AFM 231 Complete Course Notes 2 (after midterm) Reading notes summarized from the course textbook

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Accounting & Financial Management
AFM 231
Darren Charters

CANADIAN BUSINESS AND THE LAW POST MIDTERMCHAPTER 11TORT OF NEGLIGENCEThe tort of negligence is a careless act that causes harm to anotherReasonable Care The care that a reasonable person would exhibit in a similar situationNegligence is a very common tort action in the commercial world because it covers a broad range of harmful conduct eg some who has been injured by dangerous driving poor advice from accountant or lawyerPlaintiff need not show that the defendant intended to cause the damage or that there were deliberate acts that give rise to the damage defendant is liable for failing to act reasonablyNegligence law seeks to compensate victims for their loss or injurySTEPS TO A NEGLIGENCE ACTIONStep 1 Does the defendant owe the plaintiff a duty of careStep 2 Did the defendant breach the standard of careStep 3 Did the defendants careless act or omission cause the plaintiffs injuryStep 4 Was the injury suffered by the plaintiff too remote If not the plaintiff has proven negligenceStep 1 Does the defendant owe the plaintiff a duty of careDuty of care The responsibility owed to avoid carelessness that causes harm to othersNeighbor principle Anyone who might reasonably be affected by anothers conduct formulated from the case Donoghue v StevensonStage 1 Is there a prima facie duty of carePrima facie At rst sight or on rst appearancesaIs the harm that occurred a reasonably foreseeable consequence of the defendants actbIs there a relationship of sufcient proximity between the parties such that it would not be unjust or unfair to impose a duty of care on the defendantStage 2 Are there residual policy considerations outside the relationship of the parties that may negative the imposition of a duty of careStep 2 Did the defendant breach the standard of careThe defendants conduct is judged according to the standards of behavior that would be observed by the reasonable person in societyReasonable person An ordinary person of normal intelligence who uses ordinary prudence to guide his conduct the law does not demand that the reasonable person is perfectWhen the defendant exercises specialized skills the standard of the reasonable person does not apply the defendants level of expertise means that they must meet a higher standard of care The court will use a standard person of that eld as a guide for the defendants conductCANADIAN BUSINESS AND THE LAW POST MIDTERMWhen an activity or product poses a high risk the law imposes a higher standard of careStep 3 Did the defendants careless act or omission cause the plaintiffs injuryWould the harm not have occurred but for the defendants actionsCausation The relationship that exists between the defendants conduct and the plaintiffs loss or injuryStep 4 Was the injury suffered by the plaintiff too remoteEven if there is an obligation to take reasonable care and it was breached how far will the legal liability of the defendant stretchRemoteness of damage The absence of a sufciently close relationship between the defendants action and the plaintiffs loss Thin skull rule The rule that protects the plaintiff who has an inherent weakness or thin skull that makes a given injury more serious than one might otherwise reasonably anticipatePure economic loss Financial loss that results from a negligent act where there has been no accompanying property or personal injury damage to the person claiming the lossDEFENSES TO A NEGLIGENCE ACTIONContributory NegligenceUnreasonable conduct by the plaintiff that contributed or partially caused the injuries that were sufferedBoth the defendant and the plaintiff are found to be negligentThe plaintiffs damages award is reduced in proportion to his own negligenceVoluntary assumption or riskvolenti non t injuria voluntary assumption of risk The defense that no liability exists as the plaintiff agreed to accept the risk inherent in the activity a complete defense to a lawsuit and the plaintiff is awarded nothing even though the defendant had been negligentNEGLIGENT MISSTATEMENTNEGLIGENT MISREPRESENTATIONNegligent misstatement or negligent misrepresentation An incorrect statement made carelessly the plaintiffs loss does not arise due to the defendants physical actions but due to the defendants careless oral or written statementsProfessionals Someone engaged in an occupation requiring the exercise of special knowledge education and skillFrom a business perspective it is professionals who are most likely to commit the tort of negligent misstatement by giving bad advice to the clientThe justication of a lawsuit is considerably less strong when the professional relies upon a third partyCANADIAN BUSINESS AND THE LAW POST MIDTERMThird party One who is not a party to an agreementManufacturers and suppliers owe a standard duty of care to the quality of their productsProduct liability Liability relating to the design manufacture or sale of the product product liability cases often involve contract lawCommercial establishments serving alcohol owe a duty of care to impaired patrons to assist them or prevent them from being injured they are liable to members of the public that are injured by these customersStrict liability The defendant is liable for the plaintiffs loss even though the defendant was not negligent and had exercised reasonable care scope of strict liability is limitedAreas where liability is strict includeLiability in contract When a business makes a contractual promise that it breaches or fails to perform that business is liable for breach of contract The absence of negligence is no defenseVicarious liability An employer is automatically responsible for the torts of his employee
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