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hotpotato |
11/22/05 |
hello expert! i was wondering if you can explain the law concepts to me presented in these case studies?
The Sellers family own a number of department stores located in cities in Eastern Canada. In the course of their business dealings they have encountered a number of situations which have legal implications.
1. Abel Seller has been negotiating with Oprah Tune, the president of an Ontario company that manufactures sofas and chairs. Abel and Oprah have met several times over the last few months to discuss a possible deal and they have also negotiated over the phone and by mail. Abel was very impressed by Oprah’s new line of furniture because he believed that the sleek minimalist lines will appeal to Generation X’ers who are furnishing their new condos. Oprah sent a letter to Abel on November 12th, making an offer to sell 100 sofas and 200 chairs in the new line for $625,000. She stated that she would keep this offer open until December 5th. Oprah’s letter was received by Abel on November 19th. On November 18th, Oprah realized that she had completely underestimated the increased cost of fabric for the new line, with the result that the price she had quoted to Abel was much too low and if accepted would result in a serious loss for Oprah’s company. Oprah immediately called Abel on her cell phone and advised him that she was withdrawing the offer. Unknown to Oprah, Abel’s cell phone was not receiving properly and what Abel heard was simply the word offer. Just to be sure, however, Oprah sent a letter the same day stating, “This will confirm that I withdraw my offer of November 12”. Due to the Christmas rush at Canada Post this letter was not delivered to Abel until December 8th. Meanwhile, Abel, delighted with Oprah’s first letter, mailed his letter of acceptance on December 4th and Oprah received it on December 6th On December 10th, she called Abel to advise him that there was no contract and he replied that there must be as she had promised to keep her offer open until December 5th and he had accepted on December She replied that he had not accepted her offer until December 6th
2. Immediately after sending the letter of acceptance to Oprah on December 4th, Abel was anxious to capture the pre-Christmas shopping season so he arranged for radio ads describing the new line of furniture. The ads promised that if customers placed their orders before Christmas, delivery would be in January to start the New Year off right with a whole new look. Responding to the ads, Costa Mare, an interior decorator, placed an order over the phone for 40 chesterfields and matching chairs for her cousin, Jose Spittable, the owner of a small hotel. When the furniture was not delivered by Sellers by the end of January, Costa was most upset and she plans to sue both Sellers and Oprah’s company. Meanwhile, her cousin is suing Costa and Sellers because his hotel cannot open on time due to the failure of the furniture to arrive.
3. The Sellers store in Kingston has always been known for its innovative ideas and its willingness to embark on new projects. Based on the latest market research from the US which indicates that people are attracted to shopping at a destination that offers the entertainment of watching live animals and the possibility of purchase, the store has recently added a pet department and is now selling talking birds, cats, dogs, and monkeys. The store has had a state of the art facility built to house the animals in a safe and healthy environment, but because all these creatures are happiest if they are outside there is a large outside area allocated for their enjoyment. This area is adjacent to a hotel on one side and a housing development on the other. The owners of the hotel are now complaining that theft business is suffering because their guests cannot sleep due to the constant noise of the howling dogs, fighting cats, shrieking monkeys and talking and cawing birds. The owners of houses in the housing development are also up in arms over the situation, the two most vocal of these people being Mr. Goldendays who has lived there for many years, long before the department store was built, and Ms. Newcomer who moved in several months after the pet department was established.
4. Sellers Department Store in Hamilton has recently upgraded its plumbing and electrical systems and a large quantity of waste materials including piping with a high lead content and electrical wiring containing mercury and zinc were removed. Mr. Bilk, the facilities manager for the store was instructed to arrange for a scrap dealer to come and remove the refuse. Several thousand dollars was included in Mr. Bilk’s budget for this purpose. Bilk arranged for his cousin, Sam Skulk, to come and remove the refuse and the two of them decided that rather than taking the waste to the toxic waste dump, where the dumping fees are high, they would simply deposit it in the ravine on the land owned by Sellers and pocket the money between the two of them. This would normally have been impossible for Bilk to arrange due to Seller’s provisions for a monthly internal audit, but Mr. Findthemout, the firm’s internal auditor was seriously ill in hospital, and the Seller’s Board of Directors had decided that it was too difficult and too costly to replace him on a temporary basis. Over a period of many months the waste in the ravine leached toxic substances which entered the municipal water supply. While healthy people suffered only temporary digestive problems, people with compromised immune systems or serious illnesses became very ill as a result, two such people died and a number will suffer from long term debilitating health problems all their life as a result.
5. The Board of Directors of the Sellers store in Ottawa decided to close the store cafeteria so they placed an ad in the local newspaper, offering to sell all cafeteria related equipment such as stoves, refrigerators, cooking utensils and pots, cutlery and crockery. Hope Full and her boyfriend were starting out in the restaurant business so they responded to the ad and were shown around the cafeteria by its former chief chef Lovell Cook who raved about the high quality and performance of this equipment. Lovell and Hope sat down to negotiate at one of the 20 new marble tables in the cafeteria which Hope admired. Hope recognized immediately that the tables were made by a famous thriftier designer and that they were very valuable. Hope and Lovell carried on with their negotiations without further discussion of the tables and a deal was struck between them whereby Hope agreed to purchase “all cafeteria related equipment on the site, such as stoves, refrigerators, cooking utensils, pots, cutlery and crockery,” for $150,000, payment to be made in advance and collection to be on December 15th as arranged by Hope at her own expense. On December 15th, Hope arrived with trucks and a team of people to dismantle and transport the equipment. When her team began carrying out the marble tables, Lovell protested that these were not included in the deal, but Hope insisted that these were the real inducement for her to enter into the transaction, and if they were not included, there was no contract. Hope demanded her money back, but Lovell replied that a deal was a deal. Each party is now planning to sue the other.
6. In Thunder Bay, the first major snowfall on December 2nd was followed by a nasty ice storm. The customers at the entrance to the Sellers store in that city tracked in a great deal of wet snow which the Seller’s employees did their best to mop up, but due to the uneven tiles, there were always spots that held water and were slippery. The store had plans to replace this floor but these were postponed until the following year due to poor profits. Lil O’Lady, an elderly but proud and fashionable octogenarian came to shop for a gift, wearing her new stiletto heels in spite of the cold December temperatures. Lil was a most remarkable lady who ran her own fashion design business from her own home and shipped her stylish garments to upscale shops all over North America. Lil was not wearing her glasses because she felt they did not enhance her appearance, so she failed to see the large yellow sign at the entrance to the store that stated, Caution: Floor is slippery when wet: please take extra care while walking. Lil was hurrying along when one of her new stiletto heels broke. While she might have been able to save herself from falling, the slippery condition of the floor made this impossible, with the result that Lil fell, breaking her hip. Lil was hospitalized and while there contracted a nasty antibiotic resistant lung infection and was never able to return to her home or her business. The result of this was that the business had to close, depriving Lil of the approximately $100,000 per year that she earned and puffing three local designers and seamstresses, Winka, Blinka and Noddy, out of work.
7. While Lil was falling, her nephew, Ivor Trip, a self—employed male model, who had driven Lil to the store, was having troubles of his own out in the Employees Only parking lot, where he had decided to park due to its proximity to the store. Stepping smartly out of his BMW convertible in his all leather dress shoes, he encountered sheer ice on the parking lot surface and fell heavily on his head, fracturing his skull. The Sellers maintenance staff were just beginning to sprinkle salt and sand on the parking lot surface, but had not yet reached the area where Ivor had fallen. As a result of the fall, Ivor was unable to work for many months and suffered thereafter from epilepsy. Unfortunately, his modeling agency was forced into bankruptcy as a result of his misfortune.
8. In an effort to stem faltering sales at Sellers stores, management at Seller’s Head Office embarked on a new advertising campaign aimed at middle aged men, who according to recent studies were doing an increasing proportion of family shopping due to the frequency of early retirements and corporate mergers. Research has shown that these men like to recapture the joys of their youth and are very attracted to products that are promoted using sexual innuendo. Seller’s hired an advertising agency “Shock n Sell” known for its “edgy approach” and preceded with a campaign of visual ads on television showing almost naked and very beautiful women embracing various Sellers’ products. Unknown to Sellers and to Shock n’ Sell, the Ontario government had recently passed new legislation entitled the “Decency in Advertising Act” that regulated advertising on television, newspapers, and all other forms of media. This legislation was passed in response to the changing demographics in the province where the religious right socially conservative portion of the population now approached 70%. The purpose of the legislation was to protect all persons and particularly children from being influenced by undesirable images, and therefore the legislation prohibited using the images of men or women in states of undress and in sexually provocative positions. The legislation provided that any alleged offence could be prosecuted as an indictable offence and violators could be punished with large fines and prison sentences. The new Sellers ads had been on television for only a week when Sellers was served with notice that they had been charged under the new Act.
9. Also as part of the new sales promotions, the Sellers Toronto store ran an ad in the local newspaper, describing their recently expanded media center with very competitive prices. Using the slogan, “Seeing is Believing”, Sellers encouraged potential customers to come to the store by stating in the ad, “Our prices are the cheapest in town. To prove it, we offer to sell the new Viesta television, which usually sells for the low price of $3000, to the first 5 customers in the store on Saturday, December 15th, for only $1000. Many people saw the ad and lined up at the store before it opened on Saturday Dec. 15th, The first five, Sleepy, Dopey, Sneezy, Happy and Doc, and the next two in line, Grumpy and Bashful, approached the floor manager, tendered their $1000 in cash, and demanded that he sell a TV to each of them for $1000. He refused, saying that any sensible person would know that what was stated in the advertisement was not to be taken seriously, and pointed out that the price of $3000 was already well below the manufacture’s suggested retail price.
10. The CEO of Sellers, Bea Sellers, continued to grapple with the challenge of making the chain of stores competitive and profitable in the very difficult retail environment for department store. Research showed that the only area in this sector that was thriving was the low end “bargain store” segment of the market. For this reason Bea decided to explore the possibility of acquiring Cheapers, a chain of small bargain stores. The owner of Cheapers was Evan Cheapers, an old high school friend of Bea’s. When Bea called Evan and aired the idea of her firm buying Cheapers out, Evan was delighted for two reasons: one because he had always been a secret admirer of Bea’s and two because as an alcoholic, he was having great difficulty managing the business effectively and was losing a great deal of money. They agreed to meet for dinner to discuss Sellers’ possible buyout of Cheapers. They met at Saucy Lee’s latest fashionable restaurant in Toronto, and over dinner and several bottles of vintage wine, mostly consumed by Evan, they agreed that Bea would buy all the shares in Cheapers for $1,000,000. Cheapers had recently been valued by independent auditors at $10 million, so Bea was very pleased with the deal. Bea just happened to have an agreement of purchase and sale in her briefcase, so she pulled it out and Evan signed it immediately. The agreement had been prepared by Bea’s lawyer and its terms reflected exactly the deal negotiated by Bea and Evan that is the outright sale of all shares in Cheapers to Sellers for $1,000,000 cash, with the deal to close one week after the agreement was signed. After one more drink to seal the deal, Bea drove Evan home as it was clear that he was not fit to drive himself One week later, Evan was cleaning out his briefcase when he came across the contract he had signed. He could not remember anything about it, so he called Bea and asked her what was going on. When he heard the story of their evening together, he protested that she could not take such a contract seriously and that of course he would not sell Cheapers for a mere $1,000,000. Bea replied that it was too late for him to withdraw because now third parties had been affected.
11. Although, Bea was very happy about the deal to buy Cheapers, the truth was that Sellers did not have enough liquidity to raise the $1,000,000 cash price so quickly. The firm was also completely over extended with its bank, and Bea knew that no more credit would be granted, so she decided to approach old Uncle Wasa Seller who was very wealthy. Uncle Wasa had no children of his own and was terrified that he would soon have to move into an old people’s home when he could no longer care for himself knowing this, Bea approached her uncle, described the deal to buy Cheapers and promised that if Uncle Wasa lent Sellers the money, she would take him into her own home and care for him until he died. (Bea actually had no intention of doing this when she made the statement, and Uncle Wasa himself was skeptical about her promise because of Bea’s reputation in the family of not keeping her promises). Nevertheless, Uncle Wasa knew a good deal when he saw one, and because he too had share in Sellers, decided to advance the money to the firm, but demanded that this be done on a business — like basis. For this reason a contract was drawn up whereby Uncle Wasa would advance the $1,000,000 immediately and Sellers would repay the loan over a period of five years at an annual interest rate of 5%.
12. After Bea left, Uncle Wasa called his friend in the financial industry, Willie Lendit and advised him that he had a contract to sell him, because Uncle Wasa wanted the present value of the $1, 000,000 as he did not expect to live long enough to collect it all over the five years. Willie agreed over the phone to accept an assignment of the contract and later that day the two men met for lunch and shook hands on the deal. Willie paid $750,000 to Uncle Wasa as agreed. Alter lunch, Uncle Wasa telephoned Bea and told her to make any payments to Willie because he was not interested in any more business dealings involving Sellers. Bea ignored this request and Sellers made payments for the next two years to Uncle Wasa who accepted them and deposited them in his bank account. After two and one half years had passed after his lunch with Wasa, Willie, who did not keep a good eye on his business affairs, noticed that no payments had been received from Sellers. He called Bea and complained about this and threatened to sue, and Bea replied that she had made all the payments on time to Wasa. Unfortunately, Wasa was by this time suffering from advanced Alzheimer’s disease and was being cared for in a nursing home. He could remember nothing about the loan to Sellers, much less any payments he had received.
13. The chief buyer for the electrical appliance departments for Sellers stores, Greta Deal, learned that Wired, a new appliance assembly plant was being opened in the greater Toronto area and sees an opportunity to reduce shipping costs by buying most of the store’s line of custom appliances from this source. After negotiating for several weeks, Greta and Ian Wired, the CEO of Wired signed a contract in which Wired promised to deliver a specified number of appliances as described in the contract to Seller’s store over a three year period according to the price schedule attached to the contract. During the negotiations, they had a discussion about the difficulty of rising prices in the industry due to the escalating costs of steel and Ian stated that his company would never raise the price to customers who had a firm contract just because the price of steel rose. The contract was on Wireds standard form sales agreement which contained a number of “boiler plate items, including an entire agreement clause, a price escalation clause for situations of rising cost production, and a prohibition on assignment for either party. Greta, who was actually dyslexic and unable to read quickly, signed the contract without reading it, and returned to her office, happy that she had secured an economical source for electrical appliances for the next three years. Wired supplied the appliances as agreed for a period of six months after which it notified Sellers that due to rising steel Costs, the prices under the contract would rise by 15% as provided in the price escalation clause. Greta protested and reminded Ian of his promise that Wired would never do this, to which he replied, that surely she had not taken him at his word on this. He went on to state that she could take this up with Global Appliances mc, a Chinese firm that had just acquired Wired and assumed Wired’s position under all contracts. Greta protested that they could not do this either, as Sellers had contracted with Wired specifically because it was a small local company. Sellers in fact, knew of an alternative supplier ready to provide identical appliances at the price quoted in the original Wired/Sellers contract, but chose not to explore this possibility and instead insisted that Wired supply the appliances. Wired /Global continued to ship them, invoicing them at the higher price. When Wired/Global were finally forced to sue Sellers for the outstanding balance owing, Sellers defended on the basis that there was a firm contract to deliver the appliances at the prices stated in the contract, and counterclaimed for any loss they would sustain as a result of having to pay the higher price.
14. The Sellers Store in North Bay was doing very well and developed ambitious expansion plans as a result. Its managers decided to develop a new mall in that city anchored by a magnificent new Sellers store. On this basis, on October 31st’, Seller’s real estate manager, Freddy Friendly, approached the 20 homeowners whose homes now stood on the designated land and persuaded each of them to agree to sell their land to Sellers on or before January 1st of the following year provided that the Sellers’ Board of Directors approved the entire deal by the preceding Dec. 31st. Freddy belonged to the same local club as all these homeowners and they trusted him absolutely. Freddy held a big party in a local restaurant for the homeowners and their families and they all shook hands on the deal and went happily home. Meanwhile, the lawyer for Sellers negotiated a deal for the purchase of a large piece of adjacent land with Steven Shrewd, a local farmer. The contract was signed, sealed and delivered in the lawyer’s office by Steven and included the statement that completion of the sale was conditional upon Sellers obtaining project financing in the amount of $10 million at 5% over a period of 10 years. As it turned out, the best financing Sellers could obtain was 5 1/2% over a period of 10 years.
15. Once Sellers had sorted out the legal difficulties connected with the assembly of the necessary land for their new mall, they negotiated a contract with Crafty Construction for the actual construction of the mall. This contract was based upon the plans drawn up by Sellers’ architects and Crafty agreed to complete the construction as outlined in the contract for a total price of $20 million by July 1 of the following year. Work on the project progressed well until unseasonable rainstorms in April and May put the progress significantly behind schedule. Crafty’s CEO approached his good friend, Freddy Friendly, and explained that Crafty would have to hire several additional men and assign significant amounts of overtime to the present crews. Because these difficulties were caused by events beyond Crafty’s control, Freddy felt the request was reasonable, so on his recommendation, Sellers’ Board signed an agreement to pay and additional $400,000 if Crafty completed the project on time.
16. Sellers’ Kingston store had an extensive and excellent computer and electronics department. Art East, a graphic designer, went there to find a computer system to help him produce the creative work that made him very successful with advertising agencies and large corporate marketing departments. He was fairly new to working with computers in his field and was finding, as he worked more with computerized graphics, that his needs had out- stripped the capacity of his old computer. He discussed his problem with Stock Moveit, the manager of the Sellers’ computer department in Kingston, and explained what he did and what he wished to do with a new system.. Stock admitted to Art that although he was the manager of the department, he was not really familiar with this kind of work, but wanting to make a lucrative sale for himself, he gave Art the specification sheets for their top-of-the-line Apple product with graphics software installed, and the best printer available. He told Art that Apple’s products were better than those of Microsoft in this area. He also stated that, though he was not a graphics designer, in his opinion, the suggested package would meet Art’s requirements.. Art read the sheets and though he did not really understand them, he was too embarrassed to ask questions. Before signing the sales contract to buy the suggested “package”, he said to Stock: “Turns out you do know your product after all-I am glad that you have a product that meets the needs I described to you - if you hadn’t, I would have had to travel up to Ottawa to get what I need.” The computer system failed to meet Art’s needs, and he found that he had to spend a lot of money on extra software which would only work with Apple computers. It has become clear that what was recommended by Stock is not, in fact the best system for Art’s needs. Art wants to return the computer and get his money back but Sellers refuses to let him do so.
17. Sellers was anxious to move into the growing markets around Toronto so it opened a store in Newmarket. Sellers hired Ryan DeVoort to head up the very sizeable men’s clothing department in the store. DeVoort was very knowledgeable about the retailing of men’s clothing as he had managed his own men’s clothing store in the 10 years prior to joining Sellers. The manager of the Sellers store in Newmarket, Jackie Walsch, negotiated an employment contract with DeVoort. The contract included a term that stated that “should DeVoort leave Sellers for any reason, he agrees not to open a men’s clothing store within 1 kilometer of the store in Newmarket, for a period of 6 months”. DeVoort signed the contract, but had no intention of keeping his promise as he planned to join Sellers for a short time in order to build up a bigger customer base. As the time that he planned to leave Sellers and go into business for himself drew closer, Devoort began to worry about the above-noted term, so he complained about the clause to Jackie Walsch. Ms. Walsch advised him, “Don’t worry, I won’t enforce the clause against you”, and struck the clause from the agreement. A year later DeVoort left his employment at Sellers and within 1 week started up his own men’s retail store about one half kilometer away from the Sellers store in Newmarket. |
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