Textbook Notes (363,007)
Canada (158,140)
BUS 393 (52)
Chapter 1-5

Legal Fundamentals for Canadian Business Ch. 1 - 5

45 Pages
Unlock Document

Simon Fraser University
Business Administration
BUS 393
James Pflanz

Legal Fundamentals for Canadian Business Study Notes Chapter 1: The Canadian Legal System What is law? • Law: rules w/ penalties that are likely to be enforced either by the courts or other agents of government o Resolution of problems by courts/ other institutions are not an indication of success; every effort should be made to avoid litigation • Law and morality shouldn’t be confused – legal rules may express some moral content, but it should not be assumed that obeying the law = acting morally o Laws are often passed for economic efficiency, political expediency, historical reasons o Law doesn’t define moral behaviour; business ppl should rise above the minimum requirements for law • Substantive law: rules determining behaviour • Procedural law: concerned w/ how legal institutions work • Public law: disputes involving the gov’t (including criminal law and gov’t regulation) o Criminal case usually offensive conduct, considered serious enough for gov’t to get involved and punish wrongdoer  Prosecution known as Crown, person defending known as accused • Private (civil) law: rules that enable an individual to sue a person who has injured them o Plaintiff – the person suing o Defendant – person being sued o When one party is dissatisfied w/ decision and appeals to higher court, parties then known as appellant (party who lost and who is appealing, may be either plaintiff or defendant) and respondent (usually trial winner) Sources of Law • Each province given right to determine its own law w/ respect to matters under its own jurisdiction • Quebec: Civil Code o French Civil Code based on Napoleonic Code, traced back to Romans o Codifed body of rules stating general principles that are applied by courts to problem before system o Judge is not bound by precedent (following prior decided cases), but must apply provisions of Code • English-speaking Canada: Common Law o Adopted from legal system used in England o Instead of following a written code, judge looks to prior case law, chooses particular case most closely resembling one at hand, and will determine obligations of parties based on precedent o Case involving same issue decided in court higher in judicial hierarchy is binding precedent, so must be followed  Decisions from outside jurisdiction, including outside province, and other countries (e.g. UK, US, Australia, New Zealand) may be persuasive, but not binding  Distinguishing cases: when judge prepares case report, a large portion of decision is an explanation of why judge chose to follow one precedent rather than another  Stare decisis: system of determining law through following precedent in the legal system o Common law evolved from case decisions made in 3 common law courts set up under king’s authority in Middle Ages in England (Court of Kings Bench, Court of the Exchequer, Court of Common Pleas)  As body of law grew, common law courts became harsh/inflexible due to restrictions placed on king by nobles and institutional inertia – led to having to petition the king if wanted to seek a unique remedy  Task of making orders overcoming individual injustices caused by shortcomings passed from king to separate body called Courts of Chancery  Courts of Chancery and common law courts merged in 19 th Century, but body of rules developed by Courts of Chancery (Law of Equity) remained separate o Common law was developed itself from different sources: canon law → law of wills/estates, Roman law → property law, law merchant → negotiable instruments o English-speaking provinces adopted English legal systems at different times, and each has added own decisions, creating unique body of case law in each province • Third body of law: gov’t statutes o After English Civil War, principle of parliamentary supremacy established that any legislation passed by Parliament overrides judge- made law, in form of common law or equity o New law usually takes form of statues enacted by fed/prov. Legislatures The Law in Canada • British North America (BNA Act) – created Canada in 1867, united several English colonies into one confederation, declared that Canada would have constitution similar to UK o UK has unwritten constitution – found in several proclamations, statutes, traditions, judicial principles, including  Rule of law: principle that all are subject to law and legal process  Magna Carta: first royal proclamation of basic human rights  Parliamentary supremacy: principle that everyone is subject to laws made by Parliament o BNA act has constitutional status – can’t be changed through parliamentary enactment; can only be changed through process of constitutional amendment o Now known as Constitution Act (1867) – divides power b/w fed & prov gov’ts  Parliamentary supremacy vs. 10 provincial legislative assemblies – power is divided up in Sections 91 (fed – power to make laws over e.g. money, banking, military, criminal law, weights/measures) and 92 (prov – health, education, local commerce • Some overlap as sources of power rather than watertight compartments  Paramountcy – federal legislation takes precedence over provincial in cases of conflict • Legislation – how both fed/prov gov’ts make law o Elected member (usually cabinet minister) from prov. Legislative assembly or fed. Gov’t presents bill in house; process of introduction, debate, amendment, approval (1 , 2 , 3 readings); presentation to Queen’s representative (Governor General – fed, Lieutenant Governor – prov) to receive royal assent; becomes law – known as act or statute o Same process through Senate prior to royal assent at fed level • Statutes may authorize cabinet minister or other official to create sublegislation or regulations to accomplish objectives of statute o If have been properly passed w/in authorization, have same legal standing as statute o E.g. Canadian Human Rights Act has 9 bodies of regulation – general rules set out in statute, while regulations set out specific procedures to be followed, penalties for violations, fees to be charge for services, etc. The Constitution Act (1982) and the Charter of Rights and Freedoms • Passage of Constitution Act (1982) in Canada and Canada Act in England cut Canada’s ties w/ England, meaning English Parliament can no longer pass legislation that affects Canada; however, ties to monarchy remain • Canadian Charter of Rights and Freedoms is part of Constitution Act o After WWII, increased in interest in human rights saw all Canadian provinces and fed gov’t establish regulatory bodies to ensure human rights were being protected o Specific laws vary among provinces and many not include same grounds but all have established strong enforcement bodies – power to hear complaints, gather information, hold hearings, provide remedies o None of statutes had power to remedy discrimination by gov’t (parliamentary supremacy holds that the supreme law-making body is fed Parliament) o Charter solves this problem – all constitutional provisions are supreme law of Canada, meaning that no gov’ts can change provisions w/o going through amendment process o However, some limitations built into Charter give back gov’t some power that Charter takes away  Section 1 – allows for reasonable exceptions, e.g. removing mobility rights of prisoners, person being held liable for fraud/defamation against free speech  Section 33 – “notwithstanding” clause, allows for opting out, e.g. Loi 101 in Quebec o Section 2 – protection of basic or fundamental freedoms: speech/religion/press/association o Sections 3-5 – democratic rights – right to vote, run in an election, election being held every 5 years o Section 6 – mobility rights: right to live/work in any part of Canada, enter and leave Canada o Sections 7-14 – legal rights: rights to life, liberty, security of person, tried in reasonable time, have a lower, not to incriminate yourself, not to be exposed to any unreasonable search and seizure o Section 15 – equality rights o Section 23 – minority language education rights o Aboriginal rights that contravene Charter provisions are not affected, are preserved o Charter’s provisions only apply to relations w/ gov’t; legislation passed by all lvls of gov’t and conduct of officials must comply w/ provisions of the Charter The Courts • Under Constitution Act, court structure is left to provinces – some variation, bt generally similar • Provincial (lower-lvl) courts: civil and criminal matters o Small-claims court – civil actions where one person sues another for small amounts of money (up to $50K) o Youth courts o Criminal courts – less serious criminal offences o Family courts – family law matters (e.g. division of assets, awarding maintenance, custody of children) o Specialized courts – e.g. drug-related offenses, domestic violence, mental health, community courts o Superior trial courts (Supreme Court, Court of Queen’s Bench, Ontario: Superior Court of Justice) – highest provincial trial courts, dealing w/ all serious civil and criminal courts; usually deal w/ provincial statutory offences and limited civil jurisdiction o Court of appeal – highest provincial courts; only deal w/ appeals from lower courts and some gov’t regulatory bodies; 3 judges preside over cases, instead of jury  Juries limited to trial level, rare in civil cases (except for personal-injury cases under tort law), but guaranteed under Charter for criminal cases  Function: to hear evidence, decide questions of fact (what happened that gave rise to action); questions of law (what legal obligations are of parties or legal rules to be applied) are left to judge  If only judge presides, deals w/ both questions of fact and law • Federal courts: o Supreme Court of Canada  Court of last resort for Cdns, located in Ottawa  9 judges are chosen from around the country, appointed by governor general upon recommendation of PM and cabinet  Hears appeals from all provincial appeals court (can’t directly appeal to SCC) – will decide on which cases are the most important for Cdns  7 of 9 judges usually sit to hear cases, and may sometimes hear references (questions involving serious legal issues normally some urgency), directed by PM o Federal courts – trial and appeal divisions  Matters that fall w/in federal jurisdiction, matters from federal tax court, military courts, other fed gov’t regulatory bodies The Litigation Process • Civil action: one person (plaintiff) sues another (defendant) o Each step in complex process designed to uncover info, so parties will be encouraged to settle w/o trial o Prov. Courts only hear matters that have taken place in, or are closely connect to, area of jurisdiction • Self-representation – permissible both in civil and criminal courts o Usually the case in small-claims courts, but in more serious cases, lawyers (US: attorneys, UK: barristers (trial lawyers), solicitors (legal transactions) usually represent parties  Notary Publics and Paralegals provide some legal services • Civil action process o Action must commence w/in a time limit (limitation period) specified in statute – varies w/ type of action being sought o Once questions of jurisdiction/time limits are decided, plaintiff initiates action by issuing writ of summons (description of nature of complaint and address where docs related to case can be served), registering it, and serving to defendant o Defendant files an appearance at same court registry – indication that matter will be disputed  Default judgment – when defendant fails to file appearance, plaintiff can proceed to judgment w/o any further notification to defendant o Plaintiff issues statement of claim (summary of allegations supporting cause of action [summary of what plaintiff says happened] and nature of legal claim, indication of remedy requested, where damages are claimed, specific amount sought  Sometimes included in writ of summons  Ontario – notice of action commences action (including statement of claim) o Defendant responds w/ statement of defense (states what is agreed upon and what is disputed in statement of claim); can also issue a counterclaim (initiates counteraction on defendant’s behalf)  Docs aka. pleadings o Discovery process: each party looks at and copies documents from other side, examination under oath by other side’s lawyer o Offers may be presented b/w parties to encourage parties to settle prior to trial; if offer isn’t accepted and judgment is less favourable than offer, party refusing offer may pay penalty in higher costs  Pre-trial proceedings can cause delays and frustrate parties  Reforms have been introduce to expedite the process – reducing scope of discovery, mandatory use of affidavits instead of direct testimony, elimination of discovery, mandatory pre-trial mediation, case mgmt by a judge, etc. The Trial and Judgment • Trial begins w/ opening statement by lawyer for plaintiff, then witnesses called by plaintiff to answer questions by plaintiff’s lawyer (direct examination) • Cross-examination: as each witness testifies, defendant’s lawyer has opportunity to ask their own questions o Questions are often broader than in direct examination • Defendant responds by calling their own witnesses w/ direct and cross- examination from lawyers from both parties • Both lawyers summarize cases and make their arguments • Plaintiffs much establish claim on “balance of probabilities” – judge needs only to be satisfied that plaintiff's position is more correct than defendant's • criminal cases: prosecution must prove "beyond reasonable doubt" guilt of the accused o I.e. even if judge thinks accused is guilty, there must be verdict of not guilty if there is another reasonable explanation • once judgment for liability is passed in civil action, defendant usually has to pay damages (sum of money designed to compensate losses incurred) to plaintiff o special damages: can be accurately calculated (e.g. medical expenses, lost wages) o General damages: can't be accurately calculated  e.g. loss of future wages, pain and suffering (limitations on availability set by SCC) o punitive damages: awarded when conduct in question was deliberate, object to punish wrongdoer • other remedies: o injunction: order to stop offending conduct, or may be to order parties to do something, eg. back to work order  Interim/interlocutory given before ultimate determination of matter at trial  Mareva is court order freezing assets of defendant to ensure they are available to satisfy an eventual judgment at trial  Anton Piller order: similar to Mareva - authorizes one party w/o warning to the other to search and seize evidence including assets and documents to make sure they aren't destroyed o specific performance: order for one contracting party to fulfill terms of agreement o accounting: defendant must pay over any profits made because of misdeed o Order for costs (aka. party and party costs): requires that losing party pay a substantial amount to compensate winner for trial expenses • Once damages have been settled, defendant is known as judgment debtor, and plaintiff the judgment creditor • JC must take extra steps to ensure payment is collected, e.g. post-trial hearing to identify JD's assets (e.g. bank accounts, wages, cars/boats, real estate/land) • Contempt of court: when defendant fails to comply w/ specific conduct ordered or defendant tries to avoid paying, may result in stiff fines and/or imprisonment • Risk must be taken into consideration in whether or not to sue, as court litigation is very expensive, and other party may not be able to pay Alternate Dispute Resolution (ADR) • ADR: alternative solutions to litigation process; can avoid delay, expense lost productivity, publicity associated w/ litigation process • Negotiation o directly w/ each other, or through lawyers, to reach settlement o resolution is quick and cheap o if have some goodwill and parties are willing to cooperate and compromise, best choice for resolving disputes • Mediation o process where 3rd party acts as go-between or facilitator and assists parties to resolve dispute o mediator communicates w/ both parties, tries to find some common ground b/w them (e.g. suggestions) o up to parties themselves to make decisions, not mediator - more likely for parties to live up to obligations o if fail to live up to obligations, terms of settlement will be influential in court hearing o if settlement is not reached, proceedings are kept confidential - doesn't weaken party's position o may be required in some cases, e.g. collective bargaining, as part of pre-trial litigation proceedings o Pros: convenient, inexpensive, private, allows parties to resume relationship • Arbitration o decision-making is surrendered to arbitrator who is selected by both parties - often set out in initial contract b/w parties o Panel of 3 may be chosen: 1 by each party, and a 3rd neutral person o parties agree to be bound by decision, but can place limitations of scope of decision and what remedies can be imposed o Arbitrators are usually very experienced, and w/ power to make binding decision, make them very effective o Required in some situations, e.g. collective bargaining o Increasingly common to blend mediation and arbitration (Med-Arb) - 2- step process, w/ attempt at mediation first, then arbitrating if mediation doesn't work o Pros of ADR  flexibility - parties are free to tailor dispute-resolution process to suit business needs  reduces costs, should be included in risk-avoidance strategy Administrative Law • ... Requirement of Authority • Statute authorizing a process or regulations, or appointed decision-maker, must deal w/in constitutionally-mandated area and mustn't infringe on Charter rights; will be considered void otherwise • Statutes must be provided in writing - if error is made in documentation of regulatory process, law may be overturned Procedural Fairness • Decision-making process must comply w/ principles of procedural fairness • Fair hearing: person appearing before hearing/tribunal must receive reasonable notice of hearing and be made aware of what the hearing is about so can prepare appropriate response; person must be given opportunity to speak before decision is made; ppl making decision must be present to hear all evidence and not be biased or personal interest; courts will review decision when it is unreasonable, etc. • Privative clauses: added to insulate tribunal decisions from judicial review, so as to hvoid having statute's terms and processes challenged • Tribunals and regulatory boards usually made up of experts, so decisions can be made more quickly and cost-effectively than courts • Courts designed to rarely interfere w/ decisions - grounds reduced to "correctness" (above process, tribunal having authority and fairness of process) and "reasonableness" (board has several choices but choices have to reasonable) Criminal Law • State prosecutes the accused in criminal cases, unlike civil law, where an injured party sues party causing the injury seeking compensation or other remedy • Sometimes criminal and civil cases arise from the same incident • Power to make criminal law rests w/ fed gov't, but provinces have power to create/enforce statutes, violations of which can be significant • Hence, little difference b/w regulatory offences and violations of criminal law • Prosecutor must establish "beyond a reasonable doubt" that accused is guilty of offence; not enough to show that offensive conduct has taken place, need to prove that action was intentional (not intention to commit a crime or harm another) o Defense needs to show that no intention was present - insanity is a common defense (but intoxication, ignoring the law don't count) o Strict liability offences: when only fines levied, may be sufficient to prove that offensive conduct took place; only defence available is that accused acted w/ due diligence (established if accused has taken reasonable measures to ensure offensive conduct hasn't taken place, i.e. training of employees, establishment of procedures and safeguards) • Police have broader powers to arrest, and have right to make a search • Decision to arrest usually follows investigation, police file complaint setting out allegations and obtain arrest warrant from justice of the peace/judge • Justice may also issue summons to appear - accused is required to present themselves before judge in specified time; if arrested, accused has to be presented before judge 2/in 24 hours • Summary conviction offenses - minor offenses, lesser penalties (usually up to jail term of max 2 years), usually involve exchange of information and negotiation by prosecutor and defence b/w appearance and trial • Indictable offenses - more serious penalties, involve heavy fines and up to life in prison, depending, a more involved and lengthy process (preliminary hearing before trial) • Plea-bargaining: involves giving accused opportunity to plead guilty to a lesser offense; a common aspect of criminal process o advantages: serving justice, ensuring conviction, avoiding costs and uncertainty of a trial • Process o prosecutor presents evidence against accused, who then presents defence o if have jury, will hear evidence and receive instructions from judge as to law, then decides guilt; if can't agree, new trial may be ordered o If just a judge, will decide guilt/innocence and impose sentence w/in sanctions of Criminal Code (depending on seriousness of offence) o judge may make other orders, e.g. confiscation of proceeds of crime, requiring payment, suspended sentence, absolute discharge • some offences don't involve direct commission of actual crime (e.g. aid in commission of crime, accessory to crime, counsel commission of crime, conspiracy) • individuals/corporations doing business in other countries are subject to legal systems in those jurisdictions; and due to int'l treaties, conventions ,etc. crimes done abroad may have legal consequences locally Chapter 2: Torts and Professional Liability • Personal Liability - one person is held accountable when wrongful conduct causes injury/loss to another • Tort: a private wrong; i.e. if conduct causes injury, injured person can sue wrongdoer in private or civil action • Tort vs. criminal conduct - crime is offensive conduct considered serious enough for state to get involved and prosecute, while tort is civil wrong in that injured party not the state, is bringing the action, and penalties/procedures/standards are different o although some cases may result in both criminal and civil cases o Vicarious liability - an employer is vicariously liable (responsible) for all torts committed by employees in the course o their employment Intentional Torts Assault and Battery • Forms of trespass to person – intentional physical interference w/ another o Battery – actual physical contact; usually includes assault, so common practice to use term “assault” to cover situations where physical contact is involved o Assault – threat to harm another; threat of physical contact must be immediate and physically possible to carry out, need not be harmful, just unwanted o Under Criminal Code, term “assault” includes physical contact that in tort law would be referred to as “battery” • Defences o Consent – valid defence to claim of assault/battery  Medical treatment or other conduct can go no further than informed consent allows → if w/in parameters, appropriate and not actionable against  Some physical contact falls w/in consent, e.g. in sports, but not intentional extreme contact o Self-defence – when attacked , victim can use reasonable force in response, but can’t be unrestrained violence (i.e. only as much force is necessary to fend off attack)  Must be in response to immediate threat, not one that has passed, otherwise considered as revenge  Can also be used to e.g. accomplish justified arrest, defend property  Doesn’t count if e.g. you are verbally insulted and you respond w/ physical violence False Imprisonment • When someone is suspected of inappropriate conducted and restrained (counts as imprisonment); when done improperly or w/o authority, considered actionable, a form of trespass o Doesn’t need to involve physical contact, e.g. if someone submits to following another person’s orders • However, when a person has committed a crime for which he can be arrested, and is caught, anyone can arrest them (but police and other security officials have broader powers of arrest) • Proper training of employees is essential to reduce rise of false imprisonment allegations, potential criminal charges Trespass • Trespass of land – when someone comes onto another’s land w/o permission or authority o Trespass can be unintentional (e.g. if person doesn’t realize), but e.g. postman delivering mail wouldn’t count as trespass o Trespass can also be indirect (e.g. throwing smt onto land, permanent incursion, overstaying welcome, causing destruction) • Proprietor is allowed to eject trespasser using reasonable force (i.e. no more than necessary) • Can be considered criminal e.g. loitering on another person’s property at night; ejecting by reasonable force and defence of property are allowed o If trespasser refuses, considered assault • Trespassers are responsible for any damage caused on property, but no damage is necessary for trespass to be actionable o In cases of permanent trespass, remedy might be damages or injunction Nuisance • Private nuisance – one person using property in such a way that interferes w/ neighbour’s of property, e.g. fumes, odours, noise, water • Remedies – damages, injunction o Activity complained must be inappropriate use of that property; e.g. noise from nearby farms or industrial plants don’t count • Interference must be reasonably foreseeable, and offender should have anticipated result Defamation • Involves false statements about someone to their detriment; mustn’t just reflect badly on person but also clearly refer to person suing (i.e be specific, not general) • Products/businesses can also be defamed – e.g. circulating rumours about a brand of beer being contaminated • Needs to be published to be actionable, i.e. be heard or read by a third party o Libel – written defamation; treated more seriously than slander (can do more damage), easier to prove o Slander – verbal defamation; Monetary loss needs to be shown o In most jurisdictions, broadcasted defamation is considered libel rather than slander • Innuendo – spreading rumours about relationship status of people; can be actionable, even if in error • Mistake is not considered a defence • Defences o Justification – if statement is substantially true, presents effective defence  Defendant needs to prove statement true rather than plaintiff proving it false  Actual msg being communicated must be true, not intended idea of communication o Absolute privilege – comments on floor of legislature, senior gov’t committees, in trial proceedings; not actionable  Debate and free speech too important to be hindered by threat of litigation in these circumstances o Qualified privilege – limited protection of derogatory statements made pursuant to duty  Statements regarding employment (e.g. employee evaluations, statements given to police)  Also given to some matters of mutual interest, esp. professional associations (e.g. lawyers, doctors, accountants)  Cannot sue if statement was made under assumption it was true, made w/o malice, and didn’t communicate to anyone who didn’t need to know o Fair comment – entitlement to have/express opinions on matters of public interest; used mostly by media  As long as expression of opinion is commentary based on true facts, and as long as it is possible conclusion based on public facts and stated w/o malice, it is protected  If statements aren’t true, then are actionable  Also protects e.g. political cartoons that get msg across by exaggeration o Responsible Communication – as long as publication is on matter of public interest, is reasonable under circumstances, and there are diligent attempts to verify facts, publishers are protected (even if statements are false and derogatory)  SCC decision to balance freedom of speech and protection of reputation o Legislation also limits exposure of comm media by limiting amount of damages that can be claimed by victim if an appropriate apology is published o Defamatory libel – if published words injure someone’s reputation by “exposing them to hatred, contempt, or ridicule”, can be considered a criminal offence  Extortion/threat by/of defamatory libel is also a criminal offence  Publishers also liable unless they can show they had no knowledge of the inclusion of the offending words Negligence • Inadvertent or careless conduct causing injury or loss to another; involves failure of one person to live up to standard of care required in their dealings to others o “careless” – failure to live up to that required standard of care • Duty of care – required only to limited classes/groups of ppl determined by legal test and social policy o If litigation, plaintiff must show that conduct fell below required standard/level of care; must be determined that there was some sort of injury or loss caused by alleged conduct • Reasonable person – court asks: what would a reasonable, objective bystander do in the same circumstances? o Requires behaviour that’s higher than average but less than perfect; standard behaviour expected from a prudent person being careful; average isn’t good enough Duty of Care • Donoghue vs. Stevenson case(Scotland, 1930s) – Donoghue went to café w/ a friend, who bought her a ginger beer float; Donoghue found out that bottle contained rotting snail, and became very ill; couldn’t sue café b/c friend bought float for her, so sued bottler (Stevenson) on tort of negligence – did Stevenson owe a duty to be careful to Donoghue? • Established reasonable foreseeability test – we owe a duty to be careful to anyone we can reasonable foresee (anticipate) might be harmed by a product o Has become very important in development of law in negligence; applies in normal negligence case o SCC ruled that in new cases, two-step Anns case applies • Ann case – lessees of apartments (under 999-year leases) sued Merton London borough Council for failure to ensure that failed foundation had been properly constructed; House of Lords had to establish whether city owed them a duty of care; Lord Wilberforce found it did, two-step process established to determine duty • Anns case test o Determine whether there is a degree of proximity/neighbourhood b/w parties, such hat one person should have realized that their conduct placed victim at risk; was injury or damage reasonably foreseeable?  Proximity – not just what was reasonably foreseeable, but also what was just and fair in circumstances w/ result that there are even fewer findings of duty in new and unique situations o Is there any reason not to impose duty, reduce scope of duty, limit class to whom duty is owed, or should damages awarded be reduced?  Allows courts to modify nature of duty where circumstances warrant based on social policy • Recent expansions: o commercial restaurants/pubs liable to patrons who drink too much and then are injured  not just to customers themselves but also to others injured through intoxicated conduct  also extends to employers who serve alcohol to employees at office parties, etc. Standard of Care • was there a failure to live up to appropriate standard of care? • Generally, law doesn’t impose a duty to act and so omission (nonfeasance) isn’t usually actionable, unless there is some special relationship imposing a duty (e.g. lifeguard, guardian; duty to warn of some danger) • In cases where inappropriate conduct/malfeasance is involved, how careful does a person have to be? • Person is required to live up to what is expected of a reasonable person in the same circumstances – as long as standard is maintained/surpassed, no negligence has taken place o 2 ndapplication of “reasonable person test”, most significant application in Cdn legal system o Several considerations taken into account: risk, cost, potential loss  In cases of high risk w/ great potential for damage, duty to be careful is very high • Strict liability – liability may be imposed in rare circumstances where smb brings smt dangerous on their property and it escapes, causing injury to a neighbor, even when owner of property hasn’t caused escape and has taken all reasonable steps to avoid it • Expertise – professionals (e.g. doctors, accountants, engineers) are expected to have a certain lvl of expertise (i.e. skills and abilities associated w/ profession) and exercise it in a reasonable manner o E.g. doctor who misdiagnoses illness may be liable for negligence • In determining what caused loss/injury, Cdn courts look at circumstantial evidence, and if strong enough, can conclude that presumption of negligence has been established; then, up to defendant to produce evidence that they weren’t negligent, otherwise presumption is confirmed and liability determined o Historically, treated under principle of res ipsa loquitur, but SCC decided a more flexible principle of circumstantial evidence was better • Traditionally, special rules applied in some unique situations o E.g. occupiers had a particular responsibility to ppl using land and premises, depending on status – had to protect invitee from any unusual danger; licensees had to be warned of any hidden danger o Most jurisdictions have enacted occupier’s liability acts – no more distinction b/w invitees and licensees; occupiers need to take reasonable steps to protect all visitors and property, and obligations to trespassers (except children – usually greater) are minimal • Special statutory standards over-ride common law; standard of care required of certain classes changed by legislation o E.g. innkeepers to guests and common carriers to customers have been modified by statute o Not every time a statue imposes a duty on smb is a new category of tort created o Insurance is a way of avoiding risks associated w/ tort liability – in many jurisdictions, certain times of insurance coverage is mandatory Causation and Damage • Plaintiff must demonstrate causation (i.e. that conduct complained of was cause of injury or damage) in order to succeed in negligence action o w/ intentional torts, commission of tort is enough to warrant payment; tort need not necessarily have happened o w/ negligence, there needs to be some sort of resulting injury/damage before compensation can be sought • i.e. duty owed → duty breached → causation → loss → no defences Defences • Contributory negligence – where plaintiff/victim was also negligent, court will apportion the damages o Traditionally, if person suing also contributed to loss, would receive no compensation; but has been modified by common law and legislation o E.g. when both parties are at fault in a car accident o i.e. when present, court reduces amount of compensation paid to victim of negligence when victim’s own carelessness contributed to loss • Voluntary assumption of risk – where plaintiff has voluntarily put themselves in danger (thus has assumed legal and physical risk), there will be a complete bar to recovery (i.e. they are disqualified from suing for injury or loss) o Defendant must not only show that injured party voluntarily put themselves in danger, but also that they did it in such a way as to absolve defendant of any legal responsibility o Courts may apportion losses depending on percentage of fault o Rescuers who put themselves in dangerous situations are treated differently • Remoteness – where causal cxn is indirect or consequences are out of proportion to expectations, liability may be reduced o Test used is same reasonable foreseeability test used to determine duty of care, but applied to foreseeability of injury generally o Mustapha case – man changing a water bottle discovered fly inside, causing him to develop a phobia to drinking water  Product-liability case – duty of care was clearly established on manufacturer based on reasonable foreseeability best  Court of Appeal overturned lower court decision to award $300K+ in damages, but SCC dismissed appeal – there was duty to be careful and ther was breach, damages suffered were result of that failure, and injuries in question were too remote and therefore where was no liability  Legal causation will only be established when there is reasonable foreseeability of such an injury to a person of “ordinary fortitude” o There must be sufficient causal cxn b/w conduct complained of and resulting injury; if considered too remote or too indirect, requirement of causation will not be met and no liability imposed o Once cxn is found, when personal injury is involved, we take our victims the way we find them; once an injury is foreseeable, plaintiff will be liable even if degree of injury is unusual  Thin skull rule – which makes the tortfeasor liable for the plaintiff’s injuries even if the injuries are unexpectedly severe owing to a pre-existing condition. The tortfeasor must take his or her victim as the tortfeasor finds the victim, and is therefore liable even though the plaintiff’s losses are more dramatic than they would be for the average person.  Crumbling skull rule – simply recognizes that the pre-existing condition was inherent in the plaintiff’s “original position”. The defendant need not put the plaintiff in a position better than his or her original position. The defendant is liable for the injuries caused, even if they are extreme, but need not compensate the plaintiff for any debilitating effects of the pre-existing condition which the plaintiff would have experienced anyway. The defendant is liable for the additional damage but not the pre- existing damage. o In contract law, there is a duty to mitigate damages in a negligence action, i.e. plaintiff has to take all reasonable steps to keep damages as low as possible  Failure to do so means that damages will be reduced to amount they would have received had they been mitigated  In potentially dangerous situations, contract often includes provision restricting any such action, or required to sign a release Product Liability • If a product injures a person, there is a choice – purchaser can sue seller of product for breach of contract and/or sue manufacturer for negligence o Action in contract has distinct advantage of imposing strict liability where product was defective and caused injury; no need to prove fault on part of defendant • Privity of contract – principle that only parties to a contract have obligations under it o If no contractual relation b/w parties, only option is to sue for negligence – fault must be demonstrated in addition to showing that defective product caused the injury; i.e. plaintiff must show that defendant was negligent (failed to live up to standard of a reasonable manufacturer) – hard to do o If presumption of negligence is established through circumstantial evidence, manufacturer must show that it did everything reasonable to ensure that this type of injury wouldn’t happen  Responsibility is imposed even where unusual occupation or condition causes victim greater loss than normal o Once established that product was defective, caused injury and manufacturer was careless, liability will be imposed • Class-action suits are often used when products cause injuries to many people as a result of same complaint against manufacturer • Strict liability – in US, if a person can show that product was defective and it caused injury, enough to establish liability o Some Cdn jurisdictions have moved away from this approach; some impose contractual warranties on manufacturer guaranteeing fitness/quality – eliminates requirement that victim be purchaser of product o Where contractual liability can be established, no need to show existence of duty/failure to live up to standard of reasonable person Professional Liability • Professionals have direct contractual liability to clients and are liable, w/o showing fault, when they make errors that cause loss to clients • If injuries extend to 3 parties, courts must establish how far they want to extend professional liability o 1965 Haig vs. Bamford case (involving misleading financial statements, leading to injury of investors) – SCC didn’t adopt reasonable foreseeability test, but required accountants have knowledge that investors would rely on misleading statements o Solution was to supplement reasonable foreseeability w/ Cdn application of Anns case – SCC ruled that duty was owed when accountants knew that investors would use statements, but no duty existed to investors when they were prepared just for shareholders to evaluate mgmt. • Hercules Case – SCC applied Anns case test and held that there was good policy reason to deny existence of duty, reluctant to expose accountants to open-ended liability o Duty may now be modified or eliminated based on policy considerations o Court was unwilling to expose professionals to unlimited liability • Now, professional liability to clients is based on contract, tort and Anns case test o Once reasonable foreseeability established, court applies send half of Anns case test and impose limits based on basis of social policy considerations o Professionals must remember that they are not only required to be careful in dealings, but also may be held responsible for damages conducted w/ indirect parties • Need to determine standard of care o General principle: professional must live to standard of a reasonable person in circumstances; i.e. requirement to have lvl of skill/expertise expected of a nomal person in that profession, and to practice skill in reasonable manner  Assumption that professionals will act reasonably as they practice o However, if court can be convinced that standard practice is not up to standard, liability for negligence will still be imposed  If victim can establish duty owed (satisfying both steps of Anns case test), liability will be imposed o Fiduciary duty also required – duty to act in best interests of their clients, even to point of putting clients’ interests ahead of their own; involves loyalty and good faith  Confidentiality applies; conflicting interests must be disclosed and professional must step back from any decision-making process where conflict exists  Higher standard of conduct required of experts o Funds from transactions involving clients must be kept separate from professional’s other moneys and can only be used for client’s business; breach of trust can lead to criminal penalties, disqualification from practice  standard practice may not be good enough o Professionals often answerable to professional associations that authorize practice  Powers generally have authority to determine who can practice, set standard of education/skills/ethics required  Bodies can also discipline members/limit rights to practice/disqualify them; subject to law and must adhere to human rights legislation and “due process” o Risks associated w/ tort liability can be avoided/reduced through insurance  Liability (aka. errors and omissions) insurance protects professionals and others when they make mistakes that cause loss to clients  They compensate victim for injury and provide legal representation to cover insured during process, but don’t usually protect where wrongful act was deliberate or there was fraud  Increasing cost of premiums is a problem, esp. as courts are awarding larger awards  Some professional associations require insurance coverage as a condition of practice o Negligence can be considered a crime  if person performing duty does/neglects to do smt “showing wanton or reckless disregard for the lives or safety of other persons” (e.g. failure to ensure adequate safety standards) – liable for up to 14 years in prison for bodily harm, life in event of death  Criminal penalties can be imposed if acts are deliberate Other Business Torts • Fraud/deceit – when smb intentionally misleads another, cheating them out of money or gaining some other advantage • Injurious falsehood/product defamation – defamation where false info is spread to harm sales of a particular product • Inducing breach of contract – when one person persuades another to breach a contract w/ third person o Usually when one employer “steals” an employee from another employer by persuading employee to break contract w/ first employer o Can also happen when one person persuades a potential client/customer to break contract w/ competitor to deal with business • Passing off – intellectual property issue; when one business tries to take advantage of another by misleading ppl to thinking that they are associated w/ or are part of that reputable business, when in fact they are not • Trespass to chattels – when smb damages or interferes w/ some item of personal property (e.g. slashing a tire) • Conversion – broader than theft; where one person intentionally deprives another of possession and use of personal property (e.g. taking a car w/o authority, taking control of another’s property by taking it as their own/hiding it/moving it/destroying it/locking it up) • Statutory obligations require a duty to maintain a certain standard of conduct, but don’t create tort liability unless stated in statute o Usually enforceable by special board of commission o Some privacy legislation imposes obligations on business in terms of information – actionable • Most effective method of avoiding litigation is good understanding of law and vigilant effort to ensure that situations leading up to rise of tort action doesn’t occur (e.g. careful selection of employees, training/safety programs, audits) • SLAPPs (strategic lawsuits against public participation) – when companies that are threatened w/ legal action launch their own lawsuits w/ object of reducing criticism and disabling potential plaintiffs o May be effective, but ethics are questionable and there are efforts in Canada to curb use through legislation, preventing what is considered abuse of the legal system Chapter 3: Formation of Contracts • Contract – a voluntary exchange of promises or commitments b/w parties that are legally enforceable in the courts o Can create/modify/remove obligations and responsibilities • Contract law developed in courts, and there has been little statutory interference w/ common law fundamentals • Business ppl need to be very careful to fully understand what they are agreeing to do; most business transactions involve risks so it’s common for exemption clauses to reduce risk significantly Consensus • Consensus usually achieve through process of offer and acceptance, resulting in shared commitment when both parties clearly understand obligations and responsibilities to be assumed – i.e. consensus reached through bargaining; offer and acceptance leads to agreement o Bargaining process includes enticements, offers, questions, arguments and counter-offers until agreement is reached, and valid offer is accepted o Courts usually judge consensus based on subsequent behaviour of parties o consensus can still be there even if no specific offer or acceptance is identified, nor is it necessary for both parties to have a complete understanding of what they have agreed to  Only requirement is that terms are clear and unambiguous o Contract law – courts will give effect to reasonable expectations of parties, but an agreement must be present  Courts don’t bargain for parties, interprets/enforces mistakes in terms rather than finding no agreement • Offer – tentative promise/commitment that contains essential terms of anticipated contract o Other party need only indicate willingness to be found by state terms (accept) to create binding agreement o Invitations to treat - pre-contract communications that don't create contractual obligations, sometimes confused w/ offers  no legal effect in contract law - actual offer that leads to acceptance and eventual contract depends on subsequent communications b/w parties o offer must contain all important terms of contract (at minimum, identiication of parties to agreement, subject matter, price to be paid) o all important terms of agreement must be set out or be implied in agreement o offer/contract are not required, by law, to be in writing, although it's a good idea  possible for contract to be implied from circumstances o to reach consensus, offer must be commnicated before it can be accepted; offeree can't accept an offer that they don't know about o potential communications problems when offeror wants to include exemption clause that restricts liability in transaction - must be brought to other party's attention at the time contract is created  will not be considered part of the contract if communicated after the fact • End of an offer o after a specific time, as stated by offeror o if no time specificed, offer will end after a reasonable time (this varies with context) o automatically ends w/ death or insanity of offeror o upon recovation by offeror - no legal obligation, so offeror is free to withdraw offer any time before acceptance  as long as revocation is communicated prior to acceptance, withdrawal stands o upon rejection of offer by offeree - offeree can't later change their mind and accept, and nold offeror to deal o upon counter-offer by offeror - if counter-offer rejected, can't force contract by accepting original offer o selling subject matter of offer to someone else doesn't automatically end offer; considered revocation of offer by conduct and would have no effect, unless other party learned of sale before accepting  there can be no meeting of minds when offeree knows that offeror has changed their mind before acceptance is made o right of offeror to change mind and revoke offer anytime waned is often impediment to business o Option agreement - a contract where offer can't be revoked and must remain open until expiration at a specified time  Offeror now bound to separate contract to hold contract open, while offeree is free to accept or reject original offer – gives offeree time for consideration w/o worrying about revocation or deal being accepted by someone else  Similar in tendering process – company puts out request for bids on the job that requires service from others • Once bid is submitted, special contractual relationship is created (tender agreement) which makes party submitting bid commit to certain rules as laid out in tender (e.g. disclosing all relevant info, accepting only bids compliant w/ terms of tender, not accept bids submitted after deadline, to accept most competitive bid, etc.) • After bidding party submits bid, accepting that subsidiary offer binding both parties to rules set out in bidding process and resulting obligations are legally enforceable; both parties are bound by subsidiary contract rules • Standard Form Contracts o Create a “take it or leave it” approach; remove choice to bargain  One-sided terms included, e.g. exemption clauses that favour the offeror  Any ambiguity in term favouring just one party is interpreted in favour of other party  However, binding as w/ any other contract once accepted o Standard phrases used even when parties are bargaining equally; interpretation of legal agreement can be certain from outset (esp. when lawyers create legal docs)  Any time a common type of transaction is involved, there will be a standard form of agreement used by lawyers, e.g. insurance, purchase of property Acceptance • Once valid offer is made, tentative commitment bound by offeror, which requires similar commitment by offeree for contract be formed → acceptance is a commitment by offeree to terms of offer o Offeree’s commitment is usually an indication of willingness to abide by terms • Acceptance must be complete and unconditional → offeree can’t pick and choose which part to accept unless that was intention of offeror, i.e. all or nothing; conditional acceptance doesn’t apply either • General rule: acceptance is effective when and where communicated → no contract until offeror is notified of offeree’s acceptance o Where contract is formed can be important consideration in determining what court has jurisdiction and which laws apply • Offeror may require offer to be accepted by some specific conduct (usually unique, not part of person’s normal routine, and offeree must respond as directed) o Unilateral contract – when nature of contract itself requires actual performance of the contract as method of acceptance, e.g. offering of reward • Silence – general rule is that silence by itself won’t be construed as acceptance o person in receipt of goods isn’t required to e.g. return goods that are sent by marketers (who say that if you don’t return it, you’ve bought it)  However, use of product affirms contract; store for a time, and if not reclaimed by marketer, get rid of them o Only when there is pre-existing business relationship will silence be appropriate acceptance • Post-box rule – exception to rule that acceptance must be communicated to be effective o Where use of mail/post is reasonable, acceptance is effective when and where posted o Only applies where it is reasonable to respond by mail  When offer is presented another way, past dealing b/w parties, nature of subject matter, are all important factors in determining if response by mail is reasonable  Appropriate means of acceptance should be specified in offer o Entores case – when telex and other forms of instantaneous communication are used, no need for post-box rule  When fax is used, acceptance is only effective when and where received by offeror o Today, restricted to use of postal service, telegrams, and possibly couriers o Since exception, no indication that rule will be applied to other forms of communications b/w parties as they bargain Consideration • Consideration – exchange of promises/benefits required o In bargaining model, both parties must get some benefit from deal (e.g. money, service, goods) o Not necessary for consideration to actually change hands at time of acceptance; must make commitment to give the other some form of consideration pursuant to agreement (i.e. exchange of promises) • Gratuitous promises – one-sided promises where one party promises smt for another and not expect anything in return o not legally enforceable – i.e. once gift is given, giver can’t force its return; promise to give such a gift that can’t be enforced • consideration must be specific – sometimes difficult to tell whether where has been exchange of consideration o promise to pay “something” or a “reasonable price” not good enough – no specific commitment o exception – services requested  based on equitable principle of quantum meruit, requester is obligated to pay a reasonable amount for services delivered • Consideration need not be reasonable, but must be legal, possible, and have some value o E.g. paying to bring smb back from death, do smt illegal, return friendship/affection o If transaction is grossly one-sided, may support allegation of fraud or claim of incapacity • To determine consideration, easier to look at price to be paid rather than benefit to be received o By agreement, both parties must pay a price – not just money but other things, e.g. tiem given up • Past consideration – where benefit has been given before deal is struck, can’t be part of exchange; “past consideration is no consideration” • Gratuitous promises o If there is existing legal relationship/obligation that parties want to change, can be changed by agreement, but there has to be consideration on both sides to support change o Reliance upon one-sided promise (i.e. not binding to promisor) may be used as a defence o Most jurisdictions have passed legislation to effect that if creditor agrees to take less than full satisfaction of a debt, and in fact take the money, they can’t turn around and sue for remainder, debt is settled; taking less in satisfaction of a debt made binding by statute • Exceptions o Promissory estoppel - In the law of contracts, the doctrine that provides that if a party changes his or her position substantially either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise although the essential elements of a contract are not present.  Certain elements must be established to invoke promissory estoppel. A promisor—one who makes a promise—makes a gratuitous promise that he should reasonably have expected to induce action or forbearance of a definite and substantial character on the part of the promisee—one to whom a promise has been made. The promisee justifiably relies on the promise. A substantial detriment—that is, an economic loss—ensues to the promisee from action or forbearance. Injustice can be avoided only by enforcing the promise.  This defence is rarely available since promisor who has to sue
More Less

Related notes for BUS 393

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.