Sec.

A Aug 2013 exam

Q1.
What is the complaints committee and describe its function (5points):
The function of the committee is to review complaints about the beings of
professional practice and determine if the issue can be resolved or go to the
discipline commeette. Sec 24.2 of act.
PEO issues temporary licenses, in addition to paying the necessary fee the applicant
must meet one of 3 other requirements to obtain such a license, please provide two
of those requirements.
1. Resident of outside Ontario
2. Qualifications equal to Ontario
3. 10 years experience/collaboration with an Ontario P. eng unless exempt
Reg 941 sec 43 and 44.
When a license, certificate of authorization, temporary license or provisional license,
or limited license is revoked or cancelled, what should the holder do with the
certificate and seal?
When a license ceases, the certificate and seal should be returned to PEO. Reg 941
sec 54 and 55
Which license holders can hold a COA?
A CofA can be held only by a p. end or temp license holders only. Reg941 sec47.1
and sec42 of act.
Note: sec 15 and 17 of the act, limited licenses are proposed to be added to the
types of license holders than can have a CofA, but this does not apply for this exam.
What are the consequences, if any, to a prof. eng. Who does not keep his license
permanently displayed in place of business.
A license not displayed has no consequence. Code of ethics sec 77.2.4
A breach of ethics is not considered misconduct as understood from sec. 72.2
Q.2,3,4:
Case studies test misconduct and ethics codes and ability to apply them (reg941
sec 72 and 77 (Given in exam))
Sec. 72.1: definitions harassment, negligence
Sec. 72.2: professional misconduct
Safety: (b), (c), (d)
Competence: (e), (f), (g), (h)
Conflict of interest: (i)
Professionalism: (a), (j), (k),(l),(m),(n)
Sec. 77: code of ethics
Duty and respect of general sensitivity (1)
Regard for the public (2)
Care for employers, clients 3,4,5
Care for other professionals 6,7
Expose not ethical conduct 8
Q2.

Sigma is a licensed professional engineer charged with enhancing the efficiency of a liquid detergent
production line for his employer, SoftSoap, a soap manufacturer. During his work he has access to
confidential company information and observes that the company is adding very small quantities of a
well-known carcinogen (i.e. a substance suspected of causing cancer) to the detergent but is not
listing it as an ingredient. This confidential information is irrelevant to Sigmas work. However, Sigma
is aware that the additive is a banned substance.
The production process is handled by Tau, a P. Eng. In another department of SoftSoap. Sigma is
reluctant to bring the matter to Tau since they have had some recent disagreements. Sigma has
been receiving e-mails forwarded from Tau with jokes of a racially insensitive nature. More often than
not, the jokes are aimed at Sigmas race and are also sent to other members of Sigmas department.
Sigma, had become offended by these e-mails and decided to speak with Tau one-to-one last week
to explain how the e-mails are affecting him. Sigma told Tau that not only are the e-mails offensive to
him but they are not appropriate for the work environment in general. Tau shrugged off Sigmas
concerns telling him that no harm was intended and they were only for a good laugh. Tau also said
that everybody else in your department enjoys them and nobody else ever gets offended. This
week Sigma received another e-mail forwarded from Tau with a series of jokes about Sigmas race.
Using PEOs Code of Ethics and Code of Professional Misconduct as your guide:
(15) (a) Discuss what action(s) Sigma is obligated to take as a professional engineer.
Out of loyalty to SoftSoap as his employer, in accordance with sec. 77.1, Sigma should confer with
management to consider the consequences of adding a carcinogen to the liquid detergent.
According to sec. 72.2 f. and the need to follow legal codes and rules for banned substances, 72.2 d,
and to provide for the health of the public sec 72.2 b. if no agreement is reached, he should report to
public health authorities, sec 72.2 c. Although Sigma is to regard employer information as
confidential, Sec. 77.3 tells us the report must be made as public welfare is paramount as per sec
77.2 i. and to show fidelity to public needs 77.1.2.
Accordin to sec. 72.1, Taus actions (making racial jokes) constitutes harassment and violates 72.2
n. His actions do not show curtesy and good faith to another practiotioner (77.7 i). Neither is it fair to
send the jokes to other members of the department, sec77.1. Taus conduct is disgraceful and
unprofessional according to sec. 72.2 j. Sigma did the right thing by first speaking with Tau and not
trying to maliciously injur Taus reputation, sec. 77.7.3. Tau acted incorrectly again and sent another
racist email, Sigma should review Taus behavior with management and ask for a transfer or
consider resigning. Sigma can also complain against Tau to PEO and Ontario humans right
commission, sec. 77.8.
By the definition of professional misconduct (section 77 of the Regulations), a professional engineer
is bound to "act to correct or report a situation that the practitioner believes may endanger the safety
or the welfare of the public", regardless of whether it is directly his/her work or not. As such, in this
situation, I am bound to fix the situation within the company and failing that report it externally. To aid
my case, I should ensure that I obtain adequate documentation of the fact that the company is using
the carcinogen and document my attempts to correct it.
Under the Code of Ethics, R77(2)(i) requires an engineer to regard as paramount his duty to
safeguard public welfare. Under the definition of Professional Misconduct, an engineer has a duty to
safeguard health and property (R72(2)(b)), correct or report something endangering the public
(R72(2)(c)), and comply with statutes (R72(2)(d)), including statutes regarding safety. These
obligations, which exist solely from being a professional engineer and not through the contract or his
current work relationship with any employer, oblige Sigma. to take action to fix/report the situation.
(10) (b) Discuss Taus actions and what Sigma should be doing about them.

According to R72(1), harassment means engaging in a course of vexatious (i.e., unnecessary)

comment or conduct that is known or ought reasonably to be known as unwelcome and that might
reasonably be regarded as interfering in a professional engineering relationship. Since Tau persists
with his unnecessary jokes even though Sigma has explicitly informed him that his jokes are
unwelcome ("offensive" and "inappropriate") and asked him to stop, Tau is definitely guilty of
professional misconduct via R72(2)(n): harassment. As such, Sigma should report him to the
complaints committee, in accordance with R77(8).

Q3.
You are a professional engineer and have been hired recently as the chief operations and
maintenance engineer of a paper mill near a remote village in northern Ontario. The mill is the
largest industry in the area and employs (directly or indirectly) most of the workers in the region.
Upon starting your new job, you review the facilities at the mill and its operation and maintenance
procedures. You discover that your predecessor (also a professional engineer) had been operating
the mill for several years with inadequate environmental equipment. The mill has been discharging
hazardous substances into a nearby river contrary to legal limits. You also learn that government
authorities are not aware of the illegal discharges.
You discuss the situation with the companys vice president in charge of Canadian operations. You
report to the vice president that a number of environmental measures would be necessary in order to
stop the illegal discharge. In your estimation, the measures would require a substantial capital
investment in the plant. The vice president informs you that the mill has been earning very small
profits in the last decade and that the capital expenditure could not be justified at this time. According
to the vice president, the companys head office would likely close the mill rather than spend the
money.
Using PEO's Code of Ethics and Code of Professional Misconduct as your guide:
(10) (a) Discuss your obligations with respect to the public. What is the public interest in this
case? How is the public interest impacted by actions?
Public obligation is to reduce the illegal discharge into the river, sec 72.2.d. To safeguard the health
of the people being affected sec 72.2.b. Public interest is also to maintain employment in the region.
Need to be sensitive to this and act, where possible, to show fidelity to public needs, sec 77.1.2. If
my actions can control the illegal discharges, this will have a positive impact on the public and fulfill
the duty to regard the public welfare as paramount sec 77.2.1. If the operation can be saved, this will
significantly contribute to safety in the community and overall workers in the company 72.2.c. I would
also be acting with devotion to high ideals, sec. 77.1.3. my estimation of the required investment
should be reviewed with specialists to see if a way to control the discharges could be found with less
costs. Try to find investors willing to help upgrade the equipment. The object is to always be faithful
to public needs sec. 77.1.2.
The definition of professional misconduct states as professional misconduct in items b through d:
"(b) failure to make reasonable provision for the safeguarding of life, health or property of a person
who may be affected by the work for which the practitioner is responsible,
(c) failure to act to correct or report a situation that the practitioner believes may endanger the safety
or the welfare of the public,
(d) failure to make responsible provision for complying with applicable statutes, regulations,
standards, codes, by-laws and rules in connection with work being undertaken by or under the
responsibility of the practitioner,"
and so, while reporting the situation could economically damage the town and company (potentially
breaching section 72.2.b & c), not reporting it would damage the environment of the town and
perhaps the surrounding area, as well as the town and company's integrity should the environmental

problems eventually be discovered externally (breaching section 72.2.b & c, as well as 72.2.d, since
the discharge is actually illegal).
Here, I have an obligation to protect the public interest (in particular, to regard it as paramount
through 77.2.i), and the public has several relevant interests: on the one hand, they have an interest
in remaining financially solvent by keeping their jobs, but on the other hand they have an interest in
maintaining their health, in not having their waters illegally polluted, and in knowing about important
matters that impact them (I also have a duty through 77.1.iii to act towards the public with honesty,
and this further argues for reporting the pollutants).
The promise to gradually implement the environmental measures is vague in its timeframe, and
while a step in the right direction is not enough of a step. The fact is that failing to comply with the
applicable statutes and regulations in such a blatant manner is very unethical and not in the best
interests of the town under these circumstances. People respect honesty: reporting a problem in the
mill's operations and an intent to comply with the environmental statutes may even incite
government aid in response to this honesty (especially given the adverse impact on the town of
shutting down the mill). In conclusion then, in order to protect the public interest, I should take steps
to work with the Ministry of the Environment, through the company, to correct the illegal discharges
and protect the financial solvency of the town in the process.
(10) (b) Discuss your obligations with respect to the company.
Need to be loyal to the employer, by conferring with VP, sec. 77.1.1. Although I have an obligation to
keep company information confidential, sec. 77.3 I have a greater need to regard public welfare as
paramount sec 77.2.1. I should report the charges to government authorities, sec. 72.2.c and ask for
a temporary stay of legal charges for failing to comply with regulations until matters can be resolved.
Sec. 72.2.d.
I have an obligation to my company under the Code of Ethics section 1.i to "act at all times with
fairness and loyalty" and under section 3 of the Code of Ethics I must regard the information about
the pollutants as confidential. Reporting the pollutants to the relevant regulating body would have a
very adverse affect on the company, contrary to these obligations. Furthermore, section 2.f of the
Definition of Professional Misconduct states that it is professional misconduct to fail to present to my
employer the consequences of not following my advice where I am responsible for the technical
adequacy of a project and am overruled by non-technical authority (such as the VP of Canadian
operations). As such, I have an obligation to the company to express to the VP the likely
consequences of failing to implement the environmental measures (i.e., adverse health impact on
the town and environment, possible retribution to the company if the pollution is discovered by an
external body). While these obligations do not trump our obligations to the public to report the illegal
discharge, they do favour a reporting method more sensitive to the companys image (for instance,
having the PR department report the discharge to the Ministry of the Environment is preferable to
reporting to CBC on my own).
(10) (c ) Discuss your obligations with respect to your predecessor.
Inform the P. eng that the negligence of operating the mill has been discovered to
give the person a fair opportunity to respond sec 77.7.1. Although I do not wish to
injure the reputation of another practitioner, sec 77.7.3. If the respone is not
favorable I intend to expose the behavior in front of proper tribunals sec. 77.8 and
to proceed with charge of professional misconduct for the time operating the mill.
72.2.j. if I do not take the actions, I could be charged with negligence sec. 72.2.a

The Code of Ethics states in item 2.ii that I have an obligation to enhance the public
regard for my profession, and in item 7.iii to not maliciously injure the reputation of
another practitioner. While reporting the failure of the company to comply with the
environmental statutes would likely enhance the reputation of engineering,

reporting the other practitioner as the source of the noncompliance would likely not.
At the same time, to allow the pollution to continue illegal for so long is blatant
professional misconduct on the part of my predecessor, and he therefore has
questionable business practicing engineering. To report the fact that he was
overseeing the operations during the time the pollution was occurring would
certainly injure his reputation, but in this case I argue that the injuring is for the
greater public good and not malicious. To steel my resolve, item 8 of the Code of
Ethics states that I will "without fear or favour expose before the proper tribunals
unprofessional, dishonest or unethical conduct by any other practitioner" for the
purpose of maintaining "the honour and integrity of the practitioners profession".
Therefore, I should report him to the Complaints Committee (after the pollutants
have been reported as per part a and b).
Q4.
ProTestCo is a products testing company. Typically, ProTestCo is hired by various
manufacturers to perform tests on their products in order to verify that the products
are manufactured according to published standards.
You are a professional engineer and have been employed for several years on a fulltime basis as an employee of ProTestCo. In your job, you are responsible for
supervising the application of tests on various products. During your years of
employment with ProTestCo, you have acquired a great deal of expertise regarding
the design and manufacture of small household appliances and have earned an
excellent reputation.
Given your reputation and expertise, manufacturers of such appliances are often
interested in hiring you on a private basis (i.e. outside of your employment with
ProTestCo) to provide input on their product designs. You are able to supplement
your income by occasionally undertaking such work for them. You perform such
work on weekends and during evenings.
One day, while at work at ProTestCo, you are assigned the job of supervising the
tests and issuing a report on a new product that has been submitted to ProTestCo.
You smile when you realize that the product was submitted by one of your own
manufacturing clients and that you provided design input on the product.
A) Comment on the appropriateness of how you have set up your working
arrangements.
The current working arrangement is considered moonlighting.
Need to ensure the outside employment does not interfere with current job, need to
confer with daytime employer, need to give a written document to weekend and
evening employer about daytime employement and limitations as per sec77.5. If
not, it is a breach of ethics, but not subject to discipline 72.2.g
Moonlighting is not strictly illegal, so long as (as stipulated in s77(5)):
i. Employee [doesn't] compete with employer for contracts,
ii. Moonlighting time & effort [doesn't] reduce employees workday efficiency, and
iii. Employer [is] informed of the moonlighting.
Informing the employer of the moonlighting is also required by s72(2)(i)(4).

R77.5.i appears to be satisfied here, as the moonlighting is designing products

rather than testing them. Assuming that R77.5.ii is satisfied, then all I have to do to
make the arrangement potentially ethically and legally acceptable is to disclose the
moonlighting to my ProTestCo in accordance with R77.5.iii.
B) How should you deal with the testing of the new product?
Need to decline this assignment because of conflict of interest. Sec 77.3 and 77.4.
Declining will also demonstrate fairness and loyalty to the client sec 77.1.1. Also,
suggest another employee who could test the product. Supervisor may supervise
the teststing to ensure no conflict of interest 72.2.1.
This creates a clear conflict of interest for me. Not disclosing a conflict of interest is
professional misconduct by R72(2)(i), and is a breach of the Code of Ethics by
R77(4). In this situation, I have an obligation to disclose the conflict to ProTestCo,
and decline involvement on testing this product.
C) Is a p .Eng. licence sufficient to permit you to provide such design input
to your own manufacturing clients? Explain.
Services are being offered to the public.
No, I must also hold a certificate of authorization in order to provide engineering
services directly to the public (A12(2)).
Breach of contract otherwise: 72.2.g
An outside employer may have a CofA and I might perform services under that CofA
as a contract employee, but it is better to have your own CofA.

Sec. B
Q1.
Briefly define and explain:
Fraudulent misrepresentation
Fraudulent misrepresentation is a deceptive statement made by a party knowingly or without belief in
its truth or careless of whether it is true or false.
The deceived party may resend the contract, claim compensation for costs, and sue for deceit.
p.109 4th ed.
Misrepresentation: False statement or assertion of fact.
A court will rescind (which voids) a contract if a party who desires it to be rescinded can convince the
court that they were misled into entering the contract.
Innocent Misrepresentation: party making the statement doesnt realize the statement is false.
Fraudulent Misrepresentation (Negligent misrepresentation):(as described by the English Court of
Appeal in Derry v. Peak) a misrepresentation made:
1. Knowingly, or
2. without belief in its truth, or
3. recklessly, careless whether it be true or false.
(Section 14.1)
Briefly define and explain:
The difference in dispute resolution through arbitration and through mediation
Mediation resolve by voluntary negotiation.
Arbitration dispute resolved by one arbitrator or board or panel and the determination will bind both
parties.
Mediation is not binding and arbitration is binding
p.30 and 239
In mediation, a mediator listens to the situation, offers suggestions, and guides the parties towards
agreeing on a fair resolution through negotiation. In contrast, in arbitration the arbitrator decides on
how to resolve the disputes rather than the parties themselves, similar to how a judge would in a
court case but in a much more timely and cost-effective (though less rigorous) manner. An arbitrator
does not require the parties to agree on the decision for it to be legally binding. Arbitration is much
more formal than mediation (though still much less formal than a lawsuit).
Briefly define and explain:
Five examples of employment rights relating to equal treatment to which individuals are
entitled under Ontario's Human Rights Code (list only)
The Ontario Human Rights Code defines that Discrimination based on any of the following is
inappropriate workplace conduct:
Race,
Ancestry,

 Place of origin,
Colour,
Ethnic origin,
Citizenship,
Creed,
Sex,
Sexual orientation,
Age,
Marital status,
Family status,
Record of offenses, or
Handicap.
Without sexual harassment.
p.322
See section 36.3.5
Briefly define and explain:
The discoverability concept as it relates to limitation periods.
The concept relates to a time limitation period within any claims to an engineer or a contractor must
be filed. The basic limitation period is 2 yrs from discovery of defect or have reasonably been
discovered. The ultimate limitation period is 15yrs from when work is completed (building is built).
If a defect is discovered on the 14th year, action needs to be filed within a year.
Parties under businessmay define periods different from above.
p.71-73
Previous version:
(10) The question of how long an engineer or a contractor can be sued for negligence is one
that is of concern to professional engineers and to contractors. Describe the limitation
periods during which engineers and contractors can be sued in tort and in Contract.
Concept of Discoverability: the 2-year limitation period, whether in tort or contract, starts when the
damage is, or ought reasonably to be, discovered. (See chapter 5 notes)
Note - when this question was previously presented on exams the laws have changed several times.
The current laws for limitations are . . .
The limitation period is the period during which legal action can be taken, be it for breach of contract
or for tort damages.
As of 2004, the limitation period for either tort or contract is the lesser of 1) two years from the point
the damage was, or ought reasonably to have been, discovered OR 2) fifteen years from when the
act was performed. This limitation period rule for Ontario was set out by the Limitations Act, 2002,
which also states that contract attempts to explicitly change the limitation period rules are void. In
2006, the Access to Justice Act changed this to once again allow contracts to explicitly change the
lengths of the 2 & 15 year limitation periods, effective October 16, 2006.
Briefly define and explain:
The New York Convention
An agreement signed by over 135 nations, including Canada, that, in case of a dispute, a court of
either nation will force an arbitration award made in the other signing nation. The agreements

purpose was benimized because of foreign litigation. It was made in NY in 1958 under the office of
the United nation. Foreign contract should be with signing nations
p.30
New York Convention: AKA, the 1958 UN Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, was a conference where countries agreed to make arbitration decisions
enforceable on contracts which have selected this as the preferred dispute resolution method.
Canada is a signatory, as are over 135 other countries. The New York Convention gives legal
backing to arbitration as a reliable dispute resolution method.
Briefly define and explain:
DRB (Dispute Resolution Board)
A panel that recommends solutions to disputes and avoid the expense or litigation. The DRB is
formed by the contracting party before work begins. A panel of 3 neutral individuals with expertise in
the applicable industry are selected.
P.31
DRB: Dispute resolution board (AKA Dispute Review Board). Appointed board of third party experts
who are familiar with the particular project given authority to resolve disputes arising in carrying out
the contract. A DRB is intended as a way to avoid resorting to slower and more-costly dispute
resolution through arbitration (which itself is to avoid resorting to much slower and much more costly
dispute resolution through lawsuits).
Briefly define
Secret commission
Something of value offered as a bride to a party with a contract to secretly defraud another party to
the contract. The party offering or accepting the secret commission is in violation of the criminal code
of Canada.
p.179 and 180
Secret Commission: A bribe or kickback, secretly defrauding the interests of another. Basically, one
is guilty of accepting a bribe when, as an agent, one gets any kind of personal gift in exchange for
altering the way one does business for ones principal (usually to the advantage of the one giving the
bribe).
Accepting or offering a secret commission is an offence under:
The Criminal Code of Canada (Section 338) As an P.Eng, accepting or offering a secret
commission is also professional misconduct by Regulation 941/90, Section 72.(2)(i).
(REF - See Marston Chapter 23)
Define and explain:
Common law
Law based on law decisions or precedents which establish legal principles. It is judge made law as
opposed to laws passed by legislature and parliament.
Common Law:
"Common law" has several possible meanings.
It refers to the original English law system (the "common-law system"), but also refers to a set of
prescription remedies for specific crimes that formed part of that system, the other part being courts
of equity.
Common law also refers to a legal system based on this original English system (the legal system of

modern day England, the United States, and Canada except Quebec), and also refers to part of the
law within that system: theory of precedent laws, which are effectively made by judges whenever
they decide a case (the other part of the common law system is statute law, enacted by
governments). (see section 1.3)

Q2.
A long-established manufacturing company, XYZ Ltd., contemplating the possibility of a sale
of some of its properties, retained an environmental consulting firm, E Inc., to prepare an
environmental compliance audit.
The Vice-President of E Inc., a professional engineer, responsible for the performance of the
environmental compliance audit, turned the matter over to one of E Inc.'s employees who had
only recently become licensed as a professional engineer. However, on the basis of previous
assignments, the Vice-President had been very impressed by the young engineer's abilities.
The Vice-President was also aware that an extremely busy schedule would likely limit the
amount of time the Vice-President could spend on the environmental compliance audit and,
accordingly, selected the younger employee engineer in the hope that the young engineer's
involvement would decrease the Vice- President's supervisory time in connection with the
audit.
The employee engineer carried out an environmental compliance audit with respect to each
of the properties identified and E Inc. submitted its reports on each property. Included at the
beginning of each report was the following qualifying statement:
"This report was prepared by E. Inc. for the account of XYZ Ltd. The material in it reflects E
Inc.'s best judgement in light of the information available to it at the time of preparation. Any
use which a third party makes of this report, or any reliance on decisions to be made based
on it, are the responsibility of such third parties. E Inc. accepts no responsibility for
damages, if any, suffered by any third party as a result of decisions made or actions based on
this report."
Sometime later, XYZ Ltd. sold two of its properties to Acquisitions Inc. In negotiating the sale
with Acquisitions Inc., E Inc.'s reports were shown to Acquisitions Inc., but Acquisitions Inc.
had no dealings with E Inc. E Inc. had no knowledge of the sale to Acquisitions Inc. until
approximately four years later when Acquisitions Inc. commenced a lawsuit against E Inc.
Acquisitions Inc. claimed it had commenced the lawsuit in tort against E Inc. because it had
encountered hazardous substances on one of the properties and had subsequently obtained
the opinion of another environmental consulting firm who confirmed that the report in
question by E Inc. contained negligent misstatements which, in the opinion of the second
consulting firm, had resulted from E Inc. ' s representatives having spent too little time
investigating the property for hazardous substances. Acquisitions Inc. claimed in its lawsuit
that E Inc. was aware that the report might be shown to prospective purchasers and,
accordingly, E Inc. should be responsible for damages arising as a result of reliance by
Acquisitions Inc. on the negligent misstatements in E Inc.'s report.
What potential liabilities in tort law arise in this case? In your answer, explain what principles
of tort law are relevant and how each applies to the case. Indicate a likely outcome to the
matter. In your answer indicate if your conclusion would differ if the reports by E Inc. had not
contained the qualifying statement identified above and, if your conclusion would differ,
explain why.

A suit would be in tort because Ac Inc. did not have a contract with E Inc. the purpose of tort law is to
compensate a party a far as money may relieve a loss. All 3 principles of tort law can be proven
here: duty of care, breach of duty, damage or loss as a result of the breach (p.32).
The tort principles relevant here are Duty of care: Ac Inc expected a duty of care from E inc even
without a contact. There had been a contract btwn xyz and e inc and xyz and Ac in. principle 2
applies too. Hazardous substances were found by another environmental consulting firm who gave
expert testimony as confirmation. A duty of care has been breached. Damages and extra expense
needed to cover the losses, principle 3 applies. Ac inc may obtain damages from xyz in contract if
the contract clauses cover this, if not completely, than in tort. If this is the case, XYZ would be sued
in tort and in contract. XYZ and e inc would be concurrent tortfeasors. As experts in this technology,
e. inc should have taken more time to look for hazardous substances and to be aware of the
potential of problems. A primary area of negligence was the limited amount of time the VP could
spend on the audit. The recently licenced engineer could have asked more questions but in any
case, the empllyer is vicariously liable for the actions of the employee which assumes the employer
has a better ability to pay. Because e. inc had a clear and valid qualifying statement in their reports,
they have no liability. This principle has been established in the case of Hadley Burn and Wolverine
Tube vs. Moranda Medal p.43. A relating case is uniform concrete vs achorly acres (p.46)
E inc. is potentially liable in tort to Acquisitions Inc. for losses required to bring the land from its
current state (with hazardous materials) up to the standard implied by E inc. in its audit (no
hazardous materials).
That said, Acquisitions is quite unlikely to succeed in its claim against E inc., since this case is quite
similar to the 1994 Ontario case: Wolverine Tube (Canada) Inc. v. Noranda Metal Industries Ltd. et
al., which clearly confirmed that statements disclaiming responsibility to third parties will absolve the
parties making the statements from liability.
Though engineers have an assumed duty of care towards users of their report, they also have the
ability, as in this case, to "disclaim any assumption of a duty of care", thus removing the first
requirement for a claim in tort law. (see sections 4.4 & 4.1).
Had E inc. not contained the exemption clause limiting liability to third parties, it would then have had
the assumed duty of care applicable to all engineering work. Having broken this duty of care by
making negligent misstatements which resulted in damages to Acquisitions Inc., E inc. would likely
have then been found vicariously liable for its employee's negligent misstatements in line with the
principle that the purpose of tort law is to compensate the damaged rather than to punish the
negligent (see section 4.6).
Q3.
An Ontario municipality (the "Owner") decided to update and expand its water treatment
facilities. To do so, the Owner invited competitive tenders from contractors for the
construction of the new water treatment facility.
The Owner's consultant on the project, a professional engineer, designed the facility and
prepared the Tender Documents to be given to potential contractors interested in bidding on
the project. Each of the bidders was required to be prequalified and approved by the Owner
for participation in the bidding. The Tender Documents included the Plans and Specifications,
the Tendering Instructions which described the tendering procedure and other requirements
to be followed by the bidders, the Tender Form to be completed by the bidders, the form of
written Contract that the successful contractor would be required to sign after being awarded
the contract, and a number of other documents.

According to the Tendering Instructions, each tender bid as submitted was to remain "firm
and irrevocable and open for acceptance by the Owner for a period of 60 days following the
last day for submitting tenders". The Tendering Instructions also provided that all bids were
to be submitted in accordance with the instructions in the Owner's Tender Documents and
that the Owner was not obligated to accept the lowest or any tender.
Tenders were submitted by five bidders. All bids were submitted in accordance with the
Owner's Tender Documents. The lowest bid was well within the Owner's budget.
Within the 60 days specified and before the Owner's consultant had made a recommendation
to the Owner as to whom the contract should be awarded, the consultant was called to a
meeting with a prominent member of the Municipal Council who noted that the lowest bidder
was not one of the bidders who were "local bidders" from within the Municipality. The
Councillor expressed a very strong view that the contract should in fact be awarded to a local
bidder. The Councillor also noted that if one item that had been included in the specifications
was deleted from the bids the result would be that the bid of the lowest "local contractor"
would become the lowest bid overall and the Councillor's preference for awarding the
contract to a "local contractor" could be satisfied.
There had been no reference in the Tendering Instructions to any preference being shown to
local contractors.
How should the consultant deal with the political pressure being applied by the Council
member?
If the contract is awarded to the lowest local bidder what potential liabilities in contract law
may arise? If the consultant engineer recommends to the Owner that the contract be awarded
as the Councillor suggests what liabilities may arise for the engineer? Please provide your
reasons and analysis.
The terms of contract tender changes and liabilities the consultant p eng, AKA CPE, should say NO
to the council member, AKA PCM. The owners tender docmetns are ODD, represent an agreement
in the formation of a contract A. The contract A concept is from the Ron engineering case p.121. Any
change in the Owner tender documents instrucitons or specifications would be a breach of contract
A. Contract A is formed when each bidder submits a bid. 5 contract A have been formed. When the
final contract is signed with the bidder, one contract B is formed. If a signing were outside the owner
tender documents with the lowest local bidder (LLB), the other 4 bidders could sue the Owner for a
breach of their contract. The potential liabilities could include bid expenses and lost profits. The total
expenses to the Owner could come well over their budget. If the p eng does go along with the
council member and recommends the award to the local lower bidder, the p eng is open to a suit by
the municipality for a breach of trust and damages. The p eng is also open to a charge of
misconduct by PEO according to reg941 sec 72.2.j. An alternative is to reject all bids and issue a
revised tender package without the limiting item. And to clearly state that preference will be shown to
local contractors. All previous bidders will be on a level playing field and can decide whether or not to
bid.
This has the possible exposure of reducing the number of bidders and local contractors could come
in with a higher bid than before. Especially when a confidential information happens to be given to
the local contractor through the council member. The council member must have known well before
the preparation that the water treatment facilities were to be updated and expanded. Representation
to the council and an agreement preference to local vendors should have been reached well before
the preparation of the Owner tender documents.
Q4.

This question deals with implied terms in Contract A. As mentioned in Chapter 16, there are cases
which establish that in the absence of explicit statements to the contrary, calls for tender imply both
that the lowest compliant bid will be selected and that there will be no secret criterion for bid
selection, such as use of local contractors. If the municipality fails in this regard by selecting a bidder
other than the lowest because they use more local contractors, it will likely be found liable to cover
the lost profits of the true lowest bidder if taken to court.
To further illustrate the point, consider the quite similar case of the 1989 decision by the BC Court of
Appeals: Chinook Aggregates Ltd. v. Abbotsford (Municipal District): Municipality had a preference
for local contractors, but didn't want to alert contractors to their favouritism, and so put a provision
into the request for tenders reading "the lowest or any tender will not necessarily be accepted", and
then gave favour to bids within 10% of the lowest that had more local contractor use. The court
rejected this, stating that the municipality had an implicit duty to accept the lowest bidder, "unless the
tender documents expressly stated that the bids would be evaluated on other criteria."
The municipality here included an identically vague express statement "the Owner [is] not
obligated to accept the lowest or any tender", and so the same decision will apply here: Accepting
the lowest compliant bidder is a legally binding implied term in Contract A which can only be
removed by quite clear explicit statements to the contrary. Note that "the owner will not delete
requirements" is also an implied term in Contract A, so the counsellor's suggestion to simply delete a
requirement to make a local bidder the lowest would result in an identical court case by the true
lowest compliant bidder.
As such, the consultant should point out to the council member that in light of Chinook Aggregates
and similar decisions, breaking implied terms in Contract A by selecting the nonlowest bidder, by
deleting requirements or otherwise, would likely result in a successful claim for lost profits by the true
lowest bidder. The consultant should recommend selecting the lowest bidder and putting such a
preference for local bidders explicitly in the tender documents on future projects.
If the contract is awarded to the lowest local bidder, the true lowest bidder will be successful in a
claim for lost profits from the municipality for breach of Contract A. If the consultant engineer
recommends awarding to the nonlowest bidder, he will likely be found liable for the owners damages
for breaching of his duty of care by making this negligent recommendation.
Q4.
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 bagging handling
facility and the relating security facility for a major airline.
The firm's 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 airline company did not pay monthly progress payments within 15 days
following certification that a progress payment was due. Pursuant to the contract, an
independent engineering firm the certification was carried out by an independent engineering
firm engaged as contract administrator.
The work under the contract was to be performed over an 8-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 two million dollars "on the table".
Three monthly progress payments were certified as due by the independent engineering firm
and paid by the airline in accordance with the terms of the contract. However, after the fourth
monthly progress payment was certified as due by the independent engineering firm, the
airlines finance department asked the information technology firm's representative on the
project for additional information relating to an invoice from a subcontractor to the
information technology firm. The subcontractor's invoice comprised a portion of the fourth
progress payment amount. The airlines finance department requested that the additional
information be provided prior to payment of the fourth progress payment.
There was nothing in the signed contract between the information technology firm and the
airline that obligated the information technology firm to provide the additional information on
the invoice from its subcontractor. However, the information technology firm's representative
did verbally indicate to the airline's finance department that the additional information would
be provided.
The additional information relating to the subcontractor's invoice was never provided by the
information technology firm.
Sixteen days after the fourth progress payment had been certified for payment, the
information technology firm notified the airline in writing that it was terminating the contract
because the airline 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, its
purpose, how it arises, and how it would apply to the facts.
Equitable estopale applies because the ITF was not entiteled to terminate the contract. The
company was subject to significant loss and was trying to use the default of the 4 th payment as an
excuse to break the contract. If ITF insists on express writing fo the contract, AFD could invoke the
relevant legal principle concept of provisory of equitable estopale. A gratuitous promise has been
made by ITF representative to AFD . the promise was to be given additional information Before the
4th payment. The contract was not amended the promise was not in writing and it was freely made,
making the promise gratuitous. AFD was clearly depending on a promise. The contract stays
enforced and ITF takes the loss. Strict contextual rights are not followed because equiteable
estopale is an exceptional remedy to those rights. Any other result would be inequitable. Similar ase
is conwest P.92 of text.
In this case, the contracted party has attempted to escape performance on a bad contract by tricking
the contracting party into defaulting on the contract by agreeing to provide information on an invoice
before a scheduled payment (a gratuitous promise: section 10.1) and then terminating the contract
after the payment lapses, having never provided the information.
The contracted firms action of terminating the contract in this case is likely to be equitably estopped,
as in the 1979 decision by Ontario Court of Appeal in Owen Sound Public Library Board v. Mial
Developments Ltd. et al. In that case: owners payment date was extended gratuitously by
contractor; owner requests sealed document confirming it, and contractor agrees to produce it; time
lapses and still contractor does not produce documents; contractor then attempts to enforce original

contract date. To resolve the issue, the Court of Appeals ruled the action (trying to enforce an
agreement which lapsed because of ones own tardiness) inequitable. The situation at hand is
entirely analogous, and as such, the contracted firm will not be successful in its attempt to terminate
the contract. (section 10.2)
Specifically, the relevant legal principal is "equitable estoppel". Equitable estoppel is a court action to
stop a party from backing down from a gratuitous promise (which is not normally legally binding) to
provide a more fair result, typically arising where the promise has been made to allow flexibility in
fulfilling a pre-existing contract and has already been acted on by the promisee.
In this case in particular, the IT firm made a gratuitous promise to the courier company when the
"information technology firm's representative verbally indicated to the courier company's finance
department that the additional information would be provided" prior to the payment of the fourth
progress payment; and backed down from it by nevertheless attempting to terminate the contract
after the time lapsed, having still not provided the information. As in Owen Sound, this is likely to be
equitably estopped.

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