MCS 3040- Exam review.docx

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Marketing and Consumer Studies
MCS 3040
Joseph Radocchia

Topic 1: Tort Law Tort: - Defined as a private wrong - Wrongful act causes an injury, injured person can sue wrongdoer in private or civil court action - Examples of torts/ assault and battery, false imprisonment, trespass, defamation, deceit, nuisance, and negligence - Tort committed when conduct complained of is inherently wrong. - In the event of a tort, injured party, not the state that brings action, penalties, procedures, and standards of proof. Vicarious Liability: - Employer is responsible for all torts committed by employees during the course of their employment - Employer is responsible for any injuries, damages caused by employee while doing their job, even when they were doing it badly or improperly. Intentional Torts -Involve deliberate acts leading up to, but not including the injury committed. Assault and Battery: - Involves interactional interference with another - Battery- when there is actual physical conduct. - Assault- threat to harm another (apprehended physical contact) - Must be immediate, and possible to carry out. - Self Defense- a victim can use reasonable force, as much as necessary to fend off an attack. False Imprisonment: - Complete restraint without authority - When someone demands that a person has to remain in a location, or accompany without choice, imprisonment has taken place. - If the person actually has committed a crime, and is seen or caught in the act, even private citizen has authority to arrest. Trespass - Involves conduct without authority. - Trespass to land- going on someone‟s land without authority. - Trespassers are responsible for any damages they cause on property Nuisance - Private nuisance- a person using their property in such a way to interfere with a neighbor‟s use of their property. (Fumes, odors, noise, water, etc.) - Activity complained of must be inappropriate use of that property. Defamation - Involves a derogatory false statement about another. - Must reflect badly, and clearly refer to person suing. - Cannot refer to group of people. - Innuendo- when someone makes a statement presuming it to be true, but actually made in error. - Libel-written defamation. (Permanent form, therefore taken more seriously) - Slander- spoken defamation Defenses - Justification: as long as the statement is substantially true. Defendant must prove the statement to be true, rather than the plaintiff proving it false. - Absolute Privilege: Statements made on the floor of the legislature or parliament, in senior government, part of trial proceedings. Promotes free flow of information, and free speech to important to hinder by litigation. - Qualified Privilege: statements made with intended purpose, or with specialized duty, and statement was made thinking it was true without malice, and did not tell anyone who didn‟t need to know. (Employees work habits, police investigation). - Fair Comment: people are entitled to have an opinion or express opinions on matters of public interest are protected. Opinion must be based on facts known to the public, and it must be a possible conclusion, without malice. *Table 2.1 intentional torts~ Pg. 46* Negligence - Inadvertent or careless conduct causing injury or loss to another. - Failure for a person to live up to a standard of care in his or her dealing with another.  Table 2.2~ Requirements of Negligence Action Plaintiff must Establish. Pg. 47* Duty to Take Care: That injury or loss was reasonably foreseeable. Failure to Take Care: That the conduct complained fell below the reasonable person (better than average, less than perfect) standard. Causation and Damage: That the conduct complained of caused loss or injury to the plaintiff.  Table 2.3~ Defenses that defendant can raise to eliminate/ reduce liability in negligence action. Pg. 53* Contributory Negligence: Where the plaintiff is also negligent, court will apportion damages. Voluntary Assumption of Risk: Where the plaintiff has voluntarily put him/ herself in danger- and thus assumed the legal as well as physical risk- complete bar to recovery. Remoteness: Where the causal connection is indirect or consequences are out of proportion to expectations, liability may be reduced. Product Liability -When the use of a particular product injures a person, they can either sue the seller of the good for breach of contract, and or the manufacturer for negligence. - When the manufacturer is sued, negligence must be established. Privity of contract- only parties to a contract have obligations under it. (Purchaser of a product may not be able to sue for breech of contract because the contract was between the manufacturer and retailer). - Plaintiff must prove that the defendant was negligent, failing to live up to a standard of reasonable manufacturer in the circumstance. *Figure 2.4, Product Liability. Pg. 56* Professional Liability - Professionals have a direct contractual liability with clients and are liable even without fault, but making errors that cause loss for clients. - Injured clients must sue for negligence; court needs to question the extent of the professional liability. - Professional liability to clients is based on contract. - Professionals must live up to the standard of the reasonable person in the circumstance. Fiduciary Duty- putting the interest, and good faith of clients first, ahead of their own. - Professional risks associated with tort liability can be greatly reduced, or avoided through insurance. - Negligence can also be established under the criminal code, if the professional disregards or neglects the safety of life of other persons. Other Business Torts Fraud/ Deceit- when a person intentionally misleads another cheats out of money or obtaining some advantage. Inducing breach of contract- Person persuades another to breach a contract with a third person. Passing off- Using a similar logo, or any characteristics of a brand to mislead people to believe they are associated with that business. Trespass to chattels- someone damages or interferes with someone‟s personal property. (i.e.- vehicle, equipment, etc.) Conversion- Broader than simple theft; when a person intentionally deprives another of the possession or use of their personal property. - Normal remedy for when a tort has taken place is usually damages (monetary payment to compensate victim for loss) - Rare cases where conduct is deliberate, punitive damages may be awarded (punish wrongdoer rather than compensate victim). - Injunction (ordering offending conduct to stop) is used where monetary award is not appropriate. - Accounting may also be used (wrongdoer must pay any profits to victim) Topic 2: Legislation in the Marketplace - We live in a free market system in which the court will not interfere with people‟s freedom to bargain whatever they want. However some situations where statutes have been passed to modify business law. Consumer Protection Legislation: aimed at policing the marketplace, adjusting the balance between the bargaining position of buyer and seller, and offer recourse for abuse. Secured Payment: security to ensure payment. Collateral right to debt, creditor has right to take back goods, or intercept debt owing. Sale of Goods Act - Primary purpose is to supply missing terms parties don‟t think to include in their contract of sale. - Applies to all transactions where goods are sold, not only retail sale. Goods or Services - For the sale of goods act to apply, actual sale must have taken placed and a transaction of goods from seller to purchaser. - In a sale, the title and possession must be transferred. - In a conventional sale, the creditor is also the seller, and both possession of title and goods are eventually transferred to purchaser. - Act only applies for tangible good that are sold, not services. However if the service is incidental to obtaining the goods the act will apply (i.e. meal at a restaurant) - Where they can be separated, act applies to the goods not the labor (i.e. mechanic fixing car with new parts) Title and Risk - Whoever holds the title to goods if they are damaged must bear the loss. “Risk follows title”. - This does not apply in areas of CIF (cost, insurance, and freight), FOB (free on board), and COD (cash on delivery), and bills of landing - In risk follows title situation, five rules of sale of goods act apply. *Table 5.1~ Title and Risk Pg. 128* Obligations of the seller - Usually four sections imposing conditions and warranties on the seller with respect to the nature of the goods supplied. Title Implications regarding title. -Seller must deliver good title to purchaser. - Seller must provide quiet possession with respect to good being supplied. (Goods have to be usable as intended without interference). - Goods must be free from any charge or encumbrance. (Creditor has right to seize good when they have been used as security for a loan). Description or Sample - If good is bought based on a description or sample, and delivered good doesn‟t meet that description, sale of goods act permits purchaser to refuse delivery. Quality - When goods are sold by description, all goods must be of merchantable quality. - Meaning goods must be free from defects that would render them unsellable, or interfere with effectiveness. - Goods must be fit for the purpose purchased. - Implied conditions and warranties of new products try to limit liability of the sale of goods act. *Table 5.2~ Implied conditions and Warranties. Pg. 130* - Exemption clauses may limit liability. - Seller has right to stoppage in transit (Seller can stop goods in transit if purchaser defaults). - Seller has right to recover goods in event of bankruptcy of purchaser. Consumer Protection Legislation Consumer: someone purchasing a product for his or her own use, not for resale, and normally not for business activity. -Both federal and provincial law consumer protection legislation. Provincial Legislation Basic principles of common legislation among provinces. Quality and Fitness - Sale of Goods act implies certain conditions and warranties related to title, fitness, quality, and description of goods supplied. - Parties attempt to over ride provisions using limited warranties, but difficult to do so where consumer transactions take place. - Products must be fit for their purpose and of acceptable quality, and sellers are reliable for failure, no matter what other limiting clause or limitation is included in the contract. Business Practices - Protects consumers from unacceptable practices. - Prohibit misleading and deceptive practices generally, and several specific practices. - These statutes also control unconscionable transactions were the consumers taken advantage of because of factors such as under pressure or some other vulnerability that results in the victim hanging unfair price or some other Harsh adverse terms that are imposed in the contract - Remedies against the merchant engaging in unacceptable business practices include injunctions, damages, fines and other penalties. Consumer Bureaus - Government agencies are set up to assist consumers to investigate abusive practices and to resolve disputes. - These agencies have the right to search and seize for records to assist the consumer to obtain remedies and impose fines and other penalties in their own right. - Bodies may enforce large fines, but also the power to put the offending party out of business. - Classified an offence punishable by fine and imprisonment. - Referred to as quasi- criminal offences or provincial offences. New Directions - Warranties for fitness and quality set out in the sale of goods act cannot be overridden in a consumer purchase agreement by Limited warranty but also extends that protection to Leases and services. Federal Legislation - Control hazardous products, govern the bankruptcy process, and control anticompetitive business practices. - Investigate and resolve consumer complaints. The Federal Competition Act - A free market place creates high competition among businesses, which creates low prices for consumers. - Businesses try to manipulate the market for their advantage, and the federal competition attempts to prevent that. - Competition Act controls mergers and abusive practices. Interference with competition - Conspiracies that lessen competition are prohibited. Conspiracy: businesses getting together, and through agreement, trying to control market prices. Bid Rigging: Competitors conspiring together to control the bids on a particular project, so they can control the winning bid and charge a higher price. Price Fixing: involves two or more parties agreeing not to sell products below a specific price Double Ticketing: Two prices are placed on an item in the merchant sells at the higher price. Pyramid Selling - When people pay a fee to participate in a multilevel organization that is not based on the sale of a product, this is an offence resulting in high fines and jail time. - Pyramid selling schemes are prohibited. *Table 5.3~ Offences Against Competition. Pg. 137* Deceptive Marketing Practices - Any false or misleading representation made to the public, with respect to the promotion of a product. Deceptive marketing practices include: - False and Misleading representations - Warranty or performance claims not supported by tests - Unsupported tests and testimonials. - Bargain prices not supported by goods sold at regular prices. - Bait and Switch tactics (product advertised at one price, but not enough of the product is supplied so that the customer can be persuaded to buying the higher priced alternative) Full Disclosure - Merchants must make full disclosure of all relevant information in situations. - (Contest odds, telemarketer identity) - Any false or misleading representation is an offence. Other Matters Reviewable by Tribunal - Supplier restricting the supply of their product to only merchants that will sell at suggested retail price. Predatory Pricing: where supplier sells a product below cost or uses other means to drive out competition or otherwise restrict competition. Mergers and Acquisition - Tribunals can review mergers and acquisitions, which can lead to lessened competition, as well as economies of scale and more efficient business. - Schemes that tied the sale of products to other products or restrict who can buy are reviewable by Tribunal. Ponzi Scheme: Is an investment program where the early investors are paid out returns on their investment not from earnings but from funds supplied by later investors. Secured Transactions - Secured arrangements assure creditor of repayment. - Extra assurance is s=achieved by giving creditor first claim on some asset at least equal to the value of the debt owed. - Any form of property can be used to create security. Real property is normally preferred. Figure 5.1~ Secured transactions. Pg. 142* - Personal property both tangible in in the forms of goods or chattels, and intangible in the form of a right or claim one party have against another can also be used as security. - Conditional sales, chattel mortgages, and assignment of book accounts are now under the P.P.S.A. (the personal property security acts) - P.P.S.A. accommodates all forms of personal property as security. - Transaction takes place in three stages- Agreement, Attachment, and Perfection. - When contract is entered sets out rights and obligations of parties and designates asset to be used as security. Attachment: takes place when the value is given under the contract to the debtor Perfection: Gives the creditor rights to security that are good against all other claimants. Perfection is achieved through registration. Perfection can also take place when the creditor takes place of property used as security. - In the event of default, Creditors essential right is to obtain and resell secured property. - Court order is not needed to repossess, but force cannot be used. - Creditor must give debtor notice and the opportunity to redeem goods before resale. Other Forms of Security - Builder‟s liens protect contractors, sub traders, workers and suppliers. This gives contractors against the property if they are not paid. Guarantee- One person agrees to pay if debtor does not. - Involves 3 parties; the creditor, debtor, and guarantor. - Guarantor only obligated in event of default. - When the party co-signs the debt, this is called and indemnity, both debtors obligated under contract. Bankruptcy and Insolvency Insolvent- he or she is unable to pay his or her bills as they become due. Bankruptcy- A process whereby the debtor‟s assets are actually transferred to an official, who would then distribute them to the unpaid creditors. - Two ways bankruptcy is accomplished: 1. Assignment in bankruptcy - When a debtor voluntarily transfers his or her assets to a trustee in bankruptcy (a private professional authorized to act in the area) - When creditors force the debtor into bankruptcy, they must obtain a receiving order from the court to forcibly transfer those assets to the trustee. Debtor must owe at least $1000, and committed an act of bankruptcy, such as fraudulent preference (paying one creditor in preference), of fraudulent conveyance (transferring property to a spouse or friend to keep it out of the hands of creditor) or fleeing the jurisdiction to avoid debt to get receiving order. 2. Insolvency - The debtor has simply been unable to pay debts as they become due. Assets are distributed: First to secured creditors Second to preferred creditors Finally to unsecured creditors - Some assets are exempt from seizure. - If a bankrupt commits a bankruptcy offence such as failing to disclose information Or transferred property to a spouse or friend this is a punishable offense and may ultimately interfere with him or her being discharged in bankruptcy. Division Two Proposal: alternative to bankruptcy process for individuals. Debt counseling is involved, arrangements made through trustee/ administrator. Division One Proposal: Alternative to bankruptcy for companies owing larger debts over $250,000, more formal and complex. Receivership: Terms in original contract that allow the secured creditor to take over the management of a corporation in the event of default. Eliminates need for bankruptcy process. *Table 5.6~ Consequences of Bankruptcy. Pg. 151* Topic 3: Agency and Employment (Page 156 – 176) Independent Contractor performs specific service described in contract Normally this is not an ongoing obligation An Independent contractor works for him- or herself who contracts to provide specific services to another Employee commits to an employer in an ongoing relationship and is subject to more control from the principal and to specialized rules governing employment (Person working for someone who is told what to do and how to do it) Dependent Contractor operates a separate business, but provides service more like an employee of one customer and is an essential part of that customer‟s operations Agency An agent is someone who represents another person (the principal) in dealings with a third party FIGURE 6.1 Employees and dependent and independent contractors may find themselves acting as agents depending on nature of their duties (Ex. Plumber may be acting as an agent when he or she orders fixtures in the name of the property owner) Agency is usually created by contract, which outlines authority of agent. Agency depends on granting of authority Agents usually enter into contracts on behalf of their principals Principal/Third Party Relationship Agency law relates to the relationship between a principal and a third party, created when an agent functions as an intermediary. Authority In contract law, the principal and third party will be bound in contract when the agent has authority to bind the principal. Problem lies in how that authority is obtained. Expressed Authority is when the principal has directly granted the authority to act, and will support the contract Implied Authority authority to act can also be implied from the surrounding circumstances The authority of the agent that has not been directly communicated by the principal but that can be implied from the principal‟s conduct or statements (eg. A gas station attendant selling gas whether the employer has specifically state he has such authority or not) Actual Authority is authority given to agent expressly or by implication Apparent Authority is conduct of principal suggests to third party that agent has authority to act on the principal‟s behalf Sometimes principal may make it clear to an agent that his or her authority is limited, but not make it clear to a third party. If not cleared up, third party can then rely on that representation. Thus, the agent is said to act within his or her apparent authority. For example, a clerk selling a $300 item without the manager‟s permission, even though the limit was $100 still creates a binding contract with the third party and the store. The principal cannot later deny that the agent was granted authority (estoppel). Estoppel is when a person leads another to believe a certain fact is true (For example, that “A” is my agent, he cannot later deny the truthfulness of that fact) Where the principal has led the third party to believe the agent has authority the principal cannot later deny that authority Ratification (Like a voidable contract) The distinction between apparent authority and implied authority is only important where there have been express instructions to the agent not to act and he or she does anyway If the principal likes the deal (eg. Selling higher price part) he or she can ratify the agreement making it a binding contract Done intentionally with principal expressly ratifying the transaction In effect, principal is basically giving the agent authority to act after the fact, and that grant of authority works as if the agent always had authority to do so Ratification is when majority agrees with terms of collective bargain; principal confirms a contract entered into by his agent Restrictions on when a contract can be ratified; first, it must have been possible to enter into the contract at the time of ratification. Second, it must have been possible for the principal to enter into contract at the time the contract was entered into by the agent (Examples page 160) Vicarious Responsibility (Vicarious Liability) When conduct of an employee is closely related to the job he or she is employed to do, the employer/principal will be liable as well as the employee (ex. Stocking shelves on a ladder and dropping a product on a customer causing injury) If an employee negligently struck a pedestrian on her way to a meeting with suppliers, she would be liable and so would her employer If employee diverted route for a personal chore, company would not be liable for her conduct Liability for acts of independent contractors such as lawyers, accountants, insurance agents, and real estate agents is much more restricted. (Ex. If real estate agent runs over someone on the way to show my house, not vicariously liable. If, however, she fraudulently or negligently misrepresented some aspect of the house to a customer, I could be held vicariously liable for the tort) Principal will be responsible for his or her own torts committed through the agent FIGURE 6.2 The Agent/Third Party Relationship As a general rule, the third party has no claim against the agent since the agent simply acts as an intermediary (Normally, the agent can neither sue, or be sued under the contract) It is only when the agent has exceeded all authority to act that the third party can sue the agent for claiming authority not possessed  known as “breach of warranty of authority” (Exception: agent may be sued for breach of warranty of authority) Undisclosed principal is where the identity or existence of the principal is not disclosed by the agent to the third party When an agent doesn‟t disclose to the third party that he or she is acting as an agent or refuses to disclose who he or she is acting for (Ex. A developer may be reluctant to disclose that they are behind a particular project for fear that the information would push up the price of the land being acquired) -- In that case, third party has to sue the agent (Exception: agent may be sued where acting for undisclosed principal) The Agent/Principal Relationship Fiduciary Duty Fiduciary Duty is an obligation to act in the best interests of others, such as the principal, partners and employers “Utmost good
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