Instructions Specific to This Exam

1. This examination contains four questions of unequal value, worth a total of 100 marks.

2. Suggested time allocations are provided for guidance only. Candidates remain responsible for managing their examination time.

3. Unless otherwise stated, assume that:

   • the Ontario Personal Property Security Act (“PPSA”) applies to the secured-transactions problems;

   • the Ontario Sale of Goods Act (“SGA”) applies to the sale-of-goods problem; and

   • all parties and collateral are situated in Ontario.

4. You will be assessed primarily on your knowledge and application of the legislation, cases and other materials assigned in the Commercial Law syllabus, together with your ability to identify the issues raised by the facts, analyze competing claims and determine the practical legal consequences.

5. No marks are awarded for merely reproducing or summarizing the facts. Use the facts in applying the governing law.

6. Each question is independent. Do not import facts from another question.

7. In secured-transactions questions, proceed systematically. Where relevant, distinguish:

   • whether the PPSA applies;

   • whether a security interest has attached;

   • whether and how it has been perfected;

   • the effect of registration errors or lapses;

   • the applicable priority rule; and

   • the consequences of non-perfection against particular competing claimants.

8. Do not treat attachment and perfection as the same concept. A security interest may attach and be enforceable between the parties while remaining vulnerable to third parties because it has not been perfected.

9. Registration may occur before attachment. Where that occurs, consider when all requirements for perfection are ultimately satisfied.

10. Where after-acquired property or future advances are involved, identify separately:

• • whether the security agreement extends to the later property or obligation;

  • when the interest attaches; and

  • the priority consequences.

11. Where a financing statement contains an error or omission, do not assume that every defect invalidates the registration. Apply the statutory rules concerning materially misleading errors and the assigned authorities.

12. Where a registration expires or otherwise ceases to perfect the security interest and the interest is later re-perfected by registration, consider carefully whether another person acquired rights in the collateral during the period of non-perfection.

13. Where perfection by possession is alleged, identify:

• • whether the collateral is a type capable of being perfected by possession;

  • who actually possesses it; and

  • whether the secured party remained in possession at the legally relevant time.

14. In applying the Sale of Goods Act, distinguish:

• • specific goods;

  • ascertained goods;

  • unascertained goods;

  • goods in a deliverable state;

  • contracts primarily for goods from contracts primarily for services; and

  • the separate rules governing when property passes.

15. Where the contract itself demonstrates a different intention concerning the passing of property, that intention takes priority over the presumptive rules in s. 19.

16. In analyzing a stipulated damages clause, do not treat the words “penalty” or “liquidated damages” as conclusive. Assess the substance of the provision and the circumstances existing when the parties made the contract.

17. Distinguish a sum payable because of breach from an amount payable as the agreed price or condition for exercising a contractual option.

18. Unless required by the facts, do not discuss:

• • consumer protection legislation;

  • insolvency law beyond the PPSA consequences expressly raised;

  • contract doctrines outside the penalties/liquidated-damages materials;

  • or remedies not covered by the assigned Commercial Law materials.

19. Full citations are unnecessary. The case name and statutory section are sufficient.

20. Write clear and organized answers in complete sentences.

QUESTION ONE

30 marks — suggested time: 54 minutes

FACTS

Ravelin Packaging Technologies Inc. (“Ravelin”) manufactures recyclable food containers at an Ontario facility.

On January 7, 2022, Ravelin entered into a revolving credit facility with Harbourlight Commercial Bank (“Harbourlight”).

Ravelin signed a security agreement granting Harbourlight a security interest in:

“all present and after-acquired equipment, inventory and accounts of Ravelin, together with all proceeds thereof, as continuing security for all present and future indebtedness and obligations owing to Harbourlight.”

Harbourlight registered a financing statement against Ravelin under its correct legal name on January 7.

Harbourlight did not advance any money until January 10, when it advanced $800,000.

In April 2023, Ravelin purchased a new thermoforming machine for cash.

It was installed at Ravelin’s factory and immediately entered commercial production.

Harbourlight did not amend its financing statement or sign a new security agreement concerning the machine.

In May 2025, Harbourlight advanced a further $600,000 under the revolving facility.

Ravelin argues that the 2025 advance:

“was a new loan and was never separately secured.”

The Atlas Press

Ravelin also owns an industrial die-cutting press known as the Atlas Press.

In October 2025, Ravelin borrowed $350,000 from Quartz Peak Lending Inc. (“Quartz Peak”).

Ravelin signed a security agreement granting Quartz Peak a security interest specifically in the Atlas Press.

Quartz Peak immediately attempted to register a financing statement.

Ravelin’s proper corporate name is:

Ravelin Packaging Technologies Inc.

However, Ravelin commonly uses the shortened business name:

Ravelin Packaging Tech Inc.

on:

• delivery vehicles;

• advertising;

• purchase orders; and

• employee email signatures.

Quartz Peak registered its financing statement against:

Ravelin Packaging Tech Inc.

A registry search using Ravelin’s correct legal name does not disclose Quartz Peak’s registration.

A search using the shortened name does.

Quartz Peak says its registration should nevertheless be effective because:

• Ravelin itself commonly uses the shortened name;

• commercial suppliers recognize it;

• the serial number and description of the Atlas Press are correct; and

• Harbourlight’s account manager actually knew that Quartz Peak had made a loan to Ravelin.

Harbourlight’s existing security agreement and registration already covered Ravelin’s equipment, including the Atlas Press.

Quartz Peak discovered the naming problem in January 2026 and immediately registered a new financing statement using Ravelin’s correct legal name.

The Registration Lapse

Harbourlight’s original registration was due to expire on June 30, 2026.

Because of an internal clerical error, it was not renewed.

At 12:01 a.m. on July 1, Harbourlight ceased to be perfected by registration.

On July 2, Stonepath Credit Corp. (“Stonepath”) entered into a financing arrangement with Ravelin.

Ravelin granted Stonepath a security interest in:

“all present and future accounts.”

Stonepath advanced $500,000 and properly registered against Ravelin’s correct legal name that same day.

Stonepath’s credit officer had conducted a PPSA search immediately before the advance.

The search disclosed:

• Quartz Peak’s corrected registration; but

• no current Harbourlight registration.

On July 5, Elmbar Resin Supply Ltd. (“Elmbar”), an unsecured supplier holding an unpaid judgment against Ravelin, caused the sheriff to seize one of Ravelin’s palletizing machines through enforcement proceedings.

Harbourlight discovered the registration lapse on July 8.

On July 9, it registered a new financing statement restating the information contained in its original registration.

Ravelin subsequently defaults on all of its obligations.

Harbourlight claims:

• first priority in the Atlas Press;

• first priority in the thermoforming machine;

• first priority in Ravelin’s accounts;

• priority over Elmbar in the seized palletizer; and

• security for both its 2022 and 2025 advances.

Quartz Peak, Stonepath and Elmbar each dispute Harbourlight’s position.

QUESTION

Advise Harbourlight, Quartz Peak, Stonepath and Elmbar concerning attachment, perfection and priority in the relevant collateral.

30 MARKS

QUESTION TWO

25 marks — suggested time: 45 minutes

FACTS

Keystone Stageworks Ltd. (“Keystone”) rents high-end film and television equipment.

Keystone requires short-term financing.

It borrows $450,000 from Torren Finance Corp. (“Torren”).

Keystone signs a security agreement describing several items of equipment in a schedule, including:

• Motion-Control Rig M1;

• Cinema Camera C1;

• Lighting Console L1; and

• several other identified items.

Torren advances the full $450,000.

Torren does not register a financing statement.

Instead, Torren takes Motion-Control Rig M1 and Cinema Camera C1 to its own secure warehouse.

The parties expressly agree that Torren will hold the equipment as collateral until the loan is repaid.

Keystone retains Lighting Console L1 at its own premises.

Camera C1

Three months later, Keystone tells Torren that it needs Camera C1 for a five-day demonstration to an important prospective customer.

Torren agrees.

It physically returns Camera C1 to Keystone.

The parties agree that the camera remains subject to Torren’s security agreement and must be returned after five days.

On the second day, Keystone sells Camera C1 to Ledgeway Studios Ltd. (“Ledgeway”) for $95,000.

Ledgeway:

• pays the full price;

• receives physical delivery;

• has no knowledge of Torren’s security interest; and

• buys the camera for its own film-production business rather than as security for an obligation.

Keystone does not pay Torren any of the sale proceeds.

Torren says:

“We never released our security interest. Keystone had no right to sell our collateral.”

Lighting Console L1

Lighting Console L1 develops a hardware problem.

Keystone delivers it to Orchid Repair & Calibration Ltd. (“Orchid”).

Orchid completes $18,000 of authorized repairs.

Keystone cannot pay the invoice.

Assume that Orchid has a valid possessory repairer’s lien under applicable law and is entitled to retain the console until its repair account is paid.

Torren demands the console.

Orchid refuses.

Motion-Control Rig M1

Motion-Control Rig M1 remains continuously in Torren’s warehouse.

Keystone never regains possession of it.

Bankruptcy

Keystone’s financial position deteriorates.

A bankruptcy order is eventually made.

At the effective date of bankruptcy:

• Motion-Control Rig M1 remains with Torren;

• Lighting Console L1 remains with Orchid;

• several other items listed in Torren’s security agreement remain at Keystone’s premises;

• Torren still has not registered; and

• the trustee claims all equipment still forming part of Keystone’s estate.

Torren argues:

“The security agreement was signed before the bankruptcy. The trustee cannot have greater rights than Keystone itself had.”

QUESTION

Advise Torren, Ledgeway, Orchid and the trustee in bankruptcy concerning their respective rights in the equipment.

25 MARKS

QUESTION THREE

25 marks — suggested time: 45 minutes

FACTS

Pineward Instrument Systems Ltd. (“Pineward”) supplies scientific and laboratory equipment.

Its customer, Solis Bioanalytics Inc. (“Solis”), operates a commercial testing laboratory.

During June, Pineward and Solis enter into several separate transactions.

On June 30, before all deliveries are complete, Pineward experiences a sudden financial collapse and a receiver takes control of its inventory.

Solis claims that several items located at Pineward’s warehouse already belong to Solis and therefore should not be treated as Pineward’s property.

Transaction One — Centrifuge C-17

On June 3, Solis signs an unconditional purchase agreement for:

Centrifuge C-17, Serial No. C17-8841

for $92,000.

The centrifuge:

• already exists;

• is fully assembled;

• is operational;

• requires no further work before delivery; and

• is separately identified in Pineward’s warehouse.

Solis pays a 20% deposit.

The remaining price is due upon delivery on July 10.

The agreement does not contain an express title-retention provision.

It does state:

“Pineward will maintain insurance on the Centrifuge until physical delivery to Solis.”

The receiver argues that property could not have passed because:

• Solis had not paid the balance;

• delivery had not occurred; and

• Pineward remained responsible for insurance.

Transaction Two — Sterilizer S-92

On June 5, Solis agrees to purchase:

Sterilizer S-92, Serial No. S92-1107

for $180,000.

The sterilizer exists and is identified.

However, Pineward is required before delivery to:

• install a mandatory pressure-safety guard;

• update the operating firmware;

• perform a final safety test; and

• provide Solis with written confirmation that those steps are complete.

When the receiver is appointed:

• the guard has not been installed;

• the firmware has not been updated; and

• no completion notice has been given.

Solis argues that the equipment was already specifically identified and therefore belonged to it.

Transaction Three — Mixing Vessel M-8

On June 11, Solis agrees to buy:

Stainless Steel Mixing Vessel M-8, Serial No. M8-443

for:

$210 per kilogram of certified final weight.

The vessel is fully manufactured and in a deliverable state.

The parties estimate that it weighs approximately 1,000 kilograms.

Solis pays $150,000 on account.

Pineward is required to place the vessel on a certified industrial scale before delivery so the final purchase price can be calculated.

The weighing has not occurred when the receiver is appointed.

Solis says:

“The vessel is specific and finished. We have already paid most of the likely price.”

Transaction Four — Spectrometer SP-300

Pineward delivers a demonstration spectrometer to Solis on June 16 under an agreement stating:

“Delivered on approval for 14 days. Solis may return the Spectrometer for any reason during the approval period. If not rejected, the purchase price shall be $135,000.”

Solis uses the spectrometer to:

• conduct internal testing; and

• perform three paid laboratory analyses for clients.

On June 24, Solis emails Pineward:

“Performance is strong. We are continuing the evaluation and will give you our final decision before the approval period expires.”

The receiver is appointed on June 27, three days before the approval period expires.

The receiver demands the spectrometer back.

Solis says its commercial use of the equipment already made it the owner.

Transaction Five — The Clean-Room System

Finally, Pineward agreed to provide Solis with a custom sterile-testing system.

The $900,000 contract requires Pineward to:

• design the clean-room layout;

• engineer the airflow system;

• manufacture several specialized laboratory cabinets;

• provide sensors and control hardware;

• write custom software;

• install all components;

• integrate them with Solis’s existing systems;

• test the completed facility; and

• train Solis’s employees.

The parties’ internal pricing allocates approximately:

• $385,000 to physical equipment and materials; and

• $515,000 to engineering, programming, installation and commissioning.

Solis argues that the Sale of Goods Act governs the entire transaction because the project necessarily involves supplying substantial physical equipment.

The receiver says that it is predominantly a professional design and installation contract rather than a contract for the sale of goods.

QUESTION

Advise Solis and the receiver concerning whether the Sale of Goods Act applies to the clean-room transaction and when, if at all, property passed to Solis under each of the other four transactions.

25 MARKS

QUESTION FOUR

20 marks — suggested time: 36 minutes

FACTS

Fairhaven Medical Logistics Ltd. (“Fairhaven”) operates temperature-controlled pharmaceutical warehouses.

It contracts with Bluecap Automation Inc. (“Bluecap”) to design and install an automated storage and retrieval system at a new distribution centre.

The total contract price is $6.2 million.

The agreement contains three disputed provisions.

Clause 17 — Delayed Commissioning

The system is required to achieve commercial commissioning by September 1.

Clause 17 provides:

“For each calendar day that Commercial Commissioning occurs after September 1 as a result of delay attributable to Bluecap, Bluecap shall pay Fairhaven liquidated damages of $18,000 per day, to a maximum of 20 days.”

During negotiations, Fairhaven advised Bluecap that late commissioning could cause:

• extended rental of temporary refrigerated space;

• rescheduling of pharmaceutical deliveries;

• additional validation expenses;

• loss of warehouse throughput; and

• possible customer credits.

Fairhaven’s internal estimate placed those losses between approximately $12,000 and $25,000 per day, depending upon which customers were affected.

Bluecap received a summary of that analysis.

Bluecap negotiated the 20-day cap.

Commercial commissioning occurs seven days late because of Bluecap’s installation error.

Fairhaven’s actual provable loss is only $43,000 because a neighbouring warehouse unexpectedly provides inexpensive temporary capacity.

Fairhaven claims:

7 × $18,000 = $126,000.

Bluecap says any recovery beyond $43,000 is an unenforceable penalty.

Clause 24 — Security and Confidentiality

Clause 24 provides:

“Any breach by Bluecap of any data-security, confidentiality or access-control obligation shall result in payment to Fairhaven of $2,500,000 per breach as liquidated damages, without prejudice to Fairhaven’s right to recover any additional damages actually suffered.”

The underlying obligations range from:

• unauthorized disclosure of pharmaceutical customer pricing;

• disclosure of patient-related delivery information;

• release of warehouse access credentials;

to:

• failure to delete an expired employee login within 24 hours;

• leaving a printed equipment manual in an unsecured conference room;

• or sending an internal operating schedule to an unauthorized external recipient.

During negotiations, Fairhaven’s commercial director wrote internally:

“The $2.5 million number needs to be painful enough that Bluecap never gets casual about security.”

Bluecap later breaches Clause 24 when a technician accidentally emails a routine maintenance schedule to the wrong outside contractor.

The schedule contains:

• maintenance dates;

• machine identifiers; and

• technician names,

but:

• no patient information;

• no customer pricing;

• no access passwords; and

• no commercially sensitive inventory data.

The unintended recipient deletes the email immediately.

Fairhaven suffers no measurable loss.

Fairhaven nevertheless demands $2.5 million.

Clause 31 — Convenience Termination

The parties also enter into a five-year maintenance arrangement.

Clause 31 states:

“Fairhaven may terminate the Maintenance Services for convenience at any time upon 30 days’ written notice. As a condition of exercising this contractual termination right, Fairhaven shall pay Bluecap a Termination Amount equal to 35% of the maintenance fees that would otherwise have become payable during the unexpired term.”

After two years, Fairhaven decides to bring maintenance in-house.

It gives the required 30 days’ notice and expressly invokes Clause 31.

The termination amount is $630,000.

Fairhaven refuses to pay.

It says:

“Bluecap is saving three years of labour and operating costs. $630,000 has nothing to do with its actual loss and is therefore a penalty.”

Bluecap responds that the penalty doctrine is irrelevant because Fairhaven did not breach the contract:

“You exercised the termination option exactly as written. The payment is the agreed price of that right.”

QUESTION

Advise Fairhaven and Bluecap concerning the enforceability of Clauses 17, 24 and 31 and the consequences if any provision is characterized as an unenforceable penalty.

20 MARKS