Managment Law

o the lawyer is hired to provide them with instructions, they are bound to follow those instructions provided they are lawful

· Solicitor-client privilege = refers to the duty of the lawyer to keep information provided by the client confidential. Solicitor client privilege is therefore fundamental to our legal system as without it the access to justice would be significantly reduced

Case study 1.1. Can solicitor-client privilege be ignored, (Canada privacy commissioner v blood tribe department of health

Trust worthiness = truthfulness, sincerity, candour, integrity, promise keeping, loyalty, honesty

Responsibility = respoinsilbity, diligence, continuous improvement, self restraint

CH 2 Introduction Legal System

• When you complete Chapter 2, you should be able to:

– Distinguish between common law and civil law

– Identify the sources of Canadian law

– Identify the three elements of Canada’s Constitution

– Explain how legislative power is divided in the Constitution

• Detail how legislation is created in the parliamentary system

• Describe the rights and freedoms protected by the Charter of Rights and Freedoms

• Difficult to come up with a definition for law

• Definition is affected by:

• History

• Theory

• Legal system in place

• Social realities

“Law is the body of rules that can be enforced by the courts or other government agencies”

• Substantive Law

– The rules that govern behaviour and set limits on conduct

• Procedural Law

– How rights and obligations are enforced

• Public Law

– Regulates our relationship with government

• Private Law

– Regulates personal, social and business relationships

Roman Law - Justinian

• Codified

• Modified by Napoleon

• Used in Europe and many developing countries originally colonized by France

• Quebec’s noncriminal legal system is based on the French Civil Code

• United Kingdom and Commonwealth of Nations (and United States)

• Judge-made Law

• Developed in the courts

• Based on precedent or stare decisis

• judges are bound to follow previous decisions of equal or higher courts in their hierarchy, with like facts and law

• Common Law

– the precedent-making decisions of the courts of Great Britain

• Law of Equity

– decisions made by Court of Chancery

• Statutes

• Judges "discovered" law in custom and traditions of "common people“

• Borrowed legal principles from:

– Roman civil law

– Canon or church law

– Law merchant

• Common law courts had limitations

• Court of Chancery (Equity) provided relief

• Resulting principles known as the law of equity

• Adoption of stare decisis led to rigidity

• Common law and Equity courts merged

• One court, but two bodies of rules

• Both sets of principles applied (equity supplements, and overrides, the common law)

• Legislation (statutes and regulations) overrides common law (judge-made law)

• Often summarizes and modifies common law. For example:

• Criminal Code

• Sale of Goods Act

• Legislation

– overrides all other law

– as long as it is consistent with the Constitution

• Legislation also overrides

– bylaws made by municipal governments

– regulations made by cabinet

– rules made by administrative tribunals

• Laws

• Conventions

• Court decisions

• Constitution Act, 1867 – division of powers, etc.

• Statute of Westminster (1931)

• Constitution Act, 1982

– The Canadian Charter of Rights and Freedoms

• Nearly 30 other pieces of constitutional legislation

• Formerly known as the British North America Act

– An Act of the U.K. Parliament

• Sections 91 and 92 divide powers between federal and provincial governments

• Structure of the judicial system

• Lists government enactments having constitutional status

• Ends ties with British government

• Establishes amending formula for constitutional change

• Charter of Rights and Freedoms

• Canada inherited some binding constitutional conventions or traditions from the United Kingdom

– Preamble of the Constitution Act, 1867

• For example:

– Political parties

– Rule of law

continued …

• Prorogue Parliament

– Governor General to follow advice of PM

• Constitution includes case law on constitutional issues (especially SCC cases)

– Cases on division of powers

– Cases on the Charter of Rights and Freedoms

• Federal system

– 11 legislative bodies (1 federal, 10 provincial)

– Each is supreme within its designated jurisdiction

• Constitution Act, 1867 divides powers between federal (section 91) and provincial (section 92) governments

• Legislation must be within legislative body's jurisdiction (intra vires)

• Legislation that is ultra vires is invalid

• Federal and provincial government powers can overlap - adhere to higher standard

• “Paramountcy” applied where laws conflict (if can't adhere to both, follow federal)

• Powers cannot be delegated - directly

Canada’s constitutional structure is essentially different from Britain’s because it consists of the federal government and ten provincial governments, each with power to act in their own jurisdiction. What impact does this have on businesses operating within, and among, provinces?

• Charter of Rights and Freedoms

– Entrenches rights and freedoms

• Everyone

• Citizens of Canada

• Individuals

– Protects from infringement of rights by governments or their agents

continued …

• Limitations on Charter rights

– Section 1 - interference with right may be justifiable in a free and democratic society

– Section 33 - legislatures can pass acts that infringe on rights “notwithstanding” the Charter, but legislation must be reviewed every 5 years (sunset clause)

• 2. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion; (b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication; (c) freedom of peaceful assembly; and (d) freedom of association.

• Democratic rights (s. 3-5)

• Mobility rights (s. 6)

• Legal rights (s. 7-14)

• Equality rights (s. 15)

• Language rights (s. 16-23)

• Remedies are provides for certain breaches of Charter rights under s. 24

• Gives courts the power to override government legislation and policy

• This was a role that the courts did not effectively have prior to 1982

• Traditionally common law and custom protected human rights and individual freedoms

• Federal and provincial legislation now protects individuals against human rights violations in social, business and private relationships

– only in certain protected areas, and on certain prohibited grounds.

continued …

• Canadian Human Rights Act – federal legislation

• Provincial human rights acts – protect private relationships

• Must comply with Charter

• Tribunals hear complaints

• Duty to accommodate

Chapter 3: The Resolution of Disputes—The Courts and Alternatives to Litigation

– Describe the alternative dispute resolution (ADR) methods—negotiation, mediation, arbitration

• Generally, courts are open to the public to ensure that justice is seen to be done

• Court's decision is based on “balance of probabilities” – (burden of proof)

• Compensation awarded to the “plaintiff” and remedies for plaintiff imposed on “defendant”

• In a criminal case, the Crown prosecutes the “accused” or “defendant”

• The defendant is convicted only when the Crown proves the case “beyond a reasonable doubt”- (burden of proof)

• Victims are usually not compensated for their injuries or loss (but sometimes restitution may be ordered)

• Not the process to use when there is an imbalance of power or where blame or liability for injury must be determined

• Parties agree on an independent third party (or panel) to make a decision that will be binding on them

• Decision cannot be appealed but natural justice, error of law and ultra vires principles apply for court review

– Distinguish the torts of assault, battery and trespass to land listing the relevant defences

– Describe three torts that deal with wrongful interference with goods (chattels)

• A tort is a civil wrong, other than breach of contract, that causes injury to another’s person, property or reputation

• The right to sue arises when the conduct falls below the minimum social standard

• Is it appropriate for a person who engaged in wrongful conduct to be prosecuted criminally and then to be subject to a civil law suit to compensate the victim for the injuries suffered?

• Imposed on employers when they are held liable for torts committed by employees during the course of their employment

• Or by statute, such as a vehicle owner being liable for the use of it by another person

• Effecting a “citizen’s arrest” can be a defence to this type of conduct

(ii) is escaping from and freshly pursued by persons who have lawful authority to arrest that person. continued …

(b) a person authorized by the owner or by a person in lawful possession of property,

may arrest without warrant a person whom he finds committing a criminal offence on or in relation to that property.

494(3) Any one other than a peace officer who arrests a person without warrant shall forthwith deliver the person to a peace officer.

• Do any of you work in a business where employees are expected to deal with shoplifting? Does your place of business have procedures that reflect the requirements of Section 494?

• Occurs when an individual or business uses property in such a way as to interfere with a neighbor’s use or enjoyment of their property

– Commonly, luring people to breach their current employment or supply contracts

• Some courts are finding there to be common law tort of “invasion of privacy”

• Tort law is designed to provide compensation for injury or damages suffered.

• Is it appropriate for the civil court to award damages where no loss has been suffered by the person suing? For example, in a case of trespass.

– Define when a duty of care arises and explain how the courts determine whether it is owed

– Identify the types of damages or loss that the courts have recognized and deemed compensable

• Unintentional careless conduct that causes injury or damage to another person or their property

• A reasonable person is expected to be particularly careful, though not perfect

• If it would be apparent to a prudent person that the conduct was likely to cause injury - duty is owed

• We owe a duty to anyone we can reasonably anticipate might be harmed by our conduct

• Privity of contract will not defeat an action for negligence in product liability cases

• Actions that fall below socially acceptable standards create liability for damages

• “But for” test for causation – plaintiff must establish that defendant’s conduct was direct cause of loss

• Remoteness – a defence when defendant could not have reasonably anticipated general nature of injury or loss suffered by plaintiff

• Unlike intentional torts, which may be actionable without specific damage, negligence requires a loss to person or property

• Provincial statutes now allow court to apportion responsibility among plaintiff and defendants

• An occupier of property owes a duty to people (“visitors”) who come onto the property

• “Visitors” include people lawfully there, those permitted to be there and trespassers taking reasonable steps to leave

• When a dangerous situation is created by an unusual use of property which is inherently dangerous, the owner/occupier is liable for all damages when it escapes

• Employers may he held liable for the torts of their employees committed during employment

• This is justified on the basis that the employer benefits from the work of the employee

– Require skills and abilities expected of a reasonable professional in that field

• People who suffer economic loss because of a professional’s negligent statements may recover damages (Haig v. Bamford)

• In Haig v Bamford, the SCC determined that accountants owed a duty of care to those they knew would rely on the statements they prepared

• In the Hercules case the SCC applied the Anns test and limited the range of liability to only those they knew would rely on the statements they prepared and who used them as intended

a. A duty of care was owed, using reasonable foresee ability test, in new situations, The court may also refer to policy considerations

b. breach of duty = by conduct failing to the level expected from a reasonable person

c. causation = but for test = test establishes a physical link remoteness test used to determine if the injury or damage was unforeseeable

b. if the plaintiff voluntarily assumed the legal risk, the defendant has a complete defense

c. if plaintiff was hurt while engaging in illegal activity, he may be denied a remedy

a. statues may be impose a duty of care where non exists at common law or may create liability in the absence of fault

b. strict liability = liability will be imposed even where there is no fault on part of defendant

c. vicarious liability = liability imposed on one party for the wrong committed by another; employers are held vicariously liable for torts committed by employees

d. occupiers liability = legislation imposes duty upon occupiers to people who are injured on their property

b. manufactures owe a duty of care to consumers for products, but the plaintiff consumer must establish breach of duty, causation and damage

c. insured must have an insurable interest in the subject matter, recovery limited to the extent of that insurable interest

d. contra proferentum rule: policies ambiguities interpreted in the insured favor

f. insured has a duty to act fairly, fully disclose materials facts, and be honest

g. misrepresentation of material facts enable the insurer to have the insurance contract rescinded

h. when claim is paid, the insurance company has salvage rights and is surrogated to the rights of insured

A) a duty of care is owed to plaintiff 1) fore sable plaintiff test (reasonable forableity test

• A contract is a voluntary exchange of promises, creating obligations, which can be enforced and remedied by the courts

• Primary concern of the courts is to enforce the reasonable expectations of the parties

– articles displayed for sale are not offers but merely invitations for customers to offer to pay the price of the item

• Disclaimers of responsibility (exemption clauses) if strict, must be brought to the attention of the person granting it

• When it is revoked (withdrawn) before acceptance and the revocation is communicated to the offeree

• It could be expensive and frustrating to have an offer withdrawn just before you are about to accept it. How are such problems overcome?

• Parties are not always in equal bargaining positions, especially when individuals contract with large businesses like department stores and banks.

• How does the law remedy the inequities that can occur in such contractual relationships?

• Court will interpret any ambiguities in the offer to give effect to the intentions of the parties

• By performance. If you take the benefit of the offer, you are deemed to have accepted it, by conduct.

• New methods of communication make the expansion of the post box rule unnecessary

• Consider the problems that new methods of communication bring to determining the presence of consensus in a contract

• Must be specific - the price for the product or service must be stated or in some limited situations a reasonable price will be implied

– Courts will not address the issue of consideration if contract has been executed under seal (a deed)

· an offer is a tentative promise by the offeror contingent upon an acceptance by the offeree

· all the essential terms of the contract must be contained in the offer; non essential terms will be implied by the courts

· an offer will end at a specific time, but it may be revoked earlier by notice to the offeree, unless an option agreement has been entered into

· if there is not a specified time limit, an offer will lapse in a reasonable time

· a counter offer, a rejection of the offer, or the death or insanity of the offeror will also cause an offer to lapse

· a standard form contract is interpreted strictly against the party who drafted it

· an acceptance is an indication of a willingness to be bound; a contract is formed when an offer is accepted

· an acceptance must be communicated in the manner required by the offer; it is effective when and where received

· the post box rule as been extended to telegrams, but not to instantaneous forms of communication

1) consensus = parties must have reached mutual agreement to commit themselves to certain kind of transaction

2) consideration = must be a commitment by each part to do something or to abstain from doing something, consideration is the price each is willing to pay to participate in the contract

3) Capacity = parties to contract must be legally capable of understanding and entering into the agreement.

a. Limitations to infants, insane, intoxicated, aliens, native people, corporation

4) Legality = the object and consideration involved in the agreement must be legal and not against public policy

5) Intention = both parties must be serious when making the agreement and both must intent that legally enforceable obligations will result from it

Formal contract = one that is sealed by the party to be bound, traditionally had wax seal, today paper wafer affixed to document.

Parole contracts = simple contracts may be verbal or written, but are NOT under seal

Express contract = in which parties have expressly stated their agreement, either verbally or in writing, portions of expressed contract can also be implied

Case 6.2 agreement to enter into a contract is not good enough beacock versus wetter

6.3 Dickson Versus Dodd’s< An offer can’t be accepted after you know the offeror has changed his mind

6.6 communication of acceptance may be indirect (lanca contracting ltd v. brant (county) board of education

· Performance of pre existing obligation does not qualify as valid consideration

· NAV had not promised anything in return for Airport to pay for part, not legally obligated to pay

Case 6.11 without notification, continued employment not consideration, Churchill v. stock group media Inc.

· Court will not entertain any suggestions that the promise contained in a formal contract is not supported by consideration

• General principle – minors not bound but adults are bound (contract voidable)

• Alternative to a no compete restrictive covenant is a no solicitation restrictive covenant

– promises of an executor to pay a debt of deceased from the executor’s own assets

• Other legislation, ie. Sale of Goods legislation may require goods of more than a specified value to have a sale contract in writing (or title perfected by possession)

• When dealing with the Statute of Frauds, the courts first decide whether a binding contract exists and then see if the statute applies.

• What may be the public policy justification for refusing to enforce a contract merely because some formal requirements of the statute have not been met?

· If a lawful contract is performed illegally, the courts may rule that the contract is illegal and void, or just void, or they may enforce some, or all, of the contract

· An illegal contract is illegal at the time it is formed, illegal contracts include contracts that violate legislation and contracts against public policy

· The courts may rule that an illegal contract is illegal and void or just void or they may enforce some, or all, of the contract

· There are many types of contracts that are illegal because they violate legislation or are against public policy

· One example is contracts that unduly restrain trade, which are usually illegal, but contracts in which one party agrees not to carry on business in completion with another are legal, if they can be shown to be reasonable in terms of the interests of the parties and public

Stopped making payments and hid bike, after reaching age of majority he disclosed location of bike, credit union got bike sold it but was still owed 4100, sued daigle, the credit union lost case, case illustrates business dealing with minors as if they were adults

Minor Liable for tortuous acts not contemplated by contract (royal bank versus holoboff) 7.2

7.4 Unincorporated business has no capacity, maple engineering construction v 1373988 Ontario Inc.

Reducing risk 7.2 since crown corporations and government bodies acting under statutory authority may have their power to contract limited by legislation, business people dealing with them should determine before entering into contract whether contemplated dealings are within there statutory powers, if not contract is VOID, this will result in loss to business

Renovation hell, court held that plaintiffs made no effort to comply with licensing and permit requirements, statutory violations were not just technical they were advertent, could didn’t to allow plaintiffs claims, was tainted by illegality

Contracts with criminal rates of interest, an exception to rule, transport, North American express Inc v. new solutions financial corp 7.7

7.9 Helping business owned by daughter in law, a breach of sale of goodwill agreement and non competition agreement (ascent financial services ltd v. blythman)

When can severance be used with restrictive covenants? 7.10 (Shafron v. krg insurance brokers western Inc)

7.12 are business permitted to exaggerate, carlil v. carbolic smoke ball company

In practicality almost all business transactions should be in writing to reduce risk

• The court will try to give effect to the reasonable expectations of the parties

• Shared mistake—fundamental mistake about subject matter of contract—common to both parties—courts must correct obvious error if it relates to key term

• The statement must be untrue and must have been the inducement that led to the contract

• Victim of intentional misrepresentation can sue for damages in addition to rescission

• An innocent misrepresentation becomes fraudulent if not corrected when discovered

• Party should have known that representation was false even if he/she believed it to be true

• In Haig v. Bamford the courts found that even though the accountants honestly believed what they had stated on the audit was true, because they had not measured up to the standard expected of a reasonable accountant they were liable for the damages they caused to the group of investors they knew about.

– No remedy when third party will be affected or when plaintiff does not have clean hands

• The courts will presume undue influence in certain circumstances which may include a spouse assuming the indebtedness of their partner.

• What evidence do you think would convincingly demonstrate to a court that there has been undue influence?

• The benefits (chose in action) received under a contract can be assigned or transferred to another

– Describe when a breach of contract will be sufficient to relieve the opposite party from its obligations

• Contractual obligations are discharged when each party satisfactorily performs its part of the bargain

• When one party is ready, willing and able and attempts to perform but performance is refused by other party, it counts as actual performance

• Such terms cannot be unilaterally imposed – must be brought to the attention of the affected party at the time the contract is made

• Exist when the failure to perform is so basic they leave one party without any benefit in the contract

– One party indicates that they do not intend to follow through with their end of the deal

• Accord and satisfaction - parties agree to end contract based on some other consideration

• Conditions subsequent—the contract ends when some event or condition takes place

– Where unforeseen event only makes contract more costly or difficult to perform

• Legislation (Frustrated Contracts Act) provides for remedy for both parties

– Maximum compensation payable, acceleration clause, liquidated damages, deposits, down payments

• Court tries to put victim of breach in the position they would have been in if the contract had been properly performed

– Remoteness - breaching party must compensate for damages likely to be the result of the breach

– Mitigation - victims must make an effort to keep their losses as low as possible

• Liquidated damages include any situation where the contract required the payment of money in the event of a breach.

• Should liquidated damages be permitted since they limit the freedom of the court to determine what is appropriate compensation?

– Describe the agency relationship, a relationship of utmost good faith, outlining the rights and responsibilities of agents and principals

– List the characteristics of a sole proprietorship and explain why sole proprietors face unlimited liability

– Distinguish the three types of partnerships used in Canada, focusing on the method of creation and the rights and obligations of partners specific to each type

– Outline the advantages and disadvantages of operating a business through a partnership and describe the process of dissolving partnerships

• Agency contracts longer than one year must be in writing in some jurisdictions

• Agent who exceeds actual authority may be liable for injury their conduct causes principal

• A principal who acts in a way to make a third party believe that an agent has authority to act will be bound by the agent’s acts

• Estoppel - if a third party relies on the principal’s representation that the agent has the authority to act, the principal cannot then claim the agent had no authority

• A principal can ratify a contract even if the agent acted beyond both actual and apparent authority

• Ambiguities re authority will be interpreted in favour of broader agent’s authority

• Agent may be held liable to a third party when acting for an undisclosed principal

• Third party is usually bound to contract even when principal is undisclosed except where the identity of principal is important

• When agent is employee, principal may be vicariously liable for agent’s tortious conduct

• Where fraud or negligent misstatement is involved, principal may be liable even where the agent is not an employee

• If agent’s duties are changed, principle of frustration may terminate agent’s authority

• Death, insanity or bankruptcy of principal will terminate agency relationship

• Some provinces have passed legislation to permit a power of attorney to survive a loss of sanity

• Specialized agencies in such areas as real estate, travel, and insurance employ agents to promote and market their services. Customers of such services may be subject to abuse.

• What principles of agency law protect consumers when they have been taken advantage of by agents?

• Partnership - two or more people carrying on business together for the purpose of making a profit

• Corporation – a legal entity, separate from the people who own and control it

– comply with workers’ compensation, employment insurance and income tax regulations

• Group of people carrying on business together for the purpose of making a profit

• The Partnership Act provides that a partnership is created when two or more people carry on business in common with a view towards profits

– the finding of a partnership has serious financial liability implications for partners

• Vicarious liability - all partners are liable for the tortious conduct of a partner or an employee

• The Partnership Act provides that a partnership is created when two or more people carry on business in common with a view towards profits

– the finding of a partnership has serious financial liability implications for partners

• Vicarious liability - all partners are liable for the tortious conduct of a partner or an employee

• Partnership Act governs partner relationship (except where modified by agreement):

– to avoid risk of being considered a general partner (with unlimited liability)

• A partner is not personally liable for acts or omissions of employees or other partners

– articles of incorporation contain constitution, purpose, bylaws controlling day-to-day operation

• Incorporation creates a distinct legal entity, separate from the people who own and control it

– Courts may “lift corporate veil” to get at managers who commit crimes or avoid regulations

• Because a corporation is a separate legal entity, the shareholders (and that may be a single individual) are protected from liability to the creditors and may in fact be secured creditors as well.

• Is it reasonable to give a shareholder/director who is also a secured creditor priority over other creditors if it is their actions that have caused the company to incur liability?

• All methods of incorporation now provide for corporations to have all the capacity of a natural person

– owe a duty to the company to be careful - to ‘exercise the care, diligence and skill of a reasonably prudent person.’

– shareholders can bring a derivative action (representative) action on behalf of the company

• Few obligations unless they hold enough shares to be classified as ‘insiders’

– or courts “lift corporate veil” and hold principals liable for company’s obligations

– elect directors who appoint managers so are removed from day-to-day operation of company

• Major changes in corporate structure require amendments to the incorporation documents

• A corporation cannot be discharged from bankruptcy (unless it has paid all debt)