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University of Toronto Scarborough
Management (MGS)
Murphy Lawrence

Chapter 6: Special Tort Liabilities of Business Professionals The Professional - Professional: A person with special skills not possessed by most individuals - Distinguish profession from service providers: a structured and educational training program (CA, College of Surgeons) Professional Standards and Professional Associations - Control and regulate members, make sure they are educated and meet a certain competence requirement - A lawyer has Rules of Professional Conduct, which states a competent lawyer uses all relevant skills and attributes and values in a manner appropriate to each matter undertaken on behalf of the client. o Knowing the legal principles and procedures o Investigating facts, identifying issues, ascertaining to client objectives The Professional-Client Relationship - Contract: o The professional-client relationship is usually created by a contract between both parties o Usually has terms in which the professional agrees to perform certain activities o May be able to hold the professional liable for any foreseeable loss that the client has suffered as a result of the professionals breach of contract. o Breach usually are a result of careless or negligent performance of the professional service or lack of performance at all - Fiduciary Duty o A duty to place clients interest above the professionals own interests o Unbiased opinion and advice - Tort Duty of Care o In general, the person who claims to be a professional must maintain the standard of proficiency or exercise the degree of care in the conduct of his or her duties that the profession normally imposes on its members. - Informed Consent o The full and understandable explanation of the risks associated with a course of action, and the clear understanding by the client or patient o For many professions, standard of care extends beyond the single performance of the service, the professional may be required to consider third parties (e.g. architects have to consider occupants of building after it is built) o Professional negligence extends beyond carelessness in carrying out duties, and extends as well to statements made and information provided to clients o Negligent Misrepresentation: negligent misstatements made by a professional to a client May constitute a breach of duty of care o Threefold test for liability of economic loss caused by negligent misrepresentation: 1. Whether the harm was foreseeable, 2. Whether there was a relationship between the parties of sufficient proximity, 3. That in terms of public policy and the circumstances it would be just and reasonable to impose the duty on the party making the statement Accountants - Accountants in particular are subject to extended to liability because it is aware that their work is depended on by third parties - Through third parties accountants are big targets for complaints but with little success - New legislation to not only holds directors or a publicly traded company liable to wrong public statements that are provided but also accountants, lawyers, engineers and whoever was involved with the process Lawyers - Often takes the form of advice and the enforcement of a clients legal rights, but its also includes the preparation of legal documents and negotiation of business transactions on behalf of a client - Entitled to accurate under the law and carefully considered advice - The standard of care imposed on a lawyer is that of a skilled and careful member of the profession, and failure to maintain this level of competence in the performance of the lawyers duties to the client may constitute negligence - Solicitor-client privilege: The duty of a lawyer to keep confidential information provided by a client to themselves and not to anyone or any legal authorities. Engineers - Held liable for their negligence to those who rely on their expertise - Standard of care of an engineer is general: is that of a competent and careful engineer, trained in that particular area of engineering specialty Architects - Required to complete an extensive program of education and experience in order to attain the professional designation. - Maintain level of professional skill in the performance of their duties to their clients - Failure to maintain this level of skill may result in a breach of duty of care, and if loss results to the client, it may result in tort liability for negligence - Normally under contract to ensure construction is carried out in accordance with design (may limit his liability and not supervise construction of the project) Semi-Professional and other Skilled Persons - Persons engaged in business activities where some expertise, special knowledge, or skill is required may also be held responsible for losses others suffer as a result of their careless acts or omissions - E.g. insurance agents, even though are agents of a company may be held liable for client losses if they fails to provide adequate coverage Chapter 7 An Introduction to the Legal Relationship Introduction - Business relationships depend on contracts. These promises create rights and obligations, and business managers must understand the legal nature of contracts they make or receive. - Contracts may be defined as an agreement made between 2 or more people that is enforceable at law - Comes into an existence when parties have established all of the elements that make a contract enforceable - Differs from law of torts; if the parties comply with the principles laid down for the creation of an enforceable contract they are free to create specific rights and duties of their own that the courts will enforce. The Elements of a Valid Contract - Intention to be bound: The assumption at law that strangers intend to be bound by their promises o 1. An Intention to create a legal relationship o 2. Offer o 3. Acceptance o 4. Consideration o 5. Capacity to Contract o 6. Legality - In addition to these six basic elements, to be enforceable, certain types of contracts must be in writing, in an electronic substitute, or take on a special form. Must be free from any vitiating elements such as mistake, misrepresentation, or undue influence. Intention to create a legal relationship - Consensus as idem: Agreement as to the subject or object of the contract - Meeting of minds; where both parties agree to do or refrain from doing something for each other - Parties must be of one mind and their promises must relate to that subject or object. o A promise begins this process; intention on the part of the promisor to be bound by the promise made - Is technically a presumption at law because the creation of intention is hard to prove - People who make promises to one another intend to be bound by them - Promises made between family members are not considered binding or enforceable - Intention of the Parties o Statement Invitation to receive offer advertisement of goods o Statement To create legal relationship offer Offer - The Nature of an Offer o Deals with the promises made by the parties o Something in exchange for something o Such a promise is only tentative until the other party expresses a willingness to comply with the condition - Communication of an Offer o An offer must be communicated by the offeror to the offeree before acceptance may take place o Offer: A tentative promise subject to a condition o Important to know when to offeree becomes aware of the offer. This is so because an offer is not valid until it is received by the offeree and the offeror is not bound by the offer until such time as it is accepted. o No person can agree to an offer that he or she is unaware of (case of reward) o Only the person to whom an offer is made may accept the offer unless offer is made to public at large Acceptance - Acceptance of an Offer o Acceptance: A statement or act given in response to and in accordance with an offer o The acceptance of the offer must be communicated to the offeror in the manner requested or implied by the offeror in the offer o When goods are delivered and all rules set out in the offer are complied with offer is automatically accepted. o The acceptance of the offer takes place when the letter of acceptance, properly addressed and the postage paid, is placed in the postbox or post office o For all other modes of communication, acceptance is not complete until the offeror was made aware of the acceptance o Only binding acceptance is when it is clear and unconditional that the offeree accepts the offerors offer. Anything less would constitute either as a counteroffer or and inquiry. o Silence cannot be considered acceptance unless a pre existing agreement has been established between both parties o If a method other than the method mentions in the offer is selected, the acceptance would only be effective when
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