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CLAW 122 BUSINESS LAW module 1.docx

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Law and Business
LAW 122
Eric Libman

CLAW 122 BUSINESS LAW Module 1Introduction to Law and the Canadian Legal SystemAfter completing this module you should be able to1Recognize why it is important for businesspeople to study law2Acquire a working definition of law for the purpose of the course3Identify the difference between law and morality and how they relate to each other4Recognize the dynamic nature of law as reflected in two approaches to legal interpretation5List the three sources of law in the Canadian legal system the Constitution legislation and the courts6Become familiar with some important provisions of the Constitution in Canada and the way it establishes the division of powers between the two levels of government7Acquire knowledge of the Canadian Charter of Rights and Freedoms and its relevance for business conduct8Describe the litigation process and the court system in Canada9Recognize the difference between court litigation and alternative dispute resolution10Locate the areas of law covered in this course within the map of the lawWhy Study LawThere are many factors affecting success and failure in business and they are often a function of decisionmaking abilities the choice of location product marketing etc Business decisions have legal consequencesnegative consequenceseg decision to dump pollutants into environment could result in liability for damage causedpositive consequenceseg decision to bind contractual party to promise could ensure that promises will be kept Legal consequences very often have a direct effect on profits and lossesliability may be imposed for poor decisionsopportunities can be exploited by good decisionsRisk ManagementHow can legal risks be successfully managed Three steps to risk management 1Identification recognition of legal risks can we be held liable for doing something wrong2Evaluation assessment of legal risks what are the chances of something going wrong3Response reaction to legal risks what are we going to do about itRemember every business decision creates some risk The challenge is to know how to successfully manage those risks Different risks must be treated differently Forms of risk managementrisk avoidance elimination of riskeg withdraw dangerous product from marketrisk reduction minimization of risk modify product to reduce dangerrisk shifting make the risk someone elses problemeg buy liability insurance for losses caused by danger1risk acceptance choose to live with the risk do nothingCase StudySigma Corp manufactures widgets It has discovered a design defect that creates a risk that one or more widgets may cause property damage Briefly explain how the company could manage that risk by shifting it Identify a potential cost of shifting the riskPause and ReflectRisk management often has both a front end and a back end In this case if it has recognized the problem in time Sigma Corp might take steps to avoid causing property damage in the first place The question however pertains to ways in which the company can allow losses to occur but then shift their financial burden onto someone else There are two possibilitiesFirst Sigma Corp might be able to purchase liability insurance By doing so it would pay a price in exchange for an insurance companys promise to pay for any losses that the defective widgets createSecond Sigma Corp could ensure that its sales contracts contain exclusion clauses Such clauses would exempt the company from liability for losses that occur The financial burden of those losses would fall instead on the parties that actually suffered them or perhaps upon those parties insurersEither of those possibilities might allow Sigma Corp to shift the financial burden of any losses onto a third party at least in an immediate sense The company would not have to directly pay for such losses Both tactics however entail costs of their own An exclusion clause might frighten away some customers while causing others to demand a lower price because their usual right to sue is limited or eliminated An insurance policy might be expensive to buy Furthermore to pay for such a policy Sigma Corp might be required to raise its prices thereby once again hurting its ability to sell widgets at a competitive priceLaws vs Rulesnature of lawHow is law different than other rulesAll laws are rules but not all rules are laws eg the rules of playing soccer are not lawsWe may therefore define law as a rule that can be enforced by courtsNote not all law is enforced by courts Think about the number of times people may cross the street in a red light or download movies and television shows unlawfully over the internet The fact that a law is not enforced does not mean that it cannot be enforced which is why we defined law as a rule that can be enforced by courtsHow is law different from morality Consider the case below reproduced from p 6 in your textbookCase StudyWhile fishing from a lakeshore John saw a canoeist tip her boat and fall into the water Although she screamed for help for over 20 minutes John did nothing at all His motor boat was nearby and he could have easily rescued her but he preferred to continue fishingDid John Break the lawDid John do something wrongPause and ReflectMany of us would presumably say that John should have rescued the canoeist even if there is only a moral but not a legal obligation to do so But this response reflects a subjective moral perspective Think for example on how your answer might change if on the same facts you also knew that John would have risked his own life if had tried to save the canoeist Would your answer still be the sameSome of us may think saving the canoeist was the moral thing to do But how would you define morality Do you consider it as a list of acts or omissions that are either good or badOthers may think that John should have saved the canoeists life because now he may be shunned by society for not doing the right thing Very often people do the right thing because they are worried about bad publicity A failure to rescue may result in adverse publicity and therefore may hurt the bystanders business2
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