Contemporary Canadian Business Law Principles and Cases 10th Edition John A. Willes – Test Bank

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33. A and B entered a variety store owned by C. A purchased two chocolate bars from C, and gave one
to B. Unknown to A, B, or C the chocolate bar which A gave to B contained a piece of metal that had
fallen into the chocolate mix when the candy bar was made. When B attempted to eat the chocolate,
she damaged one of her teeth. She was obliged to have the tooth repaired by a dentist, and in addition,
lost a day’s work because of the painful injury to her mouth. Her total loss amounted to $300.00.
B was careless in eating the chocolate bar, and therefore was responsible for her own injury.
FALSE
Difficulty: Easy
Willes – Chapter 05 #33
34. A and B entered a variety store owned by C. A purchased two chocolate bars from C, and gave one
to B. Unknown to A, B, or C the chocolate bar which A gave to B contained a piece of metal that had
fallen into the chocolate mix when the candy bar was made. When B attempted to eat the chocolate,
she damaged one of her teeth. She was obliged to have the tooth repaired by a dentist, and in addition,
lost a day’s work because of the painful injury to her mouth. Her total loss amounted to $300.00.
B may take legal action against the manufacturer of the chocolate bar, because the manufacturer was
careless in making the bar.
TRUE
Difficulty: Easy
Willes – Chapter 05 #34
35. A and B entered a variety store owned by C. A purchased two chocolate bars from C, and gave one
to B. Unknown to A, B, or C the chocolate bar which A gave to B contained a piece of metal that had
fallen into the chocolate mix when the candy bar was made. When B attempted to eat the chocolate,
she damaged one of her teeth. She was obliged to have the tooth repaired by a dentist, and in addition,
lost a day’s work because of the painful injury to her mouth. Her total loss amounted to $300.00
The only person liable for B’s injury would be the employee of the manufacturer who made the
chocolate bar.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #35
36. A and B entered a variety store owned by C. A purchased two chocolate bars from C, and gave one
to B. Unknown to A, B, or C the chocolate bar which A gave to B contained a piece of metal that had
fallen into the chocolate mix when the candy bar was made. When B attempted to eat the chocolate,
she damaged one of her teeth. She was obliged to have the tooth repaired by a dentist, and in addition,
lost a day’s work because of the painful injury to her mouth. Her total loss amounted to $300.00.
The manufacturer of the chocolate bar has strict liability if the product he manufactures causes
injury.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #36
37. A and B entered a variety store owned by C. A purchased two chocolate bars from C, and gave one
to B. Unknown to A, B, or C the chocolate bar which A gave to B contained a piece of metal that had
fallen into the chocolate mix when the candy bar was made. When B attempted to eat the chocolate,
she damaged one of her teeth. She was obliged to have the tooth repaired by a dentist, and in addition,
lost a day’s work because of the painful injury to her mouth. Her total loss amounted to $300.00.
The manufacturer is vicariously liable for the negligence of his employees in the making of the
chocolate bar.
TRUE
Difficulty: Easy
Willes – Chapter 05 #37

38. Sam had a swimming pool in the rear yard of his suburban home. The pool was enclosed on all sides
by a 1.2-metre high wire fence, and entry to the pool area was by a gate, which Sam occasionally
locked. One day, Sam drained the pool in order to have some repair work done, and accidentally left
the gate closed but unlocked. A small four-year-old child who lived in the next house to Sam entered
the pool area by climbing over the fence, and was injured when he fell into the empty pool.
Sam is liable for the injury to the child, because he had not warned his neighbours that the pool had
been drained of water.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #38
39. Sam had a swimming pool in the rear yard of his suburban home. The pool was enclosed on all sides
by a 1.2-metre high wire fence, and entry to the pool area was by a gate, which Sam occasionally
locked. One day, Sam drained the pool in order to have some repair work done, and accidentally left
the gate closed but unlocked. A small four-year-old child who lived in the next house to Sam entered
the pool area by climbing over the fence, and was injured when he fell into the empty pool
Sam is liable for the injury to the child, because he failed to erect a fence that would prevent the child
from entering the pool area.
TRUE
Difficulty: Easy
Difficulty: Moderate
Willes – Chapter 05 #39
40. Sam had a swimming pool in the rear yard of his suburban home. The pool was enclosed on all sides
by a 1.2-metre high wire fence, and entry to the pool area was by a gate, which Sam occasionally
locked. One day, Sam drained the pool in order to have some repair work done, and accidentally left
the gate closed but unlocked. A small four-year-old child who lived in the next house to Sam entered
the pool area by climbing over the fence, and was injured when he fell into the empty pool.
The child’s parents would be entirely at fault for allowing the child to enter on Sam’s property without
supervision.
FALSE
Difficulty: Easy
Willes – Chapter 05 #40
41. Ping drove his automobile into a parking lot and, in doing so, collided with the side of a parked
automobile that was owned by Nelson. Ping has a duty not to damage the automobile owned by
Nelson.
TRUE
Difficulty: Easy
Willes – Chapter 05 #41
42. Ping drove his automobile into a parking lot and, in doing so, collided with the side of a parked
automobile that was owned by Nelson. Ping would be liable for the damage to Nelson’s automobile if
Ping was negligent in the operation of his motor vehicle.
TRUE
Difficulty: Easy
Willes – Chapter 05 #42
43. Ping drove his automobile into a parking lot and, in doing so, collided with the side of a parked
automobile that was owned by Nelson. Because a motor vehicle is a dangerous object, Ping is strictly
liable for any damage caused by his vehicle.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #43
44. A highly corrosive liquid that is stored on the property of Acme Waste Disposal leaks from its
container and seeps into the foundations of the business next door, badly damaging the building.
Acme will be liable only if the injured party can prove Acme was negligent.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #44

45. Andrew, a newly graduated lawyer, failed to do a proper title search of a property, which resulted
in his clients actually owning only two-thirds of the property which they thought they had bought.
Andrew will be held to the standard of care expected of the reasonable lawyer.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #45
46. Manish, a hairdresser, applied too much peroxide to Meagan’s hair when he was colouring it,
causing it to break off at the roots. Meagan will be held to the standard of care of the reasonable
hairdresser.
TRUE
Difficulty: Easy
Willes – Chapter 05 #46
47. Teresa is suing the Driver Trucking Co. because she was injured when one of their trucks negligently
crashed into the bus shelter in which she was standing. Since Driver Trucking can do nothing to
protect itself from its driver’s negligence, it is unfair to hold the company liable for its employee’s
actions.
FALSE
Difficulty: Easy
Willes – Chapter 05 #47
48. The Sampson Hair Products company issued by a user who contracted a painful rash from using
their shampoo. If Sampson manufactured the product in the same way and to the same standard as a
reasonable shampoo manufacturer, and the rash was simply the result of an unusual allergy, Sampson
will not be held liable.
TRUE
Difficulty: Moderate
Willes – Chapter 05 #48
49. Marc intends to sue Colleen for negligence. As a general rule, absent any unusual circumstances,
Marc will not win unless he can prove to the court that it is more likely than not that what he alleges
about Colleen’s actions is true.
TRUE
Difficulty: Easy
Willes – Chapter 05 #49
50. James and Mary are artists who have a studio in an industrial part of the city. They decide to live
in the studio, which is not against local zoning bylaws, but find themselves disturbed at night by
the noise and light from a nearby railway marshalling yard. They decide to institute a nuisance suit
against the railway since their enjoyment of their property has been seriously affected. They will be
unsuccessful.
TRUE
Difficulty: Moderate
Willes – Chapter 05 #50
51. Dave was injured in a hang-gliding accident at a hang-gliding school, and would like to sue the
owners of the school. Before they would allow him to take classes, the owners of the school had Dave
sign a document which said that the school would not be responsible, legally or physically, for Dave’s
safety. This kind of document is called a release.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #51
52. Dave and Ray are teammates on their city’s rugby team. Ray was injured early in the season and is
unable to play for the remainder of the year. Dave forgot his mouthguard on the day of a game and
borrowed Ray’s mouthguard which, although it was medically formed for Ray’s mouth, fit Dave fairly
well. During a game Dave received a high tackle and lost several of his teeth. His attempt to sue Ray
as well as the mouthguard manufacturer will be successful.
FALSE
Difficulty: Easy
Willes – Chapter 05 #52

53. Seth owns a large plot of land on which he plants pear trees. These pears are his sole income and have
earned him a reputation as a premier grower. His neighbour owns two horses which constantly break
through the fence separating the two properties and maraud Seth’s pear trees, costing him lost profits,
decreasing production and causing general damage to the orchard. Seth would have valid grounds for
a claim of nuisance.
TRUE
Difficulty: Moderate
Willes – Chapter 05 #53
54. A defendant can receive damages as a result of a tortious act even though he or she may not have
experienced any monetary loss.
TRUE
Difficulty: Easy
Willes – Chapter 05 #54
55. The basic premise upon which tort liability is founded is that individuals and corporations living
in a civilized society will not (and should not) intentionally cause injury to one another or others’
property.
TRUE
Difficulty: Easy
Willes – Chapter 05 #55
56. Initially, under tort theory, only deliberate direct injury was open to action, and compensation payable
was open to consideration based on the actual loss suffered by the plaintiff.
FALSE
Difficulty: Moderate
Willes – Chapter 05 #56
57. Much attention has been paid recently to the issue of dog attacks, which remain largely subject to a
presumption of strict liability for breeds such as pit bulls.
TRUE
Difficulty: Easy
Willes – Chapter 05 #57

58. Arthur, who is a member of the maintenance staff of Gordon’s Mall, was mending one of the
revolving entry doors when he realised that he was missing an essential tool. He placed an “Out of
Order” sign on the door, and went to get the tool. Due to an emergency caused by a washroom flood,
he was gone for longer than he expected. Not long after he left, the sign fell off the door, and, while
Susan, Antoinette and Gloria were entering, the door collapsed, seriously injuring all three women.
Susan was on her way to the pet store to buy cat food, Antoinette came to the mall to get decorating
ideas from the paint and wallpaper shop, but was not going to buy anything, and Gloria, thinking she
was dying, confessed that she was on her way to rob the jewellery store.
a. Who would they sue and why?
b. Identify what, if any, duty of care is owed to each woman, and discuss whether any of them could
win a negligence suit.
They would sue Arthur and his employer, Gordon’s Mall. Arthur would be liable for negligence and
the mall vicariously liable for its employee’s tort. It is unlikely that Arthur would have sufficient
funds to compensate those entitled, but his employer (or employer’s insurance) would probably have
sufficient funds to do so. Both Sue and Antoinetts are considered visitors to the property, and thus
are owed the general duties and standard of care expected of a reasonable person. Gloria however is a
trespasser. In Ontario, both Sue and Antoinette, by statute, would be owed a duty of reasonable care.
A trespasser is owed only minimal care—essentially that, if one has reason to believe that they may
be there, one should not intentionally set out to endanger them nor act as if they were not there. One
should treat a trespasser with ordinary humanity.
Here, since there was obviously considerable risk to anyone using the door, Arthur should have done
more than simply post a sign so carelessly that it could fall down. The reasonable maintenance person
would have rendered the door safe by locking it, and by barricading it so that it was clear it should not
be used, either with warning tape or a trestle-barrier. He clearly failed to meet the duties of care owed
to visitors and this caused their injuries. It is not clear whether Gloria could succeed. If the steps he
did take fail to meet the test of common humanity then Gloria could recover damages.
Difficulty: Challenging
Willes – Chapter 05 #58
59. After winning a lottery, Janice consulted Len, a stockbroker and accountant, about how to invest the
huge sum she had won. In their discussion she mentioned that her brother, Steve, would probably ask
her for the information and advice she received from Len. “Even though he won as much as I did,” she
said, “he’s too cheap to pay for the help we both know we need, so I better make some notes.” Among
other things, Len advised Janice to buy shares in a company just before it bought heavily into retail
stores in the U.S.A. and became overextended. Janice didn’t act on that piece of advice, but Steve did.
a. Discuss whether Steve can bring a suit against Len.
b. If he can bring a suit, is he likely to succeed?
a. Since Len was aware, from what Janice said, that Steve would probably be relying on whatever
advice he gave Janice, Steve would be able to bring a suit against Len for professional negligence
even though he is not Len’s client.
b. If Len’s advice met the standards of the reasonable stockbroker—if, for example, it was based on
the proper kind of research—then he is not liable for Steve’s losses. Len does not have to be perfect;
he need only act in accordance with the standards expected in his business. He can be wrong without
incurring liability.
Difficulty: Challenging
Willes – Chapter 05 #59

60. While demolishing a building using a crane and wrecking ball, Thompson, an employee of Bashett’s
Wrecking Co., accidentally hit Marsden’s car, which was parked nearby in a laneway, and totally
demolished it. Marsden, who fortunately was not in the car at the time, wishes to sue.
a. Who should she sue and why?
b. If she is successful, against whom will she execute judgement, and why is that permitted and
reasonable?
a. Marsden will sue Thompson and Bashett. Since Bashett is Thompson’s employer, it will be
vicariously liable for the torts committed by him in the course of his employment.
b. She will execute judgement against Bashett, leaving Bashett to collect from Thompson if it can.
Bashett’s pockets are deeper—it has insurance or at least assets against which she can execute. Since
Bashett hired Thompson and gave him a job to do which could cause harm to others, it should have
ensured he was properly qualified and trained and should have supervised him properly. Bashett
can pass the costs of its increased premiums along to its customers if necessary so, while that might
make Bashett marginally less competitive, no one party will suffer unduly, but the victim will be
compensated.
Difficulty: Challenging
Willes – Chapter 05 #60
61. A community ice rink posted a sign at the facility stating that persons using the rink are responsible
for damage or injury which they may incur. While taking a break from a hockey game, Wayne took
a seat on the bench. A faulty light used to illuminate the ice surface exploded causing severe burns
to Wayne. Using the principles of volenti non fit injuria and res ipsa loquitur discuss the success of
Wayne’s attempt to sue the community.
Wayne will use res ipsa loquitur as a foundation for a claim of negligence. The principle shifts the
burden of proof to the defendant municipality to show that it was not negligent in the installation or
maintenance of the light. Wayne will argue that he has no specific knowledge about how the light
exploded to cause his injuries, however there must have been negligent action or omission by the
municipality for the explosion to have occurred. The municipality’s defence of volenti non fit injuria
will not likely be successful. To argue this defence, there must be some foreseeable relationship
between the plaintiff’s activity at the ice rink and injury occurring from the light. While there is a
foreseeable risk of harm involved in playing hockey or watching a hockey game, injuries from an
exploding light are not foreseeable in this context. The municipality will have to show that it was not
negligent to avoid liability. This may be true if the explosion was caused by other factors such as a
unique manufacturer’s defect.
Difficulty: Moderate
Willes – Chapter 05 #61
62. In this era of global trade, discuss the legal issues of which both manufacturers and consumers of
imported products should be aware.
The issues surrounding liability for defective products becomes more complicated when goods are
imported from other legal jurisdictions into Canada. Even though Canada recognizes and enforces the
principles of manufacturer’s liability for defective goods, the country of manufacture may not. This
is more acute where the defective product comes from a lesser developed country where the state of
the legal system may be very different from that in Canada or commercial laws may be nonexistent.
Even if judgement is obtained in Canada against a foreign manufacturer, the judgement may not be
enforceable in the courts of the manufacturer’s country.
Difficulty: Challenging
Willes – Chapter 05 #62

63. Fun Unlimited Inc. was a manufacturer of children’s toys and games. For the Christmas season
it produced and offered for sale through its retail distribution channels a toy clown doll. The doll
was made of fabric and wore a colourful clown suit with several large, bright red buttons down the
front. Mr. and Mrs. Johnson purchased one of the clowns as a Christmas gift for their two-year-old
granddaughter. The child was delighted with the toy and played with it for many hours. About a week
after Christmas the child’s mother noticed two of the buttons missing from the front of the clown
suit. A thorough search of the house did not turn up the buttons. Later that day, as she supervised
the child’s play, the mother observed the little girl pulling a button off the clown suit and placing it
in her mouth. Before she could reach the child to retrieve it, the button had been swallowed. In the
several days that followed, the child had little appetite and showed considerable abdominal distension.
When the child’s mother took her to a doctor, X-rays were performed that showed the buttons were
lodged in her upper intestinal tract, blocking her entire digestive system. Immediate surgery was
required to remove the buttons. The child required considerable postoperative care at home, resulting
in substantial time lost from work for both parents.
a. Discuss the nature of the legal action which may be taken in this case, including the remedies and
damages sought. Also discuss any defences that may be raised and render a decision
b. If Fun Unlimited had discovered the ease with which the buttons could be removed by children and
had ordered a recall of the product, how would this affect your answer to (a), if at all?
a. This case explores the principles of negligence in manufacturer’s product liability. Although the
child did not purchase the toy, a claim against the manufacturer may be brought on her behalf by
her parents due to her incapacity. The claim will be founded on the duty owed by the manufacturer
to ensure its products are not unsafe or hazardous to end-users who are predominantly children. The
breach of this duty occurred in the manufacturer’s failure to properly secure the buttons to the doll.
The tests of foreseeability and the “reasonable man” apply to determine the standard of care required
of a company that produces items which it is, or ought to be aware, will be used by children. Students
must use their judgement to determine whether that standard was met.
The parents are entitled to seek damages, both general and specific, if they can be shown.
The manufacturer may attempt a defence of contributory negligence on the part of the child’s parents.
Again, the principles of a reasonable parent and foreseeability would apply to the mother’s conduct
in permitting the child to continue playing with the toy with the knowledge that the buttons could be
easily removed. Furthermore, if it ought to have been foreseeable to a reasonable parent that buttons
could be hazardous on a young child’s toy, contributory negligence might be established
b. The manufacturer’s initiative to recall the toy may serve to show that it exercised a greater standard
of care in carrying out its duty. Nevertheless, it is unlikely that such action, even though reasonable in
the circumstances, would relieve it of liability entirely where harm has been incurred by a user of the
toy. At best it may serve to reduce the amount of damages for which it may be found liable.
Difficulty: Challenging
Willes – Chapter 05 #63

64. Walter, a chartered accountant, provided services to ABC Manufacturing Inc. owned by Mr. White.
Walter took care of all of ABC’s financing, bookkeeping, payroll management, financial statement
preparation and tax planning and preparation. Early in January, White came to Walter to inform him
that he was thinking of selling the business. He explained that the slow economy had considerably
dampened his sales and that he wished to sell the business as a going concern before the situation
became critical and he might be forced to sell at a loss or liquidate assets to satisfy creditors. Walter
listened carefully but suggested that White should wait and sell until after he prepared some current
financial statements from which he could offer some constructive advice about the fortunes of the
company. Walter also told White that, based on his understanding of the situation, ABC could easily
be restored to financial health. Walter prepared draft statements using certain assumptions about the
availability, terms and cost of bridge financing and the reduction in operating expenses that could be
achieved by rearranging production in certain ways. The assumptions were not fully explained on the
statements as Walter preferred to meet with White and discuss the matter fully. However, a footnote
stated that “the figures are based on receipt of interim financing and predicted cost reductions.” Walter
then sent the statements to White for his review and invited further discussion.
Two weeks later, Walter received a telephone call from White who told him he had sold the business
at a substantial profit to Black. The purchaser had been impressed with the financial position of
the company based on Walter’s most recent statements and had taken the statements to his bank
in order to secure a loan for the purchase price. The loan was granted. Within the first six months
under Black’s ownership, ABC’s sales continued to fall. Black’s new accountant prepared financial
statements that portrayed a much more dismal situation than had Walter’s. Within another month, one
of ABC’s major suppliers forced the company into bankruptcy.
Discuss the liability of the parties in this case, if any, and render a decision.
This case looks at the issue of professional negligence and the duty of care owed by professional
accountants. As accountants are generally aware that their statements may be relied upon by third
parties, they have a high duty of care to ensure that their work reflects the true financial position of
the company to which it applies. Failure to take all reasonable steps to ensure its accuracy would fall
below the acceptable standard and constitute a breach of the duty, which, if loss resulted, would incur
liability.
Here, the accountant did not intend anyone, including White, to rely on the draft statements. Although
the purpose of the statements was to present a viable alternative to White to reverse the company’s
fortunes, Walter failed to meet the standard required of the profession. The assumptions used to
generate the statements were not fully explained on their face, thus rendering them inaccurate and
misleading. Even in light of the limited purpose for which Walter believed he was preparing these
accounts, he ought to have known that they may be relied upon by White or a third party, particularly
after White expressed his urgent desire to sell the business.
An action may lie by Black and Black’s bank, who relied upon the statements against White and
Walter for misrepresenting the company’s situation. White may in turn seek indemnity from Walter in
the amount for which he is found liable as a result of Walter’s professional negligence.
Students may also raise the issue of some intentional misrepresentation or negligence on the part of
White. An argument might be made that he either knew or ought to have known that the statements
were misleading and took the opportunity to present them to an innocent third party in order to secure
a rapid sale of the business.
Difficulty: Challenging
Willes – Chapter 05 #64

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