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Midterm Exam Review Fall 2012

Sadly, Pennys grandma died, but left Penny $100,000.00 in her will. Penny decides that shewould like to buy a house with the money in a few more years time after she graduates fromLaurier. She decides that in the meantime she needs to invest her money. One of her friendssuggests she find an investment broker.

Penny looks in the Yellow Pages and finds an ad for Sheldon the Bang Up Broker whospecializes in investing in the stock market. She sets up an appointment to see him in themorning because she has a class in the afternoon at 2:30 p.m. that she doesnt dare miss.

At their first meeting Penny explains that she knows nothing about the stock market or investingmoney. Sheldon assures her that she doesnt need to thats his job. They talk for a while aboutinvestment objectives, and she tells him that she would like to use the money to buy a house in afew years and that she is looking for a safe investment. Sheldon makes several suggestions aboutdiversifying a stock portfolio, but Penny laughs and says she doesnt understand anything aboutthe subject.

Sheldon hands Penny a standard form contract whereby he has the authority to make investmentdecisions on her behalf and to conduct trades without her prior consent. The contract alsoincludes the following clauses:

(9) The investor will not hold the advisor liable for any losses incurred whatsoever, or forwhatever reason,(10) Should the investor fail to make the regular fee payments of $100.00 per quarter duein advance on the first day of each February, May, August and November the investorwill be held liable to a fixed sum of $5,000.00

Penny takes the complicated looking contract and then glances at her watch. She exclaims abouthow late it is and that she really has to dash or she will be late for her class. She quickly signs the

contract and hands it back to Sheldon.

A couple of months later, Sheldons brother-in-law, Howard lets Sheldon know that his companyRovers-R-Us is having a share release to the public because the company is having some smallcash flow problems. Sheldon decides to take $80,000.00 of Pennys money and buy stocks inRovers R Us in order to help Howard out and get the ball rolling on the shares. He figures thatthis will be a good investment for Penny.

Meanwhile, the month of May has come and gone, and Penny has forgotten to pay her $100.00fee to Sheldon. A demand letter for payment of $5,000.00 has automatically been generated bythe companys computer and mailed out to Penny.

A couple of days later a surprise audit is conducted on the books of Rovers R Us and a scandalbreaks with the realization that the company is bankrupt. The price of the shares drops to zero.Sheldon is glad that he doesnt have any money in the company, but remembers that he boughtsome shares for Penny. He checks her accounts and discovers that all of her money has beentransferred in error and she has lost everything.

Advise Penny of all of her rights and obligations in both contract and tort with regards to the lossof her money and the demand letter for payment.

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-section of law , describe it as if she knows nothing, without reference to factsThen apply facts to demonstrate how legal principles apply

Identify party, who is plaintiff who is defendantTortNegligence- Professional Liability

Test : 1) defendant owed plaintiff duty of care2) breach duty of care by falling below standard of care

3) caused harm

*fiduciary -----Trust in relationshipDescribe law

1. Define neighbour, good neighbour principle. Reasonable foreeeable, that the outcome ofaction may hurt them, limiting scope of duty (is there a reason we want to limit liability)

2. Level of care you have to reach in order to fulfill duty of care, reasonable person, socialutiliy, degree of harm, held to a standard of competant person in same field. Fiduciaryduty- high standar, requires person to put interst of beneficiary first, avoid conflicts ofinterst, applies to special relationship. Test is three part test 1) fiduciary has

power/discretion 2) can unilaterally affect interst 3) beneficiary is particularly vulnerable3. But for test- would injury have occurred but for conduct of

Harm may be purely financial, economical, defendant does not have to be sole cause,conduct can not be too far removed (remote principle)

Application1. It is reasonable forseeable sheldons act would affect penny, she is neighbour in law2. At the least would be held to competent professionals. But most likely Fiduciary

standard, Has power over investment, his actions can unilaterally affect her, she is at hismercy- did he breach it? Yes conflict of interest with brother-in-law

3. But for sheldons investing in bros company, harm is purely economic, it was forseeablebecause company was not optimal choice (conflict of interest)

She has met her burden of proofVicarious liability- clerical error for 20, 000 made by an employee

Defences

His defence would have been she signed contract

SFC unexpected term, must have pointed it out at time of contract formation becausethere is no negotiation involvedIn our case he knew and let penny sign it

100 dollars- 5000 dollars

Is this tort or contract isuee?It is contract what is that definitionWas it properly formed? 7 elements are you missing one of the elements? Is it a legalityissueA way to get contract set aside, or is there a writing issueIs she a minor,Sheldon has right to sue for non-payment

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$5000 is not in any way relevant to $100 breach, it is an uncommon term, should havebeen pointed out to her

10 multiple choice6 short answer- only answer 4 worth 8 marks each but find 5 key points

What is legal issue, legal principleLong answer-1 case couple questionsCan answer in point form

Setting aside contacke mistake , misrep, undue ing, duressRequirement of writing- payment of miscarriage of third partyreduce

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