Business Law Case Study: Sidney and Nancy - BUS2010 Assignment 2019

This case study analyzes a business law scenario involving the startup "Compact Business Systems" and its potential legal issues. The case explores various legal concepts, including "passing off" due to the company's name and logo similarities with "Compaq Business Systems," interference with contractual relations between Compact and National Business, and defamation committed by Compact. It further examines restrictive covenants, trespassing by a leasing company, bankruptcy proceedings, and potential offenses under the Bankruptcy and Insolvency Act. Finally, the case explores negligence and breach of contract claims against Compact by Lucky Accounting. The analysis provides legal remedies and potential outcomes for each scenario, referencing relevant legal principles and case laws.

[Business law]
Case study
2019
Student

BUSINESS LAW
Table of Contents
Question 1.............................................................................................................................................2
Question 2.............................................................................................................................................3
Question 3.............................................................................................................................................3
Question 4.............................................................................................................................................4
Question 5.............................................................................................................................................4
Question 6.............................................................................................................................................5
Question 7.............................................................................................................................................5
Question 8.............................................................................................................................................5
Bibliography...........................................................................................................................................6
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Question 1
“Passing Off” is referred as an act of false representation of goods which is likely to
create confusion and make a person believe that the goods and services belong to another.
This is a deliberate or unintentional act of misrepresentation.
In the given case, Sidney and Nancy gave named their start up as “Compact Business
Systems” which was a close resemblance to the name of the company “Compaq Business
Systems”. Also, both the girls picked the exact colours used in the Compact’s logo, for their
own brand’s signage. Adding to this, the duo picked a name for their premium same day
service that was closely mimicking that of the Compaq. These similarities opted by Sidney
and Nancy would successfully create a confusion in the market and make the customers
believe their Compact company as Compaq. As per the IP laws, such an act would clearly fall
under passing off on the part of Nancy and Sidney. Hence this makes Compaq Company as a
plaintiff and Compact (owned by Sidney and Nancy) as a defendant in the given scenario
(Wishart, 2015).
Remedies - On attaining a successful claim of passing off, Compaq Business Services
can:
i. Apply for injunction
ii. Can apply for getting the injured commodities discarded
iii. Can bring a legal action against Compact and seek damages for loss
iv. Can request an investigation to prove loss
Any kind of financial losses barred by Compaq, arising out of such passing off
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committed by Compact will be addressed by the court.
Question 2
Interference with contractual relations is tortious interference where a person
deliberately brings damage to another’s contractual terms with a third party resulting in some
sort of financial damage to the other. This interference is acknowledged as a tort by law only
if such interference brings an economical loss to the claimant. In this case, Compact
interfered with a 5 year on-going contractual term in between National and International Tire
making International tire to breach the same in fact. There is clear tortious interference on the
part of Compact. Hence, here National business stands as a plaintiff whereas Compact will be
the defendant. National is rightful to bring a claim against Compact, as the latter was aware
of pre-existing contract between National business and Int. Tire. Also, Compact informed the
customers of National including Int. Tire of high prices and low quality supply by National
and due to such interference, Int. Tires breached the contract with National bringing a huge
loss to the National business (AI Enterprises Ltd v Bram Enterprises Ltd 2014 SCC 12).
Remedy- National can seek a remedy in the form of legal damage or equitable relief
(by seeking injunction, preventing Compact to attain profits from such contract with Int. Tire)
Question 3
In this case, Nancy, a member of Compact, expressly conveyed to the National
business’s clients regarding high charges being offered to them by the National business and
regarding the usage of poor quality components on the part of the company for their repairs.
This act of communication of information on the part of Compact was a clear case of “slander
defamation” as defamation was committed verbally. Hence here the National Business stands
as a plaintiff whereas Sidney and Nancy are the defendants. But Sidney and Nancy can opt
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for an exception of “honest comment” using their past experience as a justification (Epstien
& Sharkey, 2016). The justification can be considered by the courts as defendants were past
employees of the plaintiff. But if the information comes out to be false, it will be a clear case
of defamation holding Sidney and Nancy liable for compensation.
Question 4
In the case of “restrictive covenant”, one of the parties is bound for not performing a
particular act. It is commonly found in employment scenarios and courts find such contracts
as invalid as they restrain individuals from using their potential and do business. One of the
categories under restrictive covenants is “Non-competitive agreement” by which one party
restrict the other from competing for a fixed period of time and in a fixed geographical area
(Arvind, 2019).
But there exist a situational exception to such invalidity of restrictive covenant. In a
case where an employee is entrusted with responsibility and authority, there exist a
requirement to prevent such competition. The courts believe that such an employee, because
of being an old member of the team, might hold confidential information and thus refraining
a competition can be a fair term of contract. In the given case too, as Sidney and Nancy held
positions of seniority at Nationals and worked for good number of years, the restrictive
covenant clause will stand as legally binding on both (Wishart, 2015).
Question 5
In this case, the leasing company has committed a trespass as its agents illegally broke into
the premises of the Compact and thus Compact is the plaintiff and the leasing company will
be the defendant as a trespasser. As this is clear case of trespassing the leasing company will
be charged with a monetary penalty (fine) (Rendell, 2010).
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Question 6
Under the law, usually parties facing bankruptcy can set itself free from pay liabilities
by declaring oneself as bankrupt. But there can be some proviso to such situations. As
Compact is in process of business bankruptcy and it is behind on its car lease payments, the
leasing company can approach the court, seeking it to lift the automatic stay and file an action
for relief resulting from this stay which makes leasing company a plaintiff and Compact as a
defendant (Newton, 2009).
Question 7
Under the Bankruptcy and Insolvency Act 1985, following actions by Sidney and Nancy are
counted as an offence:
i. Taking credit from the bank inspite of knowing one’s bankruptcy stance
ii. Writing bad checks to the suppliers without having potential to pay
iii. Selling off the inventory and withholding the profit.
In the legal terms such an act falls under the offence of “fraud” (Newton, 2009).
Question 8
In the given case, Lucky Accounting holds a potential cause of action against
Compact and she will pursue under the law of Negligence and Breach of contract on the part
of Compact. Here, Compact and Lucky got into a contract where by Compact was liable to
hold a duty of care. By being negligent in keeping Luck’s property safely (the bills for
Compact’s surveillance cameras were unpaid) and delivering the same to him as per the
contractual terms was not met on the part of Compact. Hence, Lucky will succeed in bringing
a claim against compact. Under the law of negligence and law of contract, a remedy of
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compensation to the plaintiff shall stand correct, making Compact liable to compensate
Lucky for the damages bought to her due to such negligence and breach (Epstien & Sharkey,
2016).
Bibliography
Arvind, T. (2019). Contract Law. Oxford: Oxford University Press.
Epstien, R. A., & Sharkey, C. M. (2016). Cases and Materials on Torts. Toronto: Wolters Kluwer Law &
Business.
Newton, G. W. (2009). Bankruptcy and Insolvency Accounting, Volume 1: Practice and Procedure.
New Jersey: John Wiley.
Rendell, R. (2010). The Face Of Trespass. New York: Random House.
Wishart, M. C. (2015). Contrcat Law. Oxford: Oxford University Press.
AI Enterprises Ltd v Bram Enterprises Ltd 2014 SCC 12
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