Elements of Law PDF

Elements of Law Chapter 1 The legal environment for business Business law is divided into general areas: ​ Tort Law > Injury to others ​ Contract Law > day to day operations of a business ​ Business organizations > Formation and Operation ​ Land Law >...

Elements of Law Chapter 1 The legal environment for business Business law is divided into general areas: ​ Tort Law > Injury to others ​ Contract Law > day to day operations of a business ​ Business organizations > Formation and Operation ​ Land Law > Purchasing or leasing of premises ​ Intellectual and industrial property ​ Environmental law Other definitions of “the law” ​ Salmond > Body of principles recognized and applied by the state in the administration of justice ​ Holmes > a statement of circumstances in which the public force will be brought to bear through the courts ​ Blackstone > a rule of civil conduct prescribed by the supreme power in a state, commanding what is right, and prohibiting what is wrong Settlement, Rules, and Protection Law can be subdivided into three functions: 1.​ Settling disputes 2.​ Establishing rules of conduct 3.​ Providing protection for individuals Customary Law ​ customs that have evolved through established practices within a community ​ Communities established tribunals to hear disputes and force restitution Pre-Norman England Early courts and law imposed by invaders ​ Roman law (lex romana) was uniform in nature and application ​ Followed by Germanic influence > decentralized government under a king ​ Divided land into shires and counties, each with its own government Crown > the reigning monarch, individually or collectively representing the state ​ Successive kings and queens pronounced law ​ Laid out penalty in monetary terms Norman England and the Common Law Norman Conquest in 1066 led to: ​ Centralized system of administration ​ Establishment of central judicial system ​ Records improved, eventually becoming useful statements of the Common Law The Common Law -​ Law as found in the recorded judgments of the courts and known as “case law” -​ Stare decisis > “to stand by a previous decision” More flexible than a civil code Canon Law -​ Law developed by church courts to deal with matters that fell within their jurisdiction ​ After reformation (1534-38), jurisdiction passed to royal courts ​ Much of “church law” became part of the Common Law Equity Rules originally based on decisions of the Crown rather than on the law, and intended to be fair ​ Takes precedence over common law when equity and common law conflict Creation of Statute Law 1.​ Bill > proposed law (law not in effect 2.​ Motion > decision to read a bill the first time If bill passes second and third reading, sent to Senate for approval 3.​ Royal assent > approval from the crown 4.​ Proclaimed > when a law becomes effective Revised statutes > updated or amended to reflect changes in society Administrative Law ​ Administrative law > law made for or by or anything about administrative tribunals or boards ​ Regulations > procedural rules made under a statute ​ Administrative tribunals > agencies created by legislation to regulate activities or do specific things ○​ Power is delegated from Legislative body to Tribunal or Board ○​ Decisions may be subject to judicial review The Canadian Constitution ​ Two major parts: ○​ Canadian Charter of Rights and Freedoms ○​ British north america act Division of powers: ​ Section 91: Federal powers ​ Section 92: Provincial powers ​ All matters not expressly given to the provinces belongs to the federal government The Canadian Charter of Rights and Freedoms ​ Sets out basic rights and freedoms of all Canadians ​ Entrenched in the constitution thus difficult to change Right to Due Process Right to be informed, on arrest or detention, of the reasons for the arrest Aboriginal Rights Specific provisions for Charter rights that intersect with pre-existing aboriginal rights ​ Section 25: ○​ No rights found in Charter may be used to diminish or alter any aboriginal, treaty, or other rights of freedoms of Indigenous peoples ○​ Including rights pertaining to current or future land claims ​ Section 35: ○​ Affirms Aboriginal and treat rights “existing” at time of Charter’s inception ○​ Defines “aboriginal peoples” as being the Indian, Inuit and Metis ○​ Clarifies treaty rights Enforcement of Rights for governments Charter states that persons who believe their rights or freedoms have been violated, can: ​ Apply to a court law for appropriate remedy Charter only applies to governments, and not to individuals Private matters are dealt with through Provincial human rights legislation Protection of Others Special and General Rights and Freedoms Charter recognizes other rights and freedoms: ​ Indigenous peoples Charter entrenches the fundamental or basic rights and freedoms ​ Rights not specifically entrenched may be infringed upon by governments (e.g. property rights) Charter applies to territories as well as provinces and legislative powers of various bodies not changed by Charter Chapter 2 Early Law Reform ​ Beginning of development of the Supreme Court ​ Streamlining judicial process ​ Gradual reduction in formal procedure 1982 Charter of Rights and Freedoms ​ Court’s role became chief interpreter of rights and freedoms of individuals Structure of Judicial Law Jurisdiction right or authority of a court to hear and decide a dispute ​ Authority to deal with cases of a particular type Judicial System in Action Principle of open courts is the hallmark of Canadian judicial system ​ Promotes access to court hearings and services ​ Conveys transparency and trust ​ COVID-19 gave access to justice Civil Court Procedure Pleadings written statements prepared by parties that set out facts and claims of legal action Claim – injured party issues a writ of summons against defendant Defence – defendant prepares statement of defence with facts to support defence Close of Pleadings: Discovery: Witnesses Two kinds: ​ Ordinary witnesses – testify as to what they saw, heard or did (direct evidence) ​ Expert witnesses - recognized experts on a subject and give opinion evidence within area of expertise Hearsay Evidence Hearsay: fake gossip someone talking on someones behalf Courts insist that “best evidence” be presented Contingency Fees ​ Contingency fees lawyer’s fee payable on the condition of winning the case i.e. if lawyer does not win he/she does not get paid Alternative Dispute Resolution Mediation: ​ Mediator meets with parties with suggestions or proposals for settlement Arbitration: ​ Informal hearing is held,arbitrator makes binding decision, less formal The Legal profession ​ Attorney > a lawyer ​ Solicitor > lawyer who prepares documents ○​ Traditionally did not appear in court ​ Barrister > a lawyer who acts for clients in litigation or criminal court ​ In Canada, all attorneys are both solicitors and barristers Chapter 4 Defamation Libel > published slander with widespread circulation Slander > false verbal statements or gestures that injure a person’s reputation -​ Possible defences: Absolute privilege - protects the speaker, regardless of words’ truth or falsity Qualified privilege - statements made in good faith without malicious intent Fair comment – applies to newspapers Intentional Interference with Land and Chattels Two principal torts related to property laws: -​ Trespass -​ Conversion of goods Conversion and Willful Damage to Goods -​ Wrongful taking goods of another or willful refusal to deliver up the goods to lawful owner -​ Remedy granted by courts > Monetary damages equal to the goods taken Business-Related Torts and Crimes -​ When businesses engage in improper practices causing injury to others -​ Untrue statements about competitors goods or services Slander of Goods and Injurious Falsehood Injurious falsehood > false statements about a firm, its products or business practices Unfair Business Practises Business practices designed to take advantage of consumer ignorance or inexperience Chapter 5 Negligence Many ways in which individuals and businesses unintentionally interfere with person or property of another Causation Proximate cause > cause of injury directly related to an act of a defendant The “But For” test in causation: -​ But for the defendant’s actions, would injury or damage not have occurred? Vicarious Liability Liability at law of one person for the acts of another Res Ipsa Loquitor and Circumstantial evidence Res ipsa loquitor > “the thing speaks for itself” Occupier’s Liability Applies to acts and omission of occupiers, not owners Manufacturers’ liability (product liability) Traditionally, duty of care owed only to the purchaser of goods not the user Now, manufacturer’s owe duty of care to any foreseeable users of their products if: Nuisance Remedies available to party subjected to the nuisance: -​ Damages -​ Injunction > equitable remedy ordering a person to refrain from doing certain acts General Tort Defences Contributory negligence​ -​ When actions of the injured party contributed to their own injuries voluntary assumption of risk of injury Act of God > a natural disaster or other calamity beyond human control Waiver > express or implied renunciation of a right or claim Release > promise not to sue or press a claim, or a discharge of a person from any further responsibility to act Statute of limitations: -​ Legislation (statute law) sets forth time periods within one must bring forward an action -​ Doctrine of laches > no relief with be granted when a person delays bringing an action for an unreasonably long period of time Tort Remedies Compensatory damages -​ Monetary award Purpose is to restore the injured party to a whole state (undo the harm done) -​ Special damages: covers specific losses or costs (actual amounts/receipts) -​ General damages Punitive / exemplary damages awarded to “set an example” Injunctions and court orders -​ Court order directed to a person ordering the person to cease doing the act described -​ Contempt of court > refusal to obey a judge’s order -​ Order of replevin > permits person to recover goods unlawfully taken Nominal damages: -​ Tort does not result in a monetary loss i.e. award symbolic damages in amount of $1.00 Chapter 6 Fiduciary Duty of Care Duty to place a client’s interests above the professional’s own interests Tort Duty of Care Professionals must maintain standard of proficiency or exercise degree of care according to profession Negligent misrepresentation > negligent misstatements made by professional to a client, May constitute a breach of duty of care Chapter 7 Freedom of contract: General ability of parties to create their own “law”, which they are obliged to follow Create specific rights and duties that courts will enforce Historical Development Law of contract relates to business transactions -​ Feudal system – each manor self-sufficient, and trades were by barter or purchase -​ Manor courts – handled minor cases The Intention to Create a Legal Relationship Premise of contract:  -​ End result is meeting of the parties’ minds (consensual agreement) -​ Consensus ad idem> agreement as to subject or object of the contract -​ Essential element is a promise -​ Intention on the part of the promiser to be bound by the promise made -​ Create a legal relationship Presumptions in contract law: -​ Intention to be bound assumption at law that strangers intend to be bound by their promises Offer and Acceptance -​ Only a promise made with intention of creating a legal relationship may be enforced -​ A promise is tentative, until the other party accepts proposal i.e. to comply with the condition(s) -​ Unilateral agreements – offers that require offerees to complete their part of the contract as a mode of acceptance Effect and Timing of the Click -​ Electronic business contracts must include valid offer and acceptance -​ Click-wrap agreement > internet click box of “I Agree” as valid acceptance of contractual responsibilities Lapse of an Offer Lapse > termination of an unaccepted offer by the passage of time, a counteroffer, or the death of a party Chapter 8 Nature of consideration Consideration > something that has value in the eyes of the law, and which the promisor receives in return for a promise Gratuitous promise > promise not accompanied by consideration Exceptions to rule: -​ Negotiable instruments – person may be liable on a promissory note, to subsequent endorser even without consideration Adequacy of Consideration Courts not concerned with whether promiser received proper compensation for promise Seal as Consideration -​ Involves affixing a wax paper wafer beside signature Tenders -​ Involves advertisement or particular needs i.e. an invitation to submit offers (calling for tenders) Quantum Meruit “As much as he has earned Equitable or Promissory Estoppe Cases where it is fair (equitable) that person making promise is prevented (estopped) from later denying or withdrawing the promise -​ Estoppel > rule whereby a person may not evade a promise Chapter 9 Enforceability and the Right of Repudiation  1.​ Executed - fully executed by the minor (enforceable against minor) unless minor was taken advantage of 2.​ Executory - yet to be performed (may not be enforceable against minor) Necessary or beneficial contra Courts use criteria to determine what is necessary for a minor: -​ Social position of minor -​ If minor already well supplied with similar goods -​ Onus is on the merchant > they must distinguish between what is necessary vs. luxury Minor is liable on such contracts -​ Necessaries: food, clothing, shelter, certain types of transportation, etc. -​ Beneficial contract – employment/apprenticeship contracts which are beneficial to the minor Minors Engaged in Business Sole proprietor -​ Must repudiate after attaining age of majority or will continue to be bound ​ Minor as merchant: -​ Rules consistent with those for minors in general -​ Not necessary for a minor to engage in business -​ Contracts usually treated as contracts for non-necessaries Partnership -​ Voidable at option of the minor -​ If a minor continues to accept benefits under a contract after attaining age of majority, will be bound Temporary or permanent Mental Impairment Persons committed to mental health institutions cannot incur liability (contract is void) Liable on any contract for necessaries negotiated by them > obliged to pay reasonable price for goods and services Contracts for non-necessary items are voidable by impaired person if: -​ Can establish by evidence that they were incapable of knowing nature of their actions -​ Other party was aware of the condition when the contract was entered into -​ Contract must be repudiated immediately after person returns to sanity or sobriety Corporations Types of corporations: -​ Regular corporations -​ Same powers as a natural person - “Special-Act” corporations -​ Powers controlled by Special Act -​ Limitations are public knowledge because are contained in a statute - Ultra vires > act that is beyond the legal authority or power of a legislature or corporate body Labour Unions Ability to enter into contracts i.e. collective bargaining agreements allowed under labour legislation Contracts in Restraint of trade Three categories:  1.​ agreements contrary to the Competition Act 2.​ agreements between vendor and purchasers of a business that contains unreasonable restriction on right of vendor to engage in similar business in competition with the purchaser, and 3.​ agreements between an employer and employee that unreasonably restricts right of employee to complete with the employer once the employment relationship is terminated Restrictive Agreements: Sales of a business Restrictive covenant > contractual clause limiting future behavior -​ Purchaser must convince courts that restriction is reasonable and does not adversely affect public interest Chapter 10 Certain contracts not enforceable if not in writing (i.e. contracts covered by Statute of Frauds): 1.​ Contract concerning interest in land, 2.​ A promise by executor to settle a claim out of their own personal estate, 3.​ A guarantee agreement, or, 4.​ Contract that cannot be fully performed within one year Contracts by Executors and Administrators Executor or administrator tries to collect, care for, and distribute assets of a deceased person Assumed Liability: The Guarantee Guarantee > collateral promise (in writing) to answer or the debt of another Assumed Liability: Tort Any agreement whereby a third party promises to answer for the tort of another -​ Must be in writing -​ Signed by the party to be charged Requirements for a Written Memorandum To comply with Statute of Frauds: -​ Must include terms of contract (3 P’s): -​ Parties to agreement be identified by name or description -​ Property described in detail -​ Price – consideration paid, or to be paid Parol Evidence Rule Parol evidence rule> rule that prevents a party from introducing evidence that would add to or contradict terms of a contract Condition Precedent condition that must be satisfied before a contract may come into effect Doctrine of implied term insertion by the court of a standard or customary term omitted by the parties when the contract was prepared Collateral Agreement Collateral agreement > agreement that has its own consideration, but supports another agreement Subsequent agreement Subsequent agreement > agreement made after a written agreement that alters or cancels the written agreement Sales of goods act Sale of Goods Act is a second important statute with requirement of writing -​ Certain transactions over a certain value if not in writing are unenforceable Chapter 11 Requirements for a valid contract: Offer and acceptance Capacity Consideration Legality of object Intention Form and writing Mistake Party made a mistake Mistake of Law -​ Presumed to know the law Mistake of Fact mistake to the existence of the subject matter of a contract or the identity of a party Non Est Factum defence that may allow illiterate or infirm persons to avoid liability on a written agreement if they can establish that they: -​ Were not aware of the true nature of the document, and -​ Were not careless in its execution Unilateral and Mutual Mistake 1.​ Unilateral mistake mistake by one party to the agreement 2.​ Mutual mistake mistake where both parties have made mistaken assumptions Misrepresentation Statement or conduct that may be innocent or fraudulent that induces a person to enter into a contract Three types Innocent, negligent, fraudulent (only innocent gets rescission only and rest + damages) Fraudulent Misrepresentation Courts may use punitive damages against the committing the tort as punishment Negligent Misrepresentation Statements that are sufficiently reckless but not quite innocent nor fraudulent Undue Influence Undue influence > state of affairs whereby a person is so influenced by another If special relationship exists, undue influence alleged onus shifts to dominant party to prove otherwise Duress Threatening into contract Chapter 12 Privity of Contract Privity > person cannot incur liability under a contract to which he or she is not a party Prior Interests in Land Exception to rule of privity that deal with sale, lease or transfer of land Constructive Trusts Trust > agreement or arrangement whereby a party (trustee) holds property for the benefit of another (beneficiary or cestui que trust) Statutory Rights and Liabilities Third party has statutory right to demand performance directly from contracting party Other Privity Exceptions Tort: users of products can sue manufacturers for injuries even if no contract exists Collateral warranty -​ Can enforce a warranty against a third party Employment -​ Employees may limit their liability under the contract entered into by their employer Novation Novation > substitution of parties to an agreement, or the replacement of one agreement by another agreement Equitable Assignments -​ Can only assign rights not obligations -​ Assignor > one who assigns their rights -​ Assignee> one who receives rights under assignment Choses in action > paper document that represents a right or interest that has value Equity recognized need for flexibility in transfer of rights under contracts and business agreements Equitable assignment > an assignment that could be enforced if all parties could be brought before the court Vicarious Performance performance of a contract by a third party, where the contracting party remains liable Statutory Assignments An assignment of rights that an assignee may enforce if certain conditions are met by the assignment Set off> when two parties owe debts to each other, the payment of one may be deducted form the other Assignments by Law Other statutory assignments come into effect on death or bankruptcy Negotiable Instruments an instrument in writing that, when transferred in good faith and for value without notice of defects passes a good title to the instrument to the transferee Chapter 13 The nature and extent of Performance Performance: -​ Contract must be performed by parties in accordance with terms -​ Principle of good faith > regard for the contractual interests of partner​ Tender of Payment Tender > act of performing a contract or the offer of payment of money due under a contract Tender of payment: -​ Performance is made when money paid at time and place required under the contract Debt: -​ Debtor needs to hold amount of money until creditor demands payment Tender of performance of an act Seller’s performance is not by tender of money, but by tender of an act if contract concerns land, equitable remedy of specific performance may be available By termination as a right Contract provides for a termination right -​ Option to terminate by one party giving notice to the other By External Events Express terms > discharge by the occurrence of an event specified in the contract -​ Condition subsequent > condition that alters rights or duties of the parties -​ Force majeure > major, unforeseen event outside the control of the parties Implied terms > discharge by the occurrence of an event that by custom of the trade would normally result in exemption from liability -​ Frustrated contract > contract under which performance by a party is rendered impossible due to an unforeseen or unexpected change in circumstances affecting the agreement Sale of Goods Act: -​ Provides that destruction of specific goods (through no fault) will void contract Frustration requires impossibility not mere hardship or greater expense By Frustrated contracts act -​ Allows for recovery of deposits and/or advances -​ Allows for retention of funds to cover expenses when only part performance has occurred By operation of law Discharged by operation of law Law also comes into play when too much time passes before enforcing breach of contract -​ Doctrine of laches > undue delay in bringing an action against a party for failure to perform at Common Law -​ Limitations Act > actions not brought within specific time limit are statute-barred By Agreement Waiver > express or implied renunciation of a right or claim Novation > mutual agreement to amend the terms or parties to an existing agreement Material alteration > major alteration of an agreement Chapter 14 Express Repudiation Repudiation > refusal to perform a contract Anticipatory breach > an advance determination that a party will not perform when the time for performance arrives Doctrine of substantial performance > where a party that has committed a breach has largely performed Subsidiary promise:Do not permit party to avoid the agreement as a result of repudiation or non-performance of other party Implied Repudiation Ascertained from actions of party or implied statements made Fundamental Breach Fundamental breach > breach of a contract that goes to the root of the agreement Warranty > in the sale of goods, a minor term in a contract -​ Breach of warranty does not permit injured party to end contract -​ Injured party can sue for damages Concept of compensation for loss Breach of contract gives right of injured party to sue for compensation for the loss suffered -​ Restitutio in integrum > to restore or return a party to an original position -​ Used by courts to mean “to make the party whole” Types of Damages General damages > restitution for losses that can be naturally expected to flow from a breach of contract Special damages > specific damages that do not otherwise flow normally or naturally from a specific breach of contract Punitive damages > damages awarded by a court to punish a wrongdoer The extent of liability for loss Two “rules” apply in cases where breach of contract occurs: -​ Contemplation test > identifies damages that might obviously be expected to result from a breach as contemplated by a reasonable person -​ Special circumstances > any loss that might occur from special circumstances relating to the contract that both parties might reasonably be expected to contemplate at the time the contract is made Duty to Mitigate Loss Mitigate > obligation of an injured party to reduce the loss flowing from a breach of contract Liquidated Damages Liquidated damages > bona fide estimate of the monetary damages that would flow from the breach of a contract and agreed to as a term of the contract -​ If amount is unreasonable in relation to damage suffered, treated as a penalty rather than liquidated damages -​ Penalty clauses are unenforceable as they are akin to punitive damages Remedies for Particular Situations Specific performance > equitable remedy of the court granted when damages would be inadequate Injunction > equitable remedy of the court that orders the person or persons named therein to refrain from doing certain acts Quantum Meruit > “as much as he has earned” Enforcement of Judgements Judgement debtor - Losing party in a court action Writ > court order in formal written form, incorporating an instruction for enforcement Types of Writ Writ of seizure and sale -​ Against debtor’s land and personal property Writ of sequestration -​ Seize and maintain income-producing property of debtor, with income used to pay off debt Writ of possession -​ Voluntary or forced removal of existing occupants of land or building Writ of delivery -​ Recover possession of personal property that a person refuses to return to rightful owner Notice of garnishment -​ Recover money owed to debtor by someone else -​ Usually attached to garnishment of wages of debtor’s bank deposits Examination in aid of execution -​ Judgement debtors examined under oath as to property and financial prospects Chapter 16: Forms of business organization Basic forms of business organization: Sole proprietorships Partnerships Corporations Other forms and methods of carrying on business (e.g., joint ventures, licences, strategic alliances) Sole proprietorship and Partnership ***Unlimited personal liability - **Main disadvantage** Limited ability to raise capital; skill limitations Sole owner owns all assets and entitled to all profits Types of partnerships 1.​ General Partnership 2.​ Limited Partnership 3.​ Limited Liability Partnership Partnership versus co-ownership -​ Partnership Contractual Founded on mutual trust Partner agent of other partners and the partnership Partners share in partnership property is always personality (personal property) Subject to Partnership Act -​ Co-ownership Dissolved through disposition of property Rights and duties of partners - highlights Minimal requirements under Partnership Acts Rules determine partners’ interests, in absence of any express or implied agreement Equal share in capital and profits Indemnity by the firm for personal payments and personal liabilities Interest paid on excess capital contributions Not interest before profits Every partner may take part in management; agent for other partners in the conduct of partnership business No new partners without consent of others Contract of utmost good faith Partners must perform in the best interest of the partnership as a whole If a partner uses partnership property (e.g. pen, paper), then they must deliver any benefit to the partnership A partner cannot - unless the other partners agree - carry on for their own benefit a business in competition with the partnership. Joint and several liability *** The partnership is not a legal entity separate from the partners. Partners individually and as a group have liability for a debt of the partnership Partners are agents for each other and for the partnership Dissolution of partnership The termination of the partnership relationship Can be set forth in partnership agreement Liquidation of assets Determine partners’ share Set order of payment of debts from liquidation is set out in Act and in partnership agreement Must notify customers of firm of dissolution Partners liable for debts of partnership during time as a partner Limited partnership A partner who may not actively participate in the management of the firm, but has limited liability -​ Limited partner can become a general partner if one takes an active role in management Limited liability partnership A partnership where individual partners are liable for the general debts of the partnership and for personal negligence but not liable for the negligence of other partners Corporation -​ Definitions Natural person: a human being Legal person: also called artificial person or juristic entity. An entity, such as a corporation, created by law and given certain legal rights and duties of a human being; a being, real or imaginary, who for the purpose of legal reasoning is treated more or less as a human being Powers of a natural person: e.g. to sue and be sued, acquire properties, and assume or be made subject to legal obligations (Black’s Law Dictionary) Introduction Corporation type of legal entity created by the state Existence in law is separate from those who form it, possess shares in it or who are responsible for direction (limited liability) A person in the eyes of the law with similar rights and responsibilities to that of an individual (natural person) Nature of a corporation Shareholders elect directors and directors appoint officers -​ Director: a person elected by the shareholders to manage its affairs -​ Officer: person elected or appointed by the directors to fill a particular office Management delegated by shareholders to elected group of directors Directors make all decisions for corporation  -​ Subject to limitations in the Articles of Incorporation or shareholders agreement Introduction Principal use is vehicle by which large amounts of capital may be accumulated Properly authorized agent may bind corporation in contract with third parties ​ actions of agents can result in the corporation being held responsible. Unlike partners in a partnership, shareholders possess limited liability for debts of corporation, and creditors may look only to assets of corporation to satisfy their claims Methods of Incorporation Duties and responsibilities of directors Must have at least one director Right to declare dividends Relationship between directors and corporations is fiduciary Fiduciary > relationship of utmost good faith in which a person must act in the best interests of the person for whom they act, rather than in their own best interests Must disclose their interest in particular contract or property Refrain from discussing or voting Accountable at law for breach of duty Personal Liability of directors Directors held personally liable for certain events that occur as a result of their actions Directors defence of due diligence Due diligence> obligation on the directors to ensure that effective systems are in place to comply with the law, and to monitor the systems to ensure compliance Defence for directors: -​ Does the action lead to absolute liability i.e., liability that does not depend on actual negligence or intent to harm, but that is based on the breach of an absolute duty to make it safe -​ Can a defense of due diligence be raised? Directors must exercise the care, diligence, and skill that a reasonably prudent person would do in similar circumstances Standard of care varies depending on the circumstances Outside director > director who is not an officer or employee of the corporation Director may not: Engage in transaction with third party that might deprive corporation from opportunity to profit -​ Doctrine of corporate opportunity > use of corporate information for a personal benefit to the detriment of the corporation Be in a conflict of interest Engage in any activity that might permit the director to profit at the corporation’s expense Vote on such matters as a director but may vote as a shareholder Relations with third parties Doctrine of constructive notice > presumption at law that everyone has knowledge of the content of all statutes Indoor management rule > party dealing with a corporation may assume that officers have the valid and express authority to bind corporation Protect third parties from unusual limitations on powers of directors or on corporation itself Dissolution, purchase and sale of a corporation Corporation is solvent and may wind up its business or if insolvent, may be involuntarily dissolved. Procedure dictated by statute Private companies: Estate freeze > reorganization, often intergenerational, with redeemable preference shares distributed to departing shareholders as payment Common shares participating in future growth are distributed to incoming shareholders Management buy-out (“MBO”) transfer of ownership in a corporation to existing managers or employees Provides stability of operation and probable future success Two methods: Share sale and Asset Sale because the corporation is a separate legal entity, only it should be able to sue for wrongs that it has suffered. Derivative action: a lawsuit initiated by shareholders on behalf o f the corporation against a person, usually an officer or a director of the corporation, because the corporation fails to take action against the officer or director. A type of class action. Basic rights. Ordinarily, a shareholder of a corporation acquires four basic rights: 1.The right to vote on matters to be decided by the shareholders as members of the corporation (e.g. removal of auditor); 2.The right to participate in the profits of the corporation when distributions of profits are made; 3.The right to participate in the distribution of the assets of the corporation when the corporation is wound up, after the creditors are paid; and 4.The right to transfer his or her shares to some other person. Shareholder rights Courts recognize exceptions to “majority” rule where minority shareholders can take action against directors or majority shareholders: a)​ Act objected to is ultra vires b)​ Act personally affects rights of minority shareholders c)​ Corporation fails to comply with procedural rules d)​ Act constitutes a fraud on minority shareholders Shareholder rights - other remedies Common Law action against directors by shareholder is difficult because corporation is the body injured Shareholder must satisfy courts that: -​ Internal attempts to resolve matter have been exhausted -​ Actions or decision of directors were improper, and caused injury to corporation -​ Security for costs of action should claim fail Minority shareholders are also protected in Canada Business Corporations Act Shareholders may seek relief if directors or corporation act in a way that “oppresses, unfairly prejudices, or unfairly disregards their interests” Court may rectify matter under broad statute powers Chapter 15: Law of agency The role of an agent Law of agency:  -​ Deals with relationship between an individual (principal) who either expressly or impliedly uses services of another (agent) to carry out a specific task on his or her behalf -​ Principal > person on whose behalf an agent acts -​ Agent > person appointed to act for another, usually in contractual matters -​ Purpose is to enable principal to accomplish some particular purpose, usually formation of a contract Historical development of the law of agency Law of agency rooted in law relating to tort, contract, quasi-contract and equity -​ Late eighteenth century - use of agents became widespread with growth of trade -​ Rapid industrial change created need for Common Law response -​ Law of contract -​ Law of agency The nature of the relationship Governed by tort law, contract law, and equity Agent is empowered on behalf of another -​ Agent is conduit by which a contract can be effected between principal and third party Acts of agents bind principals if done within scope of power Can act for more than one principal at the same time (insurance agents) Minors can act as agents -​ Any contract negotiated on minor’s behalf is voidable at minor’s option -​ Even if agent was of full age Agent must not be subject to mental incapacity Agency agreement between principal and agent subject to ordinary rules of contract Agency by express agreement Express agreement > agency relationship established by an express oral or written agreement Agency by conduct > agency relationship inferred from the actions of a principal Agency by estoppel > representation by words or conduct that a person is an agent cannot later be denied if a third party relies on the representation Ordinary agency relationship extends beyond agreement between principal and agent: -​ First contract is between agent and principal -​ Second contract is between principal and third party (although negotiated by the agent) -​ Two separate contracts Duties of the Parties Relationship between principal and agent:​ -​ Both parties must act in good faith -​ Principal’s duties: -​ Pay for services rendered -​ Indemnify agent for reasonable expenses Agent’s duties: -​ Obey lawful instructions of principal and keep information confidential -​ Inform principal of any important developments Other duties of the agent: -​ Maintain standards required for that skill in performance of their duties -​ Not delegate duties without permission of principal -​ Account for goods or money when required -​ Bring to principal’s attention any information that might impact principal -​ Duty only to principal and not to third party i.e. cannot act for both parties / no secret commissions Agency by conduct or estoppel Actions which convey impression that one is an agent for another or has conferred authority to act on one’s behalf -​ Estoppel > rule whereby a person may not evade a promise or evade truth of a statement of fact made by him or her when another person has relied and acted upon the promise or statement -​ Arises most often wherein principal has adopted a contract negotiated by another Types of authority: -​ Actual > where expressly given -​ Apparent > implied from actions - Apparent authority > ability of an agent to bind a principal where the principal has not notified third parties of the restrictions or terminated authority of the agent Agency by operation of law Operation of law > agency that may arise in certain circumstances out of necessity where it is not possible to obtain the authority of the principal to act Ratification of contracts by a principal Ratification: -​ When a principal wishes to take advantage of contract negotiated by their agent when their agent did not have the authority to negotiate -​ If done properly binds principal to contract with third party -​ May ratify if principal was identified in agreement as principal -​ Subject matter of contract is something principal is capable of Ratification: -​ Must be made within a reasonable time after agent enters into contract -​ Must be for entire (whole) agreement -​ If benefits accepted under the contract then the principal has ratified -​ Must repudiate a contract made by an agent without authority promptly -​ Silence by principal is not acceptance -​ Ratification is as of date contract made by agent Third parties and the agency relationship Disclosed agency: -​ Agent should indicate only acting as agent Undisclosed agency: -​ Agent fails to disclose they are acting as an agent Fictitious agency: -​ Agent contracts on behalf of a fictitious or non-existent principal Undisclosed principal: -​ Agent fails to disclose identity of principal but expressly describes themself as an agent -​ Not personally liable -​ Agent fails to disclose acting as an agent and enters into contract with third party -​ Agent and / or principal is liable -​ Position of principal is important Liability of principal and agent to third parties in tort Rule > principal may be held liable for tort committed by agent if committed in ordinary course of carrying out agency agreement -​ Often based on fraudulent misrepresentation i.e. tort of deceit -​ If third party entered contract as a result of fraud by agent, then both principal and agent will be liable -​ If fraud committed outside scope of agent’s employment only agent liable Termination of the principal agent relationship Agency relationships created by express agreement usually provides for termination  -​ Must give other party a particular period of notice, agency will terminate on expiry of notice period (fixed) -​ If no term given, right to terminate may be implied -​ Either party can give notice to end relationship Other ways agency may terminate: -​ Task is completed -​ Incapacity of principal or agent -​ Voidable at option of minor -​ Bankruptcy of principal Must inform third parties that agency has been terminated Chapter 19: Employment and labour relations Contract of employment -​ Modified Common Law -​ Specified terms and conditions of relationship 1897 - Worker’s Compensation Act -​ Protected workers from injury arising of work accidents -​ Adopted in Canada Common Law: -​ Established relationship as one of contract “bargain” struck between master and servant Nature of the relationship Contract of employment involves: -​ Fourfold test a test for employment based on: -​ Ownership of tools -​ Control -​ Chance of profit -​ Risk of loss Courts recognize limitation of fourfold test Distinguishing an independent contractor: -​ Initiative to do the work -​ Manner in which the work is done -​ Does he or she employ others? Form of the contract -​ Contract of employment: -​ Need not be in writing to be enforceable -​ May need to be in writing under Statute of Frauds -​ If run for a fixed term for more than one year -​ Informal evidence is allowed to prove the contract -​ Many contracts are verbal of indefinite hiring -​ If employee has access to secret processes or confidential information -​ Contract usually in writing and with restrictive covenants to protect business secrets Duties of the employer Employers cannot contract out of employment legislation -​ Most provinces have employment standards legislation which sets out minimum wages, hours of work, overtime, holiday pay, holidays, etc. Two classes of laws: 1.​ Employee safety and working conditions 2.​ Terms of employment contract (employment standards) Employment standards legislation Employment standards -​ Impose minimum requirements of employers -​ Parties free to negotiate more favorable terms Duty to acommodate Duty to accommodate > obligation of an employer to adjust work for an employee with a recognized disability -​ Bona fide occupational requirements (BFOR) -​ Can discriminate in hiring process if one can establish BFOR for the position -​ Must establish requirement is reasonable and necessary in order to perform the work and complete the task -​ Must be done in good faith by the employer Age discrimination and mandatory retirement Several provinces have amended legislation to eliminate the right to retire employees when they reach age 65 -​ Can still terminate for other causes or for BFOR -​ Termination solely on age is discrimination -​ Under human rights legislation Pay equity legislation Common Law: -​ Cannot pay female employees a lower wage than male employees for the same job Position (and pay) needs to be assessed in terms of value, using job-related criteria such as: -​ Skill -​ Ability -​ Education -​ Working conditions Provide equal pay for work of equal value Duties of the employee Those specifically set out in the contract Implied duties: -​ Duty to obey all reasonable orders of employer -​ Obligation to use property or information in a careful / reasonable manner -​ Keep confidential information confidential -​ Devote agreed hours to employer’s business -​ BUT employee’s spare time is employee’s own - Employer entitled to profits earned by employee - Senior employees have higher duty - If employee has professional or other accreditation, then perform skills to standard of said profession - To act in best interests of employer When an employee believes they have been wrongfully dismissed: -​ Employee may sue for failure to give reasonable notice of termination -​ Employee must reasonably minimize their losses -​ Damages are equal to loss between time dismissed and the end of the reasonable notice period -​ Purpose is to place the employee in same position had the employee been given proper notice -​ Awarded extra compensation where actions of employer caused employee undue mental distress Punitive damages only awarded for bad faith dismissals -​ Dismissed employee must show: -​ Wrongful dismissal -​ Employer’s actions were “harsh, vindictive, reprehensible or malicious” -​ Larger damage awards made if employer dismisses employee: -​ In particularly insensitive or callous manner -​ Makes false accusations concerning employee Employer need not terminate employee directly to constitute dismissal  -​ Constructive Dismissal > employer termination of a contract of employment by a substantial, unilateral change in the terms of the conditions of employment -​ Demotions lower-paying position -​ Changes to work environment or facilities – make it impossible for employee to do their job Remedy for wrongful dismissal is money damages Cyber law aspects of employee management Electronic information exchange can create legal issues within company -​ E.g., employees engaging in harassment through company email account -​ Employees must follow company IT policies -​ Organizations need to have clearly expressed operation policies for employee IT use -​ Electronic broadcast allows damage to run further > can lead to increased amount of a damage award Employee misrepresentation (wrong hiring) When an employer induces an employee to join the employer based on misrepresentations of job duties or the position -​ Employees can take legal action based on tort of negligent or fraudulent misrepresentation -​ Employee must establish that: -​ Employer clearly misrepresented position -​ Statements made fundamental to accepting position -​ Suffered some loss as result of misrepresentation Employer liability to third parties Employer may be held liable for any loss or damage suffered by a third party as a result of: -​ An employee’s failure to perform a contract -​ Negligence on part of employee that causes injury or loss Vicarious liability on employer for acts of employee -​ Employees seldom possess financial resources to compensate third parties -​ Liability limited to acts of employee within ordinary scope of employee’s duties Workers compensation legislation 1897 – Workmen’s Compensation Act -​ Provided compensation to workers injured on job -​ Insurance scheme – all employees covered by Act entitled to compensation without need to take legal action to prove fault if injured in course of employment i.e. no-fault system -​ Employees covered by Act entitled to compensation but waive right to sue employer Employer’s required to contribute to fund from which compensation is paid Labour relations Transition to unionized work environment is a major alteration in any business model -​ Owners and managers negotiate: -​ Terms of employment -​ Restricted authority -​ Binding principles for dispute settlement, discipline and seniority If transition is mismanaged, can lead to extraordinary losses in production due to strikes or lockout Collective bargaining legislation Federal and provincial labour relations laws: -​ Remove collective bargaining relationship from Common Law and deal with it administratively -​ Jurisdiction of administrative tribunal: -​ Selection of a union as a bargaining agent -​ Negotiation of collective agreement -​ Resolution of disputes relating to negotiations Rights and duties of employer, union, and employees are also set out Certification process process under labour legislation whereby a trade union acquires bargaining rights and is designated as exclusive bargaining representative of a unit of employees -​ Employees must establish someone to act on their behalf in negotiations with the employer -​ Employees can form their own group or call on one -​ Legislative process determines what amount of support required to have bargaining unit certified -​ Employer can recognize or not, the union -​ Union applies to labour relations board Bargaining unit > group of employees of an employer represented by a trade union recognized or certified as their exclusive bargaining representative -​ Only employees entitled to bargain collectively -​ Legislation sets out who can and cannot bargain Labour relations boards at hearings will receive representation of: -​ Employer, union and employees The negotiation process Process begins when certified union gives written notice to employer to begin bargaining -​ Upon receipt of notice: -​ Employer arranges to meet with union -​ Must bargain in good faith If agreement reached: -​ Must be in writing -​ Signed by employer and union representatives -​ Once approved by employees, becomes binding for term specified in agreement Third party intervention Used when parties cannot reach an agreement -​ Assists parties by clarifying issues in dispute and taking active part in resolving conflict -​ Intervention can be in form of: -​ Conciliation -​ Mediation -​ Fact-finding -​ Only when third-party intervention fails are parties permitted to strike or lockout -​ Employers usually cannot alter work conditions Strike and lockouts Lockout > refusal of employee entry into the workplace by an employer when collective bargaining with the employees fails to produce a collective agreement Compulsory Arbitration Strike or lockout not available to all employee groups when negotiations fail -​ Essential services hospitals, firefighting, and police work -​ Compulsory arbitration is imposed: -​ Used to resolve issues that groups cannot settle -​ Used in final offers from the parties -​ Allows work to continue without interruption -​ Issues in dispute heard before an arbitration board -​ Parties bound by arbitrator’s decision The collective agreement and it’s administration Collective agreement > agreement in writing, made between employer and certified union -​ Contains the terms and conditions under which work is to be performed -​ Sets out the rights and duties of the employer, the employees, and the union -​ Common terms or clauses: -​ Employer recognizes union as bargaining agent  -​ No strike or lockouts during term of agreement -​ Dispute settlement Grievance procedure: -​ Collective agreements provide for informal meetings between parties to settle disputes (grievances) prior to arbitration -​ Involve progressively higher levels of management on both sides -​ Usually outlined as series of steps in collective agreement -​ After grievance procedure exhausted (and no settlement reached) > arbitration process invoked Dispute can be heard by sole arbitrator or arbitration board -​ Holds hearings where parties: -​ Present their side of dispute -​ Introduce evidence or witnesses to establish facts -​ Arbitrator (or board) renders an award binding upon parties -​ Given wide powers to determine procedures, examine witnesses, investigate circumstances -​ Must deal with disputes in fair and unbiased manner The termination of collective bargaining Labour legislation allows employees to terminate collective bargaining relationship -​ Union decides to cease acting as a bargaining agent -​ Majority of employees no longer wish to be represented by the union -​ Takes form of declaration by labour relations board after a hearing Decertification process: -​ Begins with request by employees for decertification -​ Hearing held by labour relations board -​ Vote – board terminates union’s bargaining rights if majority of employees in favor -​ Employment relationship reverts to individual employment contracts -​ Employer cannot instigate or encourage the decertification process -​ If so, board will reject application The union member relationship Trade union is unique entity in law -​ Lawful existence made possible by legislation -​ In some jurisdictions lack capacity to sue or be sued -​ Unincorporated entity has no existence separate from its members -​ Relationship with its members is contractual -​ Rights of each member governed by contract -​ Member may be expelled for failing to abide by contract Common clauses: -​ Closed shop clause > employer can only hire persons who are already union members -​ Union shop clause > continued employment of employee is conditional upon union membership -​ Some jurisdictions have restrictions on refusal of membership or expelling members -​ Prevents arbitrary action by union against employees -​ Membership cannot be denied on basis of race, creed, colour, sex, nationality, place of origin, etc. -​ Rules of natural justice apply in dismissal of members Chapter 27: Consumer Protection Consumer protection legislation: -​ Legislative control of the market is required to protect the public from unscrupulous operators -​ Legislation not uniform throughout Canada -​ Mix of federal and provincial statutes  -​ Designed to redress some real or perceived unfairness in marketplace -​ State has always attempted to protect its constituents from unscrupulous merchants Types of consumer protection laws: -​ Product safety -​ Product quality and performance -​ Credit granting and credit reporting -​ Business practices in general Depending on protection required, laws take five different approaches: 1.​ Disclosure of information to consumer 2.​ Expanded consumer rights at law 3.​ Minimum standards for safety, quality, performance 4.​ Control of sellers and others by registration or licensing requirements 5.​ Prohibition of unethical business practices Consumer safety To be effective, consumer protection from hazardous products or services must: -​ Compensate for injury -​ Contain incentive for manufacturer or seller to take care -​ Seller or manufacturer must warn consumer of hazards associated with product’s use or consumption Food and Drugs Act -​ Controls harmful products that may cause injury or illness -​ No civil right of action -​ Strict liability and penalties for breach -​ E.g., manufacturer liable in case of false or deceptive labelling of a product Canada Consumer Products Safety Act (CCPSA) -​ Covers most non-commercial consumer goods (except food and drugs) -​ Including the manufacture, importation, sale advertising, packaging and testing -​ Products sold to public subject to regulation -​ Packaging must bear warnings -​ Misleading advertising is prohibited Hazardous Products Act -​ Focuses on commercial goods E.g., industrial inputs and waste -​ Prohibits manufacture and sale of products of an extremely dangerous character -​ Deals primarily with packaging -​ Warning symbols printed on containers -​ Subject to specific handling requirements Consumer Information Consumer information is related to safety and consumer protection -​ Disclosure of information about product or service -​ Prohibition of false or misleading information -​ Provide standards for consumers to make direct comparison of products and prices Weights and Measures Act -​ Establishes uniform system of weights and measures for all goods sold Consumer Packaging and Labeling Act -​ Prevention of false or misleading labeling and packaging Consumer Product Quality and performance protection First area to protect consumers: -​ Prohibit sellers from exemptions under the Sale of Goods Act -​ Manufacturers of inferior goods continued to enjoy relative protection through privity of contract rules -​ Trend towards expansion of buyer’s rights and sellers’ obligations  -​ Impose heavy burdens on sellers and manufacturers who provide products that fail to meet advertised performance claims Statutory warranties > express warranties on goods provided by statute Act imposes obligation on seller to comply with: -​ Any or all other warranties or promises for performance -​ Statements made through advertising, writing or made at time of sale -​ Representations treated as express warranties and actionable in event of breach Act provides remedies depending on breach: -​ Exemplary damages if seller or manufacturer willfully acts contrary to statute Itinerant Sellers Itinerant sellers > sellers of goods who sell goods at the buyer’s residence Cooling-off period > time interval after a contract is signed that allows the buyer to repudiate the contract without liability -​ Contract exists between buyer and seller only AFTER the cooling-off period Legislation requires: -​ If sale exceeds a certain sum, must be in writing -​ Contract must describe goods, provide itemized price and give full statement of payment terms -​ Warranty must be set out in agreement -​ Attempts to encourage rational buying decision: -​ Eliminate use of questionable selling techniques -​ Allow consumer to review agreement during cooling-off period Unfair Business practises Unfair business practices > business practices that mislead or treat the buyer unfairly -​ Consumer protection legislation can be general or specific: -​ General – concerns all sectors of consumer-related business (e.g., Consumer Protection Act) -​ Lists practices considered unfair Specific – motor vehicle repairs (e.g., auto repair legislation in Quebec and Ontario) Activities deemed to be unfair business practices: -​ False, misleading or deceptive representations to consumers -​ Regarding quality, performance, special attributes -​ Designed to induce consumers to enter into purchases of goods or services Unconscionable transactions > take advantage of vulnerable consumers or result in one-sided agreements in favour of seller 1.​ Take advantage of physical infirmity, illiteracy, inability to understand the language, ignorance of consumer 2.​ Price grossly exceeds value of similar goods on market 3.​ Contracts in which consumer has no reasonable probability of making payment of obligation in full Law is to eliminate specified unfair practices -​ Penalties for breaching Act include: -​ Fines -​ Permit consumer to rescind agreement -​ Obtain damages if rescission impossible -​ Courts may award exemplary or punitive damages -​ Minister and director have powers of investigation -​ May issue cease-and-desist orders -​ Cancel registration or licence to carry on activity Restrictive trade practise Competition Act prohibits: -​ False and misleading advertising to both price and performance -​ Deceptive practices -​ Resale price maintenance -​ Monopoly practices detrimental to public interest  -​ Restrictive trade practices > business practices that restrict trade to the detriment of the consumers or competitors Regulation by license or registration Business activities are subject to licensing and special rules Used to control particular activities and unfair practices in the public interest Compliance with law is necessary to maintain licence Violation of statute accordingly minimized Examples: sellers of securities, real estate and business brokers, mortgage brokers, etc. Collection agencies Collection agencies collect debts, usually from delinquent consumers -​ Regulated by licences or registration -​ Activities subject to high degree of control; not allowed to: -​ Harass or threaten debtor in any way -​ Use demands for payment that resemble a summons or other legal or court form -​ Collect debt from persons not liable for debt -​ Communicate with debtor’s employer Credit granting consumer protection Granting of credit depends on credit rating of consumer -​ In past, lack of information and inability to understand documents left debtor at mercy of lender or seller -​ Now, legislation requires: -​ Lender or seller to disclose true cost of credit -​ Borrower provided with written statement -​ Charges, bonuses, or amounts that borrower must pay in addition to interest, as well as interest amount Credit reporting consumer protection Credit-reporting agencies supply lenders with credit reports on borrowers -​ Allows lender or seller to decide promptly if credit should be extended -​ Agencies keep information on borrower’s potential ability to pay -​ Potential for error: -​ Concerns over use of information -​ Accuracy of information Laws designed to licence credit-reporting agencies -​ Limit access of information to certain persons -​ Nature of the information obtained must be relevant -​ Must permit consumer to examine file and challenge any inaccurate information -​ Provide consumer with names of all persons who received credit reports -​ Law enforced by penalties or revocation of licence Types of consumer protection laws Chapter 21 Contract of sale is a type of contract -​ General contract rules apply i.e. rules of formation, discharge and impeachment -​ More than ordinary contract because contains promises of parties but represents evidence of a transfer of ownership to the buyer -​ Two different types of contracts of sale: Ask “Ownership of good transfers immediately? -​ Ownership transferred immediately (sale) -​ Transfer of ownership takes place at a future time, or subject to fulfillment of a condition (agreement to sell) For money: Property must be transferred for money i.e. money must change hands -​ Barter or exchange of goods is not a contract of sale -​ Consignment is not a contract of sale Writing: -​ No special form required for contract; can be written, verbal, implied from conduct of parties -​ Requirement of writing if sale of goods valued above particular amount Requirement of writing can be avoided in three ways (exceptions in Sale of Goods Act): 1.​ Accepts part of goods sold 2.​ Makes a part-payment of the contract price 3.​ Gives something “in earnest” to bind contract Transfer of title: Represents agreement to transfer property in the goods to the buyer -​ Title > ownership of the goods -​ Normally goes with possession  -​ Sale of Goods Act determines when title passes Goods not in deliverable state remain at seller’s risk until “ready for delivery” -Examples: goods that must be produced, weighed, measured, counted, sorted or tested If transfer of title not dealt with in contract, Sale of Goods Act sets out five rules -​ Deemed to apply to the sale of goods -​ Rules deal with the passing of property (title) and therefore who bears the risk -​ Specific goods - goods that are identified and agreed on at the time a contract of sale is made -​ Unascertained goods - goods not yet set aside and identifiable as the subject of the contract at the time the contract is formed Rule 1 If there is unconditional contract for sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made -​ Immaterial whether the time of payment or the time of delivery (or both) be postponed Rule 2 Variation of Rule 1 > where there is a contract for sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them in a deliverable state -​ Property does not pass until the thing is done and the buyer has notice thereof -​ Title does not pass until seller does whatever is necessary to put goods into deliverable state, and notifies buyer that goods are now ready for delivery Rule 3 Variation of Rule 1 when there is a contract for sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price -​ Property does not pass until such act or thing is done and the buyer has been notified thereof -​ Seller must have the duty to weigh, measure, or otherwise deal with the goods Rule 4 Deals with contracts for the sale of goods “on approval” or with return privileges -​ Two-part rule > where goods are delivered to buyer on approval or “on sale or return” or other similar items, the property therein passes to the buyer: I. When he or she signifies his or her approval or acceptance of transaction Ii. If buyer does not signify his or her acceptance to seller but retains goods without giving notice of rejection Rule 5 Applies to unascertained or future goods by description (subject matter of an agreement to sell) -​ Property passes to buyer when goods unconditionally appropriated to the contract 1.​ By seller with buyer’s assent; or 2.​ By buyer with seller’s assent Contractual duties of the seller Sale of Goods Act permits parties to insert any terms or conditions they wish into contract of sale -​ Seller obliged to comply with these terms -​ If not specified, Act implies certain obligations in terms of warranties and conditions of the goods: Condition > essential term of a contract; if breached, entitles innocent party, if he or she chooses, to treat breach as discharge Warranty > minor term in contract of sale; breach of the term would allow injured party damages, but not rescission of agreement Title:  -​ Implied condition that in case of a sale, seller has right to sell the goods -​ Implied warranty that goods are free from any encumbrance in favour of a third party -​ Unless seller informed buyer of the encumbrance before or at time of agreement being made -​ Buyer shall have “quiet possession” of goods i.e. no person will later challenge the buyer’s title to the goods Duties of buyer in accordance with Sale of Goods Act: Promptly examine goods sent on approval Compare goods to a sample Take delivery Pay for the goods Payment and delivery are concurrent conditions Payment is a warranty unless specifically stated as a condition Sold by description: Sold by sample: Caveat emptor and “fitness for use intended” Caveat emptor > Latin for “let the buyer beware” -​ Buyer subject to caveat emptor with respect to quality and fitness -​ Buyer has opportunity to examine goods as to quality and fitness -​ Act imposes some obligations on seller: -​ If seller is in the business of supplying such goods, and buyer makes the purpose of use of goods known to seller, and buyer relies on skill or judgment of seller, there is implied condition goods provided shall be reasonably fit for intended use Merchantable Quality Merchantable quality > goods of a quality standard suitable for re-sale -​ Goods sold must be of merchantable quality -​ Breach if reasonable buyer would not pay full price -​ Merchantability covers goods, packaging, labeling -​ Applicable only if seller normally deals in goods -​ Not applied to defects in the goods that would be discovered by reasonable examination Application of the act For goods: -​ Agreement to sell must be for tangible goods i.e. moveable personal property and not intangibles -​ Distinct from land or anything attached to land -​ Land transactions not covered by Sale of Goods Act -​ Distinguished from contract for work and materials -​ Not covered by Sale of Goods Act if majority of contract is represented by the “work” / labour Sales of goods act Sale of Goods Act sets out special rules: -​ Applies to two types of contracts: 1) Sale – applied to specific goods 2) Agreement to sell – goods not yet made or available -​ If buyer and seller do not fix terms, Act contains implied conditions and warranties that will apply -​ Series of rules in Act deal with the passing of property (title) -​ Transfer of title (ownership of the goods): -​ Represents agreement to transfer property in the goods to the buyer Title normally goes with possession -​ Sale of Goods Act determines when title passes -​ Goods not in deliverable state remain at seller’s risk until “ready for delivery” A contract for the sale of a specified quantity of No. 1 grapes was made while the grapes were on the vines. The grapes were damaged by frost after the making of the contract, and the buyer refused to accept them. -​ The seller sued for payment. -​ The court held that:  -​ there was no transfer of the property to the buyer at the date of the contract, and the grapes remained at the seller’s risk. -​ Before delivery, the seller had to fulfil certain conditions including (a) picking, (b) packing and (c) weighing. It followed that there could be no delivery until after the seller had ascertained and appropriated the grapes agreed to be sold. The seller’s action was ultimately dismissed. If transfer of title not dealt with in contract, Sale of Goods Actsets out five rules -​ Deemed to apply to the sale of goods -​ Rules deal with the passing of property (title) and therefore who bears the risk -​ Specific goods - goods that are identified and agreed on at the time a contract of sale is made -​ Unascertained goods - goods not yet set aside and identifiable as the subject of the contract at the time the contract is formed Contractual duties of the seller -​ Sale of Goods Act permits parties to insert any terms or conditions they wish into contract of sale -​ Seller obliged to comply with these terms -​ If not specified, Act implies certain obligations in terms of warranties and conditions of the goods: -​ Condition> essential term of a contract; if breached, entitles innocent party, if he or she chooses, to treat breach as discharge -​ Warranty> minor term in contract of sale; breach of the term would allow injured party damages, but not rescission of agreement -​ Title: -​ Implied condition that in case of a sale, seller has right to sell the goods -​ Implied warranty that goods are free from any encumbrance in favour of a third party -​ Unless seller informed buyer of the encumbrance before or at time of agreement being made -​ Buyer shall have “quiet possession” of goods i.e. no person will later the buyer’s title to the goods Caveat emptor and merchantable quality -​ Caveat emptor → “let the buyer beware” -​ Buyer subject to caveat emptor with respect to quality and fitness -​ Assumption: Buyer has opportunity to examine goods as to quality and fitness -​ Act imposes some obligations on seller: -​ if seller is in the business of supplying such goods, and buyer makes the purpose of use of goods known to seller, and buyer relies on skill or judgment of seller, there is implied condition → goods provided shall be reasonably fit for intended use Merchantable quality >goods of a quality standard suitable for re-sale -​ Goods sold must be of merchantable quality -​ Applicable only if seller normally deals in goods -​ Not applied to defects in the goods that would be discovered by reasonable examination Delivery -​ Seller has duty to delivery goods at the right time, in the right quantity and at the right place -​ Right time (condition of contract): -​ If time for delivery not specified, goods must be delivered within reasonable time -​ Buyer may reject delivery if it is late -​ Delivery and payment should be concurrent, time of payment is a warranty -​ Right quantity: -​ If seller delivers less than amount in contract, buyer may reject goods or retain at contractual rate -​ If seller delivers excess, buyer is not obligated to buy / accept excess and can reject excess or entire delivery  -​ Right place: -​ If not specified then seller’s place of business -​ If parties aware goods stored elsewhere, then place where goods stored is the place for delivery Limitations of Liability -​ Seller may, by express term in contract, exclude all implied conditions and warranties imposed in Act if not sales to consumers -​ Seller must comply exactly with contract made -​ Courts use the concept of “fundamental breach” to get around such exclusion clauses -​ Consumer protection legislation: -​ in some jurisdictions, seller prevented from excluding implied conditions and warranties -​ Provides “cooling off” period for certain contracts -​ Impose greater responsibility on seller of goods Buyer - Duties and remedies Duties of buyer in accordance with Sale of Goods Act: -​ Promptly examine goods sent on approval Compare goods to a sample -​ Take delivery -​ Pay for the goods -​ Payment and delivery are concurrent conditions -​ Payment is a warranty unless specifically stated as a condition -​ Remedies: -​ Rescission -​ Damages -​ Specific performance Rescission: -​ For breach of condition but not warranty -​ If seller’s breach goes to very root of contract, buyer can repudiate contract and reject goods -​ Includes right to refuse payment -​ If payment already made, right to sue for recovery -​ If seller fails to deliver goods: -​ Buyer can purchase goods elsewhere and sue for difference between contract and price paid in market Damages: -​ For breach of warranties or in minor term -​ For deficiency in quantity of delivery -​ Buyer may treat a breach of condition as a breach of warranty Specific performance: -​ On rare occasions, if goods have unique or special attribute and cannot be readily obtained elsewhere -​ Monetary damages are not adequate -​ Equitable remedy at discretion of the court Sellers - Remedies Remedies available to seller dependent upon: -​ Passing of title to the buyer -​ Right of seller to retain goods -​ Rights can be exercised against the buyer personally or against the goods -​ Depending on circumstances and nature of remedy -​ Seller may not repudiate contract for non-payment unless it is a term of the contract -​ Remedies: Lien, Action for the price, damages, Retention of deposit, Stoppage in transitu, Recovery of goods, Resale Lien: -​ Seller retains possession of goods until buyer pays ​ -​ Seller may claim a lien on goods if: -​ Sale is a cash sale  -​ Period of credit has expired -​ Goods sold on “lay-away” plan -​ If buyer becomes insolvent before goods are delivered Seller must have possession to enforce a lien Buyer must not have right of credit If seller voluntarily released goods to buyer, may lose right to lien Action for the price: -​ Seller has delivered goods to buyer, title has passed -​ Seller may sue the buyer for price of goods -​ Title has not passed, seller delivered goods but delivery was refused by buyer -​ Seller may sue buyer for the price -​ Seller must be prepared to deliver goods if seller recovers price Damages: -​ Common remedy available to seller is ordinary damages for non-acceptance -​ Seller can resell goods to another -​ Seller can sue buyer for any loss incurred -​ Damages recovered = monetary amount necessary to return seller to position prior to transaction -​ Profit or loss on sale or difference between disposal price and contract price Retention of deposit: -​ Entitles seller to retain deposit paid as liquidated damages if buyer refuses to perform contract -​ Need not be in writing to render it binding on parties -​ Advantages to seller: -​ Circumvent the requirements of writing under Sale of Goods Act if contract is unwritten and if it for more than stipulated minimum -​ Represents fund that seller can access if buyer breach’s agreement -​ Must be an honest estimate of the probable loss Stoppage in transitu > right of the seller to stop delivery of goods by the carrier if the buyer is insolvent -​ Must be done before buyer has gained possession -​ “Insolvent” does not mean that buyer is bankrupt buyer no longer meeting debt obligations Recovery of goods: Bankruptcy and Insolvency Act - if goods shipped to buyer, and buyer becomes bankrupt, the seller may, within 30 days: -​ Submit written demand to trustee in bankruptcy for return of goods -​ Goods must be unsold, still in bankrupt buyer’s possession, identifiable, and in same condition as when delivered to the buyer Seller’s rights to goods rank above claims of other secured or unsecured creditor to the goods Resale: -​ Stopping goods in transit has no affect on the contract -​ Represents a repossession of goods by the seller -​ Seller can retain goods pending payment by buyer -​ If buyer does not pay, seller may resell to a second purchaser -​ New buyer obtains a good title to the goods Electronic sale of goods Electronic retailing requires new practices to: -​ Avoid misunderstandings as to jurisdiction of applicable law Most Internet issues can be managed via company website policies Chapter 32 Forces of competition and the free market should regulate industry rather than government ❑ Competition Act: -​ Blend of criminal and administrative approaches to regulate restraint of trade -​ Some trade practices prohibited and subject to criminal proceedings Price maintenance > attempt by seller to control the resale price of a product by a retailer Price discrimination > selling at different prices to different buyers Discriminatory promotional allowances and falseor misleading advertising Conspiracy > agreement between firms to unduly lessen competition ❑ Both criminal and civil in nature ❑ Controls selling practices contrary to public interest (e.g. bait and switch) ❑ Reviewable activities by Competition Tribunal, including mergers and monopoly actions Tribunal has power to protect public by modifying/prohibiting banned activities -​ Both Common Law and restrictive trade practices legislation protect competition -​ Control those activities that restrict or interfere with competition -​ Common Law not adequate so protection of competition necessary Investigation Commissioner of Competition: -​ Investigates complaints about violations -​ Wide powers of search and seizure -​ Right to compel parties to provide information -​ Allegations brought to their attention in form of an application for inquiry -​ Can enter premises of any person related to inquiry (usually after search warrant) -​ Apply to court to for order to interrogate Competition Tribunal Tribunal is the second component of Competition Act enforcement process: -​ Consists of lay members and Federal Court judges -​ Issues heard by panel of 3-5 members + judge -​ Empowered to deal with: -​ Trade practices designated as reviewable under Act -​ Foreign laws and judgements -​ Foreign suppliers -​ Specialized agreements and mergers Failure to comply constitutes contempt -​ Investigate and review certain business practices -​ Make rectification orders to restore competition Reviewable activities: -​ Market restriction -​ Exclusive dealing -​ “Tied” selling -​ Consignment selling -​ Refusal to supply goods Common remedy > cease the restrictive activity or establish procedure to restore competition Restrictive Trade Practises Competition Act applies to both goods and services -​ Exemption: goods and services that fall under control of public regulatory body (e.g. Liquor Control Board of Ontario or LCBO) Categories of restrictive trade practices: 1. Nature of the business organization itself 2. Dealings between a firm and its competitors 3. Dealings between a firm and its customers Mergers and firms in a dominant position -​ By eliminating competitors by aggressive activity -​ Merging with competitors -​ Any merger or monopoly likely to lessen competition to detriment of public is subject to review and intervention by Competition Tribunal Conspiracies and combinations in restraint of trade  Conspiracy -​ The Competition Act provides that everyone who conspires, combines, agrees or arranges with another person to unduly lessen competition -​ Fines (up to $10 million) and imprisonment (up to 5 years) for violations -​ Need not prove complete or virtual elimination of competition but only that it will lessen or have the effect of likely lessening competition Bid-rigging> practice whereby contractors, in response to a call for bids or tenders, agree amongst themselves as to the price or who should bid or submit a tender -​ A restrictive trade practice, unless the person calling for the bids is advised of the arrangement -​ Eliminates secret arrangements -​ Not an offence if the fact is revealed to the person calling for the bids -​ Exemption allows parties to do projects jointly Professional sports Competition Act prohibits conspiracies relating to professional sports Offences relating to promotion and advertising products Misleading or false advertising and other promotional activities subject to Competition Act -​ Any representation to the public that is false or misleading in any material respect -​ Materially misleading representation concerning the price -​ Even if technically correct if impression given would mislead the public in some material way -​ Sales above advertised price publicly advertising a low price for goods, while maintaining a higher price for those goods at point of sale -​ Geographical areas must be similar -​ Exception: errors must be promptly corrected with further corrective adverting -​ Double ticketing practice of attaching several different price tickets to goods -​ Seller must sell goods at lowest of marked prices -​ Bait-and-switch publicly advertise a low price for certain goods, then stocking only different, higher–priced goods at point of sale Sales above advertised price > publicly advertising a low price for goods, while maintaining a higher price for those goods at point of sale -​ Geographical areas must be similar -​ Exception: errors must be promptly corrected with further corrective advertising Double ticketing > practice of attaching several different price tickets to goods Seller must sell goods at lowest of marked prices Bait-and-switch > publicly advertise a low price for certain goods, then stocking only different, higher–priced goods at point of sale Renewable activities Competition Tribunal may review certain selling methods: -​ Abuse of dominant position -​ Refusal to supply goods -​ Consignment selling -​ Exclusive dealing -​ “Tied” selling -​ Market restriction -​ Common remedy → cease the restrictive activity or establish procedure to restore competition Civil actions under the competition act Actions possible: -​ Common Law civil action for restraint of trade -​ Competition Act -​ Civil action by a party injured as a result of Act’s breach or violation of a Competition Tribunal order -​ Amount limited to actual loss -​ Burden of proof imposed on plaintiff in civil action  -​ Based on balance of probability Chapter 22 Right to hold property is central to free-enterprise -​ State obliged to recognize property rights -​ Businesses in Canada can acquire land interests for any reason or business activity Interests in land take on many forms -​ Each designed to serve a particular purpose Property rights referred to as “estates” in land -​ Specific rights and obligations Historical Development Real property > land and anything permanently attached to it -​ Common law includes buildings, minerals or anything else below the surface, and air space above Fixtures > chattel that is constructively or permanently attached to land -​ Law relating to land originates in England’s feudal system:​ -​ When land granted to persons, Crown retained ownership and could recover land from person in possession Tenure > method of holding land granted by the Crown -​ Estates held were either free or unfree -​ Freeholds – had fixed services attached to them Fee simple > estate in land that represents the greatest interest in land that a person may possess, and that may be conveyed, or passed by will to another, or that on an intestacy would devolve to the person’s heirs Fee simple In Canada, all land still owned by Crown: -​ Estates of land in fee simple are granted by Crown patent to individuals -​ Crown often reserves right to minerals or precious metals -​ Can dispose of land by way of sale, will, or inheritance Escheat > reversion of land to Crown when a person possessed of the fee dies intestate and without heirs Expropriation > forceful taking of land by a government or government agency for public purposes -​ Represents Crown exercising right of ownership If person grants land during their lifetime, usually by way of formal document -​ Deed or transfer > written or printed instrument effecting legal disposition -​ Grant embodied in deed: 1.​ Execution of deed by the grantor 2.​ Delivery of the document to the grantee, passes title to the land to the recipient Owner of land may use the land as they see fit Life Estate Life estate > estate in land in which the right to possession is based upon a person’s lifetime -​ Highest estate in land that the person in possession of the fee simple might grant -​ Frequently made within a family, where person who possesses fee simple wants to use land during his or her lifetime, but pass property on upon death Life tenant must use land in reasonable manner and not commit waste -​ Cannot tear down buildings, destroy property, destroy trees, etc. -​ If land subject to a mortgage, life tenant pays interest -​ Life tenant pays land taxes The condominium -​ In Canada, most provinces provide for a corporation without share capital when condominium created -​ Creation requires: -​ Intention to have property used as a condominium  -​ Description - preparation of surveyor’s drawings Document with details of condominium: -​ Referred to by various names depending on jurisdiction (e.g. Ontario – declaration) -​ Sets out interests of unit owners -​ Provides general outline for management and operation of condominium -​ Provides for creation of corporation or society to manage property -​ Must be registered in land registry or land titles office Condominium Development: -​ Begins as project of a land developer > acquires parcel of land, then building erected -​ Balance of property, excluding the units = common elements or common-use area -​ Co-ownership rights to common elements tied to ownership of individual units -​ Cost of maintaining common elements apportioned to each unit Co-operative Housing Corporation Means by which a group may acquire indirect interest in land through a corporation -​ Used to establish residential housing units where land / building acquired and owned by corporation -​ Members of co-operative acquire share in corporation and lease of a housing unit -​ Responsible for their portion of expenses of corporation -​ Corporation responsible for maintenance and mortgage payments Registration of Property Management Historically, individual guarded all documents related to land title -​ Created difficulties if title was destroyed or lost prospective purchaser had to rely on landowner’s word -​ Led to system of land registration: -​ All land in county or district was identified -​ Public record office established to act as recorder and custodian of all land-related documents Public registration system and certification of titles is designed to: -​ Reduce chance of fraud in land transactions -​ Eliminate need for safeguarding title by individual -​ All interests in property require registration to protect them; all unregistered interests in land are void Two distinct systems in Canada: -​ Registry System and Land Titles System Registry System Registry System > provincial government-operated system for registration of interests in land -​ Good “chain of title” – trace back present owner’s title to ensure good title -​ Need to establish a good chain of title for 40-year period before present owner is “clear” -​ Onus on prospective purchaser -​ Purchaser may sue seller for damages Land Titles System Land Titles System> provincial government-operated system for the registration of interests in land where the government confirms and warrants the particular interests in land -​ Title of present owner confirmed and warranted by province -​ To avoid confusion, particular language for different instruments: -​ Deed = transfer -​ Mortgage = charge Advantage of Land Titles System over Registry System = certainty of title Consists of two databases:  1.​ Title Index database > existing records, organized on a property ownership basis 2.​ Property Mapping database > property-map file organized by property-identifier number Goal to convert all Registry areas into Land Titles System -​ Every parcel of land recorded with a property-identification number and map -​ Final phase is electronic-registration system: -​ Parcel Identification Number (PIN) allows title searches from anywhere -​ Documents electronically registered -​ Transfer of funds related to transaction Easements Easements > right to use the property of another, usually for a particular purpose Dominant tenement > parcel of land to which a right-of-way or easement attaches for its better use Servient tenement > parcel of land to a right-of-way or easement Right-of-way > right to pass over the land of another, usually to gain access to one’s property Restrictive Covenants Restrictive covenant > means by which owner of property may continue to exercise control over its use after property has been conveyed to another Mineral Rights Right to minerals below surface of land is possessed by owners of the land in fee simple in most older provinces -​ More recently, Crown patents reserve the mineral rights to the Crown -​ Profit a prendre > person who acquires the mineral rights in lands of another Must be in writing and in deed form -​ Leases: Provides for the removal of minerals and for the surface use Riparian Rights Riparian owner: -​ Owns land adjacent to a watercourse, OR -​ Has land through which natural stream flows either above or below surface -​ Common law with respect to use and flow of water: -​ Right to take water from stream or watercourse -​ Cannot interfere with downstream flow -​ Must return quantity of water used -​ Cannot do anything to change quality of water used Possessory interests in land Adverse possession > possessory title to land under the Registry System -​ Acquired by continuous, open, and notorious possession of land inconsistent with the title of the true owner -​ For a period of time (usually 10 – 20 years) -​ Occupant in possession must do acts normally required by owner (pay taxes, maintain fences, etc.) General requirements to claim: 1.​ Actual possession for the statutory period by themselves and those whom they claim 2.​ Such possession was the intention of excluding from possession the owners or persons entitled to possession 3.​ Discontinuance of possession for statutory period by owners and all others, if any, entitled to possession Encroachment > possessory right to the property of another that may be acquired by the passage of time -​ E.g., Roof “overhang”, building constructed too close to property line or on neighbor’s property -​ After undisturbed possession for 10 to 20 years (depending on province), right to object encroachment is lost  -​ Only acquired in areas where land recorded in Registry System Fixtures Early rule > use and enjoyment of particular item Chattel attached to improve land became part of realty, but anything attached for the better use of the chattel did not Basic tests (at Common Law) that apply to fixtures: 1.​ Attached by own weight 2.​ Affixed slightly are realty unless intended to continue as chattels 3.​ Degree of annexation and object of annexation 4.​ Intention only material from presumption of degree and object of annexation 5.​ Tenant’s fixtures – purposes of trade Title to land Joint tenancy > joint holding of equal interests in land with the right of the surviving tenant to the interest of a deceased joint tenant -​ Identical in time, interest, and po