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Business Law Notes

© 2012 Certified Management Accountants of Ontario
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Business Law Notes

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PART 1: LEGAL FUNDAMENTALS
...
1
Definition and Purpose of Law
...
2
SECTION 1-2: SOURCES OF CANADIAN LAW AND THE LEGAL SYSTEM
...
2
Systems of Law: Civil Law and Common Law
...
4
SECTION 1-3: USING THE COURTS - AN OVERVIEW OF CIVIL PROCEDURE
...
9
The Litigation Process
...
15
Administrative Tribunals
...
17
ANSWERS TO STUDY QUESTIONS FOR PART 1: LEGAL FUNDAMENTALS
...
20
SECTION 2-1: INTRODUCTION TO TORT LAW
...
20
Development of Tort Law
...
23
SECTION 2-2: GENERAL PRINCIPLES OF TORT LAW
...
24
Liability
...
26
Limits to Damages in Torts
...
26
SECTION 2-3: INTENTIONAL TORTS
...
30
SECTION 2-5: NEGLIGENCE
...
32
Defences
...
37
Professional Liability
...
40
ANSWERS FOR PART 2: THE LAW OF TORTS
...
45
SECTION 3-1: ENTERING INTO A CONTRACT—ELEMENTS OF A VALID CONTRACT
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46
Offer
...
49
Consideration
...
52
Capacity to Contract
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56

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SECTION 3-2: PRIVITY OF CONTRACT AND ASSIGNMENT OF CONTRACTUAL RIGHTS57
Privity of Contract
...
60
SECTION 3-3: THE REQUIREMENT OF WRITING
...
62
Consumer Protection Act
...
64
SECTION 3-4: INTERPRETING CONTRACTS
...
65
The Parol Evidence Rule
...
66
SECTION 3-5: CONTRACTUAL DEFECTS
...
67
Misrepresentation
...
72
SECTION 3-6: THE DISCHARGE OF CONTRACTS
...
73
Discharge by Agreement
...
76
Discharge by Operation of Law
...
77
SECTION 3-7: BREACH OF CONTRACT
...
78
Ways to Breach a Contract
...
80
Exemption Clauses
...
82
STUDY QUESTIONS FOR PART 3: CONTRACT LAW
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89
PART 4: BUSINESS ENTITY LAW
...
91
What is Agency?
...
91
The Scope of an Agent’s Authority
...
93
Responsibilities of Agent to Principal
...
94
Termination of Agency Relationship
...
94
Sole Proprietorships
...
95
Limited Partnerships
...
99
Corporation
...
100
Nature of a Corporation
...
101

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Types of Corporations
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103
Share Capital
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104
The “Business”: External Relations
...
111
ANSWERS FOR PART 4: BUSINESS ENTITY LAW
...
115
SECTION 5-1: SALE OF GOODS
...
115
Passing of Property
...
117
SECTION 5-2: CONSUMER PROTECTION
...
119
Regulation of Business Conduct Towards Consumers
...
122
Banking Agreement
...
123
Electronic Banking
...
125
Secured Transactions
...
127
Other Statutory Protection for Creditors
...
131
Pre-employment
...
132
Termination and Post-Employment
...
135
Conspiracies
...
135
Mergers
...
136
Federal Legislation
...
138
Corporate Liability
...
139
Laws to Control or Facilitate Trade
...
140
STUDY QUESTIONS FOR PART 5: BUSINESS RELATIONSHIPS
...
144
PART 6: PROPERTY RIGHTS
...
146
Estates in Land
...
148
Leases
...
150
Transfer of Interests in Land
...
All rights reserved
...
151
Recording of Interests in Land
...
153
Acquiring Personal Property Rights
...
153
Insurance
...
157
The Nature of Intellectual Property
...
158
Trademarks
...
160
Industrial Designs
...
160
Confidential Information
...
162
ANSWERS FOR PART 6: PROPERTY RIGHTS
...
All rights reserved
...
Law affects almost every function and area of business
...
” 1 This is
because almost every business decision has legal repercussions, including deciding whether to
incorporate a business, obtaining financing, protecting proprietary knowledge used to develop
products/services, entering into contracts to purchase raw materials, ensuring that products
meet safety standards, disposing of plant wastes, promoting and pricing products/services,
entering into contracts to sell products/services, and providing product warranties and aftersales service
...
For this reason, accountants, who play
a key role in almost every aspect of operations, must have a solid working knowledge of the
law
...
” McInnes, Kerr, and Van Duzer
provide a simple definition of law as “a rule that can be enforced by the courts
...
” 3 DuPlessis and O’Byrne define law as “a set of rules and principles intended to guide
conduct in society, primarily by protecting persons and their property; facilitating personal and
commercial interactions; and providing mechanisms for dispute recognition
...
” 5

1

Mitchell McInnes, Ian R
...
Anthony VanDuzer, Managing the Law: The Legal Aspects of
Doing Business, Third Edition, (Toronto: Pearson Canada, 2011), p
...

2
McInnes et al
...
7
...
Yates, Legal Fundamentals for Canadian Business, Second Edition, (Toronto: Pearson
Canada, 2010), p
...

4
Dorothy DuPlessis, Steven Enman, Shannon O’Byrne, and Sally Gunz, Canadian Business and the
Law, Third Edition, (Toronto: Nelson, a Division of Thomson Canada Limited, 2008), p
...

5
J
...
Smyth, D
...
Soberman, A
...
Easson, and S
...
McGill, The Law and Business Administration in
Canada, Twelfth Edition, (Toronto: Pearson Canada, 2010), p
...


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With these definitions in mind, business law could be defined as rules that govern business
relationships
...
6

Business Law versus Business Ethics
While staying within the confines of an increasing array of business laws is necessary for
success in business, it is not sufficient
...
While ethical principles normally start with what is legal, they often
impose a higher standard that recognizes a multitude of stakeholders beyond just suppliers,
customers, and employees
...


SECTION 1-2: SOURCES OF CANADIAN LAW AND THE LEGAL SYSTEM
We begin this section with an overview of the Canadian legal environment to set the stage for
subsequent sections, where specific types of law pertaining to businesses, such as tort law and
contract law, will be examined
...
First, there is the distinction between substantive
law and procedural law
...
g
...
Procedural law deals with the protection and enforcement of
the rights and duties of substantive law; it provides the machinery by which these rights and
duties are realized and enforced
...

Substantive law is divided into two fields:
6

DuPlessis and O’Byrne, p
...


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1
...
Public law is divided into categories such as
constitutional, criminal, and administrative law
...
Private law consists of the rules governing relations between private individuals or groups
of persons
...

While the predominant concern in a business law course is substantive law, we will first
consider the basics of procedural law, the form or organization of the legal system and its
methods of conducting trials
...
In brief, civil law
emphasizes legislation, while common law emphasizes decisions handed down by the courts
...
Its focus is on the development of a
comprehensive legislated code
...
Most of the private law in Quebec is civil law, but
the rest of Canada falls under common law (to be described next)
...
g
...

Common law is the system of law in most of the English-speaking world and many nonEnglish-speaking countries that were once part of the British Empire, such as India, Pakistan,
and the Caribbean
...
Common law is based on precedent, the recorded reasons given by judges for
their decisions and adopted by judges in later cases
...
Consistency, so that there is equal treatment in like situations;
2
...
7
The system of determining law by following already-decided cases, or precedent, is known as
stare decisis, a Latin phrase meaning "to stand by a previous decision
...
, pp
...


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Business Law Notes

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legal consequences of our conduct
...
Stare decisis implies a preference for the objective of certainty ("let the decision
stand"), but the courts have reserved for themselves a considerable amount of flexibility while
still formally accepting the authority of their earlier decisions
...
8
Stare decisis means that a lower court is bound by a decision of a superior court in the same
jurisdiction when the superior court has decided the same issue
...
Sometimes, a court of appeal
in another province will come to a contrary decision, leaving the law in an uncertain state that
can be resolved only by a decision of the Supreme Court of Canada, which is binding on all
other courts in Canada
...
e
...

Therefore, lower courts still have considerable scope to distinguish the earlier case on the
basis of its facts
...
While the decision of a lower court is
not a binding authority on other courts, the facts of the case may still be of wide general interest
and the reasons for judgment so easily understood that the decision may have considerable
influence and even be "followed" in other later cases unless and until the Supreme Court of
Canada rules on the matter and comes to a contrary decision
...

Sources of Law: The Constitution, Legislation, and the Courts
There are three sources of law: the Constitution, legislation, and the courts
...
In turn, legislation is passed by
Parliament and by provincial legislatures in compliance with the Constitution
...
Lastly, the courts hand
down judgments that also develop and shape legal principles
...


8
9

Smyth et al
...
23
...
, p
...


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The Constitution
The Constitution provides the basic skeleton or framework for Canada’s legal system
...
The Constitution is also
the highest source of law
...
” 10 The Constitution is
also very difficult to change—the normal amending formula requires the consent of Parliament
as well as the consent of the legislatures of at least two-thirds of the provinces, which represent
at least 50% of Canada’s population
...
For instance, the federal government is responsible
for criminal law, taxation, unemployment insurance, banking and money, bankruptcy and
insolvency, trade and commerce, shipping, and copyright, while the provincial governments
have jurisdiction over property and civil rights (e
...
, contracts and torts), corporations with
provincial objects, and the creation of municipalities
...
As well, if federal and provincial statutes are ever in conflict, the doctrine of
federal paramountcy determines that the “federal law wins
...
The Charter
places limits on many aspects of government actions and protects human (versus property)
rights
...

It is important to note that the Charter does not describe property rights (the right to own and
enjoy assets) or economic rights (the right to carry on business activities)
...

McInnes et al
...
12
...
, pp
...

11

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Figure 1-1: Fundamental Charter Rights and Freedoms

The Charter is also subject to a number of other important restrictions: 13
1
...
Thus, the Charter does not directly apply to disputes involving
private parties; however, the Supreme Court of Canada has ruled that private law should be
developed in a way that is consistent with Charter values
...
The Charter also generally does not apply in favour of or against private corporations
...
Section 1 of the Charter states that its rights and freedoms are subject to “such reasonable
limits prescribed by law as can be demonstrably justified in a free and democratic society
...

4
...
However, this section has only been
used once in the common law provinces and territories
...
” For instance, the court may simply issue a declaration that the
Charter has been violated and leave it to the legislature to solve the problem
...

Going even further, the court may strike down a statute that violates the Charter, leaving the
legislature to enact a new law that adheres to the Charter
...
, pp
...


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too broadly, or reading in a statute that is written too narrowly
...
14
Statutes: Law made by Parliament, Provincial Legislatures, and Municipal Governments
Legislation may be passed by either Parliament or provincial legislatures
...
For example, every jurisdiction in Canada has an act
that allows corporations to be created
...
If
the bill receives majority support at the First Reading, it goes to the Second Reading, where it is
debated
...
At
the Third Reading, if it receives majority support, the bill passes and is sent to the Senate,
where the process is repeated
...

There are two main classes of legislation—passive and active
...
Passive legislation provides a framework within which people legally go about their
business and puts the onus on either an injured party or a law-enforcement official to complain
about any activity that violates the legislation
...
Every government department, agency, and tribunal is established by the
legislature in a statute
...
15
One of the most important types of subordinate legislation involves municipal by-laws
...

Common Law: Law Made by Judges
In the context of a discussion of legal systems, the term common law refers to a legal system
that can be traced to England, and the term civil law refers to a system that can be traced to
France
...
When
used in this connection, common law refers to laws that are created by judges rather than by

14

McInnes et al, pp
...

Smyth et al
...
25
...
All rights reserved
...
In this sense, common law is also known as
case law
...
Of course, the earliest judicial decisions
could not depend on precedent
...
17
The early courts of common law could offer only monetary damages to the injured parties
...
The rules of law that
these courts administered became known as equity
...
If they saw fit, they could order specific performance—the carrying out of a binding
obligation
...
As equity law developed, its principles—such as trust, loyalty, and
consideration of the relative position of the parties—became accepted as common law
principles
...
18
Relationship Between Statutes and Common Law
A statute overrides all the common law dealing with the same point
...
e
...
The courts are often called upon to interpret a statute to
decide whether it applies to the facts of a case and, if so, to decide on the consequences of
breaking the law
...

Courts regularly use precedent even though the facts in the original case may be quite different
from the case at issue
...
Nevertheless, Canadian courts are encouraged by the federal Interpretation Act to take
a “fair, liberal, and large” interpretation of statutes
...

17
Smyth et al
...
26
...
, pp
...
S
...
1985, c
...
12 (Can
...
All rights reserved
...
20

SECTION 1-3: USING THE COURTS - An OVERVIEW OF CIVIL PROCEDURE
The Court System
Canada has a three-tier system similar to that of England, with courts of first instance (trial
courts), intermediate courts of appeal, and the Supreme Court of Canada
...

Figure 1-2: The Federal Court System

SUPREME COURT OF CANADA

FEDERAL COURT OF APPEAL

TAX COURT OF CANADA (Trial Division)
FEDERAL COURT (Trial Division)
Tax Tribunals
Federal Tribunals,
Commissions, etc
...

The Tax Court of Canada has jurisdiction over goods and services tax, income tax, employment
insurance, and appeals from tribunals in these areas
...
, pp
...


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The Federal Court of Appeal hears appeals from the Tax Court and the Federal Court (Trial
Division)
...
It is necessary to have leave,
or permission, to appeal to the Supreme Court
...
Appeals are almost always heard by five, seven, or
nine justices (as the judges are called)
...
,
subject to review by
provincial courts

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The Ontario Court of Justice (Trial Court) uses provincially appointed judges for family-law
(custody, support, and adoption) cases and for less-serious criminal offences
...

The Superior Court of Justice (Trial Court) uses federally appointed judges
...

For civil litigation, Ontario has a Small Claims Division that handles claims up to $25,000
...
21 Claims in excess of $100,000 are dealt with by the Superior Court of
Justice under the regular Rules of Civil Procedure
...

The Court of Appeal for Ontario (Appellate Court) decides cases in panels of three judges or
more
...
In most other provinces, the Small Claims Court
is a division of the Provincial Court
...

Finally, the Supreme Court of Canada has jurisdiction over all appeals from provincial appeal
courts
...
As a general rule, all adults are free to
use the Canadian courts, whether or not they are Canadian citizens
...

Corporations are legal persons and therefore can sue or be sued
...

The general rule is that the “king can do no wrong,” which means governments cannot be sued
unless a statutory authority permits it
...
Class action claims are becoming increasingly prevalent in
areas like product liability, mass torts (e
...
, contaminated water supply), gender discrimination in
the workplace, banking (e
...
, improper service charges), business law (e
...
, price fixing), and
securities law (e
...
, insider trading)
...
R
...
1990, Reg
...

Rules of Civil Procedure, R
...
O
...
194
...
All rights reserved
...
23
Figure 1-4: Class Action Suits

Legal Representation
If you sue or have been sued, you need to choose who will be your legal representative
...
” Therefore, most litigants are represented by either a lawyer
or a paralegal
...

The defendant (the person being complained about) responds by filing a statement of
defence, in which the defendant outlines his or her version of the facts complained about by the
plaintiff
...


23

Ontario is one of seven provinces, along with the federal jurisdiction, to enact legislation to clarify rules
of class actions
...
McInnes et
al
...
31-32
...
All rights reserved
...
If a Counterclaim was made, the
plaintiff also files a defence to counterclaim, in which the plaintiff outlines his or her version of
the facts complained about by the defendant in the Counterclaim
...
If, after receiving the basic pleadings, the parties are still not sure what
the other side has in mind, a demand for particulars may be used to require the other side to
provide additional information
...
During discoveries, information is
gathered under oath outside of the court, with the parties and their representatives meeting
before a licensed legal reporter
...
Since many of the documents are in electronic form, production of these documents
may be referred to as e-discovery
...

A settlement occurs when the parties agree to resolve their dispute out of court
...
24 The legal system is designed to
encourage settlements because of the cost and time involved in using the court system
...
The
judge may also indicate which party is likely to win if the case goes to trial, thus encouraging the
likely loser to settle
...
Since 1999, Ontario has had a mandatory
mediation program (MMP), which applies to most claims brought in large urban centres
...
Even when this process does not produce a settlement, it is likely to
speed up the litigation process
...
If a jury is used, the judge determines the law, while the jury is
responsible for finding the facts and applying the law
...
, p
...


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The plaintiff is the first to present his or her evidence to the judge
...
The plaintiff and the plaintiff’s witnesses are then cross-examined by the
defendant’s lawyer
...
Once the defendant and the defendant’s
witnesses have been questioned by the defendant’s lawyer, they are cross-examined by the
plaintiff’s lawyer
...
Ordinary witnesses may testify only about the facts they know firsthand, while expert witnesses may provide information and opinions based on the evidence
...
As well, if a party attempts to introduce surprise evidence, the court may
refuse to hear it or may delay proceedings to give the other side an opportunity to reply and, in
addition, may penalize the party with loss of costs
...
To win, the plaintiff must
establish the facts that prove the plaintiff’s case and then prove the case in law
...
This means that the “defendant
will be held liable only if the scales are tipped in the plaintiff’s favour
...
In
complex cases, the judge will reserve judgment and postpone giving a decision until after the
court hearing ends and the judge has had time to review the evidence
...
26
Figure 1-5: Remedies in Civil Litigation
Purpose

Remedy
Compensatory
damages

Financially compensate for a loss
...


Nominal damages

Symbolically recognize that the party acted wrongfully even though
the other party did not suffer any loss/harm
...


Injunction

Require the party to act or not act in a particular way
...


25

McInnes et al
...
37
...
, p
...


26

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Business Law Notes

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The winning party is also normally awarded costs, the expenses incurred by it during the
litigation
...
In
exceptional cases, if the action is deemed to be frivolous or vexatious, or if a reasonable
settlement offer is rejected, substantial indemnity costs may be awarded (usually around 65
to 75% of the winner’s actual costs)
...
Thus, in the end, it may be
questionable whether the winner really won at all
...
The person who challenges the decision of the lower court is the
appellant, and the person who defends the original decision is the respondent
...
Normally, appeals
are heard by at least three judges
...
Generally speaking, appeal courts
accept the findings of fact of the trial judge and reconsider only the application of the law
...

Alternative Dispute Resolution
Alternate dispute resolution (ADR) refers to private procedures to resolve disputes without
going to court
...
27 ADR may be preferable
because the outcome of a trial is unpredictable, given the number of factors that go into a trial
...
28 Finally, ADR may allow for a win-win resolution
...
Negotiation does not involve a third party, nor is there any guarantee of binding resolution
...

27

Smyth et al
...
44
...
, pp
...

29
Yates, p
...

28

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2
...
The mediator does not render a decision
...

3
...

The arbitrator, who is chosen by the parties for his or her expertise in an area, hears
witnesses and reviews evidence
...
For
example, pursuant to the Canadian Motor Vehicle Arbitration Plan (CAMVAP), contracts
between customers and dealers require disputes to be arbitrated before that body rather
than through litigation
...
30
Administrative Tribunals
An administrative tribunal is a body that resolves disputes arising in administrative law
...
It can make binding decisions that affect
legal rights but generally operates more informally than courts in that, for instance, strict rules of
evidence typically don’t apply
...
” 31
The members of a tribunal are usually selected by the parties or by a statutory process, and are
appointed on the basis of special knowledge or extensive experience in an area
...
If a party is dissatisfied with a tribunal
decision, the party can sometimes ask a court for judicial review
...
If it uses a reasonableness
standard, the court will defer to the tribunal’s expertise and will overturn only those tribunal
decisions that are unreasonable
...
The latter standard is
used for general issues of law that are not within the tribunal’s area of special knowledge
...
Such a clause attempts to prevent a court from exercising judicial review over a tribunal
decision
...

30

Yates, p
...

McInnes et al
...
49
...
All rights reserved
...
When referring to a system of law, common law refers to:
a
...
e
...

b
...

c
...

d
...

2
...
A lower court is bound by a decision of a superior court in the same jurisdiction when
the superior court has decided the same issue
...
A decision in one province is binding in other provinces
...
Lower courts have considerable leeway to distinguish the earlier case on the basis of
its facts
...
All of the above are true
...
This type of statute prohibits an activity that used to be permitted or permits an activity that
used to be prohibited:
a
...

c
...


Bill
Passive legislation
Active legislation
Subordinate legislation

4
...

b
...

d
...
In Ontario, the Small Claims Court hears:
a
...

c
...


Less-serious criminal offences
Civil claims up to $25,000
Taxation disputes
Appeals of civil cases up to $50,000

6
...
Small Claims Court, Divisional Court, Court of Appeal for Ontario
b
...
Ontario Court of Justice, Superior Court of Justice (Divisional Court), Court of Appeal
for Ontario
d
...
All rights reserved
...
This requirement for a class-action suit refers to one or a few people having a workable plan
for pleading the case on behalf of a whole class of people:
a
...

c
...


There are common issues
There is a representative plaintiff
There is a workable notification plan
The court is convinced a class action is the preferable procedure

8
...

b
...

d
...

Ordinary witnesses may testify about evidence they heard from another person
...

The court may refuse to hear surprise evidence
...
This remedy in civil litigation is designed to make amends to the victim for loss suffered by
the victim:
a
...

c
...

e
...
This remedy in civil litigation is designed to make the guilty party fulfill his or her obligation or
promise to the injured party:
a
...

c
...

e
...
This type of alternative dispute resolution method is sometimes required by law in Ontario;
the third party does not render a decision but only clarifies issues and suggests possible
solutions:
a
...

c
...


Mediation
Arbitration
Med/Arb
Negotiation

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Business Law Notes

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ANSWERS TO STUDY QUESTIONS FOR PART 1: LEGAL FUNDAMENTALS
1
...
One of the meanings of common law is a legal system where laws are based on
precedent
...
C refers to a second set of courts that came into existence to
provide remedies other than monetary damages
...

2
...
A decision in one province is persuasive in other provinces but not binding, whereas a
decision of the Supreme Court is binding in all jurisdictions
...
B
...
Active legislation gives government the right to carry on
various programs, which in turn gives rise to the need for subordinate legislation created by
administrative agencies to exercise their regulatory powers
...

4
...
Mobility rights are protected rights under the Charter, but they are not fundamental
freedoms as are freedom of religion, thought, and association
...
B
...
Less-serious criminal
offences are heard by the Ontario Court of Justice (Ontario’s trial court)
...
Taxation
disputes are heard by the Tax Court of Canada
...
D
...

7
...
The representative plaintiff is the person or persons who are judged to have a workable
plan for pleading the case on behalf of a whole class of people
...
B
...
The courts do not normally listen to hearsay
evidence (information a witness heard from another person)
...
A
...

10
...
Specific performance would require the defendant to fulfill his or her obligation
...

11
...
Mediation uses a neutral third party who is acceptable to both sides to help the parties
reach a settlement
...
All rights reserved
...
" DuPlessis and O’Byrne
define a tort as “any harm or injury caused by one person to another—other than through
breach of contract—and for which the law provides a remedy
...
define a tort as
“a failure to fulfil a private obligation that was imposed by law
...
conclude that
“there is no entirely satisfactory definition of “tort” but define it as a wrongful act done to the
person or property of another
...
” 35
The basic premise of tort law is as follows: An obligation in tort law is owed to a person (e
...
,
there is an obligation to provide a client with sound accounting and business advice)
...
If the client wins
the lawsuit, the court will hold the accountant liable and will probably order the accountant to
pay damages to the client
...
g
...

Figure 2-6 draws four key comparisons
...
” 36 A second
reason why tort law exists is to deter individuals from failing to fulfil private obligations
...
221
...
, p
...

34
Smyth et al
...
51
...
Willes and John H
...
60
...
Hebert, [1993] 2 S
...
R
...
58, per Cory J
...
All rights reserved
...
Crime 37
Relevant
law

Obligation

Parties involved if
obligation is broken

Usual Remedy

Tort

Private law

Defendant owes an
obligation to plaintiff

Plaintiff sues defendant

Compensatory
damages (usually
money)

Crime

Public law

Accused owes an
obligation to society

Government
prosecutes accused

Punishment (e
...
,
fine, probation,
imprisonment)

Since both torts and contracts involve private obligations, it is also necessary to distinguish
between torts and contracts
...
Figure 2-7 identifies four important differences between
torts and contracts
...
Contract 38
Source of
Obligation
Tort

Contract

Enforceability

Compensatory
Damages

Risk Management

Imposed by
law

Enforceable even if
the parties have no
agreement

Place plaintiff in
same position as if
tort had not occurred

May take a person by
surprise and require
more than person is
able to bear

Voluntarily
created by
parties

Enforceable only by
or against a party to
the contract

Place plaintiff in
same position as if
contract had been
performed

Obligations are known
in advance and can be
limited to promises that
can be fulfilled

Contracts are enforceable only by parties to a contract under the doctrine of privity
...

Tort damages are backward looking, placing the plaintiff in the position he or she would have
been in had the tort not occurred, whereas in contracts, damages are forward looking, placing
the plaintiff in the position he or she would have been in had the contract not been breached
...


37

Smyth et al
...
61
...
, pp
...


38

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...


Business Law Notes

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Development of Tort Law 39
In our increasingly complex society, the risks of harm have grown rapidly
...
g
...
The basic issue is
who should bear the loss? This question is often very difficult to answer in a society committed
to increased productivity, because society as a whole benefits from advances in technology and
production
...

Originally, the approach taken was one of strict liability, in which the person who was the
direct physical cause of injury was held liable regardless of the reasons for the injury or whether
the conduct of the “injurer” was justified
...
However, strict liability still persists in some areas of
modern tort law, specifically for activities that are inherently dangerous regardless of the amount
of care taken, such as transporting explosives
...
40
Fault evolved as another basis for liability, where fault refers to “blameworthy or culpable
conduct—conduct that in the eyes of the law is unjustifiable because it intentionally or carelessly
disregards the interest of others
...
However, many activities where tort liability arises—driving a car, operating a store,
practising medicine or accounting—are covered by insurance
...
41
Social policy also plays a role in whether liability should be based on fault, strict liability, or some
other principle
...

Social policy may go so far as to eliminate lawsuits for personal injuries and compensate victims
through a government fund, as is the case for no-fault insurance schemes and workers’
compensation
...
No39

Smyth et al
...
51-54
...
, pp
...

41
Smyth et al
...
51-52
...
, pp
...

40

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...


Business Law Notes

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fault schemes also respond to complaints about the cost and inefficiency of the adversarial tort
law system
...
43
On the other extreme, responding to the pressure of social needs has resulted in the principle of
vicarious liability, to be discussed in more detail shortly, where en employer may be held liable
for torts committed by employees in the course of their employment
...
Each of these will be discussed
in more detail later on
...


Generally that the person
Assault, trespass to land,
intended to do the specific act; interference with contractual
in certain intentional torts, that relations, deceit
...


Negligence torts occur when
a person acts carelessly
...


Negligence, professional
negligence, and product
liability
...


That the act occurred
...


SECTION 2-2: GENERAL PRINCIPLES OF TORT LAW
Several general principles or concepts apply throughout tort law: burden of proof, liability,
defences, and remedies
...


43

McInnes et al
...
74, quoting from the Ontario Ministry of Financial Institutions Ontario Task Force on
Insurance, Final Report (1986) at 66
...
, pp
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 24

Burden of Proof
Since torts are civil actions rather than criminal actions, the plaintiff must prove his or her case
on a balance of probabilities
...
45
In certain circumstances, because it can be difficult for a plaintiff to know all of the particulars
about a tort committed against him or her, the plaintiff may initially meet this burden of proof
using circumstantial evidence
...
46
Liability
Tort law recognizes both primary liability, which arises from one’s own personal wrongdoing,
and vicarious liability, which arises because of a relationship with the person who actually
committed a wrong
...
Finally, it also recognizes the role of insurance in
managing risks associated with torts
...
An employer is not liable for torts committed by independent contractors
...
The employer generally controls what is done, how it is done, when it is done, and where it
is done
...
The worker uses the employer’s equipment and premises
...
The worker is paid a regular wage or salary instead of a lump sum at the end of each
project
...
The worker is integrated into the employer’s business and is not in his or her own
business
...
If the employer
pays, it can claim that amount from the employee
...
226
...
, pp
...

47
McInnes et al
...
68
...
All rights reserved
...

Vicarious liability serves tort law’s compensatory function by allowing collection from an
employer who is more likely to be able to pay or to have insurance
...
It is also viewed as fair to require a business to bear responsibility for
the losses its activities create, even if those losses were due to the misdeeds of employees
...
” Nevertheless, the plaintiff can actually recover 100% of the judgment
from any one of those defendants, thus making it possible for the plaintiff to collect from those in
the best position to pay the damages
...
If the defendant’s defence of contributory negligence is successful, the amount of
damages awarded to the plaintiff will be reduced by the proportion for which the plaintiff is
responsible
...

Liability Insurance
In keeping with good risk management by businesses, it is considered prudent to purchase
liability insurance
...
” 50 Liability insurance also
includes a duty to defend, whereby the insurance company pays the expenses related to
lawsuits against the insured party
...

However, there may still be a deterrent since excessive claims will translate into higher
insurance premiums or difficulty obtaining insurance
...

48

McInnes et al
...
67-68
...
229
...
, p
...

49

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...


Business Law Notes

P a g e | 26

Defences
More will be said about specific defences when individual torts are discussed since the defence
varies depending on the tort
...


•

Consent – The defendant either consented to the action or voluntarily assumed the risk
inherent in the event that gave rise to the loss
...
These include:
•

Lack of causation – The defendant’s action did not cause the plaintiff’s damages
...
e
...


•

Failure to mitigate – Where the plaintiff fails to take reasonable steps to minimize losses,
the damages awarded will be capped at what the court deems they would have been had
the plaintiff mitigated his or her damages
...

Figure 2-9: Tort Law Remedies and their Purposes

© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 27

Compensatory Damages
Compensatory damages require the defendant to pay for the losses the plaintiff suffered as a
result of the tort
...
There are two types:
special and general
...
g
...
General damages
include more speculative items like future loss of earnings due to disability and non-pecuniary
(non-monetary) losses such as awards for pain and suffering, loss of enjoyment of life, and loss
of life expectancy
...
A loss is too remote
if a reasonable person in the position of the wrongdoer could not have reasonably anticipated
the harm that flowed from the act
...

Punitive Damages
Punitive damages are rare
...
51 The Supreme Court also requires that
punitive damages be proportional to the tort and “no more than necessary to punish the
defendant, deter wrongdoers, or convey denunciation of the defendant’s conduct
...
They are restricted to intentional torts and strict
liability torts
...
They are used when compensatory damages are inadequate to replace what
the plaintiff has lost
...
, p
...

DuPlessis and O’Byrne, p
...


52

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...


Business Law Notes

P a g e | 28

over another’s property), the court may order restitution, the restoring of the property to its
rightful owner
...
” Intention does not
always mean that the defendant intended to cause harm but may simply mean that the
defendant “knew that a particular act would have particular consequences
...
54
Figure 2-10: Intentional Torts
Tort
Assault

Battery

False
Imprisonment

Defamation

Description of Harmful Act

Defences

Reasonable belief that threat of
offensive bodily contact (see battery)
is imminent
...


Offensive bodily contact: touching
plaintiff or plaintiff’s clothing with fist,
knife, bullet, etc
...


Self-defence; the force used must be
reasonable
Provocation: words and actions that
would cause a reasonable person to
lose self-control; this is a partial
defence that would only reduce
damages
...
g
...


No actual confinement
...


A published false and derogatory
statement in spoken (slander) or
written (libel) form
...

Qualified privilege: statement was
made in the course of duty, in the
belief that it was true, and
communicated only to those who
needed to know (e
...
, reference
letter)
...


53

McInnes et al
...
79
...
30-37; McInnes, pp
...


54

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...


Business Law Notes

Trespass

Nuisance

Conversion

P a g e | 29

Entering or putting something on
another’s land without authority;
includes customers overstaying their
welcome or breaking rules of
premises
...
g
...


Use of property so it interferes with
neighbour’s usage and enjoyment of
his/her property; includes fumes,
water, noise, etc
...


Use of another person’s property in
such a way that is it serious enough
to justify a forced sale to the
defendant
...


Some of the torts in Figure 2-10 (e
...
, assault and battery, defamation) also give rise to criminal
prosecution, but the Crown is concerned only with the criminal aspect
...

Regarding the tort of defamation, use of the Internet to make and disseminate defamatory
statements can make it difficult to identify and locate the maker of the statements, but the full
range of remedies is available once defamation is proven
...
In a 2008 case, Griffin v
...
C
...
” 55
Surprisingly, until very recently Canada had not yet recognized a general tort of invasion of
privacy
...
They also want to balance the interests of
both parties
...
A photographer who
sneaks onto someone’s land to take unauthorized pictures commits the tort of trespass
...
English courts have also recognized a tort of abuse of
information
...

In a unanimous decision, in January 2012, the Ontario Court of Appeal recognized a tort of
invasion of privacy
...
66-67
...
All rights reserved
...
Technological change poses a novel threat to a right of
privacy that has been protected for hundreds of years by the common law under various guises
and that, since 1982 and the Charter, has been recognized as a right that is integral to our
society and political order
...
” The
elements to be proven are that 1) the defendant’s conduct is intentional or reckless; 2) the
defendant invaded, without lawful justification, the plaintiff's private affairs or concerns; and 3) “a
reasonable person would regard the invasion as highly offensive, causing distress, humiliation
or anguish
...
” Proof of economic
harm is not required, and the judgment rendered specifically states that “given the intangible
nature of the interest protected, damages…will ordinarily be measured by a modest
conventional sum
...
” 58 For instance, B
...
’s
Privacy Act creates the tort of breach of privacy, and mentions eavesdropping and surveillance
as some ways to violate the privacy of another
...
The most important tort involving customers is negligence,
including product liability and professional negligence
...
The intentional torts outlined above may also be perpetrated in a business context, as
several of the examples illustrated
...

Although the torts in the previous section were labelled “intentional,” the court must normally be
satisfied that the defendant in these business torts either intended to hurt the plaintiff or at least
56

Jones v
...
R
...
C
...
T
...

Jones v
...
R
...
C
...
T
...
A
...

58
McInnes et al
...
82-83
...
282
...
All rights reserved
...
Some of these business torts may also
give rise to an action for breach of contract
...
This
will be discussed in more detail in the section on contract law
...


If act is otherwise lawful: primary
purpose was to hurt plaintiff
...


Threat to commit an unlawful act
directed against plaintiff (two-party
intimidation) or a third party (threeparty intimidation)
...

Plaintiff suffers a loss because of
threat
...
g
...


Defendant knows about contract
...

Defendant actually causes third
party to breach contract
...


Unlawful
interference with
economic relations

Unlawful act committed for the
purpose of causing plaintiff to incur
an economic loss; this is a more
general tort than the previous three
...

There is an unlawful or illegal act
or, more generally, something
that a person is not entitled to
do
...


Making a false statement—includes
telling a half-truth and failing to
update information; under the
general rule of caveat emptor (buyer
beware), a seller is usually not
obligated to volunteer information
...

Defendant intends to mislead
plaintiff
Plaintiff suffers a loss as a result
of reasonable reliance on
statement
...

The public is deceived by this
misrepresentation
...


Conspiracy

Intimidation

Deceit

Passing Off

Represent another’s goods or
services as one’s own, either
expressly or by implication
...
Cogeco Cable Inc
...
L
...
(4th) 644, (Ont
...
A
...
All rights reserved
...
g
...


Failure by occupier of premises to
take adequate precautions to protect
visitors
...

Defendant’s statement caused
plaintiff to suffer a loss
...


In Ontario, Alberta, British Columbia, Manitoba, Nova Scotia, and Prince Edward Island,
occupiers’ liability is now covered by legislation
...
The same standard of reasonable care applies to all
visitors, but the standard imposed depends on the potential danger to the visitor, the occupier’s
cost of removing the danger, the purpose of the visit, and the nature of the premises
...
Occupiers can normally avoid liability by
issuing a warning, such as the warning signs posted at a ski resort or parking garage
...
As with other torts, the victim
is entitled to take legal action to be compensated for that loss or injury
...
While the term “professional negligence” is often used, there is no separate tort by that
name; it merely refers to negligence committed by a professional person like an accountant or
lawyer
...
Each of these
elements will be discussed in more detail in the following pages
...
, pp
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 33

Step 1: Was a Duty of Care Owed?
According to the neighbour principle, “a defendant owes a duty of care to anyone who might
be reasonably affected by the defendant’s conduct
...
Stevenson, the
Canadian courts have developed a unique test for whether a duty of care is owed
...
For example, a duty of care is owed by a
beverage bottler to a consumer
...
63
Reasonable Foreseeability
This is an objective test of whether a reasonable person in the defendant’s position would have
recognized the possibility that his activities might injure the plaintiff
...

Proximity or Causation
Put simply, “there must somehow be a close and direct connection between the parties
...
g
...
g
...
64

In establishing proximity, the law treats careless statements differently from careless actions
...
As well, the impact of a careless statement can be almost limitless
whereas the risks associated with physical actions are limited in time and space
...
Stevenson, [1932] A
...
562 (H
...
)
McInnes, pp
...

64
McInnes et al
...
133
...
All rights reserved
...
65
In Hercules Managements Ltd
...
Ernst & Young (1997), 146 DLR (4th) 577 (S
...
C
...
g
...


Moreover, to avoid “indeterminate liability,” a duty of care will be recognized only if:
•

The defendant knew that the plaintiff, either individually or as a member of a defined group
(e
...
, shareholders), might rely on the statement; and

•

The plaintiff relied on the statement for its intended purpose (e
...
, management of the
company vs
...
66

In summary, whether a duty of care is imposed on a professional depends both on the existence
of a close relationship with the defendant and the extent to which the client relied on the
professional
...
For example, the courts
may be concerned that acknowledging a duty of care will flood the legal system with similar
lawsuits (e
...
, if a regulatory body was held liable for the actions of the professionals it governs),
interfere with political decisions (e
...
, how much money a municipality spends repairing
potholes), or hurt a valuable relationship (one reason a mother does not owe a duty of care to
her unborn child)
...
, pp
...

McInnes et al
...
134-135
...
All rights reserved
...

The standard of care is based on the mythical reasonable person, someone of “normal
intelligence who makes prudence a guide to his conduct
...
” 68 Some of the relevant factors pertaining to the reasonable person test are
shown in Figure 2-12
...
It does not make allowances for a defendant’s personal
characteristics, including, to a certain extent, mental or physical disability
...

Children are expected to act like a reasonable child of a similar age, intelligence, and
experience
...

A reasonable person takes precautions against reasonably foreseeable risks even if they are
unlikely to occur
...

A reasonable person takes affordable precautions
...
g
...

Step 3: Did the Breach Cause the Harm?
The third and final element to be proved in a negligence case is that the defendant’s
carelessness caused the plaintiff to suffer a loss
...
” The
question to be asked is: “‘but for’ the defendant’s actions, would the injury or damage not have
occurred?” 70 While an affirmative answer to this question would suggest that there is proximate
cause, the facts of the situation can often make it difficult to tell whether there is proximity,
especially when there are intervening events
...
A loss is too
remote if it was not reasonably foreseeable that the careless action could cause the loss
...
C
...
) per Laidlaw JA
...
81
...
, pp
...

70
Willes and Willes, p
...

68

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...


Business Law Notes

P a g e | 36

Generally speaking, the closer in time the defendant’s conduct is to the injury suffered by the
victim, the more likely it is to be found to be the cause of the injury
...
However, if a normal person would not have suffered any damages, the plaintiff
would not be entitled to damages
...
71
The remoteness principle is also used to deal with intervening acts, events that occur after the
defendant’s carelessness and that cause the plaintiff to suffer an additional injury
...
72
As is the case with the other elements, the plaintiff has to prove causation on a balance of
probabilities
...
As well, the plaintiff has to prove only that the
defendant’s carelessness was one cause, not the only cause
...
However, if different defendants cause a single
injury, they will be held jointly and severally for the loss, meaning that the plaintiff can recover all
of the damages from one defendant or some from each defendant
...

In the case of contributory negligence, the plaintiff is judged to be partly responsible for the
loss incurred and, therefore, the plaintiff’s damages will be reduced to the extent of the
contributory negligence
...
, pp
...

McInnes et al
...
147
...
, pp
...

72

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...


Business Law Notes

P a g e | 37

For voluntary assumption of risk, the plaintiff is judged to have freely agreed to accept the
risk of injury or loss
...

For instance, parking garages usually post signs to indicate that people who park there do so at
their own risk
...

Product Liability
Product liability (manufacturer’s liability) is the standard of care imposed on manufacturers
in relation to the design, manufacture, and/or sale of their products
...
Product liability also gives rise to actions for
breach of contract; however, end consumers do not typically have a contractual relationship with
manufacturers, limiting their recourse to retailers
...
Stevenson, under the principle of res ipsa loquitur (the
facts speak for themselves), if a product is defective, then it can reasonably be assumed that
there has been negligence at some stage of its design, production, or inspection, and the onus
is now on the manufacturer to prove that it took due care at all stages to try to prevent defective
goods from reaching the distribution system
...
74 In the United States, liability is not limited to cases of
negligence; rather strict liability is often found, making the manufacturer liable for injury
regardless of efforts taken to prevent faulty products from reaching the consumer
...
Lastoplex Chemical Co
...
(1972; inflammable lacquer) and
Buchan v
...
(1984; side effects of contraceptive pills)—
impose a duty on Canadian manufacturers to give consumers proper warning when, even
though a product may not be defective, dangers may arise if the product is not properly used
...
Dow Corning Corp
...
The Court also ruled that the duty to warn may be discharged in some cases by
issuing the warning to "learned intermediaries" like surgeons who use silicone breast implants
...
, pp
...

Willes and Willes, p
...


75

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...


Business Law Notes

P a g e | 38

the product or would not have used it the way she did had proper warning been given
...
76
Professional Liability
Professionals have specialized knowledge and skills that clients rely on and are willing to pay
for
...
In defining liability for professional incompetence or negligence, the courts
have tried to balance the social objective of assisting innocent victims with the need to avoid
discouraging legitimate professional activity
...
Contractual duty: An agreement to provide professional services to a client implies a
certain duty of care
...

2
...
It is a higher duty of
care than that owed under a contract since it requires complete fidelity and loyalty and may
be breached even though there has been no negligence
...
78
3
...
A duty in tort also imposes a time limit for tort action from the
moment the breach is discovered (as opposed to the moment the breach occurs, as in
contract law)
...
Plaintiffs
may choose to “cover the bases” by pleading all three causes of action
...
Professionals are held to the standard of a reasonable professional in similar circumstances
...


76

Smyth et al
...
63-64
...
, pp
...

78
DuPlessis and O’Byrne, p
...

79
McInnes et al
...
138-139
...
All rights reserved
...
The standard of care is based on the information reasonably available to the defendant in
foresight, not in hindsight
...
Carelessness results in liability while an error of judgment does not
...
A professional who follows an approved practice cannot be found liable
...
Compliance with a statutory standard will be considered in deciding whether a professional
acted with reasonable care
...
For instance, accountants
may provide a business valuation that will be relied upon by a third party, or architects may
design a building in a way that presents risks to subsequent occupants
...
Ltd
...
Heller & Partners Ltd
...
Haig v
...
Thus the test is not just that users must
be foreseeable in a general sense but that they must be specifically foreseeable in relation to a
contemplated transaction
...
There must also be a clear
causal link between the breach of the duty by the defendant and the injury suffered by the
plaintiff
...
Reliance includes the willing
cooperation of the plaintiff—an element not present in the commission of most torts
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 40

STUDY QUESTIONS FOR PART 2: THE LAW OF TORTS
1
...

b
...

d
...

The accused owes an obligation to the plaintiff
...

The usual remedy is punishment
...
Using fault or blameworthy conduct to assess liability under tort law:
a
...

b
...

c
...

d
...

3
...
The other person intended to do the specific act
...
The other person intended to do the specific act and, in some cases, that the person
intended harm
...
A reasonable person would not have acted that way
...
The specific act occurred
...
This intentional tort involves reasonable belief that threat of offensive bodily contact is
imminent:
a
...

c
...

e
...
The defence of qualified privilege in a defamation case means that:
a
...

c
...


The statement was true
...

The statement was made in the course of duty and in the belief that it was true
...


6
...
The defendant knew the statement was false or acted recklessly and without regard
to the truth
b
...

c
...

d
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 41

7
...

You are:
a
...

c
...


Guilty of the tort of intimidation
...

Guilty of the tort of deceit
...


8
...
This refers to:
a
...

c
...


Proximity
Reasonable foreseeability
Policy grounds
The neighbour principle

9
...
Someone of average intelligence
...
Someone of average intelligence who will prudently exercise reasonable care
...
Someone of average intelligence who will prudently exercise reasonable care
considering all of the circumstances
...
Someone of average intelligence who takes all possible precautions to avoid causing
harm to another
...
Under tort law, a loss may be held to be too remote if:
a
...

c
...


It was not reasonably foreseeable that the careless action could cause the loss
...
”
Too much time has elapsed between the action and the injury suffered
...


11
...

b
...

d
...

Be entitled to damages for losses a normal person would have suffered
...

Be entitled to damages suffered because they are unusually poor
...
This complete defence to a tort action asserts that the plaintiff freely agreed to accept the
risk of injury or loss:
a
...

c
...


Contributory negligence
Voluntary assumption of risk
Illegality of the act that caused the harm
Lack of a standard of care

© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 42

13
...
About risks of a product that are not reasonably foreseeable to the manufacturer
...
When, even though a product may not be defective, dangers may arise when it is
used
...
When, after a product has been placed on the market, the company becomes aware
of potential dangers in its use
...
Both b and c
...
A professional’s duty of care may arise from:
a
...

c
...


Contractual duty
...

Duty in tort
...


15
...

b
...

d
...

It is based on information reasonably available in foresight, not hindsight
...

A professional who follows an approved practice cannot be found liable
...
Professionals are liable for negligent misrepresentation when they make an incorrect
statement:
a
...

b
...

c
...

d
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 43

ANSWERS FOR PART 2: THE LAW OF TORTS
1
...
The usual remedy in tort is compensatory damages, whereas punishment is the usual
remedy for a crime
...

2
...
Circumstances can often make it hard to establish who was at fault, and it would be
unfair to leave a victim uncompensated just because of this
...
Fault is a less onerous standard
than strict liability
...

3
...
In a strict liability tort, the plaintiff need only prove that the specific act occurred (along
with the fact that that act caused a loss)
...
A
...

5
...
Qualified privilege occurs when the statement was made in the course of duty with the
belief that it was true, and was communicated only to those who needed to know
...

6
...
To prove deceit, it is necessary to prove the defendant knew the statement was false or
acted recklessly and without regard to the truth, that the defendant intended to mislead the
plaintiff, and that the plaintiff suffered a loss as a result of reliance on that statement
...
B
...
Intimidation involves threat to
commit an unlawful act
...
A
...
The neighbour principle is
the general test of whether a duty of care was owed
...
C
...
Thus, the standard considers the
situation
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

P a g e | 44

10
...
A loss may be too remote if it was not reasonably foreseeable that the action could cause
the loss or if it does not pass the “but-for” causality test: but for the act, a loss would not
have arisen
...

11
...
Under the thin skull theory, plaintiffs who are unusually vulnerable are still entitled to
damages for all their losses
...

12
...
Voluntary assumption of risk—when the plaintiff freely agrees to assume the risk of injury
or loss—is a complete defence that would lead to the defendant not being held liable
...
D
...
The duty
to give proper warning is a continuing one so that notice is required whenever a company
becomes aware of potential dangers in a product’s use
...
D
...

15
...
An error in professional judgment does not result in liability
...
The remaining statements are all true
...
D
...
The plaintiff must prove he or she relied on the statement
...
e
...


© 2012 Certified Management Accountants of Ontario
...


Business Law Notes

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PART 3: CONTRACT LAW
A contract is “an agreement that creates rights and obligations that can be enforced in law
...
” 81
Contracts, and the legal right to rely on their enforcement, form the foundation of day-to-day
business interactions
...

This coverage of contract law in this document focuses on seven main topics:
1
...

3
...


The elements required to enter into a valid contract;
Privity of contract (identifies who can enforce a contract) and assignment of rights;
The requirement of writing;
Interpretation of contracts;

5
...
The various ways a contract can be discharged or brought to an end; and
7
...


SECTION 3-1: ENTERING INTO A CONTRACT—ELEMENTS OF A VALID
CONTRACT
For a valid contract to exist, seven elements must be present:
1
...

2
...

3
...

4
...

5
...

6
...

7
...

Each of these elements will be discussed in more detail below
...
, p
...

Yates, p
...


81

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...


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An Intention to Create Legal Relations
Both parties to an agreement must intend to create a legally enforceable agreement in order for
a valid contract to be formed
...
The rationale for this is that a subjective test of
what the parties themselves actually thought would be difficult to apply because the parties
could easily lie about their intentions
...
Therefore, the law presumes that people entering into agreements intend their
promises to be legally binding
...
People often make promises to family
and friends that they would not make to strangers
...
Advertisers are given a certain
amount of latitude in how they describe their goods to the public
...

However, the above presumptions may be rebutted or disproved
...

Offer
An offer is “a tentative promise made by one party (the offeror), subject to a condition or
containing a request to the other party (the offeree)
...
” 83 Making an offer entails a risk because, as soon as it is
accepted, a binding contract exists
...
Complete – It must contain all the major terms of the agreement;
2
...
Communicated to the offeree – This may be done by act (sitting in the chair at the hair
salon), words, writing, or a combination of these
...
, p
...

McInnes et al
...
158
...
All rights reserved
...
The latter is merely an
invitation to treat
...
In making the distinction, the
courts use an objective test of how a reasonable person would interpret a particular statement in
that specific situation
...
However, if an advertisement offers a fixed
number of items at a fixed price on a first-come, first-served basis, this may constitute a valid
offer
...
This was the subject of the landmark
case Carlill v
...
The courts
viewed the advertisement as an offer to the world, especially since the advertisement stated that
£1,000 had been deposited with a bank to show the company’s sincerity
...
The display of
goods is an invitation to do business
...
This was the subject of Pharmaceutical
Society of Great Britain v
...
85 The court found that the items on the
shelf were merely an offer to treat
...
This contradicts the traditional rule in retail
sales that the retailer is only making an invitation to consumers to make offers and that the
consumers are the offerors
...
Carbolic Smoke Ball Company, [1893] EWCACiv 1 QB 256 (C
...

Pharmaceutical Society of Great Britain v
...
[1953] 1 QB 401 (C
...

86
Consumer Protection Act, 2002, S
...
2002, c
...
A, s
...

87
Smyth et al
...
116-117
...
All rights reserved
...
g
...

In general, by accepting a standard form contract, the offeree is deemed to have accepted
every term of it; that is, the offeree is presumed to have knowledge of all of its terms and to be
bound by them
...
g
...
In the absence of reasonable steps, such as
where the term is in small print or is inconspicuous, the offeree may not be bound by the term
...
A contract may be terminated in a range of ways, as shown in Figure 3-13
...
The offeree fails to accept the offer within the time period specified in
the offer;
2
...
Either party dies or becomes incapable (unless the contract states
that it is intended to bind heirs and estates)
...

Revocation must be communicated in a way that a reasonable person would
understand it to be revoked
...

This is refusal of an offer by the offeree
...

The offeree responds to the offer by indicating a willingness to enter into a
contract but on different terms
...
If a counter-offer is made, the offeree has rejected the
original offer, and it is terminated
...
All rights reserved
...

It is possible for the offeree to protect itself from revocation of the contract by the offeror by
purchasing an option, a separate contract where the offeror is paid to hold an offer open for
acceptance for a specified period
...
This gives the party calling for tenders the opportunity to
review all offers before selecting the winning bid
...
” 88 The moment an offer is accepted, a contract is formed and each party is bound to
comply with its terms
...
In a positive form, whether oral or by act;
2
...
Without any variation in the terms of the offer or, as noted above, it will constitute a
counter-offer and terminate the original offer; and
4
...
Carlill v
...
established that
an offer may be made to an indefinite number of people who remain unknown to the offeree
even after they have accepted
...
A bilateral contract occurs when a
promise is exchanged for a promise
...
g
...
Silence will be viewed
as a manner of acceptance only in very limited circumstances
...

88

McInnes et al
...
165
...
, p
...

90
McInnes et al
...
164
...
All rights reserved
...
Otherwise, according to the postal rule, acceptance by non-instantaneous
communication is effective where and when the offeree sends it
...
However, as long as the way in which
acceptance is communicated results in the acceptance being received within the same time
frame as if it had been done using the method specified in the offer, and as long as industry
practice is followed, the court will deem it proper communication
...

In a unilateral contract, the offer is accepted by performing one or more acts required by the
terms of the offer
...
There is no
expectation of formally communicating an acceptance to the manufacturer
...

Consideration
Consideration is the price for which the promise (or the act) of another is bought
...
It is enough to promise a benefit to someone; it is not necessary to provide a benefit
to the other party to the contract
...
And as business people know, a bargain
involves more than an offer and an acceptance
...
” 92
Consideration offers a sure legal test for binding commercial relationships
...
There must be
sufficient consideration, which is anything of value in the eyes of the law
...
The court will not assess the adequacy of the
consideration unless there are special circumstances such as suspicions of fraud or undue
influence
...
Rather than seeking
damages for breach of contract, the supplier of the goods or services would seek payment
under the principle of quantum meruit (reasonable payment for services rendered)
...
, p
...

McInnes et al
...
177
...
All rights reserved
...

Figure 3-14: What is consideration?
Examples of Consideration

Examples of Items that are NOT Consideration

Money

Natural love and affection
...


Promise to perform a pre-existing
contractual obligation to a third party

Pre-existing public duty: public servants cannot use a
promise to complete their public duties as consideration
for a new contract since that would be offering nothing
new
...

Promise to forgive an existing debt is not generally
good consideration
...
After all, a creditor may find it more beneficial to settle for a reduced amount than to
insist on full payment if it would mean getting some cash sooner or avoiding pushing the debtor
into bankruptcy
...

Finally, in Ontario, the Mercantile Law Amendment Act binds a creditor who agrees to accept
part performance of an obligation in settlement of a debt
...

Exceptions to the Requirement for Consideration
There are two situations where the law will enforce promises not supported by consideration
...
A seal is a mark that is put on a written contract to indicate a party’s
intention to be bound by the terms of the document even though the other party has not given
93

Mercantile Law Amendment Act, R
...
O
...
10 (Ont
...
All rights reserved
...
An insignia used to be pressed into hot wax, but now a small red adhesive circle
is used instead
...

It may be that the click of a mouse will become the newest seal when it is tested in the court by
the first party that tries to enforce a promised but undelivered Internet-based benefit
...
The maker of the statement or promise
will be estopped or prevented from denying the truth of the original statement or claiming that he
or she was not bound by the promise despite the fact that consideration has not flowed
...
It applies when 1) a promise
or statement was made by one party—by words or conduct—that was intended to affect their
relationship and be acted on; 2) the defendant relied on the statement in a way that makes it
unfair for the other party to retract its promise; and 3) the defendant’s own conduct was beyond
reproach
...
In 2008, for example, the Ontario Superior Court
upheld an employee’s claim for a promised wage increase on a number of grounds including
promissory estoppel
...
It must be possible
to determine the meaning of the contract with a reasonable degree of certainty
...
Incompleteness: The omitted terms are so important that they warrant the conclusion that
the parties have not yet reached an agreement; for example, lack of a price or a formula to
determine the price
...
141
...
Jannock Limited [2008] 63 C
...
E
...
3d 101, (Ont
...
A
...

96
John D
...
2005), pp
...

95

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...


Business Law Notes

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2
...

3
...

Capacity to Contract
Capacity refers to the competence to enter into legally binding agreements
...

Minors (or Infants)
Minors are people who have not yet reached the age of majority according to the law of their
province (usually 18 or 19)
...
There are two exceptions to a minor's immunity from contractual liability: necessaries and
beneficial contracts of service
...
To be a necessary, the
good must be necessary to this particular minor, and the minor must not already have an
adequate supply of it
...

The court requires the adult who is supplying goods to establish what is in fact necessary for the
minor, and this may be difficult for an adult who does not know of the infant's particular
circumstances
...


...
97
Beneficial Contracts of Service
Beneficial contracts of service made by a minor are binding
...
S
...
1990 c
...
1, s
...


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Business Law Notes

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exploitative
...

Other Contracts with Minors
Figure 3-15 sets out some of the other common law rules regarding contracts made with minors
...
A void contract is a nullity from its inception, i
...
, it is not really a contract at all
and thus cannot be enforced by either party
...

Figure 3-15: Rules Regarding Contracts with Minors
Topic
Repudiation

Implication
A minor may always repudiate a contract for non-necessaries, even when
those items are clearly beneficial to him or her
...

If the minor sells goods, she cannot recover the goods unless she returns the
money paid
...


Loans to a
minor

An adult can recover money lent to a minor only if the minor used the money
to purchase necessaries
...


Liability under A minor might be tempted to buy goods on credit, sell them to a third party,
Criminal law
and then repudiate the original contract and pocket the profit
...
Minors are responsible for
actions under the Criminal Code, R
...
C
...
C-46 and, upon turning 16,
could be subject to criminal sanctions; conduct of minors under 16 could lead
to penalties under the Young Offenders Act, R
...
C
...
Y-1
...


Parents of
minors

Parents may be held liable for contracts made by their children only if the
child is acting on behalf of (as the agent of) the parents
...
g
...


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For contracts that concern a single transaction, unless the minor ratifies it at
majority, she will not be bound; under the Statute of Frauds, ratification must
be in writing and signed by the minor-turned-adult to be enforceable
...
Therefore, they
need not be repudiated if ongoing nor can they be ratified
...

Diminished Contractual Capacity
A person who is insane or incapacitated through drink or drugs also lacks capacity to contract
...

While it is usually easy to establish whether or not a person was a minor at the time of making a
contract, it can be hard to prove that a person was insane or drunk at that moment, especially if
the contract was not negotiated in person
...
In the absence of clear evidence, the courts will assess the probability of knowledge
from the circumstances, including the apparent fairness or unfairness of the contract for the
party lacking capacity
...

Statutory Limitations on Contractual Capacity
Various statutes limit, in various ways, the contractual capacity of corporations, labour unions,
bankrupt debtors, Aboriginal peoples, and enemy aliens (i
...
, citizens of countries Canada is at
war with)
...
Because it can often be difficult to ascertain who in a corporation has
the authority to act on the corporation’s behalf in entering into a particular type of contract, the
indoor management rule prevents the corporation from relying on any provision in its articles
or by-laws, or on any unanimous shareholder agreement, that creates a defect in the agent’s
98

The Statute of Frauds, R
...
O
...
S
...
7 (Ont
...
All rights reserved
...
The corporation also cannot claim that a person held out by the corporation as an
officer, director, or agent does not have the authority that a person in that position usually has in
the business of the corporation
...
Any contract not made in accordance with this statutory
authority may be unenforceable
...
g
...
Some provinces have enacted
statutes to grant authority to contract, but that authority is limited in much the same way as a
statutory corporation’s constitution limits its authority
...

Legality of Object
Lastly, a contract formed without any of the procedural defects outlined so far may still be
unenforceable if it has an object or purpose that offends public policy or violates statute law
...
If the
defendant introduces evidence that this presumption is not correct, the contract may be either
void or unenforceable
...
" If either party to a void
contract has partly performed, the court will attempt to restore the parties to their original
positions and release both parties from future performance
...

Other contracts are illegal as well as void
...
For example, if Party
A were to pay Party B in advance the sum of $1,000 to steal a car, and B later refused to steal a
car, A could not proceed through the courts against B for return of $1,000 because the contract
would be illegal
...


99

Canada Business Corporations Act, (CBCA), R
...
C
...
C
...
18 (Can
...
S
...
1990, c
...
16, s
...
(Ont
...
All rights reserved
...
Statutes that make
contracts illegal are created to express disapproval of actions that run contrary to the purpose of
the legislation
...
Agreements that contemplate commission of a tort such as slander, libel, trespass,
deceit, and incitement to break an existing contract with someone else; and
2
...

Agreements Against Public Policy
Finally, an agreement may be regarded as illegal if the subject matter is contrary to public
interest, particularly in the areas of relations with foreign countries, national defence, public
service, or administration of justice in Canada
...
To a limited
extent, the courts recognize the legitimate interest of an employer to protect itself from an
employee who might leave to start a competing business
...


SECTION 3-2: PRIVITY OF CONTRACT AND ASSIGNMENT OF CONTRACTUAL RIGHTS
So far the focus has been on the original parties to the contract
...
This section discusses the concept of privity of
contract, vicarious performance by a third party, and assignment of rights to a third party
...
All rights reserved
...
Such a third party would also be prohibited from suing on
the contract
...

Figure 3-16: Privity of Contract
Justification for Privity Rule

Problems and Detractions

1
...


1
...


2
...


2
...
Donoghue v
...


3
...


3
...
It is unduly
harsh that the party who is to benefit is
unable to enforce the contract
...

Figure 3-17: Exceptions to Privity of Contract
Exception

Description

Interests in land

Interests in land always go with the land; for example, a lease will bind the
original owner and tenant as well as anyone who purchases the land
during the lease term
...


Life insurance

A beneficiary can enforce a policy taken out by the deceased
...


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...


Business Law Notes

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Consumers in
New Brunswick

New Brunswick has passed legislation that gives the user of a consumer
product a right to sue the seller or manufacturer even though she is not
the buyer
...


Novation

A third party replaces an existing party to the contract
...
Novation can also amount to the substitution of a new
contract for an old one
...

For example, a manufacturer that publishes sales brochures used by
dealers can be sued for breach of warranty by the end consumer
...


Vicarious Performance
Vicarious performance refers to the situation where a party to a contract obtains someone
else to carry out his or her duties
...

The original promisor remains accountable for proper performance
...
As long as the work is done as well as
expected, the party entitled to performance has no complaint
...

Tort Liability
In the case of an employee who is negligent under tort law while performing a contract
vicariously, the employer is normally held liable for damages
...

Exemption Clauses
Employers may use exemption clauses to protect themselves from tort liability
...
N
...
1978, c
...
18
...


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...


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liability and thus keep the cost of their services affordable for purchasers, who often buy their
own insurance against loss
...
Rights assigned under contract are part of a larger classification of
rights to intangible property (such as patents, stocks, and contracts), called choses in action,
distinguishable from rights to tangible property (land, goods), called choses in possession
...

Figure 3-18: Assignments
Statutory Assignment

Equitable Assignment

Must be in writing
...


Must be absolute (unconditional and
complete) at the time it is created
...
g
...
g
...


Promisor must receive written notice
...

Equitable assignment is not available if the contract
states that rights are non-assignable
...
Therefore, if he
completes the obligations to the assignor because he is unaware of the assignment, the
assignee cannot require completion of the obligations as well
...
Where notice is received from two or more assignees, the debtor
must pay the assignee who first gave notice
...
An
assignee takes subject to the equities, which means that the assignee can never be in a
better position to sue the promisor than the assignor was
...
However, the promisor has the right to set off, that is, the right to deduct
existing debts owed to her by the promisee
...
All rights reserved
...
The personal representative is able to stand
in the deceased's shoes and assert the rights of the deceased and fulfil his or her obligations
...

Negotiable Instruments
Negotiation is the process of assigning a negotiable instrument, such as a cheque or
promissory note
...
Notice does not have to be given to the promisor;
2
...
The assignee can sue in his or her own name without joining the assignor as a party to the
action
...

However, to avoid disputes and costly litigation, all important contracts should be in writing, and
some should be witnessed as well to attest to their authenticity
...
When contracts are part oral and part
written, it can still be difficult to be sure what was agreed to
...
Not only does it make good business sense
to enter into written contracts, the law requires some contracts to be written if the parties want to
ensure that their interests are protected by law
...
All rights reserved
...
Despite the fact that an oral contract is otherwise valid, if it falls within the Statute, it is
unenforceable
...
Figure 3-19 outlines contracts that the Statute of Frauds requires to be in
writing
...


Because of the continuous nature of the
guarantor’s potential liability: “As with any
agreement extending over a long period of time,
memories become hazy, facts may be forgotten,
and interpretations may change
...


Due to the permanent nature of land and the
system of public records that allows parties to
discover who owns land
...


It is expected that these agreements will apply
to relationships over a long time
...


Because memories fail over time
...
In
contrast to a guarantee, a person who makes a promise to indemnify makes himself primarily
liable to pay the debt
...
For instance, if the plaintiff has taken
possession of the land and has begun to make improvements on it, this would constitute part
performance
...
Contain all essential terms of the contract, including the parties, a description of the subject
matter of the contract, and all material terms such as price; and

101

The Statute of Frauds, R
...
O
...
S
...

Willes and Willes, p
...


102

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...


Business Law Notes

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2
...
(This has
been liberally construed by the courts so that handwritten initials or a hand-printed name will
suffice
...

Effect of Contracts within the Scope of the Statute
The Statute of Frauds makes an oral contract unenforceable
...
The Statute has these
implications:
1
...

2
...

3
...

4
...

5
...

6
...

Consumer Protection Act 104
Growing concern about the power imbalance between businesses and consumers has led to
the creation of consumer protection laws covering both goods and services
...
105 Unless the business has complied with the
requirements of the law, the customer will not be bound by the contract
...
171
...
O
...
A, s 30 (Ont
...

105
Smyth et al
...
215-217
...
All rights reserved
...
g
...
Other common-law provinces still have such
requirements to protect sales of goods over a certain dollar amount
...


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...


Business Law Notes

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SECTION 3-4: INTERPRETING CONTRACTS
While great care may have been taken to ensure that a valid contract was created, problems
may later arise in the interpretation of the contract as its performance unfolds
...
As the old maxim
goes, "An ounce of prevention is worth a pound of cure
...

When a court is called upon to interpret a contract, its goal is to explain the meaning of the
agreement in a way that would most fairly give effect to the expectations of the two parties
...

However, a few basic concepts will be covered in this section
...
The literal or plain-meaning approach relies on the dictionary meaning of words to
determine what meaning a term of a contract should bear
...
The liberal approach determines the purposes the parties had in mind in drafting the
contract (or term) and construes the words actually used in light of that purpose
...
In making their decisions, the courts will consider oral
evidence from the parties and give the most weight to that which is corroborated or most
credible
...

The Parol Evidence Rule
The parol evidence rule does not allow a party to later add a term that was previously agreed
upon orally but was not included in the written contract
...
) To do justice to the parties, however, the courts often find ways to avoid the rule, as
shown by the various exceptions in Figure 3-21
...
All rights reserved
...

The missing term is:
• Part of a subsequent oral agreement with its own consideration that is a collateral
agreement to the written contract or that was made by the parties after the written
contract
...
e
...

Parol evidence may also be admitted to:
Prove that a contract is illegal or invalid due to incapacity, misrepresentation, fraud, duress, or
undue influence
...

Assist in interpretation of the express terms of the contract
...

Interpretation of contracts by acknowledging the existence of implied terms is very tricky
...

Since the courts may be reluctant to find implied terms in contracts, business people are
encouraged to make anything that is important to them an express term of the agreement
...


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...


Business Law Notes

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Contractual defects may either render a contract void (as though it never happened, with no
legal effect from the beginning) or voidable (valid unless and until it is rejected at the option of
one of the parties)
...
106
Mistake
The courts may grant relief when a party enters into a contract under a basic misunderstanding,
although not in every case
...
Furthermore, a mistake in judgment is not a basis for
escaping contractual liability
...

Remedies may be available to a party who makes a factual error, but a party cannot escape
contractual obligations for all factual mistakes
...

A
...

A unilateral mistake occurs when, prior to the formation of a contract, one party is mistaken
with respect to the meaning of a contract term, and the other party is aware of that mistake
...
A mutual mistake occurs
when both parties are unaware of the mistake at the time the contract was formed
...

(i) Words used inadvertently
If one party inadvertently uses the wrong words in stating the contract, and the court concludes
that it was reasonable for the second party to rely on the inadvertent words and enter into the
contract (e
...
, a price of $354 instead of $345), the contract will be binding on the first party
...
g
...
, Chapter 10 (Contractual Defects) and McCamus, Chapter 12
(Illegality)
...
All rights reserved
...
The courts will also consider the potential
hardship to each of the parties
...
In the very
rare situation where neither interpretation is more reasonable than the other, and the words
form a major term of the contract, the court will hold that no contract had been formed
...

If two equally careless parties use an ambiguous phrase, the court will refuse to decide between
their two conflicting interpretations with the result that the defendant's position becomes
stronger than the plaintiff's since the latter did not succeed in proving his or her interpretation
...
Mistaken Assumptions
Mistaken assumptions can be defined as mistakes concerning a matter relevant to the decision
to enter into a contract
...

(i) About the existence of the subject matter of a contract
When the subject matter of a contract does not exist, but both parties thought it did when they
made the contract (for instance, when the goods being sold are unknowingly destroyed in
transit), the contract is void
...
The court will grant relief only when it decides that the party adversely affected
should not be the one to bear the risk
...

The guiding principle is whether a party could reasonably have foreseen the consequences of a
particular risk at the time of making the contract
...
All rights reserved
...

(iii) The challenge of achieving a fair result
Where one or both of the parties change their position or forego an opportunity because of a
mistake in a contract, the court gives relief where it can achieve results reasonably fair to both
parties
...
Where no
remedy appears available, the loss will often be left to lie where it fell
...
Errors in recording an agreement: Mistakes in integration
Often parties will reach an oral or informal written agreement and later record the agreement in
a formal written contract
...
e
...
The credibility of the parties often becomes an
issue in this context because one party may well assert that the written form actually reflects the
true agreement
...

D
...
Whether the mistake is about assumptions
(the victim is misled about the identity of the rogue) or about the terms (the victim is misled
about the terms of the document), by the time the victim discovers he has been “duped,” the
rogue is usually long gone, and the victim is left dealing with an innocent third party who has
paid to receive the goods or documents
...
Lindsay, the
contract would be void
...


107

Cundy v
...
Cas
...
L
...
All rights reserved
...

In such a case, the vendor could not recover the goods from an innocent subsequent purchaser
...
In general, the courts tend to protect the innocent third party rather than the original seller
who took the risk of selling on credit without checking the rogue's identity
...
v
...
109
People who are blind, illiterate, or unable to read the language the contract was written in are
usually protected under the plea of non est factum (it is not my deed) since these people must
ultimately rely on the integrity of other people
...
However, it
is now unlikely that other people who sign documents can avoid liability to innocent third parties
except in extraordinary circumstances
...
Mistakes in Performance
When a party to a contract mistakenly gives a benefit to the other party (e
...
, pays too much),
the recipient will be required to restore the benefit to the mistaken party if that recipient knows of
the mistake
...
The courts have been moving gradually toward imposing an obligation based on
the concept of unjust enrichment: if in all circumstances the recipient would be unjustly
enriched by keeping the benefit, she will be ordered to make restitution to the mistaken party
...
A pre-contractual statement is
material if a reasonable person would consider the fact relevant to the decision to enter into the
contract
...
Figure 3-22 discusses what constitutes a statement of fact, including the role of silence
...
v
...
L
...
98 (C
...

Marvco Color Research Ltd
...
Harris, (1982) 2 S
...
R
...


109

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...


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Figure 3-22: Misrepresentation?
Item

Description and Whether Fact or Not

Sales talk

A reasonable person would not rely on vague and imprecise expressions or
statements “puffing up” or aggrandizing the virtues of the product
...


Opinion

If a person with no particular expertise in an area gives his understanding of what
something is capable of, this is an opinion
...
110

Promises

Promises and statements of future conduct are representations that something
will happen in the future, not facts
...


Silence

There is typically no duty to disclose, so silence in and of itself is not a
misrepresentation
...


There are three types of misrepresentation, as set out in Figure 3-23
...

The remedy for breach of a warranty is contractual damages, and contractual damages may
well be a more effective remedy than rescission or even than damages for deceit or negligence
...
Rescission – the contract is voidable or cancellable at the option of the victim; the aim is to
restore the parties to their pre-contract state
...
328
...
All rights reserved
...
Restitution – involves the giving back of benefits already received under the contract, e
...
,
supplies or funds; it often accompanies rescission
...
Damages – monetary compensation for losses that a person suffered as a result of relying
on a misrepresentation (arise under tort law)
...
Undue Influence
Undue influence refers to improper use by one person of the power he or she has over another
person to compel the other person to enter into a certain contract
...
A contract reached through undue influence is voidable at the
option of the victim, provided he or she acts promptly upon being freed from the domination
...
The "stronger" party may rebut the presumption by showing that no undue influence was
exerted
...
The courts have tended to reject allegations of undue influence
where the parties have received independent legal advice at the time of the contract
...
Duress
Duress is the use of actual or threatened violence as a means of coercing a party to enter into a
contract
...
As far
as the contract is concerned, the agreement is voidable at the option of the victim
...


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...


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SECTION 3-6: THE DISCHARGE OF CONTRACTS
When a contract is discharged, all obligations under it are brought to an end
...
111
Discharge by Performance
Discharge results when adequate performance in accordance with the contract has been
completed by both sides
...
In some contracts, time is not of the essence and late performance
will be allowed, although the party who performs late will be liable for any losses the other party
suffers as a result
...

Tender of Payment
Most contracts require payment of money by at least one of the parties
...
g
...
As well, the debtor has the primary obligation
of locating the creditor and tendering payment, but he is not required to actually tender payment
if the creditor has indicated beforehand that it would be refused
...
For debit and credit cards, the most
common issue is unauthorized use
...


111

Adapted from McInnes et al
...
252
...
All rights reserved
...
All rights reserved
...
A party is discharged of its duty
to perform if the other party renders performance impossible
...
For example, one party may have a contract to make repairs to a
house, but the other party denies access to the premises when the person arrives to do the
work
...

When a person tenders performance, she should have the tender acknowledged or least
witnessed by a third party who can testify to the person's willingness to complete her contractual
obligations
...

Discharge by Agreement
A contract can also be discharged when the parties agree not to perform the contract, as
illustrated in Figure 3-25
...


Condition
subsequent

The contract states that the agreement will be terminated if a certain event
occurs, e
...
, a ticket to an open-air concert may state that the musician’s
obligation to perform is no longer valid in the event of rain, although the ticket
holder may be entitled to a refund or rain date
...
g
...


Rescission

The parties agree to bring their contract to an end
...


Release

The parties agree to discharge a contract without any new consideration, signing
an agreement under seal
...
It requires
fresh consideration
...
All rights reserved
...
In
effect, one contract is discharged and replaced with a new contract
...


Waiver

A waiver is an agreement not to proceed with the performance of a contract
...
The
person receiving the waiver is entitled to rely on it, although a party can retract a
waiver with reasonable notice
...
Frustration is similar to mistaken assumptions, but it relates to future events rather
than events that existed at the time the contract was made
...
The doctrine of frustration
excuses a party from performance when external circumstances make performance impossible
or have changed so much that performance would mean something much different than
originally intended by the parties
...
g
...


A person rents accommodations with a
view to attending a special event, but
the event is cancelled
...

Performance is subsequently prohibited by law
...
The frustrating event occurred after the making of the contract
...
The frustrating event makes performance impossible or undermines the purpose of the
contract—it does not just create an unforeseen hardship, such as making something more
expensive to do
...
The frustration must not be self-induced
...
All rights reserved
...
Both parties are immediately discharged from liability under
the contract
...
The performing party who has incurred expenses can retain or recover an amount not
exceeding the payment made or due
...

In provinces without a Frustrated Contracts Act, the common law position is that:
•

The contract is discharged, and both parties are freed from further performance under its
terms; any performance already due under the contract is still enforceable
...
If he has
received even the slightest benefit, the deposit is forfeited
...

Breach of Contract
A breach of contract occurs when one or other of the parties fails to live up to its obligations
under the contract
...
Therefore, breach of contract will be dealt with in a separate
section below
...
S
...
1990 c
...
1, s
...

Frustrated Contracts Act, R
...
O
...
F
...
3(2) (Ont
...
All rights reserved
...

A minor breach of contract is the “breach of a non-essential term of a contract or of an
essential term in a minor respect,” while a major breach is a “breach of the whole contract or of
an essential term so that the purpose of the contract is defeated
...
Alternatively, the innocent party may elect to continue with the contract but will still be
entitled to claim for damages
...

In distinguishing between a major breach and a minor breach, the law distinguishes among
three types of contractual terms
...
” 115 Breach of a condition would deprive the other party of the
expected benefit of the contract, while breach of a warranty would not
...
116
Ways to Breach a Contract
There are four different ways a breach of contract may occur: express repudiation, implied
repudiation, self-induced impossibility, and failure of performance that constitutes a fundamental
breach
...
Such a declaration may occur before (anticipatory breach) or after performance
begins
...
, p
...
A condition in this context should not be confused with the use of the word
“condition” as part of a condition precedent or a condition subsequent, discussed earlier under discharge
of contract by agreement
...
, p
...

116
McInnes et al
...
265-266
...
, pp
...
244-246
...
All rights reserved
...
Alternatively, the injured party may continue to insist on
performance and then sue for breach if the other party fails to perform; however, he risks that
intervening events might provide the other party with an excuse for non-performance
...
However, if the breach is not accepted, the duty to mitigate does not start until the
breach actually occurs
...
This remedy and others
will be discussed later
...

Implied Repudiation118
This type of anticipatory breach has to be inferred from the actions of one of the parties or from
statements made by her before the time fixed for performance of the contract
...
However, it is
always risky to treat the contract at an end and stop performing one’s own obligations, since if
the other party does end up performing, one may actually end up being in breach of contract
...
119 In effect, this is a self-induced frustration
...

Failure of Performance (Defective Performance)
Failure of performance, or inadequate performance, occurs when one party fails to properly
perform an obligation due under a contract
...
For example, failure of performance
would occur if a wedding photographer did not show up for the wedding
...
Finally, slightly inadequate performance might occur if the photographer took
only 375 pictures instead of the promised 400
...
246-247
...
, p
...


119

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...


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some terms of the contract but failure to perform on other terms
...

Unlike the other types of breach discussed so far, failure of performance does not usually
become apparent until the time for performance has come or until performance is already in
progress
...
More will be said about this in the next section
...
This is according to the doctrine of substantial
performance, which stipulates that where a contract is substantially performed but defective or
incomplete in some minor respect, the other party must perform its part of the bargain
...
If an
injured party elects to proceed with the contract and take benefits under it despite a major
breach, he or she may not later treat the contract as discharged
...

Often, it is difficult for the injured party to assess whether the breach is of a serious enough
nature for her to consider her own obligations at an end, especially when the breach involves
only one or two terms of the contract
...

If a contract price is to be paid by instalments or goods are to be delivered by instalments, a
missed payment or deficient delivery may not be serious enough to free the injured party unless
he or she can establish a likelihood of further defective performance and a significant loss in
relation to the whole contract
...
Consumer protection legislation in some provinces
restricts the use of acceleration clauses in consumer contracts
...
All rights reserved
...
Courts are wary of
exemption clauses because of the advantageous position of the party creating a standard form
contract
...
If there was inadequate notice of the term (and the onus is now on the defendant to prove
that was the case), the injured party will not be bound by it
...
An exemption clause will be very strictly construed against the drafting party
...
An exemption clause will not excuse a fundamental breach, i
...
, one so serious that it
defeats the whole purpose of the contract, unless the clause directly excuses such a breach
or unless the clause was intended by both parties to have such an effect
...
All rights reserved
...
Each will be discussed below, with most of the attention
focused on damages
...
All rights reserved
...
The goal of damages in contract
law is to place the injured party in the same position as if the contract had been completed
...

To qualify, damages must be for losses that are reasonably foreseeable
...
As well,
damages will not be paid for losses that the plaintiff did not take reasonable steps to mitigate
...
120
Figure 3-28: Types of Damages
Type

Description

Expectation
Damages

An amount awarded based on the expected profit or monetary benefit the
plaintiff expected to receive pursuant to the contract
...


Account of
Profits

Where the defendant ends up with a gain as a result of the breach, the
plaintiff may sue for damages based on that gain (rather than on his or her
own loss)
...


Liquidated
Damages

This is an amount of damages agreed to in advance by the parties for breach
of contract
...


Punitive
Damages

Unlike the other categories of damages, which all compensate for a loss,
these damages are intended to punish the defendant and discourage bad
behaviour
...
As well, the courts may award
general damages for harm that cannot be quantified with precision but which the courts believe
are necessary to fairly compensate the injured party
...


120

McInnes et al
...
275-286
...
All rights reserved
...
Such remedies are given at the court's discretion, and a plaintiff cannot claim such
a right automatically on breach of contract
...
e
...

Specific performance requires one party to the contract to perform what he or she has agreed
to do in the contract
...

For example, the defendant may be required to proceed with the sale of the house to the
plaintiff
...
An injunction is generally not awarded against an employee when the effect would
be to leave the employee no alternative but to work for the original employer or remain
unemployed
...

Rescission attempts to return the parties to the positions they were in before the contract was
made
...
Rescission is generally used for durable goods that fail to perform as
promised but have not been damaged
...
It may also be used in sales of land, where, for example, the vendor
would prefer to just return the down payment and retain possession of the land
...

The court will award what is reasonable under the circumstances
...
All rights reserved
...
An intention to create legal relations:
a
...

b
...

c
...

d
...

2
...

b
...

d
...
Which of these is not consideration or acceptable in lieu of consideration?
a
...

c
...

4
...

A promise to perform a pre-existing contractual obligation to a third party
...

A little red sticker
...
Is considered necessary since all minors need cell phones and therefore would be
binding on the minor
...
Is considered a contract for beneficial service and therefore would be binding on the
minor
...
Would have to be repudiated by a minor promptly after becoming an adult or the
minor would be liable under its terms as if he or she had been an adult all along
...
Could be repudiated by the minor, and the minor would not have to pay for cellphone services received before or after repudiation
...
The privity of contract rule:
a
...

b
...

c
...

d
...

6
...

b
...

d
...

Vicarious performance
...

A statutory assignment
...
All rights reserved
...
Under The Statute of Frauds, a note or memorandum of the contract must:
a
...

c
...


Contain all essential terms of the contract
...

Be in one document
...


8
...
Must be in writing, with notice to the promisor
...
May be conditional or incomplete, thereby allowing freedom for an ongoing
transaction
...
Means that the other party must complete his or her obligations to the assignor and
the assignee
...
Puts the assignee in a better position than the assignor in a lawsuit
...
This is a term not expressly included in the contract by the parties but one that a reasonable
person would have included had the person thought about it:
a
...

c
...


Express term
...

Parol term
Mistaken term

10
...
A contract that does not meet seven key requirements from intention to create
relations through legality
...
A contract with no legal effect from the beginning, as though it never happened
...
A contract that is valid unless and until it is rejected at the option of one of the
parties
...
A contract with a mistake in it
...
When one party inadvertently uses the wrong words in stating the contract, the contract will
be:
a
...

b
...

c
...

d
...

12
...
The contract is void
...
The injured party may be allowed to repudiate the contract if the court decides he or
she should not be the party to bear the risk
...
Either party may repudiate the contract since they were both aware at the time of the
contract that the value of the subject matter might change
...
All of the above
...
All rights reserved
...
Non est factum is:
a
...
The contract would be void
...
A rule used in standard form contracts that are vague but held to be enforceable
...

c
...

d
...

14
...

b
...

d
...

An expert opinion
...

All of the above
...
Which of these are not true of undue influence?
a
...

b
...

c
...

d
...

16
...

b
...

d
...
Discharge by frustration happens when the frustrating event occurs after the contract was
made and external circumstances:
a
...

b
...

c
...

d
...

18
...

b
...

d
...
All rights reserved
...
This remedy for breach compensates the victim for the time, effort, and expenditure wasted
in preparation for performance of the contract:
a
...

c
...


Reliance damages
Expectation damages
Account of profits
Nominal damages

20
...

b
...

d
...
All rights reserved
...
B
...
A subjective
test, as in A, would be too difficult to apply because people could lie about their intentions
...

2
...
This is a counter-offer, which has the effect of being a rejection of the original offer and a
termination of it
...
A
...
B and C are consideration
...

4
...
A cell phone is an ongoing contract and, as such, would need to be repudiated promptly
upon the minor reaching the age of majority, or the minor will be liable as though an adult all
along
...
Regarding B, beneficial contracts of service are things like employment and co-op
terms
...

5
...
All are true about privity
...
Another
exception is an interest in land and a life insurance policy
...
B
...
This is permitted when personal performance is not the
reason for the contract
...
Vicarious liability refers to the fact that an employer
may be held liable for acts committed by his or her employee
...

7
...
The note must contain all essential terms
...
It may be in one document or several taken together
...
A
...
It also requires written notice, whereas notice is
advisable but optional for equitable assignments
...
In either case,
the other party has to complete his or her obligations only once
...

9
...
It is an implied term
...
A mistake regarding a
term means that there never was a meeting of the minds about that term
...
B
...
The requirements in A are
for a valid contract
...
A contract with a mistake may be void,
voidable, or even valid, depending on the type of mistake
...
All rights reserved
...
C
...
g
...
The contract will only become voidable by the party making the mistake if
the court concludes that a reasonable bystander would know a mistake had been made in
expressing the terms of the contract
...
B
...
When both parties
were aware at the time of the contract that the value of the subject matter might rise or fall
quickly, the agreement will bind them
...

13
...
The non est factum defence (“it is not my deed”) is available only to select people such as
those mentioned since they have to rely on the integrity of other people
...
C is consensus ad idem, referring to a meeting of the minds
...

14
...
Only an expert who gives an opinion could be held to have made an implicit statement of
fact
...

15
...
Undue influence makes the contract voidable at the option of the victim as long as the
victim acts promptly upon being freed from domination
...
C
...
In contrast, novation
involves substantial changes to the terms of the contract
...
D
...

18
...
Failure of performance can vary from slightly inadequate performance to grossly
inadequate performance to total failure to perform
...
A
...

20
...
Quantum meruit provides a reasonable payment, based on the circumstances, as a
remedy for breach when there is no express agreement on how much is to be paid or when
the work that has been done is less than what was contracted for
...
All rights reserved
...
It begins with the basic rules of
agency relationships and then provides a discussion of the basic forms of business
organizations (sole proprietorships, general partnerships, limited partnerships, and
corporations)
...


SECTION 4-1: AGENCY RELATIONSHIPS
What is Agency?
Most people are familiar with the use of the word “agent” from interactions in their daily lives
...
More formally, agency “is
a relationship that exists when one party represents another party in the formation of legal
relations
...
” 121 Agents are often
given authority to bind principals in contractual relationships
...
Express authority (agency by express agreement) – An oral or written contract appoints
the agent and gives her specific authority to act on behalf of the principal
...
Apparent authority (agency by conduct; agency by estoppel) – No agreement exists,
but the actions or statements of the principal give a third party a reasonable impression that
the agent has authority to act on behalf of principal
...
Ratification – There is no express or apparent authority, but a principal accepts a contract
that was negotiated on his behalf without his authority
...


121

DuPlessis and O’Byrne, p
...


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...


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Figure 4-29: Ratification of an Agency Relationship
Requirements:
1
...

2
...

3
...
If not, a new agreement is formed
between the principal and the third party directly
...
The principal must have been identified by the agent at the time of negotiation
...
The principal has the legal capacity to enter into the contract both at the time of
negotiation and ratification
...
In this context,
actual authority refers to authority that was:
1
...
Could be implied by the principal’s conduct (e
...
, principal pays for the goods); or
3
...
g
...

The principal is bound whether or not the third party is aware of the exact scope of the agent’s
actual authority
...
The term holding out is used to
refer to conduct where a principal represents someone to be its agent
...
A third party will not be able to enforce a contract if it knew, or should have
known, that the agent did not have authority to bind the principal
...
In effect, the principal

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establishes the contract retroactively, thus placing the principal, agent, and third party in the
same position as they would have been in if the agency relationship had existed at the time of the
contract
...
As long as
the agent had authority to act on behalf of the principal, the third party can hold either the agent
or the principal liable if the third party later discovers the person it dealt with was only an agent
...
This
would be considered a breach of warranty of authority
...

Figure 4-30: Responsibilities of Agent to Principal
Responsibility

Description

Duty to comply with the
agency agreement

The agent has to comply with the express and implied terms
(based on custom) of the agency agreement
...
When a business is
appointed an agent, responsibility may, of necessity, be
delegated to others in the organization
...
The agent has to act in good faith
and in the best interests of the principal
...
Avoid conflicts of interest, where personal interests conflict
with the best interests of the principal
...
Disclose anything that may be relevant to the principal’s
interests
...
Not personally profit from information or opportunities as a
result of the agency relationship
...
Not compete with the principal
...


Duty of care

The agent is required to take reasonable care in the performance
of its responsibilities
...


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Responsibilities of Principal to Agent
The principal is required to:
1
...

2
...

Termination of Agency Relationship
Termination of an agency relationship may occur in a number of ways:
1
...
On notice by either party; or
3
...


SECTION 4-2: LEGAL FORMS OF BUSINESS
In Canada, there are three basic ways to carry on business: sole proprietorship, partnership
(general, limited, and limited liability), and corporation
...

Sole Proprietorships
A sole proprietorship is one individual carrying on business on his or her own (under his or her
own name or a business name) without adopting any other form of business organization such
as incorporation
...

Figure 4-31: Implications of Sole Proprietorship
The sole proprietor is legally responsible:
1
...

2
...

3
...

Thus, the main disadvantage of the sole proprietorship is unlimited personal liability, which
means that third parties are entitled to take the sole proprietor’s personal assets, as well as the
assets of the business, to satisfy the business’s obligations
...
All rights reserved
...
An
HST number may be required depending on the type of business and if the supply of HST
taxable goods/services exceeds $30,000
...
g
...
Registration would have to be done in every
province/territory in which the business operates
...
For example, a municipal
licence is required by taxi drivers, electricians, and restaurant operators
...

General Partnerships
While there is no distinct body of law relating to sole proprietorships, there is a well-developed
body of law—initially common law and now codified by statute—governing the affairs of a
partnership
...
” 123 Thus, a partnership is a joint business enterprise carried on for profit
...
The sharing of profits is an essential element of a partnership, as evidenced by
the phrase with a view of profit
...

Figure 4-32: Is the Relationship a Partnership?
Factors besides sharing of profits that suggest the existence of a partnership:
•

Contribution of property or labour to the enterprise

•

Guarantee of partnership debts

•

Joint ownership of property

•

Participation in management, including having signing authority for contracts and bank
accounts, and access to information about the business

•

Holding oneself out as a partner, or allowing others to do so
...
S
...
1990, c
...
17, s 2(2) (Ont
...
c
...
1(1)
...
S
...
1990, c
...
5, s
...

123

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...


Business Law Notes

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The Legal Relationship Between Partners
Partners have both obligations and rights pursuant to either statutes and/or a partnership
agreement
...
Debts and obligations of the partnership incurred while he or she is a partner;
2
...
Misapplication of trust funds placed in the care of the partnership
...
Therefore, actions taken by one partner
bind all of the partners
...
As well, each partner owes a fiduciary duty to the other partners, i
...
, a duty to act
honestly and in good faith with a view to the best interests of the partnership
...
The implications of
this are discussed in Figure 4-33
...
Each partner is personally liable to creditors to the full extent of his personal assets,
regardless of his partnership contribution and share of the profits
...
Partnership assets are also available to personal creditors of a partner
...

3
...
To free himself from liability, a retiring partner must notify all persons who have
dealt with the firm and must place an appropriate newspaper advertisement for other
persons
...

A partnership agreement does not have to be in writing to be legally enforceable unless it

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extends beyond one year, and performance has not yet begun
...

A good partnership agreement will clearly set out the business objectives, partners'
responsibilities, capital contribution, sharing of profit and losses, procedures for settling disputes
(usually by arbitration), and provisions for an efficient and peaceful dissolution
...
However, Ontario’s Partnerships Act sets out certain terms that
will be implied if those matters are not expressly covered in the agreement
...

Figure 4-34: Implied Statutory Partnership Rules 124
Term

Description

Sharing of
Profits/Losses

Each partner is entitled to an equal share of profits and is
responsible for an equal share of losses
...


Partnership Property

Property brought into the partnership or purchased with partnership
monies (except if designated to remain personal) must be held and
used exclusively for the partnership
...


Salaries

A partner is not entitled to be paid a salary for engaging in
partnership business
...


Access

Each partner has equal access to books/records
...


Other Decisions

Unanimous consent is required to admit a new partner, terminate a
partner, change the nature of the business, or change the default
partnership rules
...
These implied terms cannot
be opted out by agreement
...


124

Partnerships Act, R
...
O
...
P
...
20-31 (Ont
...


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Legal Requirements
As is the case with sole proprietorships, partnerships also require an HST number and business
name registration
...

In the absence of express agreement, the Partnerships Act specifies rules governing
termination
...
g
...
Agreement of the partners
...

2
...

4
...


On dissolution of a partnership, section 44 of the Partnerships Act 126 provides a framework for
dealing with claims against the partnership, as shown in Figure 4-35
...
S
...
1990, c
...
5, ss
...
Other provinces have similar rules
...
S
...
,1990, c
...
5, s
...
Once again, other provinces follow a similar
process
...
All rights reserved
...
There must be at least one or more general partners whose liability is
unlimited
...
It can be a difficult balancing act—if the limited partner chooses to exercise some
control, she will incur unlimited liability; but if she does not, there may be instances where the
business is at risk to fail
...
Limited partnerships are not often used, except for tax-planning
purposes
...

Limited Liability Partnerships
A limited liability partnership (LLP) is a special form of partnership for certain professions,
such as lawyers and accountants
...
A partner remains liable for
his own negligence and for that of people under the partner’s direct supervision or control
...
Therefore, a non-negligent partner may still lose the entire value
of his partnership share but will not lose personal assets
...
By
contrast, legislation in other provinces provides broader protection
...
Saskatchewan holds only partners
in an LLP personally liable for obligations that a director would have
...
127

127

S
...
1998 c
...
S
...
1990, c
...
6 (Ont
...
A
...
27 amending
Partnership Act, R
...
A
...
P
...


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...


Business Law Notes

P a g e | 100

All provinces require a written agreement that designates the partnership as an LLP
...
L
...
An LLP is the same as a general partnership in all other respects
...
As an artificial person,
a corporation has a continuous existence independent of the existence of its owners, and it has
powers and liabilities distinct from its owners
...
It may
enter into contracts, sue, and be sued
...
The
corporate form of ownership is covered extensively in the next section
...
It is used for all types and
sizes of businesses, from one-person operations to large multinationals
...

Nature of a Corporation
As noted above, a corporation is a person in the eyes of the law
...
It also draws attention to the special impact on
shareholders of small private companies
...


Shareholders have limited liability: their
liability for the corporation’s debts is
limited to their investment (i
...
, what they
paid for their shares)
...
Limited liability will not
necessarily protect shareholders from
personal liability for their own acts
...
, p
...


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...


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Distinct from
Shareholders

A corporation is a distinct entity
from its shareholders
...
They owe no duty
of good faith to the other owners and can
deal with the corporation as though they
were strangers
...


Shareholders are free to sell their shares
to someone else, subject to certain
requirements that may be set out in the
articles of incorporation (i
...
, the consent
of majority of directors)
...


Control

An elected board of directors has
authority to make all decisions
...


Shareholders elect a board by a majority
vote
...
In a small corporation,
however, shareholders are often also
directors and officers
...


Shareholders pay tax only on dividends
(cash or property) received as a return
on their investment
...
Only
duly appointed officers,
employees, or agents may bind
the corporation to contractual
obligations
...


Methods of Incorporation
Ontario, British Columbia, Alberta, Saskatchewan, Manitoba, New Brunswick, and
Newfoundland and Labrador, and the federal Parliament all permit incorporation by articles of
incorporation
...
E
...
still use the older system of letters patent, while Nova
Scotia uses a memorandum system, in which corporations file a memorandum and are issued a
certificate of incorporation
...
g
...
However,
a business incorporated in one province or under the federal jurisdiction is free to carry on
business throughout Canada and abroad
...
Once incorporated, a company is bound by the laws of the
jurisdiction where incorporation occurred
...
All rights reserved
...
The government office, in turn, issues a certificate of incorporation
...

Once the company has been incorporated, by-laws are adopted
...
Other
by-laws give directors or officers authority from the shareholders to carry out specific
transactions that require approval under terms of the statute or charter
...
E
...
) permit the formation of private companies,
where the right to transfer shares is restricted, the number of shareholders is limited, and no
invitation can be made to the public
...

The two types of corporations are also distinguished by the terms widely held and closely held
...
Closely held corporations restrict the transfer of their shares and do not
issue shares to the general public; thus, they have a small number of shareholders
...
130
Incorporation statutes apply to both widely and closely held corporations, but they impose
additional obligations on the former
...
These companies
are also subject to regulation under the relevant provincial securities acts for the provinces
where shares are issued or traded
...

McInnes et al
...
532
...
, pp
...

131
Smyth et al
...
617
...
All rights reserved
...
Equity financing refers to “what
shareholders have invested in the corporation in return for shares,” while debt financing
“consists of loans that have been made to the corporation
...
However, Figure 4-37 sets out some of the basic differences between equity and
debt financing
...

Figure 4-37: Equity vs
...


Bonds represent debt
...


Bondholders have a claim for a fixed amount
(principal and interest)
...
They are
paid out of after-tax profits and thus are not
tax-deductible by the corporation
...


If dividend payments are not made,
shareholders may have no remedy
...


On dissolution of the corporation, at least one
class of shareholders will receive property that
remains after all other claims have been paid
...


Share Capital
Most corporations have one class of shares called common shares, whose holders have the
three rights referred to above: “rights to vote, to receive dividends, and to receive the remaining
property of the corporation upon dissolution”
...
They may or may not have the right to vote
...


132

McInnes et al
...
536
...
, p
...


133

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...


Business Law Notes

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Authorized capital is the maximum number (or value) of shares a corporation can issue
according to its charter
...
Issued capital refers to shares that have been issued by a corporation; since shares must
now be fully paid for when issued, it equals paid-up capital (shares issued and fully paid for)
...
Par value is a nominal value
attached to a share at time of issue; most jurisdictions (those using articles of incorporation) no
longer have par value shares
...
” This definition refers to the two distinct types of corporate activities delineated
in the Canada Business Corporations Act (and the corresponding provincial statutes, including
the Business Corporations Act):
a) “The affairs: the internal arrangements among those responsible for running a
corporation”: directors, officers, and shareholders
...
” 134
Internal Affairs
Role of Directors
The shareholders of a corporation elect a board of directors to manage the affairs and business
of a corporation
...
135
Figure 4-38: The Role of Directors
Powers of Directors:
1
...

2
...

3
...

4
...

5
...

134

Smyth et al
...
628
...
S
...
1985, c
...
44, ss
...
)

135

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...


Business Law Notes

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Role of Officers
The officers exercise authority (as delegated by directors) for managing the day-to-day
operations of the company
...
g
...

Duties of Directors and Officers
Section 122 of the CBCA imposes two main duties on directors and officers:
1
...
”
2
...
” 136
These duties are also imposed at common law
...

Traditionally, in British and Canadian common law, these duties are owed to the corporation
(not the individual shareholders, other stakeholders, or the public)
...

However, the court also stated, “We accept as an accurate statement of the law that in
determining whether they are acting with a view to the best interests of the corporation it may be
legitimate…for the board of directors to consider inter alia the interests of shareholders,
employees, suppliers, creditors, consumers, governments, and the environment
...

While some courts have held that directors and officers are not personally liable for tortious
actions as long as they were acting in “furtherance of their duties to the corporation and their
conduct was justifiable,” recent Ontario case law seems “to suggest that directors and officers
will almost always be responsible for their own tortious conduct even if they were acting in the
best interests of the corporation
...
S
...
1985, c
...
44, s
...

th
Peoples Department Stores Inc
...
Wise (2004), 244 DLR (4 ) 564 (S
...
C
...
582
...
385
...
All rights reserved
...

Directors may also face statutory penalties (including imprisonment) and fines for unpaid taxes
as well as under environmental protection and other regulatory schemes
...

Rights of Shareholders
Shareholder rights derive from two main sources: the articles of incorporation and securities
legislation
...

Shareholders also have a right to access certain information, including articles, by-laws, minutes
of shareholder meetings and shareholder resolutions, the share register, and financial
statements
...

Shareholder Remedies
There are several shareholder remedies to assist shareholders whose interests have been
injured by the acts of the corporation or its directors and officers
...

Figure 4-39: Shareholder Remedies
Remedy

Description

Derivative
Action

Allows shareholders to pursue a legal claim against a wrong done to the
corporation if the directors and officers fail to do so
...


Oppression

Allows shareholders to apply to the court to obtain relief against management
and the corporation when management fails to act in their best interests (e
...
,
when management’s actions benefit the majority shareholder to the exclusion
or detriment of minority shareholders or when management is planning to
eliminate minority shareholders)
...


139

McInnes et al
...
553
...
All rights reserved
...
g
...


The “Business”: External Relations
The external obligations of corporations, pursuant to corporate governance, can be broken
down into three broad categories:
1
...

2
...

3
...

Civil Liability
Civil Liability in Contract
A corporation is liable for acts of its agents under the ordinary rules of agency
...
However, a contracting third party who knows about a particular restriction will be
bound by it
...
A directing mind is “a person who has responsibility to establish corporate
policy in the area in which the offence occurred”
...


140

McInnes et al
...
560
...
All rights reserved
...
Therefore, two types of rules have been designed to preserve the capital of a
corporation:
1
...
A corporation becomes insolvent when it has liabilities in
excess of the realizable value of its assets or when it is unable to pay its debts as they come
due
...

2
...
g
...

If the directors violate either of these two tests, they might become liable for debts of the
corporation
...
These objectives are accomplished
by registering or licensing those engaged in various aspects of the securities business, by
requiring the issuer of securities to the public to file a prospectus with the securities commission,
and by imposing continuing disclosure requirements
...

Protection of the Public Interest
Liability imposed under statutes and government regulations more closely resembles criminal
liability than civil liability
...
” 141
Penalties for failure to comply include both fines and imprisonment
...
385
...
All rights reserved
...

A regulatory offence imposes a broader definition of mens rea (“guilty mind”) than under criminal
law; it may be sufficient to show that the accused should have known that his or her conduct
would result in the commission of the offence
...


Strict Liability

The accused can avoid liability by showing she took all reasonable care
...
In general, the prosecution must prove,
beyond a reasonable doubt, that the accused committed the act or
omission that is the subject of the offence and also that the accused had
mens rea
...
v
...
142 first established the
principle that a corporation can commit an act requiring a guilty mind
...

Thus, the corporation and/or its directors and senior officers may be found guilty of criminal
offences
...

Recent changes to the Criminal Code have increased the exposure to criminal liability in three
ways:
1
...
Therefore, corporate criminal liability can be established in multiple employees with
different responsibilities
...
The physical act may be committed by any employee or contractor or a combination of
them
...
Ltd
...
Asiatic Petroleum Co
...
, (1915) A
...
705 (H
...


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...


Business Law Notes

P a g e | 110

3
...
143

143

Criminal Code, RSC 1985, c
...
46, ss
...
1, 22
...


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...


Business Law Notes

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STUDY QUESTIONS FOR PART 4: BUSINESS ENTITY LAW
1
...

b
...

d
...

Ratification must occur within a reasonable time after creation of the contract
...

All of the above are true
...
The term “holding out” refers to:
a
...

c
...


The principal having legal capacity to enter into contracts
...

Authority that is implied by the usual authority given to someone in that position
...


3
...

b
...

d
...
What determines whether a business relationship constitutes a partnership?
a
...

b
...

c
...

d
...

5
...
A partner is entitled to be paid a salary for engaging in a partnership basis
...
A partner is not entitled to interest on capital contributions to the partnership but is
entitled to interest on loans to it
...
Unanimous consent is required to admit a new partner
...
All of the above are implied terms
...
In this type of partnership, individual partners are not personally liable for professional
negligence of their partners:
a
...

c
...


General partnership
Limited partnership
Limited liability partnership
All of the above

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...


Business Law Notes

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7
...

b
...

d
...

They elect a board of directors
...

All of the above are true about shareholders
...
Which of the following generally have the authority to bind a corporation in contractual
relations?
a
...

c
...


Shareholders and the board of directors they elect
...

Duly appointed officers, employees, or agents
...


9
...

b
...

d
...
Dividends are:
a
...

b
...

c
...

d
...

11
...

b
...

d
...
This shareholder remedy entitles a shareholder who is opposed to fundamental changes
such as the sale of substantially all of a business’s assets to have the corporation buy his or
her shares:
a
...

c
...


Dissent and approval
Derivative action
Winding up
Oppression

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...


Business Law Notes

P a g e | 113

13
...
Corporation A is now claiming that its Chief
Financial Officer did not have the authority to obtain the loan and therefore is refusing to
honour the terms of this bank loan
...
Corporation A will not be bound by the loan because the CFO would not normally be
involved in a borrowing transaction
...
Corporation A will be bound by loan since everything appears to have been done
properly in the eyes of Bank B as an outsider
...
Corporation A will be bound even if there was a restriction on the CFO’s authority to
transact loans as long as Bank B did not know about this restriction
...
Both B and C
...
In the case of a regulatory offence by a corporation involving a serious violation of health
and safety legislation, the “guilty mind” in the burden of proof refers to the fact that:
a
...

b
...

c
...

d
...


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...


Business Law Notes

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ANSWERS FOR PART 4: BUSINESS ENTITY LAW
1
...
If the principal does not accept the whole agreement, a new agreement is formed
between the principal and the third party directly
...
D
...
C
refers to commercial usage
...
B
...

4
...
The court does look at substance, but sharing of profits is an essential element of a
partnership by virtue of the Partnership Act
...

5
...
Partners are not entitled to be paid a salary
...
C
...
In some provinces, this protection also applies to other torts,
breaches of trust, and contractual obligations, but not in Ontario
...
C
...

8
...
Only duly appointed officers, employees, or agents may bind the corporation to
contractual relations
...
D
...
Nova Scotia and P
...
I
...

10
...
Dividends are declared by directors at their discretion—they are not owed and
shareholders may have no remedy if they are not made
...
They are made out of after-tax profits and thus are not tax-deductible
...
B
...

12
...
Dissent and approval entitles a shareholder who is opposed to fundamental changes
such as the sale of substantially all of a business’s assets to have the corporation buy his or
her shares
...
D
...

14
...
Since this is a statutory offence, the definition of mens rea is broader than under criminal
law
...


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...


Business Law Notes

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PART 5: BUSINESS RELATIONSHIPS
The law also impacts the relationships businesses have with customers at the time of sale (Sale
of Goods Act) and thereafter (consumer protection law), as well as with banks, creditors,
employees, competitors, the environment, and trading partners around the world
...


SECTION 5-1: SALE OF GOODS
Contracts for sale of goods are the most common type of contract
...
144
Freedom of contract is preserved since the parties may come to their own terms
...
In other words, the Act provides a set of default rules
...
The statutes in the other provinces are almost
identical
...

Figure 5-41: Definition of a Sale of Goods
What is Covered

What is NOT Covered

Sale

A transfer of ownership of goods as soon as
a contract is created (sale) or sometime
thereafter (agreement to sell)

Leases, gifts, security for loans,
consignments

Goods

Tangible (physical) things that can be moved,
e
...
, cars, books, crops

Land and anything attached to it;
intangible items such as trademarks
or shares; services

Money

Cash, cheques, credit cards, debit cards,
money and goods

Trade of goods

When goods are sold together with services, the courts will determine whether the essence of
the contract was the performance of a service or a transfer of goods
...
S
...
1990, c
...
1
...

McInnes et al
...
298
...
All rights reserved
...
In other jurisdictions, the price generally ranges
from $30 to $50; in the Yukon, it is $1,000
...
Property passes when the ownership or
title in goods is transferred from the buyer to the seller
...
The Act provides rules for
determining when property passes under five situations, 148 as delineated in Figure 5-42
...

Figure 5-42: Rules on Passing of Property
Rule:

Ownership Passes to Buyer When:

1
...


2
...


3
...


4
...
If buyer does

5
...


not give approval or acceptance but retains goods
without notice of rejection, ownership passes when
the time fixed for return of goods expires or, if no
time was fixed, on expiration of a reasonable time
...
, p
...

McInnes et al
...
301
...
S
...
1990, c
...
l
...
19 (Ont
...
All rights reserved
...

Breach of a condition allows the injured party to repudiate the contract and obtain release from
any further obligations under it
...

The Act implies three types of terms: those regarding 1) the seller's title, 2) the nature of the
goods, and 3) delivery and payment
...
The seller has the right to sell the goods
...
The buyer will enjoy quiet possession of the goods
...
The goods will be free from unknown liens and encumbrances to any third party
...
Goods sold by description will conform to that description
...
Goods sold by sample will correspond with the sample in type and quality
...
Goods will be of merchantable quality, that is, a reasonable person would buy them
without a reduction in price despite knowing of their imperfections
...
If the buyer has examined the goods, it does
not cover defects that he or she should have noticed
...
Goods must be fit for their intended use
...
When the buyer makes known to the seller the particular purpose for
which the goods are required and relies on the seller's skill or judgment, the goods will be
suitable for that purpose
...

When it comes to quality and fitness for use, the buyer is, to a certain extent, subject to caveat
emptor (“let the buyer beware”)
...


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...


Business Law Notes

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Delivery and Payment
1
...

2
...
Hence, while the buyer may be
entitled to discharge the contract if delivery is late, the seller will be entitled to sue for
damages only if payment does not occur promptly
...
Delivery normally occurs at the seller’s place of business
...
The goods delivered will conform to the contract
...
However, such
clauses are strictly interpreted against sellers and cannot be used to such an extent that the
seller can default without penalty or harm
...

Figure 5-43: General Remedies under Sale of Goods Act
Remedy

Application

Discharge

Innocent party generally has the right to discharge the contract if there was
a breach of a condition
...
This is
normally the only remedy for breach of a warranty
...


Liquidated
Damages

The courts will enforce a contractual term for liquidated damages
...


Specific
Performance

In exceptional circumstances, the court may require the guilty party to go
through with the contractual promise (e
...
, unique goods such as a
priceless painting)
...


Lien

The seller can withhold goods from a buyer until the buyer has paid for
them as long as the seller still possesses the goods and the contract makes
no provision for credit to be extended to the purchaser, or the credit terms
have expired, or the buyer is insolvent
...
All rights reserved
...


Repossession

Except in special circumstances in relation to bankruptcy, a seller has no
right to repossess goods even if the buyer fails to pay for them
...


SECTION 5-2: CONSUMER PROTECTION
Consumers are “individuals who purchase goods and services from a business for their
personal use and enjoyment
...
Large enterprises that have considerably more power than buyers;
2
...
Bulk shipping in sealed packages so that neither the retailer nor the shopper can examine
products until they are purchased;
4
...
Extensive use of credit to purchase expensive goods with borrowing terms that are often
difficult to understand; and
6
...

Principal Areas of Consumer Protection Legislation
This section reviews the basic requirements imposed by the five main areas of consumer
protection laws: advertising, quality, business conduct, disclosure of cost of credit, and dealing
with the public
...
The Act also makes certain selling practices
offences, such as publishing test results or user testimonials that cannot be corroborated and
149

Smyth et al
...
744
...
, p
...

151
Competition Act, R
...
C
...
C-34, ss
...

150

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...


Business Law Notes

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have been used without permission of the testing agency or user, double ticketing, bait-andswitch advertising, pyramid selling and referral selling, and advertising an article or service at a
lower price than that asked of the customer
...
152 A
consumer who is subjected to an unfair practice can terminate the contract and, where
rescission is not possible, may recover any amount in excess of the fair value of goods or
services received
...

Regulation of Labelling, Product Safety, and Performance Standards
Since the statutes are numerous, Figure 5-44 identifies only some of the more important ones
and their key provisions
...


Textile Labelling Act 154

Requires labels bearing the generic name of the fabric to be
attached to all items of clothing
...
g
...
g
...


Food and Drugs Act 156

Regulates many aspects of food, medical, and cosmetic products,
including sanitary production, contamination prevention, listing of
ingredients, and shelf life dating
...
Requires notification of defects
to purchasers and Department of Transport
...
O
...
30 Sch
...
s
...

Consumer Packaging and Labelling Act, R
...
C
...
C
...

154
Textile Labelling Act, R
...
C
...
T
...

155
Hazardous Products Act, R
...
C
...
H
...

156
Food and Drugs Act, R
...
C
...
F
...

157
Motor Vehicle Safety Act, S
...
1993, c
...

153

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...


Business Law Notes

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Regulation of Business Conduct Towards Consumers
To reduce pressure selling, statutes provide a cooling-off period after door-to-door sales
...

To discourage sellers from creating standard-form contracts that provide self-help remedies in
the event of consumer default, statutes impose two constraints
...
Second,
there are limits on the circumstances in which a seller or creditor can enforce an acceleration
clause (whereby the unpaid balance of the price becomes payable as soon as the buyer
defaults)
...
The rules require agents to disclose the company’s name,
purpose of the call, product and service being promoted, terms and restrictions pertaining to
product delivery, and other information
...
159
Businesses often assign consumer credit contracts to finance companies
...
This ensures that consumers do
not end up owing money to a finance company (who would otherwise be a holder in due
course) with no opportunity to refuse to pay for defective goods or being forced to waive their
rights against an assignee in a cut-out clause
...
Failure to comply will result in the
consumer not being bound by the contract
...
O
...
30, Schedule A, s
...

An Act to Amend the Telecommunications Act, S
...
2005, c
...
); Telecom Decision C
...
T
...

2008-6
...
All rights reserved
...
160
Regulation of Businesses by Licensing, Bonding, and Inspection
Licensing of businesses is another common way to protect consumers
...


SECTION 5-3: BANKING
“Banks have become financial marketplaces, offering services in cash management, investment
advice and brokerage, and business financing
...
These notes will highlight some of the key legal
requirements related to the banking agreement, negotiable instruments, and electronic banking
...
Its
purpose is to specify who has authority to issue instructions to the bank on behalf of the
customer and to allocate the risk of loss associated from difficulties with verifying the customer’s
authority and carrying out the customer’s instructions
...
Common law imposes additional duties on both parties to a banking
contract
...


160

Consumer Protection Act, 2002, S
...
2002 c
...
30, Part VII (Ont
...
620
...
All rights reserved
...
However, in
instances where the bank provides services like financial advice, a fiduciary relationship exists
that imposes a duty of care and skill, as well as the requirements to disclose actual and
potential conflicts of interest and to consider the consumer’s interests ahead of the bank’s
...
” 162 The
federal Bills of Exchange Act governs the law relating to negotiable instruments
...
163
Negotiable instruments are negotiated by endorsement and delivery, although an instrument
that is payable to the holder or "to bearer" need only be delivered to complete negotiation
...
623
...
S
...
1985, c
...
4 (Can
...
All rights reserved
...
These are designed to facilitate
the free transfer of negotiable instruments from party to party
...

1
...

This makes a negotiable instrument enforceable at face value and allows the holder to collect
on the instrument even if the original debtor has not been notified of transfer(s) that have taken
place
...
The assignee may sometimes acquire a better right to sue on the instrument than its
predecessor (assignor) had
...
In commercial transactions, banks and
other institutions are willing to discount drafts or cash cheques drawn on other banks or
institutions because the law provides them the protection of holders in due course and allows
them to enforce payment despite defects of title such as a forged signature, incapacity to
contract as a result of drunkenness or insanity, or discharge of the instrument by payment
...
If the cheque has been transferred to an innocent third
party (even the payee’s bank), the purchaser will have to pay and seek recourse through
contractual law against the vendor of the goods
...
A holder may sue in its own name any other party liable on the instrument without
joining any of the remaining parties
...
These are shown in Figure 5-46
...
The promise or order must be in writing
...
The obligation must be for money payment
...
The money promised must be a "sum certain
...
All rights reserved
...
The promise or order must be unconditional
...
The money must be payable at a fixed or determinable time or on demand
...
Negotiation must be of the whole instrument
...
The instrument must be signed by the drawer or maker (or an authorized agent)
...
Problems may also occasionally be
caused by transmission failures or system crashes
...
Banks also
impose daily and weekly limits on transactions to control losses due to fraud
...
164

SECTION 5-4: SECURED TRANSACTIONS AND CREDITORS’ RIGHTS
Businesses have relationships with banks, finance companies, and other businesses, both as
lenders (creditors) and borrowers (debtors)
...
This section begins by dealing with secured transactions and the rights of
secured creditors to recover what is owed to them
...

Secured Transactions
A security interest allows a creditor to seize specified assets of the debtor (usually referred to
as collateral) if a debt is not repaid
...
In contrast, unsecured creditors have to go through court and obtain a
judgment against the debtor and an execution order authorizing seizure and sale of certain of
the debtor's assets
...
Typical transactions that
involve security interests include vehicle, appliance, and furniture purchases on payment terms,
and a bank or private lender providing a line of credit to a business that does not own real
property
...


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...


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Security Act (PPSA) legislation
...
165
How Security Interests are Created
Conditional Sales
In a conditional sale, title is not transferred to the buyer until he or she has completed a series
of instalment payments
...
(An Ontario seller may then also sue for any deficiency
between the amount owing and the sale price
...

An assignee of a seller under a conditional sales contract gets the same rights as the seller
...
As long as the loan remains in good
standing, the debtor is usually free to collect its own receivables and carry on business as usual
...
For the most part, general security agreements have
replaced the floating charges that were used before modern PPSA legislation to give creditors
first priority security interests in all personal property of debtors, not otherwise mortgaged or
pledged, at the time of default under the loans secured by the floating charges
...
A chattel mortgagee (bank)
has remedies similar to those of a conditional seller
...
As
long as the goods remain in the mortgagee’s possession, the mortgagor may redeem them by
paying the balance of the debt with interest and costs
...
C
...
46 (Can
...
All rights reserved
...
It
creates a single registration system for all secured interests, defines the secured parties, gives
remedies against the debtor, and defines priorities among various secured parties and third
party purchasers or general creditors
...
166 A financing statement sets out the debtor, the secured party, and the general
nature of the security interest
...
If registration of a security interest is required (rules vary by
province), failure to do so means third parties may acquire interests that prevail over the
secured creditor, although their interests may not have priority over other claimants
...


Creditors' Rights
Often creditors, in the normal course of business, cannot afford the time or expense of securing
debt against the property of the debtor
...

The Bankruptcy and Insolvency Act
A person is insolvent when he is unable to meet his debts to creditors as they fall due or when
his liabilities exceed realizable assets
...
Establishes a uniform practice in bankruptcy proceedings throughout the country
...
Provides for an equitable distribution of a debtor's assets among creditors
...
Provides a framework for preserving and reorganizing the bankrupt's affairs by working out
an arrangement with the creditors
...
Releases an honest but unfortunate debtor and permits a fresh start
...
S
...
10 s 11 (OPPSA) (Ont
...
All rights reserved
...
Insolvency “frequently precedes bankruptcy, but is only
one of ten possible conditions that can help trigger bankruptcy
...
168
Figure 5-47: Insolvent v
...


Or has made a voluntary assignment in
bankruptcy with the Official Receiver
...
A proposal is
a plan to restructure the business’s affairs for the purpose of enabling it to continue
...
169 The proposal requires approval of a majority of
creditors (who are divided into classes with common interests) who constitute at least two-thirds
of the value within that class
...
If the creditors approve, the proposal must be approved by the court, which may
withhold approval if the proposal is unreasonable, e
...
, creditors are likely to get less than 50
cents on the dollar
...

Administration and Settlement of a Bankrupt's Affairs
A trustee in bankruptcy takes possession of the bankrupt's assets, although some assets (up to
prescribed limits) are exempted for personal bankrupts (e
...
, personal clothing, household
furniture, motor vehicle)
...
A stay of legal proceedings occurs, which means that creditors are
not allowed to sue for payment of pre-bankruptcy debts, and all legal proceedings presently
against the debtor are suspended
...
597
...
S
...
1985 c
...
3, ss
...

169
Companies’ Creditors Arrangement Act, R
...
C
...
C
...

168

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...


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Although the principal duties of a trustee are to recover all property that should form part of the
debtor's estate and to apply that property in satisfaction of creditors' claims, the trustee has
wide-ranging powers that also permit her to carry on the debtor’s business and to borrow
money, etc
...
Anything that happened up to one year before bankruptcy can come under
scrutiny as to whether there was improper preferential treatment of certain creditors (fraudulent
preferences)
...
This is also the case for gifts of property made to the bankrupt before he or she
became bankrupt (settlement) or non-arm's length transactions (reviewable transactions)
...
Figure 5-48 identifies the priority among creditors
...


2nd: Preferred
Creditors

Include creditors owed wages, taxes,
rent, support payments, and
administrative costs of trustee in
bankruptcy

Have preference over unsecured
creditors; preference and order of
priority is defined by the Act
...


After the trustee has liquidated the debtor's assets and distributed the proceeds, the discharge
of a bankrupt usually cancels the unpaid portion of debts remaining; the debtor has a clean slate
and can start business again
...
Reasons to refuse or suspend the discharge include payment of less than 50
cents on the dollar to unsecured creditors unless the debtor can't be held responsible under the
circumstances, failure to keep proper books, continuing to trade once the debtor knew he was
insolvent, causing bankruptcy by extravagant living, and being a bankrupt before
...


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...


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Other Statutory Protection for Creditors
Bulk Sales
A bulk sale is the sale of all, or essentially all, of the assets of a business
...
170 The rationale behind
such legislation is that if a debtor sells his stock-in-trade and business fixtures, the cash flow
that creditors anticipated would arise from these assets (which formed the basis for extending
credit in the first place) would be impaired
...

Construction Liens (Mechanics' and Builders’ Liens)
Persons who have extended credit in the form of goods and services to improve land have a
statutory right to record a security claim against the land that they have improved
...

A mechanics' lien is available, under most provincial acts, only to creditors who participate
directly as workers or supply material for use directly in construction
...
Ontario’s Construction Lien Act and
some other provincial statutes entitle a lessor of equipment used in construction (but a seller of
such machinery or tools is not entitled)
...
A lien that is not registered within the statutory time
period (usually 90 days) ceases to exist
...


170

Bulk Sales Act, R
...
O
...
B
...

Construction Lien Act, R
...
O
...
C
...
1(1) and 14(1) (Ont
...
All rights reserved
...

Pre-employment
Employee or Independent Contractor?
The first of two main areas of pre-employment law is whether the relationship is one of
employee or independent contractor
...
A variety of tests exist to help
answer this question, including those in Figure 5-49
...


Entrepreneur

An entrepreneur who has control, ownership of tools, chance of profit, and
risk of loss is an independent contractor
...


Enterprise

The person is an employee if the employer controls the activities of the
person, is in a position to reduce the risk of loss, benefits from the activities
of the person, and bears the true cost of a product or service
...
The Ontario Human Rights Code (parallel legislation exists in all
jurisdictions, including federally) prohibits businesses from publishing an advertisement that
expresses a limitation, specification, or preference as to race, colour, ancestry, place of birth or
origin, political belief, religion, marital status, physical or mental disability, gender, sexual
orientation, or age (prohibited grounds) unless such limitation, specification, or preference is
based on a bona fide occupational requirement (something imposed in good faith and with
the sincere belief that it was imposed in the interests of adequate performance on the job)
...
S
...
1990, c
...
19, s
...


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...


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Care must also be taken on application forms and during interviews not to ask questions that
relate directly or indirectly to the prohibited grounds
...
The concept of vicarious liability
has already been covered
...

Supervision
The risk of vicarious liability and other workplace hazards imposes a responsibility to supervise
employees
...
The legal
implications for each of these mechanisms are discussed in Figure 5-50
...


Performance
reviews

Use of a standard written evaluation will
• ensure all employees are treated the same
• identify and correct workplace problems early
• provide a written record in case the employment relationship breaks
down
...


Rewards

It is also important to avoid discrimination on prohibited grounds when
promoting employees or providing other rewards
...

May protect against claims of unjust dismissal by an employee
...
Most of the
legislation falls under provincial jurisdiction, although there are sometimes federal equivalents
...


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...


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Figure 5-51: Labour Laws
Statute

Key Provisions

Employment
Standards
Act 173

Establishes minimum requirements for holidays, minimum wage, work
hours, overtime, rest days and leaves, and vacation time and pay
...


Human Rights
Code

Prohibits direct discrimination (rule or practice that treats one person
differently from another) and indirect discrimination (seemingly neutral
practices that are discriminatory in their impact) on prohibited grounds (see
Recruitment in previous section)
...
Prohibits
harassment and sexual harassment (unwelcome or objectionable
conduct)
...
Gives employees right to refuse
to work in unsafe conditions
...


Workers’
Compensation

Takes away employees’ ability to sue employer in event of injuries
...


Pay Equity 177

Requires equal pay for work of equal value for women compared to men
...
In
Ontario, applies to public sector and private sector employers with more
than 10 employees
...
Requires the
appointment of a personal information supervisor
...


Various statutes
regarding
unionization

Safeguard right of employees to join trade unions
...
Regulate collective bargaining
...


173

Employment Standards Act, S
...
2000, c
...

Occupational Health and Safety Act, R
...
O
...
O
...

175
Employment Insurance Act, S
...
1996, c
...
5
...
(Can
...
O
...
16
...

177
Pay Equity Act, R
...
O
...
P-7 (Ont
...
C
...
4
...

174

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...


Business Law Notes

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Termination and Post-Employment
Employees may be terminated for cause and without cause
...
Acts that may provide cause include:
•

Absenteeism and regular lateness;

•

Substance abuse, although there is a duty to accommodate this illness;

•

Incompetence – employee lacks basic skills or qualifications;

•

Disobedience – repeated and deliberate defiance of supervisor;

•

Dishonesty if it gives rise to a breakdown of the employment relationship; and

•

Conflicts of interest – actions of employee conflict with the employer’s best interests (e
...
,
employee provided confidential information to a competitor)
...
The Employment
Standards Act 179 includes statutory requirements as to the amount of notice
...


There is an upper limit of 24 months, even for senior executives
...
An employee has a duty to mitigate, to take reasonable steps to
minimize losses by seeking reinstatement or new employment
...
Wrongful resignation occurs when an employee fails to give the
employer reasonable notice
...


179

Employment Standards Act, S
...
2000, c
...
14, (Ont
...
All rights reserved
...
In particular, the Competition Act 180 deals with the following
anti-competitive practices: conspiracies, monopolizing, and mergers
...
S
...
To determine whether an
agreement has seriously reduced competition, the courts must first determine the relevant
market in terms of product and geographic area and then decide whether the accused parties
had a large enough market share to injure the competition
...
Methods of reducing or eliminating
competition include parallel pricing (adopting similar pricing strategies), setting quotas
(limiting production), market sharing (agreeing to divide up the market by territory), and
product specialization (agreeing to each make/sell different products)
...

Monopolizing
The Act also prohibits certain types of conduct by a monopoly or very powerful, dominant firm
that are contrary to the public interest
...


180

Competition Act, R
...
C
...
C-34, (Can
...
All rights reserved
...


Regional price
discrimination

A seller charges lower prices in one region than elsewhere
with a view to eliminating competition
...


Other practices related to distribution identified in Figure 5-53are not illegal but are subject to
review
...

Figure 5-53: Reviewable Distribution Practices
Practice

Supplier makes it a condition that the buyer:

Exclusive dealing

Deal only or primarily in the supplier’s products
...


Market restriction

Sell the product in a prescribed area only
...

Mergers
The tribunal can prevent a merger that it concludes will likely prevent or significantly lessen
competition in Canada
...


SECTION 5-7: ENVIRONMENTAL PROTECTION
Protection of the environment is the shared responsibility of the federal and provincial/territorial
governments
...


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...


Business Law Notes

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Historically, environmental concerns were dealt with under tort law
...

Federal Legislation
The Canadian Environmental Protection Act (CEPA) is the most important federal
environmental protection statute
...
The focus is on prevention of
harm rather than remediation
...
” The goal is sustainable development, which means
“outcomes should meet the needs of the present generation without compromising the ability of
future generations to meet their own needs
...
” 182
CEPA applies to all elements of the environment, including air, land, water, atmospheric layers,
organic and inorganic matter, and living organisms
...
The
Courts have the authority to require a polluter to stop polluting, clean up a polluted site, or pay
for the cost of an environmental cleanup by the government
...
Corporate directors and officers can be held personally liable
...

Figure 5-54: Federal Environmental Legislation
Act

Coverage

Canadian Environmental
Assessment Act 183

Regulates the requirement for and conduct of environmental
assessments undertaken to predict the impact on the environment
of a particular activity or initiative before it is executed
...


Canada Shipping Act 185

Sets emission standards for ocean-going vessels
...


181

Canadian Environmental Protection Act, 1999, S
...
1999, c
...

Willes and Willes, pp
...

183
Canadian Environmental Assessment Act, S
...
1992, c
...
Similar statutes exist in all
provinces
...
C
...
34 (Can
...
S
...
1985, c S-9 (Can
...
All rights reserved
...
Under Ontario’s Environmental
Protection Act, 187 which is overseen by the Ministry of the Environment, liability for
environmental offences generally arises from one of four categories of activity, as shown in
Figure 5-55
...


Reporting

Failure to notify government that pollution has been released into the
environment
...


Regulatory

Failure to obey government orders, directives, certificates, and other
mandatory requirements
...
For instance, in Ontario, other provincial environmental laws include
those related to air pollution, 189 water conservation and pollution, 190 pesticides, 191 and
environmental assessments
...
193
Most environmental offences are based on strict liability
...
Whether a corporation has exercised due diligence depends on whether

186

Fisheries Act, R
...
C
...

Environmental Protection Act, R
...
O
...
E
...

188
McInnes et al
...
632
...
S
...
1990, c
...
19 (Ont
...
S
...
1990, c
...
40 (Ont
...
S
...
1990, c
...
11 (Ont
...
S
...
1990, c
...
18 (Ont
...
S
...
1990, c
...
19 (Ont
...
All rights reserved
...

Furthermore, Ontario’s Environmental Protection Act imposes a duty of due diligence on every
director or officer of a corporation “to take all reasonable care to prevent a corporation
from…discharging or causing or permitting the discharge of a contaminant,…failing to notify the
Minister of [such an event]…[or] failing to install, maintain, operate, replace or alter any
equipment or other thing [required by law]
...
Of course, a Canadian business that has operations in foreign
countries is also required to follow the laws of those countries
...

Figure 5-56: Exports and Imports
Statute
Customs Act

195

Purpose
Regulates procedures for imports and rules for collection of custom
duties
...


Special Import
Measures Act 197

Prohibits dumping (selling goods abroad at lower prices than those in
the country of origin) of foreign goods into Canada
...

Controls exports, which are, by and large, encouraged
...


194

Environmental Protection Act, R
...
O
...
E
...

nd
Customs Act, R
...
C
...
), c
...
, as amended (Can
...
C
...
35, as amended (Can
...
S
...
1985, c
...
15, as amended (Can
...
All rights reserved
...
For Canada, these include the World Trade
Organization (WTO), which provides a forum for negotiating trade rules and a mechanism for
resolving disputes, and the North American Free Trade Agreement (NAFTA), which includes a
phased-in reduction and elimination of tariffs among Canada, the United States, and Mexico
...
Contract of Sale
a
...

b
...

c
...

d
...

2
...

3
...

4
...


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...


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STUDY QUESTIONS FOR PART 5: BUSINESS RELATIONSHIPS
1
...

b
...

d
...

Sale of crops, paid for by cheque
...

All of the above are covered
...
In general, under the Sale of Goods Act, a purchaser becomes responsible for risk of loss or
damage to goods he has purchased when:
a
...

b
...

c
...

d
...

3
...

b
...

d
...
Misleading advertising and other representations of sellers are:
a
...

c
...


Prohibited by the federal Competition Act
...

Prohibited by the federal Competition Act and Ontario’s Consumer Protection Act
...


5
...

b
...

d
...
When the bank provides services like financial advice to your business, it is required to:
a
...

b
...

c
...

d
...


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...


Business Law Notes

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7
...
Notice of any assignment has to be given to the original promisor
...
An innocent party who acquires possession of a negotiable instrument has the right
to collect on it, even when original contractual obligations have not been met
...
A holder may sue only if all remaining parties join in the suit
...
None of the above
...
This type of security interest gives a creditor the right to sell all of the debtor’s assets:
a
...

c
...


Chattel mortgage
Conditional sale
General security agreement
All of the above

9
...
Owes more than $1,000 and cannot meet obligations as they become due
...
Owes more than $1,000 and has debts which exceed the realizable value of his or
her assets
...
Owes more than $1,000 and has performed any of ten specific acts within the
preceding six months
...
Owes more than $1,000, has performed any of ten specific acts, and has had a
petition filed with the courts against him or her by creditors
...
When bankruptcy occurs, which of these has first priority?
a
...

c
...


Secured creditors
Preferred creditors
General unsecured creditors
Employees owed wages

11
...

b
...

d
...
Which of these may protect an employer against claims by an employee of unjust dismissal?
a
...

c
...


Employment policy manuals
Performance review
Progressive discipline program
Both b and c

13
...

b
...

d
...
All rights reserved
...
An employer makes significant changes to your job status or responsibility without your
consent
...

b
...

d
...
Under the Competition Act, this is a reviewable abuse of dominant position:
a
...

c
...


Discriminatory pricing and regional pricing
Conspiracy by two or more persons to unduly lessen competition
Buying up products to prevent price drops
All of the above

16
...

b
...

d
...
This Act prohibits dumping of foreign goods into Canada:
a
...

c
...


Customs Act
Customs Tariff Act
Special Import Measures Act
Export and Import Permits Act

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...


Business Law Notes

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ANSWERS FOR PART 5: BUSINESS RELATIONSHIPS
1
...
Services are not covered, even when the payment is money
...

2
...
Passing of property occurs when ownership or title in goods is transferred from the buyer
to the seller
...
The exact point at which property
passes depends on five different rules
...

3
...
An action for the price gives the seller its full price in the event the buyer refuses to take
delivery, even though title has passed to the buyer
...
C
...

5
...
The Consumer Packaging and Labelling Act provides general rules, such as identifying
products, stating the quantity, and using standardized package sizes
...
C
...
A are the implied duties of the bank for services in
general
...

7
...
This arises because of the fact that, under law, the assignee may sometimes acquire a
better right to sue on the instrument than its predecessor (assignor) had
...
The opposite of A and C are true
...
C
...
A covers only specific asset(s) given as collateral,
while B covers accounts receivable
...
D
...

10
...
Secured creditors have first priority
...

11
...
All of these are prohibited grounds
...
D
...

13
...
The Occupational Health and Safety Act obligates employers to provide information,
training, and instruction, as well as giving employees a right to refuse unsafe work
...
B
...
It amounts to wrongful dismissal
...
All rights reserved
...
C
...
A includes illegal pricing tactics
...

16
...
The first principle of the Canadian Environmental Protection Act is prevention of harm,
not remediation
...
C
...


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...


Business Law Notes

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PART 6: PROPERTY RIGHTS
In law, the term property actually refers to a person’s rights in relation to something other than
the thing itself
...

The last part of these notes will begin by discussing real property, including mortgages and
leases
...
The final topic is an important sub-category of personal property: intellectual property
...
The
most significant interests in land are called estates
...
The extent of your bundle of rights with respect to real property is
dependent on the type of estate or interest you hold
...

Figure 6-57: Fee Simple Estate
Right

Restriction

Possess and use

Subject to municipal bylaws
...


Sell/transfer all or part

Subject to legislation setting out rules as to how a transfer
becomes effective and subject to the Planning Act 200 regulations
for subdivision of land
...


Mortgage

Subject to legislation
...
201

199

Yates, p
...

Planning Act, R
...
O
...
P
...


200

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...


Business Law Notes

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Under a life estate, the holder is entitled to exclusive possession of a property for her lifetime
...
On the death of the life tenant, the property reverts back to the
person who holds the fee simple unless the latter person has transferred the reversionary
interest to a third party (called a remainder)
...

Life estates are often used in family situations but are rare in business situations
...

Shared Ownership
Title can be held by more than one person as either joint tenants or tenants in common
...

1
...
This means that a joint tenant has no ability to
bequeath his ownership interest at death as the surviving joint tenant automatically becomes
the sole owner
...
A joint tenant can avoid the
right of survivorship by severing the joint tenancy by acting in a way inconsistent with joint
ownership, i
...
, selling his interest to a third party without notice to the other joint tenant or
by partition, where there is a division of either the property or its sale proceeds
...

2
...
When one owner dies, her interests
pass to her estate and are bequeathed in accordance with the terms of her Will or, if there is
no Will, in accordance with the provisions of the Succession Law Reform Act
...
The owner
obtains title to a specific apartment or unit (more specifically a slice of air space above the real
property)
...
The condominium owner also obtains a third set of rights, the
right to vote on matters concerning the condominium corporation, such as the creation of bylaws
and the election of directors
...

201

Succession Law Reform Act, R
...
O
...
S
...


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...


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Cooperatives
In a cooperative, the entire building is owned by a group or corporation
...

Interests Less than Estates
None of these interests gives the right of exclusive possession as do the freehold and leasehold
estates discussed in the previous section
...
g
...
An
easement can be created by:
1
...
Implied grant – There is a right of necessity implied if the front half is severed, and no
provision is made to reserve a right-away to get to the road at the front; there is an implied
right of mutual support for owners of semi-detached homes
...
Prescription – An adjoining landowner continuously exercises a right for 20 years without
interruption or consent; the user must prove the owner knew he was using it, had the right
and power to stop him, and refrained from doing so
...
Statute – Although not strictly an easement, since the party benefiting from the easement
does not own property, statutes give utility companies the right to run wires and cables
either underground or overhead on poles
...
It runs
with the land, i
...
, it passes to the next owner
...

Mineral Leases and Profit à Prendre
A mineral lease permits a person to extract and retain something of value (e
...
, gold or oil)
from another’s property
...
Therefore, most mineral leases are made by the government, even
though someone owns the fee simple to the property
...


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...


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Leases
A lease, or tenancy, is a contract for the transfer of use and possession of land from the
landlord to the tenant
...
In other words, the
tenant controls the land and has the right to exclude all others, including the owner (subject to
the right to inspect with notice as set out in legislation and/or the contract), for a fixed period
...
It is sometimes said that the third and fourth
types are not really leases because there is no set term (in the first case) or there is no longer
any lease at all (in the second case)
...


Periodic tenancy

The lease is for a set period of time but renews automatically at the
end of the term until one of the parties provides notice of
termination
...


Tenancy at sufferance

The tenant continues to possess the premises at the end of a fixedterm tenancy without the landlord’s permission
...
202
Covenants and their Breach
A commercial lease normally provides certain covenants or promises, as set out in Figure 6-59
...

2
...

4
...
Injunction (right to order the tenant to stop a prohibited use
...
S
...
1990, c
...
19, ss1-3 (Ont
...
All rights reserved
...

Figure 6-59: Standard Covenants in Commercial Leases
Rent

Tenant covenants to pay rent
...


Assignment and
subletting

Either tenant or landlord can assign their contractual rights to a third
party
...

Tenant may also sublease leased premises to a third party, in which
case she remains a tenant under the lease with original landlord but is
also the landlord to the third party
...
Ontario law implies a term that such
consent cannot be unreasonably withheld
...

Tenant, in turn, may obtain a covenant that landlord will not rent
adjoining premises to a competing business
...


Repairs

Landlord is not liable to make repairs unless there is an express
covenant, but landlord may be liable to repair structural defects that
interfere with quiet enjoyment and is liable for maintenance of halls,
stairways, and elevators
...


Insurance

In absence of an express provision, neither landlord nor tenant must
insure premises; however, a prudent landlord will usually insure the
building to protect its investment
...


Termination of a Lease
A lease may be terminated by one of the following:
1
...

2
...


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...


Business Law Notes

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3
...
The length of notice required is normally set by
provincial legislation, although the parties may alter the period by an express term in the
lease
...
Renewal – A lease for a term certain often provides for a renewal at the option of the tenant
...
On the death of a person, land will pass either under
the Will or according to the statutory rules of inheritance
...

A person may acquire title to land by adverse possession
...
Possession must be open, notorious, and continuous
...
Adverse possession is based on a wider principle, the law of limitations,
whereby a person who has a right of action against another will lose that right if it is not pursued
within a specified period of time
...
Adverse
possession is not possible in most land titles systems (see below)
...
A mortgage is an interest in land that
provides security for the repayment of that debt
...

If the debt is repaid as promised, the conveyance becomes void, and the interest in land reverts
to the mortgagor (borrower)
...
Under the land titles
system, mortgages (called charges) are not conveyances of the legal title but are liens upon the
land
...


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Normally, a mortgagor promises to repay the amount borrowed plus interest at specified times,
to maintain adequate insurance on the land and buildings, to pay the taxes, and to keep the
buildings in a proper state of repair
...
The mortgagee’s remedies upon default are shown in Figure 6-60
...


Possession

Mortgagee may take possession of property
...


Foreclosure and sue
on the debt

Mortgagee may, after foreclosure, still sue on covenant to pay the
debt as long as it is willing and able to re-convey property to
mortgagee
...
If sale proceeds exceed principal,
interest, and expenses of court action and sale, surplus is returned
to mortgagor or to other secured creditors of property; if there is a
deficiency, mortgagee may obtain judgment against mortgagor for
that amount
...


A second mortgagee has rights (and remedies) similar to the first mortgagee, except that its
interest is in the equity of redemption, not the legal title, and it ranks behind the first mortgagee
in priority of payment
Recording of Interests in Land
Under the registry system, you must register a copy of a document creating an interest in land
(or your interest will not be protected)
...
"
Under the land titles system, (which covers parts of Ontario), the land titles office provides a
document showing the state of the title and the purchaser is entitled to rely on that document
...
All rights reserved
...
Chattels or goods – tangible, moveable things such as cars and furniture
...
Choses in action – intangible things (chose is the French word for thing) such as cheques,
shares, and promissory notes
...
Intellectual property – results of the creative process and the protection attached to those
ideas through patents, copyrights, etc
...
Intellectual property is discussed in the next section
...

Therefore, an important question is who has the right to the goods
...
However, sometimes personal
property is simply found; in that case, the finder may have a better claim to it than anyone else
except the rightful owner who lost it
...
At all times, the finder or the employer, depending on who
has a second claim to the property as set out above, has the obligation to make reasonable
efforts to locate the rightful owner of the property
...
For instance, goods can be sold, cheques can
be negotiated, and contractual rights can be assigned
...
Bailment occurs when an owner of personal property temporarily
203

McInnes et al
...
401
...
All rights reserved
...
Leasing is a form of
bailment, where the owner of a chattel permits another person to have temporary possession of
it in return for payment of rent
...
If the bailor proves that the goods were lost or damaged
during a bailment, then the burden of proof shifts to the bailee to prove that he or she was not to
blame
...
Liability arises from failure to take reasonable care
...

Figure 6-62: Bailor's Duty of Care
Type of Bailment

Low Duty

High Duty

Involuntary bailment (e
...
, you forget your tools at a friend’s
house)
...
g
...

Gratuitous bailment for benefit of bailee (e
...
, a friend borrows
your tools to use on a home-construction project)
...
g
...

Other factors that affect the duty of care include standard business practices and customs, the
nature and value of the property, how easily it can be damaged or stolen, and the bailee’s
expertise
...

There are also special types of bailment where reasonable care is dictated by statute
...

Specific Liabilities for Various Types of Bailees
Bailees for Storage and Safekeeping
There is a duty to take reasonable care of goods stored with them (e
...
, warehouse storage, car
parking lot where operator takes car keys)
...

The contract may contain an express or implied authority to subcontract for storage of the goods

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Business Law Notes

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with another warehouse, with the nature of the goods being a determining factor
...

Repairers
Repairers are bailees for value with a standard of care similar to that of a warehousing company
and an obligation to do the repairs in a workmanlike manner and in the time promised
...
A carrier may limit its liability by
inserting an exemption clause in a bailment contract that limits liability to a set amount
...

Hotelkeepers
A hotel or inn (a place of lodging that cannot choose its customers) has a duty to take
reasonable care and, in some instances, acts as an insurer against theft or loss of its guests'
goods
...

Remedies of the Bailee
If the bailment is contractual, the bailee has the usual contractual remedies
...
Where performance is partially
complete, the bailee can make a quantum meruit claim (a reasonable price for services) and
may also be able to make a claim for lost profits
...
If the owner
doesn't pay, the bailee may eventually sell the goods after following certain provisions but must
give any surplus monies to the bailor
...
All rights reserved
...
Because personal property is moveable, it is often
difficult to locate goods that have gone missing
...
Therefore, property owners are wise to
purchase property insurance, whereby, in exchange for a premium, an insurance company
promises to pay money if property is lost, stolen, damaged, or destroyed
...
204 Property insurance should, of course, be purchased for real property (i
...
,
buildings) as well as personal property housed in those buildings and used elsewhere in the
business
...
Although insurance
policies are based on the ordinary law of contracts, they have certain unique features:
1
...
Acceptance is made by the
insurer upon issuing the policy, unless interim arrangements are agreed upon between the
parties to effect their earlier coverage
...
A policy of insurance ends upon the expiry of its term unless renewed specifically or in
accordance with the intentions and past dealings of the parties
...

3
...

4
...

5
...
Virtually all insurance policies contain strict notice provisions by which the insured
must immediately notify the insurer in the event of a loss
...
Where an insured is reimbursed for a claim by the insurance company, the insurer steps into
the shoes of the insured (subrogation) and has the right to sue any third party
...


204

McInnes et al
...
416
...
All rights reserved
...
g
...
In contrast, liability insurance is an example of third-party coverage, whereby the
insurance company renders payment to a third party
...
e
...

Intellectual property is non-exclusive
...
Ideas are also nonrivalrous
...
205
In both common law and statutes, Canada has sought to balance the moral rights that creators
have to reap the rewards of their efforts with the social costs of protection and the inefficient use
of resources resulting from restrictions placed by intellectual property rights
...


205

McInnes et al
...
425
...
All rights reserved
...
Copyright law provides
automatic protection as long as the ideas are original to the creator/author, the work is in a fixed
medium (something tangible), and the author has some connection to Canada (the idea was
created in Canada or created outside of Canada by a citizen or ordinary resident or by a
citizen/resident of a jurisdiction with which Canada has a treaty)
...

The forms of expression protected by copyright are shown in Figure 6-64
...
In addition to these and other more specific rights that can be assigned by
the author or creator, there are moral rights that cannot be assigned (but can be waived),
chiefly the right to the integrity of the work and the right to prevent it from distortion and misuse
...
After that, the work protected becomes part of the public domain
...
S
...
1985, c
...
42 (Can
...
All rights reserved
...
There are other permitted usages such as
public readings of reasonable extracts or performance of musical works by churches or schools
for charitable purposes
...

Trademarks
A trademark is a word, symbol, or design (or combination of these features) that is used to
distinguish the wares or services of one business from those of others in the marketplace
...
g
...
g
...

Trademarks are protected at common law through the tort of passing off—misrepresentation
of goods, services, or a business so as to deceive the public into believing they are the goods,
services, or business of another, thus causing damage to that other person
...
Some of the advantages of registering a trademark are:
•

Creates the presumption that the trademark is valid and distinctive and indeed owned by the
owner
...


•

Provides the right to register the trademark in other countries
...


207

Trade-marks Act, R
...
C
...
T
...


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Patents
A patent is the right to stop others from making, using, or selling an invention or an
improvement to an invention for a period of up to 20 years from the date of filing a patent
application
...
The proposed invention must be demonstrated to be patentable
subject matter (e
...
, product, composition of that product, apparatus used to make a product, or
manufacturing process), novel, ingenious (or non-obvious), and useful
...
” 208 Protection of industrial designs is dependent
upon registration pursuant to the Industrial Design Act 209 (five years with a renewal), although
there may be some protection under common law as a trademark
...

Figure 6-65: Remedies for Infringement of Intellectual Property Rights
Remedy

Description

Damages

Applied in the same manner as under tort law
...


Injunction

Restrains the defendant from further infringement
...


Confidential Information
Confidential information is any information that is of commercial value, such as customer lists,
trade secrets, and know-how
...
210

208

McInnes et al
...
445
...
S
...
1985, c
...

210
R
...
Stewart, [1988] 1 S
...
R
...

209

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However, the law does protect confidential information in four ways:
1
...
Enforcement by the courts of protective covenants that stipulate that a buyer of the
information will not divulge it to anyone else
...
Enforcement by the courts of restrictive covenants that restrain an employee from
making use of an employer's confidential information
...
Imposition of fiduciary duties upon employees, directors, officers, and partners that
prevent them from misusing or divulging confidential information acquired in the course of
their relationship to the employers, corporations, or co-partners
...
All rights reserved
...
A fee simple interest in real property gives the title holder the right to:
a
...

b
...

c
...

d
...

2
...

b
...

d
...
When it comes to repairs, which of the following is a standard covenant in a commercial
lease?
a
...

b
...

c
...

d
...

4
...

b
...

d
...
You find a laptop in the guest parking lot of your employer’s property
...
Belong to you as the finder because it was found on public property
...
Belong to the employer because it was found on the public part of your employer’s
property
...
Belong to you as the finder because it was found on the private part of the
employer’s property
...
Belong to you no matter what because you found the laptop
...
Your wallet is stolen from your hotel room while you are using the recreational facilities
...
No matter what the situation is because it in effect acts as an insurer against theft of
yours goods
...
If the wallet was stolen by an employee
...
If it refused to accept your wallet for safekeeping in the hotel vault
...
Both b and c
...
All rights reserved
...
Which of these is not true about an insurance policy?
a
...

c
...


The application is the offer; the issuing of a policy is the acceptance
...

Ambiguous clauses will be interpreted strictly against the insurer
...


8
...

b
...

d
...
Under registration under the appropriate legislation, the longest-running protection is
provided to registered:
a
...

c
...


Copyrights
Trademarks
Patents
The protection is the same for all intellectual property
...
Confidential information is protected by:
a
...

c
...


Intellectual property law
Laws of licensing and imposition of fiduciary duties
Enforcement by the courts of restrictive covenants
Both b and c

11
...

b
...

d
...
All rights reserved
...
A
...
B is a life tenancy
...

2
...
Joint tenancy involves two or more people having an equal undivided interest in the
property with the right of survivorship
...

3
...
The standard repair covenant is that neither the landlord nor the tenant is liable to make
repairs
...
The landlord
will maintain hallways and elevators
...

4
...
A restrictive covenant is a promise to refrain from certain conduct on, or use of the land,
such as building a highrise
...
Both B and C are ways to acquire land
...
C is used by the government to
compel owners to sell their land to the government for some public purpose
...
B
...
If a nonemployee found the laptop, and the rightful owner could not be found, the laptop would be
his or hers to keep
...
D
...
Provincial
legislation allows them to limit liability for loss of theft of customers’ goods unless the theft or
loss occurs through a willful act of an employee (B), or the hotel refused to accept a guest’s
goods for safekeeping (C)
...
B
...
A mere renewal notice does
not extend insurance contracts
...
A
...
Trademarks are
words, symbols, or designs that distinguish your wares or services from those of another
...

Industrial designs are features of shape, configuration, pattern, or ornament applied to a
finished article to improve aesthetic appeal
...
B
...

Copyrights run for 50 years after the end of the calendar year of the author’s death
...

10
...
Confidential information is not considered intellectual property, so A is not applicable
...


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...


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11
...
The remedy of delivering up requires the infringer to turn over the goods to the rightful
owner or to dispose of them in accordance with specific instructions
...
All rights reserved

---