8. Practical Case Question (9 marks)

Three students, Tom, Dock and Harry, needed a way to earn some money while going through university. They were all knowledgeable about computers and had some contacts in the industry and decided to get together to put on a computer show at the university to display new equipment and programs.

They rented a hall and made arrangements with local merchants to display their equipment and agreed to give them a commission on any sales that were generated from the show. The first attempt was quite successful, and they were optimistic about the prospects. They entered into an agreement with each other that stated if they put on any other activities such as this they would share the profits equally and that any liabilities or debts that were incurred would also be shared equally between the parties. They put on one other computer show three months later, which was also a success.

Then Tom, through his contacts in his home town, discovered that a major manufacturer of computer hardware, IPM, wanted to sponsor an international computer fair in the area. Tom jumped at the opportunity and in his name and on his own behalf entered into a contract with IPM to promote the activity in the city and at the university. He made arrangements to get auditorium and convention space in the city reserved for the fair. As part of the deal, Tom had to guarantee a gate receipt of at least $100,000, but also acquired all of the souvenirs and program rights for the fair. This he sold to a local promoter for a set fee of $10,000, which was paid well in advance of the fair. Tom never talked to his other two friends Dock and Harry, and never got their consent for the activity. In fact, he tried to keep it a secret from them.

As the designated date for the fair arrived, a tremendous problem developed. It turned out that the city's national hockey team, for the first time in their history, managed to place in the Stanley Cup playoffs. There were seven games in all and the schedule for the last three games corresponded to the same nights as the computer fair. In fact, the series was very close and it had to go to the last game to be decided. Only 100 people in total showed up for the computer fair. At $10 per ticket this was terribly disappointing for Tom and, to make matters worse, on the day when most of the people showed up at the fair, a motorcycle gang who had a small grudge to settle against Tom, crashed in, beat up several of the patrons, damaged thousands of dollars of equipment and caused considerable damage to the facilities as well.

The university had insisted that Tom arrange for adequate security just in case such an evert were to take place. Tom had ignored this requirement. Tom and Dock were just poor students and had very little money, but Harry had been very successful developing computer games before he came to the university and had considerable assets including a large house and several valuable cars.

THIS QUESTION WILL NOT REQUIRE YOU TO COMPLETE THE CASE TEMPLATE. ONLY ANSWER THE QUESTIONS WITH ENOUGH DETAILS!

a. Had a partnership been created? Substantiate your response. (3 marks)

b. Were Harry and Dock responsible for any of Toms doings? Substantiate your answer. (3 marks)

c. Who is liable for losses and damages? Substantiate your answer. (2 marks)

d. Would your answer to question c be any different if the 3 students together arranged and put on the fair, but Harry had registered as a limited partner, investing $10,000 in the enterprise? (1 mark)