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MIDTERM 1: Chapter 1 - 4

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Law and Business
LAW 122
Avi Weisman

Midterm 1 Study Package All Chapters Chapter 1 Risk Management & Sources of Law Why Study Law? -Why Study Law as Business Students? Goal of business is to make money Knowledge of Law leads to greater risk management, reduces potential costs, increases potential profits All Business Choices have Legal Consequences Legal Education Plays a Critical Role in Risk Management Basic understanding of the law makes you a better person Law can both hurt and help you Risk Management: -What Is Risk Management? The process of identifying, evaluating, and responding to the possibility of harmful events 3 steps to Risk Management: 1. Identification: recognition of legal risks can we be held liable for doing something wrong? 2. Evaluation: assessment of legal risks what are the chances of something going wrong? 3. Response: reaction to legal risks what are we going to do about it? -Nearly every business decision creates some risk -Risk Strategies: Avoidance - not engage in risky business activity (not sell certain product or service ie. cars with exploding fuel tanks) Some risks are so serious that they should be avoided altogether Reduction - reduce occurrence of risk by modifying business practices (wiping floor if wet) Some risks can be reduced to an acceptable level Shifting shift risk to another party through contract or through insurance policy (purchase insurance for car accident) If a risk cannot be avoided or reduced, it may be shifted onto another party Acceptance sometimes appropriate for business to accept the risk (lucrative contract) -Examples of Risk Management: Insurance: liability insurance ; property insurance Insurance is a contract in which one party agrees in exchange for a price to pay $ if another company suffers a loss Exclusion and Limitation clauses: contractual terms that exclude liability for certain types of acts / losses, or that limit the amount of compensation available Business makes $ by selling goods or services, those sales are created by contracts and those contracts are often exclusion of limitations Incorporation: limited liability: directors and shareholders are not usually liable for debts of the company In order to avoid some risks, many business are set up as corporations/companies Most significant benefit of incorporation is limited liability Midterm 1 Study Package All Chapters Introducing to Legal System -What is a Law? A rule that can be enforced by the courts All laws are rules but not all rules are laws ie. rule against handling soccer ball is not law Legal Obligation vs. Moral Obligation (raises ethical considerations as well) moral wrongs are informally sanctioned - loss of friendships or damaged reputation legal wrongs are formally sanctioned - imprisonment or payment of damages -not every rule is a law Example: there is a rule against moving a bishop horizontally across the cheeseboard but there certainly is not any law to that effect -moral issues may arise even if a rule is a law Example: clothing manufacturer might be legally entitles to reduce production cost using child labour -in Canada important to define civil law and common law Civil Law: system traces history to ancient Rome Common Law: system traces history to England -The Legal System Public Law and Private Law -Public Law concerned with governments and the ways in which they deal with their citizens Divided into: Constitutional, Administrative, Criminal, and Tax Constitutional Law: provides basic rules for our political and legal systems, determines who is entitled to create and enforce laws Administrative Law: concerned with the creation and operation of those bodies, impact on business Criminal Law: deals with offences against the states; is concerned with people who break rules White collar crimes; committed by people in suits, manager who steals money from the cash drawer is a white collar criminal Tax Law: concerned with the rules that are used to collect money for public spending -Private Law concerned with regulating matters between private persons Government can also be subject to private law (ie. Gov enters into contract to purchase products) Divided into: Torts, Contracts, and Property (course focuses on torts and contracts) Tort: provides wrong against a particular person, law of tort covers a great deal of territory Example: International Tort - such as an assault and false imprisonment Example: Business Tort such as deceit and conspiracy Example: Negligence covers most situations in which one person carelessly hurts another Different Areas of Law Can Overlap (a punch can be a crime and a tort) It is possible for a private person to sue a public Example: suppose the municipal government forgot to inspect the foundation of your house while it was being built, if your basement later develops cracks, you could the construction company and also sue the city for its failure to enforce its own building regulations Midterm 1 Study Package All Chapters Sources of Law: -Three Main Sources of Law: The Constitution, Legislation, the Courts (1) The Constitution: Most important source of law Creates the basic rules for Canadian society including political and legal Every other law must be compatible with it. (section 52 - no legislation or court decision is allowed to contradict it) ; Constitution is extremely difficult to change Most laws can be changed by a legislature or a court, the constitution is different as a general rule, it can be changed only through a special amending formula Requires the consent of Parliament and the legislatures of at least two thirds of the provinces, where those consenting provinces represent at least 50% of the countrys population Constitutional amendments are rare Division of Powers: 2 levels of government Federal and Provincial; 2 sets of laws Division of powers states the areas in which each level of government can create laws Canada is a Federal country because it has 2 levels of government Federal: parliament of Canada located in Ottawa governs the country as a whole composed of 2 parts: o House of common consists of members of parliament (MPs) who are elected from every province and territory o Senate consists of senators who are appointed to their jobs Provincial and Territorial: Canadians also select politicians to represent them within their own provinces, the elected body is usually called the Legislative Assembly Charter of Rights and Freedoms: in 1982 the Charter was written into the Constitution to protect basic rights and freedoms Protects rights and freedoms for persons (i.e. businesses as well as human beings) from actions of government Irwin Toy Case (violation of freedom of expression, but justified under section 1) Sections guaranteeing freedoms and rights: 2 (fundamental freedoms ie. religion, press, speech); 6 (mobility); 15 (equality ie. race, ethnicity, colour, religion, sex, age and now sexual preference.) The character protects a large number of rights and freedoms, some deal with democratic rights (section 3-5) and some deal with legal rights that usually arise official languages and minority language education (section 16-23) -Charter is subject to restrictions: section 32 (only applies to complaints about Government behaviour); Section 1 (rights and freedoms are subject to reasonable limits). It is occasionally acceptable to violate a persons rights (RIDE Program) Section 33 (notwithstanding clause). Allows governments to enforce a law notwithstanding the fact that it violates the Charter of Rights and Freedom -Laws that are inconsistent with the Charter are of no force and effect (2) Legislation: second source of law; law that is created by Parliament or legislature constitution including the character is the first course of law, legislation is the second most important kind of legislation are statues or acts Midterm 1 Study Package All Chapters Example: every jurisdiction in Canada has an act that allows companies to be created Legislative process: first reading (formal introduction), second reading (discussion, then sent to committee), third reading (final debate and vote); after three readings sent to senate for repeat of process; finally given royal assent Provides an important opportunity for risk management, best strategy is to prevent the creation of law or make sure it is written
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