Business Law in Canada Textbook PDF

Business Law in Canada Thirteenth Canadian Edition Chapter 10 Agency and Partnership Copyright © 2024 Pearson Canada Inc. 10 - 1 Business Law in Canada Thirteenth Canadian Edition...

Business Law in Canada Thirteenth Canadian Edition Chapter 10 Agency and Partnership Copyright © 2024 Pearson Canada Inc. 10 - 1 Business Law in Canada Thirteenth Canadian Edition Chapter 9 The End of the Contractual Relationship Copyright © 2024 Pearson Canada Inc. 10 - 2 Business Law in Canada Thirteenth Canadian Edition Chapter 8 Factors Affecting the Contractual Relationship Copyright © 2024 Pearson Canada Inc. 10 - 3 Business Law in Canada Thirteenth Canadian Edition Chapter 7 The Elements of a Contract: Capacity, Legality, and Intention Copyright © 2024 Pearson Canada Inc. 10 - 4 Business Law in Canada Thirteenth Canadian Edition Chapter 6 The Elements of a Contract: Consensus and Consideration Copyright © 2024 Pearson Canada Inc. 10 - 5 Business Law in Canada Thirteenth Canadian Edition Chapter 5 Negligence, Professional Liability, and Insurance Copyright © 2024 Pearson Canada Inc. 10 - 6 Business Law in Canada Thirteenth Canadian Edition Chapter 4 Intentional Torts and Torts Impacting Business Copyright © 2024 Pearson Canada Inc. 10 - 7 Business Law in Canada Thirteenth Canadian Edition Chapter 2 Introduction to the Legal System Copyright © 2024 Pearson Canada Inc. 10 - 8 Learning Objectives (1 of 2) When you complete Chapter 2, you should be able to: 2.1 Define what are “laws” and discover more about Canada’s civil law and common law legal systems 2.2 Explain how powers are divided and exercised under Canada’s Constitution 2.3 Outline the protection of Indigenous rights and self- government in Canada 10 - 9 Learning Objectives (2 of 2) 2.4 Describe how individual rights and freedoms are protected by the Charter of Rights and Freedoms and the various human rights legislation 2.5 Discover how human rights law works in Canada, as under current human rights legislation 10 - 10 What Is Law? Difficult to come up with a satisfactory, all-inclusive definition for law Law is the body of rules made by government that can be enforced by the courts or by other government agencies Government agencies also enforce laws Law and morality are not synonymous 10 - 11 Categories of Law (1 of 2) Substantive Law – The rights and rules that govern behaviour and set limits on conduct Procedural Law – determines how substantive laws will be enforced 10 - 12 Categories of Law (2 of 2) Public Law – Includes Constitutional Law and determines how the country is governed and regulates our relationship with government Private Law – Governs personal, social and business relationships 10 - 13 Civil Law Legal System Quebec’s noncriminal legal system is based on the French Civil Code French civil law is its central code – a list of rules stated as broad principles of law that judges apply to the cases that come before them Prior decisions do not constitute binding precedents 10 - 14 Common Law Legal System Common law system emerges in England – Feudal system centralized power in hands of king – During reigns of weak kings, power was decentralized – Royal judges became fairer to attract more litigants and broadened the authority of the state Function of the royal court was to be impartial and enforce customs and traditions already in place 10 - 15 Stare Decisis A system of justice where judges are required to follow precedent Most significant feature of the common law system: the decision of a judge is binding on all judges in lower courts Allows the parties to predict the outcome of the litigation and thus avoid going to court Following precedent can be inflexible and may not acknowledge changing social attitudes 10 - 16 Bijuralism Two legal traditions - civil law and common law coexist in Canada Does not exclude recognition of other rules such as international law Courts demonstrate respect for other legal cultures, including those of the Indigenous peoples of Canada Territories have legislative jurisdiction in all matters relating to property and civil rights through federal legislation 10 - 17 Equity Common law courts had limitations due to the restrictions of stare decisis Court of Chancery (Equity) dealt with matters that could not be handled adequately or fairly by the common law courts Resulting principles known as the Law of Equity – Did not hear appeals – Allowed flexibility in decisions but also appeared arbitrary 10 - 18 Statutes Parliamentary supremacy dictates that where case law and statute law conflict statutes prevail The courts cannot overrule Parliament’s legislation and no Parliament can pass laws that future Parliaments cannot change Statutes and legislation determine what we must do to carry on business in Canada 10 - 19 Constitution of Canada (1 of 2) Confederation British North America Act created Canada in 1867 – Now the Constitution Act, 1867 Constitution similar in principle to that of the United Kingdom – Magna Carta – English Bill of Rights – Rule of law: citizens are protected from the arbitrary actions of the government Statute of Westminster (1931) 10 - 20 Constitution of Canada (2 of 2) Constitution Act, 1982 – the “rulebook” that government must follow – Charter of Rights and Freedoms Canada’s Constitution has three elements: 1. Statutes 2. Case law (i.e. jurisdiction to create statutes) 3. Conventions: unwritten rules dictating how the government is to operate and include the rule of law 10 - 21 Constitution and Division of Powers (1 of 3) Constitution Act, 1867 and the Charter of Rights and Freedoms place some limitations on supremacy of Parliament Sections 91 and 92 divide powers between federal and provincial governments Each province has powers to establish rules in those areas over which it has jurisdiction 10 - 22 Constitution and Division of Powers (2 of 3) Table 2.1 Division of Legislative Powers Federal—Section 91 Provincial—Section 92 Trade and commerce Municipal institutions Employment insurance Hospitals (and health care) Raising monies by any mode of taxation Direct taxation within the province Criminal law (although not its enforcement) Administration of justice within the province Banking, currency, postal service Property and civil rights Relations with Indigenous Peoples, and lands Management and sale of public lands reserved for Indigenous Peoples. Residual power under the “POG G” clause Generally, matters of a local or private nature 10 - 23 Constitution and Division of Powers (3 of 3) “Peace, Order and Good Government” (PO G G) clause – Federal government has residual power to make law on things not included in Constitution Act Divides law making power among three branches of government: 1. legislative branch which creates legislation or statute law 2. judicial branch which interprets legislation and makes case law 3. Executive branch which implements the law 10 - 24 Sources of Law in Canada (1 of 2) Table 2.2 Sources of Law in Canada Branch of Government Legislative Executive Judicial Who fills Federally: Prime minister and cabinet Judges appointed by the these Parliament ministers together with each various provinces and positions? department’s civil federally appointed justices servants/bureaucrats Provincially: Premier and the cabinet Blank Legislative together with each department’s Assemblies civil servants/bureaucrats Type of law Statute law Subordinate legislation Case law Made (legislation) regulations made by order-in- council or as authorized by legislation bylaws made by municipal governments 10 - 25 Sources of Law in Canada (2 of 2) Table 2.2 Sources of Law in Canada (continued) Branch of Government Legislative Executive Judicial Examples (Federal) (Federal) The decision of the Criminal Code Criminal Appeal Rules Supreme Court of Canada Income Tax Act Income Tax Regulations in R. v. Keegstra Immigration and Immigration and Refugee The decision of the Court Refugee Protection Regulations of Québec in Bearskin c. Protection Act Cree-Naskapi Band Elections Wadden Cree-Naskapi (of Regulations; Election By-Law Québec) Act no. 2009-003 of the Cree Nation of Chisasibi (Provincial) (Provincial) The decision of the Ontario Blank Workers’ Workers’ Compensation Court of Appeal in Halpern Compensation Act Regulations v. Canada (Attorney Traffic Safety Act Traffic Control Device General) Business Regulation The decision of the Court Corporations Act Business Corporations of Queen’s Bench in Métis Settlements Regulation Alberta Aboriginal Affairs Act Transitional Membership and Northern Regulation Development) v. Cunningham 10 - 26 Constitutional Challenges before the Courts Pith and substance – What is the main purpose of the law – whether the government that enacted the law had the constitutional jurisdiction to regulate that concern Colourable legislation 10 - 27 Paramountcy Powers of the federal and provincial governments can overlap considerably – If overlap is incidental, both laws are valid and operative Where laws truly conflict paramountcy may require that the federal legislation be operative and the provincial legislation no longer apply 10 - 28 Delegation of Powers Direct delegation of power is prohibited – To move power between federal and provincial jurisdictions requires constitutional amendment Indirect delegation of power is permitted – Federal and provincial government can delegate powers to inferior bodies 10 - 29 Agreement to Share Powers Shared powers between federal and provincial governments circumvents constitutional rigidity – Transfer-payment schemes – Conditional grants Federal government may set national standards to which funding is tied and ensure equal access to services 10 - 30 Exercising Legislative Power Canada’s Constitution requires legislation to proceed through first (introduction), second (debate), and third (modifications) readings and has status of statute Gains status of law after royal assent Federal and provincial statutes are compiled and published – Accessible online 10 - 31 Federal and Provincial Statutes Figure 2.1 Traditional Passage of Bills The federal government now allows for two variations from the “traditional” passage of bills. *1 A motion may be tabled for a committee to prepare and introduce a bill. *2 Bills may now be referred to committee before second reading. In any event, a bill goes to committee only once. 10 - 32 Question for Discussion (1 of 3) Canada’s constitutional structure is essentially different from Britain’s because it consists of the federal government and ten provincial governments, each with power to act in their own jurisdiction. What impact does this have on businesses operating within, and among, provinces? 10 - 33 Indigenous Rights and Self- Government First Nation, Inuit, and Métis peoples see their right to self- determination and self-government as an inherent right – pre-existing right rooted in occupation and government before European settlement Royal Proclamation of 1763 – established the relationship between the Crown and First Nation communities as nation-to-nation U N Declaration on Rights of Indigenous Peoples (UNDRI P) 10 - 34 Support for Recognition of Indigenous Self-Government 1. Before Europeans, First Nations and Inuit were organized as self-governing societies; 2. First Nations were recognized by the Crown as capable of entering into treaties; 3. Indigenous peoples did not give up their right to self- government; 4. The right to self-government was never extinguished; and 5. Restrictions on self-government may not have been legally valid 10 - 35 Indigenous Self-Government Cree-Naskapi (of Québec) Act – First piece of Indigenous self-government legislation in Canada Numerous agreements have created self-government across Canada 22 self-government agreements that recognize a wide range of Indigenous jurisdictions that involve 36 Indigenous communities across Canada 10 - 36 Business and Indigenous Peoples Businesses must respect Indigenous rights and title – Failure to consult Indigenous peoples may be costly Section 35 of the Constitution Act, 1982 recognizes and affirms existing Indigenous and treaty rights 10 - 37 Protection of Rights and Freedoms Human rights and individual freedoms protected through unwritten conventions as supported by common law Concerns about entrusting the protection of personal rights and freedoms to common law led to development of two streams of legislation: – dealing with protecting human rights against abuses by the government – second aimed at protecting individuals against discrimination and intolerance by society at large 10 - 38 Canadian Bill of Rights Provincial and federal governments were free to interfere with civil rights through legislation (i.e. Japanese internment) Canadian Bill of Rights, 1960 attempted to limit authority of federal government to violate human rights Not entrenched in Constitution Effectiveness limited 10 - 39 Charter of Rights and Freedoms (1 of 2) Charter was added as Constitutional guarantee of basic rights and freedoms in 1982 – Eliminates power to interfere with human rights except by Constitutional amendment – Rights are protected by judges rather than governments 10 - 40 Charter of Rights and Freedoms (2 of 2) Limitations on Charter rights 1. Section 1: allows interference with rights and freedoms as may be justifiable in a free and democratic society 2. Section 33: legislatures can pass acts that infringe on rights “notwithstanding” the Charter, but legislation must be reviewed every 5 years (sunset clause) 3. Section 32(1): restricts operation of the Charter to government and government-related activities 10 - 41 Fundamental Freedoms Fundamental freedoms for everyone in Canada as a result of the Charter: – freedom of conscience and religion – freedom of thought, belief, opinion and expression – freedom of peaceful assembly and association 10 - 42 Democratic Rights Include right to vote and to qualify to be elected Reasonable limitations include restrictions to those who are underage or mentally incompetent Section 4 ensures there will be an election at least every five years 10 - 43 Mobility Rights Section 6 of the Charter ensures that Canadians can travel and live anywhere within the geographic limitations of Canada as well as enter and leave the country at will Canadians have the right to earn a livelihood in any part of Canada – provincial licensing and educational requirements may create exceptions Allows for programs that are designed to better conditions of those who are disadvantaged 10 - 44 Legal Rights Intended to protect individuals from unreasonable interference from the government or its agent Section 7 states that we have the right to life, liberty, and the security of person Fundamental justice: everyone is entitled to procedural fairness and the rule of law Sections 8 and 9 prohibit such activities as unreasonable search and seizure and arbitrary imprisonment 10 - 45 Equality Rights Section 15 prohibits discrimination in the application of the law and a general prohibition against discrimination Federal and provincial laws must be applied equally to all Provides for affirmative action programs Equality provisions are important for business people – Human rights legislation – Government-funded projects 10 - 46 Language Rights French and English have equal status All federal government activities must be available in both official languages Minority-language educational rights – guaranteed for the citizens of Canada Language rights and minority-language educational rights cannot be overridden by section 33 of the Charter 10 - 47 Question for Discussion (2 of 3) Do you believe there should be limits on rights and freedoms or should rights and freedoms be inalienable and guaranteed? 10 - 48 Section 52 of the Constitution Declares the Constitution the “supreme law of Canada” Created section 92A expanding the power of the Provinces – Non-renewable natural resources 10 - 49 The Importance of the Changes to the Constitution Charter provisions are generalizations, and courts interpret broad statements and create new law Canada Act and repatriation Quebec dissent and Referendum – Meech Lake Accord – Charlottetown Accord – Reference re: unilateral secession of Quebec 10 - 50 Human Rights Legislation (1 of 3) Broad federal and provincial legislation protect individuals against human rights violations by the public at large in a variety of settings The Canadian Human Rights Act (CHR A) applies to abuses in sectors regulated by federal legislation – Ensure individuals have access to employment without barriers – Access to facilities, services, and accommodations also addressed 10 - 51 Human Rights Legislation (2 of 3) Human rights acts prohibit discrimination based on various protected grounds, including gender, religion, ethnic origin, race, age, and disabilities Evolution of human rights protection – Three decades ago discrimination based on sexual orientation was not specifically prohibited – Reference re Same-Sex Marriage case 10 - 52 Human Rights Legislation (3 of 3) Tribunal hearings – After complaint and investigation – Can impose significant sanctions and remedies For businesspeople, knowledge of the human rights codes applicable to their industry is essential Duty to accommodate unless causing undue hardship 10 - 53 Indigenous Peoples and Human Rights Exemption from the CHR A was removed in 2008 and gender equality stipulations were expressly protected – Previously, those exposed to discriminatory treatment were not able to seek remedies under the CHR A Section 67 disproportionately impacted First Nation people that were registered, members of bands, or living or working on a reserve – did not have full access to human rights protection 10 - 54 Question for Discussion (3 of 3) There are only certain protected areas and certain prohibited grounds in human rights legislation. Can you think of reasons for an area or ground to be considered for addition to the legislation? 10 - 55 Summary A workable definition of “law” Categories of law, Canada’s legal systems and the Constitution of Canada Indigenous rights and self-government The Charter of Rights and Freedoms Human rights legislation 10 - 56 Learning Objectives (1 of 2) When you complete Chapter 4, you should be able to: 4.1 Understand tort law, and how tort law is distinct from criminal or contract law 4.2 Explain vicarious liability, indicating when it may be imposed 4.3 Gain an understanding of various intentional torts 10 - 57 Learning Objectives (2 of 2) 4.4 Detail how privacy is protected in Canada 4.5 Identify issues surrounding torts committed in the online environment 10 - 58 The Nature of Torts (1 of 3) Tort: a social or civil wrong that gives rise to the right to sue and to seek one of several remedies (i.e. general or punitive damages or injunction) A tort has usually been committed when an intentional or careless act harms another Injured party may sue for redress Tort law compensate victims, acts as a deterrent, and educates society Tort law is continually evolving 10 - 59 The Nature of Torts (2 of 3) Crimes are social wrongs that affect society as a whole – Prosecution for such acts is carried out by the state – Focus is to punish the wrongdoer Wrongful conduct is often both a crime and a tort Easier to successfully sue for tort as standard of proof in tort law is based on a “balance of probabilities” test 10 - 60 The Nature of Torts (3 of 3) Breach of contract may not stem from an act that is inherently wrong, but the breach entitles the victim to a remedy Tortious activity is inherently wrongful conduct May be intentional or unintentional (negligent) acts – Remedies differ 10 - 61 Remedies Damages (monetary compensation) – General: pain and suffering or for future lost wages – Special: reimburse the litigant for expenses or costs incurred before the trial – Punitive: not to compensate the victim but rather to punish the wrongdoer Supreme Court of Canada has placed an upper limit on non-pecuniary losses of $356 000 Court can also order the return of property or grant an injunction 10 - 62 Torts Impacting Business Business activities can lead to tortious liability for: – Employees and agents Vicarious Liability: – assault and battery, negligence, trespass and false imprisonment – Occupier’s Liability – Negligence – Breach of contract, interference with economic relations, intimidation, deceit, conspiracy, passing-off, breach of confidence and invasion of privacy 10 - 63 Vicarious Liability Liability without personal fault Imposed on employers when they are held liable for torts committed by employees during the course of their employment Can be imposed by statute, such as a vehicle owner being liable for the use of it by another person 10 - 64 Question for Discussion (1 of 2) It is possible for wrongful conduct to be both a tort and a crime? Is it appropriate for a person who engaged in wrongful conduct to be prosecuted criminally and then to be subject to a civil lawsuit to compensate the victim for the injuries suffered? 10 - 65 Intentional Torts Intentional: means that the conduct was intended or deliberate/wilful as opposed to inadvertent – Wrongdoer does not need to intend to do harm Plaintiff has burden of establishing the required elements (ingredients) of the tort 10 - 66 Successfully Establishing a Tort Claim (1 of 7) Table 4.1 Simplified Ingredients for Torts Assault 1. Deliberate threat creating fear of imminent harm 2. No consent Battery 1. Deliberate physical interference (contact) with one’s body 2. No consent Trespass to Land 1. Deliberate interference with property 2. No consent/permission/lawful right to be there Trespass to Chattels 1. Deliberate interference with goods of another 2. No consent 10 - 67 Successfully Establishing a Tort Claim (2 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Conversion 1. Deliberate appropriation of the goods of another 2. The act is committed in such a way that a forced sale is justified Detinue 1. Deliberate possession (detaining) of another’s goods 2. Wrongful refusal to return the goods to the owner False Imprisonment 1. Deliberate restraint 2. Lack of lawful authority Malicious Prosecution 1. Initiation of prosecution on criminal or quasi-criminal charges 2. Subsequent acquittal of the plaintiff 3. Prosecution was motivated by malice 10 - 68 Successfully Establishing a Tort Claim (3 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Private Nuisance 1. Unusual use of property 2. Substantial and unreasonable interference caused to neighbour’s enjoyment or use of property 3. Foreseeable injury Defamation 1. False statements made 2. Derogatory to the plaintiff’s reputation 3. Publication or communication to a third party 10 - 69 Successfully Establishing a Tort Claim (4 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Injurious Falsehood (trade defamation) 1. False statements made, derogatory to the reputation of the product or business of the plaintiff 2. Publication to a third party 3. Statements were made with malice, without just cause or excuse 4. Special damages in the form of a pecuniary loss Inducing Breach of Contract 1. There was a contract that was breached 2. The defendant knew about the contract 3. The defendant intentionally induced the breach of the contract anyway 10 - 70 Successfully Establishing a Tort Claim (5 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Unlawful Interference With Economic Relations 1. The defendant intends to harm the plaintiff’s business interests 2. The defendant accomplishes this by committing an unlawful act against a third party Intimidation 1. Using the threat of violence or some other illegal activity, such as violence or an illegal strike 2. The threat causes the plaintiff to do something they did not wish to do Deceit (Fraudulent Misrepresentation) 1. The defendant fraudulently and intentionally misleads the plaintiff 2. The plaintiff suffers damages relying on such false information or representation 10 - 71 Successfully Establishing a Tort Claim (6 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Conspiracy to Injure 1. An agreement between two or more parties 2. Such parties work together to cause injury to the plaintiff 3. The plaintiff suffers actual damages Passing Off 1. The plaintiff has developed a certain brand associated with their products 2. The defendant presents to the public a product name or brand in such a way as to lead the public to believe that the product is being provided by the plaintiff 3. Such misuse of the plaintiff’s name or brand causes reasonable confusion amongst consumers 10 - 72 Successfully Establishing a Tort Claim (7 of 7) Table 4.1 Simplified Ingredients for Torts (continued) Misuse of Confidential Information 1. The defendant is privy to the plaintiff’s secret and confidential information like trade secrets and business plans, and customer lists 2. The defendant uses or discloses such confidential information without the plaintiff’s permission 10 - 73 Assault and Battery Assault and Battery (trespass to person) Assault: conduct that makes a person think they are about to be struck – Fear of contact Battery: when someone intentionally make unwanted contact with another person – Actual contact Includes threats Intent to harm is not required 10 - 74 Defences to Assault and Battery 1. Consent – Must be informed and voluntary – Physical touching beyond that consented to is battery – Consent can be outlined and limited (i.e. medical treatment 2. Self-Defence – Necessary force (must be reasonable, not unrestrained violence) to defend self or eject trespassers is permissible 10 - 75 Question for Discussion (2 of 2) Is there any tort of assault or battery committed through the conduct of a typical hockey fight? Why do some fights in hockey games result in tort actions, and others do not? 10 - 76 Trespass to Land Being on another’s land without lawful right or the owner’s permission – Ignorance is not a defence – Permission implied for people acting in professional capacity or for business offering public services Continuing trespass: permanent incursion onto the property of another Occupier owes a no duty of care to trespassers 10 - 77 Trespass to Chattels, Conversion, and Detinue (1 of 2) Wrongful interference with goods Trespass to chattels: – Where the plaintiff has possession that is interfered with physically by the defendant Conversion: – Involves one person intentionally appropriating the goods of another person for their own purposes – Includes theft – One may be sued for conversion if buying goods from someone other than owner 10 - 78 Trespass to Chattels, Conversion, and Detinue (2 of 2) Detinue: – Where a person is wrongfully retaining goods – May have come into possession of them legally but refuses to return them – Calculation of damages essentially amounts to a forced sale of the goods 10 - 79 False Imprisonment The unlawful and intentional restraint of persons against their will 1. Personal liberty is totally restrained 2. Restraint is unlawful Defence – Citizen’s arrest, section 494 of the Criminal Code: restraint may be justified if persons have done something for which they may be arrested Poses a significant risk for businesses if customers are detained when suspected of wrongdoing 10 - 80 Malicious Prosecution Available to victims of improper use of criminal justice system Conditions: 1. The defendant in the tort action must have initiated a criminal or quasi-criminal prosecution 2. Accused acquitted or prosecution abandoned 3. Prosecution motivated by malice 4. No reasonable grounds to have originally proceeded with criminal action 10 - 81 Private Nuisance (1 of 2) Private nuisance: when a party uses property in such a way that it causes damage to property or interferes with a neighbour’s use or enjoyment of their property – Neighbour does not need to be a direct neighbour Actionable only when property is being used in an unusual or unreasonable way Different from public nuisance 10 - 82 Private Nuisance (2 of 2) Need to establish that this interference was 1. Substantial 2. Unreasonable in light of all the surrounding circumstances Focuses on the harm suffered by the victim rather than on whether the conduct by the defending party was wrongful Often involves offending substances, so one of the few common law tools that can be used to enforce environmental protection 10 - 83 Defamation (1 of 2) Defamation: a detrimental false statement about someone; must be published or broadcast Once the plaintiff establishes that a derogatory statement was made, he need not prove it was false, burden on defendant to show it is true It is possible to defame a corporation or a product To “publish” means that the statement had to be communicated to a third party 10 - 84 Defamation (2 of 2) Damages for defamation can be substantial Cyber libel: occurs when someone posts on the internet or emails a statement that is untrue and damaging relating to another individual A court will consider the size of the audience and the time the defamatory material is available to be viewed when assessing damages Special, aggravated, and punitive damage awards may be ordered 10 - 85 Libel and Slander Slander: spoken defamation Libel: usually written defamation Modern forms of mass communication mean the rationale for distinguishing between libel and slander is breaking down – All broadcast defamation constitutes libel Many issues arise with defamation on the Internet – Jurisdiction, access to author information through I S P 10 - 86 Defences to Defamation 1. Truth (defence of justification) – can still be derogatory if it contains an innuendo 2. Absolute Privilege 3. Qualified Privilege 4. Fair Comment 5. Public Interest Responsible Journalism 10 - 87 Injurious Falsehood (Product Defamation) Injurious falsehood: protects an interest in a person’s property, products, or business Plaintiff must prove: 1. A false statement was made by the defendant, disparaging the plaintiff’s business, goods, or property; 2. It was published to a third person; 3. Maliciously and without just cause or excuse; and 4. It resulted in special damages in the form of pecuniary loss 10 - 88 Other Torts Inducing breach of contract: – Commonly, luring people to breach their current employment or supply contracts Unlawful interference with economic relations – a party harms the business interests of the victim by using unlawful means on a third party to accomplish this harm – Some unlawful conduct associated with the complaint, such as bribery or defamation – Conduct intended to and resulted in harm 10 - 89 Other Torts Impacting Business (1 of 2) Intimidation: – Threat of violence or some other illegal activity forcing a party to do something that harms it Intentional infliction of mental suffering (nervous shock): – Related to intimidation Deceit (Fraudulent Misrepresentation): – Involves the fraudulent and intentional misleading of another person causing damage 10 - 90 Other Torts Impacting Business (2 of 2) Conspiracy to injure: – takes place where two or more persons act together using unlawful means to injure the business interests of another Passing off – “piggybacking” by misrepresentation, with the defendant trying to capitalize on the goodwill created by the plaintiff Misuse of Confidential Information – Improper disclosure of information 10 - 91 Privacy (1 of 2) Invasion of privacy: – Physical intrusion, surveillance, misuse of an image or name, or access to information Privacy protection provided by statute law – Provincial privacy statutes Courts reluctant to recognize invasion of privacy as a tort 10 - 92 Privacy (2 of 2) Internet has heightened concerns over privacy and confidentiality Legislation at both the federal and provincial levels in place to control the collection, use, and distribution of personal information – Federal Privacy Act regulates government collection and use of private information – Personal Information Protection and Electronic Documents Act (PI PED A) regulates collection and use of private information 10 - 93 Evolution of Tort Law Constant evolution of the law The tort of intrusion upon seclusion – Recognized in the United States and has been recently asserted in Ontario The tort of spoliation – Deliberately spoiled or destroyed evidence 10 - 94 Online Torts Regulation of internet poses some unique challenges Jurisdictional issues – Where was the contract made and what law applies? Internet harassment and trolls – Law slow to catch up to online harm – Ontario courts have recognized the tort of Online Harassment 10 - 95 Question for Discussion Tort law is designed to provide compensation for injury or damages suffered. Is it appropriate for the civil court to award damages where no loss has been suffered by the person suing? For example, in a case of trespass. 10 - 96 Summary Vicarious liability Intentional torts Privacy Online torts 10 - 97 Learning Objectives (1 of 2) When you complete Chapter 5, you should be able to: 5.1 Identify and describe the elements that must be proven for a negligence claim 5.2 Distinguish the defences applicable to the tort of negligence 5.3 Distinguish occupiers’ liability, innkeepers’ liability, strict liability, vicarious liability, and product liability 10 - 98 Learning Objectives (2 of 2) 5.4 Describe the circumstances where professional liability may arise 5.5 Understand what insurance is and some types of insurance available for businesses 5.6 Identify and understand some key legal concepts in insurance law 10 - 99 Negligence (1 of 2) Inadvertent or unintentional careless conduct that causes injury or damage to another person or their property All four required elements must all be established to succeed in a negligence action The A, B, C, and D of Negligence: – A duty of care – Breach of duty – Causation – Damage 10 - 100 Negligence (2 of 2) Table 5.1 Negligence: The Required Ingredients Ingredients What Needs to Be Established Tests Used A A duty of care is owed to That the proximity of the parties 1. Foreseeable plaintiff test the plaintiff created an obligation to exercise (reasonable foreseeability test) caution or care 2. Policy considerations—may negate existence of a duty B Breach of that duty; breach That the defendant was not Reasonable person test of the standard of care careful enough C Causation 1. That the defendant directly or 1. Physical: “but for” test physically caused the injury; 2. Legal: remoteness test and 2. That the injury was reasonably foreseeable D Damage That the plaintiff suffered injury Refer to precedents—has this or loss type of loss been recognized by courts as compensable? 10 - 101 A: A Duty to Exercise Care Must Exist (1 of 2) We owe a duty to anyone we can reasonably anticipate might be harmed by our conduct Reasonable Foreseeability Test: – Establishes a duty – If it would be apparent to a prudent person that the conduct was likely to cause injury, a duty is owed 10 - 102 A: A Duty to Exercise Care Must Exist (2 of 2) Duty to anyone we can reasonably anticipate might be harmed by our conduct Anns case: created a test for determining the existence of a duty of care: – injury to plaintiff is foreseeable – proximity suggests defendant should have considered the plaintiff Used in new situations or classes of cases where a duty of care has not already been established 10 - 103 Misfeasance and Nonfeasance Misfeasance – An act that causes harm to another (wrongdoing) – Court will provide remedy Nonfeasance – A failure to prevent an injury – Courts reluctant to provide remedy 10 - 104 B: Breach of the Standard of Care (1 of 2) Once the existence of a duty is established the second issue is whether the defendant demonstrated sufficient care Reasonable person test: – What would a reasonably prudent person, in possession of all the facts of the case, have done in this situation? Reasonable care, not perfection, is required – Reasonable conduct varies with circumstances – Risk of injury affects standard, as does cost 10 - 105 B: Breach of the Standard of Care (2 of 2) Reasonable conduct varies with: – Expertise of person being sued – Standard of care does not diminish in the case of an elderly person – Expectations for children are lower Actions that fall below socially acceptable standards create liability for damages It is not always necessary to show lack of care – Circumstantial evidence may establish a prima facie case 10 - 106 C and D: Causation and Damages Negligence requires a loss to person or property No injury—no negligence claim In the past, there had to be some actual physical damage but the court now recognizes economic and mental injury 10 - 107 “But For” Test: Physical Causation Damage must be a direct result of the careless conduct “But for” test: “but for” the conduct of the plaintiff, no injury would have resulted (causation) – general test for causation 10 - 108 Remoteness Test – Legal Causation (1 of 2) Remoteness test: Whether the specific type of injury suffered was reasonably foreseeable Remoteness may arise twice in a negligence action – Proximity of the parties (Duty of Care) – As a factor in causation (Causation) 10 - 109 Remoteness Test – Legal Causation (2 of 2) Thin skull rule: We take our victims as we find them – one is liable for the full extent of injuries suffered Crumbling skull rule – Not responsible for inevitable loss 10 - 110 Defences to Negligence (1 of 3) Three defences to a negligence claim: 1. Voluntary assumption of risk (Volenti non fit injuria): – The law will not assist those who volunteer to bear risk – The defendant must show that the plaintiff assumed the physical risk and the legal risk – A successful claim of volenti is rare today 10 - 111 Defences to Negligence (2 of 3) 2. Contributory negligence: – Courts apportion the loss between the parties – Last clear chance doctrine names one party completely responsible; not often used now Provincial statutes now allow court to apportion responsibility among plaintiff and defendants Duty is owed to rescuers – If potential danger was reasonably foreseeable, so was potential need for rescue 10 - 112 Defences to Negligence (3 of 3) 3. Illegality (ex turpi causa): – Courts will not hear a lawsuit brought by a party engaged in unlawful activity – Illegal conduct must cause loss to the plaintiff before the defence will operate – Justification is preservation of the integrity of the legal system – Rarely successful 10 - 113 Legislation Impacting Duty of Care Statutes may impose obligations to exercise care not found in common law Statutes do not usually create new categories of tort Trend away from fault – No-fault insurance – Monetary ceiling for claims Statutes may create a duty of care 10 - 114 Occupier’s Liability (1 of 2) In common law, an occupier of property (not the owner) owes a duty to people who come onto the property as visitors – Occupiers must take reasonable steps to protect all classes of visitors to their property An occupier cannot do anything wilful or reckless to harm a trespasser – Duty of care is higher if they are children 10 - 115 Occupier’s Liability (2 of 2) Legislation imposes and describes duty of care and extends it to: 1. The condition of the premises 2. The activities on the premises, or 3. The conduct of third parties on the premises Alcohol – Liability is established for commercial establishments and businesses supplying liquor to employees at company activities; may be imposed on social hosts in the future 10 - 116 Question for Discussion (1 of 2) The courts have found commercial establishments liable for injuries sustained by their guests when they have consumed alcohol on their premises. Do you think the courts have gone too far in assessing this kind of liability? 10 - 117 Innkeepers’ Liability Duty of Innkeepers to safeguard guests from wrongful acts of others Historically, innkeeper responsible unless loss to a guest’s property was caused by that guest’s own negligence Statutes have modified in most jurisdictions 10 - 118 Strict Liability Liability when there is no fault When a dangerous situation is created by an unusual use of property which is inherently dangerous, the owner/occupier is liable for all damages when it escapes Vicarious liability is a form of strict liability – Employer being held responsible for the wrongful acts of an employee even though the employer has done nothing wrong 10 - 119 Product Liability (1 of 2) Manufactured products are often dangerous because of: – Some inherent defect, or – Their nature, such as in the case of chemicals, tools, or explosives Manufacturers are liable for injuries caused by defective products – Necessary to establish that there was a duty to be careful, and to prove that there was a failure to live up to that duty 10 - 120 Product Liability (2 of 2) Plaintiff must establish that the manufacturer was negligent – But breach of manufacturer’s duty can be implied from circumstances – reverses onus Intermediate inspection by a third party may absolve manufacturer from liability Warnings about defects by the manufacturer must be sufficiently adequate Circumstantial evidence can be used to prove breach of duty 10 - 121 Liability of Professionals and Other Experts Professionals belong to professional organizations and practice in a specific area of service Professional liability and insurance costs are important aspects of business Liability is: – Often set out in contract – Related to tort law, especially negligence – Based on fiduciary duty 10 - 122 Contracts If professionals provide sub-standard service they are liable for the losses resulting from the breach of the contract Standard of service is normally implied – Professionals implicitly provide reasonable level of performance given claimed expertise Often professionals attempt to limit that liability with disclaimers Liability is restricted to contracting parties 10 - 123 Negligent Misstatement Negligent conduct and negligent words are both actionable People who suffer economic loss because of a professional’s negligent statements may recover damages Reasonable foreseeability test determining duty is owed was deemed to be too broad (Anns test) Courts now use “reasonable reliance” test to determine existence of a duty 10 - 124 Breach of Standard of Care and Causation Professionals and experts held to a high standard Require skills and abilities expected of a reasonable professional in that field Inexperience does not excuse incompetence Common practice that is dangerous or careless is not an excuse Negligent conduct must have caused the loss 10 - 125 Fiduciary Duty and Breach of Trust A professional or expert, must: – Act with loyalty and good faith – Not use confidential information for own benefit – Disclose pertinent information – Use extreme care with funds entrusted to them (breach of trust) 10 - 126 Professional Insurance Often a condition of practice for professionals – Protects against damages resulting from errors and omissions – Premiums can be a significant business expense and have been rising due to increased number of claims – May cover legal costs when a professional is sued Does not cover fraud or breach of trust 10 - 127 Insurance Purpose: to reduce the cost of loss by spreading the risk Insurance transfers the risk from the insured to the insurer Premiums increase with the amount of risk involved Tightly regulated – Federal and provincial legislation 10 - 128 Insurance Industry Insurance agent has a duty to insurance company Insurance broker is an independent business Both agents and broker also have duty of good faith to customer Insurance adjuster investigates and negotiates on behalf of insurance companies 10 - 129 Liability Insurance Covers damage caused by negligence of self or employees Does not cover wilful acts Applies only when insured is at fault Takes many forms – Professional liability insurance – Umbrella liability 10 - 130 Property Insurance Property – Covers losses to buildings and their contents due to fire or other named perils – Comprehensive covers everything except what is specifically excluded Coverage should correspond to actual value of the property Co-insurer or deductible 10 - 131 Business Interruption Insurance For an unforeseen event that causes a business to cease operation for a time Covers lost profits and expenses of bringing business back into operation Puts insured in same financial position as if the loss had not occurred 10 - 132 Life and Health Insurance Life – Provides for dependants and/or Business associates (“key person”) – After death of insured Health – Medical: covers health care expenses – Disability: provides income for disabled worker – Overlapping extended benefits 10 - 133 Bonding Liability insurance does not cover wilful acts such as assault or theft Bonding offers some protection against losses brought on by employees who may act wrongfully Fidelity bond – Employee becomes liable to bonding company Surety bond – Pays compensation if a job is not completed, or completed on time 10 - 134 Insurable Interest Insured must have personal stake or interest in whatever is being insured, or insurance contract is void Can only claim on the insurance to the extent of the value of that interest Legislation may determine in whose life one has an insurable interest When the payout becomes a windfall, the insurance agreement is void as an illegal contract 10 - 135 Limitation Clauses (Exclusion Clauses) Insurance contracts take a standard fixed form and often contain limitation clauses favouring the insurer Contra Preferentum rule – Contract ambiguities are interpreted to favour the party that did not draft the contract – Coverage broadly construed – Exclusions narrowly construed 10 - 136 Contract of Utmost Good Faith Duty of insured: – Must disclose pertinent information and changes in pertinent information – Affects risk and insurance rates Duty of Insurers: – To process claims fairly – Arrange legal representation and a defence for the insured 10 - 137 Subrogation Once an insurer has paid out on a claim, they can step into the shoes of the insured – Insurer sues in the name of the insured the person who caused the loss Right of salvage – Insurer’s right to sell damaged or recovered goods The insured is not permitted to profit from their wilful misconduct 10 - 138 Question for Discussion (2 of 2) An insurance policy is a contract of utmost good faith. What do you think the public policy is of allowing insurance companies not to pay out on a loss when the insured has not provided proper disclosure? 10 - 139 Summary Negligence – A duty of care – Breach of duty – Causation – Damage – Defences Professional liability Insurance 10 - 140 Learning Objectives When you have completed Chapter 6, you should be able to: 6.1 Discuss the fundamentals of the contractual relationship 6.2 Explain consensus and the significance of a “meeting of the minds” 6.3 Describe a valid offer 6.4 Describe an effective acceptance 6.5 Define “consideration” and discuss the significance of “the price you are willing to pay” 10 - 141 Definition of Contract Business is based on contracts Contract: a voluntary exchange of promises, creating obligations which, if defaulted on, can be enforced and remedied by the courts Generally, parties have “freedom of contract” – They can enter into any contract they wish, with few restrictions 10 - 142 Elements of a Contract Elements of a contract: 1. Consensus: mutual agreement 2. Consideration: the price each party is willing to pay to participate in the contract 3. Capacity: legally capable of understanding 4. Legality: object and consideration involved in the agreement must be legal 5. Intention: must intend that legally enforceable obligations will result from contract Verbal agreements are as binding as written ones 10 - 143 Important Terms and Definitions Formal and Simple Contracts Express and Implied Contracts Valid, Void, and Voidable Contracts Unenforceable and Illegal Contracts Bilateral and Unilateral Contracts 10 - 144 Consensus Essence of a contract is a meeting of the minds of contracting parties Share an understanding of the bargain struck Be willing to commit themselves to terms Terms must be unambiguous Failure to read a contract is no excuse Comprised of Offer and Acceptance 10 - 145 Offer Valid offer must contain: – All of the terms of the contract – A communication of willingness to be bound – All significant terms of the proposed contract ▪ Terms can be implied An interim agreement may be binding – If contains all essential terms An offer may contain a condition or “subject to” clause – Contract is not binding until conditions are satisfied 10 - 146 Invitation to Treat and Offer by Conduct Invitation to Treat: an invitation to potential customers to engage in the process of negotiation – Advertisements or sales promotions are not binding offers – Articles displayed for sale are not offers but merely invitations for customers to offer to pay the price of the item Offer by Conduct: offer may be implied by conduct 10 - 147 Typical Process to Create a Contract Figure 6.1 Typical Process to Create a Contract 10 - 148 Communication of an Offer An offer must be communicated Only the person or group to whom an offer is made can accept it For a contract to be binding, all important terms must have been disclosed to the offeree Exemption clauses must be brought to the attention of the person granting it Fundamental breach may avoid exemption clause 10 - 149 End of an Offer 1. Offer ends at a specified time 2. After a reasonable time (if time not specified) 3. At the death or insanity of the offeror 4. Revocation of offer (withdrawn) before acceptance and revocation is communicated to the offeree 5. When the offer is rejected 6. A counteroffer is put forward – Request for information is not a counteroffer If the subject matter is illegal If the subject matter is destroyed 10 - 150 Offers that Cannot be Revoked Option agreement – Keeps the offer open for a specific length of time – Subsidiary contract with separate consideration Tenders – Tendered bids cannot be revoked when offer cannot be withdrawn once submitted – Subsidiary contract is formed Unilateral offer can’t be revoked once performance begins 10 - 151 Question for Discussion (1 of 3) It could be expensive and frustrating to have an offer withdrawn just before you are about to accept it. How are such problems overcome? 10 - 152 Standard Form Contract An offer with fixed terms that the customer is invited to accept – i.e. airline tickets Usually contains one-sided terms favouring the business – Exemption clauses limiting the liability of the business Consumer protection legislation controls the worst abuses and courts tend to read ambiguity in favour of the disadvantaged party 10 - 153 Duty of Good Faith Good faith contractual performance includes the need for a party to a contract to have regard to the legitimate contractual interests of the other party Common law duty to act honestly in the performance of contractual obligations 10 - 154 Acceptance The offeree’s intention to commit Must be unconditional The inclusion of new terms in an acceptance is a counteroffer Acceptance will not overcome the defect of an incomplete or defective offer When the wording of an offer is unclear, the courts will interpret the agreement to find the most reasonable construction 10 - 155 Communication of Acceptance (1 of 2) Acceptance of an agreement is usually accomplished by communicating it to the offeror Sometimes by conduct Unilateral contract accepted by completion of performance Effective at time acceptance is communicated If you take the benefit of the offer, you are deemed to have accepted it, by conduct 10 - 156 Communication of Acceptance (2 of 2) Silence is not acceptance unless part of on-going business relationship Acceptance is effective when and where received – Factor in determining which court has jurisdiction and which jurisdiction’s law will apply to the contract 10 - 157 The Postbox Rule (1 of 2) When acceptance is mailed, it is effective when and where it is posted Rule applies only when response by mail is appropriate May determine which law applies to contract New methods of communication make the expansion of the post box rule unnecessary 10 - 158 The Postbox Rule (2 of 2) Figure 6.2 Postbox Rule 10 - 159 Question for Discussion (2 of 3) Consider the problems that new methods of communication bring to determining the presence of consensus in a contract. 10 - 160 Electronic Transactions: Formation of Contracts Electronic contracts are valid Problems of electronic transactions: – Internet ad with “click-wrap” may constitute an offer while ads are normally invitations to treat Enforceability issues: – Form of assent – The reasonableness of the actual terms Post box rule unlikely to apply to electronic transactions – Determining where and when Internet transactions are created is difficult 10 - 161 Ecommerce Legislation Legislation determines when electronic communications are “sent” and “received” Ontario’s Electronic Commerce Act, 2000 splits the risks of failed communications between the parties – Place of business is assumed; physical location irrelevant Parties can override this legislation 10 - 162 Consideration (1 of 2) A bargaining process trading promises for promises and all parties derive some benefit Consideration: the price one is willing to pay for a promise of that benefit All parties must derive some benefit from the deal Gratuitous promise (a gift): a one-sided agreement in which only one of the parties is getting something from the deal – Not enforceable 10 - 163 Consideration (2 of 2) Figure 6.3 Consideration Involves the Exchange of Promises or Commitments 10 - 164 Adequacy of Consideration Need not be fair, but: – Unfair consideration may indicate undue influence, insanity or fraud Courts show willingness to assist consumers – Consumer protection statutes Must have a material value and be stated specifically 10 - 165 Gratuitous Promises Are Not Consideration Existing Duty: – A change in the contract requires new consideration – No additional consideration is permitted for public duty Past consideration no consideration Paying less to satisfy a debt: – An agreement to accept less to satisfy a debt is not binding (subject to legislation stating otherwise) Contracts with illegal consideration are void 10 - 166 Valid Consideration Settlement out of court – Each party gives up court determination of the matter Request for services – Must pay reasonable amount for services – Quantum meruit (quasi-contract): means “as much as is deserved” – Partial performance 10 - 167 Exceptions to Consideration Requirement Promissory estoppel: deals with a person making a promise or a commitment to do something in the future – Can only be used as “a shield, not as a sword” – Must show reliance on a gratuitous promise and resulting damage Sealed documents: – Sealed documents do not require consideration – Courts will not address the issue of consideration if contract has been executed under seal 10 - 168 Promissory Estoppel Figure 6.4 Promissory Estoppel 10 - 169 Question for Discussion (3 of 3) The owner of a marina promised to gift a friend a boat which would be delivered to him 6 months later. In the meantime the owner recommended that his friend reserve moorage at his marina. The friend did so but then the owner reneged on his promise to give him the boat and sued for payment for the reserved moorage. What would a judge likely rule in this case? 10 - 170 Summary The contractual relationship – An exchange of promises enforceable in court Consensus – A meeting of the minds Consideration – The price paid for another party’s promise and can be anything of value 10 - 171 Learning Objectives (1 of 2) When you complete Chapter 7, you should be able to: 7.1 Review the law relating to the capacity of minors, the insane, the intoxicated, and others of limited capacity 7.2 Discuss the element of legality relating to contracts performed illegally and to contracts formed illegally 10 - 172 Learning Objectives (2 of 2) 7.3 Explain the contractual element of intention 7.4 Examine the form of the contract, including the requirement that contracts be in writing and the principle of part performance 10 - 173 Capacity Contracting parties must have the capacity to contract Lawmakers recognize that some people are more vulnerable and receive special protection Protections include having the ability to contract limited or eliminated completely in some cases 10 - 174 Minors/Infants Minors (or infants): under age of majority, are not bound by their agreements – Age of majority varies with provinces Adults bound when contracting with minors – Voidable by minor Online jurisdictional issues regarding age – Online contracts should include restrictions 10 - 175 Necessaries and Beneficial Contracts of Service Minors are bound by contracts (except in B C) – For the acquisition of necessaries – Contracts of employment – Services that benefit the minor Minors must pay only a reasonable price for necessaries There is an obligation to repay a loan used for necessaries – Only if the funds advanced are actually used for necessaries Contracts of employment for service are binding 10 - 176 On Becoming an Adult Ratifying contract at age of majority results in lost ability to void contract – Ratification can be express (written) or implied (by obtaining benefit) Ratification must be complete – Cannot pick only the good terms Contractual Relationships: – Executory contract – Partially executed contract – Executed contract 10 - 177 Parents’ Liability Parents are not responsible for minors’ contracts Exceptions: – Legislation creating responsibility in many jurisdictions – When the minor is acting as an agent having the appropriate authority to bind the parent in contract – Parent guaranteed minors’ obligations 10 - 178 Infants’ Liability for Torts A breach of contract will sometimes also be the tort of negligence – Courts will not let an adult succeed in a tort action against a minor if they would fail in contract for the same act – If tort is a separate act from the breach of contract, then no bar to action 10 - 179 Question for Discussion If minors today are more sophisticated than in previous generations due to globalisation and ease of communication, should the age for minor treatment in law be lowered to sixteen? 10 - 180 Insanity and Intoxication Insanity: – No understanding of the nature of the transaction – Person claiming insanity has onus to prove it – Other person knew or ought to have known of insanity – May repudiate when sane Intoxication – Treated like insanity Weakened intellect – Unconscionable transaction 10 - 181 Others of Limited Capacity (1 of 3) Corporations – Contracting powers of natural persons – In some jurisdictions, capacity of a corporation can be limited ▪ Parties are affected by that limitation only if they have notice of it Crown bodies – Capacity to contract may be limited by legislation or by regulations 10 - 182 Others of Limited Capacity (2 of 3) Enemy Aliens – Contracts void, if detrimental to Canada or suspended for duration of war Foreign Governments – Are treated as all other parties for simple commercial activities (no matters of state) – Foreign diplomats have immunity Trade Unions – Contracts should relate to union activities – Capacity governed by legislation 10 - 183 Others of Limited Capacity (3 of 3) Bankrupts – Limited capacity Indigenous Persons – Capacity of First Nations is limited to some extent by the Indian Act – Limits to securing and seizing property on a reserve – Difficult for First Nation persons to use personal property as collateral for loans 10 - 184 Question for Discussion (1 of 3) A person usually choses to become intoxicated. Are there public policy reasons you can think of about circumstances when an intoxicated person without capacity to contract should not later be able to repudiate a contract? 10 - 185 Contracts Performed Illegally (1 of 2) Agreements must be legal and not contrary to public interest Contracts performed illegally – Lawful contract performed in an illegal way may be enforced by the court – Illegal performance of a lawful contract often involves a breach of regulatory legislation that may void the contract 10 - 186 Contracts Performed Illegally (2 of 2) If contract is performed illegally or against public policy, the Court may order – Contract is void and restore parties to their original positions – Severance of the illegal performance – Enforcement, if violation is procedural and not substantive 10 - 187 Contracts Formed Illegally (1 of 2) The contract itself is illegal – Courts will not restore parties to original position unless one is innocent of wrongdoing Illegal contracts involves unacceptable or immoral conduct Object of agreement must be legal – Not contrary to law, eg drug deals – Not against public policy, eg Prostitution Courts may sever the illegal provisions of the contract, leaving the balance of the contract enforceable to avoid inequitable judgments 10 - 188 Contracts Formed Illegally (2 of 2) Examples of contracts formed illegally: – to commit a crime or a tort – involving immoral acts – that are bets and wagers – in restraint of marriage or in favour of divorce – that promote litigation – that obstruct justice – that injure the state or public service – to fix prices or reduce competition – that unduly restrain trade (restrictive covenant) 10 - 189 Restrictive Covenants (1 of 2) Customers and customer lists are part of the goodwill of a business Goodwill needs to be preserved upon – Sale of Business – Change of Employment – Leaving a professional partnership Limit ability to compete for existing customers 10 - 190 Restrictive Covenants (2 of 2) Restrictive covenants must be reasonable – An agreement is against the public interest when it interferes with free trade, drives up prices, decreases service, or has any other effect whereby the public may be harmed The court will consider: – Time limit – Geographic limit Restrictive covenants in employment contracts are subject to stricter limits 10 - 191 Question for Discussion (2 of 3) Would it be better to limit the courts’ power to refuse to enforce contracts to those situations where a law is broken or a crime committed? Would this approach be more consistent with the notion of freedom of contract? 10 - 192 Intention Not all agreements are legal contracts the parties must have intended legal consequences from an agreement Courts enforce reasonable expectations or intentions clearly stated in contract – Intention presumed in commercial relationships – No intention presumed in social or domestic relationships – Reasonable person test applied in cases of when social and business relations mix and exaggerated claims 10 - 193 Form of the Contract No general rule that a contract must take a certain form Contracts are required by statute to be in writing to be enforceable in limited circumstances – E.g. Transfer of Land Verbal contracts are binding 10 - 194 Written Contract Required Types of contracts generally included under the Statute of Frauds and required to be in writing: – Longer than one year – Land transactions – Guarantees and indemnities – When goods are sold over a specific value – Promises in consideration of marriage – Promises of an executor to pay a debt of deceased from the executor’s own assets 10 - 195 Evidence in Writing Essential terms must be in writing: – Indication of the parties, the subject matter and the consideration to be paid – Other terms may become essential depending on the nature of the contract Can be actual agreement, receipt, note or email May be created after the fact Person denying the existence of the contract must have signed or initialed 10 - 196 Effect of the Statute of Frauds (1 of 2) Contract is binding on the parties – But the Court will not enforce it if not in writing The parties may be able to enforce the contract without the help of the court for a: – Lien (a right to seize property) – Right to set off a debt against the obligations created by the contract 10 - 197 Effect of the Statute of Frauds (2 of 2) Figure 7.1 Effect of Statute of Frauds 10 - 198 Question for Discussion (3 of 3) When dealing with the Statute of Frauds, the Court first decides whether a binding contract exists and then sees if the statute applies. What may be the public policy justification for refusing to enforce a contract merely because some formal requirements of the statute have not been met? 10 - 199 Electronic Contracts Electronic records and communications have become more common A signed, printed document may be needed to provide evidence in writing Electronic documents have legal effect and are enforceable Federal and provincial legislation recognizes electronic documents and signatures – Does not apply to wills, trusts, powers of attorneys, land transfers or negotiable instruments 10 - 200 Part Performance Requirement of writing waived if contract dealing with land has been partially performed Payment of money owed not usually acceptable as proof of part performance Permission to enter land to start construction usually acceptable evidence of partial performance 10 - 201 Contract Formation Table 7.1 Summary of Contract Formation No consensus Contract void But must pay for requested services No consideration Contract void But note promissory estoppel, gift, and seal No capacity Contract voidable But infants can enforce contracts with adults But infants are bound by contracts for necessaries and beneficial contracts of service Contract void But mentally incompetent persons must show the Blank others knew of the mental incompetence Illegal Contract void But depends on statute No intention Contract void Note presumptions No writing Valid But note Statute of Frauds exceptions 10 - 202 Summary Capacity – Each of the parties must have legal capacity Legality – Contact must be legal and be performed legally Intention – Each of the parties must intend to be bound by the contract Form of the contract 10 - 203 Learning Objectives (1 of 2) When you have completed Chapter 8, you should be able to: 8.1 Define “misrepresentation” and discuss the three types of misrepresentation 8.2 Distinguish duress, undue influence, and unconscionability 8.3 Define “mistake” and review the three types of mistake 10 - 204 Learning Objectives (2 of 2) 8.4 Explain the doctrine of privity of contact and describe the exceptions to the doctrine 10 - 205 Misrepresentation (1 of 2) False statement of fact that induces someone to enter into a contract Can be innocent, negligent or fraudulent The statement must be an allegation of fact Silence is not misrepresentation when there is no duty to disclose 10 - 206 Misrepresentation (2 of 2) Withholding some information can amount to a misrepresentation The statement must be untrue and must have been the inducement that led to the contract Plaintiff must be misled into doing something they otherwise would not have done Can sue for breach of contract if misrepresentation is a term of the agreement 10 - 207 Innocent Misrepresentation The person making it honestly believes it to be true Remedy is rescission – puts both parties back into original positions Rescission of contract is not available when: – Where a contract is affirmed – Impossible to restore – Where a third party is involved – Where plaintiff does not have clean hands 10 - 208 Negligent Misrepresentation Carelessly providing false and material information Must establish four elements of negligence: – A duty of care – Breach of that duty – Causation – Damages Damages in tort law and liability in contract law possible 10 - 209 Fraudulent Misrepresentation Fraud exists when the false statement was made – Knowingly – Without belief in its truth, or – Recklessly, not caring if true or false Intentional false statement of fact that induces another to enter a contract Failure to correct turns innocent misrepresentation into fraudulent misrepresentation Remedies: rescission or damages 10 - 210 Remedies for Misrepresentation Table 8.2 Remedies for Misrepresentation Type of Misrepresentation Remedies Available Innocent Misrepresentation Rescission of contract Negligent Misrepresentation Rescission of contract AND damages in tort Fraudulent Misrepresentation Rescission of contract AND damages in tort, plus punitive damages when warranted Misrepresentation as a contractual Rescission of contract OR damages for breach of contract term (written within the contract) 10 - 211 Question for Discussion (1 of 3) Is it necessary to differentiate among innocent, fraudulent and negligent misrepresentation? Why have the courts chosen to differentiate? 10 - 212 Duress (1 of 2) Duress, includes threats: – Of violence, imprisonment or criminal prosecution – To disclose scandalous information – To goods or property – Of loss of employment and financial losses – Of Economic duress The threat must be the main inducement to enter into the contract 10 - 213 Duress (2 of 2) Duress involves illegitimate pressure causing a person to enter into a contract Economic duress is a defence to enforceability of a contract Contracts made under duress are voidable Exercise of economic rights is not duress 10 - 214 Undue Influence More subtle than duress Pressure from a dominant and trusted person negates free bargaining Contract is voidable Two classes of undue influence: – Actual – Presumed in certain relationships: based on the nature of the relationship or nature of the transaction Presumption can be rebutted 10 - 215 Unconscionability Permits the court to set aside a contract in which one party has taken advantage of the other party Test: 1. Inequality of bargaining power between the parties and 2. An improvident contract Agreement must be unreasonable to be unconscionable 10 - 216 Question for Discussion (2 of 3) The courts will presume undue influence in certain circumstances which may include a spouse assuming the indebtedness of their partner. What rebuttal evidence do you think would convincingly demonstrate to a court that there has not been undue influence? 10 - 217 Mistake Error that destroys consensus Mistake can be made by one or both of the parties Can be mistaken: – Assumptions – Terms Courts will try to give effect to the reasonable expectations of the parties 10 - 218 Rules of Interpretation Test to determine if a mistake has taken place is objective – Reasonable person test Literal or liberal meanings imposed on written terms Most reasonable interpretation applied to ambiguous terms Parol Evidence Rule – Outside evidence will not change clear wording 10 - 219 Parol Evidence Table 8.3 Exceptions to the Parol Evidence Rule When the evidence to be introduced is of a fraud or some other problem associated with the formation of the contract, such as duress or undue influence When evidence of a condition precedent (a condition that has to be met before the obligations set out in the contract are in force) exists Where there is evidence of a collateral contract (a separate contractual obligation that can stand alone, independent of the written one) Where there is evidence of a subsequent agreement entered into by the parties after the written one When there is an absence of an intention that all of the contract would be embodied in the written document 10 - 220 Shared Mistake Occurs when the two parties are in agreement but have made the same mistake regarding some aspect of the contract Must be a fundamental mistake about subject matter of contract (no consensus, no contract) Can result in: – Recission – Rectification: Courts can correct a document that does not reflect the intentions of the parties 10 - 221 Mutual Mistake Both parties are mistaken about an issue but in a different way Three-part test: – Was there a mistake? – Reasonable person test applied to determine intention – Was the mistake a fundamental error? If so the contract is void 10 - 222 Unilateral Mistake Occurs where only one of the parties to the contract makes a mistake The other parties knows about the mistake (or should know) Contract may be void or voidable or rectification may be ordered 10 - 223 Non Est Factum “It is not my act” Signing party can escape performance of contract which is fundamentally different from they intended to sign Mistake goes to the very nature of the document Successful claims are rare 10 - 224 Privity of Contract Contract binds only the parties to it Figure 8.1 Only the parties to the contract can enforce it, even if outsiders are to benefit from it. 10 - 225 Exceptions to Privity of Contract (1 of 2) Table 8.4 Exceptions to the Operation of the Privity Rule Land – Rights of the parties run with the land Agency – Contract is between the principal and the other contracting party Trusts – Beneficiary can enforce the rights bestowed Insurance – Beneficiary can enforce the policy 10 - 226 Exceptions to Privity of Contract (2 of 2) Table 8.4 Exceptions to the Operation of the Privity Rule (continued) Statutory exceptions – Legislation allows third parties to enforce contract Constructive trusts – Courts infer that the beneficiary can enforce rights Principled exceptions – Courts rule that third-party benefits were intended Novation – Terms of the former contract are adopted by the parties to the new contract 10 - 227 Question for Discussion (3 of 3) The number of exceptions to the privity rule suggest that there may be no justification for its existence. – Consider the validity of this statement and the advantages and disadvantages of the principle of privity of contract, particularly with reference to trusts which are designed to bestow benefits on third parties. 10 - 228 Novation Figure 8.2 Novation: If the second party agrees to the substitution of the new party, a new contract is formed and Contract A is discharged, replaced by the new Contract B. 10 - 229 Assignment (1 of 5) A person entitled to receive a benefit under a contract can transfer that benefit to a third party – Obligation cannot be assigned – Vicarious performance: contractual obligations can be performed by others; original party remains responsible for the work 10 - 230 Assignment (2 of 5) Figure 8.3 10 - 231 Assignment (3 of 5) Statutory assignment – Do not have to sue in assignor’s name Qualifications for statutory assignment – Absolute and unconditional assignment – Must be in writing and complete – Must give proper notice 10 - 232 Assignment (4 of 5) Some things cannot be assigned: – Right to support payments – Right to sue another in a tort action ▪ Assignment of proceeds of lawsuit may be assigned – Certain statutes prohibit the assignment of benefits provided under the statute (i.e. workers’ compensation benefits) 10 - 233 Assignment (5 of 5) Involuntarily assignment of contractual rights are automatic in the case of: – Death: to the executor or administrator – Bankruptcy: to the trustee in bankruptcy 10 - 234 Negotiable Instruments Negotiable instruments: – Cheques, promissory notes and bills of exchange (drafts) True exception to privity of contract Can be freely passed from one person to another Give better rights to the holder than is the case with assignment 10 - 235 Question for Discussion The rules relative to assignment of contractual benefits seem to favour the original party to the contract because the agreement is subject to the rights between the parties to the original contract. Is this appropriate, or should the advantages be given to the assignee? 10 - 236 Summary Misrepresentation Duress, undue influence, and unconscionability Mistake Privity of contract 10 - 237 Learning Objectives (1 of 2) When you have completed Chapter 9, you should be able to: 9.1 Illustrate how a contract is discharged by performance 9.2 Describe when a contract is discharged by breach 9.3 Explain how a contract may be discharged by agreement 10 - 238 Learning Objectives (2 of 2) 9.4 Outline how a contract is discharged by frustration 9.5 Discuss the remedies for breach of contract 10 - 239 The End of the Contractual Relationship Principal methods of discharging a contract – Performance – Breach – Frustration 10 - 240 Discharge by Performance Contractual obligations are discharged when each party satisfactorily completes its part of the bargain Can happen simultaneously In bilateral contracts one party completes its side before the other is required to perform Contract is discharged when both parties perform their obligations under the contract 10 - 241 Tender (1 of 2) Tender of performance: When one party is ready, willing, and able and attempts to perform but performance is refused by other party Tender ends obligation Person who attempted performance may sue other for damages When payment is tendered and refused – Amount is still owed – Creditor bears the expense 10 - 242 Tender (2 of 2) Payment must be in legal tender – Canadian currency or otherwise as agreed Delivery as specified or at reasonable time and place – When time of performance is a condition, failure to be on time discharges the contract Some obligations continue after discharge 10 - 243 Question for Discussion (1 of 4) In some contracts, one party’s failure to perform may not relieve the other of obligations under the contract. An example of this is