Chapter 1 RISK MANAGEMENT AND SOURCES OF LAW
RISK Management (pg 2) : Process of identifying, evaluating and responding to the possibility
of harmful events
• Law is essential to any society
• Business exist primarily to make money
• Every business choice has a legal consequence
• The law can both hurt and help
• Legal education plays a critical role in risk management
• Many cases are settled before hand and don’t need to go to a judge
Identifications: Recognition of legal risks
Evaluation: assessment of legal risk
Response: reaction to legal risk
The appropriate strategy depends upon the circumstances. Goal is not to eliminate risks but to
manage them by:
Risk avoidance: elimination of risk
Risk reduction: minimization of risk
Risk shifting: make the risk someone else’s problem
Risk acceptance: choose to live with the risk
Some of the most important forms of risk management:
Insurance- 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 and property
1. Liability insurance: provides a benefit if the purchaser is held liable for doing
2. Property insurance: provides a benefit if the purchasers property is damaged lost
Exclusion clauses: is contractual term that changes the usual rules of liability. While
exclusion clauses are subject to certain rules and restrictions, the law generally allows
people to sign away their right to sue.
Incorporation: the most significant benefit of incorporation is limited liability that if
something goes wrong it is usually only the company itself, and not the people who run it
that may be held liable.
As a business person you need to know enough about the law to recognize potential problems AN INTRODUCTION TO THE LEGAL SYSTEM (pg 6)
A law is a rule that can be enforced by the courts.
Civil law systems trace their history to ancient Rome.
Jurisdiction refers to 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.
Public Law is concerned with governments and the ways in which they deal with their citizens. It
• Constitutional Law Administrative law Criminal Law Tax Law
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
Administrative law is concerned with the creation and operation of the bodies that are created by
governments to delegate and assign responsibility to a variety of agencies, boards, commissions,
and tribunals that help manage the workload in governments.
Criminal law deals with offences against the state. In other words it is concerned with people
who break rules that are designed to protect society as a whole.
• White collar crimes- created by people in suites. i.e. a manager who steals money from
the petty cash drawer is a white collar criminal.
• Corporate crime- Car dealership rolls back the odometer on its vehicles.
Tax law is concerned with the rules that are used to collect money for purposes of public
Under Section 217.1 a company can now be convicted on the basis of acts performed by a
long list of individuals. It states every one who undertakes or has the authority to direct how
another person does work is under a legal duty to take reasonable steps to prevent bodily
harm arising from that work or task
Private law: is concerned with the rules that apply in private matters. Both parties in a private
dispute are usually private persons, either individuals or organizations like corporations. It is possible for a private person to sue a public body
The gov is also subject to private laws when it enters into a private transaction
Private law is usually divided into 3 parts:
• The law of torts
• The law of contracts
• The law of property
The law of Torts: A tort is a private wrong, an offence against a particular person.
1. Intentional Torts: assault and false imprisonment.
2. Business Torts: such as deceit and conspiracy
3. Negligence: covers most situations in which one person carelessly hurts another.
The law of contracts: is concerned with the creation and enforcement of agreements, contracts
are involved in;
1. The sale of goods
2. The use of negotiable instruments, such as cheque’s.
3. Real estate transactions, such as the purchase of land.
4. The operation of corporations.
5. The employment relationship that exists between a business and its stakeholders.
The law of property: is concerned with the acquisition, use, and disposition of property. Divided
into 3 main parts;
1. Real property: which involves land and things that are attached to land
2. Personal property: which involves things that can be moved from one place to another
3. Intellectual property: which involves things that consist of original ideas, such as patents
Other areas of property law:
1. The law of succession deals with the distribution of a person’s property after death.
2. The law of trusts deals with a situation in which one person holds property on behalf
of another. Sources of law (PG 12)
The 3 sources of law:
1. the constitution
3. the courts
The most important source of law is the constitution. This document creates the basic rules for
Canadian society, including our political and legal systems. The fact that it provides the
foundation for everything else has two significant consequences.
1. First every other law in the country must be compatible with it.
2. Second the constitution is very difficult to change.
3. To change it a special amending formula must be used, requires the consent of the
parliament plus two thirds of the provinces, where those consenting provinces represent
at least 50% of the country’s population
Canada is a federal country because it has two levels of government.
Federal: the parliament of Canada, which is located in Ottawa, governs the country as a whole. It
is composed of two parts the house of commons consists of the members of parliament (MP’s),
who are elected from every province and territory. The Senate consists of senators who are
appointed to their Jobs.
Provincial and territorial- The elected body from their own province are called the Legislative
The Division of power states the areas in which each level of government can create laws.
The residual power gives the federal government authority over everything that is not
Ultra Vires- a gov tries to create a law outside of its own area also known as beyond the power
A different type of problem can occur if both levels of government create legislation that
conflicts. The federal law Wins
The doctrine of federal paramountcy- determines which law is pre-eminent based on the
constitution’s division of power The Charter of Rights and freedom (PG 14)
The charter was introduced to protect basic rights and freedoms. Some deal with democratic
rights (section 3-5), some deal with legal rights that usually arise in criminal cases (section 8-14),
some deal with official languages and minority language education (sections 16-23), and some
deal with aboriginals and multiculturalism (sections 25and 27)
The charter has had a profound impact on virtually every aspect of life in this country. It has for
example led to the recognition of same-sex marriages, and it may also dramatically affect the
availability of health care by allowing people to receive treatment outside the public system.
A focus on 3 sections of the Charter which, in addition to affecting Canadians generally,
sometimes have an impact on businesses
Fundamental freedoms (Section 2)