LAW 603 Study Guide - Midterm Guide: Common Carrier, Jaguar, Authorised Capital

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20 Jul 2016
Chapter 1 Review
Sources of Law (page 12 17)
There are three sources of law:
1) The constitution
2) Legislation
3) The courts
The Constitution
This document creates the basic rules for Canadian society, including its political and legal
systems. The fact that it provides the foundation for everything else has two significant
1) Every other law in the country must be compatible with it.
2) The constitution is very difficult to change. It can be changed only through a special
amending formula. This requires the consent of Parliament plus the legislatures of at least
two-thirds of the provinces, where those consenting provinces represent at least 50
percent of the country’s population.
Division of Powers
Canada is a federal country because it has two levels of government.
o Federal
o Provincial Canadians also elect politicians to represent them within their own provinces
and territories. The elected body, or legislative, is usually called the Legislative Assembly.
Wherever you live in Canada, you are subject to two sets of laws: federal and provincial. The
federal government has the residual power, the power over everything that is not otherwise
mentioned. Consequently, Parliament now has authority over a number of topics that did not
exist when our original Constitution was written in 1867.
A government sometimes tries to create a law outside of its own area. When it does so, it acts
ultra vire, which literally means “beyond the power.” Ultra vires occurs when one government
passes a law that is in another government’s domain.
If the court finds that the two statutes truly are in conflict, then the dispute will be decided by
the doctrine of federal paramountcy. The doctrine of federal paramountcy determines which
law is pre-eminent based on the Constitution’s division of powers. The federal law wins.
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Chapter 14 Special Contracts: Negotiable Instruments
A negotiable instrument consists of a contract that contains an obligation to pay money.
Many of the rules that normally govern contracts do not apply in the same way to negotiable
instruments. Three important differences:
o Consideration Consideration normally cannot consist of a promise to perform an
obligation that is already owed to the same party. However, that rule does not apply to a
o Privity Normally, a contract can be enforced only by someone with privity a stranger,
someone who did not participate in the creation of the agreement, cannot sue on it.
Nevertheless, anyone who holds a cheque can sue on it.
o Assignment Contractual obligations can generally be assigned to a stranger.
A negotiable instrument is more valuable than a simple contract because, like money, it is
negotiable. It can be easily transferred from one party to another in a way that may remove
any defects. It is a contract that is intended to eventual result in the payment of money.
Consequently, it carries the major risk that is associated with every contract: non-performance.
Types of Negotiable Instruments (page 337)
The Bills of Exchange Act applies only three types of negotiable instruments: cheques, bills of
exchange, and promissory notes. There are five requirements that must always be met before
the Act will apply:
1) Signed and written a negotiable instruments must be signed and written. A promise
cannot be clearly passed from one person to the next unless it is in writing.
2) Parties identified the parties must be clearly identified. It must be possible to
immediately determine who is required to make the payment.
3) Certain sum of money the contract must involve an obligation to pay a certain sum of
money. The obligation must deal entirely with the payment of money, not with such
things as the delivery of goods or the performance of service.
4) Time of payment the time of payment must be clearly stated. A person buying a
negotiable instrument must be able to determine precisely when that piece of paper can
be turned into cash.
5) Unconditional obligation the contract must contain an unconditional obligation. It must
be possible for a person who buys a negotiable instrument to immediately know exactly
what they are receiving.
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Nature and Requirements of Negotiable Instruments
Types of Instruments
Basic Requirements
An order by one party (drawer) that
directs a bank (drawee) to provide
money to someone (payee)
Identify party
Signed and written
Certain sum of money
Time of payment
Bill of exchange
An order by one party (drawer) that
directs another party who may or
may not be a bank (drawee) to
provide money to someone (payee)
Promissory note
A promise by on party (maker) to pay
money to someone (payee)
Cheques (page 339)
A cheque is created when a person orders a bank to pay a specific amount of money to someone.
The drawer is the person who “draws,” or creates, the cheque. The drawee is the bank that is
ordered to pay the money. And the payee is the person is entitled to receive the money from the
There are two contracts that exists between the drawer and payee. The first is the sale of goods
agreement, and the second is the cheque itself. There is no relationship between the payee and
the drawee; if the payee could not receive the money, they would have to sue the drawer and
not the drawee.
There are five possible complications:
o Postdated cheques
o Staledated cheques
o Overdrawn cheques
o Countermanded cheques
o Certified cheques
Postdated Cheques
A postdated cheque is dated in the future. According to the contract that exists between the
drawer and drawee, the drawee is allowed to debit the account only it if acts in accordance with
the instructions on the cheque.
Staledated Cheques
A cheque is staledated when the payee does not seek payment within a reasonable time. Banks
normally will not honour a cheque that is presented more than six months after the date that
appears on it.
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