LAW 122 - Chapter 1
Is the process of identifying, evaluating, and responding to the possibility of
harmful events; there are 3 steps: identify, evaluate, and respond to the
legal risks involved
Identification: If you accuse your ex-employee of theft, she may sue
you for defamation because your statement would cause a reasonable
person to think less of her. More surprisingly, if you unreasonably refuse
to write a letter, or if you write an unreasonably brief letter, you may be
held liable for reducing the ex-employees job prospects. You need to be
concerned about liability, about being held legally responsible and to be
concerned about the possibility of being sued.
Evaluation: Having identified the risk of being sued for defamation, you
may decide that a candid letter would nevertheless be legally
acceptable. Your allegations may be true. Even if they are not, you may
be justified in sharing your suspicions with the other company.
Response: Finally, having identified and evaluated the risks, you need
to formulate a response. You have several options. You can refuse to
write a letter or you can write a letter that does not mention your
suspicion or you can write a letter that accuses your former employee of
Risk Avoidance: Some risks are so serious that they should be avoided
altogether. An automobile that regularly explodes upon impact should be
removed from the market. Apart from issues of morality, the financial costs
of being held liable will probably outweigh any sales profits.
Risk Reduction: Some risks can be reduced to an acceptable level through
precautions. For example, a bank that lends $500,000 to a manufacturer
realizes that the loan may not be repaid if the economy goes into recession.
The bank can, however, protect itself by requiring the business to grant a
mortgage over its factory. In that case, if the bank does not get its money, it
may at least get the property.
Risk Shifting: Even if the risk cannot be avoided or reduced, it may be
shifted onto another party. We will very shortly introduce two exceptionally
important strategies for shifting risks: insurance and exclusion clauses.
Suppose, for example, that a construction company requires the temporary
use of a crane. It has two options. First, it may rent a crane and have it
operated by one of its own employees. Second, it may rent a crane and hire
an independent contractor to operate it. An independent contractor is a
person who performs services on behalf of a company, but who is not a
regular employee of that company. A company is vicariously liable for the
actions of its employees, but its not liable for an independent contractor.
Risk Acceptance: It is sometimes appropriate to simply accept a risk. It
sometimes is possible to deal with individual problems as they arise. Many of the most effective forms of risk management, however, apply more broadly.
Businesses should ensure that employees are carefully selected and properly
Insurance: Insurance is a contract in which one party agrees, in exchange
for a price, to pay a certain amount of money if another party suffers a loss.
Liability insurance provides a benefit if the purchaser is held liable for doing
something wrong. Property insurance provides a benefit if the purchasers
property is damaged, lost, or destroyed.
Exclusion and Limitation Clauses: Many businesses make money by
selling goods or services. Those sales are created by contracts and those
contracts very often contain exclusion or limitation clauses. Such a clause is
a contractual term that changes the usual rules of liability. The clause may
attempt to exclude all risk of liability, or it may exclude liability for certain
types of acts or certain types of losses, or it may limit the amount of
compensation that is available.
Incorporation: There are many ways to conduct business. An individual
who chooses to act in a personal capacity may be held personally liable for
any debts for liabilities incurred by the business. To avoid some of those
risks, many businesses are set up as corporations or companies. The most
significant benefit of incorporation is limited liability. That means that it is
usually only the company itself, and not the directors or shareholders, that
may be liable for debts. The company may be lost, but the people behind it
will be safe. It is important to realize, however, that the idea of limited
liability does not protect individuals from all risks. Employees, directors, and
officers may be held liable for the personal torts they commit.
An Introduction to the Legal System
The Nature of Law
Law is a rule that can be enforced by the courts. Depending on the precise
nature of the legal obligation, a court might put me in jail or require me to
compensate the victims family for his death. Moral issues may arise even if
a rule is identical as a law.
A Map of the Law
Civil law systems trace their history to ancient Rome. Since the Roman
Empire covered most of Europe, most countries on that continent are still
civilian. The only civil law jurisdiction in Canada, however, is Quebec, which
initially borrowed its law from France. Jurisdiction is a geographical area
that uses the same set of laws. Common law systems trace their history to
England. Consequently, most jurisdictions that were settled by English
colonists continue to use the common law. Since there are significant
differences between civil law systems and common law systems, there are
also significant differences between the laws that apply in Quebec.Public Law
Public law is concerned with governments and the ways in which they
deal with their citizens. It includes:
Constitutional law provides the basic rules of our political and legal
systems. It determines who is entitled to create and enforce laws, and it
establishes the fundamental rights and freedoms that Canadians enjoy. To
manage the workload, governments regularly delegate or assign
responsibility to a variety of agencies, boards, commissions and tribunals.
Administrative law is concerned with the creation and operation of those
bodies. It has a profound impact on business. For instance, a human rights
tribunal may decide that a corporation discriminated against women by
paying them less than it paid men for work of similar value.
Criminal law deals with offenses against the state. In other words, it is
concerned with people who break rules that are designed to protect society
as a whole. For instance, if you punch me, you have committed a tort
because you have done something wrong to me personally. However, you
have also committed a crime because you have done something wrong to
the entire community. Even if I am not particularly u