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ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION -DECEMBER12, 2009

PART "A" - Professional Practice and Ethics

You will be given a total of 90 minutes to complete this examination.

Use the correct colour-coded Answer Book for each part, place in the correct envelope and seal after
completed,

White Answer Book for Part A white question paper.


Coloured Answer Book for Part B coloured question paper.

This is a"CLOSED BOOK" examination. No aids are permitted other than the excerpts from the 1990
Ontario Regulation 941 covering sections 72 (Professional Misconduct) and 77 (Code of Ethics) supplied at
the examination. Dictionaries are not permitted.

The marking of questions will be based not only on academic content, but also on legibility and the ability to
express yourself clearly and correctly in the English language. If you have any doubt about the meaning of a
question, please state clearly how you have interpreted the question.

All four questions constitute a complete paper for Part "A". Each of the four questions is worth 25 marks.

WHERE A QUESTION ASKS IF A CERTAIN ACTION BY AN ENGINEER WAS ETHICAL OR


NOT, A SIMPLE "YES" OR "NO" ANSWER IS NOT SUFFICIENT. YOU ARE EXPECTED TO
COMMENT ON AND DISCUSS THE ACTION OF THE DIFFERENT INDIVIDUALS AND/OR
ORGANIZATIONS INVOLVED IN EACH SITUATION.

You should identify where applicable the appropriate clauses in Regulation


941. SIMPLE REFERENCE
TO THE APPROPRIATE CLAUSES WITHOUT A DISCUSSION OF HOW THE CLAUSE
APPLIES IN THE SITUATION DESCRIBED IS NOT SUFFICIENT.

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Question 1

(5) (a) What are the consequences, if any, to a professional engineer who does not
keep his or her licence permanently displayed in his or her place of business?

·
(b) A P.Eng. and a Temporary Licence holder may hold a Certificate of
(5) Authorization. Are there any limitations on the C of A held by the Temporary
Licence holder?

(c) PEO issues a Limited Licence. In addition to paying the necessary fee, briefly
(5) state three other requirements to obtain such a licence.

. (d) PEO recently recognized Engineering Intern and Engineering Student in its
regulations. What are the requirements for membership in each?
(5)

(e) PEO is authorized to discipline its members, licensees and holders of Certificate
(5) of Authorization. Give a brief outline of the Association's disciplinary process.

Question 2

Peerless Radio Manufacturing Inc. ("Peerless") is a well-known manufacturer of radio


broadcast equipment. Peerless employs Audio, a professional engineer, on a full-time
basis as an engineering sales representative in Ontario.

In addition to working for Peerless, Audio performs consulting professional


engineering services for radio broadcasters. Audio's services include technical
analyses of broadcast systems. As part of these services, Audio often makes
recommendations for the selection and purchase of broadcast equipment by
broadcasters. Sometimes, Audio recommends Peerless' equipment.

Specify and explain:

(10) (a) the requirements, if any, stipulated in the Professional Engineers Act and its
Regulations that Audio must satisfy in order for Audio to provide such
consulting professional engineering services; and

(15) (b) the requirements, if any, stipulated in the Professional Engineers Act and its
Regulations that Audio must satisfy with respect to the marmer in which such
consulting professional engineering services are performed.

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Question 3

ChemCo, an industry in northern Ontario, hired EngCo (an engineering firm


with a Certificate of Authorization) to design a system to clean up toxic
effluents being released by their processes into the river that supplied the
drinking water for several downstream towns. This was required by changes in
environmental regulation and was being done with the full knowledge and
support of the Ministry of Environment.

Alpha, a P.Eng. independent practitioner and Certificate of Authorization


holder, was requested by the CEO of ChemCo to attend a public meeting and
comment on EngCo's proposal to clean up the toxic effluent. After the meeting
Alpha reviewed EngCo's proposal and sent a letter to the CEO that was highly
critical of EngCo and their P. Engs. involved in the design. He accused them of
inadequate design, designing a more expensive facility than required just to get
larger fees, using incompetent engineers to do the work, not conducting
sufficient testing of the effluent to be treated, purposely misleading ChemCo in
what was needed and not considering alternative options to solve the problem.
Alpha signed but did not seal this letter. Alpha secretly held a patent for a
technology that claimed to be able to perform the necessary task. Alpha never
informed EngCo that he was conducting this review.

The CEO of Chemco sent the letter to EngCo who responded to Alpha's
allegations in a professional and factual manner. They politely but
unequivocally rejected Alpha's allegations and claimed that their design was
adequate, used the most appropriate current technology and was the most cost
effective option.

The CEO then hired Kappa (a well recognized P.Eng. expert) to review the
proposed design and the allegations made by Alpha. Kappa contacted all
parties and obtained any necessary information from them. She determined
that the design by EngCo exceeded the required capacity to handle the effluent
resulting in higher than required costs. In addition she determined that the
design was using out of date technologies and did not represent the practices
that a prudent engineer would apply in this project. She further concluded that
the design would not adequately clean up the effluent and would result in the
(12) continued release of harmful toxins into the river.

(8) With respect to regulation 941

(5) (c) comment on the conduct of Alpha

(d) comment on the conduct of EngCo

(e) comment on the conduct of the Kappa

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Question 4

You are a professional engineer employed by Prime Engineering Ltd. ("Prime"), a


consulting engineering company with a valid C of A.

One of the firm's clients, BoxCo Developments Ltd. ("BoxCo"), has hired your firm to
provide the engineering design for a new elevated walkway for one of BoxCo's major
shopping malls. You have been assigned the responsibility of preparing the design for
BoxCo.

You develop the design and meet with Theta (a representative of BoxCo) to discuss
your design. Theta is not a professional engineer, but disagrees with your design. The
representative gives you some suggestions on how to simplify your design. You listen
politely, but realize that the design would be compromised if the suggestions were
incorporated.

Because of the disagreement, Theta fires Prime and demands that you turn the design
drawings over to Delta, a professional engineer employed by Second Engineering Ltd.
another engineering firm with a valid C of A.

Theta had worked with Delta on a previous project, and the two of them got along quite
well. Delta has agreed to complete the design of the new elevated walkway as Theta
wishes.

You refuse to turn over the design drawings, even when Theta offers to pay for all of
Prime's services to date.

(10) Do you have any obligation to turn over the drawings? If so how?

(10) Comment on Delta's agreement with Theta.

(5) Do 'you have any other responsibilities?

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Professional Practice Examination
Study Guide
Part "A" - December 12, 2009

The objects of Part "A" are to examine knowledge of PEO functions (question 1) and the
application of Misconduct and Ethics Codes (questions 2, 3 and 4).

These Codes are contained in the Regulation 941 sections 72. and 77. Although these 2
sections are supplied at the exam, they should be carefully studied before the exam. This will
enable quick recognition of comparable situations in questions on the exam.

The skill of time management can be practiced during study.


1) Write an answer without time pressure, but with full details.
2) Set aside all materials except the question sheet, and sections 72. and 77.
3) Re-write the answer within 20 minutes, being selective in details.
4) Compare the two answers.

References as given here are for study purposes and are not, except for 72. and 77.,
anticipated in an answer. This study guide is extensive to illustrate the possible range of
content in an answer.

1 (a)Licence display - there are no particular consequences. The practitioner is to "endeavour


to keep the ... licence ... displayed", Reg. 941 section 77. 2. iv. However, sometimes an
employer will discourage it or, it is not practical. Endeavour means just trying to achieve
something. In any case, a breach of th . e code of ethics, section 77., is not a breach of the Act or
other regulations, Reg. 941 section 72.(2)(g).

1(b) C of A limitations, specifically for Temporary Licence (TL) holder(s) - the C of A expiry, is
on the "latest date of expiry of the last to expire" of the Tl's held by those named, Reg. 941 sect
49.(2).

1(c) Limited Licence (LL), 3 requirements - 1) 3 year technology diploma or 4 year science
degree 2) 13 years experience including the 3 years of academic training, with 1 year under a
. P.Eng. and the last 2 years within the practice of the LL 3) pass the PPE and 4) (1 extra) good
character, Reg. 941 section 46.

1(d) Engineering Intern (El) requirements 1 ) enrolled in El program of PEO 2) licence


-

application is still in process 3) academic requirements for a licence are met or are in process,
Reg. 941 section 32.1.

Engineering Student (ES) requirements - 1) enrolled in ES program of PEO 2) enrolled in a


CEAB accredited program, or accreditation is being sought for the program, Reg. 941 section
32.2.

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1(e) Disciplinary process - 1) complaint is received in writing 2) person complained against is
given an opportunity to explain 3) complaint is resolved by phone call(s) or letter(s) and the
matter is closed, and is not referred to Discipline Committee. OR 4) the matter is not resolved,
and it is referred to Discipline 5) person complained against is called to a hearing 6) penalty
may be set, PE Act sections 24., 28. & 30.

2(a) Provide consulting engineering services - Audio must - 1) be a P.Eng. and; 2) hold a C of
A, PE Act section 12.; 3)(a) hold liability insurance OR 3)(b) not hold insurance and notify the
client(s) of such, and receive from the client(s) written authority to provide services regardless,
Reg. 841 section 74.; 4) hold a valid designation of Consulting Engineer, Reg. 941 section 59.

2(b) Manner of performance -


- moonlighting - 1) Audio is obligated to be competent in the work undertaken, 72.(2)(h), 77.1.iv.
and 77.1.v. In addition, Audio must - 2) inform Peerless, the daytime employer, of the
moonlighting work; 3) inform the radio broadcasters of a) limitations to services and b)
employee status at Peerless; 4) be satisfied the extra work will not conflict with the daytime
work at Peerless; Reg. 941 section 77.5.
- conflict of interest - to be recommending Peerless equipment is a conflict of interest and, if this
is not disclosed, a violation of Reg. 941 sections 72.(2)(i) and section 77.4. The disciplinary
process could come into effect as in 1(e) above. If it is fully disclosed, and if all parties are
satisfied, then it is not a conflict.

3(a) Chemical clean-up, conduct of Alpha - keeping a secret for personal advantage was a
failure to disclose a conflict of interest, 72.(2)(i), and this failure to was also a violation of the
code of ethics to disclose a prejudicial interest, 77.4. The CEO of ChemCo was paying for an
'honest' report but Alpha appears to be disloyal in giving a 'distorted' report, in hopes of gaining
some business later, 77.1.i. This is not devotion to high ideals of honour and integrity, 77.1.iii.
If these misdemeanors should become widely known, it would not enhance public regard for the
profession, 77.2.ii. Alpha did not inform EngCo of the review, violating 77.7.ii. The CEO of
ChernCo may have given this as a directive but that is no excuse for lack of faith toward a
practitioner, 77.7.i. EngCo "was informed" once they had the report from ChemCo.
Furthermore, by being highly critical, Alpha was maliciously injuring the reputation of another,
77.7.iii. By failing to seal (stamp) a prepared letter or document, Alpha has violated Reg. 941
section 53., and at least indirectly, the code of conduct, 72.(2)(e). The above leaves Alpha open
to a charge before the proper tribunals, 77.8., and to a charge of unprofessional conduct,
72.(2) Q ).

If Alpha however, has given an unbiased report, it could be opinions founded on adequate
knowledge and honest conviction, 77.2.iii. By suggesting alternative options should be
considered, Alpha has been loyal to ChemCo, 77.1.i., and also, more testing of effluent, has
regarded public welfare as paramount, 77.2.i.

3(b) Conduct of EngCo - by politely responding, EngCo was acting toward another practitioner
with courtesy and good faith, 77.7.i. The Ministry of Environment had full knowledge of the
clean up plan, so EngCo was cooperating with other professionals, 77.6.

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If as Alpha alleges, and this is supported by Kappa, the EngCo design was deficient, then
EngCo was undertaking work they were not competent to perform, 72.(2)(h). Neither does
EngCo have the needed knowledge of developments, 77.1.iv., or the competence to perform
the services, 77.1.v. The design was failure to safeguard life, health and property, 72.(1)(b),
and was failure to show fidelity to public needs, 77.1.ii. EngCo is exposed to a charge of
unprofessional conduct, 72.(2)0).

3(c) Conduct of Kappa - since Kappa is a recognized expert, we can assume Kappa had a
knowledge of developments, 77.1.iv., and was acting with competence, 77.1.v. By contacting
all parties, Kappa was cooperating with other professionals 77.6., and acting with courtesy and
good faith, 77.7.i. Kappa pointed out the EngCo design would not adequately clean up effluent,
and thus has regarded public welfare as paramount, 77.2.i. By supporting Alpha, Kappa has
been loyal to an associate, 77.1.i.

4(a) Yes, I do have an obligation to turn over the drawings for which payment is available, to be
fair to the client, 77.1.i., and to avoid a conflict, 77.3. I do need to sign and seal the final design,
72.(2)(e). However, I should confirm io BoxCo, in writing, including a legal disclaimer, that I
have no responsibility whatsoever for how the drawings may be used, since my presentation of
consequences has been overruled, 72.(2)(f). I should also send a copy of the letter to Second
Engineering, as a courtesy and in good faith, 77.7.i.

4(b) If Delta has knowingly agreed to a compromised design, this is not being fair to the client,
77.1.i., and is not conforming to all codes and rules, 72.(2)(d). It would be failing to safeguard
life, health and property, 72.(2)(b). If the walkway should fail, then this result is a failure to show
fidelity to public needs,

77.1.ii., and to regard the public welfare as paramount, 77.2.i. Delta is reviewing my work but
my contract is terminated so this is not a factor, 77.7.ii.

4(c) I do have other responsibilities because Delta has agreed to complete the design following
the wishes of Theta, who is a non-technical authority. I must report a danger to public safety,
72.(2)(c). I must report the design is compromised and expose this unprofessional conduct by
Delta before the proper tribunals, 77.8., and see that Delta is charged with professional
misconduct, 72.(2)0).

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ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION - December 12, 2009

PART "B" - Engineering Law and Professional Liability

This eicamination comes in two parts (Part "A" and Part "B"). Both parts must be completed
in this sitting. You will be given a total of 180 minutes to complete the examination.

Use the correct colour-coded Answer Book for each part, place in the correct envelope and seal
after completed.

White Answer Book for Part A white question paper.


Coloured Answer Book for Part B coloured question paper.

This is a "CLOSED BOOK" examination. No aids are permitted other than the excerpts from
the 1990 Ontario Regulation 941 covering sections 72 (Professional Misconduct) and 77 (Code
of Ethics) supplied at the examination. Dictionaries are not permitted.

The marking of questions will be based not only on academic content, but also on legibility and
the ability to express yourself clearly and correctly in the English language. If you have any
doubt about the meaning of a question, please state clearly how you have interpreted the
question.

All four questions constitute a complete paper for Part "B". Each of the four questions is worth
25 marks.

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ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION .c. December 12, 2009

PART "B" - Engineering Law and Professional Liability

You will be given a total of 90 minutes to complete this examination.

Use the correct colour-coded Answer Book for each part, place in the correct envelope and seal after
completed.

White Answer Book for Part A white question paper.

Coloured Answer Book for Part B coloured question paper.

This is a"CLOSED BOOK" examination. No aids are permitted other than the excerpts from the 1990
Ontario Regulation 941 covering sections 72 (Professional Misconduct) and 77 (Code of Ethics) supplied at
the examination. Dictionaries are not permitted.

The marking of questions will be based not only on academic content, but also on legibility and the ability
to express yourself clearly and correctly in the English language. If you have any doubt about the meaning
of a question, please state clearly how you have interpreted the question.

All four questions constitute a complete p·aper for Part "A". Each of the four questions is worth 25 marks.

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I. B riefly define, explain or answer any five of the following:

(i) Why arbitration is often selected as the basis for dispute resolution on
contracts for equipment or services being supplied to other countries (i.e.
"international contracts").
(ii) Five examples of employment rights to which individuals are entitled under Ontario's
Human Rights Code (list only).
(iii) The rule of contra proferentem.
(iv) The essential criteria for tort liability to arise.
(v) Bid shopping.
(vi) On the basis of what criteria should engineers be selected for appointment to a
dispute resolution board? (list three).
(vii) Duress.
(v;.ii) The discoverability concept as it relates to limitation periods.

2. A telecommunications development company leased an outdated and unused underground pipe


system from an Ontario municipality. The developer's purpose .in leasing the pipe was to utilize it as an
existing conduit system in which to install a fibre optic cable system to be designed, constructed and
operated in the municipality by the telecommunications developer during the term of the lease. All
necessary approvals from regulatory authorities were obtained with respect to the proposed
telecommunications network.

The telecommunications development company then entered into an installation contract with a
contractor. For the contract price of $4;000,000, the contractor undertook to complete the installation of
the cable by a specified completion date. The contract specified that time was of the essence and that the
contract was to be completed by the specified completion date, failing which the contractor would be
responsible for liquidated damages in the amount of $50,000 per day for each day that elapsed between the
specified completion date and the subsequent actual completion date. The contract also contained a
provision limiting the contractor's maximum liability for liquidated damages and for any other claim for
damages under the contract to the maximum amount of $1,000,000.

Due to its failure to properly staff and organize its workforce, the contractor failed to meet the
specified completion date. In addition, during the installation, the contractor's inexperienced workers
damaged significant amounts of the fibre optic cable, with the result that the telecommunications
development company, on subsequently discovering the damage, incurred substantial additional expense in
engaging another contractor to replace the damaged cable. Ultimately, the cost of supplying and installing
the replacement cable plus the amount of liquidated damages for which the original contractor was
responsible because of its failure to meet the specified completion date, totalled $1,800,000.

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Explain and discuss what claim the telecommunications development company could make against the
contractor in the circumstances. In answering, explain the approach taken by Canadian courts with respect
to contracts that limit liability and include a brief summary of the development of relevant case precedents.

3. (a) (15 marks) An information technology hardware supplier ("BIDCO") submitted a fixed price
bid on a major computer installation project for a large engineering firm, in response to the engineering
firm's request for proposals. BIDCO included with its tender, as required, a certified cheque for $100,000
payable to the engineering firm as a tender deposit.

The request for proposal also provided that if the tender was accepted by the engineering firm and
the successful bidder did not execute the contract enclosed with the request for proposal the engineering
firm would be entitled to retain the tender deposit for its own use and to accept any other tender.

BIDCO made a clerical error in compiling its tender submission, omitting an amount of $1,000,000
from its tender price of $6,000,000. BIDCO drew the clerical error to the attention of the engineering firm
within 5 minutes after the official time for submitting bids had expired. BIDCO indicated that it wished to
withdraw its tender but the engineering firm refused to allow it to do so and awarded the supply contract to
BIDCO.

Was BIDCO entitled to withdraw its bid? Was the engineering firm entitled to keep the tender
deposit? Please provide your reasons and analysis, explaining the relationships and indicate a likely
outcome.

(b) (10 marks) An engineer engaged as an environmental consultant ("ENGCO") entered into a contract
with an owner ("OWNERCO") of a piece of land to conduct an environmental compliance audit.
OWNERCO was considering selling the land.

ENGCO included in its environmental report the following provision:

"This report was prepared by ENGCO for the account of OWNERCO. The material in it
reflects ENGCO's best judgment in light of the information available to it at the time of
preparation. Any use which a third party makes of this report, or any reliance on decisions
to' be made based on it, are the responsibility of such third parties. ENGCO accepts no
responsibility for damages, if any, suffered by any third party as a result of decisions made
or actions based on this report."

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If ENGCO's report contained negligent misstatements, could a third party who had
subsequently purchased the land from OWNERCO succeed in a tort claim against ENGCO?
Explain.

4. A newly formed energy company ("NEWCO") decided to investigate the possibility of developing a
liquefaction process to convert coal deposits into oil.

NEWCO entered into a contract with a large engineering firm pursuant to which the engineering
firm was to carry out a feasibility study to determine, over a period of eight months and by a specified date,
the feasibility of the proposed liquefaction process. The contract between NEWCO and the engineering
firm expressly provided that should the feasibility study be completed by the "deadline" date specified and
should the results of the study indicate that the liquefaction process proposed by the engineering firm
would meet the specified quality and volumes of liquefied oil output, then the engineering firm would be
authorized to carry out further work to develop the liquefaction process to operate on a commercial basis,
all on terms and conditions clearly set out in the contract between NEW CO and the engineering firm.

The engineering firm undertook the feasibility study and, although the results of the feasibility study
appeared promising and in compliance with the parameters specified in the contract with NEWCO, the
engineering firm found that it would be unable to complete the feasibility study by the date specified. The
president of the engineering firm explained to the president of NEWCO that the engineering firm would not
be able to fulfil all aspects of the feasibility study as required by the specified date. The president of the
engineering firm emphasized that whereas the engineering firm would likely be two weeks late in
completing its feasibility study obligations, the results of the feasibility study indicated that the
liquefaction process would very likely meet NEWCO's requirements for commercial production as
specified.

The president of NEWCO indicated to the president of the engineering firm, verbally, that the time
for completion of the feasibility study would be extended.

The engineering firm completed the feasibility within two weeks after the date specified in the
contract.

Subsequently, NEWCO took the position that the engineering firm had not completed the feasibility study
in time and, accordingly, that NEW CO was not obligated under the wording of the contract to authorize the
engineering firm to carry out further work to develop the liquefaction process on a commercial basis.
Instead, NEWCO issued a request for proposals from several firms for the development of the liquefaction
process

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to operate on a commercial basis. NEWCO selected another firm that was prepared to undertake the
development of the process for a fee substantially lower than the fee that was to have been paid to the
original engineering firm had it completed the feasibility study by the date specified in the contract.

Was NEWCO entitled to deny the engineering firm's right to develop the liquefaction process to operate on a
commercial basis? Identify the contract law principles that apply, and explain the basis of such principles and how
they may flpply to the positions taken by NEWCO and by the engineering firm.

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Professional Practice Examination·
Study Guide
Part "B" - December 12, 2009

The object of Part "B" is to examine an elementary understanding of law, as this may apply in an
engineer's work experience.
Question 1. is definitions - only 5 answers are needed from 8 options.
Questions 2., 3. and 4. are case studies. The value of case study answers is not in their totality, but within
each and. every answer. Each answer should include the names of the essential legal terms and
principles, and how each term or principle applies to one or more elements of the case.

Page references below, Marston 4th edition, are for study purposes and not needed in answers.

In the case of any perceived ambiguity, the text should be taken as authoritative.

1. (i) Arbitration selection, international contracts - this selection is made to avoid the uncertainties and
risks of exposure to courts of a foreign jurisdiction. The New York Convention, signed by over 135
countries in 1958, agreed arbitration decisions will be enforced by signatory nations. It should be
determined before signing a contract, that the parties are from among these nations, page 29.

1. (ii) Employment rights - equal treatment regardless of (list only 5 of the14 given here) race, ancestry,
place of origin, colour, ethnic origin, citizenship, creed I religion, sex, sexual orientation, age, marital
status, family status, record of offences, or handicap, text page 322.

1.(iii) Contra proferentem, rule of - where a contract provision is ambiguous, preference in settlement will
be against the party which drafted that particular provision. Who drafted what should be recorded
beforehand, text page 136.

1.(iv) Tort liability criteria - 1) the defendant owed the plaintiff a duty of care 2) the defendant breached
that duty 3) there was resulting damage, injury or loss to the plaintiff,
· text pages 38 and 39.

1.(v) Bid shopping - after tenders have closed, an owner attempts to negotiate a lower price from one or
more bidders. This is unethical and violates the "Contract A" tendering process, page 131.

1.(vi) Selection criteria for a dispute resolution board (ORB) - 1) individuals should have expertise in the
constructjon or applicable industry 2) must be neutral with no personal or monetary interest in the contract
3) must be honest and have a reputation for the utmost integrity, text page 31.

1. (vii) Duress - threatened or actual confinement or violence, used to persuade a party to sign a contract.
The contract is voidable and may be repudiated by the oppressed party, text page 110.

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1.(viii) Discoverability concept, as it relates to limitation periods - when damage or loss as a cause for
legal action is discovered, or ought reasonably to have been discovered, this point in time begins a
limitation period within which an action for damages must be filed, text beginning on page 71.

2. Fundamental breach, claims enforceability - this case is one of fundamental breach going the root of a
contract and, historically, a clause to limit liability is not normally enforceable. However, if the intent of the
parties as expressed or constructed in the clause is clear and true, and the liquidated damage provisions
are supported in detail by a genuine pre-estimate of the costs of a possible breach, then the legal principle
of "true construction approach" is said to have taken place and the clause is enforceable. This means
therefore, that the law has changed in this area.

The telecommunications development company (TDC) could make a claim of $1,800,000 against the
original installation contractor (OIC) to recover the excess costs, and the failure to meet the specified
completion date. However, some Canadian courts have allowed the enforceability of liability clauses, as
noted above. If so, the recovery would be $1,000,000. TDC would sustain a loss of $800,000.

Relevant case precedents are Harbutt's Plasticene vs. Wayne Tank and Pump where the clause was not
enforceable and Hunter Engineering vs. Syncrude where it was, text pages 155 and 159.

3.(a) Contract A and tender deposits - BIDCO was not entitled to withdraw. On submitting a bid, a
"Contact A" was formed, as was the case for each of the other bidders. From the terms established,
BIDCO could not withdraw. The Contract A concept resulted from the Ron Engineering case. The large
engineering firm (LEF) was entitled to keep the deposit, as provided in the request for proposal (RFP)
even though a clerical mistake was made. However, a just and reasonable person would not insist on
profiting from the mistake of another. A likely outcome is BIDCO would not respond to future tenders put
out by LEF and would "spread the word" about LEF. See text starting at page 121.

3.(b) Disclaimer of liability - no, a third party purchaser (TPP) would not succeed in a tort claim against
ENGCO. There was no contract between ENGCO and TPP so it would be a tort claim. The TPP might
make a claim, that the contract of sale was misrepresented by OWNERCO.

ENGCO had duty of care to ensure the report did not contain negligent misstatements. However the
report contained a disclaimer of responsibility, for any loss sustained by a "third party". Therefore, any
responsibility by ENGCO is limited to the "second party" who paid for the report. The ordinary duty, of care
has been disclaimed and there is no basis for a third party to proceed with a tort case.

Similar case precedents are Hedley Byrne, text page 42 and Wolverine Tube, text page 43.

4. Gratuitous promise and equitable estoppel - no, NEWCO was not entitled to deny the large engineering
firm (LEF) the right to develop the process to a commercial basis. A "gratuitous promise" was made by
NEWCO to LEF, that the deadline date for the feasibility study completion would be extended. This
promise was verbal, not in writing and was made without consideration. However, LEF was relying on the
promise.
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LEF would probably have invested considerable effort in the project, planning to continue with further work
for a commercial basis, to recover their investment. If desired, NEWCO could negotiate a financial
agreement to fully compensate LEF for its work.

If NEWCO insists on their strict contractual rights, then LEF could invoke an exceptional remedy, the
principle of "equitable estoppel". This would continue the contract, because otherwise the result would be
inequitable. However, co-operation from NEWCO might be something less than desirable.

A similar case precedent is Conwest Exploration vs. Letain, text page 92.

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