CChapter 1: Risk Management and Sources of Law
WWhy Study Law?
• The success or failure of a business generally depends on the ability to minimize
losses and maximize gains.
• Legal education plays a critical role in risk management.
• Law reflects and shapes the ways in which we interact with each other including in
the business world.
• Many business decisions have legal consequences which may negatively but also
positively affect business profitability.
• Businesses must manage legal risks.
• Risk Management is the process of identifying, evaluating and responding to the
possibility of harmful events.
• Identification: recognition of legal risks
• Evaluation: assessment of legal risks
• Responding: reaction to legal risks
FForms of Risk Management
• Risk avoidance: e.g. withdraw dangerous product from market
• Risk reduction: e.g. modify product to reduce danger
• Risk shifting: e.g. liability insurance and exclusion clauses
• Risk acceptance
TThe Nature of Law
• Rules and Laws: all laws are rules but not all rules are laws.
• Morality and Law: moral wrongs are informally sanctioned. Legal wrongs are
• Law is a rule that can be enforced by the courts.
AA Map of the Law
• Originated in ancient Rome.
• Quebec and most of the countries in Europe have civil law system.
• The written law is the primary source of legal rules. • May also refer to private law (as opposed to public law)
• Originated in England.
• Australia, NZ, US have common law system.
• Applies federally in all of Canada and in all provinces and territories except
• Operates on the principle of stare decisis (precedent).
• May also refer to rules that are made by judges rather than by legislatures.
Within Canada’s Common Law System
1. Public Law
Matters of public concern
• constitutional law
• administrative law
• criminal law
• tax law
2. Private Law
Matters of private concern
• The law of torts
• The law of contracts
• The law of property
Different areas of law may overlap
Sources of Law
Hierarchy of sources of law
• The Constitution
• Constitution Act, 1867 – division of powers
• Constitution Act, 1982 – contains the Charter of Rights and Freedoms
• Legislation – Parliament or Legislative Assembly
• The Courts – decisions (judge made law)
• Provides basic rules for legal and political systems.
• All laws should be compatible with the Constitution.
• Section 52 of the Constitution: The Constitution of Canada is the supreme law.
• Any inconsistent law is of no force or effect.
• It is very complicated to amend the Constitution. • There is a special amending formula which requires the consent of both:
• The legislatures of at least two-thirds of all provinces. The consenting provinces
should represent at least 50 percent of the population.
Canada is a federal country that has two levels of government:
• Represents entire country.
• The Parliament of Canada:
• The House of Commons (elected)
• The Senate (appointed).
• Prime Minister (leader with most members in Commons).
Provincial and Territorial
• The Legislative Assembly (elected).
• No Senate.
• Premier (leader of party forming government)
Division of Powers
• Constitution creates division of powers (ss. 91-92)
• Topics divided into federal or provincial authority:
• Federal: criminal law, tax law, banks, copyright, etc.
• Provincial: property and civil rights (such as contracts and torts), the creation of
• The federal government holds residual power (e.g. telecommunications and air
• Ultra vires legislation:
• Created outside the scope of authority of the enacting body.
• Has no force or effect (section 52).
Charter of Rights and Freedoms
• Part of the Constitution since 1982.
• Any law that is inconsistent with the Charter is of no force and effect (unlike the
Bill of Rights, 1960).
• Rights and freedoms commonly affecting business:
• Section 2: Fundamental Freedoms (freedom of religion, freedom of
• Section 6: Mobility Rights (This only applies to citizens)