You're not to blame in any way, and frankly I think the pup is much better off with you than with this irresponsible breeder. I would suggest, though, that unless your mom is very experienced with dogs and able to give this baby the special treatment and diet she needs, i.e. getting up during the night to feed her, I would make your mom wait a little longer for her new baby and get her up to at least 12 weeks of age. Just a suggestion. If you're still going to give her to your mom now, make sure she understands all the particulars of how such a young chi needs to be cared for -- feedings every 4 hours, a *warm* bed to conserve calorie burn, milk replacement, VERY high-quality puppy food, hypoglycemia, Karo syrup, etc.
I would pass this little tip on, too. When I got my chi Chiclet, she broke her paw jumping off my lap not long after I got her and was in a cast. I carried her around with me in a tummy pack (It was called a Pak-A-Pal, they're no longer made but you can still search it and find them occasionally). It was perfect for such a wee dog, and helped us bond really fast, and I could keep an eye on her constantly. Just another suggestion. Re reporting the breeder, your vet would know what channels to go through. Anne

