Duplessis.SG.Chapter 22.doc

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Department
Management and Organizational Studies
Course
Management and Organizational Studies 2275A/B
Professor
Henry Meredith
Semester
Winter

Description
PAR6:EMPLOYMENT AND PROFESSIONAL RELATIONSHIPS C HAPTER 22 P ROFESSIONAL S ERVICES Objectives After studying this chapter, you should have an understanding of: • how business uses the services of professionals • the legal responsibilities of professionals to their clients and others who rely on their work • the role of professional bodies Learning Outcomes • Understand the contractual, fiduciary, and tort responsibilities of professionals to their clients (pages 561) • Recognize how professionals manage legal risks (pages 570) • Understand how a self-regulating profession governs and disciplines itself (pages 572 – 574) Chapter Summary Professionals owe a range of duties to their clients. Professionals are governed by contract and tort law. They must deliver services as contracted for and in accordance with the requisite professional expertise. If they are negligent in performing their responsibilities, they will likely be responsible for damages. In addition, professionals may be in a fiduciary relationship with their clients if the elements of trust and confidence and the reliance on skill, knowledge, and advice are present. Because of inherent vulnerability or dependency, the client is owed this duty of loyalty and trust. Professionals also owe duties to those who are not clients but who rely on their work and advice. Whether a duty is owed in a particular situation depends on foreseeability and the need to impose reasonable limits on potential liability. Professional service providers manage risk for the same reasons as businesses in general, but without the same freedom of choice. Insurance is critical, and many professions make such coverage obligatory. Professionals can consider organizing their practices as limited liability partnerships or corporations, although other trends have greater immediate impact for clients. In particular, new forms of practice, such as national and international firms, offer benefits for users. The professions are governed by legislation that establishes them as self-regulating entities. The professions create codes of conduct or rules of practice. These determine the standards that their members must meet, as well as providing a measure of the expected standard of care in contracts, torts and fiduciary obligaMosts. professions have created dispute resolution services or complaint procedures to assist clients. They are also maintain a discipline process that provides assurance to users that professionals violating professional rules will be disciplined, up to and including removal from membership. The challenge facing clients and professionals is to ensure that the individual Copyright © 2011 by Nelson Education Ltd. PART6:EMPLOYMENT AND PROFESSIONAL RELATIONSHIPS professionals continue to comply with the ethical obligations of the profession, despite increasing pressures, both from their own members and from clients, to become more business minded. Study Outline Use this outline to prepare a complete set of notes for this chapter. Business and Professional Services – page 561 Relationships and obligations_______________________________________________ _______________________________________________________________________ Ethical obligations________________________________________________________ _______________________________________________________________________ Hiring professionals in-house_______________________________________________ _______________________________________________________________________ Responsibilities of Professionals – page 563 _______________________________________________________________________ _______________________________________________________________________ Responsibilities in contract_________________________________________________ _______________________________________________________________________ Professional service contracts_______________________________________________ Fiduciary responsibilities___________________________________________________ _______________________________________________________________________ Independent legal advice___________________________________________________ _______________________________________________________________________ Responsibilities in tort ____________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Responsibility to third parties_______________________________________________ _______________________________________________________________________ _______________________________________________________________________ Professionals’ Risk Management Practices – page 570 Incorporation or limited liability partnerships___________________________________ _______________________________________________________________________ Insurance ___________________________________________________________ Governance Structures of Professions – page 572 _______________________________________________________________________ _______________________________________________________________________ Legislation ___________________________________________________________ Copyright © 2011 by Nelson Education Ltd. CHAPT22:PROFESSIONAL SERVICES _______________________________________________________________________ Self-regulating professions______________________________________________ Right to practice__________________________________________________________ _______________________________________________________________________ Multidisciplinary practice_______________________________________________ Disciplining professionals__________________________________________________ _______________________________________________________________________ The complaint process__________________________________________________ SELF-ASSESSMENT Key Terms Briefly define each term in the space provided. Professional – page 562 _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Retainer – page 563 _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Duty of confidentiality – page 566 _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Privilege – page 566 _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Matching Match the correct letter of each term in the space provided before each sentence. A Professional fiduciary duties B Confidentiality C Fiduciary D Insurance E Limited liability partnerships 102 PART6:EMPLOYMENT AND PROFESSIONAL RELATIONSHIPS F Privilege G Professional H Retainer I Self-regulating 1. ____ A person with specific expertise and skills in an accepted area of knowledge. 2. ____ An advance payment requested by a professional to fund services to be provided to the client. 3. ____ A person who has an obligation to act primarily in the interest of the person to whom a responsibility is owed because of the relationship between the two parties. 4. ____ The obligation of a professional not to disclose any information provided by the client without the client’s consent. 5. ____ The professional’s duty and the client’s right not to have their confidential information to divulged by the professional to third parties. 6. ____ Legal duties of loyalty, trust and confidence that go beyond the contractual or tort responsibilities owed by the nonprofessional service provider. 7. ____ The rights of the professions to self-governance. 8. ____ A firm where a client can get a full range of legal and accounting services. 9. ____ Partners are not personally responsible for negligence claims against other partners. 10. ____ One way for professionals to manage risk exposure. Questions Write a short, point-form answer for each question in the space provided. To assist you in understanding the chapter, it is recommended that you also use additional paper to write a full and complete essay answer for each question. 1. Does the nature of the contract for service change a professional’s obligations? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 2. Is the professional relationship solely governed by a contract? Explain. _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 3. Is a professional employee simply a manager by another name? Explain. Copyright © 2011 by Nelson Education Ltd. CHAPTE22:PROFESSIONAL SERVICES _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 4. What advantage might in-house professionals have relative to external service providers? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 5. How does a contract contribute to defining responsibilities owed to a client by a professional? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 6. What are the most contentious issues relating to professional practice and what system attempts to address them? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 7. What issues should be addressed prior to engaging a professional’s services? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 8. What are the obligations of a fiduciary? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 9. What is the role of the auditor? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 104 PART6:EMPLOYMENT AND PROFESSIONAL RELATIONSHIPS _______________________________________________________________________ _______________________________________________________________________ 10. Are there circumstances that require professionals to breach their duty of confidentiality? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 11. Does the nature of the contract for service change a professional’s obligations? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 12. What is the purpose for permitting professional-client privilege and where does it apply? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 13. What are the particular challenges that arise when dealing with negligence in the professional context? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 14. What cases involving professionals are the most difficult? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 15. Why have courts been hesitant to allow third parties to make claims for negligent misstatement? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 16. What is the reason suggested for professionals been favoured as defendants for shareholders launching lawsuits? Copyright © 2011 by Nelson Education Ltd. CHAPTE22:PROFESSIONAL SERVICES _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 17. How are claimants able to prove breach of the professional standard of care? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 18. Why did the Supreme Court of Canada hold that the auditors owed no duty of care to the plaintiffs in Hercules Managements Ltd. v Ernst & Young [1997] 2 S.C.R. 165? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 19. How do professionals manage risk exposure? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 20. Are professionals permitted to limit personal liability through incorporation? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 21. What is the legal significance of professional LLPs and what legitimate concern from the client’s perspective arises as a consequence? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ 22. What is a condition of practice in most professions and what consequence does this present for clients or users of professional services? _______________________________________________________________________ _______________________________________________________________________ 106 PART6:EMPLOYMENT AND PROFESSIONAL RELATIONSHIPS ________________________________________________
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