had 20 retails outlets in western Canada concentrating on supplying the needs of the home owner and amateur builder. There had always been a considerable problem with shoplifting and this was particularly true at Joe’s location. Maters had been made worse in recent months with a serious downturn in the economy which showed a related increase in theft from the store. All normal steps had been taken to reduce this problem including hiring floorwalkers, inspecting packages of customers as well as requiring all vehicles that came onto the premises to submit to a vehicle inspection as they left. When Joe became manager he was told that one of the major problems he had to deal with was the excessive shoplifting taking place at his store. Joe was also told that the old manager lost his job because of an inability to reduce such thefts and so he knew that his success in his new job depended to a large on the way he dealt with this problem. Joe decided to enlist all of his staff into this struggle and as a part of his regular weekly sales meetings devoted a significant part to a program encouraging all the employees to get involved in the theft prevention business. “To have a go,” as he put it. He also made sure that any new person hired not only looked like, but could “take care of himself” He encouraged everyone working at the store to be watchful for any sign of shoplifting and a significant portion of the weekly training sessions were spent on how to spot such thefts. Within 6 months of taking over as manager Joe was satisfied that all of the employees were excited about the program. They seemed not only vigilant but eager to catch shoplifters and indeed in that time several shoplifters had been apprehended. Joe took a zero tolerance tough approach and made sure that all were prosecuted to the full extent possible, even kids. He further rewarded the employees involved in the apprehensions by recognizing their contributions on the staff bulletin boards and also in a more tangible way by giving them a day off with pay. He noticed that the other employees appreciated this and were further encouraged to participate in the program. One Saturday afternoon Joe was walking around the floor of the store when he saw a well dressed customer (Oliver Mann) carrying an obviously full large brown paper bag in both hands, looking at merchandise in the store. Joe had noticed him because on another occasion one of the employees had pointed him out as a person who had been acting suspiciously but they had never caught him taking anything in the past. This time Joe saw him pick up a small but expensive power tool and put it into the bag he was carrying. Joe called over two of his new employees, both young vigorous athletic looking young men. He gave Sam the keys to his car and his cellular phone, telling him to drive around the block and call into the customer service desk to coordinate so that he could cut the customer off if he tried to get away. He and Harry the other young man, looked around and found the customer in another section looking at building supplies. This was near the supply entrance where there was no cashier located and sure enough the customer left the store through that open side door. Joe sent Harry off to follow and as he went out the front way to intercept the fleeing customer he told the customer service clerk to alert Sam in the car that the customer was fleeing and was heading across the intersection at the front of the store. When Mr. Mann, the customer saw that he was being followed he started to run. Harry ran after him. Joe also ran after him cutting across at an angle from the front door. Harry caught up to him first in the intersection garbing him, but the Mann dropped his package shrugged off Harry and leaping away made a run for it. Just at this time Sam in the car drove into the intersection, jumped out of the car and made a flying tackle sending himself and Mr. Mann in a heap onto the street. Sam sat on Mann, and proceeded to hit him several times in the head. Harry joined the action at this time and added several of his own blows, all before Joe the manager caught up and arrived at the scene. All three then picked up Mr. Mann who was severely dazed by this time and half dragged and half carried him back into the store. When Joe returned to the store he immediately called the police. About the same time the police arrived at the store, Richard also presented himself at the store identified himself to the police and explained that he had been stopped at the intersection waiting for a red light immediately beside where Sam had parked his vehicle when these events took place. Richard had witnessed the whole thing from when the customer had left the store. His attention was first drawn to a well dressed man carrying a large parcel as he left the store hurrying across a right turn segment of the intersection just ahead of a right turning car. He had witnessed one person come after the man from around the side of the store and another come after him out of the front door. He had witnessed Harry’s initial attempt to subdue the customer and said he had had a “grandstand seat” for what he had described as a perfect “flying tackle” coming from the driver beside him who had jumped out of his car and brought the man with the package down. He had also described the blows that Harry and Sam had administered to subdue the customer on the ground and had seen the man being dragged back to the store. Richard left his name and address with the police and they said he would likely be called on later. Mr. Mann at this time wasn’t making much sense and so the police arrested him and called an ambulance. The next day at the hospital Mr. Mann who had suffered a concussion in the fray, explained to the police that he had simply been looking at what was in the store, and although he had at first intended to buy a small tool he had decided it was too expensive and had changed his mind. Because he was not purchasing anything, he had left by the most convenient exit. When asked why he ran, Mann replied “wouldn’t you run if you saw several big men chasing you?” The police went back to the store and asked to look in the bag that Mann had been carrying. Joe realized that in the excitement they had not brought it back to the store with them. They went out into the street looking for it but by that time of course it was gone. 5. Joe v. Everybody Joe, a recently graduated business student decided to start his own business. After attending a franchising and small business opportunity conference he was particularly persuaded by a franchising opportunity involving a pot and pan repair and refurbishing business. After the conference he researched out the business getting all of the information he could from the people selling the franchising opportunity “Tinker’s Damn” Inc. He talked to Ted, the salesman trainer and area representative for “Tinker’s Damn” and found that the services offered involved the company providing training in the repair of pots pans and other such utensils as well as training in a new technique of refurbishing such items to almost new condition. The company would also provide the specialized equipment necessary, a designated area in which Joe was entitled to carry on the business involving both residential and commercial premises and a commitment to provide a certain amount of advertising in the local paper, on billboards and the like. Ted also promised that they would solicit sufficient appointments in the first two months so that the business would not only break even (including a salary for Joe) but would generate a modest profit as well. After these first 3 months the “Tinker’s Damn” would provide a list of 500 potential clients but other than that and some advertising, Joe would be on his own other than use an ongoing bookkeeping service that would be supplied by the head office. Part of Joe’s training involved where to look for customers and how to solicit business. The fee to be paid to “Tinker’s Damn” was $20,000 and 15% of all revenue earned by Joe. These provisions were clearly stated in a written contract between Joe and “Tinker’s Damn” Inc., which Ted signed on behalf of the company. In addition Joe had to purchase a truck in which to house the equipment and from which he would do his business. This was a further $25,000 investment. He borrowed enough money from his father to pay the franchise fee and to make a $3,000 downpayment on the truck. They agreed that this should be done in a business like way and so Joe incorporated a company and on behalf of the company agreed to repay the loan at a rate of $500 per month until repaid with 9% annual interest. Joe gave his father a promissory note on behalf of the company to that effect. Without consulting Joe’s his father gave the note to Joe’s recently married sister to use as a downpayment on a house. Joe also felt that he needed to establish a small office in his home. For this he needed a computer, printer, fax machine, a telephone answering machine and photocopier. He felt that he would like a scanner as well. Based on the projected sales and income figures supplied by the franchise company and his own needs he calculated that he had enough income to be able to carry the extra debt and went to “Tomorrow Town” a retail electronics store to see what kind of deal he could get on these items. When he entered the store he was approached by the salesman Sam who after listening to him for a few minutes told him “he had just what he needed”. Sam showed Joe a computer, monitor hard drive etc. which was on sale with a printer for $2,500. The salesman explained that this was the most up to date technology available anywhere. He said that the computer was not only the leading edge of computer development and would be current for years to come but that it was upgradeable when advances beyond its capabilities finally were developed, “not that Joe would ever need anything better” Sam also pointed out that the computer would run all current software that was available even the most advanced, and would run any software that might be developed in the foreseeable future. Sam also pointed out that the printer supplied with it was the most recent high impact 24 pin design and that nothing was better. For the other equipment, Sam showed Joe a Concord 100, which was a special combination fax, scanner, and photocopier that was available for only a further $1,700. Sam said that this was what everyone was using nowadays and that they were extremely fortunate to find one in the store that had not yet been sold. Joe was told that he had better decide to take it right away as it would not likely be available later in the day they were going so fast. Sam said that if he bought the package he would throw in one of the new “brother” answering machines they had on sale that day for no extra charge. Joe was impressed with what Sam had to say and agreed to buy the computer printer and combination fax/scanner/photocopier. He also agreed to purchase an extended warranty as well as a management contract for a further $500 which provided that any repairs and servicing necessary would be done by the provider of the service for only a “small fee” at Joe’s office. He also agreed to purchase a packaged “office” software bundle. The price came altogether to $5,800 including PST and GST. Joe paid his last $500 as a down payment and agreed to repay the loan at a rate of $150 per month for 5 years. He had no worry about being able to afford this as the sales projections and costings that he and the advertising company had done had assured him of a monthly income high enough to not only pay a substantial salary to him but also cover the franchise payments, the payments of the truck and this further debt to Tomorrow town electronics. Because Joe had incorporated his business, and wanted to put the purchase in the company name for tax purposes, Joe had to sign a promissory note in his own name for the money owed as well as a conditional sale agreement in the name of the company secured against the computer equipment purchased Joe took the computer home hooked it up and found when he tried to run the standard software he had purchased the hard drive was not big enough to load it all. He also found out that while the computer was able to run some of the software supplied it did so very slowly. He further discovered that some of the software purchased that he didn’t really need for the business (a presentation program) would not run on the computer at all. He asked a friend knowledgeable in computers to come over and have a look. The friend pointed out that the computer that he had been sold was an older model (a “386”) which had been sold as a special package (CPU, monitor, hard drive etc.) and while it could be upgraded to run some of this newer software it would require a complete removal and replacement of the motherboard, in effect a replacement of the whole heart of the computer. Even then the monitor (and video card) and other internal components which was packaged with it were really designed for this outdated technology and would not operate with the new CPU that efficiently. Joe was further disappointed that some video games that he had hoped to use on the computer were incompatible with such an obsolete system. He was also disappointed to find out from his friend that although the combination fax/scanner/photocopier worked it required special paper and special ink that made any kind of volume work prohibitively expensive compared to the alternative. For this reason the Concord 100 was no longer being sold in other stores and was being sold off at “Tomorrow Town Electronics” at a sales price in order to get rid of them. The main difficulty wit this is that the special paper and ink were used only with this unit and it would be extremely difficult to get them in the future. The printer itself was completely compatible with the computer because it too was an old obsolete system. He found that he should have purchased a laser or inkjet printer which would have provided better resolution, much greater speed with modern software, and less noisy operation. His friend also noticed that the telephone answering machine he had been “given” was used not new. Joe went back to “Tomorrow Town Electronics” in an irate mood to demand the return of his money. He looked for the salesman but Sam was not there. He demanded to talk to the manager. The manager, Ruth, was sympathetic upon hearing Joe’s story. She explained that Sam was not a salesman but only a sales trainee who was on the floor that day only to get exposure to the “real world” of sales. Sam had not been authorized to make any sales without the direct involvement of one of the regular sales staff. Despite that when the sales manager had realized what Sam had done he had decided to honour the sale even though they didn’t have to, and Ruth had supported that decision and so would not demand the return of the computer. Ruth explained that she could not help Joe because earlier that day they had assigned the conditional sales agreement along with the promissory note to Ace Finance Ltd. “Tomorrow Town Electronics” was no longer involved, Ruth explained, and so any problems Joe had (“except warranty problems of course”), would have to be taken up with Ace. Ace was a special independent finance company that “Tomorrow Town Electronics” had set up to handle all of their installment sales. The manager also pointed out the small print in the contract which stated that “all sales were final,” that “unless the product was actually defective in which case it would be repaired or replaced, there was no other warranty express or implied with respect to the product, its performance or its quality”. The contract also stated “That any statements made by salesperson or otherwise that were not specifically included within the written contract were void and of no effect.” The manager expressed sympathy for Joe’s position and stated that for another $1,000 they would upgrade the mother board of the computer which would solve “many” of Joe’s problems but otherwise since there was nothing actually wrong or defective with the computer he was “out of luck”. Joe was extremely angry by this time and feeling cheated said that he would not make any further payments and that he wanted his downpayment back. The manger Ruth feeling that she had been more than generous and feeling that Joe was not only ungrateful but insulting, managed to hold her temper and simply told him he would have to take that up with Ace as she ushered Joe out of her office. Later that Week Joe received a letter from Ace, informing him of the assignment of the conditional sale agreement along with the promissory note and requesting him to make any further payments to Ace at a specified address. Joe wrote a letter back stating what had happened, demanding hat the computer be replaced or that his downpayment be returned. He also clearly stated that he would be making no further payments until the mater was rectified to his satisfaction. Part 2 Joe makes no payments. Ace does not return any money paid by Joe. “Tomorrow Town Electronics” refuses to have anything more to do with the mater or with Joe. A bailiff attends at Joe’s house to repossess the computer but Joe refuses to let him take it until he “at least gets his down payment back”. Ace sues Joe and “Tomorrow Town Electronics”, Joe sues “Tomorrow Town Electronics” and Ace. How would the situation be different if Joe had signed a personal guarantee instead of a promissory note? To make matters worse for Joe, he was in no financial position for carry on these court actions. It turned out that the business he had started was not anywhere near as profitable as he had anticipated and been lead to believe by “Tinker’s Damn” Inc. If it weren’t for the help of his father he would have lost the truck say nothing of the electronic equipment he had purchased from “Tomorrow Town Electronics”. He had considered just not making any further payments on the Promissory note he had given to his father but when he learned that it had been used as part payment on a house for his sister, he was unsure what effect not paying would have on his sister and father. Upon further investigation he discovered that Ted, the salesman and trainer for “Tinker’s Damn” had misled him. Joe went to the appointments made by Ted, he found that half of them had never been contacted and about half of those that had, said no to the appointment. Only about 25% of the appointments he had been given by Ted were in fact valid and he was now scrambling to drum up enough business to keep afloat. As a result he had to immediately turn to the list provided of potential customers and to his dismay he discovered this list was simply the restaurant section extracted from the of the yellow pages and consisting of only 200 names listed twice. Joe has discovered that with a lot of hard work over several months he could build up a sufficient client base to “do OK” in this business but that it would be “touch and go for quite awhile.” It was clear that he had not received anywhere near the value he had expected from “Tinker’s Damn” Inc. What should Joe do in these circumstances? 6. I’m a Lumberjack and I’m O.K. Jack owned and operated one of a multitude of small logging operations in western Canada called Lumberjack Inc. A few of these small operators had their own allocations of timber (as licensed by the provincial government) but most including Jack, were “contractors” working for larger companies (the Majors). This meant that for a negotiated contract price they would go onto the areas licensed to the major company and harvest that timber for them. They also occasionally harvested timber for private landowners who had stands of timber on their own land. They would contract to purchase the standing timber, cut these logs and sell them to one of the major companies to be made into pulp or sawed and sorted for lumber depending on the type of timber and the quality and size of log. There were only a few of these major companies and the small loggers usually had no choice but to sell their logs to the one operating nearest to them because of the prohibitive cost of transporting the Logs. The value of working together was clear very early and years ago a small loggers associations (SLA) was formed to handle the problems of Jack and other small loggers like himself. A great problem that Jack and the other small loggers had was that they could usually only sell their logs to one buyer, the one nearest their operation. Because of this and the fact that there are only one or two major companies interested in purchasing their logs the market is very restricted and the Majors can dictate the price. Jack and the other small loggers don’t really have much choice. As a result one of the major concerned of the SLA was to ensure that they get the best price for their timber. One of the main purposes of the SLA was to provide a monthly forum for Jack and his friends to get together and discuss the prices they should get for their logs. They invited representatives from the major logging companies (the purchasers) and together they would discuss and set prices for the timber to be sold in the following month. The members of the Small Loggers Association agreed that they would sell exclusively to the Majors and the representatives of the Majors in turn agreed on behalf of their companies to purchase a set amount of timber from those small loggers at a specified price. The major companies agreed to this because they were not happy about the control they had over the pricing in the past, feeling that they had too much power to control the market and as a result were vulnerable to prosecution. Also this kind of arrangement created a certain security of supply that they had never had before. These major companies had another problem that this arrangement solved. The Majors were all divided into different divisions and the divisions that purchased logs and chips from the small logger often found themselves selling those same logs and chips or logs and chips they had produced themselves to other divisions of their own company or they were purchasing from those other divisions, and it was required that this be done at fair market price or they would again be vulnerable to prosecution. Because of this arrangement with the SLA they had a price they could use in their internal dealings. Thus the representatives who attended these monthly meeting of the SLA were both the customers and the competitors of Jack and the other small loggers. The Chips purchased are either used locally in the pulp and paper division of the Major, or are if there is an excess, they are sold offshore. The logs also may be sawn up by the timber division of the Major for export or be exported offshore in their raw state. But often these logs are also sold to private specialized sawmills for use in the local building industry. One of these private specialized sawmills Busy Bee enterprises, learned of this arrangement and was irate at what they saw as price fixing. Busy Bee approached three of the smaller loggers including Jack and demanded that they sell logs directly to Busy Bee for the same price they sold logs to the Majors. Jack didn’t know what to do and took the matter to the next SLA meeting. Jack has another significant problem that he has to deal with as well. In one of his deals he agreed to log a stand of timber covering 1/3 of Sam’s ranch. This was a nice property located on the wall of a small valley near a lake which Sam intended to convert into a guest ranch in the near future although he never told this to Joe. The ranch covered 150 acres and was worth on the open market about $200,000. This was a little higher than normal because of the nice location of the ranch. In fact this is what Sam had paid for the property 6 months earlier. One of the reason’s Sam bought the ranch was because he knew he could sell the timber. Sam’s deal with Jack required Jack to pay Sam $100,000 for the standing timber. Jack then would come onto the property with his men and equipment and remove the trees “with as little disruption to the rest of the property as possible.” In addition to this provision included in the contract the agreement also required that after the trees were harvested the property be “restored” within 2 years of the harvest. Jack’s worker’s cut down the trees in June 1993 using clear cut methods and Jack resold the timber for $200,000 which after considering his costs left a profit to the company of $25,000. Unfortunately the property was left in a very disreputable condition. Roads had been made crossing other parts of the ranch, stream beds were destroyed in the process and the clear cutting itself left that part of the property in a miserable mess with the land not only dug up by the equipment used but covered with all sorts of unsightly debris. No attempt was made by Jack’s company to “restore” the property after the removal of the trees. Jack explained to Sam that there was “just not enough money in it.” Sam had expected this part of the ranch to be cleared and then to be landscaped giving a dramatic view of the valley and lake making it ideal for use as a guest ranch. Instead he was left with a blasted landscape looking as bad as any clear cut extending beyond the original tree stand and making it impossible to develop the property as he intended. When Sam inquired he discovered that it would cost him $150,000 to clean up the property and put it into the shape that he had envisioned when he started the project. Sam complained to Jack and threatened to sue. He demanded that the property be restored as agreed or that he receive compensation so that he could have the work done by someone else. Jack was surprised when Sam told him he intended to develop the property as a guest ranch. Jack had assumed he would be using it as a cattle ranch like all of the others in the areas and that the esthetics were “no big deal.” He investigated and found that if the property were used as a cattle ranch as he thought it would be, the increased market value had it been landscaped as Sam wanted would only go from $200,000 to $215,000. One the other hand if the property were developed as a guest ranch the restoration and landscaping would be a vital part of the project and would have increased the value dramatically. Explain the legal position of the parties in these situations and explain what should be done by them. 7. Something Fishy Joe had operated a very successful chandelling business supplying the needs of the fishing industry on the west coast of British Columbia for 20 years. Unfortunately because of over fishing drastic cutbacks had to be made to the west coast fishing fleet and to the overall fishing industry on the west Coast and his business suffered as a consequence. In an effort to save his business, Joe set his mind to other related fields but realized he knew very little about other types of businesses. Joe’s operation consisted of about 20 employees. Joe was the “boss.” Five employees worked in the store ordering supplies, doing the paperwork and servicing the customers. The rest manned the dock and the fueling facilities, or worked in the machine shop. Joe’s particular talents were in obtaining supplies at reasonable rates and in operating the machine shop. When Joe understood that the impending cutbacks in the west coast fishing industry would severely affect his business he realized he needed expert help in order to survive. He decided to hire a sales and marketing manager who would run the sales and generally market the business finding them something else to do. He interviewed Pat, a recent graduate of Simon Fraser University. Pat had graduated top of the class and had concentrated in Small business Entrepreneurship with a specialty in sales and marketing and was just what Joe needed. Pat had also worked on fishing boats before going to university and during summers and knew the industry. He offered Pat a Job and this offer was accepted. The terms of the employment were that Pat would agree to work for 4 years in this position at a generous and increasing yearly salary. At the end of that period both parties would review the situation and if they agreed would negotiate a new and continuing contract. As is the case with most contracts of this type there was included a 3 month probation period where Pat could be let go if Joe was not satisfied with the level of performance. Pat had a similar right to leave during this period. Pat knew the business and after a few weeks working with Joe and getting to know what they had to offer Pat suggested that they turn to the offshore fleet taking great amounts of fish off the west coast of B.C. “We might as well try to get something back from them since they likely caused this problem in the first place.” Pat explained that when fishing they often would see many ships of other nations working the fishing grounds and that these ships would have to go home or to long distant ports for supplies or to make repairs. “Why not offer the service of supplying and making minor repairs to those ships right here. We have the equipment, the talent and the facilities. It would not be much different from what you have been doing all along with our own boats.” Joe liked the idea but had no idea of how to go about starting the business. Pat did and under Joe’s signature sent a series of letters to Companies operating these offshore fleets offering their services. They received several serious replies and after some further negotiating by mail 3 viable potential agreements looked certain. Of these one of the companies was Japanese and another was from Algeria owned and operated by Arab, Muslim interests. The next stage was to do in person negotiations to clinch the contracts. Pat was eager to go but Joe had a conversation with several friends in the lumber industry who had done business with the Japanese and they explained that the Japanese were extremely conscious of the status of the people they dealt with and might consider dealing with Pat an affront. Pat was female and of black African American heritage. Joe made some inquires and discovered that the problem might be even more serious in dealing with the Algerian company. Because of the size of Joe’s operation he couldn’t afford to hire another person to do the negotiations especially since he realized that an on going relationship would result and the person he originally sent would have to be kept on to service the contract. After serious soul-searching Joe called Pat into his office and explained to her that because she couldn’t do this part of her job he would have to let her go. He explained that even though he was not required to because her probation period wasn’t up he would pay her 3 months wages if she would stay and help her replacement get started. Joe then hired Sam, another Simon Fraser graduate, second in the class and of a white, European background. But Sam did not have the same specialization in small business and sales that made Pat so attractive to the business, but Joe felt that with Pat’s help, these limitations could be overcome. Pat reluctantly agreed to help and while angry, said she understood Joe’s dilemma. Sam did successfully carry on the negotiations with the Japanese and Algerian companies and agreements were signed giving Joe’s business exclusive rights to do minor repairs and supply these ships. The only difficulty that Sam had was when dealing with the Algerian Company. He was in fact dealing with an agent of that company and that agent insisted on a payment of 15% of the value of the contract to cover “advanced promotional expenses.” Joe and Sam did some further investigation and found that this was nothing more than a kickback or bribe. They also found out that it was a common and expected aspect of doing business in that part of the world. If they wanted the business Joe felt that he had no choice and so reluctantly made the payment. Joe’s only potential rival in this new business was another person in the same town who had also supplied the west coast fishing fleet. This business was run by George, who was in fact an old friend of Joe’s and had struck up a great friendship with Pat as well. He had faced similar problems when the west coast fishing industry went down the tubes, but had taken another way out. Instead of looking to the offshore fleet, George turned his interest to the still viable recreational fishery. George went into the business of providing supplies for the recreational fishermen as well as the many resorts and boat rental facilities catering to these sports fishers. George and Joe had been rivals in the past and both feared that the other would go after their new business. After some conversation both agreed that there was only enough business in both areas for one. They prepared and signed an agreement to the affect that George would not carry on the business of supplying or offering services to any foreign commercial fish boats and Joe agreed to stay out of the recreational fishery business in any form. Both retained the right to continue to supply and service any B.C. fishboats as they had in the past. They agreed that if either violated this agreement the victim would be entitled to damages in the amount of $500 per day for each day the breach continued. All went well for another season and then the recreational fishing business also began to go sour. About this time several other companies operating offshore fleets who now saw the advantage of the arrangement their rivals had with Joe came to town and approached George eager to obtain access to the same kind of services. George could not pass up the opportunity and made arrangements to provide similar services for them. Although this did not directly hurt Joe’s business since he had all he could handle just servicing the needs of the three companies that he had contracted with, he still felt that was in breach of this agreement even though and George had not solicited the business. Joe had a falling out with George and threatened to sue. When Pat discovered how well Joe’s business was going and how he was treating George she also decided to sue. 8. Software the Hard Way Joe is a software developer working for Ace Development Company for the last 10 years. He has no management position with the company other than being a software developer, however because he is key to its operation and one of the original founders, he is one of the 5 directors of the company. He and 2 other friends (Sam and Harry) had originally set up Ace to develop some software they had created at the beginning of the personal computer boom. They had all been employed by a major computer company but they had found the atmosphere, the suits, and the eight-to-five schedule stifling and decided to take the ideas they were working on and set up their own company. Originally 1,000,000 shares were issued in Ace Development Corp. Joe retained 30 % of the shares (300,000) and is a director of the company. Sam and Harry also have 30% each of the shares and are also directors. The remaining 10% are divided equally between Tom, the President/production manager and a Dick, the Marketing Manager who also hold director positions. Joe Sam and Harry all knew that their skills were in the software development aspect of the business, not the management and so from the beginning they planned to hire the management skills the company needed so that they could get on with their research and development. This worked out to be a very successful strategy and over the years Ace developed into one of the most successful and influential companies in their field with 30 employees and annual sales in the millions. The next part of the strategic plan developed for Ace by Tom and Dick was to go public and sell shares on the stock market. This would require a further expansion of the business with an infusion of borrowed funds of about $1.5 M. from the bank. It is important to note that although Sam and Harry made important contributions, it was Joe that was considered the software genius. He was key to the whole Ace operation and had a great reputation in the industry. There is no question that the success and reputation of Ace was largely dependent on Joe’s role in the company. It is clear that the Bank’s willingness to provide the additional capital needed was on the assumption that Joe would continue with the company. Over the years the Ace had specialized in the development of communications software, particularly networking and more recently the company had directed its attention towards exploiting the exploding interest in the interment. Joe was disinterested in the business aspects of Ace. He had a lab at home and a couch at work and he would wander in and out whenever he felt like it often not distinguishing between his personal and his work life. Certainly he was just as likely to be working or sleeping at his home as at the office. Everyone was tolerant of his eccentric lifestyle because of what he produced. But Joe was finding Ace in its new successful corporate status as stifling and as restrictive as the company he had left. He was not a happy camper especially when he felt the resentment of the other employees towards his “privileged position”. He couldn’t deny how successful the company had become however and so he just kept plodding along in what he considered his rut of a life. On the Morning of June 18 Joe and his assistant George were summoned along with the other employees to a general meeting where it was announced that everything was now in place. The funding had been obtained and the public share offering was to go ahead over the summer. Every Employee of the company was to have the right of first refusal of the additional 1,000,000 shares to be offered to the public. Tom, the president, explained that they had borrowed $1.5 M from the bank and they intended to use this money to diversify. Joe knew vaguely about the intention to go public but he now realized that they had borrowed a considerable amount of money effecting the value of his shares, and that his percentage of Ace would also be severely diluted as well as any say he had in its operation with the sale of the new shares. He also realized that Ace was being diverted from its original purpose and now would be just another business, which completed his disillusionment. Of course he would have known all of this had he bothered to attend the directors meeting as he should have. The champagne was broken out and all began to celebrate. Everyone congratulated Joe and the role he had played in developing the successful company. All recognized the role that Joe’s expertise skill and genius had played. Tom Toasted Joe and his great accomplishments. Left unsaid was the fact that the reason the management of Ace wanted to diversify was to make the company fortunes less dependent on such an unstable character as Joe. Joe’s son, Little Joe, had a lot of his father’s characteristics. There was that same flash of genius, and also much of the same instability. He had followed in his father’s footsteps and taken computer programming at university. But he became bored and found the regime required by university study stifling and dropped out after his third year. He said that THEY weren’t teaching him anything he couldn’t learn on his own anyway. He and two friends who had graduated decided to up their own development company just like Joe and his friends had done 20 years before. One of the projects that Little Joe had been working on at university was a new interface for working with the internet. This was cutting edge and promised to revolutionize the use of the internet and ease the connection with individual users. This new interface promised to speed up the process and the convenience of using the internet. The idea had come from his father. Little Joe had been out with Joe on his boat one day and had complained to about needing a major project to work on as part of his studies. Joe remembered a conversation he had with one of his clients who had expressed a need for a faster and better internet interface and had also given some basic ideas as to how it could be accomplished. Joe had been too busy to follow up on it and had never told anyone else at Ace about the idea. Little Joe took the idea back to the university and got the permission and support of his supervisors to proceed with the project. In fact the university thought so highly about the idea that they provided a Lab and several other personal to work with Little Joe. They told Little Joe that if things worked out this could be the basis for a major part of the new product development and marketing strategy of the university. The two other students (graduate students) were the friends that Joe was working with and at the university they proved the workability of this new software. Those three were the only ones who had any detailed knowledge of the project. When they decided to leave the university their main problem was how to take their equipment with them. They didn’t want to leave anything behinds so that their ideas and work could be stolen. They came to Joe. Joe advised them that even though they had assembled the equipment it was with university grant money and they couldn’t get away with taking the equipment with them. That belonged to the university. But they should erase all extra copies of their data that remain in those computers before they go. It was clear to Joe that a new business should be set up and that capital would have to be raised to recreate the lab that the boys had left behind. Other funds would be needed to market the new product. Joe even mentioned to the boys that they could go to Ace and enter into an arrangement with that company to co-develop the software. They had the market developed, the marketing expertise, and the production facilities and there was no question that they could successfully market the new product. Although Joe was enthusiastic about the new enterprise his years of experience in the computer industry had taught him to be cautious. Many of these new ideas run into snags and never get anywhere. He understood that it was risky but that the potential rewards were great. He told this to Little Joe and his friends but they didn’t care about the risk. They knew it would work and anyway, they didn’t have anything to lose. They were just concerned about how to best complete the development of the product and how to best exploit it and get it out on the market. Joe said that he would help as much as he could. After a considerable amount of thinking and after checking his finances, Joe decided that he could take some personal risk and told the boys to count him in. It was clear that they would need at least $900,000 to set up the lab and get the business going. He decided that he could risk $300,000. Since little Joe and his friends had no money the rest would have to be borrowed from other sources. Joe wanted to make sure that the rest of his fortune was protected and not at risk. He couldn’t start all over again. He also didn’t want to do anything to put Ace in danger as most of his wealth was tied up with his shares in that company. He had to consider whether he would stay working for Ace and remain as a director or sell his shares, quit and go into business with Little Joe and his friends even with all of the negative impact that would have on Ace. One thing was sure and that is that if he left Ace he would take his sidekick George with him who was a technician and an absolute miracle worker with software and this would further damage Ace. Remembering his own experience with his own friends and Ace that they had started, he wanted to not only limit his liability to the $300,000 but also make sure that the had more control in what would happen with the new business. He wanted to have some say in management and he wanted to be assured of a share of the profits. He didn’t want to discourage or control the enthusiasm of the young people he was helping out but with his experience and age he knew that there had to be some guiding hand and that that guiding hand was going to be his. A major difficulty was just what kind of business arrangement would be appropriate for him and the boys. Joe decided that he needed advice and although it was against everything he stood for he decided he had to talk to his lawyer. All of these were on his mind when he called on his lawyer to discuss his options. The lawyer talked about Companies, limited liability, limited and general partnerships, shareholder agreements, share structures, security arrangements, collateral, directors’ duties, personal liability, fiduciary duties and by the time that Joe left his head was reeling. Examine this situation and discuss it from the point of view of Ace, the university, Joe, the bankers, and little Joe and his friends. In your answer look at the different methods of carrying on business that Joe, Little Joe, Tom and Dick might consider. 9. To Be or Not To Be Anthony was an officer, director and shareholder of ACI Inc. The company took a loan from the Bank of Nova Scotia and Anthony guaranteed repayment of the debt. His guarantee was limited to $350,000, although the amount owed to the Bank by the company was much greater. The company default on its payments to the Bank and in October 2004, the Bank wrote a letter to Anthony advising him they had demanded payment from the company and stated that “[w]e have today demanded payment of the Borrower’s obligations to us…. If payment of our demand is not made as required, we will take steps to recover payment from you.” The company went bankrupt in December 2004, and the Bank appointed a Receiver to sell the company’s assets. The sale was finalized in February 2007, but the Bank was not paid out in full. The company still owed over $1 million and as a result, the Bank’s lawyer sent a second letter to Anthony and demanded payment from him of the full amount of his guarantee. Anthony did not make payment and the Bank sued him for the amount owing. When the matter came before the Court, Anthony defended and argued that he was not obliged to pay the amount of the guarantee because the Bank had not sued him within the 2 year period prescribed by the Limitation Act. Anthony argued that the limitation period started either when ACI Inc. defaulted on the loan or when the Bank sent him the first demand letter in October 2004. On that basis, he argued that the limitation period expired at latest in October 2006, and the Bank had not sued him until July 2007. Anthony’s position was that the Bank’s claim was statute barred. Not surprisingly, the Bank argued that the limitation period did not start in 2004, but that it started on June 12, 2007 when the Bank’s lawyer sent the second demand letter to Anthony. This argument was based on the premise that the guarantee was a “demand guarantee” and as a result the limitation period did not start until demand was issued. The Bank then argue that the first letter sent in October 2004, was not a demand but merely a notice sent out of courtesy to inform Anthony that the Bank would look to him if the company did not pay the debt in full. Both Anthony and the Bank conceded that the limitation period expired after 2 years and the only question was when did that period commence. For Anthony, the answer would determine whether or not he had to pay the Bank $350,000. 10. Fraud and the Mortgage Lender Mr. Gill owned a residential property in British Columbia. In November 2005, an unknown fraudster forged Mr. Gill’s signature and transferred the property to Gurjeet who was a participant in the fraud. Gurjeet then borrowed $40,000 from Mr. and Mrs. Bucholtz who registered a mortgage against the property to secure the repayment of their loan. The Bucholtz mortgage was registered against the property on November 10, 2005. On December 8, 2005, Gurjeet mortgaged the property to 4337 Investments Ltd. (“4337”) to secure a second loan for $55,000. That mortgage was submitted for registration in the Land Title Office but before it was registered Mr. Gill discovered that the property had been transferred and he filed a caveat against the land and started legal proceedings to recover the property. Although the registrar at the Land Title Office refused to register 4337’s mortgage as a result of the caveat having been filed, the parties proceeded as if both mortgages were properly registered. Neither the Bucholtz nor 4337 were aware that the property had been fraudulently transferred and they had both sought and obtained confirmation of Gurjeet’s identity before they advanced funds. As a result, both lenders argued that their mortgages should be recognized as valid charges against the property. Mr. Gill obviously argued that the mortgages were invalid and he sought an Order from the court that the mortgages be discharged and the property be returned to him. The problem for the Court was that a basic tenant of the Torrens Land Registry System is that parties are entitled to rely on the state of the registry when purchasing property and acquiring other interests in land such as a mortgage. Those who suffer a loss as a result of an error in the registry are entitled to make a claim against the Registry Assurance Fund, but that does not invalidate the transaction. How should the Court resolve this case given that both Mr. Gill and the two lenders were innocent victims of a fraud? Should Mr. Gill get the property back? Should the mortgages be discharged? Should either Mr. Gill or the lenders have a claim against the Registry Assurance Fund? Is there any other way that Mr. Gill or the lenders could protect themselves? Appendix 3 Comments with Respect to the Yates Cases Note that these comments are not an attempt to respond to the general questions set out in the introductory comments for the cases but are some observations that show what I had in mind when I created the particular case in the first place. 1. Adams v. The Royal Vancouver Hospital This sequence of events actually happened to a friend of mine. The names of the parties and the institutions involved and some details have been changed, but the events are essentially as described. Of course the dilemma here is whether Mr. Adams should sue or not. He has been defamed and he has lost his job. This case presents an opportunity to discuss the law in the areas of defamation and wrongful dismissal and to examine the advisability of the policies and actions of two large institutions First look at the article written in the Chronicle. Is there defamation? Discuss what constitutes defamation. In this case, to refer to a person by name and suggest that he along with others is eligible to be criminally prosecuted for fraud is derogatory and qualifies as defamation. But not all defamation is actionable. There are a number of defenses such as truth, absolute and qualified privilege and fair comment. None of these are available here. The fact that the newspaper reporter made a mistake and thought that what she was saying about Mr. Adams was true is also not a defense. In the US they have a constitutional provision that guarantees freedom of the press. This has been interpreted to mean in effect that such media organizations are not liable for defamation unless it can be shown that the publisher of the statement knew it was incorrect. We have a similar provision in the Canadian Charter of Rights and Freedoms, but thus far the Supreme Court has not extended this same kind of protection to the Canadian media. Newspapers and broadcasters are in the same position with respect to defamation as any private individual. Note, however, that there are provincial statutes in place in many provinces (including B.C.) that give some limited protection to the media and these should be reviewed with respect to this situation (see the B.C Libel and Slander Act RSBC (1979). It should also be noted that as a mater of policy many large newspapers, and broadcasters, refuse to acknowledge they have defamed anyone, refuse to apologize and vow to fight any action against them very vigorously. They have established a “war chest” to defend such actions and make it clear to anyone suing that they better be prepared to face huge legal costs win or lose. This policy is often justified on the basis that they feel that they ought to be in the same position as the US media and plan to do their job as if they were. Right or wrong, this policy places people like Mr. Adams in a very difficult position and when the actual person faced this problem and obtained legal advice he was discouraged from suing the newspaper involved. He was told that if he insisted on going ahead with the mater, the law firm would need at least a $15,000 retainer before they would start the process. He did not have access to this kind of money and discouraged, simply returned to the US to get on with his life. As far as the RVH is concerned they really had no choice. He was hired as a givings officer and with his reputation ruined could not do the job. They had to let him go whether the dismissal was justified or not. Point out here that merely having a valid reason to let someone go (e.g., no more work) does not necessarily excuse the employer from living up to certain basic obligations. In this case, a question that arises is whether Mr. Adams had ever been hired so that his leaving could be classified as wrongful dismissal. This is an opportunity to distinguish between working as an independent contractor and as an employee. Was he hired as an employee in April or not until June 1? What was his status in April and May? Did the fact that he was unable to do his job legally justify getting rid of him? What about the implications for the morale and loyalty of other employees. Should they have tried to find him another job in the hospital organization? What were the consequences facing the RVH if it was determined that they had wrongfully dismissed Mr. Adams. What is he entitled to? This is an opportunity to explain the employee’s obligation to mitigate, and what effect this will have on what he is offered in a settlement. The basic questions here once the legal relationships have been established are what should Mr. Adams do now? What should the Chronicle do? What should the RVH do? Cost and further damage to his reputation must motivate Mr. Adams. The Chronicle must consider the broad business advantage of fighting such a defamation action though they have clearly wronged Mr. Adams. And the RVH must consider the damage having Mr. Adams in his position can do to the hospital and to their donations campaign against a wrongful dismissal action if in fact Adams was ever an employee and chose to sue? They must also consider how they treat Mr. Adams who is clearly a victim here will affect the moral and loyalty of their other employees and whether this is an important consideration to them. 2. Valley Homes v. Ace Minerals Corp. The main problem here concerns the bidding process and whether the bid itself is legally binding and presents an opportunity to discuss not only the law concerning offer and acceptance but of consideration and mistake as well. The standard position in contract law is that once an offer has been made it can be revoked any time before acceptance. An exception to this is where there is an option agreement to keep the offer open. This is essentially a subsidiary contract, where, usually for a fee the offeror agrees to give up the right to revoke the offer. In tendering cases the usual view of the request for tenders is that it corresponds to an invitation to treat or to make an offer not an offer itself. The bid is the offer and without such a subsidiary contract the offeror ought to be able to withdraw his bid anytime before the bids are open and one is accepted. But this seems completely inconsistent with the bidding process and so attempts have been made to alter the status of the request for tenders and the bid. In this case it can be argued that as a condition of the company considering the bid, the offeror agreed to give up their right to revoke their offer anytime before acceptance. The dilemma here is whether that requirement and subsequent promise amounted to a subsidiary contract similar to an option agreement with essentially the same effect (see Calgary v. Northern Construction). If so, Valley’s attempt to revoke is invalid, the offer has been accepted and a contract formed. The other angle of attack by Valley is that they have made a mistake and that Ace knowing of it should not be able to profit by it. But likely such a mistake would only make the contract void or voidable if it went to the nature or substance of the contract. Here the parties knew the basic nature of what was agreed and the mistake went only to the profitability. This would likely not give Valley the right to end the agreement. Whether Ace’s knowledge of the mistake being made before they accepted the offer should prevent them from snapping up the offer in face of such an error is the subject of debate. Could estoppel apply here? Can an analogy be drawn to the situation where the customer in a store is not permitted to take advantage of the mismarking of the price of goods and snap them at a lower cost? How is that different if in both cases the offeree is aware of the mistake? The second major problem concerns the legal relations created by the negotiations that took place between Ace and Valley after the bid was accepted wherein Ace agreed to pay Valley a substantial bonus if the job was done on time. If the original bid was successfully revoked, there was no contract and the subsequent agreement where Ace agreed to pay a bonus would be binding along with the other terms on both parties as a new contract. If that bid was successfully accepted forming a binding contract, then the promise to pay the bonus was an attempt to change that contract and so there must not only be consensus but also consideration on the part of both parties to support that alteration. Valley was already obligated to get the job done on time and so what did Ace get for their promise to pay the bonus; the promise of future business, the promise of a good deal on the next project? These are not specific enough. What about the fact that Ace saved the interest normally payable on a higher amount of money (they were not obligated to and were not paying Valley until 60 days after the date specified in the contract, and now the payment of the bonus was also delayed.) (See University Construction v. Gilford Steel.) Could you argue promissory estoppel here? Likely not as Valley is suing Ace and Ace made the promise of the bonus (the promise is being used as a sword and with promissory estoppel can only be used as a shield.) Finally could Valley take the position that their acceptance of the promise of a bonus was by way of a settlement of a contentious matter and involved giving up the right to litigate over the question of their right to withdraw their bid? Would this constitute sufficient consideration to support the promise of the bonus? Would this have to be clearly specified? Note also that Grey on behalf of Ace said that they decided not to pay the bonus because Valley was not in as dire financial straits as originally thought. This could only make a difference if the payment of the bonus was conditional upon Valley being financially ruined without it or if Ace could argue that they only promised to pay the bonus because they were mislead about Valley’s financial situation. Some other legal issues worth noting are first the status on Li and Grey the VP’s finance for Ace. They are agents and both likely have the power to bind the company. The fact that there is a change should make no difference as to the legal obligations of Ace; it just possibly explains the change in policy. Finally there is a question about the dismissal of Brundel the sales manager of Valley. How much notice is this long-term employee entitled to? Nothing! This is a mater of just cause and Brundel can be dismissed immediately without notice. There are also a number of non-legal factors to be taken into consideration. Once we have determined the legal position of Valley, even if they do have a legal right to the bonus is it wise to insist on it in the light of Grey’s promise of a hope of “many years of cooperative ventures in the future”? Also consider if it was wise of Ace to change their mind about the bonus even with the change of Financial VP’s? It also could be damaged by becoming known as a company not willing to live up to its obligations. What about the practices associated with the bidding process? How should these be changed to avoid a reoccurrence of this problem? Was it a good idea to offer the bonus? Why? Was it wise for Valley to let Ace know about their problems in the first place this being their first venture into such large-scale construction contracts? Of course Valley had better clean up their accounting and accountability procedures so that they are not vulnerable to this kind of sabotage in the future. Note that the bid was sabotaged by the sales manager because he felt his position threatened. This is not as farfetched as it seems and is based on an actual event in my experience. 3. Busy Bee v Joe Student et al (Secured Transactions) The main area of focus here is how best to secure a business loan and then a look at the rights of the parties when the business goes sour. Note that this case can also be used as a good tool to introduce the subject of secured transactions at the beginning of a class. As an initial observation, from a business point of view what is Joe Student getting for his franchise fees? Is Joe simply paying Ace an exorbitant fee for the privilege of being forced to buy supplies from them at an inflated price? What is the benefit of the bookkeeping and the tax preparation service? I suspect Ace is only supplying Joe these services as a method of ensuring that they know Joe’s financial picture so that they will be sure to get their “set percentage of Joe’s sales”. Remember Joe is paying Ace for this service as well. The only thing Joe seems to be getting out of this is the cart and the “limited amount of advertising.” Joe has no funds himself and has to borrow the money. Are there other alternatives? What about bringing in a partner? In any case he decided to borrow the money needed for the venture and went to Busy Bee. From their point of view their main problem is to ensure they get repaid. They need security. They try to get the best security possible. That means a chattel mortgage against the boat, against Joe’s car and a guarantee by Joe’s father against the loan. This they did. The cart itself was not used because it was “of little value” Note that in order to properly secure the loan Gabrielle acting for Busy Bee must make sure that the proper financing papers are filled out and filed under the appropriate statute for the province. She must also make sure that if there is legislation governing the creation of a guarantee in that province that is also followed. This is an opportunity to discuss any unique statutory requirements present in your province. Part 2. When the loan goes bad When the business started to go sour, Joe’s first impulse was to put more money into it. From a business point of view should he have put more into it or recognized that the business was not viable and cut his losses? From Busy Bee’s point of view it was a grievous error on Gabrielle’s part to allow him to sell the boat. There is no indication here that they got permission from Joe’s father for the sale of the boat. This is a common error. The lender thinks that they are only dealing with the debtor and forget bout the separate rights of the guarantor. Since the guarantor has the right to step into the shoes of the creditor if he has to pay the guarantee, it is vital that nothing is done by the creditor to weaken that position after the guarantee has been given. By allowing Joe to sell the boat, Busy Bee has weakened its position since it no longer has the boat to repossess if Joe fails to pay. And in the process they have weakened the position of the guarantor. There are three parties to this contract, Joe, Busy Bee and the father as guarantor. Since Joe and Busy Bee have changed the agreement without the father’s permission and to his detriment, there is a strong argument to be made that he is no longer party to the new arrangement and can no longer be required to honour the guarantee. Another significant problem for Busy Bee is with the incorrect registration of the security. The reversing of the serial numbers can be corrected under the legislation (check your particular province) but not so as to impair the position of anyone who has already obtained rights to the goods used as security. Lorenzo finally purchased the car from Hakeem after the correction of the registration. He failed to check the registration and had he done so he would have found the lien against the car and so it looks like he should take subject to the chattel mortgage, giving Busy Bee the right to repossess. But there is a strong argument for Lorenzo taking the car free and clear. In these circumstances if Busy Bee is allowed to repossess the car from Lorenzo, Lorenzo has the right to sue Hakeem for breach of contract (the car was not free of charge or encumbrance as required in the Sale of Goods Act). Hakeem would in turn sue Kendra and Kendra would suffer the loss. Hakeem and Kendra are the ones intended to be protected by the requirement of registration since both acquired the car before the correction was made. In order to protect them Busy Bee must be prevented from retaking the car from Lorenzo. 4. O. Mann v. The Builder’s Friend et al (Torts) This capture actually took place in front of me as I was parked at a red light. I created the surrounding circumstances for the purposes of this case. The main legal problem here involves assault, excessive force, and false imprisonment. The main business problem is the wisdom of this kind of policy and program with respect to shoplifters. The company itself placed tremendous pressure on its manager to correct a problem that he had few resources to correct and in the process they exposed themselves to considerable risk. The whole atmosphere of the store seems to be “to catch a thief.” The problem seems to be that all of the people involved, including the manger, are over zealous in this process with the danger that they see theft where there isn’t any, and then overreact. Consider the store’s policy of “zero tolerance” and “to have a go.” Many consultants advocate a non-confrontational, “Excuse me sir, did you forget to pay for that item?” approach. With this approach, while there might be more shoplifting, there is no danger of offending innocent customers and risking huge damage settlements for mistakes made by untrained employees. Consider the training the store employees received. It was mainly designed to get them excited about catching shoplifters, not how to avoid mistakes. Most stores have rules for employees to follow in such situations, such as not stopping the shoplifter until they leave the store and then only if they have kept them in sight at all times since they witnessed the taking of the item. This is not based any legal principle but is an attempt to ensure that no mistake will be made. The other side of the argument, of course, is that there are huge losses from shoplifting today and something has to be done. A good discussion can be generated in terms of what good business policy should be in these circumstances. At least make sure that if the policy is to pursue shoplifters the employees must be trained in what to do and when to do it. Note as well the preference given in hiring “thugs” and the danger this entails. As far as this event itself is concerned, they never should have taken such a violent approach once they lost sight of the customer in the store. They had no way of knowing when he left whether he still had the goods or not. Similarly it was a big mistake not to have retrieved his bag when they took him back to the store. There is now no proof even if he did take the tool and if he sues there will be no way to establish that he was a shoplifter. In this situation the question arises whether the employees had the right to retain this person at all. They had to have reasonable grounds to suppose that he had committed the theft in order to detain him and in these circumstances it is likely that they did not. The fact that he had been acting “suspiciously in the past” did not create such reasonable grounds. It would be a good idea to look up and use the appropriate sections of the Criminal Code dealing with powers of arrest. Even if they did have the right to hold this customer as a shoplifter it is clear that they used excessive force to subdue him. The chasing and the tackle likely could be justified if they had the right to hold him, but the blows that were administered when he was being held on the ground were unnecessary and thus excessive. I doubt that that police were guilty of false imprisonment here since after hearing the statement of the witness and the store personnel they had reasonable grounds for arresting Mr. Mann as a shoplifter, but that does not relieve the store of the liability for the continuing arrest in the hospital since they initiated the process. This kind of event often happens with overzealous and loyal employees but it puts the business at great risk. It is vital that employees be properly trained on when and how to deal with shoplifters to ensure that this kind of mistake does not happen. The damages and legal fees that can result from this kind of action can far overshadow any loss from shoplifting that might occur. In terms of what constitutes false imprisonment look up Hanisch v. Canada. See text Chapter 4. 5. Joe v. Everybody This case raises issues in the area of breach of contract, misrepresentation, assignment of contractual rights, negotiable instruments, the sale of goods, consumer protection, secured transactions, agency and company law. Since so many areas of law are touched on it might be best to deal with this case towards the end of the course, as a review. Joe’s problems with Tomorrow Town Electronics arise from the conduct of Michel, the salesperson he dealt with. Joe clearly relied on Michel’s statements and recommendations, and they were misleading at best and at worst outright lies. These comments and recommendations raise the issue of misrepresentation (fraudulent innocent or negligent) and also may bring into play the provisions of the Trade Practices Act, Consumer Protection Act and the Federal Competition Act. The contract states that any such statements of the salesperson are not included in the contract unless written into it. These statutes have provisions in them that may override such an assertion. The Sale of Goods Act also comes into play here since Joe was clearly relying on the statement of the salesperson Michel that the computer equipment would do the job for which it was needed. This relates to the warranty provisions of the Sale of Goods Act and the requirement that the goods be suitable for the purpose purchased. There is an attempt to override this provision of the act in the contract, and so it is a good place to interject a discussion about whether such an attempt can be effective given the provision in the provincial Sale of Goods Act. In some provinces the act prohibits such attempts to override this provision where the goods are purchased not for resale. Does it matter that the sale was made to Joe’s company? Note that it might also be interesting to discuss the need for extended warranties here given the provisions of the Sale of Goods Act. The manager of Tomorrow Town Electronics seems convinced that since Michel was just a trainee they were not obligated to honour the contract. This begs a discussion of the law of agency including a look at apparent and actual authority as well as the principal’s liability for the acts of the agent. Here the agent entered into a contract and committed a Tort (misrepresentation) Is Tomorrow Town Electronics liable? Even if Michel is not an employee, (which he likely is,) because this is likely an example of fraudulent misrepresentation, it is likely that the principal would not only be liable on the contract (apparent authority) but vicariously liable for the tort. The manager of Tomorrow Town Electronics also assumes that because the contract has been assigned to Ready Cash Finance Ltd. (and the promissory note negotiated) they are no longer responsible for the performance of the contract. There is an opportunity here to discuss what happens when contractual rights are assigned and to teach that only the benefits can be assigned, not the obligations. Joe and his company entered into the contract with Tomorrow Town Electronics, and they are still responsible that it be performed properly. Also point out that any defense available against Tomorrow Town can be used against Ready Cash as well and so Ready Cash likely would not have the power to enforce payment or repossess the goods because Michel’s fraud could be used as a defense against them. This is an appropriate point to discuss the difference between negotiable instruments and the assignment of contractual rights. Ready Cash will succeed against Joe if they can show they are holders in due course on the negotiable instrument. (Two problems that arise here are whether this is a consumer transaction and has to be stamped on the promissory note as such. The answer is, probably not... and secondly whether Ready Cash is independent of Tomorrow Town enough to be a holder in due course?) The use of the conditional sale agreement here also encourages a discussion about that subject and the personal property security act. Discuss the rights and obligations given to Ready Cash because this form of secured transaction was used. In the discussion of negotiable instruments prompted by the promissory note given by Joe to Tomorrow Town above, also discuss the other promissory note given by Joe to his father, then to his sister, and eventually used for the down payment on her house. Is there consideration here? Must Joe’s company honour it? What about Joe? If he fails to do so, what are the rights and obligations of the sister and his father? The separate status of companies and limited liability of shareholders must also be noted here. All of these obligations assumed by Joe should also be looked at in terms of the separate corporation he set up. Unfortunately for Joe the fact that the corporation is separate will only help him where he gave the promissory note to his father, since in all other cases, he was a party to the transaction as well as his company. Joe also has a claim against Tinker’s Damn. They have breached their contractual obligation to their franchisee. They were obligated under the contract to make initial appointments with potential customers this was not done or not done properly. They were also obligated to supply a list of customers and a reprinted list from the yellow pages does not qualify as proper performance. Even if it did the fact that the second half of the list was just a reprint of the first half is a clear breach. There is also a question of whether Theo’s statements and estimates that encouraged Joe to enter the agreement with Tinker’s Damn were misrepresentation and whether that was fraudulent innocent or negligent. The question of what remedies Joe is entitled to should also be discussed. From a business point of view Tomorrow Town must review the training of their personal, including management. This should never have happened. When it did they should have looked very carefully before cutting their losses by trying to force an obviously inadequate deal on a customer. Much of these problems could have been avoided if the manager of Tomorrow Town had a better understanding of the law of sales. Allowing the matter to go to court was very questionable on the part of Tomorrow Town. Joe’s understanding of business matters was naive at best. He relied on the salesperson for Tinker’s Damn when purchasing the franchise just as he relied on the recommendations of Michel when purchasing the computer equipment. He was misled in both instances. He also failed to make allowances for Theo’s over optimism with respect to his projected income incurring all sorts of debt he couldn’t afford. Now he must decide whether it is worth his while to pursue his rights against Ready Cash, Tomorrow Town and Tinker’s Damn. Is he just throwing good money after bad? Does he have a choice? As far as Tinker’s Damn is concerned, their actions are highly questionable. Assuming this is not just a scam it is in their best interests to make sure that their franchisees succeed. These overoptimistic projections and incorrect or incomplete information is just as damaging to them as it is to Joe because of the nature of their continuing relationship. 6. I’m a Lumberjack and I’m O.K. This case is designed to focus attention on the problems associated with price fixing and the operation of the federal competition act. There are not as many varied issues brought up allowing the students to focus on the competition act in much greater depth. That legislation should be examined from its social economic as well as its legal objectives and effects. The main problem here is that this is the reverse of a normal market place system. There are a number of sellers and only one or two purchasers and they have control of the price. Here the sellers have gotten together to agree on a price so that they can balance the power of the purchaser. Does this violate the competition act? Look not only at the legalities of this arrangement but ask how else these problems could be dealt with by the parties. Compare milk boards and egg marketing boards that have similar problems but have dealt with them in a different manner. What is the purpose of the Competition Act? How effective is it in achieving that goal? The problem with one division selling at a lower price to their own company is that it could destroy other companies selling to those divisions as well by undercutting. This type of vertical integration can also violate the competition act and should be examined. These problems are brought to focus by Busy Bee wanting to purchase logs directly and their accusation of price fixing. The other legal problem in this case deals with breach of contract and remedies for such a breach in Jack’s contract to clear Otto’s land. There is no doubt that Jack breached his contract with Otto. The problem is over the remedy to which Otto is entitled. Jack only made $25,000 on the deal and he failed to finish the Job because there was “no money in it.” This is a good place to interject a discussion about frustrated contracts and whether the fact that one of the parties will lose money is enough to frustrate a contract The question is whether Jack must pay the $150,000 that it would cost to “restore” the land and make it usable as a guest ranch as Otto intended. But Jack did not know of this use. He only thought the property was to be used as a ranch resulting in only $15,000 loss. Can Jack be allowed to knowingly breach his contract and leave the land in its devastated state or must he be required to pay to put it back in the shape it should have been in? Is “Restore” too vague or is the basic meaning of the contract clear here at least to the extent that it was clear to even Jack that he came nowhere near performing properly. Even if Otto had intended it to be left simply as a ranch wouldn’t he be entitled to have Jack perform his contract as agreed and not be left with a blasted landscape? There are really two principles here that overlap. Damages for breach are only supposed to compensate the victim for his loss, not be a windfall. As well, the breaching party is only supposed to be responsible for the damages that flow from the breach that he can reasonably foresee. The problem here is that Jack would have known all along that there was not enough money in the job and could have simply lead Otto along with his promise to “restore” the land. If he is allowed to get away with it would be a form of legal fraud. This would be true even had Otto intended to use the land only as a ranch. Just what should be the purpose of the award of damages in cases such as this? If damages cannot adequately compensate the victim of the breach what about some other remedy? Is this an appropriate case for specific performance? 7. Something Fishy This case concentrates on Human rights, wrongful dismissal, the competition act, and breach of contract. Does the fact that Liam seems to have a legitimate business reason for not retaining Maia in this employment, justify her dismissal. The argument that because she is black and female she can’t do her job is essentially the same argument used in the American south that refused service to blacks because it would upset the white customers. This is none the less discrimination on the basis of race and sex and under the various human rights statutes in the country Liam would likely be liable for letting her go for these reasons. This is a good opportunity to discuss the purpose of this type of legislation. People often think that if there is a good business reason to do what they are doing they’re conduct is proper but the various statutes in place make it a higher purpose to stamp out this kind of discrimination and so as a matter of policy Liam’s conduct towards Maia would likely be actionable. What about the fact that it happened in the 3 month probation period, does that make any difference? Is Liam free to get rid of her in this period for any reason? What about the fact that she agreed to stay on, does this take it past the 3 month probation period. Is there an estoppel here? Another important question is raised here with the need to pay the 15% fee to the agent of the potential customer. This is likely a bribe, and although it may be common in those countries it may be a criminal offense for Liam to pay it? This is the case both in Canada and in the United States. Consider the wisdom of such a policy. Discuss how they may get around it. For example by hiring an Arab company to act as your agent in that country and let them pay the bribes. Is that ethical and does it avoid legal liability in Canada? What about Liam’s contract with Nathan? Isn’t that a violation of the Competition Act? But why should this kind of arrangement be restricted, isn’t this good business for them to carve out their areas of interest as they service such a limited market? This is a good place to discuss the provisions of the Competition Act, its objectives and whether they are effectively reached by the statute. This is another situation where common sense from a business point of view will likely lead you into a violation of law and so it is a good opportunity to examine the validity of that law. Even if the contract between Liam and Nathan were valid from a competition point of view what about the $500 a day to be paid in the event of breach? Is this a penalty or a valid example of liquidated damages? You might also examine whether the fact that the offshore people came to Nathan meant that he was not in breach of the agreement at all since he was not “offering services” to them, they came to him. This shouldn’t be taken too far as there is not enough information supplied in the case. Look also at the fact that although the breach caused Liam no damage as he had all the business he could handle, it could certainly be argued that Nathan’s supply of these services to the rivals of Liam’s customers wiped out the competitive advantage they had obtained over those rivals by dealing with Liam in the first place. Now instead of the Japanese company and the Arab company that Liam was servicing having a significant advantage, all of these offshore companies were in the same boat, so to speak, each being able to get services locally. 8. Software the Hard Way This case looks primarily at the nature of fiduciary duties, Different methods of carrying on business and intellectual property rights Consider the problems of New Ware and their dependence on Noah. Have they taken the best path to solve that problem? Have they considered Noah’s reaction to these changes? Note the corporate and the control structure of New Ware? Was this destined to cause trouble given the parties? How could this have been set up to avoid these problems? Look at Noah’s reaction to the borrowed money and the share offering? Isn’t this just a way for Amir and Rasheeda to wrest control and ownership of the company away from Noah, Kyoshi and Catrina? What should he do to best protect his interest? Look at Josh’s project with the internet interface. Did Noah have the right to give this idea to Josh instead of offering it to New Ware? Remember the idea had come from a client of New Ware in the first place. Just whose property is this? Is there a violation of Noah’s fiduciary duty to New Ware here? And what about Josh’s relationship with the university? Now who owns the idea, the university or Josh? Does Josh have a fiduciary duty to the University? The university funded the project, provided the facilities and now Josh and his assistants are stealing the idea. Look at both ownership of the intellectual property here as well as the violation of Josh’s fiduciary duty? The Boys didn’t want their idea stolen. Just whose idea and data is it to steal? What about the sabotage of the computers involving the erasure of the stored data? Is this actionable by the university? Fiduciary duty? What else? Under the new federal copyright act? Who owns the copyright here? Is it copyrightable or patentable? What about Noah’s obligation to New Ware to bring this new idea and opportunity to them? Consider the various types of structures that could be set up by Noah and the boys to work this project, partnerships, joint ventures, corporations, shareholders agreements, and shareholders loans (see the list at the bottom of the case where the lawyers lists a number of areas to be considered). Those looking at the case should consider unique and imaginative ways to structure the business so as to protect Noah from risk, and yet to ensure that he has an appropriate share of profits and a controlling role to play in management. But also look at this from the point of view of the boys and their interests, Can all interests be satisfied? From the point of view of New Ware: Has Noah violated his fiduciary duty by disclosing the clients idea to the boys instead of New Ware, by supporting the boys and setting up and participating in a competing company, and by not bringing the opportunity to New Ware when the boys left the university? How should the management of New Ware have dealt with Noah to avoid their dependence on him and to keep him satisfied? Is the method they have now chosen appropriate or will it just cause them more grief? From the point of view of the university: Who owns the property in this project? Who owns the data that has been destroyed? What can the university do about this? What should they have done to avoid this kind of problem in the first place? What about the broader problem of who has the property rights in the papers, research and commercially viable ideas that are generated by students, faculty and others in the university community as part of their role at the institution? From the point of view of Noah: Has he violated his duty to New Ware? Does he owe a duty to the bankers? Is his interest in New Ware being diluted? How can the best protect this? What would he have done to avoid the problem in the first place? Does this action by the management of New Ware against him end any duty he has to New Ware? What about when they left the original company and set up New Ware, did he violate his duty to that firm by taking the ideas they were working on with them? Just what can you do and what can’t you do as an employee? Look also at how Noah can best protect his investment with the Boys and still maintain control? Look at the various methods of carrying on business as well as the different combinations that may work better for him? From the point of view of the Bankers: If Noah knows that they are lending money to the New Ware on the strength of Noah and his reputation, does he owe a duty to them to do all he can to protect that investment? Is he in violation of that duty by letting them loan the money and not telling them about his deteriorating relationship with New Ware? From the point of view of Josh and his friends. Look at what they have done to the university? Is this theft? Who owns the data and the project? Is this a violation of their duty to the university? How should they set up the business so as to keep Noah happy but make sure that their interests are protected? 9. To Be or Not To Be This case emphasizes the importance of limitation periods and also addresses the issue of contractual interpretation. The case is based on the Ontario Court of Appeal decision in Bank of Nova Scotia v. Williamson 2009 ONCA 754. As indicated in the case summary, the broad question before the Court was whether the limitation period began in October 2004 or in June 2007. To answer this general question, the Court of Appeal looked at three sub-questions: Does a demand guarantee require a demand before it is enforceable? Does the Limitation Act (Ontario) change the date for the commencement of the limitation period from the date of demand to the date the Bank knew or ought to have known that the debtor was not going to pay? Did the Bank’s letter of October 2004, constitute a demand on the guarantor? The Court reviewed the first question and determined that although there were earlier court decisions that stated that the limitation period on a guarantee ran from the date of the primary obligant’s default, those cases were restricted to situations where the guarantee itself did not require a demand. In this case a demand was required and as a result the limitation period ran from the date of the demand. The second question was also answered in favour of the Bank. The Court reviewed the Limitation Act and concluded that “the intent of the legislature [was] that for all demand obligations, a demand is a condition precedent for the commencement of the limitation period.” The common law rule thus remained intact and the limitation period would not commence until demand had been issued. Having disposed of the first two sub-questions, the only remaining issue was whether the October 2004 letter constituted a demand on the guarantee. The Court determined that it did not. That determination was based on the language of the letter, which the Court said “was sent merely to advise the guarantor that if the principal debtor … did not pay the debt, the Bank would look to the guarantor for payment.” It was not a demand on the guarantor. Accordingly, demand was not formally made until June 2007, and therefore the limitation period had not expired when the Bank sued Anthony in July 2007. 10. Fraud and the Mortgage Lender This case is based on the British Columbia Court of Appeal decision in Gill v. Bucholtz 2009 BCCA 137. It is an extremely important decision in that it reverses what most lenders assumed to be the state of the law. Prior to this decision, most lenders assumed that if they dealt with the registered owner of land their mortgage would be enforceable against the land even if it was later shown that the registered owner became registered by virtue of a fraud. The logic was that even if the title was restored to the rightful owner, the mortgage would either remain in place or the lender would have a claim against the assurance fund as it would have suffered a loss as a result of having relied on the certificate of registration. This was understood to be the advantage of the Torrens Land Title Registration system. The Court of Appeal ultimately decided that lenders cannot rely on title certificates to the same extent as someone acquiring a fee simple interest in the land. This is seen in the final wording of the judgment: It may be that in a perfect Torrens system, any person lending money bona fide on the security of a mortgage granted by the registered owner, would have a valid charge. But there are sound policy arguments on both sides of the question. The Legislature of British Columbia would appear to have adopted the policy that the cost of frauds perpetrated against mortgagees and other chargeholders should be borne not by the public (as the funders of the Assurance Fund) but by lenders and other chargeholders themselves. Whether this policy choice is a good one or not is not for us to decide. We must give effect to the language of the statute in its ordinary and grammatical meaning. In arriving at its conclusion, the Court conducted an extensive review of the relevant case law and legislation. The primary issue was the interpretation of section 23 of the Land Title Act. That section reads as follows: An indefeasible title, as long as it remains in force and uncancelled, is conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title as registered owner is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title, subject to the following: (i) the right of a person deprived of land to show fraud, including forgery, in which the registered owner has participated in any degree (emphasis added) From the wording of this section, the Court concluded that the section only provides protection to persons who acquire a fee simple interest in land from a person named on the title as a registered owner. It does not extend to lesser interests such as the interest that a mortgage lender acquires upon registration of a mortgage. Accordingly, if the registered owner of a property does not have a valid ownership interest he cannot create a valid mortgage of that interest. Moreover, since the lenders were not deprived of their interest in the land by reliance on the registry, they have no claim against the assurance fund. Given the uncertainty that this decision creates for mortgage lenders, it is necessary to consider how they might protect their interests. The most immediate suggestion is that Canadian lenders follow the lead of their American counterparts and require that all borrowers obtain Land Title Insurance to protect against the possibility that there interest in the property is proven to be defective. Such insurance is now readily available in Canada, and is being heavily promoted despite the fact that the intent of the Torrens System was to remove rather than create uncertainty when dealing with land. Instructor Manual for Business Law in Canada Richard A. Yates, Teresa Bereznicki-Korol, Trevor Clarke 9780133847130, 9780132164412