CHAPTER 7

FIRST SAMPLE EXAM (1993) 7

NOTE: The following Is the Professional Practice Eul'D, hdd April 24th, 1993. Mloor
edltln& has been done to lave space, and the refertnces to the 1984 RegulatioD (538/84) bave
been replaced with rduences to tbe 1990 Regulation (941/90). Try the questions on this
exam paper under exam condldons. Allow younelf90 mhlutu, maximum, to solve each
part before looking at the aonren. This chapter is not contained on tbe video-tape.

7.1 PART A - Etbics Exam Questions

PROFESSIONAL PRAcnCE EXAMINATION - APRIL 24, 1993

PART" A" - ProCessional Practi« and Ethks

FOUR QUESTIONS constitute a complete Part· A· Question 1 is compulsory - ALL candidates must attempt
Question I, plus three additional questions. All full questions are of equal value (25%). When answers for more
than fout questions are submitted, without stating which four are to be graded. marks wiU be awarded for only
the first fou.r answers in the book.

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 should identify the applicable sub-section numbers in Ontario Regulation 941190 and comment
on the action in each situation. .

ETHICS QUESTION 1.
Assume that you are a senior Professional Engineer employed by an equipment manufacturer. A division of the
company, under your direction, has designed and assembled a novel type of all terrain vehicle. A prototype of
the vehicle has been involved in an accident, which is under investigation by Transport Canada. It is not known
whether the accident was due to operator error or failure of a machine component
(a) Do you have any ProfessionaJ responsibility to become involved with the investigation?

(b) Having ref~ to the code ofProfcssional Ethics and Professional Conduct, what contribution can
or should you make to facilitate the investigation?

ETillCS QUESTION 2.
(a) For what reason can a Certificate of Authorization be cancelled?

(b) Is a P.Eng. required to'keep up to date with technical development in the professional's specific
field of interest?

(c) Why is it important that a P.Rng. protect the public interest in Engineering matters?

(d) How can you become involved in the affairs and activities of the association?

(e) What are the consequences to a company that uses persons without professional qualifications
in positions which are generally considered to require Professional Engineering expertise?

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ETHICS QUESTION 3.
A Professional Engineer employed by the Ministry of the Environment has inherited the family construction
business. From time to time in the past, this construction company bas contracted work from the Ministry. The
P .Eng. would like to cany on the construction business but also wants to continue as a Ministry employee for five
(5) more years, which would be the minimum time needed to qualify for early retirement
.. Is it ethically possible for this P.Eng. to do so? If you believe tbat it is, are there certain steps that must be
taken to avoid a conflict with Ontario Regulation 941190 sections 72 and 771 ~

ETmcs QUESTION 4.
Assume that you an: a P.Eng. engaged in supervising the construction of a natural gas pipe line. The lengths of
pipe are joined together by welding before the pipe is lowered into the trench. All of the welds must be
radiographed (x-rayed) to insure that they are sound before the pipeline trench is backfilled. Your employer has
contracted the radiography to an outside contracting firm which does the x-ray work and inteIprets the results.
Although the outside contracting finn has a licence ofTecbnica1 Competence from the Federal Government, it
has no Professional Engineers on staff. From some of your field observations. you are concerned about the
completeness of this company's inspection procedure. If it bad an engineer on the job, you would certainly
discuss your doubts with this person, but since it does not, you are uncertain how to proceed. You have reread
the intercompany contract for this inspection work. No reference is made in it about Professional Eogineering
requirements on the job, but you still feel that the work has an engineering component.
.. What is your ethical responsibility in this situation?

ETmcs QUESTION S.
Many gcoeml hea1th problems reported by the staff of XYZ County courthouse appear to be related to the
workplace atmospheric environmenl By resolution, County Council has instructed the Chief Administrative
Officer (C.A.O.) nto obtain quotes to have the matter rectified."

Assume that you are a P.Eng. in a consulting fmn with qualified professional staff and with coDSiderable expertise
in the "clean air" field. You know that the cost of rectification depends on the source(s) of the problem. You
have spoken to the C.A.O. and have advised that a two stage approach to the solution is necessary. First, the
sources of the problem must be identified, for which only a modest expenditure is required. Followirig this. the
cost of the remedial work can be estimated realistically and hence tenden called fOT.

You are shocked to read an advertised proposal from the County requesting fixed price bids to clean up the Court
House building to a specific "air quality reading," while in the same newspaper the C.A.D. is quoted as saying
that the county bad budgeted -X" dollars for the work. Based on your previous experience. you feel strong1y that
the procedure proposed by the County is wrong. You arc concerned that some general contractors will bid on
the work without undcntanding a1l the possible complications, and that satisfactory results will not be achieved.
Your attempts to reason with the country's CAD. bave been to no avail. You wonder if your finn should refrain
from putting in a proposal.
... Do you have an ethical responsibility to take further action? Discuss your social obligations in this matter.

7.2 PART B- Law En_mlDation Questions

PROFESSIONAL PRACTICE EXAMINATION - APRIL 24, 1993

PART "B" - Engineer:lng Law and Professional Uability

FOUR QUESTIONS constitute a complete Part -B". All four questions arc of equal value. Question I is
compUlsory. Four other questions are offered, and 3 of these mqst be selected for a complete paper. When
answers for more than three optional questions are submitted (in addition to Question I) without stating which
three are to be considered. marks will be awarded only for Question 1 and theji1'$t 3 answers in the answer book.

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 LA W QUESTION 1. (COMPULSORY - TO BE ANSWERED BY EACH CANDIDATE)
I. Bn"ej/y. derme any fiYe of the following:
(a) Secret Couunission
(h) Common Law
J
(e) Contract Rectification
(d) Director's Duty of Care
(e) Duress
(f) Gratuitous Promise
(g) Parol Evidence Rule
(h) Slander
(i) The 5 Essentials ofa Binding Contract (list only)

LAW QUESTION 2.
2 . Answer all aftbe following question:

(a) Briefly describe the basis upon which damages fOT breach of contract are ca1culated at common law.
What is the difference, if any, between the basis for calculating damages for breach of contract and for
tort?

(b) Bricfly describe how a bonus feature may be included in a guaranteed maximum price construct:ioo
contract to the advantage of both the owner and the contractor.

(e) GasMates Limited is a designer and manufacturer of small enginc-Orivcn equipment with. factory in
Ontario. It produa:s lawnmowers., snowploughs and portable gasoline-powered electrical genetttors.

A consumer, "C", purchased a gasoline--powered lawnmower manufactured by GasMates from a retail

hardware ston:. The Hardware Club Limited. which is an authorized dea1er of GasMates. The model '
which "C" purchased included a written manufacturer's wammty that the unit would be free from defects
and deficiencies for a period of one year from the date of purt:hasc.

"C" was quite satisfied with the lawnmower and used it for a Dumber of years. The lawnmower required
no maintenance except for a yearly oil change. After five years ofuse, lbe lawnmower's blade required
shaJpening. "C" turned tbelawrunower over and used a wrench to loosen theout which secured the blade
to the drive ahaft of the engine. As "C" was loosening the nut. "C" inadvertently rotated the blade one
full tum and the engine started as a result

"C" sustained serious injuries as a result of the engine starting. including serious cuts to the bands, the
loss of a thumb, and a concussion caused when the WTCDch "C" was using was burled at "es" bead by
tbe spinning blade. "Cot also sustained property damage when the wrench broke a window after hitting
"C" in the bead.

After an investigation, it was determined that "c" failed to read the maintenance section in the owner's
manual which was provided with the lawnmower. The owner's manual contained the following sentence
in regular size print:
"The spark plug should be disconnected before any maintenance is performed on this unit"

No other safety warnings were given.. Had "C" disconnected the spark plug before attempting to remove
the blade, it would have been impossible for the engine to start.'

I> Discuss what claims "C' may make in the circumstances.

 problem, pnor to expiry of the option period, and the optionor indicated that the option period would be
extended. However. no written record of this extension was made, nor did the optionorreceive anything from
the optionee in return for the extension.

The optionee then proceeded to perfonn the services and to finally expend the specified minimum amount
during the extension period. However, when the optionee attempted to exercise its option to aC4uire the
mining claim the optionor took the position that, on the basis of the sbict wording of the signed contract, the
optionee bad not met its contractual obligations. The optionor refused to grant the mining claims to the
optionee.

• Was the optionor entitled to deny the optionee's exercise ofthe option?
• Explain the contract law principles that apply to the positions taken by the optionor by the optionee.

LAW QUESTION S.
5. Prime Equipment Inc. (- Prime-) is a company engaged in the business of supplying heavy ·equipment used
in the oil exploration and drilling industry. Prime became aware that Conventional Oil Company Ltd.
("Conventional,,) required a contractor to design, manufacture, supply and install specialized gearboxes. The
gear boxes would be used to drive a number of bucket wheel conveyor belts that traruported sand at
Conventional's oil extraction tar sands plant in Alberta. Prime decided to tender on the Conventional contract.

In order to tender on the contract, Prime set out to purchase the geac boxes. Prime was contacted by a
representative of MachineWorks Ltd., a company which manufactured similar equipment After visiting
Conventional'S site and examining the conveyors, the representative of Machine Works became familiarwith
the requirements of the gear boxcs. MachineWorlcs represented to Prime that MachineWorb would be able
to design and manufacture the specialized gear boxes and that the gear boxes would be suitable for the
purpose intended. On the basis of these representations. MachineWorXs and Prime entered into a contract.
MachineWorks agreed that if Prime were successful in its tender to Conventional, MachineWorb would
provide the equipment for a price of $300,000. The contract also contained a provi.ion limiting
MachineWooo' total liability to $300,000 for any loss. damage or injury resulting from MachineWorks'
performance of its services tmder the contract

Based on the informatjon provided by the MachineWorks representative, Prime prepared and submitted its
tender to Conventional. Conventional accepted the tender and entered into a contract with Prime for the gear
boxes.

The gear boxes were installed at Conventional's site by employees of Prime according to MachineWorlcs'
installation procedures. Shortly after the gear boxes were put into service, main gears inside them failed As
B result of this failure, the conveyers were damaged and it was impossible for Conventionsl to operate its
conveyors. MachineWorks made several unsuccessful attempts to correct the gear boxes.

In order to meeU its obligations under the Conventional contract, Prime hired another supplier to correct the
defects in the gear boxes. For an additional $400,000 Prime was able to correct the problem by replacing the
gear boxes with gearboxes manufactured by another company and by repairing the damage to the conveyors.
The total amount which had hc:en paid by Prime to MachineWorks prior to discovering the defect was
5250,000.

Explain and discuss what claim Prime can malee against Machine Works in the circumstances. Would Prime
be successful in its claim? Why? In answering, please include a summary of the development of relevant
case precedents.

NOTE: This is Ihe end of the uam - Try to solve it before reading the aoswen 00 the out pace.

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 7.3 Solutions to J!:tlJlcs Questions
The following solutions are suggested by the author of this Study Guide.

ANSWER TO ETHICS QUESTION I.

l.(a) The term "become involved" is very vague, and should be more clearly defined However, the answer
is clearly "yes," regardless of the definition.

If there has been serious damage or death as a result of the accident, the company (and I) will certainly
"become involved" in whatever legaJ actions may be taken, whether I wish to ornot, so it would be important
to learn the cause of the accident, and an offer to Transport Canada to "become involved" would be
appropriate.

If the damage is not an issue, but the design may be suspect, then I have a clear obligation to safeguard the
public under the Code of Ethics (Reg. 941/90, section 77 .2.i) by finding the cause oftbe accident, because
the prototype vehic1e (or future similar vehicles) may become involved in other accidents and be a danger
to life. If future failures occurred, of a similar nature, then I could be guilty of professional misconduct, as
defined in Reg. 941/90, Section 72.(2Xd), for "failing to make reasonable precautions .....

However, speaking as an engineer involved in design, sheer professionaJ curiosity would drive me to "become
involved." This question has a simple answer.

l.(b) My contribution to the investigation would be to supply technical infonnation on the vehicle. as
requested. If confidential infonnation is required to protect the public, then in accordance with the Code of
Ethics (Reg. 941/90, section 77.2.i), I wou1d provide it

A more important question is what would be done with the results of the investigation. If the investigation
sbows that the vehicle may endanger the public, I have an obligation under the Code of Ethics to infonn the
public (if other vehicles have been sold), and to remedy the defect in the design. Failure to do so wou1d be
professional misconduct, if future faiJlU'CS occurred (see same references as above).

ANSWER TO ETIDCS QUESTION 2.

2.(a) The rules for issuance of a Certificate of Authorization are described in Regulation 941190, section 47.
The certificate can be cancelled if any of the requirements are substantiaJly changed:
• A common reason would be if the Professional Engineer designated as the person who assumes
responsibility and supervises the engineering services, resigns, retires, quits or is fired, or loses his or ber
licence to practice for whatever reason.
• If the company no longer provides professiona1 engineering services.
• The company fails to pay the annual fee.

2.(b) A Professional Engineer is required to keep up to date with technical developments in accordance with
the Code of Professional Conduct, Reg. 941190 72.(2)(b) which classifies "undertaking work the
practitioner is not competent to pcrfonn1t as professional misconduct In addition, the Code of Ethics,
Reg 941190 section 77.1 requires the engineer to be knowledgeable and competmt in the provision of
engineering.

2.(c) It is important for a P.Eng. to protect the public interest in engineering matters for two reasons, an
obvious one and a philosophical one:
• The obvious reason is that it is required by the Code ofEtbics, Reg 941190 section 77.1.
• The philosopbicaJ reason is that this is the basic pwpose of establishing engineering as a selfwregulating f
profession. If the safeguarding of the public interest (meaning the life, health, property or the public C.
welfare) is not important to the engineer, then this strikes at the root of the philosopby regulating all of
the professions in our society. f
4
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•
2.(11) A gooo way lor a person wntmg this exam to get involved in PEO activities would be to enroll in the
Engineering Intern Training (EIT). M an Err (or as a P.Eng.), I would receive notices of and could
attend chapter meetings in my region of Ontario. I could also read the Engineering Dimensions, and
possibly write to the Editor. As a P.Eng., I could offer 10 serve on PEO committees, to serve my chapter
in an executive capacity, or to stand for election to PEO Council.

2.(e} A company that permits persons without professional quaJilications to practise engineering is acting
contrary to the ProfessionaJ Engineers Act, section 12, and according to section 40, is guilty of an
offence and, on conviction, is liable to a fine of S25,OOO (or S50,OOO on a second offence), If the
company's personnel are eligible for P.Eng. registration, then they should apply for it. I{they are not
eligible, then the company may be receiving poor quality services, and the reputalion oflhe company
may be al risk.

ANSWER TO ETHICS QUESTION 3.

3. The engineer may continue to remain a Ministry employee, provided thai there is no conflict of interest with
the construction business, and provided that the Ministry (the employer) and the clients of the construction
company are aware of the dual activities of the engineer. The engineer must strictly avoid any construction
business lhat involves the Ministry, or any Ministry business wbich involves his company (particularly
preparation of Requests {or ProposaJs by the Ministry which only the family business could meet}. The
conflict of interest is prohibited by the Code of Ethics, (Reg 941190, section 77.4 and 77.5) and is considered
to be professional misconduct under the Code ofProfessiona1 Conduct (Reg 941190. section n(2).i), unless
proper disclosure is made.

It would be best for the family construction business to be managed by others for five years. These
ammgements should be made known to the Ministry of Environment, and to all clients of !he construction
company, to satisfy the disclosure requirements.

ANSWER TO ETBlCS QUESTION 4.

4. (Note: This question is rather vague about your precise position in the company and responsibility for the
project.. Therefore, you must assume a role which seems logical, and then answer according to the way you
have defmed the problem. Many different answers are therefore acceptable. According to the question, you
are "supervising" the construction, so let WI assume that you are the project manager, and you are completely
responsible for the project, including the weld quality, trenching, material quality, and proper backfilling.)

The flTSl step in solving any problem is to gather the facts, ask questions and determine the issues. As you
know, the Professional Engineers Act applies, and the Code of Ethics clearly states that the professional
engineer's duty to public welfare is paramount (Regulation 941190 Sec. 77 .2.1.), and in a project as potentially
dangerous as natural gas pipeline, you must be very diligent in safeguarding life, health and property. In fact,
failure to do so may be considered professional misconduct (as defmed in Regulation 941190, section
72.(2)(b)). There is a further duty to correct or report any situation that may endanger the public, in
Regulation 941/90, section 72.C2Xc}. Therefore, as a supervisor of this project, you have a responsibility to
e:nsure ddt the public welfare is protected.

However, in any technical area where safety is an issue, oilierregulatioDS, codes and standards usually exist.
Vournat step would be to imd and ~ these documents. if you have not done so, almldy. (In fact, a simple
web search would show that there are at least two government regulations made under the Technical
Standards and Safety Act, 2000 which regulate natural gas and gas pipelines.) Let US assume lhat you have
these documents. If these regulations specify that an engineer must direct the weld inspection. then you
would approacb the sulH:ontractor conducting the x-ray tests, to determine why the regulation is not being
foUowed.. If the sub-contractor is providing engin~ring SCJYices without a licensed engineer, then you would
require them to Slop operation until they hired an engineer who could direct the work properly. If the sub-
contractor refused to do so, you would ask PED to investigate and enforce the AcL

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 In any quality assurance procedure, there must always be a continuous chain of people who are responsible
for quality - from design, to manufac~, to inspection and documentatioD. The question implies that the
quality assurance process has a gap in it. since you are near the top oftbe qualitY assurance chain, and you
do not have confidence in the quality. Your actions would be more aggressive ilyou have proof of danger
or incompetence, but the problem says there is merely a "concern" about the procedure, so you would be
polite: but firm in dealing with the sub-contractor. Ifyourconcems are satisfied, no furtheractiQn i~ required.

However, if you are not confident lhat weld quality is being inspected adequately, you would contact a more
superior person within your company, because: your company has an interest in ensuring that the work is
performed competently, and you would get full support on an issue as important as this. All discussions
should be documented in writing, in case they had to be verified later in a court case.

ANSWER TO ETIDCS QUESTION 5.

S. The constraints imposed by the Chief Administrative Officer (CAO) will limit the quality of the solution that
will resull If! am correct (and the problem states that my previous experience is valid), then I would not
bid on the project since satisfactory results will not be achieved, the County will 10K public money, the
contractors who mistakenly try to solve the problem may be sued or suffer loss of reputation, and this will
reflect badly on the entire profCS!ion. In other words, many bad effects result from the CAO trying to put
financial constntints on a tecbnical problem.

Therefore, I do have an ethical responsibility to take further action. Safeguarding ofbealth is at risk in this
case., and the method used will not remedy the Mclean air" problems, Therefore I should speak out to protect
the public welfare, in accordance with Regulation 941/90, section 77 .2.i. The action by the County Council,
indicates a clear lack of care for the interest of the public even though I penonally spoke to the CAO. A
letter should be sent to the County Council reiterating the concern. I should take an active role in auditing
the process and questioning the procedure, to ensure that public welfare is protected.

However, there anD question of professional misconduct ill fail to do any of these things, since I am under
no contract or obligation, other than the Code of Ethics. Moreover, as a potential bidder on the project, my
activities may be construed as self-serving, so any comments must be backed by sound technical evidence,
as required by the Code of Ethics in Regulation 941190, section 71.2.ii .

7.4 Solutions to Law Questions

ANSWER TO LAW QUESTION 1.-
1.(a) S~c.rd Commission - a bnbe, kickback. rewud or advantage, sucb as money or somethUig of value,
resulting from a secret agreemcot to deceive or show favour (or disfavour) to a third party. Offering or
accepting a secret commission is an offence under the Criminal Code of Canada. Section 338. A
Professional Engineer who offers or accepts a secret commission is also subject to charges under
Regulation 941190, Section 72.(2Xi), n .t .i., 71. I.ii., 71.3 and 71.4. (See p. 169 also Wsecret profitM)

I.(b) Common Law - In deciding cases, the cowts apply legal principles established in previous court cues.
These court decisions are known as "Conunon Law." It is judge-made law, as opposed to law "statutesM
passed by legislative assemblies or parliaments. All provinces except Quebec use common law. (See
law text, pp. 2 and 99.)

I.(c) Contrad RectijicaJion - A court order used to correct an obvious common mistake. The party applying
for the order must persuade the cow1: that the written contract is inconsistent with the terms agreed upon
by the parties, because ofa secretariaJ or recording mistake. (See "rectification, Mlaw text, p. 113.)

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I.(d) Director's 1)uty oJ l :are· hvery (hrectorand ottlcer ot a corporatIOn In exerClsmg powen; or dlschargmg
duties shall:
(a) act honestly and In good faIth WIth a view to the best mterest ofthe corporation; and
(b) exercise the care, diligence and skill that a reasonably prudent person would
exercise in comparable circumstances. (See law text, p. 20.)

1.(0) Duress -Intimidation, such as threatened or actual violence or imprisonment of a person, Ii close relative
or property. An agreement executed under duress is not an offer willingly made and accepted, and
therefore is not a binding contract. (See law text, p. 108.)

I.(Q Gratuitous Promise· A promise made without something of value (consideration or a seal) expected in
return and therefore not legally binding. It may be enforceable under equitable estoppel, iftherc is a cleat
inequity. (See law text, p. 88, under "equitable estoppel.")

I.(g) Parol E~idence Rule - "Parol" means "oral" or "verbal". The parol evidence rule states that ifclauses
or conditions are not written into a contract, they are not enforceable in resolving a dispute. A contract
may, of course, always be amended by agreement. There are only a few exceptions to this rule. (See law
text, p. 128.)

I.(h) Slander - A defamatory oral statement. It is slightly different from libel, which is a written or permanent
defamatory statement. Either may be the basis ofa tort. (See Law text, p.53.)

l.(i) Five essentials ofQ binding contract: For a contract to be binding and enforceable. five elements must
be present:
1. An offer must be made and accepted;
2. a mutua} intent to complete the contract;
3. a "cons;d~l"Qdon." usually m~ney;
4. "capacity" or ability of the parties to create and perform a contract; and
5. a lllwful purpos~ (legal purpose) for the contract.
If anyone (or more) oftbe above essential elements is not present, then a contract bas not been fanned.
8D.d such an agreement is not enforceable. (Sec Law text, p. 75.)

ANSWER TO LAW QUESTION 2.

2.(a) There are long-established common law principles for calculating damages for breach ofcontract, starting
with the 1854 case of Hadley "s. Baxendale.. The basic principle is that damages must "flow naturally
from the breach," which means that the damages should cover the reasonable consequences which would
benonnally foreseeable. For example. if a contract is awarded for repair of a machine part, and the repair
is seriously delayed., then reasonable damages might equal the cost of manufacturing a replacement part,
but not the economic loss of production of the machine from which the part was taken, unless avoiding
lost production was spedfically mentioned as a clause in the contract. Obviously. it is good law, and
good engineering, to consider all reasonable ways that an agreement may go wrong, to foresee the
damages which may result. and to include clauses which specify bonuses for good results, payments for
damages, andlor limits to liability. Damages cannot be included to "punish" a contractor. (See law text,
p. 139, "remedies.")

The principles for damages in tort law are similar to contract law, in that damages must be only those that are
reasonable in the circumstances. However, one significant difference is that in a contract, the parties have
an opportunity to include clauses which limit the damages for which one of them may be liable. However,
in tort Jaw, a duty ofcare may exist, even iftbere is no contract, and therefore no opportunity to limit liability.
For example, in the case of Rivtow Marin~ lIS. Washington Iron Works-, it was established that economic
losses (such as lost profits) may in some cases be recoverable in tort law. (See law text, p. 55.)

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 2.(b) A "bonus" is an extra payment for special service (like a "tlp"). A bOnus clause Slver me a contractor
an incentive to reduce costs. For example, a clause may say that for every dollar saved beneath the
guaranteed maximum price, the contnctor will receive a percentage of the savings. Both the owner and
the contractor benefit 1bc owner may ask or expect the engineer to estimate the contractor's costs, to
get an accurate estimate of the maximum price, so that the bonus will be a reasonable incentive. (See law
text. p. 183.)

2.(c) The consumer ·e" could make a claim for damages under tort law, and would have to prove that the
manufacturtr railed to exercise a duty of care. However, the consumer is unlikely to collect damages.
Manufacturers owe a duty to consumers to ensure that DO defects will give injury during the ordinary
course of use. However, the repair made by the consumer"C" should have been carried out following
the manual provided. Since the safety warning was ignored, the consumer would not likely collect
damages. A similar case is in the law text George Ho Lem vs. BarollO Sporu. (See law text, p. 51 .)

Although the manufacturer would probably claim the warning to "remove the spark plug before working on
the machine" was clear and unambiguous, the design engineer would have an obligation under the Code of
Ethics, to review the accident and see if the machine can be made safer. This might include improved
warnings in the manual or on the machine, or making the warning print larger, or re-designing the machine
to require the $parle plug to be removed before the blade can be removed.

ANSWER TO LAW QUESTION 3.

3 . The purpose of II law-suit in a case of tort is to compensate a party sustaining loss. It is not to punish
criminals, which is covered under the Criminal Code. The 3 principles of tort law could be applied to this
case. All three principles in a tort action must be proven by the plainliffbeyond a "balance of probabilities"
for the claim to be successful. The 3 principles arc:
(a> a duty of care;
(b) II breach of that duty;
(c) resulting loss or damage

In this case, it appears that the owner would be successful in a tort claim llgainst the government engineer.
The government engineer (wbetberintentiona1ly or not) was placed in II position ofnsponsibility fora duty
of C~, simply by reviewing the plans and offering an opinion; that is, by writing the -Good plans" note.
Therefore, principle (a) is satisfied. Since the government engineer did not carefully analyze the plans, that
responsibility was violated, satisfying principle (b), and damage occurred as II result of the violation,
satisfying principle (c).

The fact that no fee was paid by the contractor does not Jessen the responsibility of the government engineer.
The contractor also bears some responsibility for the failure, since there was no rebar schedule on the plans
and the contractor apparently determined the sizes. A conscientious contractor would have known the
consequences of a poor design and would have been more speciJic in asking for engineering approvaJ .

This case was taken directJy from the law text; see Unit Farm Concrete liS. Eckeleo Acres, p. 40. The court
(00 appeal) assigned responsibility for reconstruction costs and remedial work, as 75% to the government
engineer, and 25% to the contractor. Where the claim is in tort, the contractor and the government engineer
are "conCWT'COt tortfeasors". lbe government is ·vicariously liable- for the act of its employee engineer.

ANSWER TO LAW QUESTION <.

4. This is Sample Case Study on page 92 of the text The facts are very similar to a case which actually came
before the courts (See Conwe.rt Ezploration vs. uloin. p. 88.) The principle of "equitable estoppel" states
lbat if one party to a contract makes a gratuitous promise which effectively amends the terms of the contnct,
and the second party relies on that promise, then the rust party may be stopped from reverting to the original
terms of the contract A court will pennit equitable estoppel only to avoid an obvjously unfair result

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 In the Conwest case, the court ruled that the optlonor IS not entitled to deny the opllonee's exercise 01 tile
option. When the optionee notified the optionor of the problem and requested the extension, the optionor
agreed verbally to the extension. This verbal agreement is a gratuitous promise by the optionor, since no
"consideration," or payment was made to obtain the extension. In contract law an agreement without some
consideration is nonnally unenforceable. However, denial of the options would be inequitable, since the
optionee relied on this promise and completed the work. 1berefore, the optionee could exercise "equitable
estoppel- to prevent the optionor from reverting to the original tenos of the contract .

ANSWER TO LAW QUEsnON s.

5. This question is presented in detail as a Sample Case Study in the specified law text on pages I S4 to 156.
The problem involves a fundamental breach of contract, and while in previous years a clause to limit liability
was not enforceable in the case ofa fundamental breach, recent court decisions have changed the law (as
explained in the law text in Chapter20, Fundamental Breach), and the clear wording of the provision limiting
liability would now stand (see Hunter and Syncrude case, pages 127 and 151). This is an example where the
law has changed in the last few years, as the result of court ·'precedents." (Sec pages 154 to 156.)

THREE FINAL HINTS (repeated from page lH):

o PART A- The examiner who sets and grades PART A of the PPE bas asked me to explain that, wben
applying tbeREAD -EGAD! - SUMMARIZE proccdute. too many candidates spend a1mostall of their
time on the E,G.A steps (Ethical issues. Generation of alternatives, and Analysis) and not enough time
on explaining step D! (the Decision) and the SUMMARY. This usually results in a sbort and incomplete
answer to the question. Remember that the EGAD! process is intended merely to help you tbinJc about
the problem in an orderly way. It is not necessary to write out these steps; your grade will be based on
bow well you have explained your decision in your written summary, so start to write L'!I soon as you can.

o PART B - The person who sets and grades Part B of the exam is a prominent lawyer and Professional
Engineer. He bas asked me to "emphasize to the candidates the importance of closely studying the text
material in preparation for the examination. All too often, in answering, unsuccessfu1 candidates simply
identify legal concepts without indicating an awareness of the meaning of the legal principle. Providing
conclusions without reasons doesn't indicate to the marker that the candidate bas a sufficient awareness
ofthe nature of the legal principle. Reliance on memorizing sample examination solutions also occun
too often. These are problems reflected on many recent unsuccessful exam papos. It's really important
to convey to the candidate that a detailed appreciation oftbe text material is required, as the vast majority
of failures simply stem from lack of preparation,"

o DrFFERENCE BEtwEEN ETIDCS & LAW: As mentioned on the video-tape, ethics is a code of
behaviour which one follows in order to avoid problems with the law. Another way of expressing it is
that "Ethics is what you follow to avoid bad things from happening, and Law is what you must follow
after bad things happen." The people who grade the exams have suggested that it is not wise to mix
ethics and law in your answers on the PPE. That is, your answers to the ethics questions should be based
mainly on the Professional Engineen: Act and Regulation 941 , Section 77 (the Code of Ethics) and
Section 72 (the definition ofprofessionaJ misconduct) and concepts from the ethics text. On the other
hand, your answers to the law questions should be based on Canadian law, such as the laws of tort and
contracts and the previous law cases (''precedentsj whicb are discussed in the law text Separating the
concepts simplifies the marking.

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 CHAPTER 8

SECOND SAMPLE EXAM (1998) 8

NOTE: The foUowing is the Professional Practice Enm,held September 12, 1998. Minor
editing has been done to save space. Try the questions on this exam paper under exam
conditions. Allow yourself90 minutes, maximum, to solve each p ....t before looking at the
answers. This chapter Is not contained on the video-tape.

8.1 PART A- Elbla: Eum Questions

PROFESSIONAL PRACTICE EXAMINA nON - September 12, 1998
PART" A" - Professional Pradke and Ethics

FOUR QUESTIONS constitute II complete Part" A." Question 1 is compulsory - ALL candidates must attempt
Question I, plus three additional questions. AJi full questions are of equal value (25%). When answers rOT more
than four questions are submitted, without stating which four arc to be graded, marks will be awarded for only
the first Jour answers in the book.

Where a question asks if II certain action by an engineer was ethical or not, a simple · yes- or "no· answer is not
sufficient: you should identify the applicable sub-section numbers in Ontario Regulation 941190 and comment
on the action in each situation.

ETIDCS QUESTION l.
a) Axe any of the foUowing advertising components appropriate on a consulting finn's letterhead:
i) the PED logo
ii) • reduced reproduction of your eugineering seaJ
iii) the slogan "Iowe&t price in the business"
Briefly describe the reasons for your selection{s).

b) Can a corporation. holding a Certificate of Authorization, still provide engineering services to the public if
the P.Eng. named on the certificate is flttd or resignJ?

c) DiSCUSI the principal objective of the Association of Professional Engineers of Ontario.

d) Briefly describe the main differences between a limited licence. a temporary licence and a licence.

e) Name three requirements that a professional engineer must meet in order to use the title "consulting engineer".

ETlDCS QUESTION Z.
Professional Engineer Mu, employed. by an aircraft manufacturer, conducted tests on a new,lightweight, brake
system being developed by Mu's employer. Mu found that under certain conditions the composite lining oftbe
brake pad would fuse, which could lead to the possible destruction of the aircraft when landing.

Later, Mu attends a conference in the United States on aircraft design and inadvertently overbears Professional
Engineer Omicron describing a new braking system that is under development by Omicron's company, a
competitor 10 Mu's company. Mu suspects that Omicron's brake is similar to that which Mu', company is
developing. Mu feels an obligation to act upon this infonnation but is unsure what to do. Mu asks you, a P.Eng.,
what action to take, if any.
.. What advice do you give Mu?
.. What are your ethical Obligations?
... Cite the relevant sections of Professional Misconduct and the Code of Ethics.

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h~l'1tJCS (,JUJ!:bllUN 3 .
For seventeen years Psi has worked in the engineering division of Electron. a large corpomtion in the electrical
industry based in British Columbia. Psi was promoted to vice-president of engineering two yean ago and
rransferred to Manitoba. Last year the major shareholder of the corporation sold its ownership to a foreign based
company. This change in ownership Iw resuJted in a new corporate structure. Psi's position has been designated
redundant and Psi has been offered a generous financial settlement and one month's notice. Psi decjdes to accept
the package and leave at the end ofthc month. -

For some time Psi has wanted to join a friend and stan a partnership de5igning and manufacturing electrica1
widgets in Ontario. Through their experiences at Electron, Psi and the friend believe they have gained sufficient
technical expertise to create a profitable company. They decide such an opportunity may not come again and
decide to establish their own company.

to Are there any professional requiremt:nts and obligations that Psi should meet before starting the company?
to Discuss this situation as it relates to the Code of Ethics and Professional Misconduct

ETIDCS QUESTION 4.
Professional Engineer Rho is a sales engineer for Kool Inc. Kool manufactures and sells tenninal units (devices
that detennine the final temperature control in heating, ventilating and air conditioning systems) . Rho offers.
free of charge, to consulting engineer Omega. a computerized design developed by KaolInc. for complete air
distribution systems. The computer printout specifies not only terminal units but also duct size, duct fittings. air
quantities, static pR:SSUrC. noise leveIs. sound absorption and insulation Rquirements. This output information
is based on data which is input by Engineer Omega.

.. Is it ethical for EngineerOmega to utilize the services provided by KoolInc. without his independent analysis
of the data furnished and considention of alternatives ?
to Is it ethical for Engineer Rho to offer these services to Engineer Omega?

ETIDCS QUESTION S.
Procorp, a wellicnown and respected development company, was awarded the contract to develop a site for an
upcoming international symposium. It is expected that thousands of delegates will be attending from many
different countries. Procorp is responsible for renovating some existing facilities and building additional facilities
to accommodate the symposium members. Your finn has been retained by Procorp to design a pedestrian bridge
that will permit access to the facilities from the local transportation network..

You have been working with the firm for three years and you were ~t1y licensed asa professiobal engineer.
Your boss, also a profcssionaJ engineer, bas asked you to design the structural components for the pedestrian
bridge. You complete the design, including a construction cost and time estimate, and present it to ~rp for
their approval prior to obtaining approval from the City building department

After reviewing. Procorp requests a design change on the basis that the bridge cannot be completed in time for
the symposium and the estimated cost is JOOA greater than their allocated budget Procorp says they haVe received
approval from the regulatory Ministry to reduce the design standards for the bridge for this special occasion and
asks you to redesign it using the reduced standards.

You know you won't have the time to redesign the bridge. You discuss this matterwithyourboss. Yourboss teUs
you the fum designed a similar bridge for a private client last year. 'Ib.is bridge was designed using lower desigu
standards since it was not a public bridge. With only some minor modifications to its design it should meet
Procorp's budget and time constraints.
to Are there any restrictions that might prevent you from uaing the previous design?
to What other issues sbawd you address before proceeding?

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 •
,• 8.2 PART B - La,. E:nminadoD Questions
•• PROFESSIONAL PRACTICE EXAMINATION - September 12,1998
PART "B" - Engineering Law and ProCessional UabUlty

,,• FOUR QUESTIONS constirute a complete Part "B". AJI four questions are of equal value. - QUestion I is
compulsory. Four other questions are offered. and 3 of these must be selected for a complete paper. When
answen [or more than three optional questions are submitted (in addition to Question 1) without stating which
• three are to be considered. marlcs will be awarded only for Question I and thcftrst 3 answers in the answer book.

•
,• LAW QUESTION 1.

,, Briefly defrnc and explain any five of the following:

(a> Liquidated damages
(b) Statutory holdback

, (e) Gratuitous Promise

(d) Vicarious Liability
(e) Fraudulent Misrepresentation

,,• (I) Common Law

(g) Shmder
(h) Five examples of prohibited conduct in the workplace under the

, Ontario Human Rigbt! Code

(i) Specific Performance
,
, LAW QUESTION 2.

, An infonnation tcchnology fum assigned to one orits junior employee enginccn the task of developing special
software for application on major bridge designs. The employee engineer had recently become a professional
,, engineer and was chosen for the task because of the engineer's background in both the construction and the
"software engineering" industries. The resulting bridge software package wu purcb.asedand used by a structural
engineering design finn on a major bridge design project on which it had been engaged by contract with a
, municipalgovernmenL Unfortunately, the bridge collapsed in less than one year after completion ofconstruction.
Motorists were killed and injured.
•
• The IUUlting investigation into the cause of the collapse concluded that the design of the bridge was defective
and that the software implemented as part of the dc$ign did not address all of the parameters involved in the scope
• of this particular bridge design. The! investigators concluded that although the design software would suffice for

• certain types of structures it was not appropriate in the circumstances of the particular subsurface conditions and
length of span required for this particular application. The investigators' report also indicated that the design
• software package wu not sufficiently explicit in warning users of the software of the scope of the design

• parameters addressed by the software. The investigators' report also stated that even an experienced user of the
software might reasonably assume that the software would be appropriate for application on this particular project
• and that too little attention had been paid to ensuring that adequate warnings had been provided to software users
• of the IimitatiOIU on the application of the software.

• .. WhatpokntiaJ liabilities in tort law arise in this case? In your answer, explain what principles of tort law are
• relevant and bow each applies to the case.

• .. Indicate a likely outcome to the matter .

•
I
LAW QUESTION 3.
A $30,000,000 coolraCt for the design. supply and installation ofa co-generation facility was entered into between
a pulp and paper company ("PuJpco·) and an industrial contractor. The co-gencntion facility. the major
I
components of wbich included a gas twbine. a beat recovery steam genCI1ltor and a steam turbine, was to be
I designed and constructed to simultaneously generate both electricity and steam for use by Pulpco in its operations.

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 ,,•
.
The contract provided that the electrical power Jenerated by the co-genenttion faclliry was not to be less than 25
megawatts. A liquidated damages provision was included in the contract specifying a pre-estimatcd amount
payable by the contractor to Pu1pco fOT each megawatt of electrical power generated less than the minimum 25
4
megawatts specified_ 4
4
Other provisions specified additional liquidated damages at prescnbed rates relating to other matters under the
contract, including any failure by the contractor to meet the required beat rates or to achieve completion of the 4
facility for conunercial usc by a stipulated date. However, the contract also included a "maximum liability" 4
provision that limited to S5,OOO,OOO the contractor's liability for aU liquidated damages due to failure to achieve
(i) the specified electrical power output.
4
(ii) the guaranteed heat rate and 4
(iii) the specified completion date. t
The contract clearly provided that under no circwnstanccs was the contractor to be liable for any other damages t
beyond the overall total ofS5,OOO,OOO for liquidated damages. Pulpco's sole and exclusive remedy for damages t
under the contract was strictly limited to the total liquidated damages. up to the maximum of S5,OOO,OOO. The
contract specified that Pulpco was not entitled to make any other c1ai.m for damages, whether on account of any
I
direct, indirect. special OT consequential damages. howsoever caused. t
Unfortunately the contractor's installation fell far short ofthe electrical power generation specifications (achieving
4
less than 25% of the specified megawatts) and the beat rate spccificatiOll5 provided in the contracL The contractor f
was paid $27,000,000 before the problems were identified on startup and testing. Because of its very poor f
performance. the contractor also failed to meet the completion date by a very substantial margin. Applying the
liquidated damages provisioDS, the contractor's overall liability for all liquidated damages under the contract f
totalled $4,000,000. U1timatcly Pulpeo had to make IU'T81lgements through another contractor for newcquipment f
items and parts to be ordered and installed in order to enable the co-generation facility to meet the technical
specifications, with the result that the total cost of the replacement equipment and parts n::achcd an additional
f
$ 15,000,000 beyond the original contract price of S30,OOO,OOO. f

.. ExplaiD. and discuss what claim PuIpco could make against the contnctor in the circumstances. In answering. ,
f
explain the approach taken by Canadian courts with respect to contracts that limit liability and include a brief
summary of the development of relevant case precedents. ,
LAW QUESTION 4. - Answer all ofthc following questions:
Ca) (5 marks) Some construction contracts contain a provision that failure of the contractor to complete the work
by a specific date will result in-the contractor being required to make a specified payment to the owner for each
day, wceJc: or month that completion of construction is delayed.
.. Is such a pcna1ty provision always enforceable? Discuss.

(b) (12 mules) A contractor, in designing and constructing a sbopping centre in 1983, negligently designed and
installed certain ceiling anchors. 1bc shopping centre was sold to a new owner in 1996. The inadequacy of the
ceiling anchors was not detected until September of 1997 when the new owner undertook: significant renovations
and discovered that new ceiling anchors and new ceilings bad to be installed.
.. Is the new owner entitled to recover any damages from the contractor? In your answer, describe the limitation
periods during which engineers and contractors can be sued in tort.
.. Explain what the limitation period would be if there was privity of contract between the 0WDer and the
contractor.

(e) (8 maries) A professional engineer entered into a written employment contract with a Toronto- based
civil-engineering design fmn. The engineer's contract of employment stated that, for a period of five years after
the termination of employment, the engineer would not practise profess:ional engineering either alone, or in
conjunction wjth, or as an employee, agent, principal. or shareholder ofan engineering firm anywhere within the
City of Toronto.

-40-
 During the engineer's employment with the design finn, the engineer dealt d1rectJy WIth many OE the tum·s cllems.
The engineer became extremely skilled in preparing cost estimates, and established a good personal reputation
within the City of Toronto.

The engineer terminated the employment contnlCt with the consulting finn after three years, and immediately set
up an engineering fmn in another partoftbeCityofToronto. The engineer's previousemployen then commenced
a court action for an injunction, claiming that the engineer bad breached the employment contract and should not
be pennitted to practise within tho City limits . .
I> Do you think the engineer's formercmployen sbould succeed in an action against the engineer'l In answering.
state the principles a court would awly in arriving at a decision.

LAW QUESTION S.
Arbour Pulp &. Paper Company ("ARBOUR") entered into a written equipment supply contract with Recovery
Exchangers and Turbines Inc. ("RECOVERY"). According to me agreement, RECOVERY was to design,
manufacture and deliver a heat recovery steam generator to ARBOUR's pulp and paper mill in Ontario for a
purchase price of $3.5 million. ARBOUR would ammge to install the equipment in its mill as part of a c0-
generation system for the pwpose of converting steam into electricity.

According to the agreement, RECOVERY was to begin manufacturing the equipment on February I , 1992 and
deliver the finished product to ARBOUR on or before March 30, 1993. The agreement provided that ARBOUR
would I?ay the $3.5 million purchase price in monthly instalments over the manufacturing period. The agreement
contained the following provision:

-Each instalment of the purchase price shall become due and payable by ARBOUR on the last day of the
month for which the instalment is to be made. If ARBOUR fails to pay any 1nsta1ment within 10 days
after sucb instalment becomes due, RECOVERY shall be entitled to stop pcrfonning its work under this
contract or terminate this conb"act.-

As tbeworkprogresscd, RECOVERY invoiccdARBOURfOl'eachmonthly insta1menL Although ARBOURpaid

the first instalment on time, it was mort than 20 days late in paying each of the second, third, fourth, fifth and
sixth instalments. RECOVERY never once complained about the late payments, even when ARBOUR
apologized for the delayed payments and commented in meetings with RECOVERY that ARBOUR's eurrcnt cash
flow difficulties resulting from the impact of rccessiorwy times, were the reasons for the late payments.

By the middle ofSeptembcr 1992. it became apparent to RECOVERY that due to serious cost ovenuns resulting
from its own design errors and lack of productivity, it would stand to lose a substantial amount ofmooey on the
conlnct by the time the equipment wouJd be completed. Although the instalment for August had been invoiced
and was due on August 3 1,1992, ARBOUR had not yctpaid it by September IS, 1992. 00 September IS, 1992,
RECOVERY terminated the contract
... Was RECOVERY entitled to terminate the contract? Explain.

8.3 Solution. to Ethles Questions

ANSWER TO ETHICS QUESTION I,

• (A) See p. 165 in the Ethics text or Regulatioo 941, Sec. 75 for restrictions on advc:rti.sing and use of the seal.

• i) The PEO logo is acceptable on a consulting fllll1'S letterhead, but only to denote that the finn is licensed
to practise engineering (that is. the finn maintains a Certificate of Authorization).
•
I
ii) It is never pennissible to use your engineering seal on anything except a document (drawing, report,
evaluation, etc.) which you have personally prepared.
iii) A slogan such as "lowest price in the business" is clearly inappropriate, since it implies that pricc ramer
I
than competence is the major factor in selecting a consuItanL
I
I
-41·
 ......
(B) See the Ethics text (p. 35) on Licensing of Corporations or (p. 89) OD Licensing for Private Practice. To
obtain 8 licence, a corporation must identify the P .Eng. woo is personally responsible for ensuring engineering ,,
quality and competence. If the engineer is rued or resigns, another P .Engmust be designated by the COrpontiOD.
If there is no suitable P .Eng to assume the responsibility, then the corporation must surrender the Certificate of
Authorization and therefore can DO longer provide engineering services to the public. ,,
(C) The principal objective of PEO, as stated in the Professional Engineen Act (Section 2(3», is to "regulate
the practice of professional engineering and to govern its members ..• in accordance with thisAct, the regulations
and by-laws in order that the public interest may be served and protected.." I doubt that much furthc:r discussion
,
,.
is required, although it might be appropriate to emphasise that the PEO was not set up to serve its members, but
to serve and protect tbe people of Ontario. Many members of the general public are not aware of this key fact.

(D) See p. 34 of the Ethics text. Section 18 of the Professional Engineers Act and Sections 42 to 46 of
Regulation 941. The difference between a licence, a temporary licence and a limited licence is as follows:
(i) Licensing and "registration" have the same meaning. According to the Act (Section I), _licence permits
...
the member or "licenc~" to practise professional engineering in Ontario.
(ii) A temporary licence is awarded to foreign (orout-of-province) engineers for specific projects only. A
foreign engineer must collaborate with an Ontario engineer to practise on the project; but an out-of
province engineer, iffuUy licensed in a province which requires qualifications equal to Ontario may be ""
(iii)
pennjtted to practise on the project alone.
A limited Ucence is rarely issued, but it is allowed by Sections 45 and 46 of the Act It permits a senior
technologist (minimum 13 years experience) to provide specifica1ly-defined engineering services to a
""
specifically-defined employer. If the technologist leaves the employer, the IinUted licence must be
returned to PEO. ""
(E) See the Ethics text (p. 92) or Regulation 941, Section 56. The designation of "Consulting Engineer" is
awarded to a licensed P.Eng. provided that the P.Eng. ""
(i) is engaged in the independent practice of engineering,
(ii) has 5 or more years of satisfactory experience, ••
••
(iii) bas passed exams (or been exempted) as designated by Council.

ANSWER TO ETIflCS QUESTION 2:

This question is very similar to Case Study 7.6 in the Ethics text (see p. 142).

ANSWER TO ETIflCS QUESTION 3: ••

Thisquestion is somewhat obscure. The question asks about "'professional requirements" and from the viewpoint
of PEO, the most obvious requirement is a licence, if the business is practising engineering. Since the
Professional Engineers Act specifically includes "any act ofdesigning" then it appears fairly certain that the new ••
company wHl be practising engineering, so the individua1s and the company must be licensed. However. the
question asks for a discussion related to the Code of Ethics and Professional MUconduct, which wouJd apply to
the P .Eng. only after licensing. I suggest the following:
••
Since Engineer Psi will be practising engineering in Ontario, presumably within a month (as stated in the
question) then an Ontario licence is required. EngineerPsi cannot practise in Ontariousinga licence from another
••
province. To become licensed in Ontario, Engineer Psi must make an application to PEO, and provide the
supporting documentation. In view ofEnginecr Psi's experience and (presumed) previous registrations in BC
and Manitoba, then licensing in Ontario should be a routine matter. However, PEO may require a few weeks or
months to process the application, so the application sbou1d be rude as soon as possible, and the start-up sbouJd
•,•
be planned to occur after the licence has been granted. (Note that it is not possible. at present. to ''transfer'' a
licence, but an engineer practising in one province will usually be granted a liccoce quickly in any other
province.)
••
In addition, a corporation (or partnership) which provides engineering services to the public in Ontario must have ••
-42-
••
 a Certificate of Authorization. This fonn of Certificate IS not reqUtred m Ht: or MaDltoba., so l:ngmeer 1"SI may
nOt be aware of the requirement To obtain a Certificate of Authorization. the company must designate a P.Eng.
who will take responsibility for supervising the engineering activities of the company. In addition, the partncnhip
would most likely obtain liability insurance (unless theexcmption under Regulation 94] Section 74 is to be used).
These requirements will also take time, and the C of A application cannot begin until Engineer Psi is licensed,
so Engineer Psi obviously must begin the application process as soon as possible.

Providing that the above licensing requirements arc met, and there is no abuse of proprietary infonnation owned
by the previous employer, then there should be no concerns involving Code of Ethics or Professional Misconduct.

ANSWER TO EnneS QUESTION 4,

This question involves the unauthorized use of a computer program by Engineer Rho, who works for KooIIne.
Engineer Rho has been accepting input from Engineer Omega, running it through the program without the
knowledge of the employer, and then turning the output over to Engineer Omega. EVeD though there is no
mention of payment or other reward for offering this service, both Rho and Omega arc engaged in blatantly
unethical practices. (A similar, but not identical, case is discussed in the Ethics text in Case Study 7.3, p. I3S.)

Engineer Rho, by providing the unauthorized use of the employer's computer-program is contravening the Code
of Ethics (Regulation 941, Sections 77(1) and 77(3» concerning the duty of the engineer to bislberemployer.
More importantly, Engineer Omega presumably ia \mabie to carry out independent calculations to validate o r
check the results of the Kool propm. Therefore the computer output may be grossly inaccunlte and Engineer
Omega would unable to check and detect this inaccuracy. This failure to maintain adequate standards of
validation would be considered to be negligence under Regulation 941 , Section 72(1). Also, see the Ethics text
under "Liability for errors in computer programs" (p. 148). 1fKoollnc.. becomes aware of the arraogement, both
engineers Rho and Omega could be subjected to professional discipline under the Act. In addition, if an incorrect
design should cause a [mancial loss for one of Omega's clients, the engineen may be Iiablc for damages.

ANSWER TO ETlDCS QUESTION 5,

It is not unethical to use a previous design as the basis for a new structure. In fact. experience shows that most
designs improve as tbey are re-workcd. However, there are some restrictions that apply:
(i) The company must own the previoUJ design. This is typically IrUc if the design were done by an
employee oflhe firm, un1ess the previous agrccmc:nt specifically stated that the design was to belong to
lhe client
(ii) The statement that the "Ministry bas reduced the design standards" must be substantiated in writing. A
verbal assurance will leave the engineer totally defenceless against charges of negligence if the bridge
should ever fail at any time in its expected lifespan.
(iii) The design calculations (specifically those for strength) must be carried out again, at least to the extent
that the previous calculations an: independently verified. It is not sufficient to accept the work of an
earlier engineer for a second application, since there may be hidden reasons why the design may be
unsuitable for the second application. By approving the design for a second installation. the second
engineer accepts full responsibility for the design. Flaws or errors in the design, even if they can be
traced to the worle oftbe first engineer, are nevertheless the responsibility of the second engineer. A
thorough analysis must be done.
(iv) Then:: must be no reduction of your fee if you agree to use the prior design, since you are accepting as
mucb responsibility (perhaps more) by agreeing to use a previous design rather thaD carrying out tbe
design completely.

HINT: You might want to review pages ]67 to 175 in the Ethics text which deal with design issues such as the
use ~fthe engineer's seal, "checking" engineering worle, design calcuJatioos and reviewing the wort of another
cngmeer. ~ problems occur frequently in engineering practice and I1C therefore frequently the subject of
exam quesuons.

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~.4 :SoJuhOnS to Law \,!uesnoDs

ANSWER TO LAW QUESTION 1 (25 marlu)

Briefly deftue .ay 5 01 tbe foUowing:
(a) Liquidated damages (Ref: page 206, Marston. lAw for Professwnlll Englnun)
An estimate of damages likely to result from non-performance of a contract. A "liquidated damages" clause
in a contract can be used to limit liability.
(b) Statutory holdback (Ref: page 243 and chart, p.244)
This is a term which 0CCUI1 mainly in construction contracts. The purpose is to ensure that sub-contractors
(suppliers, tradespeople or skilled workers who work for the contractor) are paid by the main contractor
responsible for the construction projecL Each province has a "statute" (or law) which requires the owner to
"hold back" a percentage of the amount owed to a contractor, for a specified period oftime, to permit the sub-
contractors to file liens with the government if they have not been paid If no liens arc filed by the sub-
contractors within the specified period, then the holdback may be paid to the contractor. !fa lien is filed, then
the owner must not pay the holdback amount until the dispute is settled between thesub-contractorortbrough
negotiation.
(c) Gratuitous promlR (Ref: pages 88 to 92)
A valid contract must involve a "consideration" (something of value, such as a fee, property, etc) that induces
each party to complete the contracL A contract made without consideration. is a "gratuitous promise." This
occurs most often when amendments are made to a contracL For example, if a contracf:!:lr requests an
amendment (such as a deadline extcnsion) to a contract, the client usually receives no consideration for
agreeing to the amendment. The amendment therefore. is not Jegally binding, and the client is not legally
obligated to honouriL However, the doctrine or"equitable estoppel" is also relevant here (see text, page 88).
Cd) Vitarioas lIabUlty (Ref: page 46)
"Vicarious" means .lacting for another-." '"Vicarious liabiUty" occurs when a person is acting as an agent of
anotherperson.. For example, the courts usually agTCe that an employer is vicariously liable for Ule negiigent
actions of an employee.
(e) Fraudulent misrepresentation (Ref: page 107) .
A "'misrepresentation" is a "false statement of truth" (that is, a lie). An "innocenC' misrepresentttion is a lie
whicb is repeated by a person believing it to be true, but a "fraudulent" misrepresentation i$ a lie Which is
repeated by a persOn deliberately or carelessly. If a contract is based on either type of misrepresentation. then
the person wQo was deceived can reject the contract. In addition. if the misrepresentation is fraudulent, the
deceived pelSOn may claim compensation for any costs resulting from the contract and can sue ror damages.
(f) Commob ~w (Ref: page 2 and page 287)
Common Law is the term typically used for the British fonn of law, in which the most impo~t arguments
are based on decisions in previous cases (or "precedentsj. Common law is use4 in all provinces and
territories except Quebec. Common law is therefore frequently called "judge-made" law. Quebec uses a
"Civil code" which is a set of statutes which form the foundation for the law, and decisions must be seen to
be based on the statutes.
(&) Slander (Ref: page 58)
Slander and libel are "torts of defamation." If a defamat?ry statement damages a person's reputation, then
the defamed person may sue the person making the statements. If the defamatory statement is in writing, it
is called "libel;" ifit is verbal, it is called "slander." Ifharmful statements can be proved to be true, then no
liability results.
(b) Ontario Human Riabtl Code: (Ref: page 312)
State five examples of prohibited conduct in the workplace undc:l- the Ontario Human Rights Code: The
Ontario Human Rights Code prohibits employment discrimination based on race, ancestry, place of origin.
skin colour, ethnic origin, citizenship, creed, sex. sexual orientation. age, marital status, family status, record
of offences, or handicap. The Code also outlaws sexual harassment.
(I) SpeclDc PerformaDce (Ref: pagel44)
When a contract bas gone wrong and the parties to the contract appear in court, the judge may solve the
dispute by requiring them to perform a specific part of the contract. lbis occurs most often in cases where
a single specific act will end the dispute. For example, in a disputed land sale, the judge may order the sale
 to be completed (fPc sale: is the " specitic perfonnancc"). However, JUdges typlcauy will not oroer sp«l!IC
perfonnance in cases: such as engineering design, where constant supervision would be needed to ensure thai
the specific perfonnance has been completed properly.

ANSWER TO LAW QUESTION I {IS nwks}

Notcs! See page 150 in the Ethics text for an eXCClpt from the PED Guideline on software use in engineering.
Also. the Hartford Civic Center Arena Roof Collapse in Hartford. Connecticut. January 18, 1978 is very similar
to this case. An interesting summary of the Hartford collapse (with a photo of the demolished arena) is given on
the web at: http://www.eng.uab.edulceelreu_osf99lhartford.htmHlegal. Unfortunately, the Hartford case was
settled out of court and no clear delineation of responsibilities was published.

SU&Kested Ans..,er:
Tort law requires that three conditions must be proved to link a defendant to an injury:
.. The defendant owed a duty of care;
.. the duty was breached by the defendant's conduct; and
.. the injury can be shown to be a result of that conduct

In this case, the software engineer owed a duty to the strucrural engineer to provide adequate software, where
" adequate" would mean fully tested, without flaws. and properly documented. The software had a naw or
inadequacy (it was not appropriate for this type of bridge) and the inadequate documentation concealed that flaw.
The inadequate software was a factor in the poor design and subsequent failure of the bridge.

However, the structural engineer owed a duty to the client (the municipal government) to verify that the "results
obtained by the software are accurate and acceptable." Where independent vaHdation of the software does not
exist. the engineer must "establish and conduct suitable tests to determine whether the software perfonns what
it is required to do." (See page ISO of the Ethics text) Ifsucb tests had been carried out, the flaws in the software
would most likely have been detected. The bridge collapse can therefore be traced back to the failure to carry
out the software tests.

In assessing the relative responsibilities, judges would likely differ in the precise proportions, but in my opinion
the structural engineer would likely be found to be about 8oo..;. responsible for the bridge collapse. and the
software engineer would be only about 20% liable. (TItese percentages may change in future, as software
engineering evolves into a respoc:tcd, organized and disciplined branch of engineering.)

ANSWER TO LAW QUESTION 3 {2S nwks}

The common law for breach of contract can be traced back to the 1854 case of Hadley lIS. BllXendtde (page 139).
The basic principle is that damages must -flow naturally from the breach,· which means that the damages should
cover the reasonable consequences which would be normally foreseeable. 1be text states clearly that "the cowts
will not enforce a penalty clause that does not represent a genuine prc-estimate of damages." However, more
information is needed before the similarities between this case and the Hadley vs. BllUndtde case cao be seen.

In the Pu1pco case, thehugc difference betwten the actual damages (S115 million) and the "liquidated damages"
($4 million, calculated from the penalty clauses in the contract) indicates that something very Wlusual happened.
Did an unexpected event (sucb as a hunicane.labour strike, or fire) interfere with the remedial work, thus driving
the costs up, or Wit! the limiting value set unreasonably low (for example, was the limit just a "low-ball" value
inserted into the contract at the insistence of the contractor)? The key question to be established is whether the
limiting value ofS5,OOO,ooo which was set in the contract for all three possible breaches (inadequate electrical
power output. inadequate heat nte and late completion date) was a reasonable value which would be normally
foreseeable when the contract wu signed.

!fit can be shown that this value was thoughtfully estimated using the best information available at the time, and
the extremely high actuaJ damages are the result of some unexpected event. then the contract would prevail. and
Pulpco could not expect to collect more. However, if it can be shown that the clauses in the contract were poor

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 •
guesses, then the actual costs would take precedence and the court would hkely rule in favour of Pulpeo and
•t
award a greater proportion of the actual damages. Although both PWpco and the contractor arc equally
responsible for the poor wording of the contract, the contractor is responsible for the breach of contract, and
t
should carT)' the responsibility for the full damages. t
ANSWER TO LAW QUESTION 4 (25 marks)
t
(A) (5 marks) This question is similar to question 3. Penalty clauses (or more accurately " Iiquidited 'damage" t
clauses) are generally not enforceable unless they are drafted wing realistic estimates of the foreseeable costs of t
a breach of contract (Sec page 141)
t
(B) (12 marks) This case is identical to Rob~rt Simpson Co. Ltd n. Fount/lltio" Co (page 67). The negligence t
of the contractor satisfies the 3 requirements ofa tort: The contractor bas an obligation to the fIrSt and subsequent
owners of lhe house to install the ceiling ancbors properly; that obligation was not met, and as a result, the new
t
(1996) owner suffered a loss (had to pay to have new ceilings and anchors installed). However, a1tbougb the t
limitation period in torts is 6 years, the limitation period docs not start when the anchors were installed, but when t
the damage is first detected. Since tbe damage was detccted in 1997, the limitation period bad not run out (See
page 66, 67 and page 165).
t
t
However, ifthcre had been a contract between the owner and the contractor, then the limitation period for the
contract (which is also 6 years) runs from the date of performing the (tuty. That is, since the anchol$ were
t
insta1lcd in 1983, and the legal case was started in 1997, then the time limit would have been exceeded. and no t
lawsuit could be undertaken. (This is discussed in some length on page 165 oftbc Law text) t
(C) (8 marks) (lbls problem is fully explained on pages 99 to 101.) This case involves an employment contract. t
and a contract mwt satisfy 5 conditions (offer/acceptance, intent, consideration, capacity, lawful purpose). The t
courts always assume initially that any agreement which restrains trade is against public policy and tbC:reforevoid
The employer would be forced to prove that the restriction preventing the engineer from practising within the city t
limits for 5 years is a reasonable restraint of trade. Before agreeing to issue an injunction. the court would apply t
the principles of reasonableness to sec whether the time lintit (5 years) and location (city limits) are reasonable
t
restrictions on the ctnployee. If the restrictions arc unreasonable, the court will not enforce the contract.
However. everything will hinge on additional details that are Dot given in the problem and the court's decision t
could go either way. t
ANSWER TO LAW QUESTION S (25 marks) t
The details in this problem are very similar to the fact3 in Job Burrows Lul n. SUbsNrfllce Survqs LuI (see t
a full discussion beginning on page 89). (Also, this problem is included in the text as problem 15. page 335.)
t
In brief, one party in a contract can terminate the contract if the other party is not fulfilling their obligations (that t
is, if the other party "breachcs" the contract). When ARBOUR failed to make payments on time, they breached t
the contract and RECOVERY could have tenninated the contract. However. when RECOVERY accepted the
late payments and did not mention that late payments were unacceptable, or give any other warning of t
dissatisfaction, RECOVERY implied that the lateness was acceptable. RECOVERY cannot later usc these t
payment defaults as the basis for tenninating the contract Although ARBOUR is technically breac:hingtbcterms
of the contract bypaymg late, ARBOUR would win a court case based on the principle oCWequitable estoppel." t

Equitable estoppel refcn to the principle in which a perIOD is prevented from applying the strict interpretation
t
of a CODb"act when it can be shown to be clearly unfair to do so. Using the principle of equitable csroppel.
ARBOUR could stop RECOVERY from terminating the contract because it would Dot be fair (equitable) for t
RECOVERY to Bvoid its responsibility for the cost ovcnuns and design errors because oflate payments whicb t
RECOVERY (by its actions) had implied were acceptable.
,
CHAPTER 9

I
I THIRD SAMPLE EXAM (2002) 9
I
I NOTE: The following is the Professional Practice Enm. held April 27, 2002. Minor
I editing was done to save space. Try the questions on tbls exam pape:r under exam
conditions. Allow yourself90 minutes, maximum, to solve each part before looking at tbe
I suggested answers. This chapter Is not contained on tbe video-tape.

PRACfICE EXAMINATION - April 11, 2002.

PART "A" - ProfessIonal Practice and Ethics
~
FOUR QUESTIONS must be answered in Part A. Question 1 is compulsory - ALL candidates must attempt
~
Question I , plus three additional questions. All full questions are of equal value (25%). When answers for more
~ than four questions are submitted without stating which four are 10 be graded, marks will be awarded for only the
I first four answers in the book.

Where a question asks if a «:rtain action by an engineer was ethical or not, a simple "yes" or "no" answer is not
sufficient You must comment on the action in each situation and, ifpossible, you must identify the clause in tbe
Code of Ethics (Section 77) or the definition of professional misconduct (Section 72) in Ontario Regulation
941190 which applies.

ETIDCS QUESTION 1.
a) In addition to the professional engineer (p.Eng) licence, PEO grants two (2) otbertypes oflicence to
practise professional engineering; namely: the temporary licence and the limited licence. What
conditions or restrictions, if any, are placed on the:
(i) P .Eng Licence.
(ll) Temporary Licence
(iii) Limited Licence

b) What does the term "self-reguiating- mean ?

c) Consistent with its legislative mandate to regulate the practiCe ofprofessionaJ engineering, what is the
difference between the functions of (i) Discipline and (ii) Enforcement that PEO carries out?

ETIDCS QUESTION 2.
Epsilon, P .Eng., is the environmental manager of a well-known chemical manufacturing plant. located near a
resort town. Epsilon's monitoring oftbe plant's testing laboratory results indicates that the plant's effluent. which
goes into the neaJby lake, is cBl15ing slightly more pollution than is legally permitted by the provincial ministry's
environmental guideline. Epsilon reasoned that to infonn the Ministry would cause negative publicity for the
plant and could adversely affect the lakeside town's resort business. In addition. Epsilon estimated that it would
cost the company in excess of $300,000 to introduce remedial measures. Epsilon does not believe that the
company would be willing to spend this amount of money to address the problem. On the other hand, Epsilon
rationalized that the violation poses little danger to the public and may only endanger a few fish in the lake.
Epsilon is therefore unsure what to do.

... What should Epsilon do? In your answer, discuss the relevant ethical considerations that should bear on
Epsilon's decision making.

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 ,,
ETIDCS QUESTION J. ,
Asswnc that you are a licensed professional engineer and Chief Director of a fedenl gOYc:rnment
conrract-granting agency. Prior to your new position. you Wert a partner in a very successful consulting
engineering finn. At the end of the spring last year, you sold yourmtcR:St in the paItnenhipto yourpartne:r. wbo
••
is also a professional engineer, and soon tbereafteryou a~epted the appointment to your current position. A few
days later. much to your surprise. you learned that your former partner had sold the finn to Octopus Enterprises.
Inc., and became an offica oftbc corporation. It is now several months later. In your new capaciijl, yOll have
••
beeu presented with documents recommending the award of a major engineering contract to Octopus.
••
••
.. In light ofPEO's Code of Ethics. discuss your etbica1 obligations, if any, pertaining to the situation at hand.

ETIDCS QUESTION 4.
Rho, P.Eng, is a principal in a large consulting engineering fum. Omega. an engineering intern employed by
another consulting finn worked the previous summer, while a student., in Rho's tum. Although Omega worked
in Rho's finn. Rho did not have any direct involvement or interaction with Omega. Omega, who is now applying ••
for professional engineering licensure, sought and obtained Rho's pennission to use his name as a reference.

Prior to completing the licensing referee questionnaire:, Rho inquired about Omega's engineering capability and
••
suitability for licensure from one ofbis subordinates to whom Omega reported during her summer employment
at Rho's finn. Based on the information Rho received, be completed the questionnaire. ••
• Was it ethical for Rho to act as a referee on Omega's behalf, even though he did not have any direct
knowledge of her engineering work and capability? Discuss in tenos of the Code of Ethics. ••
ETmCS QUESTION 5.
Gamma. P.Eng. bas been in the employ ofU &: I Engineering Inc since his graduation from engineering school ••
six (6) years ago. Since obtaining his P £ng licence, two (2) years ago, he has been discussing with his
supervisor, Theta. P.Eng. the possibility of being assigned more challenging projects. Theta agreed to provide
Gamma with the challenge be is seddDg. However, in Gamma "opinion. the opportunity does not appear to be ••
forthcoming and he has therefore become frustrated.

Gamma's engineering potential is well recognized both inside and outside U &: I Engineering Inc. ConsequentJy, ••
while Gamma is still waiting to receive the promised challenging assignments at U &: I Engineering Inc, be learns
of an opening at a regular supplier to U &: 1 Engineering Inc., ABC Engineering Limited. through Psi a
professional engineer employed at that company. Gamma is successful in an interview with ABC Engineering «•
Ltd and, upon receiving an offer of employment, submits his resignation with the required two (2) weeks notice
«
to U &: I Engineering.

Theta is disturbed by Gamma's resignation and asa Gamma to reconsider. Gamma advises Theta that his
decision is finaJ, and. aJthougb be is asked, does not reveal the identity of his new employer. However, Gamma
••«
••
continues to negotiate and cvaJuate bids submitted by ABC Engineering Ltd. and other mpplien.

Was it ethical for:

•
(i) Psi, P.Rng to tell Gamma about the opening he applied for at ABC Engineering Ltd?
(li) Gamma to inkrYiew for. poIition with ODe ofU &. I Eogineering Inc. suppliers?
(iii) Gamma not to volunteer the information to U &. 1 Engineering Inc. that
ABC Engineering Ltd. would be hit; new employer?
« •
Use the Code ofEtbics as yoW' guide in answering each part of the above question.
••
••
48- •
•
 9.2 Part B - Law Exam Questions

FOUR QUESTIONS must be answered in Part B. Question I is compulsory - ALL candidates must attempt
Question I, plus three additional questions. All full questions are of equal value (25%). When answers for more
than four questions are submitted, without stating which four are to be graded, marks will be a~arded for only
thefintfouranswen in tbebook.. -

In answering law questions, you should state tbe rules oflaw upon which you have based your answer, and if
• possible, you must cite precedent cases. In some cases, the Code of Ethics (Section 71) or the definition of
Professional Misconduct (Section 72) may apply. and should also be cited.

• LAW QUESTION I.
• Briefly define and explain any five of the following:
(a) Rule of contra proferentem
(b) Liquidated damages
(e) Gratuitous promise
(d) Statutory holdback
• (e) The five essential elements ofan enforceable contract (list only)
• (f) Undue influence
(g) Five examples of inappropriate conduct in the workplace prohibited by the
• Ontario Human Rights Code (lin only)
(b) Concept of discoverability
• LAW QUESTION 2.
• An infonnation technology finn assigned to one of its junior employee engineers the task of developing special
software fOl" application on major bridge designs. The employee engineer bad reccnt1y become a professionaJ
engineer and was cbosen for the task because of the engineer's background in both the construction and the
·software engineering- industries.

The fum's bridge software package was pW'Chased and used by a $tn1ctuBI engineering design finn on a major
bridge design project on which it had been engaged by contract with a municipal government Unfortunately,
the bridge collapsed in less than one year after completion of construction. Motorists were killed and injured.

The resulting investigation into the cause of the collapse concluded that the design oftbe bridge was defective
and that the software implemented as part ofthc design did not ~ all ofthc parameters involved in the scope
of this particular bridge design. The investigators concluded that although the design software wouJd suffice for
certain types of structures it was not appropriate in the circumstances of the particular subsurface conditions and
length of span required for this particular application. The investigators' report also indicated that the design
software package was not sufficient1y explicit in warning users of the software of the scope of the design
parametCfS addressed by the software. The investigators' report also staled that even an experienced user of the
software might reasonably assume that the software wouJd be appropriate for application on this particuhrproject
and that too little attention had been paid to ensuring that adequate warnings had been provided to software users
of the limitations on the application of the software.
• Whatpotentialliabilities in tort law arise in thisca.se? In your answer, explain whatpriDciples of tort law are
relevant and bow each applies 10 the case.
.. Indicate a likely outcome to the matter .

LAW QUESTION 3.
A S30,OOO,000 contract for the design. supply and installation ofa co-genention facility was entered into between
a pu.lp and paper company (·Pulpcoj and an industrial contractor. The co-generation facility, the major
components of whicb included a gas turbine, a beat recovery steam generator and a stearn turbine, was to be
designed and constructed to simultaneously genemtc both electricity and steam (or use by Pulpco in its operations.

-49-
 ,
The contract provided that the electrical power generated by the co-generahon facIlity was not to be less than 25 C
megawatts. A liquidated damages provision was included in the contract specifying a prc-estimated amount
payable by lbe contnlctor to Pulpco for each megawatt of electrical power generated less than the minimum 2S
f
megawatts specified. Other provisions specified additional liquidated damages atprescribed rates Rlatingto other I I
matters under the contract, including any failure by the contractor to meet the required heat nttes or to acbieve I
completion of the facility for commerc:ia1 use by a stipul.a!ed date. However, the contract also included a
"maximum liability" provision that limited to S5,OOO,ooo the contractor's liability foraliliquidatecfdamages due f
to failure to achieve: (i) the specified electrical power output, I
(ii) the guannteed heat note and
(iii) the specified completion date.
f
•
The contract clearly provided that under no circumstances was the contractor to be liable for any other damages
beyond the overall total ofS5,OOO,OOO for liquidated damages. Pulpco's sole and exclusive remedy for4amages •
under the contract was strictly limited to the total liquidated damages. up to the maximum ofS5,OOO,OOO. The
•
contract specified that Pulpco was not entitled to make any other claim for damages, whether on account of any
direct, indirect, special or consequential damages, howsoever caused. •
•
Unfortunately the contractor's installation feU far short of the electrical power generation specifications (achieving
less than 25% of the specified megawatlls) and the heat rate specifications provided in thecontRct. The contractor •
was paid S27,OOO,000 before the problems were identified on startup and testing. Because of its very poor •
perfo rmance, the contractor also failed to meet the completion date by a very substantial margin. Applying the
liquidated damages provisions, the contntctor's overall liability for aU liquidated damages under the contract
•
totalled S4,OOO,OOO. Ultimately PuJpco bad to make arrangements through another contractor for new equipment •
items and parts to be ordered and installed in order to enable the co-gencnttion facility to meet the technical
specifications, with the result that the total cost of the replacement equipment and parts reached an additional
•f
$15,000.000 beyond the original contract price ofS30,OOO,OOO.
f
.. Explain and discuss what claim PuJpco could make against the contractorin thecircumstances. In ahswering.!
explain the approach taken by Canadian courts with respect to contracts that limit liability and include a brief •
swnmary of the development of relevant case precedents. •
•f
LAW QUESTION 4.
An Ontario municipality (the "Owner") decided to update and expand its water treatment facilities. To do so, the C
Owner invited competitive tenders from contracton for the construction oflbe new water treatment f;1yiliry.
. •
The Owner's consultant On the project designed the facility and prepared the Tender Documcots to be given to •
potential contncton interested in bidding on Ibe project. The Tender Documents included the pians and
Specifications, the Tendering Instructions wrucb described the tendering procedure and other requiremq.ts: to be •f
followed by the bidders, the Tender Form to be completed by the bidders, the fonn of written Contract that the
successful contractor would be requin:d to sign after being awarded the contract. and a numbcl:. of other C
documents. f
According to the Tendering Instructions., each tender bid was to remain "fum and irrevocable and open for
f
8ccepta.nce by the Owntt for a period of 60 days following the last day for submitting tenders." The Tendering
Instructions also provided that eacb bidder was to include with its tender a certified cheque for S200,OOO payable C
to the Owner as a tender deposit In addition, the Tendering Instructions contained the following provision
descn1>ing the ciraunstances in which the Owner would be entitled to retain the tender deposit: f
f
"The bidder guarantees that ifits tender is accepted by the Owner and the Owner docs DOt, far any reason
whatsoever, receive the Contractsigned by the succcssful bidder within 7 da)'l after the succeufuI bidder C
bas been presented with the Contract for sigDIture. the Owner may retain the tender deposit for its own
usc and may accept any other tender.·

c
-50-
c
 XVZ Constructors Inc. ("XVZ") submitted its tender in accordance with the Tender Documents. Approximately
ten minutes aftcrthe official time for submitting bids had expired. XVZ discovered that it made a clerical mistake
in preparing its tender. XVZ had mistakenly copied a figure from a calculation sheet Due to the clerical error,
XYZ bad omitted an amount ofS800,OOO from its tender price ofS3,300,OOO. Immediately upon its discovery
of the error, XVZ notified the Owner of the mistake and indicated that XYZ wished to withdraw its tender. XYZ
and the Owner agreed that the clerical mistake was genuine; however, the Owner refused to permit XVZ to
withdraw its tender.

Within two weeks, the Owner announced that it had awarded the contract to XVz. who was the lowest bidder,
and presented XVZ with the contract for execution. XVZ refused to sign the contract As a result ofXYZ's
refusal, the owner awarded the contract to the next lowest bidder for a price of S3,6OO,OOO.
~ What potential liabilities in contract law arise in this case? What would the Owner be entitled to claim
fromXYZ?
• Would the Owner be entitled to keep the tender deposit?
• Indicate a likely outcome to this matter,
Please provide your reasons and ana1ysis. In doing so, explain the contractual relationships.

LAW QUESTION 5.
A mining contractor signed an option contract with a land owner which provided that if the mining contractor(the
"optionee·) performed a specified minimum amount of explonttion services on the property of the owner (the
· optionor") within a ninc.-month period, then the optionee would be entitled to exercise its option to acquire
certain mining claims from the optionor.

Before the expiry of this nine-month "option period", the optionee realized that it couldn't fulfill its obligation
to expend the required minimum amount by the expizy date. The optionee notified the optionor of its problem
prior to expiry of the option period and the optionor indicated that the option period would be extended.
However, no written record oflhis extension was made, nor did the optionor receive anything from the optionee
in return for the extension.

The optionee then proceeded 10 perform the services and to fmaUy expend the specified minimum amount during
the extension period. However, when the optionee attempted to exercise its option to acquire the mining claims
the optionor took the position that, on the basis of the strict wording oftbe signed contract, the optionee had not
met its contractual obligations. The optionor refused to grant the mining claims to the optionee.

• Was the optionor entitled to deny the optionee's exercise of the option?
• Identify the contract law principles that apply, and explain the basis of such principles and how they apply,
to the positions taken by the optionor and by the optionee.

I
I
I
-51-
 9.3 SOIUtiODS to Ethics QUeitiODl

ANSWER TO ETBlCS QUESTION 1.

a) This was asked befocc - ScePPE Question led) in 0Iap. 8 of this manual (Also, seep. 34 oftbeEthics text,
Section IS oftbe Professional Eogincas Act and Sections 42 to 46 of Regulation 941.)
The difference between a licence, a temponry licence and a limited licence is as follows:
(i) LlceDslng, membership, and registration have the same meaning. According to the Act (Section I), a
licence permits the member or "licenscc" to practise professional CDSineering in Ontario. i
(ii) A temporary Ucencc is awarded to foreign (or out-of-province) engineers for specific projects on1y. A 1
foreign engineer must collaborate with an Ontario engineer to practise on the project; but an out-of
province engineer, iffully licensed in a province which requires qualifications equal to Ontario, may be
permitted to practise on the project alono.
(iii) A Umlted licence is rarely issued, but it is allowed by Sections 4S and 46 of the Act. It permits a senior
technologist (minimum 13 years experience) to provide specifically-definod engineering services to a
spccifically-defined employer. If the technologist leaves the employer, the limited licence must be
returned to PEO.

b) The term "self-regulating" refers to those professioDll which regulate themselves under legislation passed by
the govenunent, as contrasted with some other countries where engineering is licensed directly by a
government bureau. (See page 29 of the ethics text and page 2 oftbis manual.)

Although the Ontario government passed the Professional Engineers Act. the Act is administc:rcd by PEO.
The majority of members of the PEO Council are elected from (and by) the licensed Professional Enginecn.
The PEO Council establishes the committees and directs the PEO staff who administer the Professional
Engineers Act IItd Regulation 941, and Professional Engineers are disciplined by a committee of "peers. who
arc licensed engineers appointed by PEO Council The engincc:ring profession is therefore governed by the
cnginCClS, lhcmsolvcs. and for this reason, it is called "self-regulating".

c) The difference between the functions of (i) Discipline and (ii) Enforcement may be simply expressed:

(l) Dbcipline: Wbeo licensed enaineers (or PEO "members) contravene some aspect of the Professional
Engineers Act or Regulation 941(forcxample, by committing actions such as professional misconduct), they
are disciplined by the PEO Discipline Committee, a committee of "peers" which has the authority to revoko
or iUSpCOd the licence oftbe member or the certificate of authorization, etc., or impose tcnns, conditions ,
restrictions or fines etc., on Professional Engineers (in accordance with the Act. Section 28).

(lJ) Enrorcemeat: Enforccmc:nt is required when unlicensed people infiinge the Professional Engineers Act
For example: any person who practises engineering without a license, or who uses an engineering seal or the
title of "Professional Engineer'" or any title that could lead people to believe that the person may legally
practise professional engineering, is in violation of the Professional Engineers Act. The Act is enforced by
prosecuting such people in the Superior Court (in accordance with the Act, Section 39). People who are
convicted by the court may be required to pay rather severe fmes (as set in the Act, Section 40).

ANSWER TO ETmCS QUESTION 1-

Nou: This question has some similarity to Problem Ion page 212 oftbe Ethics text, although the effects of the
pollution are apparentlymuch less severe in the PPE question. The diJcussioo of the "Engineer'. Duty to Report"
on pages 207-211 and the pollution case histories on pages 263-270 of the Ethics text may also intcnst you.

EtlIlc4l wlla: This is a typical fonn of ethical dil~ On the one hand, the engineer (Epsilon) bas an
obligation under the Code ofEthics (Regulation 941, Section 77 (2) (i» to "regard the pBCtitionc:r's duty to public
welfare as pantmOUDL" In addition, failure to comply with "applicable statutes, regulations, standards, codes.'"
is defmed as professional miscondu<tt (Regu.lati.on 941. Section 72(2)(d». However, if Epsilon foUows these

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 ,
,
, rules, bad things will happen. As Question 2 explains. if Epsilon reports the pollution levels, the negauve
I publicity would advenely affect the town's resort business. and the chemica] company is probably not willing to
I pay to correct the problem (and this will presumably give some hardship). Epsilon is clearly faced with two
equally undesirable courses of action. Initiative and resourcefulness are needed to find a third coune of action.
I
I Courses ofAction: As the discussion of pollution case histories (pages 263·270 of the Ethics text) shows. failure

•• to act in the early stages of a pollution problem can have immense social consequences later. The facts and
regulations indicate that Epsilon must report the problem to the Ministry at some point in the very near future.

•• Clearly. the first step is for Epsilon to make a well-documentcd explanation oflhe problem to hislher employer,
explaining the public relations value (to thecompany) of correcting the problem before Epsilon is forced to report
it to the MinistJy. Although Epsilon "does not believe" that the company will remedy the pollution problem,

•• Epsilon has not actually received a nt&ative answer. Therefore, the proper place to start is within the company.

Jfthe employer agrees with Epsilon's proposal to reduce pollution, then Epsilon can report both the pollution

•• problem and Ihe solution to the Ministry, at the same time. The bad publicity for the company and the local
resorts would be minimal, very little hann would be done, and the problem is solved.

•• However, if the employer rejects Epsilon's proposal, then Epsilon desperately needs to create a thied option.
Epsilon must show some initiative and imagination to fmd this third option. For example:
.. perhaps the Ministry, if contacted, would penni! increased pollution levels under the circumstances, or
•• .. perhaps funds might be available from the Ministry to assist in reducing the pollution; or
.. pabaps funds might be available from the local resorts to help the company reduce the pollution.

•• Conclusion: In any case, Epsilon must follow the government environmental guideline. If Epsilon Dcverreports
the elevated pollution. the other alternatives will Deverbe considered. By reporting the problem. Epsilon changes

•• the personal problem (a serious infraction of Regulation 941 which may come back to haunt Epsilon in future
years) into a politica1 problem which is now more likely to be solved.

•• ANSWER TO ETIDCS QUESTION 3.

This is a typical conflict of interest case. In view of your previous partnership with a pezson who is now an
executive in Octopus Enterprises, you will appear to be favouring your old partner if you approve a major

• engineering contract to Octopus. Although you might think thai you can still give a fair and impartial judgement,

•• your decision will not be seeD to be fair by the general public. This is particularly true in government contracts,
and it is the: role of the official opposition to fllld and expose such conflicts of interest, in order to ensure that
government contracts are awarded fairly and such key decisions are not influenced by friendships or bribes. Such

•• decisions must not ooJy be fair, they"'ust be sun to be/air.

In accordance with the Code of Ethics (Regulation 941, Sections 77(3) and 77(4». a professional engincermust

••
"avoid or disclose a conflict ofintcrest that might influence the practitioner's actions or judgment." 10 this case,
you would avoid the conflict by sending the documenlJ to your superior for a decision, with a note explaining
that you have a conflict of interest in the case. The decision would then be made by your superior. who does not

•• have such a conflict. (In exceptional cases, the decision might be made by an equal - a chief of a different
directonte. for example. but should never be delegated to a subordinate.) This is a cornman procedure in
goverrunenl and business, and generally works effectively.

•• If you iDlist 00 awarding the contract yourself: you might be dismayed to fmd your name mentioned by
opposition memben in the fedenl parliament (ortbe provincial legislature), and after an investigation, youwould
•• likely lose your job. Failing to disclose an apparent conflict of interest in the award ofa major contract is not only
a breach of the Code of Ethics, it is grounds for dismissal.

••
• -53-
 ,,
ANSWER TO ETHlCS QUESTION 4.
Background Facts: References are obtained to ensure that the applicant for PEO membcnhip satisfies the , i
Rquirements of good chanlCier and adequate engineering experience and to satisfY the admission requirements
(as explained in Chapter I of !his manual). Therefore, the referee must have adequate knowledge of the
applicant's experience and character to judge these characteristics. References are not intended to be an
evaluation of the candidate's mendliness or personality; although these are admirable traits,. .they are not
••
requimnents for admission. .
•4
However, this case involves an additional fact which should be well-mown to applicants: Section 7 of the
application form states that at least three referees are required. One must be the applicant's current supervisor •
(whether the supervisor is licensed or not), but the other two referees must be professional engineers.

EtlticlllIssues: The Code of Ethics requires professional engineers to "provide opportunity for professional
••
development" of subordinates," (Regulation 941, Section 77(1Xv» so Rho bad an obligation to assist Omega by
writing a reference. However, the Code prohibits professional engineers from expressing publicly "opinions on
•I
professional engineering matten: that are not founded on adequate knowledge and honest conviction."
(Regulation 941, Section 77(2Xiii» (A reference would be considered a public opinioll.) ,,•
Therefore. the ethical issue here is really whether Engineer Rho was the right person to the write the letter of
reference for intern Omega to PEO, and whether Rho had adequate knowledge of Omega's experience and
character, before writing the letter.
,,•
Genertl/;n, A/terntJtiHS: Omega was employed by the consulting engineering fll1ll during the previous summer,
so ber previous supervisor (Rho's subordinate) presumably is oot ber currmt supervisor. Howcwer, tbe~oo
does not state whether the supervisor is licensed as a P.Eng. We therefore should examine two scenarios., based
,,
on whether the supervisor is licensed or not licensed.

Analysis:
,,
If Omega's supervisor (Rho's subordinate) is licensed, then it would not be appropriate for Rho to write the letter
at all. Rho sbould have suggested to Omega that the supervisor would be a better referee, since the supervisor
has a mucb better knowledge of Omega's experience and character, and is a P .£og, as required by PEO~'
,
,
However, if Omega's supervisor is not licensed, then Rho is an appropriate penon to give the referen<:e; f
otherwise, Omega's experience at the consulting firm might not be counted by PEO. However, Rho must have
adequate knowledge of Omega's experience and character, befon:: writing the Jetter. Tbequa4ionstates that Rho
merely "inquired about Omega's engineering capability and suitability for licensure from ODe ofhia: subordioates." f
Rho then based his assessment entirely on that information. This is not adequate. The supervisoc'a opiniQn might
have been swayed (either positively or negatively) by friendship, personality, prejUdices or conflicts tbatbad DO (
bearing on Omega's character or experience. Therefore, Rho should have obtained some evideoce . tba~ was
independent of the supervisor. Rho should have consulted at least one otherpersoo familiar with OnIega.'s work:
or should have asked to see some evidence of Omega's work, such as rcporu.letterJ.Iog-boolcs, etc.

DeclsiDn: As the question is stated, either Rho should Dot have written the reference, or Rho sbou1d have been
more thorough in obtaining infonnatioo about Omega's character and experience. Rho depended too much on
the supervisor's opinion, and Iilc:ely did not have adequate knowledge, as required by the Code of Ethics.

ANSWER TO ETHICS QUESTION 5.

You might want to n::ad Case Study 7.2 in the ethics text (page 136), which bas some similarity to question 5.

Filets: Both Gamma and Psi, as professional engineen, have obligations WIder the Code of Ethics, Section
77(1 Xi), to act at all times with fairness and loyalty to associates, employer&, clients,subordinatesand employees.
Let us examine each part of the question separately: (

·54-
 (i) Was It ethical for p,~ P.Ena: to teU Gamma about the opening at A.Ht.: t:ngtneenne Lid '! AIUlOUgn lIle
Code of Ethics forbids euglneeB from "maliciously" injuring thc: business ofanother engineer (Section 77(7Xiii»,
simply telling Gamma about an opening in a rival company would not be "malicious. to This is infonnation that
Gamma could have obtained without Psi's assistance, and Psi offered no inducement to Gamma. Therefore, yes.
it was ethical for Psi to tell Gamma about the opening.

(n) Was it. ethical for Gamma to Interview fOI" a position with one ofU & I Enelneerinc Inc supplien?
Gamma has an obligation to the employer, but Garruna also has a personal obligation to seek challenging work
and to progress within the profession. From the facts in the question, it would appear that Ganuna bas satisfied
any initial investtnent that the U&I corporation made in training Gamma. Oanuna has shown loyalty through
six year.; of work, and has made repeated requests for more challenging work. lfU&I is unable to permit him
to advance within the company, then Gamma should have no guilt and should face no obstacles in seeking work
elsewbere. Therefore. yes, it was ethical fOI" Ganuna to interview for a position with one ofU&I's suppliers.

(ill) Was II ethiul for Gamma to conceal that ABC Engineerina: Ltd. would be his new employer? A:i soon
as Gamma interviewed for the job at ABC Engineering, he placed himself in a con1lict of interest position (as
discussed above in Question 3). Although Gamma might think that he can still give a fair judgement when
negotiating and evaluating bids submitted by ABC Engineering, his decision will not be seen to be fair by the
employer, U&I Engineering, or by other companies submitting competing bids. In accordance with the Code of
Ethics (Regulation 941, Sections n(3) and n(4)}, a professional engineer must "avoid or disclose a conflict of
interest that might influence the practitioner's actions or judgment" In this case, since Ganuna was evaluating
bids submitted by ABC Engineering, Gamma should have disclosed the conflict of interest to his supervisor,
Theta. Theta would then decide how to ensure that the bid evaluation was fair. Therefore it was unethical for
Gamma to conceal the fact that ABC Engineering would be his new employer.

Moreover, if Theta should discover, after Gamma leaves U&J Engineering, that Gamma showed any favouritism
to ABC Engineering during the final 2 weeks of employment, then Theta could request both civil suits and
disciplinary action be commenced against Gamma for failing to disclose this conflict of interest Engaging in a
conflict of interest is VCl}' dangerous, professionally.

9.4 Solutions to Law Questions

ANSWER TO LAW QUESTIUN 1.

(a) Rule of tODtra proferentem (Ref: page 128, Mamon, lAw for Professional Engineers)
This rule tries to ensure that contracts are written clearly and unambiguously. The rule states that where a
clause in a contract is written ambiguously. the clause will be interpreted against the party thst wrote the
clause. It is therefore important to avoid ambiguities.

(b) Liquidated damae:cs (See Law text, p. 206)

An estimate of damages likely to result from non-pcrfonnance of a contract A "liquidated damages" clause
in a contract can be used to limit liability.

(c) Gratuitous Promise (See Law text, p. 88, under -equitable estoppel.)
A promise made without something ofvslue (considenl1ion or a seal) expected in return and therefore not
legally binding. It may be enforceable under equitable estoppel, if there is a clear inequity.

(d) Statutory holdback (See Law text. p. 243 and chart. p.244)
This is a term wwch occurs mainly in construction contracts. The purpose is to ensure that sub-contractors
(suppliers, tradespeople or skilled workers who wort for the contractor) are paid by the main contractor
responsible for the construction project. Eacb province bas a "statute" (or law) which requires the owner to
"hold back" a percentage oftbe amount owed to a contractor, for a specified period of time, 10 penrut the sub-

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 ••
contractors to file liens with the govenuncnt if tbey have not been paid. If no liens ar~ filed by the sub-- ,
contnelOrs within thc specified period. then the holdback. may be paid to the contractor. Ifa lien is filed. tbe:n
the owner must not pay the holdback amount until the dispute is settled between the main contractor and the •,•
,
su1H:ontractor.

(e) Five C$$cntials of a blndlnt: contract: (See Law text, p. 75)

••
For a conb'act to be binding and enforceable, 5 elements are needed:
I. An offer must be made and accepted;
2. a mutual intent to complete the contnet;
3. a "consideration," usually rDODCy;
4. ·capaclty· or ability oftbe parties to create and perfonn a contract; and
5. a lawful purpose Oegal pwpose) for the contract. ••
If one (or more) oftbe above essential clements is not present, then a contract bas not been fonned, and such
an agreement is not enforceable.
••
(I) Undue Innueace: (See Law text, p. 111)
Undue influence is similar to "duress" but usually is less drastic and occurs in different circumstances.. Undue
influence occun when one party to a contract exerts a dominating effect on the other party. It is not common
•C
in business, but occurs occasionally in family matters. For example. if a contract should be created between
family members. it is not uncommon for older membcn to dominate younger memben. A contract may be
repudiated if it can be showu that the parties had unequal bargaining positions, and undue influence was
•
C
exerted when the contract was created
•
(&) Ontario Human RJgbts Code: (Sec: Law text, p. 312) •
State five examples of proh.ibited conduct in the workplace Wlder the Ontario Human Rights Code: The
Ontario Human Rights Code prohibits employmeot discrimination based on race, ancestry. place of origin. •f
skin colour, ethnic origin. citizenship, creed, sex. sexual orientation, age, marital status, family status, record
of offences., or handiCip. The Code also outlaws sexual harassment. f

(h) Concept ordlscoverabiUty: (See Law text, p. 68-71)

Tort cases must begin within a specific time limit. The limitation period varies significantly, depeoding on
the type of lawsuit and other factors, but it is typically 6 years. If ~e plaintiff delays past the limitation
period, DO action may be taken. However, when does the limitation period start - on the construction date
or on the date when the damage is discove:rM? The Supreme Court of Canada ruled in a 1984 docision (City
ofKamloop$ v. Nielsen) that the limitation period in tort begins when the damage is first discoveied (or ought
to have been discovered by a reasonably diligent person). This coocept of"discoverability'" was extended
from tort cascs to contract cases in a 1985 case (Conmmer.s Glau), when the Court of Appeal ruled that in
cases where a breach ofa duty of care occurs. whether in conb'act or tort, the limitation period does not begin
until after the plaintiff discovers (or ought to have discovered) the damage. This extension bas not been
tested before the Supreme Court. (see p. 70)

ANSWER TO LAW QUESTION 2.

This question was also asked on the September, 1998 exam. The answer is on page 45 of this manual.

ANSWER TO LAW QUESTION 3.

This question was also asked on the September. 1998 exam, and the answer is also on page 45 of this manual.
Some questions arc obviously ~cled by the examiner.

ANSWER TO LAW QUESTION 4. (See Iawtext,pagcsl13·1I9.)

This case emphasizes the importance ofpreparinl teodcr documents accura1ely. The XYZ company made a
"unilateral mistake" (see Law text, p.113) when XYZerroncously omitted an amount ofS800,OOO from itJ tendef
price ofS3,JOO.OOO. (In other wonls. XYZ should ha.. bid S4.100.000.) When th. Owner aocepted xyz.[
tenderofS3.300,OOO, then XYZ had a dilemma: Either XYZ accepta the contract and does the work for $800,000

·56-
less than it should have calculated, or XVZ refuses the contract, and is then liable for whatever damages result,
such as the forfeiture of the tender deposil

A fair person does not want to profit from an bonest mistake, and a contract made under a mistaken bid will likely
lead to I poor job, Therefore, it may seem fair for the courts to offer some relief if an bonest mistake is made,
However, the courts will intervene only very rarely, because people should not make tender bids carelessly, and
if tender mistakes are easily forgiven, the tendering process could be opened to manipulation and game-playing.

In a similar case (Belle River-p. 114) the courts ruled in favour of the contractor, and created the principle that
an offeree cannot accept an offer which the offeree knows has been made by mistake. However, in a later case
(Ron Engineering - p. 116), the trial court came to the same decision, but the decision was set aside by the
Supreme Court because the tender documents contained a separate clause concerning the forfeiture of the tender
deposit. The courts have thcrefo~ indicated that the tender is a separate ~lationship from the awarding of the
contract. That is, the CaJ/jor Tenders ~ itsclfan offer, whicb ~ accepted when the lender is submined.

• What potend.lllabilities in contract law .rbe In tho case? What would tbe Ol'fDtr be entitled to claim
from XYZ? First, since XVZ was presented with the contract, and refused to sign it, then XYZ is liable to
lose the tender deposit of $200,000. In addition, the Owner may be entitled to sue XYZ for the $)00,000
difference between the XYZ price and the next lowest bidder's price ($),600,000 minus $3,300,000 equals
$300,000), plus any costs which arise through the inconvenience of accepting the next-lowest tender and
suing the XYZ company.

• Would tbe OWDer be entitled to kec:p the tender deposit? In view of the ruling in the Ron Engineen'ng
case (p. 116), the Ownerwould likely be entitled to keep the tender deposit, since XYZ was presented with
the contract. and refused to sign it, and the clause in the tender document stated quite clearly that the deposit
was forfeited if the Owner did Dot receive the Contract signed by the successful bidder "for any reason
whatsoever." This conclusion is supported by the Supreme Court ruling in the Ron Engineering case where
the contractor was required to forfeit the deposit because of a similar tender clause.

• Indleate a likely outcome to tbls matter. This is not an easy case to predict. Although the law favours the
Owner concerning the tender deposit, in view of the circumstances of the case (the mistake was an honest
clerical error, the contractor informed the Owner of the mistake within 10 minutes of the tender closing, and
offered to withdraw its tender before the tendcn were opcoed), I believe that the Belle RiW!r precedent (po
114) would likely be invoked, and while the $200,000 tender deposit would be forfeited. XYZ would not be
required to pay further damages.

ANSWER TO LAW QUESTION S.

This question is actually the Sample Case Study at the end of Chapter 10 in the Law text and is fully explained
in the text (see page 92).

Good luck on your examination!

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CHAl'TERIO

FOURTH SAMPLE EXAM (1999) 10

NOTE: The following is the Professional Practice E:um, held April 14, 1999. Minor
edlelng was done to save space. Try the questions on this uam paper under eum
conditions. Allow yourself90 minutes. maxlmom, to solve each part bdore looking at the
hlots. This cbapter is Dot contained on the video-tape.

10.1 Part A - Professional Practice and Ethics Exam

ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION - APRIL 24, 1999

PART" A .. - ProCessional Practice and Ethics

This examination comes in two parts (part A and Part B) both of which must be completed within the allotted
lhree-hour time period. Each part of the examination (A & B) must be passed at one and the same sitting, by
candidates on their first attempt, in order to "PASS" the Professional Practice Examination. 1be result of the
combined examination, Part A plus Part B. will be declared as "PASS" or "FAIL. II

Use the correct colour-coded answer booldet(s) for each part. place it (them) in the correct envelope and sea} it
before submitting at the end of the examination.

White answer booklet(s) for Part A (white question paper);

Coloured answer booklet(s) for Part B (coloured question paper).

This is a "CLOSED BOOK- examination. No aids arc 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 pennitted.

The marltjng of questions will be based not only on academic content. but also on legibility and the ability to
express oneself. If you have any doubt about the meaning of a question, submit with your answer a clear
statement of how you have interpreted the question.

Candidates must attempt Question number I and any three of the other four questions; ie., four questions
constitute a complete paper for Part •A·. All full questions are of equal value. When answers for more than the
three optional questions arc submitted (ie., not including Question I). without stating which three are to be
considered, only the ftrst three answers, as they appear in the examination booldet(s). will be graded.

Where a question asks if a certain action by an engineer was ethical or not, a simple "ycs· or "no· answer is not
suflicienl you should identify the applicable clauses in Regulation 941 and comment on the action in each
situation.

-58-
 ,
,
-'
Question I' TbIs Question to be AOIwered DX III clndidates
,
4
a) The practice of stamping an original drawing exposes a P.Eng . to liabilJty . Why is
it not a good practice to release drawings which bear only a photocopy of the
practitioner's stamp and signature? (

bl What is the purpose of the certificate of authorization?

c) Can limited licence holders call themselves professional engineers? Explain.

d) Is the Code of Ethics enforceable under the Professional Engineers Act? Explain.

el Section 56 of Ontario regulation 941 lists four requirements that an applicant must
meet in order to become a consulting engineer. List two of them .

Question 12

Lambda. the owner of a development company, is in the process of developing a

structure on a parcel of land in a rural area of south western Ontario.

Lambda entered into an agreement with Consultex, a consulting englneerinij firm , to

undertake the construction supervision on a 'payroll plus' basls.- Consultex assigned
P.Eng. Epsilon to the superviskm. Epsilon as6igned a small staH to the site to inspect
and supervise the work. Epsilon made regular viSits to the site to meet with the staff
and supervise the work.

Lambda called Epsilon to a meeting and urged that local help be added to the
inspection/supervision team. Lambda willingly offered to bear all extra costs
associated with the extra staff. Epsilon indicated the work was adequately supervised
and the increased costs could not be justified. Epsilon was concerned that s~uch a
commitment would create problems and drive up the engineering fees which could
damage Consultex's reputation . Furthermore. Epsilon threatened to withdraw from
the agreement. if lambda Insisted.

What problems might have arisen? Was Epsilon's action ethical? Relate your
discussion to the Code of Ethics and Professional Misconduct.

Ethics Exam ApriV99 Pall" 2 of 4

·S9-
Question '3
uen8 IS an umana l""roreSSlOnal t:nglneer employed by the Federal Government in
Ottawa. Delta Is responsible for the development of infrastructure for native
communities in western Canada. One such community has had to ferry its children
across a river to the school in a neighbouring community. The cost of ferrying is very
costly and during the spring thaw and tho autumn freeze-up it is not possible.

A recent drowning of a young student caused the federal government to investigate

this situation. They determined that a new school would eliminate this hazard and,
by eliminating the ferry;ng, would be less costly.

The Assistant Deputy Minister (ADM) has assigned this project to Delta. One of
Delta's first tasks is to determine an adequate location for the building. Delta retained
a respected local consulting firm to identify the optimum location. Of the three
locations identified, the least costly is at the base of a small mountain. Among other
attributes, this site provides shelter from the frigid north w;nds. Of the other two
options, one requires the construction of a costly road and the second Is unsheltered,
resulting in substantially higher projected heating costs.

Delta presents the consultant's report to the Assistant Deputy Minister. who concurs
with Delta's recommendation to accept the preferred sheltered site. During the initial
conceptual design phase, one of the native elders informs Delta that a small
avalanche occurred near the site about ten years eartler. This disturbing knowledge
causes Delta to study methods to protect the building from any future snow slides.
Delta's superior questions the concern and directs Delta to develop the building
without any special protective measures. The ADM reasoned that since an avalanche
had occurred so recentfy, the probability was very low for another to occur in the
design life of the structure. Further. it was felt that the extra cost of protective
measures would disrupt the current delicate political balance between the federal
government. the locel government and the native peoples.

Discuss this scenario In relation to Delta's duties and obligations as a professional

engineer.

Page 3 of4

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t

i
i
••
QUBstion #4

Professor Nu, a professional engineer, divides his time between teaching and research
a
on a project in association with the University. Nu is also associated with private
research and development company where Nu provides part time consulting services.
Another federal government agency has invited proposals for a new project from a
•
••
number of organizations. This project may be viewed as an extension of work
previously done with the university by Professor Nu.
•
•
Can Professor Nu ethically participate In a proposal preparation for the university,
Nu's development company, or both? If one of these proposals is successful can Nu
participate in executing the project? In each case, discuss the basis for your answer.
••
•
Question '5 •
Psi Is a recently licensed professional engineer emplo.yed by a medium sized software
•4
development company, Sohdlsk.. Psi has worked for Softdisk since graduating from I
university and has been promoted to the pOSition of software engineer as a result of I
being licensed. With this promotion has come an increased salary and the inevitable
increases in responsibility and workload. At home, Psi is a new parent and Is I/?oklng
to purchase a new house .

Psi is working furiously to meet 8 deadline for the design of an electrical proce~s
computer modening program. Psi is afraid that he/she will not meet the deadline and
does not want to admit defeat by informing his/hsr boss. Psi's spouse, also a
professional engineer. has access to design software developed by her/his cO'1lpany,
HarDisk Inc. The software had been used effectively for similar design worK. Psi's
spouse reasons that HarDisk Inc. would not mind since they had upgraded to II more
current version. With the help of this software Psi expects to be able to meet the
deadline.

What are the ethical issues Psi should resolve before using the software? Does Psi's
spouse have any ethical obligations to fulfil?

Ethlos Enm Apri1199 Plgo4of4

-61-
lU ..l rart u - .t.ngmeerlDg Law anQ 1"rotesslonal LlaDWty t.:xam

Al>l>UCLAllUN UF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION - APRIL 24, 1999

1"AKT "H" - .l!;ngtneering.Law aDd J'rotessional Liability

This examination comes in two parts and both must be completed within the three-hour period. Each part of the
examination (part A and Part B) must be passed independently. in order to "PASS" the ProfessionaJ Practice
Examination. The result of the combined examination. Part A plus Part B. will be declared as "PASS" or "FAIL".

Use the correct colour-coded answer booldet(s) for each part. place it (them) in the correct envelope and seal it
before submitting at the end of the examination:
White answer bookJet(s) for Part A (white question paper);
Coloured answer booklet(s) for Part B (coloured question paper).

This is a "CLOSED BOOK" examination. No aids are pennitted other than the excerpts from the 1990 Ontario
Regulation 941 covering sections 72 (The Definition of ProfessionaJ Misconduct) and 77 (Code of Ethics)
supplied at the examination.

DJc:doDarles are Dot permitted.

The marking of questions will be based not only on academic content, but also on legibility and the ability to
express oneself. If you have any doubt about the meaning of a question, submit with your answer a clear
statement of how you bave interpreted the question.

Candidates must attempt Question number 1 and any three of the other four questions; ie., four questions
constitute a complete paper for Part "0". All full questions are of equal value.

When answers for more than the three optionaJ questions are submitted (ie., not including Question I), without
stating wbich three are to be considered, only the ftrst three answers, as they appear in the examination bookJet(s),
will be graded.

Page 1 of S pages

-62-
 Part B. AprH. ,~~~
. !
•
.: .
(OUESTION ! TO BE ANSWERED BY EACH CANDIDATE)

(MARKS)

(15) 1. ilIWIY define and expIam my 100> of the following:

(a) Undue influence
(b) Gratuitous promise
(e) Secret Commission
(d) Duty to mitigate
( e) Parol evidence rule
(I) Rut, of contra proferentem
W Holdback under- ConslTUCtion Uen Act
(b) Discharge by _tion
(i) Contract A

(15) 2. Hyper Eutectoid Steellnc. ("HESl") i. a company which produces various types of
steel for industrial applications. In order to increase the strength orits steel product~ HESI
uses a process of quenching and tempering. During the quenching stage., hot steel is quicldy
cooled with water. During the tempering stage. the steel is tben heat treated for an
appropriate time. The process requires large amounts of water and heat.

Faced with rising costs for energy, IIESl decided to install. heat recovory syst<m.
The system would include a heat exchanger by which heat could be recoVered from the
cooling water in the quenching stase. combined with additional heat from a steam line in the
plant that was otherwise not beU1g fully utiIiud. The recovered heat, then, would be used to
heat the steel in the tempering stage.

IIESI entered into an equi~ supply contn.ct with Energy R=very and
Recyclings Sy3tems Inc. ("ERRS"). ERRS agreed to design, supply and instaIl a beat
recovery uNt for a contract price ofS600,OOO. After an analysis ofHESrs processes ERRS
detennined and guaranteed in the contract that the heat recovery system would recover 40"/.
of the heat in the cooling water and that this would result in substantial savings in energy
costs.

The contract abo contained a provision limiting ERRS's total liability to 5600,000 for
any loss, damage OT injwy resuJting from ERRS's performanco· of its services under the
contncl.

The heat recovery system was installed and was operationaJ; however, certain defects
in the heat exchanger prevented the system from ever recovering mo,," than 5% of the heat
in the cooling water. Aller repeated unsuccessfulanernpt. by ERRS to ranody the deIecIs,
HESI hired another supptier, who, for an additional $800,000, replaced the hest exchanger
and wu able to achieve the level of performance originally promised by ERRS. The toul
amount received by ERRS under its contract was $500,000.

Pap 1.,5 pa..,

.,,,-
 Part 8, April, 1999

Explain and discuss what contract law claim HESl can make against ERRS In the
cin:umstan<:a. In answering, please include a brief summary of the develop..",t of relevant
case precedeJfts relating to the enforceability of contract provisions that limit liability.

(10) 3. ~ . An environmental consulting firm. E Inc., wu retained by • large

manufacturing company, Acme Ltd. E Inc. was retained to prepare an environmental
compliance audit as Acme Ltd. was contemplating the possibility of a sale of two of its
properties.

E Inc. carried out the environmental compliance audit with respect to each of the
pt"operties and submitted its reports on each property. Included at the outset of each report
was the roUowing statement:

"'This report was prepared by E Inc. for the account of Acme Ltd,
The material in it reflects E Inc. 's best judgement in tight of the
information available to it at the time of preparation. Any use which
• third party makes of this report. or any reliance on decisions to be
made based on i~ are the responsibility of such third parties. E Inc.
occcpU no responsibility for damages, if any, suffered by any third
party as 8 result of decisions made or actions based on this repon.. "

Some time later, Acme Ltd. sold each ofthc two properties to Acquisitions Inc. In
negotiating the sale with Acquisitions Inc., E Inc.'s reports were ~wn to Acquisitions Inc.•
but Acquisitions Inc. hid no deaJinp' With E Inc. E Inc. had no knowIeilge of the sale to
AcquWtiona Inc. uillil approximately foor yean lote< when Acqui&itiolis Inc. commenced a
lawsuit "goinst E Inc. Acquisitions Inc. c:Iaimed it had commenced the lowsuit 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 finn who confinned
that the report in question by E Inc:. contained negligent misstatementl. Acquisitions Inc.
c:Iaimed in its lawsuit that E Inc. wu aware that the report might be shown to 0 prospective
purchaser and" accordingly, B Inc. should be responsible for dainages arising as a result of
r<liance by Acquisitions Inc. on the negtigont misstate<nents in E Inc. 's report.

Should E Inc be liable in the c:ircwnstances? Explain.

(5) (b) The Ontario Hunwt Righu Code protects e<nployees against certain types of
behaviOUT in the workplace. B)iefIy identify (list) five examples of inappropriate conduct in
the workplace that &nO prohibited by the Ontario Human Rights Code.

(10) (c) 1110 question of how long an engineer or & contn.ct:or can be sued for
negligence or breaclI of contract is one that is of concern to professional engineers and to
contracton. De.cribe the lirniution periods during which engineers and contracton can be
sued in tort and in contract.
(lS) 4. An information technology finn assigned to one of its junior employee engineers the
task of developing special software for application on major bridge designs. The employee
engineer had recently become a professional engineer and was chosen for the task because
of the engineer's background in both the construction and the "software -engineering"
industries.

The finn 's bridge software package was purchased and used by a suuctunl
engineering design firm on a major bridge design project on which it had been engaged by
contlllct with a municipal government.

Unfortunately, the bridge collapsed in less than one year after completion of I
construction. Motorists were killed and injured.

The resulting investigation into the cause of the collapse concluded that the design of
the bridge was defective and that the software implemented as part of the design did not
address a11 of the parameters involved in the scope of tfUs particular bridge design. The I
investigators concluded that although the design software would suffice for certain types of •
structures it was not appropriate in the circumstances of the particular subsurface conditions t
and length of span required for this particular- application. The investigators' report also
indicated that the design software package was not sufficiently explicit in warning users of I
the software of the scope of the design parameters addressed by the software. The I
investigators' report also stated that even an experienced user of the software might
reuonably assume that the software would be appropriate for applicatipn on this particular
project and that too little attention had btC:n paid to ensuring that adequate warnings had been
provided to software usen of the limitations on the application of the software.

What potential liabilities in tort law arise in this case? In your answer, explain what
principles oftort law are relevant and how each applies to the case. Indicate a likely outcome
to the matter.

(15) s. A mUting contractor signed an option conb'8ct with a land owner which provided that t
if the mining contractor (the ·optionee,,) perfonned a specified minimum amount of
explon.tion services on the property of the owner (the ·optionor") within a nine month '
period, then the optionee would be entitled to exercise its option-to acquire certain mining ,
claims from the optionor.

Before the expiry of this nine month -option period-, the optionee realized that it
couldn't futfiJ its obligation to expend the required minimum amount by the expiry date.. The
optionee notified the optionor of its problem prior to expiry of the option period and the
optionor indicated that the option period would be extended. However, no written record
of this extension wu made. nor did the optionor receive anything from the optionee in return
for the extension.

The optionee then proceeded to perform the services and to finaIJy expend the
specified minimum amount during the extension period. However. when the optionee
Part B, April, 1999

attempted to exercise its option to acquire the mining claims the optionor took: the position
that, on the basis of the strict wording of the signed contract. the optionee had not met its
contractual obligations. The optionor refuxd to grant the mining claima to the optionee.

Was the optionor entitled to deny the optionee's exercise of the option? IdentifY the
contract low principles that apply, and explain the basis of such principles and how they apply,
to the positions tak... by the optionor and by the optionee.

i
j

,I'
iI
,
i

PaceSors_ i
 1U.3 l!:XAM HlNTS
The tollowmg are definitely not complete answer.; - they are merely bints to help you get started.

Part A - Professional Practice and Ethics Exam -APRIL 24,1999

ETHICS QUESTION 1. . . . ~ ') _
a. Photocopied sea1- Not a good Idea - may be duplicated. See Ethics text, p. 1-'70- :,. . -.t ..,-
b. C of A identifies the person responsible in a corporation for engineering. See Ethics text. p. 34
c. Limited Licensees arc: not P.Eng.:! - A bolder ofa temporary licence or a limited licence is not a member
of the Association. - See Professional Eogineers Act. section 18(5). .
d. Code is not enforceable unless the breach of the code also satisfies the definition of professional
misconduct See Professional Engineers Act, section 72 (2)(g).
c. Consulting Engineer - See Ethics text, page 35.

ETHICS QUESTION 2.
Lambda's true motives are Dot clear in this question. In any case, Epsilon must "act in professional engineering
matters for each employer as a faithful agent" (Code of Ethics, 77(3». Adding unnecessary personnel could also
be considered to beprofessional misconduct (See Regulation 941, Section 77(2)G» as "conduct or an act relevant
to the practice of professional engineering that, having regard to all the circumstances. would reasonably be
regarded by the engineering profesAion as ... unprofessional." Other clauses might also apply.

ETHICS QUESTION 3.
As the questions is posed, Delta has an ethical dilemma with two bad choices. A third option must be found that
is consistent with the Code of Ethics. does not constitute professional misconduct, and yet satisfies the political
balance mentioned in the question. You need to put yourself in the place of Delta and generate these alternatives,
then analyze them.. In any case. the "'public welfare" (and you must try to define ,this) must come fust.

ETHICS QUESTION 4.
Nu has a conflict of interest here. The conflict must either be avoided or disclosed, according to Regulation 94 I
(See the Code of Ethics, n(3». Moreover, Regulation 72(2)(i) applies, since "'failure to make prompt, voluntary
and complete disclosure of an interest, direct or indirect, that might in any way be, or be construedas,
prejudicial
to the professional judgment of the practitioner in rendering service to the public, to an employer or to a client"
is considered professional misconduct.

ETHICS QUESTION S.
This question is similar to Ethics Question 4 in Chapter 8 (page 38 in Utis manual). See page 43 foc some hints.

Part B - Engineering Law and Professional LiablUty Exam - APRIL 24. 1999
LAW QUESTION 1.
Definitions - Look up the various terms in the Index of the Law textbook.

LAW QUESTION 2.
This is problem 20 on page 340 of the Law text, and appears to involve breach of contract. Read the section on
"Fundamental Breach" in the Law text, particularly the sample case study on page 154.

LAW QUESTION 3.
(8) A similar case (Wolverine v. Nora~in theLaix~tunder"Deve)opmentofTortLaw" (page 36).
(b) Ontario Human IUghts-Seepago 0 theLaw $1;),
(c) Limitation periods - See page 65 of the Law text

LAW QUESTION 4.
This question bas appeared on several earlier exams. The answer is on page 45 of this manual.

LAW QUESTION 5.
This question has also appeared on several earlier exams. It is actually the Sample Case Study at the end of
Chapter 10 in the Law text and is fully explained in the text (see page 92).

-67-
 FIFTH SAMPLE EXAM (2000) 11
NOTE: The following is the Professional Practice Exam, held August 19, 2000. Minor
editing WJI' dODe to save .pau. Try the questions on this exam paper under exam
conditions. AJlow yourself 90 mlDDtes, muimum. to solve eJlcb part before looking at the
hints. This chapter is not rGot.iDed on the video-tape.

11.1 Part A - P rofessional Practice and Ethics Enm

ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACTICE EXAMINATION - AUGUST 19, 2000

PART" A .. - Professional Pncticc and Ethics

This examination comes in two parts (part A and Part B) both of whicb must be completed within the allotted
three-bour time period. Each part of the examination (A & B) must be passed at one and the same sitting, by
candidates on their first attempt, in order to "PASS" the Professional Practice Examination. The result of the
combined examination, Part A plus Part B. will be declan:d as "PASS" or "FAIL."

Usc the correct colour-codcd answcrbooklet(s) for each part. place it (them) in the correct envelope and sea} it
before submitting at the end of the examination.

White answer booklet(s) for Part A (white question paper);

Coloured answer bookJet(s) 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. Dldlonaries are not permitted.

The marking of questions will be based not only on academic content, but also on legibility and the ability to
express oneself. If you have any doubt about the meaning of a question, submit with your answer a clear
statement of bow you have intetpreted the question.

Candidates must attempt Question number I and any three of the other four questions; ie., four questions
constitute a complete paper for Part "A". All full questions are of equal value. When answers for more than the
three optional questions are submitted (ie., not inctuding Question I), without stating which three are to be
considered, only the first three answers, as they appear in the examination booklet(.), will be graded.

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 should identify the applicable clauses in Regulation 941 and comment on the action in each
situation.

I
Pace 1 oC 3 paees

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 •
•
Ethics QUestlOD # 1
(i) In addition to the Professional Eogineer (p .Eng) licence, the Association a1so issues "limited licences"
•f
and "Iemponry licences" to permit the authorized practice of professional engineering in Ontario.
f
(a) What is the main difference between a "limited licence· and a "temporary licence"? f
(b) In accordance with O.Reg.94IJ9O, what is the eligibility requirement for:
f
a Limited Licence? "
a Temporary Licence? f

(ii) The engineering profession in Canada is said to be self·rcgulating. What does the term "self·regulating"
mean?

(iii) How would you deflDe the term "profession"?

Etblcs Question # 2
Sigma, P .Eng., an independent practitioner, was engaged by an engineering finn to perform conceptual design
and prepare drawings for a fuUy·automated high-temperature and low·pressure reactor system in accordance with
the existing safety regulations. Upon completion of the work. the original drawings, with Sigma'S seal. signature
and date affixed, were turned over to the project manager of the engineering finn.

Sigma was laterretained to inspect the fabricated reactor facility and found that many crucial aspectS of the design
had b<en ignoml.

~ Discuss the situation, including Sigma's actions and professionaJ responsibility.

Ethics Question # 3
ABC, a chemical e:ngineeringmanufacturing company, produces a well·known consumer item that enjoys a high
rating in the industry and with consumers.. In recent years competitors have introduced a similar product, oflower
quality ala lower cost. on the marXet. ~ a result, ABC has begun to experience a serious decline in the sales of
its produCL

To deal with the competition, ABC professional engineers to redesign its product so that it may be made a lower
price. Some oftbe engineers question whether sucb an action would be consistent with Professional Engineers
Ontario's Code of Ethics, since a lower quality product under the same brand name would mislead the public.
They reason that the consumer would be of the mistaken belief that this lesser quality product mec:U the
high.quality standards with which ABCs product has been associated with over the years.

• DiSCUSl!l the engineers' ethical obligation (if any) to protest the ABC company's instructions, or to refuse to
redesign the product.

Page 2 or 3 pagel

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1!.thiCS t..!UesUOD ." 4
ASSume mat you are a licensed professIOnal engmeerm the employ ofa consulting engineering fum. Recently,
you became aware that one of your colleagues, who is also a professional engineer, bas clwgcd a considenable
amount of your time and that ofa senior manager to a project that neither you nor your manager had worked on.
The time sheet showed that time charged to other work was deliberately transferred to this job. You tried to raise
the matter with your P.Eng. colleague but you were rebuffed.

.. What action(s}, if any, should you take in this circwnstance? Discuss your answer.

1!:thlcs Question #IS

Delta is a licensed professional engineer employed by XYZ Consulting Engineers. It is wellimown that Delta's
company sub-contracts a considerable amount of its work associated with the set·up, printing and publishing of
<q>O<ts.

Delta's spouse is trained in all aspects oflhe publishing business and worked in the field for many years before
considering to embark on a career change. However, Delta's spouse has been baving great difficulty finding
employment in a new field.

During a family discussion, Delta became convinced that they should start a business, Eta, Inc., that would get
work from XYZ and other consulting fums to do report publishing. The plan is for Delta's spouse to be President
of Eta., Inc., wbile Delta and the cbildJen would be directors oftbe corpontion.

.. Would it be ethical for Delta to carry out this plan?

.. Discuss and give reasons for your answer using the Code of Ethics as your guide.

Pale 3 of 3 pale(
11.1. rart Ii - J!.nglneenlll Law -ad "rofasioaaJ uaDwry 1!.Dm

ASSUCIATIUN UI" PRUFJ<:SSlUNAL ENlilNJ<:KIQi UJ" UNTAKIU

PROFESSIONAL PRACTICE EXAMINATION - AUGUST 19, 1000

PART "8" - EngiBeerine Law -ad .. rotaslonal UaDUlty

This examination comes in two parts and both must be completed withm the tbree-hour period. Each part oftbe
examination (part A and Put B) must be passed independently, in order to ·PASS" the Professional Practice
Examination. The resu1t of the combined examination, PartA plus Put B, will be declared as "PASS" or -FAll....

Use the correct colour..a>ded answer booldet(s) for each part, place it (them) in the correct envelope and seal it
before submitting at the end of the examination:

While answer booklet(s) for Part A (white question paper);

Coloured answer booklet(s) for Part B (coloured question paper).

This is a -CLOSED BOOK" examination. No aids are permitted other than the excCIpts from the 1990 Ontario
Regulation 941 covering sections 72 (The Definition of Professional Misconduct) and 77 (Code of Ethics)
supplied at the examination..

Dictionaries are not permitted.

The marJcing of questions will be based not only on academic content. but a1so on legibility and the ability to
express oneself If you have any doubt about the meaning of a question, submit with your answer a clear
statement of bow you have intcrpreted the question.

Candidates must attempt Question number I and any three of the other four questions; ie., four questions
constitute a complete paper for Part "S". An fun questions are of equal value.

When answen for more than the three optional questions are submitted (ie., not including Question 1), without
statiog which three are to beconsidered, only the first three answers, as they appear in the examinatioo boolclet(s),
will be graded.

Page 1 of 4 paCei

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Law Question 1. (1;5 Marks)
Briefly define and explain or simply list (where indicated) any five of the following:

(a) Liquidated damages

(b) The limitation period applicable to an action in tort against a contractor.
(c) Duty to mitigate
(d) Statutory holdback
(.) ADR
(f) Parol evidence rule
(g) Five examples of inappropriate conduct in the workplace prohibited by the Ontario Human Rights Code
(it is not necessary to define these. just list five examples).
(h) Undue influence

Law Question 2. (25 Marks)

An information technology finn assigned to one of its junior employee engineers the task of developing
special software for application on major bridge designs. The employee engineer bad recently become a
professional engineer and was chosen for the task because of the engineer's background in both the construction
and the ..software engineering" industries.

The firm's bridge software package was purchased and used by a structunll engineering design fum on a major
bridge design project on which it had been engaged by contract with a municipal government Unfortunately.
the bridge collapsed in less than one year after completion of construction. Moto~ were killed and injured.

The resulting investigation into the cause of the collapse concluded that the design of the bridge was defective
and that the software implemented as partofthe design did not address all of the pamneters involved in the scope
of this particular bridge design. The investigators concluded that although the design software would suffice for
certain types of structures it was not appropriate in the circumstances of the particular subsurface conditions and
length of span required for this particular application. The investigators' report also indicated that the design
software package was not sufficiently explicit in warning users of the software of the scope of the design
parameters addressed by the sOftwlUe. The investigators' report also stated that even an experienced user of the
software might reasonably assume that the software would be appropriate for application on this particular project
and that too little attention had been paid to ensuring that adequate warnings bad been provided to software users
of the limitations on the application of the software.

... What potential liabilities in tort law arise in this case? In your answer. explain what principles of tort law are
relevant and bow each applies to the case. Indicate a likely outcome to the matter.

Law QuestloD 3. (25 Marks)

An Ontario municipality (the "Owner") decided to update and expand its water treabnent facilities. To do so,
the Owner invited competitive tenders from contnactors for the construction of the new water treatment facility.

The Owner's consultant on the project designed the facility and prepared the Tender Documents to be given to
potential contractors interested in bidding on the project. 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 Fonn to be completed by the bidden:. the form of written Contract that the
successful contractor would be required to sign after being awarded the contract, and a Dumber of other
documents.

Paee 1 of 4 paees

-72-
 •,
Accoramg to me 'enoenng inSb'UChons. each tenaer bid we to remam ~ nrm and trI'CYocable 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 eacb bidderwas to include with its tender a certified cheque for $200.000 payable
,,
to the Owner as a tender deposit 111 addition. the Tendering Instructioo.s contained the foUowing provision
dcscn"bing the circumstancC$ in which the Owner wouJd be entitled to retain the tender deposit: ,,
"The bidder guarantees that if its tender is accepted by the Owner and the Owner does not. for any reason
whatsoever. receive the Contnlct signed by the successful bidder within 7 days after the succcssfu] bidder bas
been presented. with the Con1nct for signature, the Owner may retain the tender deposit for its own use and may
,,
accept any other tender."

XYZ Consb'Uctors Inc. ("XYZ") submined its tender in accordance with the Tender Documents. Approximately
,,
ten minutes afterthe official time for submitting bids bad expired. XYZ discovered that it made a clerical mistake
in preparing its tender: XYZ had mistakenly copied a figure from a calculation sheel Due to a clerical error.
XYZ had omitted an amount of $800.000 from its tender price 0[$3.)00.000. lmmcdiately upon its discovery
,,
of the error. XYZ notified the Owner of the mistake and indicated thatXYZ wisbed to withdraw ita tender. XYZ
and the Owner agreed that the clerical mistake was genuine; however, the Owner refused to permit XYZ to 4
withdraw its tender.

Within 2 wedcs. the Owncc announced that it bad awarded the contract to XYZ, woo was the lowest bidder, and
,, 4

presented XYZ with the Contract for execution. XYZ refused to sign the Contract As a result ofXYZ's refusal,
the Owner awarded the contract to the next lowest bidder for a price ofSJ,600.000.

.. What potentiaJliabilities in contract law arise in this case? What would the Owner be entitled to claim from
XYZ? Would the Owner be entitled to keep the tender deposit? Please provide your reasons and analysis.
,4

In doing so, explain the contractual relationships and indicate a likely outcome to this matter.
4
4
Law QUestiOD III. (25 M...ItI) 4
Hyper Eutcctoid Steel Inc. (-RES!-) is a company which produces various types of steel for industrial
applications. In order to increase the strength of its steel products, HESI uses a process of quenching and 4
tempering.

During the quenching stage. hot steel is quickly cooled with water. During the tempering stage, the steel is then
•
·4
heat treated for an appropriate time. The process requires large amounts of water and beal 4
4
Faced with rising costs: for energy, BESt decided to install a beat recovery system. The system would include a
beat exchanger by which heat could be recovered from the cooling water in the quenching stage, combined with 4
additional beat from a steam line in the plant that was otherwise not being fully utilized. The recovered heat. then, 4
would be used to beat the steel in the tempering stage.
4
RESI entered into an equipment supply contract with Energy Recovery and Recycling Systems Inc. (-ERRS-). 4
ERRS agreed to design. supply and install a heat recovery unit for a contrKtprice ofS600,OOO. After an analysis
ofHESrs processes. ERRS determiDCd and guaranteed in the contract that the heat recovery system would recover
4
4()O.4 of the beat in the cooling water and that this would result in substantial savings in energy costs. t
t
The contract also contained a provision limiting ERRS's total liability to S6OO,ooo for any loss, damage or injury
resuJtina: from ERRS's performance of its services under the contJact.
•
t
t
Pace 3 of III palCi •
t
t
-73- t
•
t be heat recovery system was mstalitO ana was OperaUOn81; bowever, certam detects m tne beat excbanger
prevented the system from ever recovering more than .5% of the heat in the cooling water. After repeated
unsuccessful attempts by ERRS to remedy the defects, HESJ hired another supplier. who, for an additional
$800.000. replaced the heat exchanger and was able to achieve the level of petformance originally promised by
ERRS. The total amount received by ERRS under its contract was $500,000.

.. Explain and discuss what contract law claim HESI can make against ERRS in the circumStances. In
answering, please include a brief summary of the de'Velopment of relevant case precedents relating to the
enforceability of contract provisions that limit liability.

Law Question 5. (25 Marks)

An information teclmology finn submitted a bid to dcsignsoftwareand hardware for an electronic technology
process to control the operation of a large-scale baggage handling and related 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 fum to tenninate the contract if the airline 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 fum 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 infonnation technology finn determined that ithad made significant judgment errors in arriving at its bid price
and that it would face a major loss on tbe projecL 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, by comparison with the other bidders. it bad left more than two million doUars "OD the table".

1ltrce 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 WI!
certified as due by the independent engineering finn. the airline's finance department asked the infcmnation
technology firm's representative on the project for additionaJ information relating to an invoice from a
subcontnctor to the information technology fU1Jl. 1be subcontractor's invoice compriJcd a portion oftbe fourth
progress payment amount. The airline's finance department requested that the additional information be provided
prior to payment afthe fourth progress payment

There was nothing in the signed contract between the information technology finn and the airline that obligated
the information technology (inn to provide the additional information on the invoice from its subcontractor.
However, the information technology finn's representative did verbally indicate to the airline's finance department
that the additional information would be provided.

1be additional information relating to the subcontractor's in'Voice was nC'VCf provided by the information
technology firm.

Sixteen days after the fourth progress payment bad been certified for payment, the infonnation technology firm
notified the airline in writing that it was terminating the contract because the airline was in default of itll
obligations to make payments within fifteen days pumlaIlt to the express wording oftbe contract.

• Was the information teclmology firm entitled to terminate the contract in these circumstances? In giving
reasons for your answer, ideolity and explain the relevant JegaJ principle and bow it would apply.

-74-
""

J.J..J t.A.AM HlN·J.::t

flIe IOllowmg are dehmtely not complete answers - they arc merely hints to help you get started.

Part A - Professional Practke and Ethics Exam - AuC.,t 2000

EnneS QUESTION I.
(i) A similar question was asked before - See page 52 of this manual or page 34 of the Ethics..texl
(ii) This question was asked before - See page 52 of this manual or page 29 of the Ethics text
(iii) See Ethics text, page 16. .

Ennes QUESTION 2.
This is similar to Case Study 9.4 in the Ethics text (page 181).

Ennes QUESTION 3.
The professional engineer hu an obligation under the Code of Ethics to safeguard public welfare. Regulation
77(2), but also bas an obligation to the employer to "to act at all times with fairness and loyalty to the . ..
employer."Reguiation 77(IXi) Note that Regulation n(2)(f) states that "a failure ofa practitioner to present
clearly to the practitioner's employer the consequences to be expected from a deviation proposed in work. iftbe
professional engineering judgment of the practitioner is ovemtled by non-technical authority ..." is defined as
professional misconduct. Therefore, the professional engineer must inform the employer clearly of the
consequences oftbe re-dcsign at lower quality. lfthecngineerinfonns the employer but is over-ruled, then this
requirement is satisfied, as long as the product is not unsafe or pose a bazard to beaJth or safety of the pUblic.

Ennes QUESTION 4.
This is similar to Question 4 on page 374 of the Ethics text (See answer on p. 374).

EnnCS QUESTION 5.
This is similar to Question 2 on page 373 of the Ethics text (See answer on p. 373).

Part B - EncJneertnc Law and Professional Liability Exam - August 2000

LAW QUESTION I.
Def1l1itions - Look up the various tcnns in the Index of the Law textbook.

LAW QUESTION 1.
This question was asked on several previous exams. The answer is on page 4S of this manual.

LAW QUESTION 3.
This question was asked on the April 2002 exam.. The answer is on page 56 of this manual.

LAW QUESTION <.

This is problem 20 on page 340 of the Law text., and appears to involve breach of contract. Read the section on
"Fundamental Breach" in the Law text, particularly the sample case ItUdy on page 154.

LAW QUESTION 5.
This question appears to involve equitable estoppel. Read Chapter 10 on "Consideration" in the Law text.
particularly the John Bul7O'Ws case on page 88 and the sample case study on page 92.

-75-
CHAPTER 1]

SIXTH SAMPLE EXAM (2001) 12

NOTE: The following is the Professional Practice Exam, held August 18, 2001. MiDor
editing was done to save space. Try the questions on this exam paper under uam
conditions. Allow younelf90 minutes, maximum, to solve eacb part before looking at the
hints. This chapter Is DOt contained on the video-tape.

12.1 Part A - Professional Practice and Etblcs Exam

ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACfICE EXAMlNATION - AUGUST 18, 2001.

PART" A"· ProCessional Pn.ctlce and Etblcs

This examination comes in two parts (part A and Part B) both of which must be completed within the allotted
three-hour time period. Eacb part of the examination (A &. 8) must be passed at one and the same sitting. by
candidates on their first attempt. in order (Q "PASS" the Professional Practice Examination. The result of tbe
combined examination, Part A plus Part B, will be declared as ·PASS" or "FAIL."

Use the correct colour-coded answer booklet(s) for each part, place it (them) in the correct envelope and sea} it
before submitting at the end of the examination.

White answer booklet(s) for Part A (white question paper);

Coloured answerbooldet(s) 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. Dldlonaries are not permitted.

The marking of questions will be based not only on academic content, but also on legibility and the ability to
express oneself. If you have any doubt about the meaning of a question, submit with your answer a clear
statement of bow you have interpreted the question.

Candidates must attempt Question number 1 and any three of the other four questions; ie., four questions
constitute a complete paper for Part • A". All full questions are of equal value. When answers for more than the
three optional questions are submitted (ie., not including Question I), without stating which three are to be
considered, only the first three answers, as they appear in the examination booldet(s), wiU be graded.

Where a question aslcs if a certain action by an engineer was ethical or not, a simple "yes- or "no· answer is not
sufficient you should identify the applicable clauses in Regulation 941 and comment on the action in each
situation.

Paee 1 of 3 pages

-76-
 1

August 2001, Part A - PPE

Questloa 111- *TBI$ QUESTION IS COMPULliUKY*

Proli=iooal Eogincers Outario (PEO) is ~wer<d under tho ProfunonoI Engine ... Act
to regulate tho pra<ticc: ofproli=iooal enginceriDg in ODlatio to fulfill its principal object.
By so doing, PEO grants Iiceuces to individuals who satisfy objective admissionsllicensing
requirements. PEO also provides its licensees with a seal (also called a stamp). Although
PEO bas s1rict gWdelioes in respect of situations where tho sealsbould sod should not be
used, many of its licensees are still \UJSUIC what they are.

a) What is PEO's principal object?

b) What is tho sigDificance of tho engineer's seal provided to its licenoces by PEO?

c) When is tho seal_oed to be used?

ANSWER ANY 3 OF THE FOLLOWING 4 QUESTIONS

QUestlDD 1# 1

.You are a licensed (mieCbaoical) professional engineer charged with enbancing the efficiency
of a liquid. dete..gcm production 1ine for your employer, • soap O'J!IIM.tBaura-. During your.
work you have access to c:oNidential company info:nnlltion and observe that the company is
adding ""'Y smsII q..,nities of. well·lmown can:inogen ("LO-, • substance suspected of
causing cancer) to !be detergent but is not listing it as ao ingredient. This confidential
information is irrelevant to your YiOrlc. However, you are aware that the additive is a banned
substance.

Under tho circumstances, what action(s) are you obligated to take as a prolessional engineer?

Questio. 1# 3

An owner retained consulting engineer. Rho, P.Eng.. UDder written contract, to pcrfunn
engineering services. Bofure Rho bad completed his work, tho owner oftho company
ootified him that tha agreement w*. being terminated. Suhsequently, tho owner retained
consulting engineer, Deha, P.Eog., to do tho same work. Upon learning ofDelta',
engagement by tho owner, Rho infurmed Delta in writing !bat tho tcnnination ofhis
~metd is by the unilatc:ral action of the OWDC!' and that be has not agreed with it.

In accordance: with Prolessional Engineers ODIatio's (PEO) Code of Ethics, what is Delta as •
PEO member oxpected to do?

..
AUCu.n 2001, Part A - PPE Pa.elo(3
·77·
OaestiOD " 4

A profe3sional softwan: cnainoer beco.,.. aware that 0 . . of the embedded softwan: products
that her co~y produ<es does not meet the standards established by the induStry. When
she brinp the matter to the attention ofher immediate supervisor, Epsilon. P. Eng., she is
igoored, and the products are shipped to the customers.
a) What action(s), iilD)', sheuld she taU?
b) Would it make ID)' difl"emJce what action(s) she should taU iithe safety of the public is not
threateoed? ExpJam.

O.esdon # 5

Profe3sional Engmeer. Ontario's (PEO) Code of Ethics outlincs the standard of conduct fur
PEO roemben and its other licensee. with respect to their profe3sional behaviour and
conduct. However, many employers of engineers are not f8.miliar with it or even aware of
its existCDOC.
a) Why, then, should the Code of Ethics be considered importaut to indu5try7
b) What could be the consequences of. compeny using individnals who on: DOt Iiccnsed
professional enginem to work in engineering positiooa? Under what eircumst.aDces may an
unIicensed·individualperfurmprnfOssionalenginrningwozk'l
<:) Discuss the competibility ofP!!O's Code of Ethics with the goals of industry.and the role 01
the prnfe3sional eogiDeer m d.,ding with any mcompetibility bctw= the two, iiID)'.

Aucust 2001, Part A - PPE Poco 3 of3

.7~ .
 11.2 Part H -1!;nglneering Law and Professional Liability ~xam

ASSOCIATION OF PROFESSIONAL ENGINEERS OF ONTARIO

PROFESSIONAL PRACfICE EXAMINATION - AUGUST 18, 2001.

PART "Btl _ Engineering Law and Professional Liability

This examination comes in two parts and both must be completed within the three-hour period. Each part oCtile
examination (part A and Part B) must be passed independently, in order to "PASS· the Professional Practice
Examination. Tbe result of the combined examination, Part A plus Part B, will be declared as "PASS" or "FAlL".

Use the correct colour..coded answer booJdet(s) for each part, place it (them) in the correct envelope and seal it
before submitting at the end oftbe examination:

White answer bookJet(s) Cor Part A (white question paper);

Coloured answerbooJdet(s) for Part B (colowt:d 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 (The Definition of ProCessional Misconduct) and 77 (Code of Ethics)
supplied at the examination.

Dictionaries are not permitted.

The markin, of questions wiD be based not only on academic content. but also on legibility and the ability to
express oneself. If you have any doubt about the meaning of a question. submit with your answer a clear
statement of bow you have interpreted the question.

Candidates must attempt Question number 1 and any three of the other four questions; ie., four questions
constitute a complete paper for Part "B". AU full questions are of equal value.

When answers for more than the three optional questions arc submitted (ie., not including Question I), without
stating which three arc to bcconsidered. only the fu-st tbrcc answen., as they appear in the examination booklet(s),
will be graded.

Paee 1 of 5 pacn

-79·
(<.!UJo;S'1'1UN 1 TO BE ANSWERED BY EACH CANDIDATE)

(MA.KKS)

(l5) \. Briefly define and explain any lin ofthe following:

(a) Parol evidence rule
(b) Secret commission
(c) COntra JrOfcreuIem
(d) Statutory holdback
(e) DRctor's standanI ofcare
(I) Gnltuitous JrOmise
(g) Liquidated damages
(b) Concept of discoverability

(25) 2. Clearwater Limited, a process-design and manufacturing compaoy,

COlored into ao equipment-supply contract with Pulverized Pulp Limited.
Clearwater agreed to design. supply, and install a cleaoing system at Pulverized
Pulp's Ontario mill for a contract price ofS800,OOO. The specifications fur the
cleaning system atated that the equipmelll was to runovc ninety-cighI pen:ent
of certain prescribed .chemicals from . the mill', liquid effluent in order to
comply with · the iequiremenls of the enviiollDlCllllll conirol aotherities.
However, the contract clearly JrOvided that Clearwater accepted no
responsibility whatsoever for aoy indir<eI or oonscquenlial damages, arising as
a resuJt ofits pcrfonnance of the cont:racl

The c1caniDl system installed by Clearwater did not meet the

specifications, but uu. was not determined uIIIil after Clearwater bad been paid
$720,000 by Pulverized Pulp. In fioet, ooly seventy pen:ent of the prescribed
ebemi<als wore removed from the elIIuent.

As • result, Pulverized Pulp Limited was fined $60,000 and was shut
down by the environmental coutrol authorities. Clearwater made several
attempts to remedy the situation 'by ahering the process and cleaning
equipment, but without success.

Pulverized Pulp eventually contracted with aoother equipment supplier.

For an additional cost of $950,000, the second supplier successfully redesigned
aod installed remedial process equipment that cleaoed tlw emuent to the
satisfaction of the environmental authorities. in accordm::e with the original
contract specifications between Clearwater and Pulverized Pulp.

Explain and discuss what claim Pulverized Pulp Limitnd cao make
against Clearwater Limited in the circumstances. In answering, explain the

lotS paces
-80-
 approach taken by Canadian courts with respect to contracts tbat limit llabllity
and includz: a brief summary of the d.velopmeol of relcvant case precedents.

(l5) 3. Mammoth Uedertaking Ltd. ("Mammoth"), a development compaoy,

retained an en:hiteclunll finn to design a twenty-storey office building. The
architect abo agreed with Mammoth that the arcb.itect would provide or arrange
:fOr inspection ~ duriog, the course of coDStl'uCtion of the project in ordc:l'
to ensure that constIUction was carried out in accordance with the project plans
and specifications.

The en:hitect prepared a concept1lal design and retained a structural

engineering firm to prepare the detailed structural design for the project and
also to carry out inspection services to ensure that all structural aspects of the
oonstruction·ofthe project were carried out in accordance with the project plans
and specifications.

The engineering finn prepared the sUucturaI design and eventually

Mammoth awarded the contract for the construction of the project. to a general
o o _ r , Swill Construction Ltd. ("Swill").

The cugiDcCIjing firm appointed one of its employee e.ngince~ Jim

Neophyte, a recent engineering graduate. as the engineering finn's
represc:atative and. inspector on the oonstruction site.

Construction colJllJlCllCCd daring the moolb of October and soon .

thereafter Swill recommeoded to Mammoth that a substantial cost savings
could be achieved if the specified fill material around the fuundation was
changed to a more readily available material Mammoth sought the architect's
advine on the .suitability of the proposed alternative liII material and indicated
to the architect that it was .most important that • decision be made as soon as
possible in order· to complete as DJJCb of the foundation and backfi11ina as
poSSlDle prior to frost conditions sett.ina in.

The arehitect, in tum, re1ared the matter to the sUucturaI engineering

linn through its ' .... e.._ TIID Neophyte, requesting that the sUucturaI
engineering firm approve the proposed chang. u quickly as possible in the
cin:umstancea. Tun Neophyte determined that the originallill material bad been
specified by an engineer who DD longer worked fur the structural engineering
rim! and that the specification bad been made on the basis of a carefUl
investigation of soil coeditio .. at the site. [lID Neophyte contacted one of the
structural engineering firm', vice-presidents aDd was autlx:Irized to advise the
. architect as to the suitability of the ahernatiw liII material alter coeducting an
appropriate investigation.

Ueder signilicaol pressure from both Mammoth and Swill to approve

the proposed fill material without delaying the construction schedule, Jim

~ILI XIOIODI_

-81-
 Neophyte approved the change of materials WIthout gJVmg due CODSld.eratton to
the possible repercussions.

The substitute material did not drUl IS ",,11 .. the material originally
specified; in fact, ~ retained ",me water and, as ~ expanded during liecze UP. it
caused significant cracking in the foundation walts. necessitating remedial work
resulting in substantial additional e _ being incurred by Mammoth. In
addition, the completion of the project was considerably delayed as a result.

of W:ts. In your explanation, _US!

Explain the potential liabilities in tort law arising wm the preceding set

indicate a likely outcome oftbe matter.

and apply the principles of tort law and

(lS lu totaQ · 4. (a) The Ontario Human RigbO Code protects employees against
certain types of behaviour in the workplace. BrioDy identify (list) five
(5)
examples of inappropriate conduct in the workplace that "'" prohibited by the
. Ontario Human RighU Code.

(5) (b) Engineers, as creative prolCssionals, may require industrial (i.e.

intellectual) property protection. Briefly identify 3 types of industrial property
protection and the duration of protection provided by cacb.

(5) (e). In some COmtructioD contracts. In engineer is authorized to be

the sole judge of the performance of wor!< by the c o _ r . Wbcrc sueb •
provision is stated. is it possible that the provision will not be enforceable o.
aceouot of the TNnl1l!'!l" in whlch the engineer perfonns his or her duties?
Explain.
(10) (d) The question of how long an engineer or a contractor can be
sued fur DClligence or breach of contract is ODe that is of concern to
profi:asional eogiDoen and to contractors. Describo the limitation periods
during which engineers and contracton can be sued .in tort and in contract.

(15) S. 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
co_.

The firm', 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 conlroct if the courier company did not pay
montbly progn:ss payments within 15 day, filllowing certification that a
progress payment was due. PwsuaDt to the contract, the ecrtification was
carried out by an independent engineering firm engaged as contract
administmor.

~ILI_ClUI_
4 of5 pales Aapat,2001: PartB-Jl'PX
·82·
 "I'hc work 'UIldcr '\he cotUad. 'WU to be pcrfurmed O'VCT a 5 UlOJ'.iD
period. After commencing v.oork on the project the information technology firm
determined that h bad made sigDificant judgment errors in arriving at hs bid
price aod that it would filce • major loss on the project. Its concern about the
anticipated lou was increased further when it also 1eamed that. in comparison
wtth the 0","," bidders, hs bid price was cxl!emely low and that, in winning the
bid, it had left more than one million dollan "on the table".

Two monthly progress payment. were certified as due by the

ind~ndcnt enprint firm and 9'id b! the courier colIl1/llrj in =tdanc.e
with the teons of the contnu:t. However, aIIcr the thinl monthly progre..
payment W1IS certified as due by the independent engineering firm, the courier
co_'s finance department aslced the infurmotion teclmology firm',
representative on the project for additional iafurmation relating to au. invoice
from a subcontractor to the information technology finn. !be subcontractor's
invoice coopi!cd. portion oftbc third progress payment 1IImunt. The courier
company's finance department requested that the additional information be
provided prior to payment of the thinl progress poym<III.

Tbc:re was nothing in the signed contract between the information

tcclmology firm and tho courier company that obligated the mmrmation
technology firm to provide the additional information on the invoice from its
subcontractor. However. the infurmation techno.1ogy firm's repesentative did
verbally indicate to the courier conpmy's finance department that "the
additional information would be provided.

Tbe additional infonnation relating to the SUbconh'actol'S invoice was

nc... provided by the information teclmology firm.

Sixteen dsys sfte.- the thinl progress payment had been certified fur
payment, the infurmation technology firm notified the courier company in
writing that it was terminating the c:ontract became the COmle:r company was in
defirult of hs obligations to make payments whbin fifteen dsys pursuant to the
express wording of the contnu:t.

W.. the information technology firm enthled to terminate the contncl

in these circumstances? In giving reasont for your ans;we:r. ideatify aud explain
the relevant Jegal principle and bow it would apply.

5 ofS PICes Aapst,2001 1 P_rtB-l'PE

·83·
Excerpt from Ontario Regulation 941 made under the Professional Engineers Act
CODE OF ETHICS
n. The foIowing Is the Code of Ethics of the
AssociaIJon:
(~ It Is ... <My at. ~ to Iho pubic, ., Iho
practitioner's employer, to the pr.ctHionec~s
clients, to other rnernbEn of the prICtitione(s
profession, and to the pnICtitioner to act at a.
times with.
e _ and loyally to Iho pnICtitione(.
associates, empkIyers. dIents.
suboIdinates and empIoyeet,
il. fidItftty to pubic needs, and
iii.d8YOfion to high Ideals ot perIIOI'\8J
honour and proIonionai ntogriIy.
iv. krlow$edge of developments In the area
of profess&onal engineeI1ng reIeYent
to any services that are undertaken,and
v . competence In the perfomwICe of any
professional engineemg MMces that
are undertaken. O.Reg. 48192
(2) A practitioner shal,
i. reganllho pnICtitione(. duty ., public
weffare as paramount,
ii. endeavour at an times to enhance the
public regard for the pradIioner's
profession by extending the public
knowledge .......,. and chccuragkog
untrue, unfar or exaggerated
_10
statements with respect to professional
engineering,
iii. not express PUblictf. or whIe the
""""'V ... -
before a COU't, COI1YI'Iiuion or other
tribunal, opinions on profusk:InaI
engineering maUer1: that . . not
founded on adequate knowledge and
honest conviction,
iv. endeavour" kee9 the pnIdtioner'l
1K:ence. temporary -.ce.. -
licence or c:erUftcate of.uthorizdon, as
the case may be, permanentty
dlsp&ayed In the pnICtitione(s place of
business.
(3) A pnoditlonor shall act In profe..1onaI
engineering matIera for each ~er as a
faithful agent or trustee, and shall regard as
conrxientiallnfoml8tion obtained by the
prac:titioner as to the busIneN atrab,
technical methods or processes of an
employer and avoid or diac/ose a conftict of
-84-
interest that might influence the practitioner's 8C1.... 1$
or judgement
4) A practitioner tnlJSt disdose irmlitdiately to the
praclilionef'. - . wry Interest, direct 0 < _
that might be construed as prejudicial in any way to
the professional judgement of the practitioner in
rendering &erv\ce to the client
15) A practitioner who is an empk)yee-engineer and Is
contracting In the pIiICtitjoner's own name to perform
professional engineering WOf1( for other than the
practitioner's empbyer, must provtde the
practitioner's client with a written statement of the
nature of the pr-.ctitioner's status as an employee
and the attendInt limitations on the practitioner's
services to the client, rrust satisfy the' practitioner
that the WOfk wII not conftlcl wiIh the practiIioner's
duty to the practiIioner's empkIyer. and must inform
the practitioner's employer of the worit..
(6) A practitioner must co-operate In working with other
professionals engaged on a project.
m A practilioner shall.
i. act towards other practitioners with courtesy
and good faith ,
i, not accept an engagement to review the work of
another practitioner for the same employer
-.
except wth the knowtedge of ttl8 other
practitioner or except where the connec50n of
the other practitioner with the WQf1( has been
ii. not maIciousIy Injure the reputation or business
of another pI"IIditioIl8f',
iv. not attempt to gan ., advantage over other
_ by pay1nv 0< accepting.
_0_
commiuion In secumg professional
engineering _ and
v. give proper credl b engineering wor1<, uphold
the pmc;:ipte of 8dequate compensation for
.ngIneerIng ...... for
professionaJ devetopment and advancement of
the practitioner's assocl8tel and subordilates,
and extend the el'factfvenea of the profession
"rough Iho InIerd1ango of engineering
information and experience.
(') A practitioner shaI ma6n1aln the honour and Integrity
of ... ~ proIonion and without fear 0<
favour expose befont the proper tribunals
unprofes.a6ona~ dishonest or unethical conduct by
any other prec:tffioner, O.Reg.538184. 5.91 .
 The HRC prohIl/tI diIatminaJIon (n::kJding In the workplace)
because of InherenI personal c::M"ac:tefisIics, n:Iuding (from
AIhough not taking IWilY from ooncr.::tuIII respollsiliMies, the ht of 1. auch ch«ac:IeriMic:s in the COde beIf):
the 10M of "'p&rlnerIng" reIIects 1he goals of ADA. where the
parties reoogllizelhe primery ImpoNnce of coopeultion (l.. ,
wen. Iogettw 10 avoid PItIb/IIIms. rllher than Ioa.Ulg on
- ,.
,..,... ~ rigtrtt iI _ _ c:Ioe«I, m.t ....

x
In !his way, IOITMItirMS wiIh llomwII "piInnering~,
the ~ locus on flO impon8nce of good
OCIfTIITIIri:eI, ...., ~ WId fI'IUIUeII pro;ect goals,
o o

I "tortfeuor" II .omeone who corrmits I tort, and

This concema 'bBtWld·thHCenes' price negotiations laking
place, initiated by the owner, outside of the neutral, transparent
bidding and seledlon procell.
This oIIen involYn the owner discJos~ Inlormallon about bids
(that ha.... been opened) to other bidcIef. whom the owner may
want to contract with, onoe the deadline lor . ubmlsslonll!l OYer.
" 18 called 'bid JhoppIng' as a melaphor lor lhe owner 'shopping'
tor Ihe IoweIt bid (LI ., ·X '1141 de this lor $ . will you do better?").
This Is not only unethical, but a breach of tha owneN obligations
oIla1mess in the bidding process (an implied !firm of contract
"" '. That.aid, p.-cMded the owner 18 aear in oortrx!"A" abW
the pcr;sIlIity of poer4Mdlne negodaliOn. (soope Mel .ubjeCt.
matter), this Is pennIUIIMe. 0
"concur'r'tnI" moM. 'at !he same time'.
therefore, concurrent tortfeatOl"l means two or more
detendanls can be found to be liable 10 the plaintifllor
I1Is.t!er Injune.. Therefore It Is possible lor the plaintiff 10 sue
two or more defendants for negIgenoe (the cIotendant$, at
Ihat lIage, aralXltt!'!tllbconcurrent tortIeascrI).
112 or more Dafendants _found iabIe, the provincial
Ne!i'b" t1I Act notea that the Cour1 hIlS !he pow. 10
detennlne tha portion (".4) IiaOiity of each c:oncurent
Dtleasor (I.e.. 10 "apportion" ordWHI liability between
them). 0

b.I. referlio written delamation .

J.Iald« relllf1l to verbal delamaon.

Also, wiih the ~s of ~ (i.e., to maka profit)
comes responsibility for IhoM people'. actions.

o
o

st.~rd • .., (Jr<7"f tM C,-v;'/, ~.;.

!he f>tairWitI "-* PfO'<4I "or111!!!,anca of~ that Clc::-&c:
(at . . one 01) Ihe O(s) owed !hi plahilf liUy
"'.,..
(. IMst one of) Iha 0(,) br..::had ttMII duty

.... pIaintitr'• . . " . __ iI direct ~ of the

"'-:h(es), In ocher words, • c..IAI cor.l8Clioo.

I . ' p h ): these are the specHic rUes as 58140wn by (U
go'o'efMl8Ots In Ihe loon 01 ActsIStaI:IAes. Aegulalione III'\dA:)r
by-laws (e.g.. !he PEA.).
CgI\IIIQO-Jaw: mo caIIed"JUdgHrtede a.w. ~,va
may be noIed by judges (and noIlound In legi$Iatiorl). Also,
put deciaions 01 the Court are rMvanI to etmIfII decisions
being macfe. As long as the a9Uficant Iacts ate the same, lit
lower court must kIIow the binding law as . .-down by the
higher cou1 (1his ill ceIed !he theory of -p.ecedenC"),
o Should no liens be filed, \he ~ .8 p* ouI 45 0.1'
A direcKIr 01. oompeny II usuaIy p6"t of a board whose role
is to make major decisions ()()(I()8rl'I/n the c::ompany. All
duties .., ,Iatutay - they'relound In Ihe teIeYanI bullness-
law legi5lallOn.
Fnriaof duly: 'lk!u:a'Y'means honest.nd .... ut/I'IO.t
~ taittl {trom Ihe Latin ficIeIM - for 'f~ 0ired0rI
owe lit fiduciafy duty 10 act In the belt inlentstI of the
oorporilliOn (not what', besllor the cIrector(s)).
StpWd 01 Cau: Dnckn II'IOM do . . jOb u8fCising
"reasonable 1kiI, careltlld dilIgenoe". 0
The'~ principle" ...... 10 IirnitaIion perbds
(the length of time wiIhin which • ~ can be btougtC. lifter
whictlll\e dUn Is ,«lei 10 be 'b...ed" (proceduraIy)). Sirrpy
put. the prh;ipIe means !hal the limitations clock doesn't
-.rt to run untilltMt _lest of the plaintiff being awn of h
.,..., or ought 10 hal ... bewlawn of the .......
n.s
prinolpIe was once a common-law prWJcipe 0.•.• iI _
deYMlped and recogni~ed In case-Iaw),
Ihe Con$tn.diotI u.n Ad provides for vane- kft:t5 of
~ tor 1hote in fie consuuction industry.
one oIlhese ~ is ttlat the payer must
'hoId-tlack' 10%. oIlhe veIoe 01 ~ prcMded 10
the job-siIe. during the COrlstndion process (tnerel0f8 10%
heId-badI .. ...men ~ are submitted).
n.. 00M'I8J 0I1he ptq)IIfty is pMIOOlIIy I5IbIII tor Ihi$
hoIdbedl. lhetelore 10% payment Is ~
ther.... two kinds (or ...... 01 the hoIdbadIl . 1MIsIc' Ire:
WOfIl completed up \0 "SIJ)slanlial completion" date) 8fld
'1Intshlng' (re: ~ eft. "IWstIWltial ~. dale),
IoIoWing the dale of II.tIstInIiaI eompletiOrl (general). and 45
days after the prajed it fuIy completed (tiristq).
o
A limilatlon period is the amouoI 01 lime IOOleOOII has to
,t.ltnW Ieg".,;tiorl (it ill. proc«:Iurlil O8atIine),
As. '-* oIlhe ~ Ac:t, IOf4 ( i j ' " ill.
getWIII 2-yeIt ImItelkJn period: (I) thM ~yur ctx:t ~
rnowe torwwd becIuse otlhe 'discoYInbIity pMcipIe' [Me
aeparate card); (Ii) tlowIIMw, • canno4 go put the ob;ectlYe
15-year limitation period: and (Iv) although 'lXlnSun'Iers'
cannot concr.:t.out of !he LA, .2'002 'tlusiness' conlrllctl can
" - ' eMorceabIe agra.nent abouI specIIIc ImItaIion periods
lseethe Access Ie) .AI$Iio6 Act, 2l:lI:H). 0
-.
"pa'tiel1O a dspute . . tom a country, and l1l'i arbitration Is
held In ttl. country. the decisb'I of the lllbiter II obYlously
NormaIy, p!CIbIer'N.ud ocx:u,~, iI!he pafties 10
the IfI)Ir1IIIon are !rom cIIfterMt COU'lb'Ies, sinCe !he legal
result 01 the 8rtIiIr1Iion may not be ~~,
135~, oo-...r, IIigI-.:Ilhe New Vork COnveolion,
l1li lnlemationallegll agreement thallll'ly arbilrltioo award in
any of these c:ourrtrieI. Is recognized and ~ In any
of .,. 0Iher countriM. 0