ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION December 11, 2010

PART A Professional Practice and Ethics

You will be given a total of 90 minutes to complete this examination.

Use the correct colour-coded Answer Book for each part, place in the correct envelope and seal
after completed.
White Answer Book for Part A white question paper.
Coloured Answer Book for Part B coloured question paper.
This is a CLOSED BOOK examination. No aids are permitted other than the excerpts from
the 1990 Ontario Regulation 941 covering sections 72 (Professional Misconduct) and 77 (Code
of Ethics) supplied at the examination. Dictionaries are not permitted.
The marking of questions will be based not only on academic content, but also on legibility and
the ability to express yourself clearly and correctly in the English language. If you have any
doubt about the meaning of a question, please state clearly how you have interpreted the
question.
All four questions constitute a complete paper for Part A. Each of the four questions is worth
25 marks.
WHERE A QUESTION ASKS IF A CERTAIN ACTION BY AN ENGINEER WAS
ETHICAL OR NOT, A SIMPLE YES OR NO ANSWER IS NOT SUFFICIENT.
YOU ARE EXPECTED TO COMMENT ON AND DISCUSS THE ACTION OF THE
DIFFERENT INDIVIDUALS AND/OR ORGANIZATIONS INVOLVED IN EACH
SITUATION.
You should identify where applicable the appropriate clauses in Regulation 941. SIMPLE
REFERENCE TO THE APPROPRIATE CLAUSES WITHOUT A DISCUSSION OF
HOW THE CLAUSE APPLIES IN THE SITUATION DESCRIBED IS NOT
SUFFICIENT.

Part A - December 11, 2010 Exam

(5)

Question 1
(a) Describe the roles performed by PEOs Complaints Committee and
Discipline Committee.

(5)

(b)

List 5 requirements for a P.Eng. licence in Ontario.

(5)

(c)

The practice of stamping an original drawing exposes a P. Eng. to liability.

Why is it not a good practice to release drawings which bear only a
photocopy of the practitioners stamp and signature?

(5)

(d)

PEO issues Certificates of Authorization. Who or what is eligible to receive

one? Why is it necessary to obtain one?

(5)

(e)

PEO is mandated to regulate the practice of professional engineering, govern

its members, other licencees and holders of Certificate of Authorization in
order that the public interest be served and protected. How is regulation
conducted by PEO?

Question 2
You are a professional engineer who is employed full-time by a company that
manufactures sophisticated electronic products primarily for use in the automobile
industry. Recently, you were contacted by one of your former classmates from
engineering school who owns and operates a small company that markets golf practice
aids and instructional products. Your friend tells you that the company occasionally
needs a professional engineer but isnt yet busy enough to hire one on a full-time basis
and asks whether you would be interested in working for them occasionally as a parttime employee in your spare time. You think this opportunity sounds interesting and
wouldnt mind making some additional income.
You accept your friends offer. One day, your friend tells you about a new device the
company has been trying to perfect or develop aimed at helping golfers improve the
speed, rhythm and consistency of their golf swings. Immediately, it occurs to you that
some advanced motion sensor technology developed by your full-time employer for its
line of automobile sensors (which your full-time employer intends to patent) could also
be utilized for the golf device.
(10)

(a)

Assuming you have all required licences and authorizations, is it appropriate for
you to work for your friends company in addition to your full-time job? In
your answer, describe the issues you need to consider in evaluating this
opportunity as well as the specific steps you need to take before accepting it.

(10)

(b)

(5)

(c)

Should you make use of this technology from your full time employment in
your work on the golf device? Explain the reasoning behind your answer.
Explain how Section 72(2) (g) of Regulation 941 could apply to your answer in
Question 2(b) above. Are there any other parts of such Section 72(2) that could
apply to your answer?

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Part A - December 11, 2010 Exam

Question 3
Zeta P.Eng., a recently licensed geological engineer, was hired by Moose Engineering
(Moose) to act as assistant project manager on the construction of a new railway in
northern Ontario serving a new mine. She reported to Primus, a very experienced
P. Eng, who was the project manager. The railway was being constructed by Digger
Inc. (Digger) whose work was being directed by Sigma P. Eng. Zeta was thrilled to
have been hired for such an important position and to be working under such an
experienced project manager.
The design had been done by Moose who had also been hired to verify the construction
on behalf of the mine. Part of Zetas work involved checking the progress payments
submitted by Digger, verifying them as being within the contract and submitting them
to Primus for approval. Primuss signature on the payment approval certifies that the
costs were in the original agreement and that the interests of the mine were being
served.
After a few weeks, Zeta began to experience doubts about the project. The design for
the railway, called for cutting deep channels---some of them more than 100 metres---through the rugged terrain with cliffs rising sharply on both sides of the railway. Zeta
was concerned that with the instability of the rock, it did not appear as if enough
geological borings had been taken to identify potential slide areas.
She was reluctant to talk to Primus about her concerns since she knew he had been
involved in the design. Primus also seemed unhappy with having a female engineer
working for him and made frequent negative comments and jokes about female
engineers. She finally felt strongly enough about her concerns to report them to Primus
who told her not to worry her pretty little head over this since the work had been done
by him according to normal engineering procedures. Zeta was still concerned but
wondered if it was more from Primuss attitude towards her than from a valid concern
over the engineering. Her fears were confirmed when several slides occurred narrowly
missing some workers. Fortunately, no one was hurt.
Digger submitted a progress payment for approval that included additional substantial
costs for slide removals. Zeta viewed the request of adding the slide removal costs as
not justified by anything in the contract. At first Zetas position was supported by
Primus; however, with mounting pressure from Sigma, Primus ordered Zeta sign off on
the costs and submit it to him for approval. He told her that although the costs were
not really in the original contact there was enough money in the budget to cover these
costs. Zeta refused to do so, insisting that it would be a violation of the mines
interests which Moose was charged to protect. Primus fired Zeta for not following his
specific instructions and signed the progress payment himself.
(20)
(5)

Discuss in terms of Professional Engineers Ontario's Code of Ethics and Professional

Misconduct.
The actions of: Zeta (10 marks), Primus (7 marks) and Sigma (3 marks).
Is there a recommended recourse that Zeta might pursue in view of the dismissal?

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Part A - December 11, 2010 Exam

Question 4

Chi is a recently licensed professional engineer employed by a medium-sized software

development company, Softdisk. Chi, P.Eng. has worked for Softdisk since graduating
from university and she has been promoted to the position of software engineer as a
result of being licensed. With this promotion has come increased salary and an
increased responsibility and workload. At home, Chi is a new parent and is looking to
purchase a new house.
Chi is working furiously to meet a deadline for the design of an electrical process
computer modelling program. Chi is afraid that she will not meet the deadline and
does not want to admit defeat by informing her boss. Chis spouse, also a professional
engineer, has access to design software developed by his company, HardDisk Inc. The
software has been used effectively for similar design. Chis spouse reasons that
HardDisk Inc would not mind since they had upgraded to a more current version. With
the help of this software Chi expects to be able to meet the deadline.
(15)

(a) What ethical issues should Chi resolve before using the software? Discuss

(10)

(b) Does Chis spouse have any ethical obligations to fulfill? Discuss

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Study Guide - Part A

December 11, 2010 Exam Reprint
The objects of Part A are to test a knowledge of PEO functions (Question 1) and of the
Misconduct and Ethics Codes (Questions 2, 3 & 4) and to apply these codes by section and
sub-section numbers.
The Codes are contained in Regulation 941, sections 72. and 77. These two sections are
supplied at the exam, but they should be carefully studied before the exam. This will facilitate
recognition of comparable situations within the questions, and an appropriate response to each
situation.
Answers should be given within about 20 minutes each. During study time, try practice writing
and re-writing, to develop a timing skill, while giving a complete and concise answer.
The references here are for study purposes and, except for 72. and 77., are not expected in an
answer.
This study guide is extensive to illustrate the possible range of content in an answer.

1(a) Roles of Complaints Committee (CC) and Discipline Committee (DC):

1) CC - to investigate written complaints (CC and DC will have PEO staff support, with
files, etc.)
2) give person complained against at least 2 weeks, to explain in writing, PE Act
24.(1)(a).
3) resolve complaint, e.g., by phone call or letter, PE Act 24.(2)(c)
4) if not resolved, then CC will refer, PE Act 24.(2)(a), to the DC, PE Act 28.(1)(a)
5) DC - to call a hearing with the person complained against, and make a finding,
PE Act 28.(2) or (3)
6) order a penalty and its publication, PE Act 28.(4).
1(b) Requirements for PEng licence (list only 5 as asked, from the 6 here) PE Act 14.,
Reg 941 / 33.:
1) 18 years or older
2) academics in engineering, meaning a university degree or equivalent educational
qualifications
3) experience, 48 months of which 12 months may be after one-half of the degree
classroom component
4) at least 12 months Canadian experience under PEng supervision, within the experience
after a degree
5) successful completion of the Professional Practice Examination (PPE)
6) good character as determined from reference forms or letters.
Note: citizen or permanent resident was repealed October 25, 2010 but was acceptable for this
exam.
1(c) Drawings, etc. a stamp and signature must be originals because a copy could come
from other documents. Originals help identify a P.Eng(s) who is actually responsible and liable,
Reg 941 / 53.

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Study Guide - Part A

December 11, 2010 Exam Reprint

1(d) Certificates of Authorization (C of A) a PEng or engineering firm is eligible to receive a

C of A, providing the designated person(s) and insurance requirements are met, Reg 941 / 47.
A C of A is necessary to comply with the PE Act 12.(2). Also in case of a dispute, the licence
holder(s) who is assuming responsibility can be readily identified, Reg 941 / 48.
1(e) Regulation is conducted by PEO through organization and process, including to:
1) compose a Council, PE Act 3., and establish committees, PE Act 10. (most are
volunteer PEngs)
2) set qualifications for a licence or a Certificate of Authorization (C of A),
Reg 941 / 33. and 47.
3) examine persons applying for a licence, as to their engineering education and
experience
(Council and Committees have a responsibility to oversee processes, as carried out
by PEO staff).
4) issue licences or C of As to those who meet requirements (see 1(b) and 1(d) above)
5) discipline a licence holder who has acted with incompetence or dishonesty (see 1(a)
above) and
6) enforce the requirement for a licence or C of A to offer services, PE Act sections 12.
and 40.
2(a) It is appropriate for me to "moonlight" for my friend's company, providing I take specific
steps before accepting the work, of advising 1) my full-time employer of my interest in the parttime work 2) my friend, in writing, about my status as a full-time employee, 3) my friend, in
writing, about the limitations I may have on performing part-time work; and 4) I must satisfy
myself the part-time work will not conflict with my regular full-time work, 77.5. Further, if my
part-time employer does not have a C of A under which I can be designated, then I must apply
for and obtain a C of A, PE Act 12.(2).
When evaluating this opportunity, I must consider the issues of being fair and loyal to my regular
employer, 77.1.i., and acting with devotion to high ideals of honour and professional integrity,
77.1.iii.
2(b) I should not use the motion sensor technology on the golf device. If I did, I would be failing
in devotion to high ideals, 77.1.iii., and not be protecting my employer's proprietary technology,
77.3. I could be in conflict of interest, 72.(2)(i)4., and open to a charge of unprofessional
conduct, 72.(2)(j).
Alternatively, I might approach my full-time employer about licensing the technology. This
could be a win-win. It would also be acting toward other practitioners with courtesy and good
faith, 77.7.i.
2(c) Section 72.(2)(g) applies, if the PE Act or regulations are breached, excluding section 77.
(code of ethics). A breach of 77.5. would not breach 72.(2)(g). If the breach is unprofessional,
72.(2)(j), or if I failed to disclose a conflict of interest, e.g., took part-time employment without
disclosure to my full-time employer, I would be breaching 72.(2)(i)4. Either of these would be a
breach of 72.(2)(g).

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Study Guide - Part A

December 11, 2010 Exam Reprint

3 Zeta, PEng (hired by Moose) did the right thing, by viewing the costs for slide removals as not
justified by anything in the contract. She was acting with devotion to high ideals of personal honour
and integrity, 77.1.iii. At first she was supported by Moose (Primus) but later she was ordered to
sign off. She refused, being fair to the client, 77.1.i. Although Zeta would not wish to injure the
reputation of another practitioner(s), 77.7.iii., and even though Zeta would ordinarily keep company
information confidential, 77.3., the order to include unjustified costs in the progress payment, by
PEngs at Digger and Moose, is dishonourable conduct, 72.(2)(j). Zeta should expose this before
the proper tribunals, 77.8.
When doubts were experienced about borings, Zeta should have reported her concerns to Primus,
PEng (Moose), 72.(2)(c). By not reporting, Zeta is open to charge of unprofessional conduct,
72.(2)(j).
Primus, PEng did the wrong thing, and caved in to mounting pressure to approve the costs for slide
removals, which is dishonourable, 72.(2)(j). Primus failed to listen to Zeta and further made
unwelcome comments which amounted to harassment, 72.(2)(n). Primus should concede the
design is below prudent standards, 72.(2)(a), is incompetent, 72.(2)(h), and is deficient in
performance of services undertaken, 77.1.v. The project should be re-designed, based on complete
geological borings. Supplementary costs should be calculated, including the costs of safely
removing the slides.
Negotiations should be opened with the railway owner, with a view to an agreement on a revised
contract, with damages to be paid by Moose, to be fair to this client, 77.1.i. The slides narrowly
missed some workers, which was the result of incompetent work by Primus. This is a serious
matter. Workers are the public. Moose and Digger should show fidelity to public needs, 77.1.ii.,
should regard public welfare as paramount, 77.2.i., and thereby enhance a public regard for PEngs,
77.2.ii.
Sigma, PEng (director for Digger) did the wrong thing by submitting a progress payment for approval
that included excess costs for slide removal. This actually amounts to theft and is not honouring the
contract and being fair to the client, 77.1.i., or acting with devotion to high ideals of professional
integrity, 77.1.iii.
In view of the wrongful dismissal, Zeta should engage legal advice and sue Moose.
4(a) Chi, PEng should resolve the primary ethical issue, simply by admitting defeat and informing
her boss. It will be the best way to be fair to her employer, 77.1.i. Being honest and forthright will be
devotion to high ideals of personal honour and professional integrity, 77.1.iii.
No doubt her boss wants the project to be successful and may have a solution (e.g., add more
resources) to enable completion on time. Alternatively, Chi could recommend a purchase or licence
arrangement between Softdisk and HardDisk for the needed software.
If Chi keeps the situation to herself and decides to use software made available by her spouse,
without any arrangement, this amounts to theft, and is disgraceful conduct, 72.(2)(j). Subsequent
events that develop could become very serious, not only for Chi and her family but also for Softdisk.
4(b) Chis spouse (CS), PEng does have ethical obligations to fulfill. CS should obtain clearance
from his employer to use the software, even if the version is not currently used by them. It still may
have proprietary attributes and would be misuse of information, 77.3., and unfair to his employer,
77.1.i

15

PROFESSIONAL PRACTICE EXAMINATION December 11, 2010

PART B - Engineering Law and Professional Liability

This examination comes in two parts (Part A and Part B). Both parts must be completed
in this sitting. You will be given a total of 180 minutes to complete the examination.
Use the correct colour-coded Answer Book for each part, place in the correct envelope and seal
after completed.
White Answer Book for Part A white question paper.
Coloured Answer Book for Part B coloured question paper.
This is a CLOSED BOOK examination. No aids are permitted other than the excerpts from
the 1990 Ontario Regulation 941 covering sections 72 (Professional Misconduct) and 77 (Code
of Ethics) supplied at the examination. Dictionaries are not permitted.
The marking of questions will be based not only on academic content, but also on legibility and
the ability to express yourself clearly and correctly in the English language. If you have any
doubt about the meaning of a question, please state clearly how you have interpreted the
question.
All four questions constitute a complete paper for Part B. Each of the four questions is worth
25 marks.

27

Part B - December 11, 2010 Exam

(25)

1.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)

(25)

Briefly define, explain or answer any five of the following:

Parol evidence rule
Fraudulent misrepresentation
DRB
How arbitration awards are enforceable internationally
Contract A in tendering
The rule of contra proferentem
The discoverability concept as it relates to limitation periods.
Duress

2.
National Stores Inc. (NATIONAL) , the owner of a grocery store chain in
Ontario, contracted with an architect to design and prepare the construction
documentation for a new store in a town in northern Ontario.
The architect produced some general construction specifications that included a
requirement that an automatic sprinkler system, conforming to the National Fire
Protection Association (NFPA) standards, be installed.
The architect retained an engineering firm pursuant to a separate agreement to which
NATIONAL was not a party. Under the contract the engineering firm was to prepare the
detailed engineering design for the project, including the sprinkler system. The
engineering design was to conform to the architects general specifications.
A recent engineering graduate employed by the engineering firm prepared the design of
the sprinkler system. Not being familiar with the NFPA requirements, the employee read
certain sections of the standards but did not have enough time, given other project
responsibilities, to pay close attention to all the details. A professional engineer reviewed
the employees completed sprinkler system design. Although the professional engineer
did not perform a detailed check, the professional engineer considered the design
satisfactory.
.
Six months after the store opened for business, a fire occurred early one morning. The
fire caused substantial damage to the store and to its inventory and NATIONAL had to
close the store for repair.
NATIONAL retained a consulting engineer to conduct an independent investigation.
The consulting engineer determined that the sprinkler system was inadequately designed.
Specifically, the design did not conform to the NFPA standards, which required, among
other things, that the coverage per sprinkler head was not to exceed 10 square metres.
The engineer determined that 10 percent of the sprinkler heads were designed to cover an
area as high as 25 square metres. The report indicated that, in the engineers expert
opinion, had the sprinkler head spacing conformed to the NFPA standards, the fire should
have been quickly extinguished and would not have spread to any great extent.

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Part B - December 11, 2010 Exam

What liabilities in tort law may arise in this case? In your answer, explain the purpose of
tort law and identify what essential principles of tort law are relevant. Apply each
principle to the facts. Indicate a likely outcome of the matter.
(25)

3.
ACE Construction Inc. is a company primarily engaged in the business of
supplying heavy equipment used in construction. As part of the companys economic
plan to expand its business, ACE became interested in the rock crushing industry.
ACE had become aware that International Metals Company Ltd. (IMCO) required a
contractor to crush, weigh and stockpile approximately 250,000 tons of ore. As ACE
believed this was an excellent opportunity to venture into the rock crushing business, it
decided to tender on the IMCO contract.
In order to tender on the contract, ACE set out to purchase the necessary equipment to
crush the material. ACE was contacted by a representative of Rock Busters Ltd., a
company which sold such equipment. After visiting the IMCO site and determining the
nature of the material to be crushed, the representative discussed the IMCO contract with
ACE. After performing a number of calculations, the representative determined and
guaranteed that the equipment Rock Busters would provide would be capable of crushing
the material at a rate or 175 tons per hour. On the basis of the guarantee, Rock Busters
and ACE entered into a contract. Rock Busters agreed that if ACE were successful in its
tender to IMCO, Rock Busters would provide the equipment for a price of $400,000. The
contract also contained a provision limiting Rock Busters total liability to $400,000 for
any loss, damage or injury resulting from Rock Busters performance of its services
under the contract.
Based on the information provided by the representative, ACE prepared and submitted its
tender to IMCO. IMCO accepted the tender and entered into a contract with ACE to
crush the material.
The rock crushing equipment was set up at the IMCO site by employees of Rock Busters
and crushing operations commenced. However, from the beginning there was trouble
with the operation. One of the components of the crusher, called the cone crusher,
consistently became plugged by the accumulation of material. Each time the cone
crusher became plugged, the operation would have to be shut down and the blockage
cleared manually. In some cases, such blockages caused damage to the equipment. Rock
Busters made several unsuccessful attempts to correct the defect by making modifications
at the site and at its factory. The crushing equipment was never able to crush more than
30 tons of materials per hour.
In order to meet its obligations under the IMCO contract, ACE hired another supplier to
correct the defects in the Rock Busters equipment. For an additional $500,000 the
supplier replaced the cone crusher with one manufactured by another company. The
modified equipment was able to crush the material at the rate of 180 tons per hour. The
total amount which had been paid by ACE to Rock Busters was $350,000.

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Part B - December 11, 2010 Exam

Explain and discuss what claim ACE can make against Rock Busters in the
circumstances. Would ACE be successful in its claim? Why? In answering, please
include a summary of the development of relevant case precedents. In particular, point
out how the law changed because of these relevant case precedents. Identify the legal
principles on which the precedent decisions were based and apply the appropriate legal
principle to the facts.
(25)

4.
An information technology firm submitted a bid to design and install software and
hardware for an electronic technology process to control the operation of large scale
sorting equipment for a major international courier company.
The firms fixed guaranteed maximum price was the lowest bid and the contract was
awarded to it. The contract conditions entitled the information technology firm to
terminate the contract if the courier company did not pay monthly progress payments
within 15 days following certification that a progress payment was due. Pursuant to the
contract, the certification was carried out by an independent engineering firm engaged as
contract administrator.
The work under the contract was to be performed over a 5 month period. After
commencing work on the project the information technology firm determined that it had
made significant judgment errors in arriving at its bid price and that it would face a major
loss on the project. Its concern about the anticipated loss was increased further when it
also learned that, in comparison with the other bidders, its bid price was extremely low
and that, in winning the bid, it had left more than one million dollars on the table.
Two monthly progress payments were certified as due by the independent engineering
firm and paid by the courier company in accordance with the terms of the contract.
However, after the third monthly progress payment was certified as due by the
independent engineering firm, the courier companys finance department asked the
information technology firms representative on the project for additional information
relating to an invoice from a subcontractor to the information technology firm. The
subcontractors invoice comprised a portion of the third progress payment amount. The
courier companys finance department requested that the additional information be
provided prior to payment of the third progress payment.
There was nothing in the signed contract between the information technology firm and
the courier company that obligated the information technology firm to provide the
additional information on the invoice from its subcontractor. However, the information
technology firms representative did verbally indicate to the courier companys finance
department that the additional information would be provided.
The additional information relating to the subcontractors invoice was never provided by
the information technology firm.

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Part B - December 11, 2010 Exam

Sixteen days after the third progress payment had been certified for payment, the
information technology firm notified the courier company in writing that it was
terminating the contract because the courier company was in default of its obligations to
make payments within fifteen days pursuant to the express wording of the contract.
Was the information technology firm entitled to terminate the contract in these
circumstances? In giving reasons for your answer, identify and explain the relevant legal
principle and how it would apply.

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Study Guide - Part B

December 11, 2010 Exam Reprint
The object of Part B is to examine a knowledge of elementary law, as this may apply to an
engineers work experience. Question 1. is definitions, and requires only 5 answers from the 8
options.
Questions 2., 3. & 4. are case studies. Each of these answers should include the names of the
relevant legal terms and principles, and how each of these applies to one or more elements of
the case. An answer should reach a pass value on its own, i.e., marks over 38 for 3 answers
may not be a pass.
Page references below are for the Marston text, 4th edition, and are given here for study
purposes. In the case of a perceived ambiguity, the text should be taken as authoritative.

1.(i) Parol evidence rule precludes evidence of an omitted condition. Verbal agreements are
not part of a contract. However, if it can be substantiated that a verbally agreed-upon condition
must be precedent for a contract to be formed, then verbal evidence of that condition may be
admitted, page 136.
1.(ii) Fraudulent misrepresentation - statement(s) made by a party:
1) knowingly or 2) without truth, or 3) careless of whether it is true or false.
The deceived party may rescind the contract, claim compensation for costs and sue for deceit,
page 109.
1.(iii) DRB, dispute review (or resolution) board - the purpose of a DRB is to resolve a
dispute without going to court and to avoid the costs of litigation. A DRB is formed by the
contract parties, before work starts. Usually 3 neutral individuals are selected, who have
expertise in the applicable industry, page 31.
1.(iv) Arbitration awards - in 1958 a New York Convention under United Nations auspices,
was signed by over 135 nations including Canada. By the terms of this convention, arbitration
decisions are internationally enforceable. International contracts should be with a party from a
signing nation, page 30.
1.(v) Contract A in tendering a request for proposals constitutes an offer, and the
submission of a bid constitutes acceptance, thus forming a Contract A. There are as many
Contract As as there are bidders. Contract B is one signed agreement with the one successful
bidder, pages 119 - 134.

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Study Guide - Part B

December 11, 2010 Exam Reprint

1.(vi) Contra proferentem, rule of - where a contract provision is ambiguous, it will be

construed or interpreted against the party who drafted the provision. Who drafted what, should
be noted, page 136.
1.(vii) Discoverability concept determines a point in time when a limitation period begins.
For the 2 year basic, it is when damage or loss is discovered, or ought reasonably to have been
discovered. For the 15 year ultimate, it is when the act or omission that is the cause of a claim
took place. A legal action in tort or contract, must be filed within these periods, or it will be
statute barred, pages 71 - 73.
1.(viii) Duress - threatened or actual violence or imprisonment used to persuade a party to
enter into a contract. Such a contract is voidable, text page 110.
2. Tort, potential liabilities - the purpose of tort law is to compensate an aggrieved party for
damages, so far as money will suffice. The 3 essential principles of tort law are relevant and
they are: 1) a duty of care, 2) a breach of that duty and, 3) damage or injury as a result of
the breach.
The case is in tort because National Stores Inc. (NSI) did not have a contract with the
engineering firm (EF). Unless settled out of court, NSI could bring an action in contract against
the architectural contractor (AC), depending on that contracts clauses.
The EF had a duty of care to:
1) provide a sprinkler design meeting NFPA standards. This duty was breached since the
2) investigators report (expert testimony) tied the fire damage to inadequate sprinklers. There
was
3) damage as a result of the breach.
The liabilities in tort law that may arise, and the likely outcome is, AC and EF must pay for the
losses. AC and EF would be concurrent tortfeasors, roughly estimated at 20% to AC and 80%
to EF.
EF would be vicariously liable for the actions of its engineer employee(s).
The PEng who supervised the design is primarily responsible, not just the recent engineering
graduate. Although recent engineering graduates, or even recent PEngs, have met certain
standards, a seasoned engineering designer or manager should perform a detailed check and
give the benefit of feedback.
A relevant case precedent is Unit Farm Concrete Products vs. Eckerlea Acres, page 46.
3. Contract, breach and liability - one legal principle that may apply, is fundamental breach
going to the root of the contract and if so, a clause to limit liability is not normally enforceable,

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Study Guide Part B

December 11, 2010 Exam Reprint

based on a history of these cases in Canada and England. It may be enforceable if the cause
for action is unknown or there is ambiguity, neither of which is the case here.
Another legal principle that may apply is the true construction approach. If the intent of the
parties as expressed or constructed in the liability clause is clear and true, then a true
construction approach has taken place to form the clause and it is enforceable. Therefore the
law has changed in this area.
Based on fundamental breach, ACE Construction Inc. (ACE) could make a claim against Rock
Busters Ltd. (RBL) for the net additional cost. ACE had paid $350,000 to RBL and $500,000 to
the cone crusher supplier (CCS) for a total of $850,000. There would also be the costs of
delays and lost production. ACE had expected to pay $400,000, so the balance claim against
RBL would be at least $450,000.
However, for the true construction approach principle, some Canadian courts have allowed the
enforceability of liability clauses. RBL would then be liable for only $400,000, if this amount is a
genuine pre-estimate of damages. ACE would sustain a loss of $450,000. This may limit
business expansion.
Similar case precedents are Harbutts Plasticene vs. Wayne Tank and Pump where the clause
was not enforceable, and Hunter Engineering vs. Syncrude where it was, pages 155, 159.
4. Contract, equitable estoppel - the information technology firm (ITF) was not entitled to
terminate the contract. ITF was exposed to significant loss, and was trying to use the failure of
the courier company finance (CCF) department to pay within 15 days of certification, as an
excuse to break the contract.
If ITF insists on the express wording of the contract, CCF could invoke the relevant legal
principle or concept, of "promissory" or "equitable estoppel", which is to ensure the result would
be equitable.
A "gratuitous promise" had been made by the ITF representative to CCF. The promise to CCF
was, to provide additional information relating to an invoice from a sub-contractor to ITF, before
CCF would make the third progress payment. The contract was not amended, the promise was
not in writing, and it was freely made. This makes the promise "gratuitous". CCF was clearly
depending on the promise. Therefore the contract stays in force and ITF takes the loss.
A similar case precedent is Conwest Exploration vs. Letain, page 92.

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