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Final Notes BU231.docx

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Valerie Irie

Bailment Bailment -Bailment – a transfer of possession of personal property without a transfer of ownership -Bailor – owner of the goods -Bailee – party accepting possession of goods from a bailor -Ex. Big Bang Theory – Sheldon signing package for Penny -Bailor – Penny -Bailee – Sheldon -3 ways that bailment can arise: -Contractual -Non-contractual -Involuntary -Ex. Leave your coat at a restaurant, the restaurant becomes an involuntary bailee -Non contractual: -Gratuitous bailment – a bailment where one party provides no consideration, or where there is no intention to create a contractual relationship -Ex. “I’m going to leave my car in your garage while I go to Australia, if you want to take it to go to Toronto to go to the Leads game, feel free to” Nature of Bailment -Personal property (chattels) only – can include documents containing legal rights – anything you can own -Transfer of Possession without transfer of title (ownership) -It is NOT a deposit of money -Have to give up actual possession – Ex. A car as collateral is NOT bailment because you still keep the car Sub-bailment -Sub-bailee – a person who receives a bailment of property from a bailee -Ex. Ring sent to Toronto to get fixed, sent by Canada Post, fixed and set back by CN railroad, doesn’t make it – All 3 are sub-bailees Savoy, Canada Post, and CN are liable Rights and Duties of a Bailee Liability Under Contract and Tort -Sometimes bailed goods are lost, damaged, or destroyed while in the possession of a bailee -All bailees have a duty to take care of the goods in their possession -Bailment is governed by its own rules The Standard of Care -Depends on type of bailment -Lowest standard is or the gratuitous bailment where the benefit is for the bailor -Highest standard is for the gratuitous bailment where the benefit is for the bailee -Also depends on other factors including: type of good bailed, extent of promise to look after the goods, value of the bailed property, whether the property is easily stolen/damaged -Special standards are set for special bailees Remedies of Bailment -Can sue for damages -Usually CANNOT obtain rescission – “Can’t unrepair something” -Can sue for quantum meruit in situations where there has been part performance Rights and Remedies -Quantum meruit – an amount a supplier deserves to be paid for goods or services provided Lien -Gives the right to the bailee to retain possession of the goods -The bailor cannot repossess the goods until he has paid the sum due -Generally, a right of lien arises only when the services have been performed and payment is already due -“If you don’t pay me, you won’t get your stuff back” – not ideal, you’d rather have the right of sale The Right of Sale -Provides the bailee/lienholder the right to sell the goods in their possession to cover the costs -Max. 2 weeks time will be given or final demand (before selling it) -Must follow prescribed formula to sell: 1. Provide a specified period of time to bailor to come up with funds 2. Advance notice of the bailee’s intention to sell the goods must be provided to the bailor 3. Sale must be advertised 4. Sale must be by public auction -Once sold, first moneys received from sale are used to pay fees -Bailor gets the surplus -Ex. Storage Wars Special Types of Bailment Storage and Safekeeping -Storer is required to exercise duty of care of the goods to protect them from harm -Goods brought in must be same ones returned unless fungible - any goods replaced by goods of the same quality and quantity – Ex. Grains and wheat -Statutory right to lien applies only to professional storers -Ex. Bank is a bailee for safety deposit boxes Repairs and Work on a Chattel -A repairer who works on these articles, say electronics or a car, is a bailee for value -The bailee is also under a duty to take care of the article while it is in her possession -Standard of care of bailee – duty of care to protect the goods from harm -Common law right to lien, but only a statutory right sell if payments are 3 months past due -Ex. Someone taking watch in for repair -Dry cleaner is a bailor Transportation -A gratuitous carrier is anyone who agrees to move goods from one place to another without reward – Ex. “You have a truck, help me move” -A private carrier is a business that undertakes on occasion to carry goods for reward, but reserves the right to select its customers and restrict the types of goods it is willing to carry -A common carrier is a business that holds itself out to the public as a transporter of goods for reward – insurer as well as bailee – highest standard of care – Ex. You need to ship horses, you aren’t going to call Fed-Ex -Shipper need only demonstrate: -Goods were delivered in good condition -Carrier failed to deliver goods or delivered them in bad condition -Bill of Lading – document signed by a carrier acknowledging that specified goods have been delivered for shipment -Their defences to damage are: -An act of God -Inherent vice in the goods -Default by the shipper -Inherent vice in the goods - poor wrapping by shipper – improper packaging – they’re going to self- destruct because of the way you packaged them -It is implied that the goods in question are safe to be shipped – if they are not and that’s what causes the loss – default by shipper -When a shipper puts down a value for the goods, you are declaring what they are worth, and if something happens to them that is what the shipper is liable for -Remedies for a carrier when shipper defaults: -Common carrier – right of lien by common law -Private carrier – has no right of lien by common law or statute - can only obtain by contract -Neither has the right to sell by common law or by statute, but can obtain only by contract Innkeepers -A person or firm that maintains an establishment offering lodging to any member of the public -They have a higher duty to protect your goods - must keep goods safe -Innkeeper can avoid liability for lost goods if they can how that the guest was negligent -If goods were damaged – must show negligence on part of innkeeper -Innkeepers Act: -Innkeeper must conspicuously display copy of the act -Innkeeper must provide safekeeping if a guest requests it -Entitled to common law right of lien -Right to sell is statutory Pledge of Pawn -Pledge or pawn – a bailment of personal property as security for repayment of a loan where possession passes to the bailee -The borrower is the pledger and the creditor the pledgee -Ex. You give over Canada Savings Bonds and some shares as collateral and you give the physical documents - they then have to keep them safe – “If I don’t pay off my debt, use these to pay off my debt” -Pawn: -Pawnbroker obtains title to goods pledged -Must send notice of last opportunity to the pledger -Must advertise in newspaper the final notice to pledger -Ex. Hock Shop -If the pawnee fails to pay, the pawnbroker obtains absolute ownership -Only type of bailment where the bailee obtains total ownership of the goods Agency Defining Agency -Agent – a person acting for another person in contractual relations with third parties -Principal – the person on whose behalf the agent acts -The agent acts on behalf of the principal to bring third parties into a contractual relationship with the principal rd -THREE WAY RELATIONSHIP  principal, agent, 3 party -Contractual relationship between principal and agent -Contractual relationship between principal and third party Creation of an Agency Relationship -Agency agreement – the agreement between principal and agent whereby the agent undertakes to act on behalf of the principal -The easiest way to form an agency relationship is by agreement -An agency agreement may be expressed or implied, oral, written, or in writing under seal -If an agency agreement is to extend beyond one year it must be in writing -Contract should set out limits to Agent’s Authority – can be express or implied -Power of attorney – a type of agency agreement authorizing the agent to sign documents on behalf of the principal Duties of an Agent to the Principal Duty to Comply with the Agency Agreement -Just like any other contract – binding on both parties -Principal can sue for breach of contract where agent acts outside authority Duty of Care -At a minimum: reasonable care, diligence and skill in transacting business on behalf of the principal -Standard of care will depend on agent’s own knowledge and skill; as well as the nature of the task Personal Performance -Generally personal performance is required -Can sometimes use a sub-agent: -Contractually agreed to use subagent -No privity of contract between sub-agent and principal Good Faith -Fiduciary relationship - act in beneficiary’s best interest -Agent must put principal’s interests ahead of their own -Agent cannot make secret profits on any transaction made for the principal -Agent has duty to disclose any and all relevant information Acting for 2 Principals -Conflict of interest -Ex. Real estate, buyer and seller – didn’t get the best deal for either party - Breach of duty of goods faith -Must obtain consent from both principals Expenses -Implied term that principal will cover the reasonable expenses of the agent -No obligation to pay for unauthorized acts unless ratified The Authority of the Agent Actual Authority -Actual authority – the authority given expressly or impliedly to the agent by the principal Apparent Authority -Apparent authority – the authority that a third party is entitled to assume that the agent possesses -Test for apparent authrdity: -Should the 3 party have been aware of the agent’s lack of authority or at least been suspicious? Or is it reasonable to assume from the type of business that the agent is engaged in, that the agent has the authority in question? -Principal has to receive some sort of authority “Looks like the person has authority” -Ex. Going to Timmy’s and say ‘I need to talk to CEO to see if you have the authority to take my order’ – ridiculous – employee has apparent authority -Holding out: -Representing by words or conduct that a person is one’s agent or has a particular authority -Ex. Changing someone’s title to seem more important – creating a situation where someone has authority that they don’t Ratification -Where an agent exceeds his/her authority, principal must ratify the contract -Subsequent adoption by the proposed principal of a contract made by an agent acting without authority -An agent’s contract with a third party may be ratified: -expressly or impliedly -within a reasonable time -by a named principal -if the rights of an outsider are not affected -if, at the time of creation and ratification, the principal was capable of making the contract Rights and Liabilities of Principal and Agent Principal alone is liable -Agent acting with real or apparent authority -Agent must make it clear to the third party that they are acting for a principal – even if an undisclosed principal Agent alone is liable -Where agent represents themselves to be the principal – liable to the third party -Under these circumstances the principal has no rights or liabilities under the contract Either the Principal or the Agent is liable -Where agent did not disclose status as an agent – third party can sue either the agent or the principal but not both -If agent is sued successfully by third party then principal has no liabilird -If existence of principal becomes apparent during court proceedings, 3 party can have the action discontinued against the agent and brought against principal instead Liability for Torts rd -Fraudulent misrepresentation (deceit) – 3 party has right to: -Rescind contract -Sue both agent and principal for tort of deceit -Agent can also be held liable for negligent misrepresentation -When an agent is guilty of fraudulent misrepresentation in making a contract, even though the principal did not authorize the misrepresentation or had forbidden it, the third party may rescind the contract, just as I the principal had made the misrepresentation himself -If the agent was acting with her apparent authority, the third party may sue the principal as well as the agent for the tort of deceit Rights of the Undisclosed Principal -Right to enforce the contract against third party where: -they can show that the contract was made with his authority -the authority must be real and not apparent -EXCEPTION: the undisclosed principal cannot enforce a contract that is personal in nature -Third party cannot hold undisclosed principal liable in a situation where the agent acted without real authority Breach of Warranty of Authority -Third party has the right to sue for breach of warranty of authority where: -Agent has no real or apparent authority (and no ratification by principal) – there is no contract -Third party will have an action in deceit against a fraudulent agent – there is no contract -Third party will have an action in negligent misrepresentation where agent negligently misrepresents their authority – there is no contract -If agent innocently exceeds authority – Ex. Contracts without knowing that principal has died, become insane or bankrupt – there is no contract -Warranty of authority – a person who purports to act as agent represents that she has authority to contract on behalf of the principal -Purpose is to put parties back in the position they would have been had the misrepresentation not occurred Terminating an Agency Relationship -Agents authority is terminated when: -At the time specified in the agency contract -At completion of the particular project -Upon notice by either party -Upon death or insanity of either principal or agent -Upon bankruptcy of principal -Upon an event that makes performance of the agency agreement impossible EmploymentLaw Development of the Law Governing Employment -Contract between parties = employment agreement -Can be for continuous service -Can be for fixed term (Ex. Maternity leave) -Governed by: -Statute -Labour Union -Common Law -A contractual relationship whereby one party, the employer, is authorized to direct and control the work or another party, the employee Employee Compared with an Independent Contractor -An independent contractor undertakes to do a specified task such as building a house -The contract between the parties does not create an employer-employee relationship because the contractor is not subject to the supervision of the person engaging him -His job is to produce a specified result, but the means he employs are his own affair -When a firm undertakes work as an independent contractor, any liabilities it incurs in carrying out its task are almost entirely its own -A person engaging an independent contractor is not generally responsible for the contractor’s obligations Liability in Contract -The promisor will be liable for breach of contract should its own employees do improper work -Vicarious performance Liability in Tort -A business is liable for damages to a third party for the consequences of any tort an employee may commit in the course of employment -Vicarious liability -Negligent hiring -Wrongful referral Duties of the Employment Parties -Employees’ duties: -Duty to obey -Duty to exercise skill and care -Duty of goods faith and fidelity – company loyalty -Employers’ duties: -Duty to pay Termination of Employment Contract -Employment contracts are discharged by way of notice -Notice = Time = $$$$$ -Payment in lieu of notice – payment of the amount of compensation the employee would have earned during the reasonable notice period - Employers commonly terminate this way to avoid friction with the now-terminated employee -To terminate you need to give a set period of time -In order to successfully discharge, you must perform the contract -How much notice is required? -Employment Standards Act – minimum requirements -Trade Practices – often suggest longer than minimum as normal within an industry -At common law – reasonable notice – very vague -Some factors or determining reasonable notice: -Trade practice -Duration of employment -Intention at time of contract formation -Frequency of pay -Level of position Grounds for Dismissal without Notice Dismissal for Cause -Dismissal without notice of further obligation by the employer when the employee’s conduct amounts to a breach of the contract -Only certain (3) breaches will be a major breach for termination: misconduct, disobedience, incompetence Misconduct -May be a crime associated with employment -Bad behaviour -Where reputation of employer is affected -Other employees are affected -Causes direct financial loss -Ex. Naked lawyer, pictures taken, law firm took a hit to reputation, lawyer fired Disobedience -Wilfully disobeying: -A reasonable request -A lawful request Incompetence -Need for implied or express term of competence: -Express: stating in a resume that one possesses certain required skills -Implied: applying for a job that requires certain specific skills – Ex. Applying how a typist job implies you know how to type -Doctrine of Condonation applied – condoning incompetence makes a claim for dismissal difficult -Incompetence is a cause for dismissal Illness -Discharge by frustration – not a breach of contract -Role of employment insurance -Ex. Kim Diamond – can’t pay 2 people to do one job, but insurance generally kicks in when it’s long- term disability Effect of Dismissal -Any of the four grounds for dismissal set out above permits an employer to treat the contract of employment as discharged -Only the most serious events of cause entitle an employer to immediately terminate an employee after the first incident: -violate an essential term of the employment contract -breach the faith inherent in the relationship -fundamentally or directly conflict with the employee’s obligation to the employer -Need to provide adequate training and assistance -Obligation to give the employee some warning and give them the opportunity to change their behaviour -Need to document activities of both employer and employee Wrongful Dismissal -Where an employee claims they have been wrongfully dismissed: -Employers defences: -Employee was dismissed for cause -Adequate notice was provided -If cause is discovered after the dismissal, the employer can use this in their defence -Can be constructive dismissal – When an employer creates a situation where it is impossible to work and trying to avoid paying notices – Ex “We need to downsize so let’s move the company to Sudbury and employees won’t follow and we’ll just hire new ones” -Factors considered by the court: -Character of the employment -Length of service -Age of the employee – Ex. Letting someone go who is 57 to find a new job vs. someone who is 27 -Availability of similar employment -Experience, training and qualifications of employee -Whether the employee was induced to leave secure employment -Bad faith on the part of the employer -Expenses incurred seeking other employment Damages -Once the court sets the reasonable notice period – Ex. 6 months (Rate of pay + benefits) x Notice = $$$$ -Ex. “6 months notice is reasonable for this employee” -How to calculate what must be paid Mitigation -Contract law requirement to act reasonably to reduce losses -Must try to obtain reasonably comparable employment -Court will reduce damages award if there is a failure to mitigate -If a defendant successfully mitigates, they receive difference between notice and income as damages -Employee does not have to take any job but must take a reasonably comparable job -Employee can be charged for mitigation -Need to mitigate and search for job -Ex. Get paid $60 000 for dismissal, 3 months in, you find a job for $24 000 – get $24 000 knocked off the money paid for dismissal Mental anguish -Recognition over time that while employment contracts are economic in nature, there is decidedly a human element as well -Problems of trying to assess intangibles such as “pain and suffering” and “humiliation” Reinstatement -Equitable remedy -A form of specific performance by which the court orders the employer to continue to employ the aggrieved employee -Principle of symmetry – If A asks for B for remedy, if the situation were reversed would B owe it to A – if not, you cannot get an equitable remedy Employee Welfare Legislation -Human Rights – private sector – marital sector, sexual orientation, etc. -Charter of Rights and Freedoms – government – rights of Canadians - -For many years, Canadians accepted mandatory retirement schemes as desirable and human social institutions: workers were expected to leave their jobs, usually at age 65, and enjoy retirement on an adequate pension – Ontario abolished mandatory retirement in 2005 -Pay Equity Legislation – equal pay for equal work – Can’t pay women less for the same jobs that a man does -Employment Equity Legislation – Strives to make the work force reflect the various underrepresented classes – Ex. Aboriginals -Regulation of working conditions – ESA, Labour codes, Health and Safety – Ex. No child labour, minimum wage -Employment Insurance Act – insurance against unemployment Workers’ Compensation -No fault scheme -Applies to certain industries -Injured employee can apply to the fund except if it was the employee’s wilful misconduct that caused the injury – exception: death or permanent disability -Statutory Reform - This statute creates Workers’ Compensation Boards to hear employees’ claims and also establish funds to which employers subject to the Act must contribute regularly and which are used to pay claims Worker’s Compensation - Occupational Health -Areas of growing concern -Awareness of dangerous substances that can have harmful effects over time (Ex. Asbestos) -Focuses on the prevention of harm and occupational safety -Proactive approach to prevent injury in the workplace -Ex. Toronto office buildings – 220 person building suddenly fits 2 000 people – poor ventilation system – germs spread InternalAffairsofaCorporation Business Organizations -Sole proprietorship -Sue in individual’s name -Partnership -Can be sued in the firm’s name -Limited Liability Partnership – If one of these parties is negligent, only one is responsible -Personally liable – joint liability -Limited partnership – one partner is a silent partner, but if you start participating in business, you lose your status of limited -Corporation -A legal person formed by the act of incorporation according to a prescribed legal procedure -Liable solely for the debt it incurs Internal Affairs of a Corporation -Day to day management of a company – not the “business” of the company -Canadian Business Corporations Act (CBCA) -Ontario Business Corporations Act (OBCA) -CBCA and OBCA are virtually identical – Quebec is the only different one The Structure of the Modern Business Corporation -Directors - Supervise the officers -Officers - Run the business of the corporation -Shareholders - Owners of the corporation -Stakeholders - Other interested parties, Ex. Employees, creditors, community, etc. Directors -Director’s roles: -Power to issue shares -Power to declare dividends -Power to adopt by-laws -Power to call meetings of the shareholders -CBCA whose shares are issued to the public requires a corporation to have 1 or more directors; and for a publicly held corporation minimum of 3 directors -Subsequent directors are elected by the shareholders -Director can sit for 3 years before the need to be re-elected -Must be at least 18, sane, and not bankrupt Director’s Duties (1) Every director and officer of a corporation in exercising his powers and discharging his duties shall: a. Act honestly and in good faith with a view to the best interest of the corporation; and b. Exercise the care, diligence, and skill that a reasonably prudent person would exercise (2) Every director and officer of a corporation shall comply with this Act, the regulations, articles, by- laws and any unanimous shareholder agreement – don’t disobey law -A good manager will not ignore the interests of stakeholders Director’s Duties of Care and Skill -Cannot be negligent – standard of the ordinary person -Can rely on information provided to them as long as they are not wilfully blind -If a director acquiesces in situations of misconduct or negligence, then they can be held personally liable -If a director votes for a decision that is financially detrimental to the corporation and the corporation becomes insolvent, then they can be held personally liable -If taxes are not paid – directors can be held personally liable -Defences: -Due diligence -Acted diligently -Relied on audited financial statements -Business Judgment Rule Directors – Fiduciary Duty -Fiduciary duties: -Must place corporation ahead of own interests -Must avoid conflicts of interest – must declare conflict of interest and cannot vote on matter -Cannot intercept a Corporate Opportunity -May not carry on business in competition with the Corporation -Director is fiduciary and corporation is beneficiary -Breach of a fiduciary duty: -Held liable to corporation for loss sustained arising from breach -Any property acquired by the director as part of the breach will be held in the name of the corporation as a constructive trust -Where property has been transferred to a bona fide purchaser for value, director will be liable to account for profits Directors – Insider Trading
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