AFM 231: Canadian Business and Law Textbook Notes

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University of Waterloo
Accounting & Financial Management
AFM 131
Darren Charters

Canadian Business and Law Ingrid Liu AFM 231 introduces you to basic concepts in law, particularly on topics that will be of specific relevance to you as future business managers or operators. Further, the emphasis is not only on legal principles but on the management of legal services. U n i v e r s i t y o f W a t e r l o o CHAPTER 1 KNOWLEDGE OF LAW AS A BUSINESS ASSET Spam unsolicited email advertising a product or service LAW IN BUSINESS ENVIRONMENT Business Law A set of established rules governing commercial relationships, including the enforcement of rights Business law:  Defines general rules of commerce  Protects business ideas and more tangible forms of property  Provides mechanisms that permit business people to select their desired degree of participation and exposure to risk in business ventures  Seeks to ensure losses are borne by those who are responsible for them  Facilitates planning by ensuring compliance with commitments Rules and Principles Law Set of rules and principles guiding conduct in society Protecting Persons and Their Property The law protects members of society in two ways: 1. It sets rules with penalties in order to encourage compliance 2. It seeks to make those who break the law accountable for their misconducts Breach of Contract Failure to comply with a contractual promise Facilitating Interactions Contract Law Rules that make agreements binding and therefore facilitate planning and the enforcement of expectations Litigation The process involved when one person sues another Providing Mechanisms for Dispute Resolution Legal system offers mediation and arbitration as ways of avoiding litigation Mediation Process through which parties to a dispute endeavor to reach resolution with assistance of a neutral person Arbitration Process through which neutral party makes a decision (usually binding) that resolves a dispute Liability Legal responsibility for event or loss that has occurred HOW AD WHY THE LAW WORKS Goals of Canadian justice system are ambitious and often difficult to accomplish Employment equity law will not end discrimination Reform of bankruptcy law will not prevent business failures Restrictive copyright laws will not stop unauthorized copying in everyday life Law can, however, offer itself as a mechanism for achieving goals of protection, facilitation, and dispute resolution Legal Risk Management Plan A comprehensive action plan for dealing with the legal risks involved in operating a business LAW AND BUSINESS ETHICS Business Ethics Moral principles and values that seek to determine right and wrong in the business world A few examples:  Labour practices  Employee privacy  Environmental protection  Advertising  Bluffing CHAPTER 2 THE CANADIAN LEGAL SYSTEM BUSINESS LAW IN PRACTICE Statement of Claim A document setting out basis for a legal complaint INTRODUCTION Government is divided into three branches:  Legislative branch – creates law in form of statues and regulations  Executive branch – formulates and implements government policy and law  Judicial branch – adjudicates on disputes Government Policy Central ideas or principles that guide government in its work, including the kind of laws it passes Constitutional Law Supreme law of Canada that constrains and controls how the branches of government exercise power Liberalism Political philosophy that elevates individual freedom and autonomy as its key organizing value Canadian Legal System Machinery that comprises and governs the legislative, executive, and judicial branches of government THE LEGISLATION BRANCH OF GOVERNMENT Legislative Branch Branch of government that creates statute law Statute Law and Jurisdiction Statute Law Formal, written laws created or enacted by the legislative branch of government Jurisdiction Power that a given level of government has to enact laws Exclusive Jurisdiction Jurisdiction that one level of government holds entirely on its own and not on a shared basis with another level Concurrent Jurisdiction Jurisdiction that is shared between levels of government Paramountcy Doctrine that provides that federal laws prevail when there are conflicting or inconsistent federal and provincial laws Bylaws Laws made by the municipal level of government THE EXECUTIVE BRACH OF GOVERNMENT Ratify To authorize or approve Treaty An agreement between two or more states that is governed by international law Formal Executive Branch of government responsible for the ceremonial features of government Political Executive Branch of government responsible for day-to-day operations, including formulating and executing government policy, as well as administering all departments of government Cabinet A body composed of all ministers heading government departments, as well as the prime minister or primier Regulations Rules created by the political executive that have the force of law THE JUDICIAL BRANCH OF GOVERNMENT Judiciary A collective reference to judges Judges Those appointed by federal and prov gov’t to adjudicate on disputes, as well as to preside over criminal proceedings Inferior Court Court with limited financial jurisdiction (judges appointed by prov gov’t) Small Claims Court Court that deals with claims up to a specified amount Superior Court A court with unlimited financial jurisdiction whose judges are appointed by the federal government Supreme Court of Canada The final court for appeals in the country Federal Court of Canada Court that deals with some types of litigation involving the federal government Canadian Charter of Rights and Freedoms A guarantee of specific rights and freedoms enshrined in the Constitution and enforceable by the judiciary COURTS DEALING WITH COMMERCIAL DISPUTES Supreme Court of Canada Courts of Appeal -> Superior Courts -> Small Claims Courts In each prov. & territory In each prov. & territory Other prov. courts Federal Court -> Federal Court Appeal Division Trial Division Fundamental Freedoms a. Freedom of conscience and religion b. Freedom of thought, belief, opinion and expression c. Freedom of peaceful assembly d. Freedom of association Equality Rights Every individual is equal before and under the law and has the right to equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability SOURCES OF LAW Royal Prerogative Historical rights and privileges of the Crown, including the right to conduct foreign affairs and to declare war SOURCES OF LAW Sources of Law  Constitutional convention  Royal prerogative  Statute law  Common law Common Law Rules that are formulated in judgments Precedent An earlier case used to resolve a current case because of its similarity There are a number of rules governing application of precedent:  Lower court must follow relevant precedent created by higher court within same jurisdiction  Not all precedents are of equal value – higher court that created precedent, the more valued the decision is  Supreme Court of Canada – highest court in Canada – entitled to decide case in any way it sees fit Equity Rules that focus on what would be fair given the specific circumstances of case, as opposed to what the strict rules of common law might dictate CLASSIFICATIONS OF LAW Domestic Vs. International Law Domestic Law internal law of given country, includes both statute and case law International Law law that governs relations between states and other entities with international legal status Substantive Vs. Procedural Law Substantive Law Law that defines rights, duties, and liabilities Procedural Law Law governing procedure to enforce rights, duties and liabilities Public Vs. Private Law Public Law areas of law that relate to or regulate the relationship between persons and government at all levels Private Law areas of law that concern dealings between persons Examples of Public Law  Criminal law  Tax law  Constitutional law  Administrative law Examples of Private Law  Contract law  Tort law  Property law  Company law Civil Code of Quebec The rules of private law that govern Quebec Administrative Law Rules created and applied by those having governmental powers CHAPTER 4 DISPUTE RESOLUTION Negotiation Process of deliberation and discussion used to reach a mutually acceptable resolution to a dispute THE NEGOTIATION PROCESS Number of factors influencing success of negotiations:  Willingness of parties to compromise and negotiate in good faith  Nature and significance of the dispute  Priority the parties give to its resolution  Effectiveness of those involved in negotiations Alternative Dispute Resolution (ADR) A range of options for resolving disputes as an alternative to litigation Mediator Person who helps the parties to a dispute reach a compromise Arbitrator A person who listens to both sides of a dispute and makes a ruling that is usually binding on the parties Binding Final and enforceable in the courts THE LITIGATION PROCESS Class Action A lawsuit launched by one person who represents a larger group whose members have similar claims against the same defendant Limitation Period The time period specified by legislation for commencing legal action Plaintiff The party that initiates a lawsuit against another party Defendant The party being sued Pleadings The formal documents concerning the basis of lawsuit Claim The formal document that initiates litigation by setting out the plaintiff’s allegations against the defendant Defence The defendant’s formal response to the plaintiff’s allegations Counterclaim A claim by the defendant against the plaintiff Discovery The process of disclosing evidence to support the claims in a lawsuit Trial A formal hearing before a judge that results in a binding decision Burden of Proof The obligation of the plaintiff to prove its case Evidence Proof presented in court to support a claim Appellant The party who begins or files an appeal Respondent The party against whom an appeal is filed Contingency Fee A fee based on a percentage of judgment awarded, and paid by the client to the lawyer only if the action is successful CHAPTER 5 AN INTRODUCTION TO CONTRACTS Contract An agreement between two parties that is enforceable in a court of law Some elements of the contract that should be defined:  An agreement: composed of an offer to enter into contract and an acceptance of that offer  Complete: agreement must be complete, that is, certain  Deliberate: The agreement must be deliberate, that is, both parties must want to enter into a contractual relationship  Voluntary: agreement must be freely chosen and not involve coercion or other forms of serious unfairness  Between two or more competent persons: those who enter into contract are known as parties to the contract  Supported by mutual consideration: contract involves a bargain or exchange between two parties – each party must give something of value in exchange for receiving something of value from the other party  Not necessarily in writing: oral contracts are enforceable, though it is preferable for negotiators to get the contract in writing Objective Standard Test Test based on how a “reasonable person” would view the matter Equal Bargaining Power The legal assumption that parties to a contract are able to look out for their own interests CHAPTER 6
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