Professional Practice Examination ‘Study Notes - Part "B” - April 24, 2007 1.() Secret commission - a payment or promise to influence the actions of a party to a contract, to secretly defraud the interests of the other parly. This is a violation of the Criminal Code of Canada, section 426. See text page 169. 1.(i) Partnering on construction contracts - a concept of clarifying common goals and developing cooperative attitudes, to assist in resolving project disputes at as early a stage as possible. See text page 230. 1.(ii) Employment rights - equal treatment regardless of (list 5 of 14) race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, family status or disability. Text 312. 41.(iv) Rule of contra proferentem - where a contract provision is ambiguous, preference in ‘settlement will be against the party who drafted the particular provision. Who drafted what, should be recorded beforehand. See text page 128. 4.(V) Contract A - is formed by submitting a tender, and it must remain submitted, otherwise the process is unreliable. The number of Contract A's equals the tenders. Contract B is formed when a contract is awarded. See text page 121. 1.(vi) Statutory holdback - a percentage of a contract price, held back from a contractor(s) for a time after substantial performance, to cover any liens that may be claimed against a project, e.g, 10% for 45 days. See text pages 243 - 254. 4.(vil) Gratuitous promise - made verbally by one party to the other party, without money or other consideration in return. Because it is not in writing it is not normally enforceable. However if the other party is clearly depending on the promise, the principle of "equitable estoppel” may be invoked to prevent an unfair result. See text pages 87 - 93. 1.(vill) Director's conflict of interest - any personal interest in any contract to which the corporation is a party. The director must abstain from voting on any such contract, and should be absent during discussion. See text page 23. 2. NEWCO was not entitled to deny the engineering firm's right to develop the liquefaction process on a commercial basis. A gratuitous promise was made by NEWCO, verbally and without consideration, to extend the time for completion of the feasibility study. ‘The engineering firm was clearly depending on this promise and continued to work on the study as otherwise agreed. If NEWCO persists in following strict contractual wording, the principle of equitable estoppel could be invoked, because otherwise the result would be inequitable, A relevant case precedent is Conwest Exploration vs. Letain 3. The relevant principles of tort law are 1) a duty of care 2) a breach of that duty and 3) damage or injury as a result of the breach. The action is in tort because National Stores Inc.(NS1) did not have a contract with the engineering firm (EF). Unless settled out of court, NSI could bring an action in contract against the architectural contractor (AC), or in tort, depending on clause coverage. PpeStéyNtsBO7An21Professional Practice Examination ‘Study Notes - Part "B" - April 24, 2007 ‘The EF had a duty of care to 1) provide a sprinkler design meeting NFPA standards. This duty ‘was breached since 2) the investigator's report (expert evidence) tied the fire damage directly to inadequate sprinklers. There was 3) damage as a result of the breach. The P.Eng, who reviewed the design is responsible. The liabilties in tort aw arising, and the likely outcome is, AC and EF must pay for the losses, using their insurance or other assets. They would be concurrent tortfeasors, probably 20% to AC and 80% to EF. EF would be vicariously liable for the actions of its engineer employees. A relevant case precedent is Unit Farm Concrete vs. Eckerlea Acres. 4, The legal principle here is fundamental breach going to the root of the contract, and a clause to limit liability is not normally enforceable, based on a history of these cases in Canada and England. It may be enforceable if the cause for action is unknown or there is ambiguity, neither of which is the case here. ‘ACE Construction Inc. (ACE) would make a claim against Rock Busters Ltd. (RBL) for the net additional cost. ACE had paid $350,000 to RBL and $500,000 to the cone crusher supplier (CCS) a total of $850,000. There would also be the costs of delays and lost production. ACE had expected to pay $400,000 for a working system, so the balance claim against RBI. would be at least $450,000. Some Canadian courts have allowed the enforceability of ability clauses, if the intent of the parties as expressed or constructed in the liability clause is clear and true. The ‘true construction approach’ is said to have taken place and the clause is enforceable. Therefore the law has changed in this area. RBL would then be liable for only $400,000 and ACE would sustain a loss of $450,000. No doubt this would compromise their economic plan to expand their business. Similar 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. peStdyNtsBOTADI21