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LAW 122 (614)
Chapter 1

ch.1 -Risk Management and Sources of Law .docx

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Ryerson University
Law and Business
LAW 122
Theresa Miedema

Chapter 1 – Risk Management and Sources of Law - Law is essential to any society, it shapes and reflects how people interact - Can affect a person even before birth and death - It governs the most impt. issues that arise in between: the freedom to choose a lifestyle, the right to marry, the ability to create and raise children, the obligation to pay taxes, etc. Why Study Law? - As consumers, we need to be aware of the rules that govern commercial transactions - Employment, you may intend to work in the public sector – you need to understand the nature of the govn’t organizations, and the different types of laws that may affect you - Businesses exist primarily to make money – goal is to max. gains and min. losses – hard work, natural talent, good luck – but success and failure are the results of choices - Must choose a product, a price, a location and marketing strategy – and every one of those business choices has legal consequences – some consequences are profitable, others financially disastrous - Diff between winning and losing depends on the ability to make good choices from a legal perspective o Law can both hurt and help us o Many ppl think of laws only in terms of prohibitions and punishments o Write a contract, a legal concept that allows people to create enforceable promises Risk Management - Ways businesses can positively benefit from the law - How to avoid losses - Legal education plays a critical role in risk management, the process of identifying, evaluating and responding to the possibility of harmful events - 3 steps: 1. Identification: recognize legal risks “can we be held liable for this” 2. Evaluation: assessment of legal risks “what are the chances of something going wrong” 3. Response: reaction to legal risks “what are we going to do about it” - While court cases are public events, very few cases ever go before a judge, most are settled by the parties themselves - There are potential costs associated with nearly every form of behaviour, including doing nothing at all - Abusiness probably can’t exist, and can’t profit, unless it’s willing to take some chances - The goal is not necessarily o eliminate risks, but to manage them - Forms of risk management: 1. Risk avoidance: when risks are too serious, they should be avoided all together (eliminate risk) Ex. Withdraw dangerous product from market 2. Risk reduction: reducing risks to an acceptable level through precautions (minimize risk) ex. Modify product to reduce danger, bankers ask for guarantors (mortgage) for loans 3. Risk shifting: if a risk can’t be avoided or reduced, it may be shifted onto another party (make risk someone else’s problem)  Ex. Insurance – a contact 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 purchaser’s property is damaged, lost or destroyed • Premium, if sued, insurance company pays settlement  Exclusion clauses and limitation clauses – contracts have clauses, a contractual term that changes the usual rules of liability. It may attempt to exclude all risk of liability, or exclude liability for certain types of acts or losses, or it may limit the amount of compensation that is available • Disclaimer, we are not liable for you (contract) • Law allows people to sign away their right to sue  Independent contractor – a person who performs services on behalf of a company, but not a regular employee of that company. Acompany is vicariously liable for the actions of its employees  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. Corporations and companies benefit of incorporation, having limited liability - only the company itself, not the directors or shareholders can be held liable for debts. Company may be lost, but people behind it will be safe. The concept of limited liability doesn’t protect individuals from all risks – employees, directors and officers may be held personally liable for the torts that they commit • “Legal person” who are separate from shareholders and directors, can hold property, sell property, and have limited rights 4. Risk acceptance: accept the risk. Ex. Do nothing at all - As a business person, you need to know enough about the law to recognize potential problems – sometimes you can resolve problems yourself, by taking steps to avoid them in the first place, or other times you need to call in an expert, a lawyer - Lawyers are very expensive, but in the long run, you may have to pay much more if you don’t seek professional advice at the outset - Compared with the cost of losing a lawsuit or watching a deal collapse, a lawyer’s bill is often a bargain o Many businesses have in-house counsel – instead of hiring lawyers from time to time as the need arises, a company may create its own permanent legal department – may be an additional expense, but provides more efficient risk protection – lawyers are on hand to resolve legal problems, and to help identify and prevent them Intro to the Legal System The Nature of Law - Most people say laws are rules, but not every rule is a law o Ex. Moving a bishop horizontally across a chessboard is a rule, but not a law - Moral obligations and legal obligations o Moral wrongs are informally sanctioned – Ex. Punished through public opinion – damaged reputation or friendships, unflattering newspaper articles o Legal wrongs are formally sanctioned – depending on the nature of the obligation – fines or imprisonment - Alaw is a rule that can be enforced by the courts - Moral issues may arise even if a rule is identified as a law – Ex. – clothing manufacturer – you may be legally entitled to reduce prod’n costs by using child labour in developing nations – may be faced with a choice between your heart and your wallet AMap of the Law - In Canada: o 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 o Common Law – systems trace their history to England – most jurisdictions that were settled by English colonists continue to use the common law - Jurisdictions – a geographical area that uses the same set of laws o Civil law jurisdiction - Quebec (borrowed its law from France), France, most of Europe and Louisiana o Common law jurisdiction – England,Australia, New Zealand, most of Canada, US - Criminal laws and constitutional laws are the same across Canada Public & Private Law Public law – is concerned with govn’ts and the ways in which they deal with their citizens - Includes: o Constitutional law – provides the basic rules of our political and legal systems – determines who is entitled to create and enforce laws, and it establishes the fundamental rights and freedoms that Canadians enjoy o Administrative law – concerned with the creation and operation of agencies, boards, commissions and tribunals that govn’t regularly delegate or assign responsibility to o Criminal law – deals with offences against the state – it’s concerned with people who break rules that are designed to protect society as a whole  Ex. Punching a person – a tort b/c you did something wrong to the person personally, but also a crime b/c you have done something wrong to the entire community  Crimes in the business world: • White-collar crimes – committed by people in suits • Corporate crime – committed by a company itself • Ba company can be convicted under the criminal code for acts of directors, officers, employees and others o Tax law – is concerned with the rules that are used to collect money for public spending 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 such as corporations - It’s how we choose to live our lives – how we engage in a contract (voluntary) - 3 main parts in private law: o The law of torts  a tort – is a private wrong, an offence against a particular person (involuntary) • Intentional torts – assault and false imprisonment • Business torts – deceit and conspiracy • Negligence – covers most situations in which one person carelessly hurts another o The law of contracts – concerned with the creation and enforcement of agreements (voluntary)  Contracts are involved in: the sale of goods, the use of negotiable instruments (cheques), real estate transactions, operation of corporations, the employment relationship between a business and its workers o The law of property – concerned with the acquisition, use, and disposition of property  3 main parts of property: • Real property – involves land and things that are attached to land • Personal property – involves things that can be moved from one place to another • Intellectual property – involves things that consists of original ideas (patents, copyrights) o The law of s
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