Business Law Textbook Notes - Ch. 1- 27 - Prof. King

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Management and Organizational Studies
Management and Organizational Studies 2275A/B
Frederick King

BizLaw1 - Chapter 1 business law - set of established rules governing commercial relationships, including the enforcement of rights law - set of rules and principles guiding conduct in society. Mainly 1) protects person and their property 2) facilitating personal and commercial interactions 3) providing mechanism for dispute resolution - protects person and their property - 1) sets rules with penalties in order to encourage compliance -2) seeks to make those who break the law accountable - ensures accountability - ensures losses are paid for by parties responsible for creating them exp. assault, fraud, robbery. Business legally obligated to protect consumer's information - breach of contract - failure to comply with a contractual promise - facilitating Interactions contract law - help companies facilitate planning and enforce expectations - creates certainly in property, contracts, profitability - facilitates, not constrains business. Law a business asset - business relationship btwn two parties determines whether contract will be enforced, suing too expensive litigation - process of suing - providing Mechanisms of Dispute Resolution - sometimes better to protect business relationship than sue and waste time and money - always depend on situation (exp. stealing vs. incompetence) - choice of litigation must be available to both parties - mediation - settling dispute with mediator - arbitration - mediator sets binding decision - liability - legal responsibility for the event or loss that has occurred - breach of contract; victim must be put in position had the contract been fulfilled - laws cannot fully stop illegal activities legal risk management plan - action plans which predicts legal risks and lists way for dealing with them business ethics - moral principles determining right and wrong in the business world; just following the law is not enough (exp. business’s responsibility to customers, society, employees, other businesses). More strict than law sometimes BizLaw2 constitutional law - values of the nation, limits on power of three branches of gov't - liberalism - tied to constitutional law, recognizes individual freedom as key organizing value Canadian Legal System - legislative - executive - judiciary Canadian Constitution - both written and non-written - Constitution Act, Canadian Charter of Rights and Freedoms, and relevant decisions by judges concerning constitutional law - constitutional conventions - code of ethics governing political processes, cannot be enforced in court (exp. the need for a prime minister - not written in constitution) Legislative Branch - federal, provincial, and municipal - Federal; laws get passed through House of Commons and ten approved by Senate - provincial; Legislative assembly etc., not upper house to approve - statute law - law created by legislature - Jurisdiction - Constitutional Act grants each division of gov't different areas to make laws in - executive jurisdiction - only one level can makes laws (Exp. criminal law for federal gov't only) - concurrent jurisdiction - both federal and provincial can make laws (exp. public health) - paramountcy - federal law prevails in concurrent jurisdiction if conflicts between federal and provincial law - businesses most affected by provincial and municipal levels of gov't - bylaws - laws made by municipal level of gov't Executive Branch -formal executive - ceremonial function. Governor general and lieutenant general passes statue laws - political executive - day to day functions of gov't, executes gov't policy. - cabinet - ministers heading gov't departments - regulations - laws passed by executive branch Judicial Branch - separate from legislative and executive branches - group of judges appointed by provincial and federal gov't inferior courts - with judges appointed by provincial gov't. Less formal, quicker, cheaper, sometimes no need for a lawyer. Divided by type of court (exp. family, criminal, civil). - civil/small claims court - disputes over smaller sums (under $25k) of money. superior courts - judges appointed by federal gov't. More formal, entry level for serious criminal cases. No limit amount of money disputes. Supreme Court of Canada - final appeal court, must have granted leave by SCC itself. Case must be of national significance. Federal Court of Canada - with both trial and appeal divisions, for when one party is the gov't or its agencies. Canadian Charter of Rights and Freedoms - Part of Canadian Constitution. Used by judges to make sure laws protects individual freedoms and is right for a liberal democratic state. - Does not affect private parties; under provincial and federal human rights codes. - Puts limits on majority rule Two important sections to businesses; Fundamental Freedoms - - freedom of conscience and religion - '' of thought, belief, opinion and expression, including press and media - " of peaceful assembly - " of association Equality Rights - everyone has equal protection and benefit by the law without discrimination Section One - Charter not absolute, limited to reasonable limits Notwithstanding Clause (sec. 33) - Under some cases legislative can override decision of judiciary, or not let judiciary interfere at all (public consequences involved) Sources of Law constitutional convention - through Canadian constitution statute law - law made by legislature royal prerogative - based on historical rights and privileges of the crown common law - as a result of precedents (judge's decisions in previous cases) - "like cases should be treated alike" - lower court must follow precedent from higher court of same jurisdiction, higher court's precedents more valuable, SCC can do whatever it wants regardless of precedents - can be ambiguous as not all cases are alike - Equity - sometimes used instead of common law. Anything goes as long as it's fair, as long as it is within bounds and the victim has "clean hands" - statue law triumphs common law Classification of Law domestic law - internal law of country, both statue and common law. Deals with individuals/corporations and less of the state. international law - between states and international legal organizations sustantive law - defines rights, duties, and obligations procedural law - law governing procedure to enforce rights, duties, and responsibilities public law - between persons and gov't. Can restrain gov't, exp. criminal, tax, constitutional, and administrative law private law - between private parties (can involve gov't sometimes). Exp. tort, contract, property, company law. No definite line between public and private law. Case can be tried through both public and private law (exp. criminal law and tort law). common law system - (not common law). Private law based on judicial decisions that are relevant and binding. civil code of Quebec - private law based on civil code interpreted by judge, not absolute administrative law - between individuals, boards, and committees given gov't powers and businesses. Fairness and constrains on administrative bodies - Administrative bodies - can have administration, legislative, and judiciary functions. As this type of law occurs after an issue, can be perplexing. Chart pg. 43 BizLaw 4 - goals of managing dispute; 1) avoid time-consuming and expensive litigation 2) preserve desirable long-term commercial relationships Alternative Dispute Resolution - alternatives to litigation - can preserve business relationship, can be private - no mandatory requirements for ADR practitioners Negotiation - most common; cheap and quick, can be in both parties interests - can be for any disputes (except if you have insurance, then insurance company negotiates), at any stage of dispute - can be conducted by lawyers or person - confidentiality clause usually used to not disclose settlement agreement to public - sometimes need to negotiate first if put in original business contract - high success rate Mediation - mediators (lawyers, retired judges) from national roster of mediators help conduct negotiations between two parties - high success rate - sometimes imposed by gov't (exp. civil cases) instead of voluntary - settlement agreement enforced by law bc it is a contract Arbitration - still private, both party must agree on arbitrator and formality of arbitration - can choose arbitrator with knowledge in case - can become a lengthy process if parties engage in delay tactics - arbitration clause - term in original contract to resolve disputes through arbitration - arbitration legislation - statues in some provinces with general guidelines to arbitration ---------------------------- Litigation Process - slow, expensive, unpredictable, stressful - last resort - plaintiff - the suing party - defendant - party being sued - limitation period - limit of time from when the situation commenced that a party can sue; different across provinces - class action - many suing against one - commercial litigation - between two business, private/civil litigation. Cost on litigants, and loser pays compensation costs to winners. Small $ small courts (under 26K), large $ large courts (should get a lawyer). Stages of Lawsuit 1.pleading - formal documents concerning the basis of lawsuit. Filed by plaintiff and delivered to defendant. No evidence, only points that plaintiff must prove in court - claim - initiates litigation, formal allegations against defendant - defence - with 20 days defendant must formally respond - counterclaim - defendant can also file claim against plaintiff instead 2. discovery - process of disclosing evidence to support claims in a lawsuit. Limited time frame - mediation sometimes mandatory before going to court - settlement and pre-trial conference mandatory before court 3. trial and decision - may take a while, can have a jury if wanted - burden of proof - obligation of plaintiff to prove case - must prove the case on the balance of probabilities (over 50%) - decision - judge's resolution of case supported by evidence, given immediately after trial or later - loser must pay part legal fees of winning party, claim, plus interest 4. enforcement - court helps successful party get its money. Will help sell loser's assets (land, cars, etc.) but not all of it if loser is a person. Important to know if debtor has money or not - judgement debtor - party ordered by court to pay specific amount to winner 5. appeal - can appeal to higher court in a certain amount of time - can only argue that the judge made errors in understanding and applying the law. Not fact. - can appeal to Supreme Court of Canada if granted "leave" - if case is of public importance - appellant - person making appeals - respondent - person who defends the appeal Ch.5 - Intro to Contracts Contract - a deliberate and complete agreement between two or more competent persons to do some act voluntarily. - does not need to be in writing - supported by mutual consideration - enforceable by law an agreement - offer to enter into a contract and acceptance of that offer complete deliberate voluntary btwn two or more competent persons supported by mutual consideration - each party must give something of value to receive something of value not necessarily in writing - some must be in writing to be enforceable - based more on common law and precedents - casual understanding - informal business agreement without writing. Not good for big transactions, no proof ---------------------------------- - communication can eventually become contract objective standards test - used to determine if communication was contract or not by thinking what a reasonable person would think the communication was equal bargaining power - legal assumption that both parties are able to look out for their own interests while signing the contract (even though equal bargaining power doesn't usually apply). People are expected to take care of themselves. Sometimes law comes in to make things slightly fairer for victim. - breach of contract not common. Good to keep business relationship in mind before suing for compensation economic breach of contract - when business breach contract because a more profitable opportunity even after the compensation comes by. Not good for the long term reputation Ch. 6 - Forming Contractual Relationships The Contract - Agreement - Complete - Deliberate - Mutual Consideration Agreement • Offer - promise to perform specified acts on certain terms, does not need any more clarification Offeror and offeree - does not need to be verbal (exp. walking up to the cashier with product) invitation to treat - Not offers, vague, does not specify terms or scope. Exp. advertisements not offers Termination of offer - revocation - offer can be revoked by offeror before acceptance revocation of firm order - offeror can revoke offer even if he/she promised to keep it open for a set period of time, provided that the offeree did not provide something in return for the promise. Therefore, making another offer to keep offer open. option agreement - buying the obligation for offeror to keep offer open for a period of time revocation of tendering contract - when tender asks for offers and offerors give offers, they are automatically entered into an offer to keep their new offer open for set amount of time - lapse - when deadline or reasonable time causes offer to terminate - rejection - counteroffer - when counteroffer is made original offer is automatically terminated. Counteroffer is anything with a different term or condition. Can be confusing - death or insanity - when someone dies offer is terminated unless deceased party does not personally perform it. Insanity terminates offer • Acceptance - unqualified willingness to enter into a contract on the terms in the offer - should be communicated through any medium, unless specified in the offer a certain medium must be used - sometimes no communication is needed, though not likely - acceptance must reach offeror for contract to stand, can't be loss in mail etc. - postbox rule - acceptance is in effect when it is mailed, not when it is delivered. Only applies when offeree intends the postbox rule to apply - agreement very hard to prove unless in writing, some contracts (property) requires written agreement - formal contract - if contract says "this agreement is subject to formal contract", contract not enforceable until written and signed • Consideration - price paid for a promise. Both sides must give up something for contract. - gratuitous promise - promise not supported by consideration, no contract, not enforceable - pre-existing legal duty - changes made on contract through promises are unenforceable if no consideration on the new promise is made - variation of contract - in New Brunswick gratuitous changes not as a result of economic duress are enforceable. Everywhere else changes in contract without new consideration not enforceable. - promises enforceable without consideration promise under seal - contracts with red sticker promissory estoppel - can only be used in defence if the person who went back on the promise sues person who relied on the promise. Person who relied on promise must be in bad situation. Fairness principle. Complicated. partial payment of debt - in some jurisdictions, agreeing to partial payment of debt (a change of contract) is enforceable without consideration. Creditor cannot sue debtor for original amount after partial payment • Intent to contract - both parties must have intended promise to be contractual and enforceable by law - business agreements - presumed to be contractual. rebuttable presumption - presumption can still be rebutted - family agreements - presumed to be not contractual Ch. 7- Terms of a Contract Terms • Express Terms - explicit in the contract, not assumed. • Vague or ambiguous terms - courts give reasonable meaning to these terms, drafters bears risk of unclear language. - fail for uncertainty - when contract is so ambiguous it is hard to understand • Rules of Construction - guiding principles for interpreting terms of a contract when it is not clear. Either according to contract's intentions or plain-wording • Implied terms - inexplicit term parties intended to have in contract but didn't. Plaintiff must prove on the balance of probabilities that implied term was intended - business efficacy - judge will assume implied terms that makes contracts workable. Parties expected to act in good faith - customs in the trade of the transaction - relying on trade customs as implicit terms is rarely successful - previous dealings between the parties - if done business in the past, terms of past contract can be implied - statutory requirements - some statues makes it mandatory that some terms are implied Sales of Goods Act - entire contract clause - a clause in contract indicating that only explicit terms are part o the contract, no implied terms Parol Evidence Rule - if the written contract is intended to be the sole form of contract, no explicit evidence (exp. oral agreement) can be brought into the contract. Entire clauses in contracts dedicated to this - evidence can be brought in if; - when contract was intended to be partly oral partly in writing - when there is a separate contract for a part of the item of the contract - if contract language was ambiguous - when there is problem in formation of contract Using Contract Terms to Manage Risk Changed Circumstances - changed circumstances, no matter how drastic, does not change terms of contract. - price-variation clause - allows for contract to change according to circumstance, specific. Good to analyze risk before signing contract Conditional Agreement - when contract is only valid under certain agreement - conditions subsequent - an event which brings the contract to an end (exp. employees sales figures drop, employment contract therefore terminated) - conditions precedent - contract valid after signing, obligation to perform only occurs after specific circumstance. Offeree must not sell away item in the meantime (exp. real estate must be kept until due date). • Limitation of Liability Clause - offeror will not be held responsible for loss of profits or other damages offeree suffers if contract is breached • Exemption Clause (Exclusion Clause) - offeror not responsible for causing losses for which there is no liability. Exp. Provides tracking, though design of tracking causes a loss of profit. Not Tracker's fault. • Liquidated Damages Clause - clause that sets out specific amount of damages that should be paid if contract is breached. Only enforceable if it's a reasonable amount, as contract law is not set out to punish. Ch. 8 - Non-enforcement of Contracts - contracts enforced to protect the integrity, reliability, and predictability of contract - not enforced when; 1. an unequal relationship exists btwn two parties 2. there is misrep. or important mistake with the contract 3. a defect within the contract itself voidable contract - contract aggrieved party can either keep in force or bring to an end void contract - contract with substantial defects that there is no contract in the first place Unequal Relationships Legal Capacity - ability to make binding contracts. • Minors - contracts are voidable; get to decide to keep or not - age of majority - age a person becomes legal adult, different between provinces - necessities - if purchased item necessary and the minor does not have much of it, contract enforceable. This is to protect minors - beneficial service contracts - contracts largely in benefit for minor enforceable. Exp. employment contract that minor breached - once minor reaches age of majority, old contracts must be ratified to become enforceable; not true for partnership agreements • Mental Incapacity - both parties must be able to understand contract before signing it. If offeror knew offeree was under the influence of drugs or alcohol, contract voidable. Must be taken to court immediately for effect - duress - contract voidable when offeree was under physical or economical duress - undue influence - unfair manipulation that compromises someone's free will actual pressure - one party exerts unfair pressure on another (exp. caregiver exerts pressure on elderly person in exchange for care) presumed pressure - very unbalanced power relationship (exp. doctor and patient). More advantaged party must prove no undue influence - unconscionability - when one party takes advantage of the weakness of another - must prove - inequality btwn the parties - if victim is unsophisticated, poorly educated, lacks language skills, lower economic standing etc. - an improvident bargain - must be substantial unfairness in terms Misrepresentation and Important Mistakes Misrepresentation - false statement that causes one party to enter into a contract • rescission - remedy that results in parties being put into their pre-contractual position • Actionable misrepresentation; statement is; - false - clear and unambiguous - significant (material) - one that induced party to enter into contract - concerned with fact, not opinion (unless it is expert's opinion) • Categories of Actionable Misrepresentation - fraudulent misrep. - speaker had deliberate intent - negligent misrep. - speaker did so carelessly - innocent misrep. - not fraudulent or negligent • Remedies - fraudulent and negligent misrep. can qualify for tort law; rescission in contract, damages in court Mistake - error made by one or both parties. Rarely works in court, most difficult • common mistake - both parties to agreement share same fundamental mistake; not enforceable by law - mistake must be more than subtle when signer signs the wrong contract by mistake, too bad. Unless signer is poorly educated, illiterate etc. Contracts based on Defects • Illegality - illegal contract - when contract violated specific statue, or against public policy - statues; criminal code, competition act, real estate and business brokers act etc. - contrary to public policy - when it is not in social interest. Exp. employment contracts limiting a person from working with competition for a long time - judge can't redraft clause to make more enforceable non-solicitation clause - forbids employee from contacting business's customers after termination - not enforceable non-competition clause - forbids competition outright for set amount of time, more intrusive - not enforceable • Writing as a requirement - some contracts must be written because of Statue of Frauds - guarantee - promise to pay debt of someone else should that person default - contracts not to be performed in one year - land contracts - exp. leases, sales. Unless part performance; when person has already done things on land in relation to another oral contract - contracts for the sale of goods - must write if amount is above a certain amount listed in Sales of Goods Contract; different for all provinces Managing Risk of Unenforceability - should train employees well Ch. 9 - Termination and Enforcement of Contracts • Termination through performance - when implied and express promises are fulfilled o vicarious performance - when work is done by third party and not person/corporation that signed contract. Only when allowed in contract. Contract signer still responsible for quality of work of employees • Termination by Agreement - when both parties agree to terminate o novation - substituting one contract for another, or substituting a party. Thus cancelling the last contract o varying terms - when a term is varied and consideration is given (unless in New Brunswick), it is a new contract o end the contract - Sometimes one party pays to agreement to end o substitute a party - new contract made o assignment - contractual rights (exp. right to receive payment) can be transferred to an assignee (s) but contractual obligations can't. If there are multiple, debtor must pay the first assignee to give notice first. Debtor must be given notice • Termination through Frustration - unexpected event which makes the contract functionally impossible or illegal. Contract left where it was and cost of termination not allocated. o force majeure - clause in contract that specify what is considered frustration, rather than leave to courts o event must be - dramatic and unforseen - a matter that neither party assumed the risk of occuring - arose without being either party's fault - makes performance functionally impossible or illegal - exp. price of construction material or inability in market of construction material not frustration • Termination through Breach - in order to prove one party didn't complete its obligations, the plaintiff must prove the following on the balance of probabilities o Privity - only parties to a contract can enforce the rights and obligations it contains. Exp. clause in contract to protect employees of the contractor from being sued by contractor does not apply, bc. contractor did not enter into a contract with them. Similarly, employees cannot be sued for breach of contract bc it's not their contract exception; - in Saskatchewan, consumers are allowed to sue manufacturer even if no contract exists between them. Exp. Friend bought you Cola but there's a bug in it - beneficiary of insurance allowed to sue insurer even if contract is not between them (maybe between another family member) o Breach of Contract - condition - important term of contract that if breached, innocent party has the right to terminate contract and claim damages - warranty - minor term of contract that if breached gives innocent party right to claim damages only - innominate terms - part of contract that can't be determined as condition or warranty, could be both. Exp. term of building according to Code - fundamental breach - breach of contract that affects foundation of contract. - limitation of liability clause does not apply in Canada - cannot escape from breach through a clause - anticipatory breach - when notice that contract will not be fulfilled is given, innocent party can sue immediately. Innocent party entitled to damages and sometimes can even treat the contract as over, depending on the case o Entitlement to a Remedy - - damages - monetary compensation for breach of contract or other actionable wrong - expectation damages - damages equivalent to contractual performance. Money to put the wronged party in a position they would have been had the contract been carried out. Goal is to compensate, not damage - punitive damages - used to punish defendant for "malicious, oppressive and high-handed" conduct. - test for remoteness - test to see what damages can apply as a result of breach - damages could have been anticipated, "arose naturally" from breach - damages difficult to anticipate but reasonably forseeable bc unusual circumstances were communicated to defendant when contract was form - recovery of non-pecuniary damages - 1. object of contract was to secure an psychological benefit that brings distress when breached (exp. insurance) 2. degree of mental suffering sufficient - recovery of pecuniary damages - party that suffered from breach of contract subject to all pecuniary damages, unless there is a clause that limits liability - duty to mitigate - obligation to take reasonable steps to minimize losses resulting from a breach of contract equitable remedies - when damages would not be enough • specific performance - when monetary compensation is not enough and court orders contract to be fulfilled. Exp. a specific piece of land. o improper behaviour by plaintiff - plaintiff must have "clean hands" o delay - request must be prompt o impossibility - will not be ordered to fulfill contract if impossible. Exp. defendant does not own land o severe hardship - does not need to fulfill if fulfilling will cause severe hardship to defendant and/or third party o employment contract - employee will not be forced to work for someone they don't want to • injunction - order for defendant to refrain from doing something. Exp. if the contract was for defendant to not compete with them, court can order defendant to comply - upon discretion of court, can decide not too if innocent party not prompt enough or doesn't have clean hands o interlocutory injunction - order to refrain from doing something for a certain period of time restitutionary remedies - compensating the plaintiff even when contract cannot prove to be enforcable o unjust enrichment - when defendant undeservedly or unjustly benefited from plaintiff. Court will order benefit be restored to plaintiff o restitutionary quamtum meruit - pay amount reasonable given the benefit the plaintiff conferred o pay compensation - pay what will put plaintiff in good position as the plaintiff was in prior to conferring the benefit Managing Risk - should create a clause to limit liability, train employees properly, or make good decision when contract is breached Ch. 10 - Introduction to Tort Law tort - harm caused by one person to another, other than through breach of contract, and for which the law provides a remedy. - completely based on precedents - will only compensate when there is fault (exp. if driver suffers stroke and causes damage to another car, not compensated. Except for strict liability), very rarely no fault - injunctions sometimes given • tort-feasor - person who commits a tort Can cover many areas, including • trespass to land • deceit or fraud - when false representation is made given intentionally or recklessly • negligence - when someone suffers due to unreasonable conduct of another, most popular for businesses o professional negligence - when professional gives incompetent advice (not bad advice, just not well researched/analyzed advice) o product liability - when consumer suffers bc of bad product o when bar over serves customer Intentional Torts - harmful act committed on purpose • assault - threat of imminent physical harm w.o physical contact • battery - intentional infliction of harm or offensive physical contact - one can be charged under tort and criminal law (exp. aggravated assault and tort of assault) - criminal law used to protect society and secure fine/imprisonment for the benefit of the society. Defendant/accused versus complainant - tort law used to compensate victim privately. Plaintiff versus defendant - tort law and contract law can be violated at the same time. Exp. bounce attacks customer, customer's contract with bar to be provided a safe environment is broken primary liability - when it is one's own wrongdoing vicarious liability - due to relationship defendant has with third party. For an employee; - conduct must be authorized by employer - unauthorized mode of doing something that is authorized by employer (exp. bouncer assaulted customer as controlling behaviour is part of his job, an unauthorized mode of doing something that is authorized by employer. Not liable if he assaulted friend after hours) joint tort-feasors - when more than one person responsible for tort. Plaintiff can sue one or both and compensation split according to degree of responsibility. However plaintiff can get 100% of judgement from any one of the tort-feasors contributory negligence - defence claiming plaintiff was partially responsible for harm. Compensation decreases by that percentage worker's compensation legislation - gives workers right to receive monetary compensation for work-related illnesses or injuries despite who is at fault. Thus, cannot sue employer for negligence non-pecuniary damages - damages awarded to compensate plaintiff for - pain and suffering - loss of enjoyment of life - loss of life expectancy pecuniary damages - tangible damages o cost of future care - determined by experts. Exp. cost of personal care attendant, modification to living accommodations etc. o loss of future income - calculation complex, determined by range of experts o special damages - out-of-pocket expenses resulting from event. Exp. ambulance costs, mediation, housekeeping, yard work etc. Should keep receipt punitive damages - an award to punish the defendant for malicious, oppressive, and high- handed conduct, or for profiting from the behaviour. Punishes aggravated damages - compensation for intangible injuries such as distress and humiliation caused by the defendant's reprehensible conduct (exp. when store detectives unlawfully restrain a customer) Ch. 11 - Tort of Negligence reasonable care - the care a reasonable person would exhibit in a similar situation. Negligence is when reasonable care is not performed - negligence laws makes people more careful - must prove 1. Does defendant owe plaintiff duty of care duty of care - responsibility owed to avoid carelessness that causes harm to "neighbours". neighbour principle - duty of care only owed to anyone who reasonably might be affected by the defendant's conduct. However, if case has precedent with case before neighbour principle was made, no neighbour principle Stage 1: - prima facie duty of care - is the harm that occurred a reasonably foreseeable consequence? - is the relationship between the parties of a sufficient proximity to make responsibility on the defendant's part unfair or injust Stage 2: - any other general considerations that may omit the defendant's duty of care. Make sure that duty is not unfair 2. Did the defendant breach the standard of care reasonable person - standard used to judge one's conduct. Specialized fields (exp. doctors, meat producing factories) judged against other reasonable parties in their fields 3. Did the defendant's carelessness (or omission) cause the plaintiff's injuries causation - relationship between the defendant's actions and plaintiff's injuries. but for test - would injuries have occurred but for the defendant's actions? 4. Was the injury suffered by plaintiff too remote? - how far can the legal liability of the defendant stretch remoteness of damage - absence of a sufficiently close relationship between the defendant's actions and the plaintiff's injuries thin skull rule - defendant is responsible for all damages suffered by plaintiff despite plaintiff's predisposed condition (exp. thin skull, weak immune system) - plaintiff must prove each and every step of negligent action pure economic loss - cannot be recovered through torts. Only few cases permissible as to not hold up courts and cause too much liability for people (exp. misrepresentation) Defences to a Negligence Action contributory negligence - prove the plaintiff was partly negligent as well. Provincial legislation comes into play and plaintiff will only receive part of damages voluntary assumption of risk (volenti non fit injuria) - prove plaintiff consented to accept the risk of the activity, defendant assumed no legal responsibility. Full defence; plaintiff awarded nothing. Hard to prove, rare (sign waivers). negligent misstatement/misrepresentation - incorrect statement made carelessly. Duty of care owed and special relationship exists between parties - usually by professionals, not only tort but breach of contract (exp. accountants, lawyers, engineers) - monetary loss included - third party - if expect info. was based on false info. from third party, case considerably less compelling product liability - manufacturer held by standard of care for design, manufacture, and sale of products - usually buyer can also sue for contract law against retailer but not manufacturer, contract law more strict negligence and service of alcohol - clubs, bars, and other places that serve alcohol for economic purposes hold duty of care for their drunken customer's conduct, especially driving strict liability - case where liability imposed regardless of reasonable standard of care. Regardless of fault, rare . Exp. fires, escape of dangerous animals, escape of dangerous chemicals. - liability in contract - strict bc. defendant always liable regardless of care - vicarious liability - strict bc. sometimes third party did not have to be involved in incident. Exp. employer's responsibility over employee - in States and UK manufacturers hold strict liability to customers Ch. 12 - Other Torts - protects customers and businesses at the same time occupier - someone who has some degree of control over land or buildings on that land. Exp. tenants, owners etc. Occupier's Liability - different across provinces. Newfoundland, Quebec, Saskatchewan common law, New Brunswick abolished, everywhere else legislation As common law - liability different depending on class of entrant - contractual entrant - someone paid and contracted to enter the premise (exp. movie theatre). The premises must be as safe as a reasonable care and skill on the part of anyone can make them - invitee - someone on the premise in the benefit of the occupier. Exp. Person in grocery store. Must be warned of any unusual dangers which he knows or ought to know. - licensee - people on property for their own benefit. Exp. Party goes. Duty of care same as invitee - trespasser - no invitation, unknown to owner or objected by owner. Owner holds duty of care of acting with common humanity towards him. Cannot deliberately inflict harm. Different if is a child. Under Occupier's Liability Legislation - all provinces except Quebec, Saskatchewan, Newfoundland, New Brunswick - high duty of care, equivalent to negligence standard, held for anyone with expressed or implied permission (so except trespasser) tort of nuisance - activity that unreasonably and significantly disturbs the neighbour's ability enjoy their land (exp. very loud noise from factory) - intrusion must be unreasonable and significant - must not be just temporary - not all interests protected; exp. sunlight - court will consider if the intrusion is beneficial for the community trespass to land - tort which protects person's possession of land from "wrongful interference" - when person enters without implied or expressed permission - when permission is given but was subsequently asked to leave and refuses - when object is left on property without expressed or implied intent - when large economic loss is caused bc of trespass, plaintiff can claim damages - many legislations have fines as well Torts from Business Operations assault and battery - exp. when bouncer attacks customer. Assault results from no touching, battery results from touching (though the physical contract did not have to cause the injury, just had to be aggressive) false imprisonment - unlawful detention or physical restraint or coercion by psychological means. Exp. shop owners against thieves - legal authority (citizen's arrest) - can only arrest if there is reasonable grounds to detain the person and there is proof that a crime such as theft or fraud was committed. Cannot just be suspicion. Must call police officer immediately deceit - misrepresentation made fraudulently or with reckless regard for the truth. With contracts, plaintiff is freed from contract, can be for noncontractual things too Business -to-Business Torts passing off - when one business represents their goods as being those of another. Can be committed innocently. Goods or business name 1. Goodwill or reputation is attached to product 2. Implied or expressed misrepresentation by the maker leads members of the public into believing it is product of another 3. Original owner has or likely will suffer from damages interference with contractual relations - incitement to break the contractual obligations of another. Defendant must have known about the original contract(?). defamation - public utterance of a false fact or opinion which harm another's reputation. For both slander (oral) and libel (written). - words were defamatory and tend to lower plaintiff's reputation in the eyes of a reasonable person - statement was against plaintiff - words communicated to at least one more aside from the plaintiff - justification - if statement is substantially true, no defamation - qualified privilege - when words are relevant, made without malice, and communicated only to party with legitimate interest in receiving it (exp. an employer asking for a reference, bad reference given) - fair comment - when opinion 1)concerns a matter of common interest 2)based on facts 3) expressed a view that could be honestly be held by anyone (exp. restaurant review) - responsible communication on m Forms of Business Organization Agency - three parties. Legal relationship where agent acts on behalf of principal in order to enter into contract with third party. Very common in business. - Not all employee are agents - Entered into through contract, but could be from words/actions which made outsider think they are in agency agency agreement - actual authority of agent. Circulate agreement with third party to match apparent and actual authority - if agent exercised more authority than actual, principle can choose whether or not to keep agent's contract with third party, provided third party knew the actual authority of agent - if principle accepts any benefit from third party from contract from agent, it is bound despite actual authority of agent negligence/tort liability - principle liable when agent is acting in scope of employment - principle liable when action that causes negligence was told by principle to agent to do - principal responsible for agent's actions if agent act with authority; expressed, implicit, or apparent authority • actual authority - actual written or oral authority from principle • implied authority - authority reasonable for the position the agent occupies, necessary to carry out actual authority, from custom of the profession • apparent authority - power agent appears to have to third party bc of conduct/statements of the principal - Bounding for principal but principal can sue agent for breach of contract of actual authority (if contract exists, but can still sue for tort if contract doesn't exist) • agency by estoppel - agency relationship is created if third party thinks there is a relationship as a result of misrepresentation from the principal. Onus on principal to clarify if relationship exists and actual authority directly to third party (can sue for tort, misrepresentation) - Exp. principal terminated contract with agent but did not tell third party • agency by ratification - dealings between person who is not agent of principal but acting out of own will as one not binding on principal. No conduct from principal thus no responsibility to take deal, though has choice to take contract - contract can only be entered into by principal if ; - within reasonable time - principal had capacity to create contract at the time the agent entered into it and at ratification - agent identified principal at time of entering the contract Duties - agent owes to principle, not to third party • duty of agent 1. Fiduciary duty - honesty, view of best interest for principle, in good faith, full disclosure, no competition, not acting for two principals in one transaction, must not use principal's resources for personal gain (all permissible if communicated to principal before and approved) - exists between accountant and client, lawyer and client, etc. When one has power & influence and other has reliance, vulnerability, and trust on the other 2. Duty of care - reasonable care 3. Contractual duty - no breach • duty of principal to agent- set out in contract Contract Liability - principal's liability to third party depends on nature of agent's authority - agent is bound by contract if they chose to be part of the contract along with the principal warranty of authority - representation of authority by a person who appears to be an agent but is not. Acts beyond actual and apparent authority. No contract between principal and third party or agent and third party, though agent can be sued. undisclosed principal - principal is unknown to third party who doesn't know about the principal at all - if agent represents himself as neither agent or principal, contract bounding on principal - if agent states anonymous principal, bounding on principal - if agent represents himself as principal, bonding on agent Termination of Agency Agreement - either when both party agrees or as a result of death, dissolution, insanity, or bankruptcy - principal should give notice to third party to avoid agency by estoppel/apparent authority - privity is exception to agency law Ch. 14 - Business Forms and Arrangements - ownership determines who is financially liable, gets profits, and makes/ is accountable for management decisions of company Sole Proprietorship - oldest and most popular with small businesses; easy and cheap - unlimited liability - unrestricted legal responsibility for obligations - life span on the proprietor - taxed through personal income tax - provincial/federal licenses for special services Partnership - partnership law same all over the world, from partnership law, agency law, and contract law. Based on agency. Easy, cheap. - Professionals (accountants, lawyers, doctors etc.) not allowed to create corporation - each partner has an interest in all partnership property • joint liability - liability shared by two or more parties where each is personally liable for the full amount of the obligation • joint and severely liability - dictated by partnership act; individual and collective liability for a debt. Each liable party is individually responsible for the entire debt as well as collectively liable for the entire debt Partnership act - two or more people carrying on business together with a view to profit - can have partnership with humans and corporations - despite agreement saying we're not partners we are if criteria agree - they must be carrying on business together; 1. do they share decision making 2. do they share profit and losses 3. do they share in capital (capitalization of company) • second section of partnership act - rules between partners of partnership, unless partners say otherwise (default rules that apply only if partners don't make their own partnership agreement) • third section of partnership act 1. every partner is an agent of the partnership Exp. If one partner made bad decision to borrow money from bank and looses it, bank can take money from her account and the borrowing contract is binding 2. every partner is jointly and severely liable for partnership debts • ends - bc of expiration, termination if one partner dissolve the partnership, following death, insanity, or bankruptcy of one partner - when one partner leaves money assets are first used to pay debts, then loans made by partners, capital contributed by partners, finally as profits (unless specified otherwise) Limited Partnership (LP) - one or more general partner and more limited partners. More for investment purposes; tax breaks and profit. Must submit written agreement through provincial body - general partners - unlimited liability and manages - limited partners - enjoy limited liability unless they participate in management of partnership - flow-through investment - favourable over corporations (set-up fees similar) for cash flow purposes as a result of tax deductions on personal income Limited Liability Partnership (LLP) - for lawyers and accountants. Partners not responsible for negligence of other partners unless the work was done collaboratively - Alberta, Manitoba, Quebec, Nova Scotia - partners protected from negligent and wrongful act of partners as long as there is no involvement. Not protected from contractual relationships like debts - Ontario, NB, BC, Saskatchewan, NW territories, Newfoundland and Labrador - full personal protection against other partners and contractual obligations Corporation - created by the King, creation of law - perpetual existence unless voluntarily dissolved or by court - limited liability - shareholders and directors only liable for their investment. Personal assets only liable if they are guarantees for a loan - corporate profits, capital gains, dividends, salaries all taxed - expensive to incorporate; need certificate of incorporation Business Arrangements - subject to contractual obligations, agency law, and fiduciary duties. Not business organizations • Franchise - contract where owner of trademark/trade name allows another to sell products/services under the same name, based on goodwill - franchisor (seller) vs. franchisee (buyer) - not usually fiduciary obligations, but parties must act in good faith and fair dealing in performance and enforcement of franchise agreement • Joint venture - when two parties (corporations, individuals etc.) get together to work on a venture together for usually a set amount of time. Fiduciary duties may apply, court can impose duties on parties despite expression of so - partnership - equity joint venture - a corporation - contractual arrangement • Strategic alliance - arrangement where two or more businesses agree to cooperate for some purpose (exp. consulting firm into business). Defined by contract, fiduciary duty unclear • Distributorship/Dealership - when one party sells good of another. Defined by contract, usually no fiduciary duty and not agency relationship • Sales agency - when one party sells products on behalf of another. Agency relationship with fiduciary duty • Product licensing - agreement when one party has right to manufacture and distribute goods of another. One party usually hold patent/copy-right, defined by contract and one party received royalties (exp. Anne of Green Gables merchandise). - relationship between franchiser and franchisee is a contract agreement Law of Agency - from tort and common law. Ch. 15- The Corporate Form: Organizational Matters corporation - separate legal entity, liable solely for its debts and obligations. Created by king, does not die stakeholders - one who has an interest in a corporation. - Internal; direct or indirect role in governing the corporation. Exp. shareholders, board of directors, corporate officers - External; people who have dealings with or affected by the corporation, no governing. Exp. gov't, public, creditors, customers incorporation- either provincially or federally. If done provincially must apply for licensing to operate in other provinces, cheaper for corporations that will only operate in a limited number of provinces share structure - must decided what classes of shares and rights will be attached to each of them. Can add classes later but very costly share - ownership interest in corporation with no right to use assets or control/manage corporation. Basic rights that must be in one class; voting rights- right to vote for election of director financial rights- right to dividends declared preference rights- share in the proceeds of dissolution of corporation after creditors are paid • securities legislation - laws to regulate shares and bonds, different in each province (no effective oversight due to status quo) • Public corporation/widely held - shares offered to public, subject to different securities legislations of the provinces it sold at • Private corporation/closely held - does not sell shares to public. Majority of Canadian corporations. Enjoys lower tax rate on first $500,000 of income. - restrictions on the transferring of shares; exp. right of first refusal (shareholders wishing to sell must s
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