COMMERCE 393/BUSI 393 FINAL EXAMINATION
Giovanni and Leporello decided to go into business together under the name of “Great Adventures Unlimited” (GAU). They wanted to provide guided adventure vacations for rich clients. Leporello was very experienced in providing such adventures, and Giovanni was looking for investment opportunities. Giovanni contributed $50,000 to the start up costs and Leporello contributed $25,000. They set up a bank account in the name of Great Adventures Unlimited but did not discuss how profits and losses would be split. They did agree that neither would incur expenditures on behalf of the business in excess of $500 without the approval of the other.
Leporello saw an excellent opportunity to provide a new adventure to clients, and while Giovanni was away on a holiday, Leporello entered into a contract on behalf of GAU with Elvira Sails Ltd. (a corporation engaged in selling and leasing boats) to rent a large cabin cruiser for a period of 3 months at a cost of $10,000 per month. On October 1 Leporello signed the agreement for GAU and paid a deposit of $10,000 with a cheque dated November 1 drawn on the business account.
On October 5, Leporello took delivery of the cruiser and has not been seen since. The cruiser was reportedly last seen in the Virgin Islands.
On October 5 Elvira, who was the only shareholder and director of Elvira Sails Ltd. , endorsed the $10,000 cheque over to Friendly Finance by signing her own name to the back of the cheque. Sails Ltd. Friendly Finance gave her $9500 in return. When Giovanni discovered that the cruiser was taken to the Virgin Islands he put a stop payment on the cheque.
a) 10 MARKS 15 MINUTES
What rights, if any, does Elvira Sails Ltd. have against Giovanni personally?? Explain fully.
b) 10 MARKS 15 MINUTES
Suppose that Leporello returns the cruiser to Elvira Sails Ltd. Giovanni soon learns that while Leporello was in the Virgin Islands he had taken several clients on guided tours. Giovanni learns that Leporello made a profit of $15,000 on these tours. Does Giovanni have any claim to the profit made? If so, how much? Explain.
c) 10 MARKS 15 MINUTES
What rights does Friendly Finance have against GAU?
d) 10 MARKS 15 MINUTES
Assume that GAU and Elvira Sails Ltd. are both out of business and have no money. Would Friendly Finance have any recourse against Elvira, the sole director and shareholder of Elvira Sails Ltd.?
QUESTION #2 20 MARKS 30 MINUTES
Dave is vice-president and senior sales manager with Perfect Products Inc. He represents the corporation in selling heavy machinery to construction companies. His agreement with Perfect Productsproducts says that before concluding contract with customers he must get approval of Perfect’s CFO. He has been instructed to use the order forms provided by Perfect Productsperfect on which it is stated in bold print on the signature page that the contract will not bind Perfect Products until the CFO’s signature is placed on the order.
Dave was is angry with the CFO whom he feels wasis too conservative and so he abandons Perfect’s forms and substitutes his own. On the forms he now uses on behalf of Perfect there is nonot statement that orders must be approved by the CFO before binding Perfect.
Dave had recently entered into a contract with Charlie’s Construction (CC), a new customer, to sell $300,000 worth of specialized heavy machinery to CC.. Dave signed the contract on behalf of Perfect. Dave promised that the equipment would be provided November 1.
When Dave gave the order to Perfect’s CFO, the CFO refused to approve it. As a result the equipment was not delivered to CC, and Perfect says it will not perform the contract. CC is suing Perfect and claims as damages:
$20,000 because it cost $320,000 to obtain the machinery from another supplier.
$60,000 in lost as revenue for jobs it could not complete because it...
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