Sample Case Analysis Questions #3 & Key
Question #2, Total Marks: 28
Palina and A.J. had a great idea to work together to renovate an abandoned gas station and turn the building into a restaurant – they could pool their expertise and money and make a sizeable return on their investment. The vendor, Timothy, indicated that the property would work very well for a restaurant. Palina had just read an article in the paper dealing with environmental hazards and was concerned about any such potential contamination from the underground gas tanks used by the previous property owner. When the men raised this matter with Timothy, he indicated that there was no problem at all and that the storage tanks had been removed under close scrutiny of the city. Palina clearly remembered the conversation as Timothy was extremely animated in the conversation and emphatically guaranteed that there was no environmental contamination.
Acting on emotion, the friends used all of their savings (and a substantial amount of the bank’s money) and purchased the property.
When Palina and A.J. applied for a development permit, they were told that they needed an environmental assessment proving that there was no pollution on the property. They hired an environmental audit company who advised them that the ground under where the gas storage tanks were located was polluted and that the contamination was spreading to the neighbouring property. Palina and A.J. were told that the cleanup costs would be almost double that which they had paid for the property.
a. Identify and discuss the nature of the relationship between Palina and A.J. and the rights and obligations that they have and owe to each other as a result of their relationship. Include any applicable legislation in your response, tie the law to the facts and draw a conclusion. (10 Marks)
Shortly after they purchased the property their neighbour, Mackenzie, contacted them and asked when they would be cleaning her property. She pulled out a written agreement executed by Timothy that stated that the new owner(s) would be responsible for all clean up costs associated with removing the contaminated soil from the property. Mackenzie said that if they did not start to clean the property immediately, she would see them in court.
b. Discuss whether Palina and A.J. are compelled to clean up the property based on the contract produced by Mackenzie. Include any applicable legislation in your response, tie the law to the facts and draw a conclusion. (5 Marks) MGMT 3230 Sample Case Study Questions April 12, 2021
c. Discuss whether Palina and A.J. may be compelled to clean up the property based on a source of
other than the contract. Include any applicable legislation in your response, tie the law to
the facts and draw a conclusion. (7 Marks)
d. Discuss what Palina and A.J. could have done to limit their potential liability in the venture, both with regard to how they chose to set up their business and due diligence that they could have conducted before deciding to purchase Timothy’s property. Include any applicable legislation in your response, tie the law to the facts and draw a conclusion. (6 Marks)