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Legal Issues in Business Transactions and Litigation

Question 1: RCD Ltd. and Alastair Du's Breach of Contract

1 RCD Ltd. sells household appliances, including washers, dryers, dishwashers, stoves, and refrigerators. Most of RCD’s customers are developers of apartment buildings and condominium complexes. RCD’s sales representative is Alastair Du. He is authorized to make contracts with buyers, provided the value of each contract does not exceed $100 000. Alastair ignored the restriction on his authority and concluded a contract to sell 50 sets of washers and dryers to BES Developers at a price of $500 000. BES placed its order on RCD’s application form, which states that contracts over $100 000 require written approval of RCD’s vice president of sales, and Alastair on behalf of RCD accepted the order. RCD delivered the 50 sets of washer and dryers, and received payment from BES. Within a month of delivery of the washers and dryers, BES complained that the washers vibrate excessively and the dryers overheat, and they have caused damage to the apartments in which they were installed. RCD claimed to be protected from any liability for the faulty machines because Alastair had no authority to bind RCD to this contract. Does RCD’s argument constitute a valid legal defence to a claim against RCD by BES? Explain.

2 ABC Farms Ltd has lost one of its horses due to a broken fence which allowed the horse to escape. ABC decides to post a notice in the local newspaper offering a $200.00 return for the return of the lost horse. The horse is easily identifiable from any other due to unique marking in that its ears and head are black and the rest of it is white.  John Smith shows up a few days later at ABC with the horse and claims the 200.00 reward. ABC accepts the horse but is going through some rough financial times and says they won’t pay the reward because John Smith did not communicate with them beforehand that he was going to look for the horse and would accept the offer to return the horse.

What legal argument can John Smith make so that ABC will be contractually bound to pay him the reward? What landmark case would he rely on?

3 A woman from British Columbia, Saliha Alnoor, recently sued Colgate-Palmolive, alleging that she was injured by a defective toothbrush. She stated that the toothbrush snapped as she was brushing her teeth, which injured her gums and caused them to bleed profusely. Alnoor claimed that she had endured permanent injury and sought damages, including $94 000 in anticipated treatments. Colgate denied any wrongdoing. Soon after the trial began, the judge made several rulings against Alnoor, who was self-represented. Alnoor later agreed to drop her claim in response to Colgate’s offer to waive legal costs against her (estimated at about $30 000) if she did so. According to the National Post, Alnoor's brother stated as follows: “We spent $21 000 on lawyers and experts, but we have no regrets. Now we know how justice works. Now we are much wiser.” Do you agree with Colgate’s approach to Alnoor’s litigation? What are the risks Colgate faced from the litigation? What are Alnoor’s risks? Support your work. 

4 Merchandising has come a long way from the days when “marks” were carved on silver goblets or earthenware jugs to identify the wares produced by a certain silversmith or potter. Their traditional role was to create a link in the prospective buyer’s mind between the product and the producer. The power of attraction of trade-marks and other “famous brand names” is now recognized as among the most valuable of business assets. However, whatever their commercial evolution, the legal purpose of trade-marks continues (in terms of s. 2 of the Trade-marks Act, R.S.C. 1985, c. T-13 ) to be their use by the owner “to distinguish wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others”. It is a guarantee of origin and inferentially, an assurance to the consumer that the quality will be what he or she has come to associate with a particular trade-mark (as in the case of the mythical “Maytag” repairman).

The BARBIE doll is said by the manufacturer, Mattel Inc. to be an iconic figure of pop culture. And so, within limits, it is. The sale of various BARBIE products annually exceeds $1.4 billion worldwide, representing 35 percent of the appellant’s sales. The appellant advises that Canadian girls aged 3 to 11 years are given an average of two BARBIE dolls per year. Mattel was recently advised that a company is seeking to register trade-marks in connection with its small chain of Montreal suburban “Barbie’s” restaurants. Mattel feels the use of the name (albeit in relation to different wares and services) would likely create confusion in the marketplace. On a casual acquaintance with both marks, it is contended, there is a likelihood that consumers would think that the doll people had something to do with a restaurant called “Barbie’s”. Or, as Mattel framed its point in a consumer survey by asking the following question “Do you believe that the company that makes Barbie dolls might have anything to do with the restaurant identified by this sign or logo?” (Emphasis added.)

The matter proceeds to Court. How do you think a court would rule on the issue?

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