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LAW 122 Study Guide - Final Guide: Bona Fide Purchaser, Judiciary Of Australia, Professional Liability Insurance

Law and Business
Course Code
LAW 122
Leigh Lampert
Study Guide

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Chapter 1
Why Study Law?
• factors affect success and failure in business
– primarily decision‐making abilities
• choice of location, product,marketing, etc
• business decisions have legal consequences
– negative consequences
• decision to dump pollutants into environment
– positive consequences
• decision to bind contractual party to promise
• legal consequences affect profits and losses
– liability imposed for poor decisions
– opportunities exploited by good decisions
Business and Risk Management
• businesses must manage legal risks
• three steps to risk management:
1. identification: recognition of legal risks
• “can we be held liable for doing something
2. evaluation: assessment of legal risks
• “what are the chances of something going
3.response:reaction to legal risks
• “what are we going to do about it?”
Forms of Risk Management
• nearly every business decision creates some risk
• different risks must be treated differently
• forms of risk management:
– risk avoidance: elimination of risk
• withdraw dangerous product from market
– risk reduction: minimization of risk
• modify product to reduce danger
– risk shifting: make the risk someone else’s
• buy liability insurance for losses caused by danger
– risk acceptance: choose to live with the risk
• do nothing
Examples of Risk Management
• insurance
– liability insurance
– property insurance
• exclusion and limitation clauses
– contractual terms that exclude liability for certain
types of acts/
losses, or that limit the amount of compensation
• incorporation
– “limited liability”: directors and shareholders are
not usually liable for debts of the company.
– employees, directors and officers may still be
held personally liable for the torts they commit.
The Nature of Law
• rules and laws
– all laws are rules but not all rules are laws
• e.g.rule against handling soccer ball is not law
• morality and law
– moral wrongs are informally sanctioned
• e.g. loss of friendships or damaged reputation
– legal wrongs are formally sanctioned
• e.g. imprisonment or payment of damages
• laws = rules that can be enforced by courts
The Nature of Law
• Law is an evolving, “malleable” process, rather
a static list of “dos” and “don’ts”
– Laws evolve to reflect changes in society
( beliefs and equality rights, e‐commerce,
prohibition on alcohol, prostitution, etc.)
– Humans(judges and politicians)try to strike
between conflicting interests.
• Since it evolves, must know law today and in the
• Law and “justice” or “right vs. wrong” often overlap
but are two entirely different concepts, especially in
today’s multicultural society, where consensus is
more and more difficult to achieve.
Civil Law and Common Law
“Jurisdiction” refers to a geographical area that
uses the same set of laws.
• “Civil law jurisdictions” can be distinguished from
“common law jurisdictions”.
• Civil law jurisdictions:
– Trace their history to ancient Rome, e.g. France,
and the province of Quebec in Canada
• Common law jurisdictions:
– Trace their history to England, e.g. Australia,New
Zealand, most of Canada
• Some types of laws are the same across Canada,
e.g. criminal laws and constitutional laws.
A Map of the Law
• division between public law and private law
– public law: matters of public concern
– private law: matters of private concern

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Public Law
• constitutional law
– rules governing basic operation of law and politics
• administrative law
– rules governing creation and operation of
boards, tribunals, and commissions that exercise
delegated authority
Public Law
• criminal law
– rules governing wrongs against society (e.g.
punching a person)
– crimes in the business world:
• white collar crimes(committed by “people in suits”)
• corporate crimes (committed by a company itself)
– a company can now be convicted under the
Criminal Code on the basis of acts performed by
directors, officers, managers, partners, employees
and agents
• tax law
– rules regarding collection of money for public
Private Law
• tort law
– rules governing wrongs against persons
• contract law
– rules governing creation and enforcement of
• property law
– rules governing acquisition, use, and disposition
Sources of Law
• hierarchy of sources of law
– constitution
– legislation
– courts
The Constitution
• provides basic rules for legal and political systems
• difficult to amend
– amending formula requires consent of both
• Parliament
• Two‐thirds of all provinces with at least 50% of
• highest source of law
– law inconsistent with Constitution: no force or
• section 52 of Constitution
• Canada is a federal country
– two constitutionally recognized levels of
• Federal government
– represents entire country
– Parliament
• Senate (appointed)
• House of Commons(elected)
• Prime Minister(leader with most members in
• Provincial(territorial) government
– represents province (or territory)
• no senate
• legislature (elected)
• premier(leader of party forming government)
Division of Powers
• Constitution creates division of powers
– topics divided into federal or provincial authority
• federal: crime, bankruptcy, copyright, etc (section
• provincial: property, civil rights, etc (section 92)
– federal government holds residual power
• topics not otherwise allocated
– doctrine of federal paramount
• determines which law is pre‐eminent if there is a
conflict between a federal statute and a provincial
• ultra vires legislation
– created outside scope of government’s authority
• no force or effect(section 52)
Charter of Rights and Freedoms
• part of Constitution since 1982
• rights and freedoms commonly affecting business:
– freedom of religion
– freedom of expression
– freedom of mobility
– right to equality
• prohibited grounds of discrimination include
race,sex and religion,
but not poverty
• interests not protected by Charter:
– economic and property interests
Limitations on Charter Rights
• Charter only applies to government action

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– not(directly) applicable against private businesses
• Charter may apply in favour of private business
– some provisions are limited to any “individual”
– some provisions are available to any “person”
• Charter rights subject to “reasonable limitations”
– balance individual rights and community interest
Charter Remedies
• section 52: Constitution as supreme law
– law inconsistent with Charter “of no force or
• section 24: enforcement of rights and freedoms
– judge may award any appropriate remedy
• declaration
• injunction
• striking down
• severance, reading down, or reading in
• damages
Charter Dialogue
• parliamentary supremacy
– democratic society
• Members of Parliament are elected and
• judges are appointed and unaccountable
– ultimate authority should rest with parliament
• Charter dialogue
– Parliament creates laws through legislation
– courts identify Charter violations
– Parliament may respond by amending or enacting
laws to Conform with Charter
• laws created by Parliament or legislature
– statutes, regulations, by‐laws, etc
• legislative process
– introduced as “bill”
– majority support through series of “readings”
– finalized by “royal assent”
• function of courts
– interpret and apply Constitution
– interpret and apply legislation
– create and apply “common law” (judge‐made law)
The Common Law
• meanings of “common law”
– system: legal system inherited from England
• compare: civil law inherited from ancient Rome
– sources: rules made by judges
• compare: rules made by legislators
• compare: rules made by constitutional drafters
– courts: rules made by judges of law
• compare: rules may by judges of equity
Chapter 2
the litigation system
• the court system
• administrative tribunals
• alternative dispute resolution
• litigation = dispute resolution in court
• risks of litigation
– expensive
– time consuming
– unpredictable
– frequently fatal to business relationships
• litigation is rare
– very few cases are decided by judges in court
• The person who initiates a law suit is called
the plaintiff.
• The person being sued is called the
• The law suit as a whole is frequently called the
Who Can Sue and Be Sued?
Who has access to the courts in Ontario? Who
can be sued in an Ontario court?
All adults, regardless of their citizenship.
• Corporations, even if they are incorporated
Of Ontario. (Remember that the law treats
corporations as legal persons for some purposes.)
• Trade unions
Special cases:
– Children: children can sue and be sued, but they
must be represented by a parent or litigation
Adults suffering from a mental incapacity (e.g.
dementia or Alzheimer’s): they can sue and be
sued, but they must be represented by a litigation
– Unincorporated organizations, such as clubs,
Amateur teams, and community groups, are
generally not recognized in law as “persons”.
– generally cannot sue or be sued
– members can sue or be sued as individuals
–exception: trade unions generally can sue
and be sued
– Historically, it was not possible to sue the
government. However, legislation has now made
it possible to sue the government under some
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