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Chapter 1

LAW 122 Chapter Notes - Chapter 1: Petty Cash, Section 33 Of The Canadian Charter Of Rights And Freedoms, Royal Assent

Law and Business
Course Code
LAW 122
Brad Mac Master

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Chapter 1: Risk Management & Sources of Law
As consumers, we all need to be aware of the rules that govern commercial transaction. In terms of
employment, you may intend to work in the public sector, thus you need to understand not only the
nature of gov’t org., but also the different types of laws that may affect you.
Every business decision or choices has a legal consequence. Some consequences are profitable
while others maybe financially disastrous. The difference between winning & losing in the business
world often depends upon the ability to make the right choice from a legal perspective.
Risk Management
oRisk Management is the process of identifying, evaluating, and responding to the possibility of
harmful events.
a) Identification: For e.g. If you are accuse your ex-employee of theft, she can sue you for
defamation (that’s the risk).
b) Evaluation: After identifying the risk, you may decide that a candid letter would nevertheless
be legally acceptable. Assess you case, & determine if you should share this info with her
new employer.
c) Response: After identifying and evaluating your risks, you need to formulate a response. Do
you write the letter?
The goal in risk management is not to eliminate the risk but to manage them. The appropriate
strategy depends upon the circumstances.
Risk Avoidance: Some risks are so serious that they should be avoided altogether.
E.g. A car that regularly explodes should be taken off the market. Aside from issues of
morality, the financial liability will probably outweigh the sales profits.
Risk Reduction: Some risk can be reduced to an acceptable level via precautions.
E.g. A bank can lead $500,000 to a manufacturing company, and to reduce their risk
of non-repayment they can have the company put a mortgage over its factory.
Risk shifting: Even if a risk cannot be avoided or reduced, it may be shifted onto another
party. Two important methods of shifting include insurance and exclusion.
Risk Acceptance: It is sometimes appropriate to simply accept a risk.
If a golf course operates behind a factory, it is possible that a wild shot might hit a
factory window & that the golf course could be held responsible for the resulting
Three important concepts:
a) 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.
i. Liability insurance: provides a benefit if the purchaser is held liable for doing
something wrong.
ii. Property insurance: provides a benefit if the purchase’s property is damaged, lost, or
b) Exclusion Clause: is a contractual term that changes the usual rules of liability. For instance,
a courier comp. may provide notice that it will not be held liable for more than $100 if a
package is lost, damage, or destroy.
c) Incorporation: Many businesses are set up as corporations or companies – the many
benefits of incorporation is limited liability. That means that if something goes wrong, it is
usually only the company itself, and not the people who run it, that may be held liable. The
company itself might be lost, but the ppl behind it will be safe.
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Chapter 1: Risk Management & Sources of Law
Risk mgt. doesn’t require you to become a lawyer, but it requires you to hire one. Although, lawyer
fees may be expensive, they will help you recognize potential problems, and help you avoid
expensive compensations down the road.
Natural Law
For example, if you are fishing and you see someone drowning? Are you legally responsible for
saving his life? Or for his death if he dies? No, and No. You are not legally responsible for his death,
but you might be morally punished by the public opinions.
oLaw: is a rule that can be enforced by the courts
A Map of the Law
To make sense of it all, we need to organized law into different parts; in Canada it is necessary to
distinguish b/t civil law & common law.
oCivil Law: is a system that traces their history to ancient Rome, which was embodied in the Justinian
code, especially that which applied to the rights of private citizens.
Since the Roman Empire covered almost all of Europe, the legal system of the vast majority in that
continent are sill civilian. The only civil law jurisdiction in Canada is Quebec, which initially borrowed
its law from France.
oJurisdiction: is a geographical area that uses the same set of laws.
oCommon Law: is a system that traces their history to England. These laws are based on court
decisions and precedent, which has grown out of legal customs and practices.
Consequently, most jurisdictions that were settled in English colonists continue to use the
common law. This is true for rest of Canada, Australia, New Zealand, and most of the U.S.
Public Law
oPublic Law: is concerned with gov’t and the ways in which they deal with their citizens. It includes
Fig 1.1 shows that the major division is b/t public law & private law.
oConstitutional Law: provides the basic rules or our political and legal systems. It determines
who is entitled to create & enforce laws, and it establishes the fundamental rights and
freedoms that Canadians enjoy.
oAdministrative Law: is concerned with the creation & operation of administrative agencies
and tribunals. E.g. a human rights tribunal may decide that a corp. discriminated against
women by paying them less than men for work so similar values, and thus must compensate
millions of dollars.
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