Crook was employed as the scrap manager for Canada Labs Inc (Canlab). In that capacity, Crook regularly sold waste gold generated by the experimental work conducted by Canlab to Golden Corona Mines Inc for recycling.

Corona also sold gold, although Canlab had never been one of its customers. Crook devised a scheme to make himself wealthy. One day, he sent a purchase order on a Canlab order form to Corona for $1 000 000 in gold. Because Corona had not sold gold to Canlab in the past, it called Smith, the manager of purchasing for Canlab, to ask if the gold order from Crook was authorized. Smith, who was responsible for all purchases made by Canlab, said she would check into it. She called Crook, and he convinced her that the gold was needed for a particular set of experiments. Smith was too busy to inquire further and forgot to call Corona back. Corona called Smith several more times, but Smith did not call back. In frustration, after five days, Corona called Crook who, of course, confirmed that Corona should send the gold.

Corona did send the gold to Canlab. It was received by Crook, who then skipped the country with it. Corona sued Canlab for payment for the gold. On what basis could Canlab be liable to pay for the gold? Are any defences available to Canlab?