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Which of the following accurately describes vicarious liability?
Which of the following accurately describes vicarious liability?
What must happen for an assignment of a contract to be effective?
What must happen for an assignment of a contract to be effective?
What is an example of an event that could lead to contract frustration?
What is an example of an event that could lead to contract frustration?
What generally must occur when varying certain terms of a contract?
What generally must occur when varying certain terms of a contract?
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What does the tort of nuisance address?
What does the tort of nuisance address?
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What is required to prove negligence in a tort action?
What is required to prove negligence in a tort action?
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What typically establishes an agency relationship?
What typically establishes an agency relationship?
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Which type of authority refers to the power an agent appears to have to outsiders or third parties?
Which type of authority refers to the power an agent appears to have to outsiders or third parties?
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In the tort of nuisance, what must be established for a claim to be successful?
In the tort of nuisance, what must be established for a claim to be successful?
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Which of the following does not fall under the protections offered by the tort of nuisance?
Which of the following does not fall under the protections offered by the tort of nuisance?
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Which relationship is primarily involved in the agency relationship?
Which relationship is primarily involved in the agency relationship?
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Who is referred to as the principal in an agency relationship?
Who is referred to as the principal in an agency relationship?
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In an agency relationship, who is considered the outsider or third party?
In an agency relationship, who is considered the outsider or third party?
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What protection does legislation offer regarding privacy?
What protection does legislation offer regarding privacy?
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Which statement describes a sports agent's role?
Which statement describes a sports agent's role?
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What is a defining feature of the law of agency?
What is a defining feature of the law of agency?
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In assessing unreasonableness in a nuisance claim, which factor is NOT considered?
In assessing unreasonableness in a nuisance claim, which factor is NOT considered?
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What should a contractor consider if entering into a contract with a minor for a significant value?
What should a contractor consider if entering into a contract with a minor for a significant value?
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What must be present for oral contracts to be enforceable?
What must be present for oral contracts to be enforceable?
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What is generally true if the writing requirement under the Statute of Frauds is not met?
What is generally true if the writing requirement under the Statute of Frauds is not met?
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Which aspect of non-solicitation clauses is considered obsolete due to globalization?
Which aspect of non-solicitation clauses is considered obsolete due to globalization?
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What is the primary purpose of tort law?
What is the primary purpose of tort law?
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What distinguishes intentional torts from negligent torts?
What distinguishes intentional torts from negligent torts?
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What is required to prove negligence in a tort action?
What is required to prove negligence in a tort action?
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What characterizes the legal concept of false imprisonment?
What characterizes the legal concept of false imprisonment?
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What is a key factor in determining whether a duty of care exists between parties?
What is a key factor in determining whether a duty of care exists between parties?
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What standard is typically used to judge whether a defendant has breached the standard of care?
What standard is typically used to judge whether a defendant has breached the standard of care?
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For a negligence claim, what must the plaintiff demonstrate regarding damages?
For a negligence claim, what must the plaintiff demonstrate regarding damages?
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What must a plaintiff show to confirm that the defendant's breach caused their damages?
What must a plaintiff show to confirm that the defendant's breach caused their damages?
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What is a typical trait of a reasonable person in negligence law?
What is a typical trait of a reasonable person in negligence law?
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Which factor is NOT considered by courts when assessing the reasonableness of non-competition clauses?
Which factor is NOT considered by courts when assessing the reasonableness of non-competition clauses?
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In what context are restrictive covenants subject to more scrutiny?
In what context are restrictive covenants subject to more scrutiny?
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What must employers demonstrate for non-competition clauses to be enforceable?
What must employers demonstrate for non-competition clauses to be enforceable?
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What role does independent legal advice play in cases of presumed undue influence?
What role does independent legal advice play in cases of presumed undue influence?
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How is an unconscionable contract defined?
How is an unconscionable contract defined?
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Under which condition will a contract made with a mentally impaired person remain enforceable?
Under which condition will a contract made with a mentally impaired person remain enforceable?
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What is true about the liability of partners in a partnership?
What is true about the liability of partners in a partnership?
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What should a partnership agreement include regarding member responsibilities?
What should a partnership agreement include regarding member responsibilities?
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In a partnership, which scenario indicates a breach of fiduciary duty?
In a partnership, which scenario indicates a breach of fiduciary duty?
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What is essential for a partnership to function successfully regarding decision-making?
What is essential for a partnership to function successfully regarding decision-making?
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What happens when partners cannot agree on how to divide profits in a partnership?
What happens when partners cannot agree on how to divide profits in a partnership?
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How is decision making typically handled within a partnership?
How is decision making typically handled within a partnership?
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Which statement best describes the legal status of a partnership?
Which statement best describes the legal status of a partnership?
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What constitutes a partnership according to partnership legislation?
What constitutes a partnership according to partnership legislation?
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Which of the following best describes a partner's liability in a general partnership?
Which of the following best describes a partner's liability in a general partnership?
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Which situation does NOT create a partnership under partnership law?
Which situation does NOT create a partnership under partnership law?
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Study Notes
Contractual Liability
- Businesses are held responsible for their employees' actions (vicarious liability)
Termination of a Contract
- Parties can agree to cancel and create a completely new contract (novation)
- Parties can also change existing contract terms
- Most provinces require new consideration for changes
- Parties can mutually agree to end a contract
- Parties can transfer obligations to someone else
- Must include all parties in agreement
- Limited form of novation
Assignment of Rights
- One party can transfer rights to another
- Example: a company can transfer the right to collect payment from a customer
- This is an assignment
- The assignment does not terminate the original contract
- The assignor (original party) relinquishes their role
- Only rights can be transferred, not duties
Assignment notice
- A creditor can assign the right to collect a debt without the debtor's consent
- The debtor must be notified of the assignment
- This prevents the debtor from paying the original creditor
- If there are multiple assignees, the first to notify the debtor has priority
- The assignee cannot have a stronger right to collect than the original assignor
Frustration of Contracts
- A contract may be frustrated by an event that makes performance impossible
- Example: natural disasters, war or government regulations
- This is different than “mistake” where an event occurs before the contract
- Frustration is difficult to prove in court
Case Example: Martin v AGO, 2022 ONSC 1923
- A man slipped on a wet floor in a building
- He sued the building owner
- The court dismissed the claim, finding the defendants had taken reasonable precautions:
- Cleaning procedures were in place
- Mats and warnings were available
- The amount of water involved was minimal
- The plaintiff contributed to the accident by wearing worn shoes
Tort of Nuisance
- An unreasonable interference with the enjoyment of another’s property
- Interference must be substantial and unreasonable
- Temporary interference is not usually considered nuisance
- The tort does not protect all interests
- Example: right to sunlight is not protected
- Courts consider factors like public good and tradeoffs in interests
Case Example: TMS Lighting Ltd v KJS Transport Inc, 2014 ONCA 1
- TMS Lighting manufactured lighting products that required clean premises
- KJS Transport operated a trucking business next door, using an unpaved parking lot
- Dust from the parking lot entered TMS’s factory, damaging products and disrupting operations
- Blocked TMS’s driveway
- The court found that the trucking company’s actions constituted a substantial interference
- TMS was granted an injunction to prevent future trespass
- Additional trial ordered to determine damages
Environmental Torts
- Various torts can provide relief for environmental damage:
- Negligence
- Trespass
- Rylands v Fletcher
- Nuisance
- Each tort can result in an injunction or damages
- Negligence requires proof of carelessness
- Trespass requires unauthorized pollutants entering another’s property
- Rylands v Fletcher does not require carelessness but rather a dangerous use of land that results in pollutants entering a neighbor’s land
- Example: water or gas
- Nuisance requires unreasonable and substantial interference with the use and enjoyment of property
Government Regulation
- Legislation exists to balance economic development with environmental protection
- Municipal and land-use planning laws limit activity on land
Business Torts
- Assault: Threat of imminent physical harm
- Battery: Intentional harmful or offensive contact
- Injurious falsehood: Making false statements about goods or services with malice or improper motive
- Malice can be implied from knowledge of falsity or reckless disregard for truth
Privacy Protection
- Common law remedies for privacy violations include defamation, trespass, nuisance, assault, battery, and false imprisonment
- In 2012, the Ontario Court of Appeal recognized “intrusion upon seclusion” as a tort
- Protects privacy interests
- Provides $20,000 limit for damages
- Intrusion upon seclusion requires intentional, offensive invasion of another’s personal affairs without lawful justification
- Government legislation regulates the collection, use, and disclosure of personal information in commercial activities
- Some provinces have legislation that creates the tort of breach of privacy
Agency
- Agency exists when one person (the agent) acts on behalf of another (the principal)
- The agent affects the principal’s legal relationships
- Examples of agency relationships:
- Sports agent
- Insurance agent
- Travel agent
Agency Relationships
- Agency relationships involve two key relationships:
- Agent-principal relationship
- Outsider (third party) – principal relationship
- The law of agency governs rights and duties of principals, agents, and third parties
- It is derived from tort and contract law
Creation of Agency
- An agency relationship is usually created by contract
- Principal authorizes the agent and the agent agrees to act
- The contract can be for a single purpose or part of a larger contract
- Agency can also arise from conduct or behavior
- Agency agreements can be expressed, implied, oral, written, or under seal
- A power of attorney is a document granting specific or broad powers to an agent
Authority
- The ability of an agent to act for the principal is important
- Authority determines whether a contract is enforceable between the principal and a third party
Actual Authority
- Based on express or implied agreement between principal and the agent
- Express authority is specifically granted by the principal
- Implied authority is not explicitly granted but is implied from the agent’s position, necessity, or custom
Apparent Authority
- Power that an agent appears to have to a third party
- Based on the principal’s actions or statements
- Principal is bound by the actions of the agent if the third party is led to believe the agent has authority
Case Example: Agent’s Authority To Enter Agreement to Share Prize
- Finalists in a competition agreed to share a prize
- One finalist won
- The court determined that the agreement to share prize money involved the agency relationship between a winner and the other finalists
Legal Capacity: Minors
- Contracts made by minors are voidable at the minor's option, meaning they can be cancelled.
- Reaching the age of majority does not automatically validate contracts made by minors unless they expressly adopt or ratify them.
- Agreements of a permanent nature, like partnership agreements, must be explicitly repudiated by the minor upon reaching the age of majority.
### Business Application of the Law: Dealing with Minors
- Businesses face increased risk when contracting with minors due to their legal protection.
- To mitigate risk, businesses can contract with the parent or guardian, require parental co-signature, or ask the parent to guarantee the minor's performance.
Legal Capacity: Mental Incapacity
- Both parties must understand the nature and consequences of a contract.
- Contracts with mentally impaired individuals are not voidable if they are fair, made in good faith, and the other party was unaware of the impairment and didn't exploit it.
Duress
- Contracts formed under duress, where one party is threatened with physical harm, are unenforceable.
- Economic duress involves threats of economic harm that coerce a party's decision-making, making the contract voidable.
- Lack of realistic alternatives can be evidence of economic duress.
Undue Influence
- Undue influence refers to unfair manipulation that compromises someone's free will.
- Contracts affected by undue influence are voidable at the victim's discretion.
Case 8.4: M & P Drug Mart Inc v Norton
- A non-compete clause prohibiting a pharmacy manager from competing for a year after termination was deemed unreasonable and unenforceable.
- The clause was overly broad and vague, potentially limiting the employee's activities beyond reasonable restrictions.
Non-Solicitation Clauses
- Non-solicitation clauses must be reasonable, unambiguous, and have time restrictions.
- Territorial limitations in non-solicitation clauses are less common due to globalization and technological advances.
Writing as a Requirement
- Contracts typically don't require to be in writing for enforceability.
- Oral contracts need to be proven through other means, such as witness testimony.
### Statute of Frauds
- The Statute of Frauds mandates certain contracts be in writing for enforceability.
- It aims to prevent fraud and perjury.
- Key categories relevant to business include: contracts of guarantee, contracts not performed within a year, contracts dealing with land, and contracts for the sale of goods.
### How Torts are Categorized
- Torts can be intentional or negligent.
- An intentional tort involves a deliberate harmful act.
- Examples include false imprisonment and battery.
- Negligence involves causing harm without intention, but due to a failure in care.
### Tort Law and Criminal Law
- The same event can lead to both tort and criminal legal consequences.
- Criminal law focuses on punishment, conducted by the government.
- Tort law focuses on compensation for the victim, pursued by the injured party.
### Commencing the Actions
- In criminal law, the action is a prosecution, brought by the Crown.
- In tort law, the action is a civil suit brought by the injured party (plaintiff) against the wrongdoer (defendant).
### Proving the Actions
- In a criminal action, the Crown must prove guilt "beyond a reasonable doubt."
- In tort law, the plaintiff must prove the defendant's negligence.
### Establishing a Negligence Action
- To prove negligence, the plaintiff must establish a duty of care, breach of the standard of care, damage, and causation.
- Duty of care arises when a reasonable person in the defendant's position would recognize a risk of harm to the plaintiff.
- The defendant must have breached the standard of care by failing to act reasonably.
- The plaintiff must have suffered damages, and the defendant's conduct must be the cause of those damages.
Case 11.1: Resurfice Corp v Hanke
- This case involved an individual mistakenly putting hot water in the gasoline tank of an ice-resurfacing machine, causing an explosion.
- This case establishes that individuals must act reasonably in their actions, and failing to do so can result in legal liability.
Case 12.2: TMS Lighting Ltd v KJS Transport Inc
- This case involved a dust nuisance caused by a transportation company's trucks.
- Nuisance requires substantial and unreasonable interference with a party's use and enjoyment of land.
- The court considered the gravity of the harm and the utility of the defendant's conduct, finding the interference unreasonable.
### Trespass
- Trespass to land involves wrongful interference with a person's possession of land.
- Examples include entering property without permission, staying after being asked to leave, or leaving an object on the property without permission.
- Trespass is actionable without proof of harm, and injunctions are a common remedy.
Case 12.3: TMS Lighting Ltd v KJS Transport Inc (continued from Case 12.2)
- This case focused on the trespass aspect of the legal dispute.
- Large trucks owned by KJS frequently entered TMS's driveway, exceeding the turning radius on KJS's premises. -TMS tried to deter the trespass with barriers, but KJS's trucks continued to enter, eventually destroying the barriers, escalating the trespass further.
Legal Capacity: Minors
- Most contracts entered into by minors are enforceable upon reaching the age of majority
- Exception: Former minors can avoid contract obligations by expressly repudiating the agreement.
- This applies to agreements of a permanent or continuous nature, such as partnership agreements.
Business Application of the Law: Dealing with Minors
- Businesses face more risk when contracting with minors.
- To mitigate risk, businesses may consider contracting with parents or guardians.
- Businesses may require parents or guardians to co-sign or guarantee the performance of the minor.
Legal Capacity: Mental Incapacity
- A contract entered into by an individual impaired by illness, alcohol, or drugs may be voidable.
- The contract will stand if it is "fair and made in good faith" and the other party did not know or take advantage of the individual's mental incapacity.
Duress
- Contracts made under duress of physical harm are not enforceable.
- Duress renders these contracts voidable at the option of the victim.
- Economic Duress: Threat of economic harm that coerces the will of another party can also void a contract.
- For example, a company may threaten to break a contract that it knows is crucial to the other side to gain financial concessions.
- This applies when there are limited practical or realistic alternatives, and the coercion goes beyond ordinary commercial pressure.
Undue Influence
- Undue influence is unfair manipulation that compromises someone’s free will.
- Voidable at the option of the victim.
- Undue influence can arise from actual pressure or a special relationship.
- Actual Pressure: For example, a contract between an elderly person and their caregiver to hand over their estate in return for care.
- Presumed Pressure: Occurs in relationships like family members, attorney-client, or doctor-patient.
- This presumption is rebuttable
- Recommending independent legal advice for the stronger party can help protect against this.
Case Study: Bank of Montreal v Duguid
- In this case, the bank made a loan to a couple that the bank insisted be secured by the wife's co-signature.
- The bank did not advise the wife to get independent legal advice before co-signing the loan.
- The court found that the bank had a duty to inquire about undue influence due to the close personal relationship between the couple.
- The court concluded that the bank's failure to ensure independent counsel could lead to the wife’s loan being set aside.
Unconscionability
- Unconscionable contracts are unfair contracts formed when one party takes advantage of another's weakness.
- The Ontario Real Estate and Business Brokers Act stipulates that unlicensed realtors cannot pursue legal action for services rendered.
- Businesses must ensure that their contracts and their business operations adhere to legal and regulatory requirements.
Contracts Based on Defects: Illegality
- Contracts that are contrary to public policy are not enforceable.
- Public Policy: Reflects the community’s common sense and conscience.
- Restrictive Covenants: Clauses that restrict someone’s business activities.
- Restrictive covenants are often deemed unenforceable as they interfere with earning a livelihood and limit market competition.
- Exception: Restrictive covenants are subject to less scrutiny in the case of business sales, as the business owner typically receives compensation for goodwill.
Contracts Based on Defects: Illegality
- Employment contract restrictive covenants are scrutinized more closely due to the power imbalance between employer and employee.
- Non-solicitation Clause: Forbids contact with the business’s customers.
- Non-competition Clause: Forbids competition.
Contracts Based on Defects: Illegality
- Non-competition clauses are generally enforceable if reasonable between the parties and the public interest.
- Courts consider the employer's proprietary interest, the geographic area covered, time period, and scope of activity limitations.
- Courts will not re-draft overly broad clauses, rendering them unenforceable.
- Employers bear the risk of drafting overly broad non-competition clauses.
Business and Legislation: Non-Compete Clauses
- Ontario recently banned most employee non-compete clauses to protect employees from unfair disadvantages.
- These clauses still exist in senior executive agreements and business sale scenarios.
- Non-disclosure agreements are not banned by this legislation.
- Liability: The employer, not the employee, is typically held legally responsible for their employees’ negligence (vicarious liability).
Termination by Agreement Between Parties
- Parties can enter into agreements to alter or dissolve existing contracts.
- This includes:
- Novation: Replacing the original contract with a new contract.
- Modification: Varying certain terms of the contract, which often requires new consideration.
- Termination by Agreement: Ending the contract by mutual agreement.
- Substitution: Replacing a party in the contract, which is a limited form of novation requiring all parties’ consent.
Termination by Agreement: Transfer of Rights
- Parties can assign their rights under a contract to another party.
- Assignment: Transfer of a right from an assignor to an assignee.
- An assignor’s duties cannot be transferred, only rights.
- The assignee’s rights are limited by the assignor’s rights.
Termination by Frustration
- Frustration: A contract becomes impossible to perform due to events beyond the parties' control such as natural disasters, wars, and changes to government regulations.
- Distinction from Mistake: Frustration deals with post-contract events.
- Proving frustration in court is challenging.
Case Study: Crocker v. Sundance Northwest Resorts Ltd.
- A guest at a ski resort sustained a serious injury after a tubing accident.
- The court held that the resort had a duty of care to the participants because the activity was inherently dangerous.
- The court found the resort liable for failing to prevent the intoxicated guest from participating.
- The resort's defence, that the guest assumed the risk, was rejected because the guest was intoxicated.
- Key Takeaway: Businesses involved in inherently dangerous activities must take all reasonable precautions to prevent injuries.
Negligent Misstatement (or Misrepresentation)
- Generally, pure economic loss due to negligence is not recoverable, with exceptions such as negligent misstatement or performance of services.
- Pure Economic Loss: Financial loss that results from a negligent act without accompanying property or personal injury damage.
- Negligent Misstatement: An incorrect statement carelessly made.
- Professionals such as accountants, lawyers, and engineers are more likely to be held liable for this.
Negligent Misstatement (or Misrepresentation)
- Professionals can be held liable for negligent misstatement by providing bad advice or an incompetently prepared report.
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Description
Test your understanding of contractual liability, termination of contracts, and the assignment of rights. This quiz covers essential concepts including vicarious liability and novation. Enhance your knowledge of how contracts can change and how obligations can be transferred.
