Question $4(2$ points$)$

Three years after starting Fearless, Carol and Sidney decide to ask Michael to join the business. Michael shares Carol and Sidney's love of the outdoors. They are also attracted by the $$50,000$ he has agreed to invest in the company. After receiving legal advice, they decide to register the business as Fearless White Water Rafting Incorporated.

The shareholders and board of directors are as follows:

$$ Carol, $40\%$ of the common shares, Chair of the Board and CEO

$$ Sidney, $40\%$ of the common shares, Director

$$ Michael, $20\%$ of the common shares, Director

The business decides to upgrade the sports equipment, rafts and office equipment required to operate the business.

$4.$ As part of its plan to upgrade its rafts, Fearless enters into a contract with Canada Rafts Inc. to supply four new ultra$-$light river rafts. It will take Canada Rafts Inc. a month to fully build the rafts. Before the rafts are built, the supplies needed for the construction are no longer available due to an international dispute. The contract between Fearless and Canada Rafts Inc. is $(2$ marks$)$:

$($a$)$ Discharged by agreement as every commercial contract has an implied term that the contract will come to an end if there is a negative regulatory change;

$($b$)$ Discharged by the doctrine of frustration as an event outside either party's control has made the contract impossible to complete

$($c$)$ Fully enforceable and Fearless should sue for damages

$($d$)$ None of the above

Question $4$ options:

Question $5(6$ points$)$

Now that the business is a success, Sidney decides it is time to take a well$-$deserved vacation. He decides to spend two weeks in Mexico. While in Mexico he decides to tour the countryside and rents a car from Avis Car Rental, an American company with a local office in Mexico. While driving the rental car, Sidney is in a collision with a car operated by another tourist, Steve who lives in New York City.

$5.$ If Steve wishes to bring an action against Sidney what court would have jurisdiction over the claim and what laws would it apply? $($Six Marks$)$

Question $5$ options:

Question $6(12$ points$)$

Carol, Sidney and Michael were wise to start the white$-$water business as it has been successful beyond their wildest dreams. In fact, they have written a five$-$year business plan which included plans to open a second location in the Ottawa area. The area seems ideal for expansion as it not only has a population to support the business but also is close to the Ottawa River which has a series of rapids perfect for white$-$water sports. In fact, as part of their expansion plans, they have located three possible sites for a new location. They contacted the owners of the locations but none of them were willing to sell. Carol, Sidney and Michael decide to bide their time and wait for the owners to change their minds.

One day Carol and Sidney were visiting their friend Abby. Abby casually mentioned that her Uncle Amos had decided to move to Mexico and intends to sell his property located along the Ottawa River. The two immediately realized this was one of the properties they had earmarked for a possible second location and that Amos was one of the owners who had refused to sell.

Without a moment's hesitation, Carol and Sidney contact Amos who agreed to sell the property for $$320,000.$ The $$320,000$ price was well under the fair market value but Amos was willing to take a lower offer as Carol and Sidney are friends of his niece.

Carol and Sidney took title to the property in their own names $($not in the name of Fearless$)$ and immediately offered it for sale to Fearless for $$760,000,$ the fair market value for the property. Acting as the majority of the directors they accepted their offer and were paid the $$760,000$ by Fearless.

Michael is furious and feels he has been mistreated by Carol and Sidney. He approaches them about what he considers their "secret profit.$\text{'}$ When he raised it with Sidney, he was told that, $"$if he doesn't like it$,$ he'd better learn to lump it because so long as Carol and I own the majority shares you're stuck."

Michael smiling at them responded "We'll see about that"

$6.$ Carol and Sidney are interested in Michael's response. Advise them of anything you feel they, as Directors may have done incorrectly and also what rights Michael may have. $(12$ marks$)$