Business Law Assignment - Desklib

This Business Law Assignment discusses the essential elements of a valid contract, passing off, interference with contractual relations, and the remedies available for the parties involved. It also provides insights into the Canadian Trademarks Act and the passing off tort. The article is relevant for students studying business law.

Running head: BUSINESS LAW ASSIGNMENT
Business Law Assignment
Name of the Student
Name of the University
Author Note

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BUSINESS LAW ASSIGNMENT
Table of Contents
PART ONE.................................................................................................................................................2
Question 1...............................................................................................................................................2
Question 2...............................................................................................................................................3
Question 3...............................................................................................................................................3
Question 4...............................................................................................................................................5
Question 5...............................................................................................................................................6
Question 6...............................................................................................................................................7
PART TWO.................................................................................................................................................8
Question 1...............................................................................................................................................8
Question 2...............................................................................................................................................9
Question 3.............................................................................................................................................10
Question 4.............................................................................................................................................11
Question 5.............................................................................................................................................11
Question 6.............................................................................................................................................12
Question 7.............................................................................................................................................13
Question 8.............................................................................................................................................13

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PART ONE
Question 1
One of the essential elements of a valid contract is the competency and capacity of the
parties to enter into a contract. Among the factors like maturity of age and soundness of mind,
parties are required not to be barred by law and pre-existing contracts to be capable of
contracting. When a party is involved in a contract with a company for a particular work, the
party cannot engage with another company for the same work. The party would be barred by the
pre-existing contract, unless it is expressly mentioned that the party is at liberty to enter into
similar contracts with other parties. If no such express clause is added in the agreement, it is to
be considered that there is a contractual bar to enter into a similar contract.
The contract between Compact Business System and International Tire Inc. is not valid.
International Tire Inc. was already contract bound with National Business Systems. The contract
required International Tire to be in a 5 years servicing contract with National Business. The
companies were in their 3rd year of the 5 years contract when International Tire signed the
service contract with Compact. This marks a breach of contract between International Tire and
National Business and simultaneously makes the contract between International Tire and
Compact invalid, as a company cannot enter into a similar contract with another when it is
already contract bound with a company.

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Question 2
When two parties are bound by a contract that specifies the time of performance of the
contract; failure to meet such specified time would result in breach of contract. The party who
does not deliver or perform within the required and specified time bracket would be held liable
for the breach of contract. Such breach would capacitate the suffering party to discharge or
terminate the contract (Sutliff v Thirkell). The party who has suffered loss due to the non-
performance of the other party would have the remedy of rescission of contract.
Assuming that the contract between Compact Business system and International Tire Inc.
was valid, it was eventually breached by Compact. The company breached its promise to repair
the computers of International tire within 4 days and extended it to 7-8 business days, which led
to the loss of business for International tire. Therefore, international Tire is at no fault in
rescinding their contract.
The specific time of performance is an essential factor to keep in mind for performing a
contract as a party depends on another for a work to be done within the required period. Thus,
non-performance of a contract due to not meeting the required time is a severe lack.
International tire Inc. can start a lawsuit against Compact for breaching the contract by
not performing in the required time. It can claim damages from Compact for such breach that
has made them lose business when the computers were not repaired within the stipulated time.
Question 3
The kind of damages awarded in a suit depends on the claim of the aggrieved party. In a
breach of contract, courts generally award ‘expectation damages’ which refers to the los
sustained by the aggrieved party if such breach had not occurred. The damages amount is

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speculative in nature. Expectation damages has become a common and customary remedy in
breach of contract suits whenever the court determines that the aggrieved party has suffered a
loss due to non-performance of duty of the other party; the court determines the expected
damages amount that is awarded to the party at loss (Hamilton v. Open Window Bakery). The
court uses the ‘rule of expectancy’ to evaluate the amount of damages. This evaluation consists
of three steps:
 The court finds out the amount that the aggrieved party would have earned if there was
no breach of contract at all;
 The court will ascertain the loss of the aggrieved party and the loss it has not regained
yet;
 Lastly, the court would determine how the aggrieved party could be restored of its
position or condition had it not suffered a loss due to the breach.
In the given case, the court would look deep into the matter of Compact and International
Tire Inc and would try to figure out the loss sustained by International tire because of the delay
in repairing time taken by Compact. There is a clear non-performance of the agreement that
required Compact to repair and service International tire’s computer within 4 business days,
which they consistently delayed to 7-8 business days. International tire has sufficient ground and
evidence to prove that it sustained heavy loss for a substantial amount of time due to the non-
performance of duty by Compact. This makes International tire eligible to recover expectation
damages from Compact. The court would evaluate the injury or losses sustained by International
Tire and award the damages accordingly.

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Question 4
‘Completeness’ is one of the lesser known essentials of a contract which is equally
significant as the importance of offer-acceptance or consideration to make a contract enforceable
in a court of law. For example, price or consideration is one of the most essential elements of a
valid contract and therefore, any confusion, ambiguity or mistake regarding the consideration on
which the contract is based makes such contract invalid. However, if the parties agree on such
ambiguous or incomplete terms of consideration or remain silent even after witnessing the
ambiguity, in such case the contract would be considered to be accepted by both the parties
knowing the irregularity and ambiguity.
The contract between Compact and American Tire Co is not valid. The original contract
between the parties comprised of an agreement where it was verbally decided that Compact
Business System is to receive $100,000 per year for a period of 4 years. While, later on Nathan
noticed that the agreement papers quote the payment of $10,000 to Compact per year, instead of
$100,000. This incomplete and ambiguous contract involves mistake of fact on the part of
American Tire Co for incorporating $10000 instead of $100,000 per year as discussed with
Compact. This leads to the invalidity of the agreement between the parties.
However, Nathan maintained silence even after noticing the changed consideration
amount in the agreement papers. This would constitute that Compact did not raise its voice
against the ambiguous agreement when it should have, within a reasonable time. Therefore,
Compact would not be successful to bill American tire Co. for $100,000 per year, unless it
choose to file a lawsuit claiming its ground.
Compact may argue on the point that American tire Co has misrepresented and falsify the
contract agreement document and fraudulently settled the deal with Compact. The company may

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claim that it would be a severe loss of the company to repair 1300 computers in $10,000 a year.
It might pray before the court to evaluate its expectation damages, and award compensation as
the court may think fit.
Question 5
The ‘capacity’ of the parties to enter into a contract is important. Common law requires
parties to be above 18 years of age, having a sound mind and not restricted by any law to be able
to form a valid contract, which is enforceable in a court of law (Bawlf Grain Co. v. Ross). A
contract entered into by a minor is voidable at the option of such minor. However, it has a few
exceptions like contract entered for necessities and contract of benefit. The former would be
binding on the parties as it is determined by referring to the minor’s lifestyle and the necessities
for the contract for maintain such lifestyle. While, the latter is determined by the benefits derived
by the minor from such contract.
Suzanna was 17 years old when she approached Compact for repairing computer. The
company repaired it and charged exorbitantly which seems quite unjustified. $750 for a one-time
repair of a computer is quite unfair and questionable. Suzanna’s parental involvement was
necessary in this circumstance when the company demanded such hefty amount from a minor.
Therefore, Suzanna has the right to sue Compact in the capacity of a minor.
Suzanna can consult a lawyer and eventually sue Compact Business System for damages.
She might be successful in doing so, given the fact that she is a minor who had entered into the
contract out of sheer necessity to get her computer repaired. Therefore, the contract would be
held as valid based on the exception and Suzanna would hold the option to declare the contract
void or not as per her choice.

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For the purpose of the lawsuit, Suzanna’s parents would be considered as the plaintiff for
Suzanna being under 18 years of age to be a plaintiff. While, Compact Business System would
be held as the defendant.
Question 6
A valid contract not only involves a clear offer and an acceptance of such offer, but also
comprises of the essential element of legality of the contract. Under common law, a contract
cannot be based on something that is unlawful or illegal in the eye of law. Therefore, parties
contracting to an agreement that has illegal clauses would be declared void ab initio (Haugesund
Kommune & Anor v. Depfa ACS Bank).
Therefore, Shady would not be liable to sue Compact for the fact that installing such
software in the company amounts to an illegal action. Thus, considering the fact that the software
that Shady wanted Compact to install for him was unauthorized and a pirated one that helps to
download things from ITunes free of cost. This is not an authorized application or software made
by Apple, the owner of ITunes. Therefore, the agreement stands void. However, it was
Compact’s duty to educate the customer about such policy details and that it is illegal to use
applications that encourage piracy.

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PART TWO
Question 1
‘Passing off’ in Common Law refers to a tort, which is used to enforce trademark rights
that are unregistered. It protects the goodwill of a business from being misrepresented. It refrains
a trader from copying or calling the work of another trader as his own. In Canadian law, passing
off is a statutory action under the Canadian Trademarks Act which refers to the deceptive or
misleading representation of goods and services by traders in such a manner that it creates
confusion in the minds of consumers. Section 7(b) and (c) of the Trademarks Act lays down the
statutory provisions of passing off. It depends on the plaintiff to prove whether a trademark in
question has already been registered or not. In the given case, Compact Business Systems clearly
mimicked another computer-servicing firm operating in another city, named ‘Compaq Business
Systems’. They even copied the color tones of the logo of Compaq and used it in their signage
and advertisements. They used the same name as Compaq for naming their premium same day
service. It is clear that Compact can be held liable for infringing trademark of Compaq, and
therefore can be sued for damages. Here, Compaq would be the plaintiff while Compact the
defendant.
The plaintiff would enjoy certain remedies against the defendant pertaining to the
infringement of trademarks. Compaq can sue Compact for expectation damages for the losses
that can be evaluated depending on the fact that Compaq has had a substantial loss due to such
infringement and it would have made the amount of money had there been no such infringement.
Compaq can opt for injunction to stop Compact from carrying out further business, along with a
request to inquire into the loss it suffered.

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The action of Passing off would be instituted against Compact Business Systems for
establishing a business of similar nature with a name extremely close to that of Compaq Business
Systems. Additionally it would also be charged for mimicking the logo and the name of the
premium same day service package of the same company. Losses would be evaluated based on
these similarities, where the court would inquire into the losses sustained by Compaq if such
infringement of trademarks had not occurred.
Question 2
Interference with contractual relations means refers to interference by a third party
affecting the contractual relation of two parties. It is a situation where a third party induces a
party to a contract, breach its contract with its contracting party. It may be done by misleading,
influencing or creating obstacle in the way of the party to perform its contract with such
contracting party. In the given case, Compact Business systems influenced International Tire Inc.
who was in a contract with National Business systems. This made International tire breach its
contract with National. Therefore, Compact Business Systems is the defendant as it would be
held liable for interference with contractual relations between International tire and National, and
can be sued by National Business Systems, the plaintiff as it has sustained loss due to such
breach.
International Tire Inc. had a 5-year service contract with National, which it breached on
the influence of Compact. Nathan, one of the founding member of Compact and an ex-employee
of National convinced that National had been charging its clients exorbitantly along with
providing inferior quality repair parts. This statement can be held as a substantial evidence that
Compact interfered with the contractual relations between International tire and National.

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National would be eligible to sue Compact for damages for the tortious interference with
contractual relations, provided substantial loss needs to be proven by the plaintiff. Additionally
the court may award punitive damages to the plaintiff if it finds out malicious intentions on the
part of the defendant.
Question 3
The tort of Defamation is impliedly present in the matter of interference of contractual
relations discussed above. Compact Business Systems provided misleading and deceiving
information about National Business Systems to International Tire Inc., one of National’s old
clients. Compact said to International tire that National has been charging all its bigger clients
exorbitantly and using computer parts that are inferior in quality. Compact made all such
comments without having any authority or position over National to say such derogatory things
about it. This amounts to the tort of defamation on the part of Compact. A tort of defamation in
the form of Slander has occurred in the given case. The derogatory statements against National
were conveyed to International Tire orally and not in writing. Therefore, it would amount to a
slanderous defamation. The National Business Systems would be the plaintiff while Compact
would be held as the defendant as defaming National.
Stephanie and Nathan would be eligible to cite defense against the allegation pertaining
to defaming National. They can claim that the statement regarding the exorbitant charging and
the inferior computer parts are true to the best of the knowledge as ex-employees of National
Business Systems. In Alexander v North Eastern Railway Co it was held that the defendants
need not prove that, every single aspect of the statement made by them is true.

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The court on disallowing the defensive arguments of the defendants, would award
appropriate remedy to the aggrieved party. National Business would be liable to sue Compact for
damages pertaining to the loss of business it sustained due the derogatory comments of Compact.
Question 4
Restrictive covenants are the non-competitive clauses that organizations add in their
employment contract, which restricts employees from engaging or starting a similar occupation
as the organization. The sole purpose of such restrictive covenant is to resrict potential
competition in the market.
The non-competition clause signed by Stephanie and Nathan with National to refrain
from working for a competitor or initiate a competitive business within three years after leaving
the organization would be enforced. In Jones v Gerosa, the Alberta Court dealt with the case of
restrictive covenant where it was held that non-competition clause did not amount to a direct
prohibition on competition, rather it prohibits employees or associate member of the organization
not to work against or in competition with the company. In Ontario Inc. v Pitton, the court
granted an injunction in favour of the employer who was the plaintiff but only in respect to the
usage of confidential and sensitive data of the company and not otherwise.
Question 5
Trespass refers to the entry of a person at a place where has does not have the
authorization to enter. In the given issue, the leasing company sent his agent to recover the van
of Compact Business systems that was leased under the company, fearing the complexities of the
bankruptcy proceedings. This makes the leasing company a trespasser in this circumstance.

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Here, Compact Business Systems would be the plaintiff to bring charges against the
leasing company for breaking and entering their premise and eventually, starting a fire that
caused a substantial damage to the property. The leasing company would be the defendant who
needs to defend its position as a trespasser who broke and entered into Compact’s property and
caused a substantial damage.
In this case, Compact will be liable to receive damages from the leasing company for the
substantial loss it sustained from the breaking and entering of the agent of the leasing company
and the destruction from the fire caused by such trespass. The court awards damages in all forms
of trespass as trespass is actionable per se irrespective of the plaintiff to prove any substantial
loss or damage from such trespass. In Bank of Nova Scotia v Dunphy Leasing Enterprises Ltd.,
the court held that compensations for trespass could be more than just nominal in any given case.
No rule can restrict an award of damages for the tort of trespass.
Question 6
The leasing company who is the proven trespasser in the above-mentioned question can
defend its actions to a certain limit. The leasing company can defend its case on the grounds that
the van it tried to recover from Compact was still under its hold as the lease period and the lease
amount was still pending. It can justify that the bankruptcy proceedings would have made it
tough and complicated to procure its asset and thus it tried to recover its property in its own
possible ways. The leasing company can even start a lawsuit against Compact for not meeting
the lease period and for non-payment of the lease amount on time.
In such scenario, the leasing company would be the plaintiff while Compact would be
held liable to defend itself being the defendant to the suit.

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The leasing company may argue that it had to take the necessary step of breaking and
entering Compact’s premise to recover the van, which was authenticated under it to avoid the
complexities of bankruptcy proceedings. It can claim that it was only procuring its own property
from Compact who no longer had the capacity to hold it due to insolvency. However, the court
would not allow such a claim because trespass in any form is actionable per se. The court would
disallow the claim of the leasing company, thereby penalizing it for trespass and the destruction
its agent caused for starting the fire.
Question 7
Prior to the bankruptcy proceeding, Stephanie and Nathan cleared the outstanding
payments of three of the suppliers who had treated them well. Additionally, they prepared to sell
some of their unused inventory to a warehouse at a price that is 35% lesser than what it should
be. They kept the sum received from the sale, for them for they perceived that they deserved the
money for the amount of effort they put in. This scenario is relevant to the provision of Section
198(1 )(a) of the Bankruptcy and Insolvency Act.
This situation calls for a breach of duty as a bankrupt by the party who has the
probability of liquidating his company for any given reason. Section 158(a) of the Bankruptcy
and Insolvency Act lays down the various duties of a bankrupt before as well as after the
bankruptcy proceedings (Century Services Inc. v. Canada (Attorney General)).
Question 8
It is a ‘standard duty of care of the party who has been assigned with a task to do
something. Failure to do the task resulting in material injury amounts to Negligence under the
law of tort in Common law. In this case, Lucky Accounting assigned Compact to service one of

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its desktops which got stolen from its office. The employee of Lucky Accounting was informed
by Compact that the company had nothing to do with the stealing and made them aware that
neither the company nor the goods had any insurance coverage.
As for arguments, Lucky Accounting may sue Compact on the grounds of Negligence
because Compact was supposed to be not only servicing the system, but also liable to keep it safe
from being stolen or injured. Lucky can sue Compact for damages or compensation, not only
because it lost a computer, but also for the confidential information that might be tampered with
which were present inside the computer when sent for servicing.
The tort of negligence when proved facilitates the aggrieved party to remedy
’Damages’. The court awards monetary compensation to the victim of negligence who suffers
due to such act or omission amounting to negligence.

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References
Alexander v North Eastern Railway Co [1865] 6 B & S 340.
Bank of Nova Scotia v Dunphy Leasing Enterprises Ltd., 1991 ABCA 351
Bankruptcy and Insolvency Act
Bawlf Grain Co. v. Ross (1917) 55 S.C.R. 232
Canadian Trademarks Act
Century Services Inc. v. Canada (Attorney General) 2010 SCC 60
Hamilton v. Open Window Bakery, 2004 SCC 9
Haugesund Kommune & Anor v. Depfa ACS Bank, [2010] EWCA Civ 579
Jones v Gerosa 2016 ABQB 207
Justice Laws Website. (2018). Bankruptcy and Insolvency Act. [online] Available at:
https://laws-lois.justice.gc.ca/eng/acts/B-3/ [Accessed 15 Oct. 2018].
Sutliff v Thirkell [2001] All ER (D) 65 (Jun)