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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Cristin Keller

MOS 2275a Review Chapter 2 Natural Law Theorists – only good rules are considered law Legal Positivists – Only the rules enacted by those with authority to do so qualify as law Legal Realists – rules that the courts are willing to enforce are considered law Law is the body of rules made by the government that can be enforced by the courts or by other government agencies. Substantive Law – established not only the rights an individual has in society but on the limits of his or her conduct (guarantees the right to travel/vote/own property) Procedural Law – determines how the substantive law will be enforced Law can be distinguished between two functions; - Public Law – includes constitutional law that determines how the country is governed and laws that affect an individual’s relationship with the govt - Private Law – rules that govern our personal social and business relations enforced by one person suing another in a private and civil action Stare Decisis – “following precedent”, system of justice, which the judges were required to follow each other’s decisions - Decisions of a judge at one level is binding on all judges in the court hierarchy in a court of lower rank Distinguishing the Facts – judges try to avoid applying the precedent judgment by finding essential differences between facts of the two cases Common Law Courts/Court of Equity – Judicature Act of 1873-1875 combined these two Statutes or Legislations– parliament enactments that take precedence over judge made law based on common law/equity - Legislative/Parliament – creates law - Judicial Branch – court system - Executive Administrative branch – agencies which administer and implement the law Rule of Law – although Parliament is supreme, citizens are protected from any uninformed actions of the government - Canada’s constitution is the rule book that the government must follow Constitution and Division of Power Federal Government – power over banking, currency, postal service, criminal law, and appointment of judges in federal and higher level provincial courts Provincial Legislation/Municipal Bylaws – includes statutes dealing with the sale of goods, consumer protection, employment, workers, compensation, collective bargaining, secured transactions, incorporation, real estate, and licensing Pith & Substance – what is the main purpose of the law and does the government enact the law Intra Vires – means it was within its power Ultra Vires – beyond one’s jurisdiction or power (one level of govt cannot invade the area of another by trying to make it look like the legislation is different – colorable legislation) Paramountcy – federal and provincial can overlap, but the principal paramountcy may require the federal legislation be operative and the provincial goes abeyance Legislation - Introduced in the form of a bill, which goes through intro, debate, modification, and st nd rd approval (1 , 2 , 3 readings) o When bill is enacted has the status of a statute o Such statute does not have status of law until it receives the approval of the Governor General (Federal) or the Lieutenant Governor of a province (royal assent) Canadian Bill of Rights – basic human rights protections set out in ordinary statutes passed by the federal or provincial govt may or may not protect people from abuses by government Charter of Rights and Freedom – constitutional guarantee of basic rights and freedoms - Neither the federal/provincial govt has the power to modify or otherwise interfere with the basic rights - Ordinary legislation will not override the charter simply because it is passed after the charter MOS 2275a Review - Burden of protecting those rights lie within the judges - Limitations o Section 1 – “Reasonable Limits” on those rights and freedoms when limiting them can be “demonstrable justified in a free and democratic society”  Gives the power to interpret the provisions of the Charter to avoid an unreasonable result  NOT absolute o Section 33 – “notwithstanding clause” allows each of the provinces and federal govt to override section 2, 7-15 (fundamental freedoms, legal rights, and equality rights) by simply stating the new legislation operates “notwithstanding” (regardless of) the charter - Fundamental Freedoms – (Section 2) declares certain underlying fundamental freedoms available to everyone in Canada - Democratic Rights – (Sections 3-5) protects our rights to vote and to qualify to be elected to the House of Commons or the provincial legislative assemblies - Mobility Rights – (Section 6) ensure that Canadians can travel and live anywhere within the geographical limitations of Canada as well as enter and leave the country at will - Legal Rights – intended to protect individual from unreasonable interference from the govt and if it there is interference, it is done fair and consistent o (Section 7) – we have the right to life, liberty, and the security of person o Procedural Fairness – relates to the principle that the individual/s should have the opportunity to present their case fully and fairly o (Section 8-9) – prohibit such activities as unreasonable search and seizure and arbitrary imprisonment - Equality Rights – (Section 15) prohibits discrimination in the application of the law on the basis of gender, age, religion, race, age, or national origin - Language Rights (Section 16-22) – ensures that French and English have equal status - Section 52 – sets out all the statutes have constitutional status Chapter 15 Scope of Sales of Goods Act: - Primary purpose is to imply the terms that the parties to sale of goods transactions often leave out - Same contract standards apply (5 rules, and such) Goods and Services - Affects contracts only involving goods o Tangible items (but includes crops still growing on land) o Buildings/Materials subject to the Act until they become attached to the land - Intangible are not covered Transfer Of Goods - Act applies when it can be demonstrated that the parties intended the actual possession and property of the goods would transfer to the buyer - Must involve money - Ontario has eliminated the requirement of writing o Past performance may also make the contract enforceable Title and Risk - Agreement to Sell – title does not transfer immediate upon sale agreement’s being conducted, title transfers at some future time - Sale – title transfers immediately - 4 methods to override this provision: o CIF Contracts (Cost, Insurance, Freight) – doesn’t matter where title transfers, cause 1 party designated t as responsible for paying the costs and risks o F.O.B contacts (free on board) – bear the risk until a specified point in the transport contracts (FOB shipping point/destination) MOS 2275a Review o COD Contracts (Cash on delivery) – seller maintains rights and control over goods until they are delivered to the buyer o Bills of Lading – used by the seller to maintain control over goods during shipment. Seller can maintain control (and risk) by identifying itself as the party entitled to receive delivery of the goods at their destination Transfer of Title - Whoever has title, affects which remedies are available in the event of a breach o If transferred already, seller can sue for entire price o If not, only damages for breach of contract is available - Who has title also has first claim to the goods in the event of default/bankruptcy - 5 Rules o 1) When there is an unconditional contract, title is passed to the buyer when the contract is made (Time of payment and delivery are immaterial) o 2) When the seller is bound to do something first with the good, title is not passed UNTIL it is done (E.g repairs on a car, transfers only when repairs are finished) o 3) When the seller is bound to weigh, measure, test, or do some other act or thing without reference to the goods for the purpose of the price, title does not pass UNTIL it is done so o 4) When goods are delivered to the buyer on approval or on “sale of return” the title passes to the buyer, the title transfers  Buyer signifies approval OR retains goods without notice for a long period of time (E.g trial periods) o 5) When goods are not manufactured yet, title passes upon unconditional appropriation and approval Right to Convey Clear Title - Makes it a condition that the seller has the right to sell the goods, or will have the right at the time it is transferred - Quiet Possession – goods be delivered in such a condition so the buyer can use it the way they were intended, free from interference Goods must match their description (if not breach of condition) Merchantable Quality – must be free of any defect that would have persuaded the buyer not to purchase them at the agreed upon price if the buyer has known - Implied condition if seller recommends it for the buyer’s needs o DOES NOT apply when goods are purchased by trade name in such a way it is clear that the skill of the seller is not being relied on Goods must match samples (implied condition) Other implied terms: - Reasonable price for goods/Reasonable delivery - Little or too much goods delivered allows the buyer the option to reject or pay for them at the contracted rate Sales Made Online - Required to comply with the terms of the Act IN the jurisdiction that covers the transactions - Sellers usually try to include terms that override or limit these provisions, but are required to take reasonable measures to draw notice to them o If the buyer does not read them, they would be bound Remedies On Defaults Seller’s Remedies - Buyer defaults, seller has an unpaid seller’s lien against the goods (right to keep possession of property belonging to another person until a debt owed is discharged) - Stoppage in Transit – if buyer defaults along the transportation of the goods, the seller has the right to intercept the goods and retake possession as long as the goods have not reached their destination - Bankruptcy and Insolvency Act – allows a seller of goods to recover those goods within 30 days of delivery, if the buyer has become bankrupt, or receiver still has them o Has right to sue for the price of goods when title has passed to the buyer MOS 2275a Review o If buyer refuses to accept goods, but title has transferred, still may be required to pay purchase price o If seller sells goods to someone else, can only sue original buyer by the loss in sale NOT full price of the goods - Seller is required to mitigate damages - Seller can keep the deposit Buyer’s Remedies - Where misrepresentation is involved, buyer may be able to rescind the contract to seek damages when there has been fraud or negligence - Condition is breached, buyer can refuse to perform/pay o If title passes, buyer may lose right to discharge the contract - If warranty is breached, must go through the deal subject to a right for damages Consumer Protection - Consumer Transactions – involves goods/services purchased by individuals for personal use and no for resale or for business purposes - Mission of the Competition Bureau is to protect and promote competitive markets and enable informed consumer choice in Canada o Independent law and enforces the Competition Act o Control mergers, review them Horizontal Merger – when one competitor buys another Vertical Merger – involves the merge of a supplier and retailer Conglomerate Merger – involves companies not in direct competition - “Efficiency Defense” is acknowledging that the merger will lessen competition but increase efficiency and improve position in an overall energy market (tribunals will approve) - The Competition Act criminalizes some anti-competitive practices; o Conspiracy to unduly lessen competition (eg. Price fixing) o Bid Rigging (eg. Bidders agreeing in advance who will bid the lowest) o Discriminatory and predatory pricing (using loss leaders to drive competitors out of business) o Price Maintenance and refusal to supply o Misleading ads/marketing Provincial Legislation Responsibility for Goods Sold - Imposes responsibility on sellers, consumers have recorse in either contract or negligence - Only manufacturer can be sued, since wholesalers and retailers don’t deal with packaged goods they sell o Must prove fault o Can sue seller under contract law, if they purchased the product themselves, i.e. privity of contract still applies Unacceptable Business Practices - False or Exaggerated Claims o Prohibits misleading or false statements to persuade people to buy a product o Misleading/False statement not actionable unless they are actually included in the contract itself  Statements controlled by statutes which incorporate them into contract; verbal exaggerated claims becomes terms in the contract - Unconscionable Transactions o Consumers are sometimes taken advantage of because of vulnerabilities (desperation, poverty, intellect) o Unequal powers of bargaining - Gift Cards o Regulates expiry dates and fees - Door-to-Door Sales MOS 2275a Review o Legislation provides cooling off period – allows a purchaser a given period of time to change his mind and rescind the contract o Registration of direct sellers may be required Loan Transactions - Requires that the true cost of borrowing be disclosed for public - Prohibits excessive rates of interest and costs - Prohibits hiding excessive interest rates in the payment of bonus - Prohibits hiding misleading info in ads - Requires moneylenders to be registered and controls credit reporting bodies Debt Collection Process - Requires these agencies to be licensed Negotiable Instruments - Essential characteristics o Claim for fund against drawer of instrument o Transferable o May be used as a credit instrument o May give greater rights to the bearer than the person from whom it was issued to - Negotiable instruments are: o Order of one person to another to pay funds to a third o Promise that funds will be paid out to another at some future date - Primarily cheques, bills of exchange (drafts) and promissory notes o Cheque – Drawer physically hands the cheque to the payee, who later presents it to the bank  Associated with electronic banking, aka debit cards and credit cards o Bills of Exchange – Drawer physically hands the instrument to the payee, who then presents it to the drawee for payment or acceptance  3 parties involved  Drawee doesn’t need to be a bank o Promissory note – only involves 2 parties, the maker promises to pay a certain sum to the payee at a specified future date or on demand  Creditor-debtor relationship - Must be paid as soon as the cheque is presented for payment - Holder in due Course – when a negotiable instrument is signed and passed into the hands of an innocent third party, the signee almost certainly will be required to honor it o Must have been acquired before it was due and payable o No knowledge of any defect - Endorsers – liable if instrument is refused by drawer o Holder must give timely notice of dishonor Chapter 16 - Creditors’ rights are a matter of provincial jurisdiction Methods of Securing Debt - Secured Creditor - creditor who has priority over other creditors in the event of bankruptcy or insolvency - Personal Property – both real & personal property can be used as security o Real Property – land or anything attached to land (buildings/fixtures)  Mortgages often use this o Divided into chattels (tangible, movable things) & choses in action (intangible rights that are legally enforceable claims, ex; cheques/promissory notes) o Pledge – situation where a pawnbroker lends money and holds an item as security until the loan is paid  Loan isn’t paid, seller has right to sell the item MOS 2275a Review  Default may occur when payment is missed OR debtor fails to meet an obligations Traditional Approach - Conditional Sales Agreement o Seller retains title until last payment o Incase of default – seize or sue - Chattel Mortgage o Differs from Conditional Sales Agreement cause the creditor is not the seller of goods o Debtor maintains possession of goods o Title to goods is transferred to lender as “collateral security”  When last payment is made, the title of the goods secured as collateral returns to the debtor  Sales of Goods Act does not apply - Leases are common method of securing relationship between creditor & debtor o Operating Lease – goods are rented out to the lessee to use during the lease period - Lease to Purchase – provides security to creditor o When title to the goods will be transferred to the lessee - When goods are sold to a financial institution, then leased to lessee, relationship more like a chattel mortgage Personal Property Security Act - Creates a common process for using personal property as security o Allows less common forms of personal property (licenses, shares, bonds, & intellectual property) be used as security - Secured transaction gives you right to take possession of goods used as security even if they get into hands of innocent purchaser - Creating a Secured Relationship o Parties must enter into contractual agreement o Secured interest must attach to collateral that has been identified to provide security o Secured interest must be perfected by  Registration, or  Creditor obtains possession of the collateral - Attachment – takes place when the debtor receives some value under the contract (debtor receives the loan) o Gives creditor a claim against the security in the event of default Priority of Secured Creditors - If more than one security interest is perfected by same collateral, usually first to register has priority o Exception; Purchase money security interest – prevails over a general security agreement covering all of a merchant’s assets, if it is registered within a specified time period Rights and Remedies Upon Default - In event of default o Secured Party may sue Debtor for debt o And legislation provides  Means to enforce Secured Party’s security interest in the collateral  Debtor’s ability to redeem collateral - Secured Party can take possession of collateral o Without violating the law o Secured Party must take care of the collateral o May retain collateral in satisfaction of amount owed OR o Sell collateral after giving stipulated notice to the Debtor  Debtor required to be pay deficiency  Creditor also required to pay surplus back to debtor MOS 2275a Review - Creditor typically hires a “Bailiff” who goes onto debtor’s property and retrieves good - If goods require a repair to sell, the repair will be added on to amount owed by debtor - Right to redeem – before goods are sold, debtor must be given notice and opportunity to redeem goods by paying the amount owed - Example: when person borrows money from credit union using car as security, attachment takes place when loan is sent to debtor and contract is entered into. Perfection takes place when credit union files the financing statement with appropriate registry. An interested buyer or another creditor would search the registry to find that the car is already secured as collateral. If car is purchased & default takes place, credit union can recover the car. Once there is default, the creditor can either pursue normal breach- of-contract remedies, or take possession & sell the car Guarantees - Used by creditors to ensure payment of debt by a third party (in the event of a default) - Must be evidenced in writing o Separate contract – must contain all elements of a contract  Consideration – advancement of funds TO creditor’s refraining from suing the debtor - Indemnity – primary obligation when someone agrees to be DIRECTLY responsible for the debt of another - Rights and Obligations o Creditor must not change the contractor, it will unbound the guarantor  Or withhold info o Guarantors often claim misrepresentation, non est factum, or undue influence - Continuing Guarantee – allows creditor to continue to advance funds up to pre-set amount & guarantor continues to be bound in case of default Other Forms of Security The Bank Act - Allows bank’s flexibility in what they can take as security growing crops, inventories, & goods in process of manufacture Floating Charges - Used by creditors when dealing with corporations that are free to buy and sell the assets used as security (ex. Bonds) - Allows the business to continue - Only upon default do the floating charges crystallize, at
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