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LAW 122 (616)
Chapter 1

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Ryerson University
Law and Business
LAW 122
Theresa Miedema

Chapter 1 Law Notes Risk Management and Sources of Law  Law shapes and reflects how people interact Why Study Law?  Success and failure are the result of choices (maximize profit, minimize losses)  Every choice has legal consequences; some profitable, some disastrous Risk Management  Risk management is the process of identifying, evaluating, and responding to the possibility of harmful events  Identification: liability is actually being held legally responsible, which, along with the possibility of being sued, you need to be concerned about  Evaluation: if you evaluate whether it is worth it to go ahead with legal action, or another action that may result in your being sued  Response: you are now in the position to make an informed decision  The goal is not necessarily to eliminate risks (taking chances is necessary for a business to survive or profit) but to manage them  Some risk management strategies: 1. Risk avoidance: the risk may be too serious 2. Risk reduction: some risks can be reduced to an acceptable level through precautions (a bank getting a mortgage for giving a loan for a house) 3. Risk shifting: if a risk cannot be avoided or reduced, if may be shifted to another party. Two of the most important are insurance and exclusion clauses. An independent contractor is a person who performs services on behalf of a company, but who is not a regular employee of that company, making the company no longer vicariously liable for the actions of that person 4. Risk acceptance: sometimes it is appropriate to accept a risk  Besides making sure that their employees are carefully picked and properly trained, there are more legal concepts in businesses 1. Insurance: 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 anything wrong. Property insurance provides a benefit if the purchasers’ property is damaged, lost, or destroyed. Insurance shifts the risk 2. Exclusion and limitation clauses: sales within business are created by contracts which often contain exclusion or limitation clauses. Such a clause is a contractual term that changes the usual rules of liability. It may attempt to exclude all risk of liability, or for certain types of acts or losses, or limit the amount of compensation available. In some cases the company can do so by posting a sign somewhere on its premises 3. Incorporation: an individual who chooses to act in a personal capacity may be held personally liable for any debts or liabilities incurred by the business. To avoid this, many business are set up as companies or corporations, which means limited liability. Shareholders or directors, will not be held liable for debts. The company may be lost, but the people behind it may be safe. This does not protect individuals from all risks  Risk management may require you to hire a lawyer, who can help you in problems that you may not be able to resolve or avoid yourself An Introduction to the Legal System The Nature of Law  It may be difficult to distinguish between moral obligations and legal obligations  Law is a rule that can be enforced by the courts  You may be punished through public opinion (unflattering article, disliked by people) but not legally  What is immoral may not be illegal, but what is illegal is usually immoral A Map of the Law  Civil law systems trace their history to ancient Rome  A jurisdiction is a geographical area that uses the same set of laws  Common law systems trace their history to England  The differences between civil and common law systems means that there are differences between the laws that apply in Quebec and the ones that apply in the rest of Canada  Criminal and Constitutional laws are the same across the country  Refer to figure 1.1 on page 8 for a map of the law Public Law  Public law is concerned with governments and the ways in which they deal with their citizens (including Constitutional law, administrative law, criminal law and tax law)  Constitutional law provides the basic rules of our political and legal systems (who is entitled to create and enforce laws, fundamental rights and freedoms)  Administrative law is concerned with the creation and operation of agencies, boards, commissions and tribunals (profound impact on business)  Criminal law deals with offences against the state; concerned with people who break the rules that are designed to protect society as a whole  White-collar crimes are committed by people in suits (a manager who steals from the petty-cash drawer)  Corporate crimes are committed by a company (used car dealership rolling back odometers on its vehicles is fraud committed by the company)  Tax law is concerned with the rules that are used to collect money for public spending Private Law  Private law is concerned with the rules that apply in private matters (law of torts, the law of contracts, the law of property)  Can apply to two person (individuals or corporations) or government (a private person can sue a public body)  A tort is a private wrong; an offence against a particular person i. Intentional torts; assault or false imprisonment ii. Business torts; deceit and conspiracy iii. Negligence; most situations where one person carelessly hurts another  The law of contracts is concerned with the creation and enforcement of agreements; governs transactions i. The scale of goods; such as cows and computers ii. The use of negotiable instruments; such as cheques iii. Real estate transactions; such as purchase of land iv. The operation of corporations v. The employment; relationship that exists between a business and its workers  The law of property is concerned with the acquisition, use, and disposition of property i. Real property; land and things that are attached to land ii. Personal property; things that can be moved from one place to another iii. Intellectual property; things that consist of original ideas (patents and copyrights)  Every company owns personal property, most have interests in real property, and a growing number rely heavily on intellectual property  Other areas of law that deal with forms of property i. The law of succession; deals with the distribution of a person’s property after death ii. The law of trusts; deals with a situation in which one person holds property on behalf on another Overlap  Different areas of law can overlap  A single event can trigger more than one set of rules (committing both a crime and a tort)  Some situations involve various types of law Sources of Law  There are 3 sources: the Constitution, legislation, the courts The Constitution  The Constitution is the document that creates the basic rules for Canadian society, including its political and legal systems; the most important source of law  Every other law in the country must be compatible with it; section 52 states “the Constitution of Canada is the supreme law of Canada, and any law that is inconsistent with the provisions of the Constitution is, to the extent of the inconsistency, of no force or effect”  The Constitution (the fundamental rules of Canadian society) is very difficult to change. It can only be changed through a special amending formula, which requires the consent of the Parliament plus the legislature of at least two-thirds of the provinces, where those consenting provinces represent at least 50 percent of the country’s population Division of Powers  Canada is a federal country because it has two levels of government  Federal: the Parliament of Canada, located in Ottawa, governs the country as a whole. The House of Commons consists of members of parliament (MPs) who are elected from every province and territory. The Senate consists of senators, who are appointed to their jobs. The Queen of England remains the head of state. In reality, the country is run by the prime minister, who is the leader of the political party with the most MPs  Provincial and territorial: in addition to electing MPs to represent them in Ottawa, Canadians also elect politicians to represent them within their own provinces and territories. The elected body, or legislature, is usually called the legislative assembly. Each of the 13 legislatures is similar to parliament for the most part; power is really held by the party with the most elected members, whose leader is the premier  You are always subject to federal and provincial laws if you live in Canada  The division of powers states the areas in which each level of government can act to minimize contradictions or overlaps (section 91 and 92 of the constitution establish this)  Residual power gives the federal government authority over everything that is not specifically mentioned (things that did not exist when the constitution was written in 1867)  When a government tries to create a law outside of its own power, it is acting ultra vires (“beyond the power”), which means that “such laws have no force o
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