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CONTENTS
I) AN INTRODUCTION TO LAW AND CANADAS LEGAL SYSTEM.............................................4
Institutions that create law:............................................................................................... 8
1. Courts....................................................................................................................... 8
2. Legislatures............................................................................................................. 11
3. Delegate Bodies...................................................................................................... 12
Systems of Law............................................................................................................... 14
1. Civil Law..................................................................................................................... 14
Weaknesses:................................................................................................................ 16
2. Common Law.............................................................................................................. 16
Justification for the doctrine of Stare Decisis...................................................................19
The Nature and Roles of courts....................................................................................... 20
5 roles of the court:..................................................................................................... 21
Adversary system:....................................................................................................... 22
The Court System in Canada........................................................................................... 23
Who appoints the judges?............................................................................................ 24
The Court Process in the Context of Litigation.............................................................25
Lawsuit Expenses......................................................................................................... 27
II) THE CANADIAN CONSTITUTION....................................................................................... 27
Where do you find the Canadian constitution?................................................................28
The Nature of a Constitution........................................................................................... 29
Sources of the Constitution: the institutions that create constitutional law in Canada. . .29
Authoritative sources of the constitution:.......................................................................30
Persuasive sources are important to the constitution but are not enforced....................32
Selected Topics in Canadian Constitutional Law..............................................................33
Federalism in Canada................................................................................................... 33
Is there federalism in Canada?........................................................................................ 34
Stance 1: We are a federal country because:..............................................................34
Stance 2: We are not a federal country because:........................................................36
Why do we have the style of federalism that we have?...............................................37
Other forces at work:................................................................................................... 38

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Responsible Government................................................................................................ 40
Responsible government is the single most important achievement for 3 reasons:....40
The most important is the 3rd reason because.............................................................40
Other legislative institutions:....................................................................................... 40
1982 Revisions:............................................................................................................... 41
Constitutional Amendment Process.................................................................................42
The Charter of Rights...................................................................................................... 45
III) THE MAJOR FORMS OF BUSINESS ORGANIZATION IN CANADA.......................................47
Advantages of Sole Proprietorships:............................................................................ 47
Disadvantages of Sole Proprietorships:........................................................................48
A limited partnership................................................................................................... 53
Limited Liability Partnerships.......................................................................................... 53
Two types of companies:................................................................................................. 56
Limitation on the separate entity principle:.................................................................57
Methods of incorporation (see textbook):....................................................................57
Component parts of the constitution:..........................................................................58
Public companies vs. private companies:....................................................................60
Apparent authority is manifested in 3 major ways:.........................................................62
Directors Duties:............................................................................................................. 64
Minority Shareholder Protection:..................................................................................66
IV) THE LAW OF TORTS....................................................................................................... 67
The Nature of Torts.......................................................................................................... 68
Intentional Torts............................................................................................................... 69
Damages (remedy):......................................................................................................... 70
The Tort of Negligence..................................................................................................... 71
Professional Liability........................................................................................................ 73
Five Basis of Liability (some of which relate purely to the statutes that create the
governing organization)............................................................................................... 74
Standard of Care:......................................................................................................... 76
V) THE LAW OF CONTRACT................................................................................................. 76
Six Elements of a Contract:............................................................................................. 77
1. The Offer.................................................................................................................. 77
2. Acceptance............................................................................................................. 80
3. Consideration.......................................................................................................... 81
4. Intention to create legal relations...........................................................................83

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5. Capacity.................................................................................................................. 84
6. Legality of the Contract.......................................................................................... 84
Impugning a Contract...................................................................................................... 85
Enforcement of Contractual Rights and Problems of Enforcement..................................91
Discharge of a Contract................................................................................................... 96
Effect of Breach and Remedies........................................................................................ 97

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I) AN INTRODUCTION TO LAW AND CANADAS LEGAL SYSTEM


INSTITUTIONS THAT CREATE LAW:
i)

Courts

ii)

Legislatures

iii)

Delegate Bodies

Substantive law: the rights and duties which person has in society. It is concerned with
liabilities.
Public law: concerned with the conduct of government and with relations with government
on side and private persons on the other. Divided into criminal, constitutional,
administrative laws.
Procedural law: the process through which liabilities can be enforced.
Private law: composes the rules governing the laws between private person when
disputes arrive, the persons involved may go to the court to have their rights (liabilities)
decided by the rules of private law. These rules are the basis substance of contract law,
tort law, property law and civil law.
Civil law: relies on code
Common law: relies on precedent cases.

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1. COURTS
The courts are a mechanism of settlements of disputes and are the most formal method.
Judges determine facts and apply legal principles. (Called adjudication)

Look to the courts for guidance

create legal principles (primary creator of law in society)

institution of dispute resolution however there are other institutes that do this as
well
1. arbitrators: always get fee in advance because loser will not be happy
2. mediator: appointed by statute or agreement, can only suggest a solution
3. conciliation: gets the party talking but cant suggest anything
4. settlement: disputes resolved but not by the courts, however they pay
attention to methods resolved by the courts
a) this is the best method because it is formalized and others pay
attention to it
b) another function of the courts is creating common law

all provinces are common law except Quebec (sources based on previous cases)

all states as well except for Louisiana because it was a French settlement

decided on the basis of previous principles (precedence) Stare Decisis

there are case reports that explain the judges reasoning for the verdict as well as
the facts, discussion of the laws and the holding

Plaintiff (the one suing) goes to court to fix a wrong by getting a remedy (money
for damages, etc)

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In this the judge has created a legal principle called a ratio decidendi: the
narrowest and necessary legal principle upon which the decision was
based. The most basic element of the principle of law. It is not specifically said
and you have to interpret and identify it. It is the key creative element of the
courts.

The principles are called common law "judge made" (expositions of law as
pronounced by the court of law.)

2 types of cases (sept 17)


1. Cases regarding legislation, i.e. statues or subordinate legislation
Interpreting legislative instruments and seeking to discern the intent of
the legislation and effect of law as formulated by legislation. Based on the
word of the statute; courts want to determine the nature of the legislation
and the judge makes final decision.
Family Property Act (formerly marital property act)
Made to include conjugal (living as family what does that mean?)
cohabitation with minimum of 3 years. Property split up 50/50.
Intestate Succession Act to die without a will. Property is distributed
among the family members. This process or a will needs to be probated by
a lawyer. (Probate - to prove and read the will and fulfill it)
2. Judge made/Common law: Court rather than interpreting and applying
legislatively created law is declaring the law in areas untouched by
legislation. The law established by the courts in this matter is the core of
what is known as judge made or common law. Here the courts are
themselves making authoritative pronouncements of the law without the
existence of legislative enactive laws whose intent the courts are
generally bound to follow subject to the process of interpretation. The
courts and judges are themselves making the law. Judges had lots
of power to determine the principles of the law. Their views were biased of

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value of both philosophical and social. They were liberal-capitalists. This
was common until the ~20th century.
It is further subdivided into 2 categories:
a) the common law courts
b) the law of equities
COMMON LAW COURTS:
In feudal times, the king was the fountain of justice(the king created all the laws)
in early times. This jurisdiction was exercised by the king himself. The king was said to
have a court, but it was a court of advisors and hadnt been segregated with duties. This
was during the Feudal System times. The king appointed member to do cases in different
areas. In 1066 there was the battle of the Normans vs. Anglo-Saxons (William the
Conqueror). The Normans conquered England, but retains aspects of the Anglo-Saxons
system where the Lord had control of all his subordinates below him. Retained it for
political control of property. Judges dispensed law that was common to all people in
England. It became distinct of the kings court. It did not however strip the king of all
judicial authority, he retained an overriding residual authority to administer law outside
the common law courts. It was however, only invoked when the common law courts were
unable to uphold justice. The king was approached for equity. There were too many cases
so he appointed the chancellor to deal with these cases. It was called the Court of
Chancery or the Court of Equity. Equity principles overruled common law
principles, because equity principles evolved of lack of common law principles.
Cases could take up to 60 or 70 years.
In 1865, in response to Charles Dickens commentary on court systems, Blique
House, (also wrote Christmas Carol, Great expectations) they created the Judicature Act:
one set of courts simultaneously (equity and common law). Both bodies of principles
remained separate, however, both are considered during court cases, where equity law
still upholds common law. This was applied to Canada and Manitoba.
Courts have appointed judges who need a law degree, practicing for about 10+ years. This
means they are chosen from a narrow group. This is a more reactive process, by means of
waiting for a case to occur.

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2. LEGISLATURES

The legislatures produce laws known as statutes or acts. Are proactive. Need to be
18+ and win election.

11 legislatures in Canada.

Halsbury defines it as: a statute or act of parliament has been defined in the
English law as a pronouncement by the sovereign in parliament. That is to
say made by the Queen (monarch) by and with the advice and consent of both
Houses of Parliament, or in certain circumstance the House of Commons alone, the
effect of which is either to declare law or change the law.

A bill is a draft of a statute. This definition applies mutatis mutandis, which


means with necessary changes being made, to statutes of Canadian
parliament and provincial legislature.

There are 3 institutions that make up parliament


1) In the UK:
i. Monarch Queen
ii. Upper house House of Lords: werent appointed, but is being changed by Toni
Blair. He is stripping hereditary peers with appointed life peers from the labour
force. They will be considered designated members of lords because they are
not titled. Its modelled after the Canadian senate.
iii. Elected assembly House of Commons (Lower House)
2) In Canada
i. Monarch Queen or monarchical representative (governor general David
Johnston); is recommended.
ii. Upper house senate: completely appointed, no social prestige, no credibility,
used to be a senator for life
iii. Elected assembly House of Commons (MPs, approve all statutes)

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3) Provincial Legislature (MB)
i. Monarch Queen or representative (lieutenant governor John Harvard)
ii. Upper house doesnt exist, it was abolished in 1873, but was called the
legislative council (Quebec was the last province to have one)
iii. Legislative assembly legislative assembly: inhabited by politicians, statutes
generally started in the elected assembly.

Monarch

UK

CDN

Provincial

Queen Elizabeth

Queen Elizabeth II

Queen Elizabeth II

(Governor General)

(Lieutenant

II

Governor)
Upper House

House of Lord

Senate

[No long Exists]

Lower House

House of

House of Commons

Legislative Assembly

Common

American Constitutional Structure is exactly like the British Bicameral Model that
existed in 1776, but the king is now the President and is elected into power.
-House of Congress
- Senate (two senators from each state)
- House of Representatives (based by rep by pop)

3. DELEGATE BODIES

Delegate bodies produce Subordinate Legislation.

Defined as: legislation made by a person or body, other than the sovereign
in parliament by virtue of powers conferred either by statute (delegated
legislation) or by legislation (sub-delegation), which itself is made under
statutory powers. Frequently referred to delegated legislation in the former case
and sub delegated legislation in the latter.

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The influence can be overestimated. In terms of volume in legislations it constitutes


by far the largest number of laws. In terms of effects it regulates, organizes and
directs a broadening sphere of social conduct by the specific implementation of the
general legislative policies embodied in enabling statues. Very powerful and
dominant. Cabinet has this power often.

There are thousands of bodies for example, school boards, municipalities, police
depts, fire depts, crown corps, CRTC, etc because parliament does not have time to
make all these decisions.

Statutes give them power and are very brief, the regulation is very in-depth.
Frequently the recipient of power is the cabinet. The problem with this is that the
cabinet has so much power now, the legislature has none left. Executive
Dominance: delegation to cabinet of subordinate legislation. Canadas system has
the worst aspect of the US and UK systems.

Subordinate legislation has various names: regulation, orders, rules, bylaws or


ordinances (created by delegate bodies). Subordinate does not mean that they
have any less power, it only means it was been delegated by the legislation.

They have a quasi-judicial role: they need to resolve disputes, hear grievances,
produce regulations

There are 2 principles of law that form administrative law.

1. Delegate bodies can only create legislation within the jurisdiction given by
statutes. Anything else is ultra vires(beyond the power/jurisdiction) is void(has no
force or effect). Intra vires means within the power, the jurisdiction.
2. Delegates cant delegate delagatus non potest delagare cant further
delegate their power. For example, in estate law you appoint an executor, they cant
delegate their powers, unless legislation allows them, they have to attend to them
personally.

Until the 20th century, the most significant institution creating law was the courts
(Judge(s)) To become a judge you have to be appointed and you are eligible if you
are a lawyer for ten years and then you need to be deemed meritorious. Judge has

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to hear the dispute and then aplly a principle of law. Judge can only create laws
when a dispute arises. Law creation by Judges are reactive, and not proactive.
Legislature is proactive so they do not have to wait for a dispute. To be an MLA you
need to be a Canadian citizen, at least 18 years old.

In the early 20th century, the delegate bodies exploded and the relative roles of
significance reversed. Legislatures act proactively, not having restricting of the
Courts.
o

Why did this occur? (Estor Brown) Courts vs Legislature

1. In order for courts to make law they must wait for an appropriate dispute to
arise.
o

The other is proactive; they can make law, giving the advantage to the
legislature.

Judges were conservative, relatively uneducated, non-proactive, non-elected,


narrow in background.

2. Previously there wasnt a great demand for laws.


1. No legislature needed to organize non-existent social services
2. Court resolution worked quite well because there wasn't an enormous
necessity for it and there weren't too many laws needed at the time.
3. Bolstered by scholars (historical inertia)
4. Legislative process was difficult, expensive, sophisticated, intellectual

Suddenly with the industrial revolution there was a big change in


society. The legislature, because they were proactive, they could
immediately act to the problems of the industrial society, however, the
courts, because they were conservative, couldnt/didnt react lost their
dominant position.

3. Society finally had sufficient wealth to support an ongoing legislature function.


Ironically, it was the industrial revolution that fuelled the wealth and allowed for

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the problems to occur. It required more legislation and aided it come about. The
industrial revolution provided both the wealth and problems.

SYSTEMS OF LAW

When discussing systems of law we are looking at o and system and it does not
include legislative instruments (i.e statutes) This topic needs to be isolated from
everything else.

Blacks law dictionary: a system is an orderly combination or arrangement as


of particulars parts or elements into a whole, especially such combinations
according to some rationale or principle.

The essence of a system is the rationale and/or principle according to which various
related matters are arranged. When we speak of legal systems in contradistinction
from one another, we mean to differentiate that rationale or principle around which
laws and legal decisions are ordered.

Principles judges use to adjudicate cases not including legislation

The genesis and organization of the principles the Judges utilize to adjudicate cases.

In Europe there are 2 great legal systems.


i)

Civil Law

ii)

Common Law

1. CIVIL LAW

more ancient of the two systems.

Europe: everywhere but England, Whales and Ireland, where they have the common
law system.

Americas: everywhere except Guyana.

Louisiana, in the US, because it was colonized by the French and Spanish.

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Mexico uses civil law.

Canada we have basically the common law system except for Quebec, because they
were colonized by the French. Even though Quebec was conquered by England in
1759 in the battle of the planes of Abraham (General Wolf for the English, General
Montcalm for the French.) General Wolf won. It became part of the British Empire in
the treaty of Paris in 1763. (English had choice from Guatalu)However in 1774 the
Quebec act allowed for the continuation of the Quebec system (civil code).
Regarded by one of the intolerable acts for the Americans. The British allowed the
civil law system to continue.

Everything is so nicely articulated, instead of trying to figure out the principles


yourself.

The essence of the civil law system is the existence of the code.

The modern system owes it genesis to the Roman/Byzantine Empire, in particular


the empire of Justinian in the 6th century AD. The Roman Empire divided into two
empires. Justinian wanted one set of codes to be used throughout the empire.

According to Blacks legal dictionary codification means: the process of


collecting and arranging the laws of a country or state into a code, that is
into a complete system of positive law; scientifically ordered and
promulgated by a legislative authority. It became known as Justinians code.
The creation of code, and the utilization of the code for the adjudication of cases.
Major contribution to jurisprudence.

It was replaced in 1804, when Napoleon Bonaparte created a replacement code.


Known as the Napoleonic Code. The modern civilian countries update the code
more frequently. They have ongoing tribunals that update the code on an ongoing
basis.

Always refer to the code to access a principle to settle a dispute. Only if


the code does not cover the new problem is the court free to settle the
problem from the introductory general principles (in the introduction of
the code book).

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There is no doctrine of precedence in the civil law system. Later courts, in


the civilian court, may decide in a similar case that a just result is a reverse to the
original decision. Each Judge can select the principles that they see fit regarding a
case they adjudicate. This is regarded as the critical weakness in the civil law
system. Its a deductive system.

WEAKNESSES:
1) There is an absence of doctrine of precedence, which removes certainty from the law.
2) In new areas of development where there arent specific principles; the application of
the general principles is illusory.
To ameliorate these difficulties, certain practical amendments have been made.
1) There are frequent revisions to the code, so in newly developing areas of the law there
are up to date principles. These revisions are usually based on decided cases.
2) There is a growing tendency by the courts to apply precedence. Lawyers argue them;
judges read them, with the result that nevertheless precedents are applied with upon
commitment greater certainty and predictability.

2. COMMON LAW

Common law system: applies to court created law, how they are applied. It applies
to certain statutory laws as well.

It originated in England, Whales and Ireland and current former British colonies. The
English in the middle ages had to device a different system to solve disputes
because England essentially was cut off from Europe, because its an island.
Consequently it wasnt influenced by the factors that influence mainland Europe.
The problem was that the judges in the Anglo-Saxons courts had to solve disputes,
but where did the principles come from? Some came from the church, the king(King
Alfred). However they said it had come from time and memorial and then theyd
make it up. There was an oral history but not many people could read at the time.
Why did they do that? Because it gave them a level of legitimacy. They spoke of
precedent cases. When mercantilism became prominent, it demanded more

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certainty and assurance and the doctrine of precedence was begun to be recorded.
Eventually it was based on precedence that was organized and it became
preferable over the civil law system.

The doctrine of stare decisis (doctrine of precedence stand by previous


decisions) has been used for 1000 years, but only in the 19 th century did it become
a rule of law that needed to be followed. The only binding principle is the ***on
exam***ratio decidendi: The narrowest and necessary legal principle which
determines the case and is found in the case report. Everything other than
the ratio is Obiter Dktum: a statement by the way.

Rupert Crosss jurisdiction every court is bound to follow any case decided by
the court above it in the hierarchy of court, and the pellet(appeal) courts are bound
by their own decisions, except in the Supreme Court of Canada. However, it does
not indicate, the only binding part of the case, the ratio. Ermeged on an adhawk
basis.

Three C's: certainty, consistency and continuity. One of the downside to stare
decisis doctorine is that errors can be perpetuated. The other thing is the principle
of stare decisis leaves it open to interpretation with the different type of principles.
You never know how many facts will used by the ratio. Doctor of precedence
became more important. In England there was the market revolution and then there
was the industrial revolution. Eventually stare decisis was seen as a rule itself in
England.

A few things had to evolve before the system could be effective:


1. Literacy amongst the general population and judges themselves. Positivism
was increasing at this time period.
2. A system of publishing precedent cases (law reports), essential the discussion
of the judges findings and discussion of law.
3. Wide spread distribution of these printings. started in the Tutor period (1485
1650) with Henry VIII. During this era, the doctrine of precedence started to
work in an effective way. From the myth came a fully functioning legal

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system. The creator of the law is the precedence where as in civil law the
creators are the courts/judges.

Law Reports: published reasons for judgements given by a judge

Has individual case reports


1. Summary of facts
2. Discussion of law
3. Resolution of case

The doctrine of stare decisis has two aspects:


1) Definitional or Substantial:

the principle of law is found in the precedence called the ratio decidendi: the
narrowest and necessary legal principle upon which a legal decision was based.

In the case report there is the judges review.

The binding aspect of the case is the ratio decidendi. It is up to the reader to
determine what the ratio is.

Always therefore subject to argument and debate until the court tells us what the
ratio is in another case. In the civil law system is clearly articulates what the
precise principle is, so there isnt the certainty that some commentators make
about the common law system. It also allows flexibility for some judges that arent
as well informed but it undermines the certainty that the doctrine of precedence
should contain. Obiter dictum: statements by the way.

2) Structural:

What precedent cases do we follow?

The answer was provided by Rupert Cross, he wrote a book called precedence in
legal law and described the structural component of the stare decisis as: every

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court is bound to follow any case decided by a court above it in the
hierarchy of courts and appellate courts are bound by their own decisions
save and except the court of Canada and the house of lords. The only part
of the case that is binding is the ratio decidendi. Order: trial court, appellate court,
appeals court, final

The case must be relevant and on point. There is a hierarchy of courts.


The Manitoba courts do not have to follow decisions made in Ontario because its
not in our jurisdiction. We do not also have to follow decisions made by The Hague
(world courts) in Holland.

Hierarchy of Jurisdiction:
1) Provincial courts narrow jurisdiction, ex. Family court, juvenile court, small
claims court (up to 7,500), traffic court, bylaw court , all appointed by provincial
government
2) Court of queens bench (appointed by the federal government)
3) Court of intermediate appeal (court of Manitoba appeal) must be exercised in
30 days
4) Supreme court of Canada- the final appellate court for all jurisdictions in Canada.
It serves a unifying function. If something comes from Quebec then its heard from
the 3 Quebec judges, however those judges can do cases from the common law
system.
5) JCPC (the judicial committee of the Privy Council) ended in 1949 and still can be
binding precedence in Canada.
Common law: The progress of legal history is the slow revelation and refinement of
refutable principles. This is the metaphysical justification.

JUSTIFICATION FOR THE DOCTRINE OF STARE DECISIS

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1) Historical: classical it is based on principles metaphysically inspired that have
the appearance of change because they are being applied to modern cases. It is
only the application of old principles to new circumstances that give the appearance
of change. They do not make law but declare what it is. Change comes from the
legislature.
2) Modern: best annunciate by Samuel Freedmon who was one of Manitobas two best
judges (Brian Dickson). Freedmon wrote many articles on the doctrine of stare
decisis. Those wedded to the rigorous application of the doctrine of stare decisis
insist that it produces the 3 Cs: certainty, consistency, and continuity.
a. Certainty: we must know what the law is
b. Consistency: equality of treatment should be sought with similar cases
being treated similarly
c. Continuity: we must avoid the disastrous inconvenience of introducing
doubt into the law through judicial departures from precedent. Linked to this
is the reliance principle: that is the principle that people order their
affairs in reliance on judicial decisions (principles declared by judges)
and therefore their interest should be adversely affected if judges
altered principles. People order their affairs on the bases of these
decisions therefore interests would be inversely affected if judges departed
from decisions.
Some problems exist with the doctrine:
1) Because you follow pre-existing decisions, if one of these courts make an error and
makes a bad principle, it will persist for a long time.
2) The principles or ratios themselves in the common law system arent that clear, they
are interpreted and interpolated. Very seldom are those ratios clarified, which creates a
level of uncertainty which the civil law system doesnt have.
Emergence from custom to law:

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Historically the doctrine of stare decisis operated on a rule of custom. It was not till the
19th century that the House of Lords accepted the doctrine of stare decisis and proclaimed
it law. The reason why it was accepted was complex:
1) industrial revolution - requiring certainty, people dealing with commercial contracts,
more wealth.
2) intellectually rationally and positivism was becoming ascendant
3) commercial printing (printing press) had become even more developed and greater
distribution systems were available.
Convergence of systems:
Interestingly, the civil law system and common law systems are growing in similarity.
Youll find the law almost the same within Canada and Quebec systems. There is a
convergence of reality, because there is pressure on the two systems.

Common law looks more like civil law systems and vice versa.

The civil law system now uses precendences.

In the common law system we simultaneously find a greater use of codes, for
example the criminal code, human rights code, fire code, the partnership act, the
sale of goods act.

We have also seen that the final appellate courts are not bound by their
precedences (up until 1966), the ability of courts to distinguish cases on their facts
gives the courts more freedom.

THE NATURE AND ROLES OF COURTS


Courts are an institution of dispute resolution. Their unique feature is that they make law
simultaneously. There are other institutions that make law and resolve disputes:
arbitration, mediation, reconciliation, settlement. Arbitration is where the parties by
contract or statue have an adjudicator who is not a judge in the court and they can make
final decisions. Arbitration allows to resolve a dispute whether if it is an individual
arbitrator or a panel. Mediation is where the individual can talk to party and suggest

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solutions but cannot make a final decision. Conciliation is where someone gets the parties
to talk but cannot suggest solutions. They are more casual than mediators. 90% of cases
end in settlement where a plan is made to resolve the dispute. It is better to resolve the
dispute because courts are expensive and they create delay. They take too much time.
Another advantage of ADR(alternative dispute resoltion) is arbitor. Another advantage is
confidentiality. Finally there is preservation of ongoing relations.

5 ROLES OF THE COURT:


1. Arbitror of the constitution: Canada is a quasi federal country in a federal system:
it means that theres government of two levels each of which are independent and each is
assigned different jurisdiction. These two levels were created in 1867 by the British North
American act changed to the constitution act of 1867.

Federal parliamentary powers are GST, military, post office, currency, national
defence, weights & measures, trade & commerce, penitentiaries

Provincial government controls health care, education, taverns, highways and liquor.

The act that sets out the jurisdictions was made in July 1 1867, but there are going
to be disputes over jurisdiction over things that they didnt have back then.

The courts have ultimately taking over arbitrating these disputes. They have
assumed it and both parties have respected it.

Inter-jurisdictional matters (not examinable), for example Attorney General of


Manitoba vs. Attorney general of Canada over liquor taxes. Someone wanted to get
the taxes on liquor being served on the airlines while flying over Manitoba. Supreme
court decided that there are 3 strata of airspace: right over the person that owns
the ground, then provincial, then federal and hadnt decided what altitude each
occupied, however said the plane were in federal airspace.

2. Interpreter of legislation:

They give meaning to terms in the context of disputes.

When they are interpreting legislation they have various approaches:

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1. plain meaning approach(literal rule) dictionary definition,
2. mischief/liberal approach purposive, they look at the object of the statutes in
the context it was created
3. golden rule use plain approach and if necessary go to the liberal approach
*Preferred rule is the plain meaning approach.
3. Protector of civil liberties: (traditionally refers to the freedom of the individual in
politics and religion.)

These terms have embraced


o

freedom of expression, both of speech and the press,

freedom of association and assembly,

freedom to practice and preach ones religion,

freedom from arbitrary arrest, and

the right to a fair trial.

The courts assume the role of protecting civil liberties, and have changed over time.
In 1960 during Diefenbaker government, a bill of rights was passed in statutory
form by the government of Canada, encapsulated in statutory form both rights and
freedoms and the need for their protection. However importantly it was not
entrenched, the courts didnt have the final decision making power.

In 1982 their dreams came true when the Trudeau government gave the charter of
rights. It is entrenched which gives ultimately the supreme court of Canada final
decision making power as well as the power to give those terms meaning. Protects
private people over government and parties.

4. Arbitror of disputes between private persons: all about private law, people go to
court to have their disputes resolved. This gave rise to contract law, tort law, family law
etc

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5. Arbitror of public law disputes: government on one side, include criminal law,
constitutional law and administrative law.

ADVERSARY SYSTEM:

Characteristic of the courts system, not really a system.

In civil disputes it means that it is generally up to the parties, not the court to
initiate and prosecute litigation to investigate the pertinent facts and to
present proof and legal argument to the decision-making tribunal.

It is

about enlightened self-interest (selfishness) and fits with the capitalist approach.

The courts function in general is limited to adjudicating the issues submitted to it by


the parties or the proof presented by them and to apply appropriate procedural
sanctions upon the motion of a party.

Presentation and prosecution is done by the party with the court (which is acting a passive
arbiteur)
2 assumptions:
1) The factual proof and appropriate law is more likely to emerge from
bilateral investigation and presentation motivated by the strong pull of
self interest then from judicial investigation motivated only by official
duty. In some cases, the prosecutor is the judge and therefore there is an inherent
bias. Example, OJ Simpson case, said there was a rush to judgement that they
didnt investigate other alternatives. There is an element in the adversary
system of individualism much like capitalism. Capitalism is the use of self
interest to generate wealth. Most capitalism systems have adversary system. The
more extreme the capitalism system, the more extreme the adversary system
seems to be.
2) The moral force, legitimacy, and acceptability of a decision will be
greatest when it is made by one who does not have and does not appear
to have the kind of psychological commitment to the result that is implied
in initiating and conducting a case. Legitimacy means that we have the day in

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court to argue our case and even though the result isnt what we want, you were
able to represent yourself.
WHY DOE THE ADVERSARY SYSTEM NOT ALWAYS WORK?
1) People arent of equal means (poor, middle class, rich). If youre rich, you can
hire better council to represent you. You can hire better expert witnesses.
2) Lying and covering up evidence
3) Self interests can create abuses of procedures. In 96/97 the OJ Simpson case
was thought to be unfair because OJ had lots of money. (However it was really that he had
only 8 million dollars and the LA County invested 60 million dollars.) In every case there is
an unequal means issue. Jerome Frank: one hires George Forman and the other person
gets Peewee Herman.
In Manitoba we dont have a pure adversary system, lawyers have duties to the court. For
example, the lawyer wont do the case if he knows the client did it and is going to lie.
Secondly judges will move the case along. They are involved in the court process. This
seems to make up for the deficiencies in the adversary system.

THE COURT SYSTEM IN CANADA

Court system is organized according to the constitution (BNA act of 1867) now
called the Constitution Act.

The provinces (provincial legislatures) have jurisdiction over the administration of


justice including the organization and operation of police forces and the system of
courts.

Federal parliament under section 96 has the exclusive right to appoint and pay all
county court and superior court judges, though the former are now phased out.

There are 3 tiers of court in Canada:


1. Courts of 1st instance(trial courts) which is divided into:

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A. Provincial court (ex. traffic court, small claims court [up to 10,000],
youth court, bylaw court) established by provincial legislature (judges
appointed by the province)
B. Court of Queens bench as the superior court it has plenary
jurisdiction over trial (judged appointed by feds). The person that
brings the lawsuit is called the plaintiff and the defending person is the
defendant. This is where the matter is first heard and an attempt is
made to resolve the dispute. If you are not happy with the decision
you have an automatic appeal.
2. Court of appeal - the individual who is appealing the case is called the
appellant and the person defending the appeal is called the respondent. Anyone
can appeal. Here you dont hear evidence, only principles of law. If you
are still dissatisfied you then must be granted appeal to the
3. Supreme Court of Canada, It was created in 1875 pursuant to the provision in
the constitution. It didnt however become the final appellate court until 1949.
Until then the JCPC was the final appellate court, could appeal directly. Tribunal
in the UK, all members were judges, one report and could easily find ratio. It is a
leave court you need special approval and application.

WHO APPOINTS THE JUDGES?

The supreme court of Canada is appointed by the prime minister.

Generally the judges appointed will think the same way as the prime minister

In the 1981 reference case this was most apparent when the prime minister voted
his friends in. On the court there were 9 judges, 7 appointed by Trudeau and 2 left
from Diefenbaker. The result was a 7 to 2 split.

Canada is a federal country so the prime minister appoints people to hear disputes
between the federal legislature and provincial legislatures cases.

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Another court structure called the federal court created pursuant to the federal court act
and replaces the exchequer court, which means the tax court, in 1970. However the
jurisdiction was expanded beyond tax to trademarks, patents, copyrights, and . The
problem is that it creates a lot of chaos because you dont know what to sue and sued in
the wrong court. There are 3 divisions: federal court of trial division, federal court of
appellate division, Supreme Court of Canada.
Statutes of Limitation: people may appeal the decisions made up to 2 years for torts and 6
years for contract matters. Because of the effect of evidence eroding, decisions can
change.

THE COURT PROCESS IN THE CONTEXT OF LITIGATION


1) Who may sue?
All legal persons may sue, even corporations. If you are incompetent or under 18 then
your guardian can sue.
2) Must have standing: if you have a special interest to be vindicated (prevents frivolous
claims.)
3) Class action: one individual represents a group or class of individuals with the same
issues, this helps stop clogging of the courts. Now we have the Class Proceedings Act if
there is a common interest, not an exactly same interest. Ex) Ralph Nader vs the
automotive industry
Procedural law: how to engage the law and how to move it along to achieve the
remedy in respect to substantive law (dealing with liability). Purpose of the court
process is to discourage a case from going to trial and to settle it before the court.
1. To engage the court:

Plaintiff issues a statement of claims it is served to the defendant, describe the


wrong-doings, the remedy sought. Has to be served within 6 months.

Includes the name of the plaintiff and the identity, the defendants name and the
identity, all the material fact you rely upon (must be fact).

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There are service rules contained in the Queens Bench rules, normally there is a
bailiff to serve the document and sign it.

If person avoids service you can get an order of substitutional service for real
delivery of service and the court will tell you what to do: place ads in the newspaper
or mail to the last address.

If they are outside the province they have 40 days.

2. Defendants issue/file a statement of defence

If the defendant does not file this within 20 days then the plaintiff automatically
wins.

This statement is a statement of the facts.


If the statement of claim is not clear then they can ask for better particulars
through a formal or informal process.

Case management see a judge in chambers and the judge organizes the next
step to promote settlement, applies to all family matters and civil matters under
$50,000 then the judge asks if you want the case to be mediated by the judge,
otherwise the judge will set up the next step.

3. Examination for Discovery

Each side gets to ask the other side relevant questions, so both sides have the
opportunity to have all the information of the case.

You are more likely to achieve settlement.

There is a court reporter attend, both sides attend and the information is read into
evidence. Achieves several purposes, get a basis for cross examination, get to test
the medal of the opposite side, see if they are credible, and institute the evidence.

4. Pre-trial conference

A judge who will not hear the case meets with the parties in their chambers to
discuss the case.

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The lawyers submit briefs on the matter and the judge then in advance gives you an
idea of what will happen in order to try and achieve settlement.

Gives the litigants an idea of whether or not you have a strong case.

If the pre-trial conference fails then the judge will set a trial date.

5. Trial

The plaintiff puts in their case first, then the defendant puts in their case and there
is cross examination.

The plaintiff has a chance to respond to new issues made.

Trials can take days, weeks, months and the whole process can take years (8 10
years is not uncommon).

LAWSUIT EXPENSES

Lawsuits are expensive in many ways: financial costs and emotional costs.

The courts in Canada award costs to the winner, because the winner shouldnt have
to have gone to court to settle.

It is rather a portion of the costs; they have a chart that says what each service
actually costs.

Lawyers charge on 1 of 2 basis:


1. hourly rate, which can range between 150 and 500 an hour, (it doesnt really
dictate quality though),
2. contingency agreement, paying the lawyer on the basis of the percentage of the
money obtained through the settlement. Normally its between 25% and 40%
depending on what stage the settlement takes place. However, you must pay
the disbursements on a normal basis. Tend to be a fairly hefty proportion,
because you are overpaying the lawyer because there is a risk for the lawyer of
not receiving any money if they lose.

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We do have a legal aid system in Manitoba to help the poor.

Lawyers are known as barristers and solicitors. In England there are two different
professions, youre either one or another. Barristers go to court and solicitors do
everything else including hiring your clients. Therefore there is a split bar in
England. There is a good reason for it because very few people can effectively do
both.

II) THE CANADIAN CONSTITUTION

The constitution reflects the relationship between law and politics.

What is the constitution?

It creates the organs, institutions of the country that both create law and administer
law.

Cheffins: (pg. 3) of the constitution: A constitution must


1. First provide for the creation of the basic organs and institutions of public
authority.
2. Second, it must define the powers possessed by each of the public institutions
and in some respects define the relationships between these various
institutions.
3. Third, a constitution must provide for the processes by which law is created, and
at the same time provide for the limitations on the power (assumption that
freedom exists unless the act is specifically prohibited) exercised by the officials
of public institutions. Thus a constitution assigns legal responsibility, defines the
limits of authority, and establishes the processes which must be followed before
this authority can be exercised.
4. Furthermore, a constitutional document must provide for a method of change,
both of political leadership (1) and of the basic constitutional framework (2), the
latter by way of amendment to the constitution.

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Laws make up part of the constitution but they reflect political values and in turn define
the political process.

WHERE DO YOU FIND THE CANADIAN CONSTITUTION?

Canadas constitution (current) is found, according to Cheffins, in Canada it is


necessary to look at a whole series of statutes and other legal documents to ascertain
how, at least to some extent, power is allocated in the Canadian system. However, as
will be demonstrated later, many of the rules with respect to the functioning of
authority in a constitutional system are not defined in authoritative legal documents
but rather are the result of consensus among the actors in a political and constitutional
system.

The Canadian constitution isnt neatly contained in any specific document.

Fundamental constitution document: BNA act 1867 - MISLEADING.


o

Says that the Queen and then the governor general have the executive power and
sometimes the Privy Council (created to assist the monarch in use of executive
authority, but they have never met).

However, the prime minister has the real executive power and yet he isnt
mentioned in the constitutional document. Its a convention that the monarch
follows the decisions of the prime minister.

Many parts of the constitution are


1. not from written and or authoritative sources or documents, and
2. Concomitantly not legally enforceable conventions

Much of the constitution isnt law!

THE NATURE OF A CONSTITUTION


A constitutional lawyer, DesSmith provides a precise definition: constitutions are primarily
about the political power, the location, the conferment, the distribution, exercise and
limitation of power among the organs of the state.

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Cheffins talks about the limitation of power:

the principle of constitutionalism, about having restraints on the governors, it is the


assumption of freedom unless an act is specifically prohibited.

This in turn results in the limitation on governors;

Constitutionalism: legitimate actors in the political system have only such authority
as is vested in them by law and that any attempt to move beyond the peripheries of
these authorities is illegal or ultra vires: beyond the power, and therefore void.

Case of DuPlessis: no official has any authority to act unless empowered by statute.

SOURCES OF THE CONSTITUTION: THE INSTITUTIONS THAT CREATE


CONSTITUTIONAL LAW IN CANADA
Definitions:
i)

Authoritative sources: create constitutional rules which are law because they are

ii)

enforceable in the courts.


Persuasive sources: create rules of the constitution which are not a part of the
constitution. Meaning, the courts wont enforce them because they are not law.

iii)

Entrenchment: page 71 of Cheffins: by entrenchment we mean there are certain


provisions in the constitution which are beyond the normal control of either the
federal parliament or the provincial legislatures. That is to say, certain provisions of
the constitution are regarded as so significant and so important that they can only
be changed by an extraordinary process.

Prior to 1982 that extraordinary process included the agreement by the UK


parliament, after 1982 you must resort to one of 2 amending formulae. Its a
resort to a different process. Since 1982 nothing has changed, because it is so
difficult of a process that they cant pass anything.

iv)

De Jure: at law

v)

De Facto: in fact

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vi)

Patriated: amendment process for entrenched parts of constitution are wholly


domestic.

AUTHORITATIVE SOURCES OF THE CONSTITUTION:


1) Legislatures: create statutes that are constitutionally relevant to Canada
a. UK parliament has produced legislation/statutes of significance to Canada.

2 most important statutes:


1. BNA Act 1867: created Canada (the statutes united these
colonies into a country), it laid out the framework of our
constitution: courts created, supreme court created.
2. The constitution act 1982: the charter of rights were created
as well as it allowed for a domestic amending process.

b. Canadian parliament:

some is entrenched:
1.

election act,

2. the Canadian bill of rights,


3. all the statutes creating other provinces (6 other provinces otherwise anyone in the parliament could obliterate the
opposition by getting rid of one of the provinces.) First was
Manitoba, so it was established by the Manitoba precedence.
The last province confederated was Newfoundland.
4. The supreme court of Canada is also entrenched,

Quebec is entitled to 3 Supreme Court judges even though


their population is declining, but the Quebec province would
have to agree to change it.

c. Provincial legislatures:

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all of them have created constitutional law, section 92(1) of BNA act
1867 and section 45 of the Constitution act 1982

- provides the legislature of each provinces to make laws of the


constitution laws of the province.

Each province has the ability to make constitutional law, none of it is


entrenched except the office of the lieutenant governor in section 45
of the Constitution act 1982 which is entrenched.

To change any offices requires unanimous provincial consent and


the consent of the federal parliament. The provinces are active in
changing their constitutions.

Major change was the elimination of the upper house.

2) Courts produce constitutional law in accordance with common law.

Interpret constitutional statutes.

Prior to 1982 they focused on the constitution of the division of power; since
1982 the main focus has been interpreting the charter.

Roncarelli Duplessis

Once they have given meaning to the charter, thereby creating law, then it is
then only amendable through one of the amending formulae.

3) Royal prerogatives:

although the royal prerogatives are defined by the court, their


authority rests in the historical recognition of the crown and its
prerogatives legal rights. Since the constitution act of 1982 entrenches
the monarchy and the offices of governor general and lieutenant
governor, any change in the powers would need the use of the
appropriate amending formulae.

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The Royal Prerogative itself is the residue of the legal power residing in the
crown and passing through the crown to the crowns representatives.

Royal Prerogatives are the contemporary residue of those ancient powers not
taken away from statute and include the power to:
a. appoint the first minister,
b. dismiss the first minister,
c. dissolve the elected assembly,
d. declare war, and the power to appoint ambassadors.

What were these ancient powers? Back 1100 years, the monarch was an absolute
monarch, where the monarch can declare what the law was and could also render judicial
decisions. In 1066 William the Conqueror came over and became the monarchs absolute
powers. The big erosion happened in 1215 with the Magna Carta (Big Charter),
which forced the king into surrendering some of his powers. Could not create new law
suits. The baroness forced the king to give up his powers; he could no longer raise taxes.
He lost control over his own money, so that slowly to get additional funds he was held with
extortion until he gave up more powers to get the money.

Prerogative powers give a level of discretion; they are there to protect the democracy
when the ministers are not acting appropriately. Ironically the ancient residue exists for
the preservation of democracy.

PERSUASIVE SOURCES ARE IMPORTANT TO THE CONSTITUTION BUT ARE


NOT ENFORCED
1) 1st convention (not really a source)

some of the most important principles of the constitution are referred to as


conventions,which guide political actors in how they function but are
not enforced by the court and are thus conventions of the constitution.

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They are not contained in any written enforceable document but instead are
generally accepted traditions and principles of how participants in the process
should function at particular times.

The supreme court of Canada in 1981 defined the conventions in the case
Reference Re-Amendment of the Constitution of Canada. In contra distinction
to laws of the constitution they are neither created by the courts nor enforceable
by the courts.

According to Cheffins: The Supreme Court suggested however that some


conventions are more important than most constitutional laws.

The court in the same case held that conventions are a part of the constitution
and the constitutional conventions plus constitutional law equals the
total constitution of the country.

2) There are other persuasive sources:


i)

Learned authors writings: ex. Cheffins, Peter Hogg

ii)

Parliamentary rules/privilege or custom of parliament

iii)

Relevant judicial decision from other jurisdictions

SELECTED TOPICS IN CANADIAN CONSTITUTIONAL LAW


FEDERALISM IN CANADA
1. What is federalism?
1) K.C. Wheare wrote the seminal work the federal government and he defined the federal
principles: is the method of dividing powers so that the general and regional
governments are each within a sphere coordinate and independent. The existence of
federal principles in a country allows it to be regarded as a federal state. In a federal
country governmental power is distributed between a central authority sometimes
called a national authority or federal authority and several regional authorities

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sometimes called provinces or states. It is distributive in such a way that every
individual is subject to two authorities.
2) In a federal system, if we are truly federal, the two authorities are coordinate that
means in essence that neither is legally subordinate to the other.

In a unitary state, government power is vested in one national authority; there are a
municipal government with powers over their localities but differ because they are
legally subordinate to the national authority; can amend, control or take away
there power. An example of a unitary state is the United Kingdom, governed by one
parliament.

In a federal state it is common to speak of different levels of government. The


notion of equality of status does not necessarily extend beyond the legal format. (In
Manitoba, we are all immediately subject to the laws of the federal government and
the laws of the provincial legislature and we notice this every time we buy
something: PST and GST.)

3) The key point: it is the legal guarantee of a legal autonomy (not legally
subordinate) to each of the regional authorities in respect of the areas which
constitute their jurisdiction, however dispirit in size and wealth those
regional authorities may be, which justifies their description as coordinate
with the central authority.
Doctrine of Paramouncy: reqs that federal law prevails, but regional authorities are not
legally subordinate.
4) There are 2 corollaries:
1. To be truly federal, a final arbitrator of constitution is required which neither level
of government alone can control or appoint.
2. A method of constitutional amendment in areas related to the division of power is
required which neither level of government can control.

IS THERE FEDERALISM IN CANADA?

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STANCE 1: WE ARE A FEDERAL COUNTRY BECAUSE:


1. We are subject to the laws of 2 authorities and jurisdictions assigned to
both in the BNA act of 1867 there were two jurisdictions created.
a. Provincial areas of jurisdiction: property rights, education, health care
i. Notwithstanding Act - it allow s the legislature to be able to exclude
themselves from the effect of judges appointed federally using the
Charter to trespass on provincial jurisdiction. to preserve the sense of
federalism.
b. Federal legislation: military security, post office, taxes, weights and
measures.
2. The statutes are entrenched. (1871)
3. The existence of the amending formulae that requires provincial participation
and specifically the division of rights further strengthens this argument, because in
1982 there was an argument that the federal government could do it alone.
4. The colonies are to be federally united (was written in the BNA act of 1867 by
the fathers of confederation.)
(end October 1)
5. There were judicial decisions that consolidated federal realities:
a. 2 most important decisions were given by the JCPC

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i. Hodge v THE QUEEN 1883:

The ratio: the provinces are not delegates of the federal


parliament; the provincial legislatures are in their own
spheres supreme. (substantiated federalism.)

The existence of the JCPC made us more federal because it was a


truly an independent arbitrator.

Now it is the supreme court of Canada appointed by the prime


minister with the result that we are less federal. They have
attempted to erode federalism because in key economic decisions
they always align with the federal government.
o

The liquidator of the Maritime Bank of Canada v. the Receiver


General of New Brunswick (called the Maritime Bank case in an
exam) in 1892.

The ratio: the lieutenant governor is not merely a


federal official rather the lieutenant governor
processed all the prerogative powers of the crown.

However despite these decisions of the JCPC there is more than a little doubt that Canada
is a federal country; in fact the better view is that Canada is not a federal country because
it does not measure up to the federal principles and corollaries.

STANCE 2: WE ARE NOT A FEDERAL COUNTRY BECAUSE:

Wheare: Canadian constitution is quasi federal in law and predominantly federal in


practice: meaning that Canada isnt federal, at best in law its quasi federal. Canada
acts like a federal country

Cheffins says on pg. 119: What Wheare is saying is that in constitutional theory the
central government is given sufficient powers to control the autonomy of the
provincial governments and thus the principle of equal and coordinate status is
not sustained in the black letter law of Canadas constitution. He goes on to make
it clear, though, that the centralizing features of the Canadian constitution which

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undermine the federal principle have so fallen into disuse that in practice Canada is
a genuine federal state.

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1. Power of Disallowance (Section 90 of BNA act 1867)
a. the federal government is given the power to disallow any act passed by a
provincial legislature, which is essentially a straight veto power.
2. Section 58 BNA 1867 the federal government is given the power to
appoint thelieutenant governor of each province and
Section 92 (1) BNA 1867 provinces are denied the ability to alter the
office of lieutenant governor, who has a significant impact on provincial
legislature.
3. Power of reservation
a. Section 57 BNA 1867 -the federally appointed lieutenant governor of each
province can, on instruction from the federal government, reserve
provincial bills for the consideration of the governor in council in
Ottawa. They can send a bill straight to the parliament
b. In recent years, the use of power of disallowance and the power of
reservation have been frequently disused.
c. The power of disallowance was used 112 times to disallow the provincial act,
but the last disallowance took place in 1942.
d. The power of reservation was used 70 times, the last one taking place in
1961.
Declaratory power (Section 91(29) and Section 92(10c))
e. the federal parliament was given the power to unilaterally bring local works
within exclusive federal legislative jurisdiction, simply by declaring them to
be for the general advantage of Canada. The parliament can take away the
power of the province if it is in the best interest of the country.
f.

This is tantamount to jurisdictional expropriation.

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g. It has been used on numerous occasions, but not since the early 1960,
important to matters with railways, grain matter, atomic energy, bridge,
cannels.
4. Remedial legislation by the federal government in the event that Roman
Catholics and Protestants are deprived of their traditional rights to
religious education. (Section 93 BNA act)
a. This power has never been used, but it still exists. Tupper tried to use this
and Laurier had prevailed ( a French Catholic ) and didn't use it. Manitoba
wanted to disallow French Catholics to practice their religious education.
Ont. Hydro (1993) DOCTRINE OF DESUETUDE Provincial argument said that even
though the powers are not used, they still exist and have standing. It was proved by the
Supreme Court.
5. Federal government power to appoint judges of the superior court (and
above) and in addition Section 101 allowed the federal government to
create the final appellate court of Canada and appoint the judges (Section
96). JCPC no longer exists so Supreme Court is final appellate court.
a. This is inconsistent because the arbitrators should not be controlled by one
level of government.
6. Charter of rights
a. The judiciary is empowered to trespass on provincial legislative jurisdiction if
the provincial legislation doesn't meet the Charter. Judges interpreting a
charter of unknown advent could trench on provincial legislation.
b. Judges can compromise a great deal of provincial jurisdiction and they are
federally appointed.
7. The amendment process
a. The 1982 amendment has made the process more federal as the
formulae to amend the entrenched aspects of constitution are

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beyond the control of either level of government. Prior to 1982, the
process could be dominated by federal parliament.

WHY DO WE HAVE THE STYLE OF FEDERALISM THAT WE HAVE?


1. Constitution 1867 reflects the values of the individuals that created it at the time.
We must understand the times of when the act was created and the reasons for
Canadian confederation. Some of the reasons were:
2. The threat from the US invasions
o

US had invaded Canada before in the war of 1812. They were looking for more
resources and they had the idea of Manifest Destiny through the Munroe
Doctrine.

Canada launched a pre-emptive attack and won by Issac Brock.

Also in 1776 and 1777 Benedict Arnold was the leading American general and
lead the attack on Ottawa with Benjamin Franklin.

People were worried because there was a real threat and danger.

The civil war had just ended (1860) and they feared that the Americans would
just move the war north. Americans thought one country would be stronger.

3. Economic reasons: need for larger markets.


o

In 1840s the British dismantled their mercantile system (vertical integrated


industry) and wanted their colonies to work on an international level. Canada did
not have preferred access to large markets anymore.

We wanted an advantage by creating free trade with the United States.

Treaty of reciprocity was created. A preferred access with US.

In 1864 the 10 year treated was terminated by the American because they were
mad at Canada.

With confederation we could have a larger domestic market by creating our own
country.

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4. Existence of common history and traditions, the growth of nationalism on
the international scale. Assembling of larger states into one nation as a whole.
o

Canada is actually older than Italy and Germany and Australia, so why do we
insist on saying were young, because it excuses making mistakes.

OTHER FORCES AT WORK:


5. Former British colonies and in the years prior to confederation developed distinct
political and economic existences which they did not want to see submerged in a
larger union. (especially New Brunswick and Nova Scotia)

6. French, Roman Catholic population of Quebec (as opposed to the rest of the
colonies in North America)
o

The French Canadians rightly worried that a larger union without a


federal structure, allowing for region linguistic and religious control
would result in their homogenization.

A federal system would liberate the French Canadians from at least, at the
local level, English Canadian control which had existed in the province of the
Canadas

7. The sheer size of the composed country


o

The various maritime colonies at the time of confederation had a perception


of remoteness from central Canada and therefore the desire to preserve
some local authority and governmental power.

Ontarios interest has always sided with a strong central government; they
made sure that the central government was provided with the legal weapons
to ensure its ultimate dominance over the provinces, since they knew that
they were the most populated province.

Cheffins on 119 much of what federalism is about is economic. Federalism


is an attempt by regional governments to retain some control over their local

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economic destinies, which they often feel are in conflict with national policy.
In fact, many of the political tensions in Canada since its inception have been
struggles between central Canadas economic interests and those of its
regional hinterland. Add the fact that Quebec is largely French-speaking, and
one can see that the two main threads running through the stream of
federal-provincial relations have been those of cultural identity and economic
self interest.
There is federalism in Canada, because John A. Macdonald made sure the deck was
stacked in favour of Ontario, they had sufficient legal weaponry if they needed to use it,
because of their size. Wilfred Laurier on the 5 dollar bill, John A. Macdonald is on the 10
dollar bill, the Queen on the 20 dollar bill, Mackenzie King on the 50 dollar bill and Robert
Borden is on the hundred dollar bill. This shows that this reflects political values. They
would be able to control the provinces legal and economic interests.

RESPONSIBLE GOVERNMENT
RESPONSIBLE GOVERNMENT IS THE SINGLE MOST IMPORTANT ACHIEVEMENT FOR
3 REASONS:
1. It is an example of how significant conventions are to the constitution,
2. It illustrates how important constitutional principles were inherited from Great
Britain and the pre-confederation period, and
3. ***It is the mechanism which ensures the democratization of executive
government in the country. Linked the executive officials to

THE MOST IMPORTANT IS THE 3RD REASON BECAUSE

In any governmental system you need executive authority, which surrounds the
operation of laws and government, the executive has a great deal of authority.

In our system it is vital, because they can lead to the declaration of war, control of
the budget, elect judges, has been the recipient of a great deal of delegate power
through statute, they can generate a lot of subordinate legislation.

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In a democracy you want concentrations of power to reflect the democratic power


of the people.
o

US solved the problem of executive power; they have three levels of


government: president, senate, congress.

George bush has tremendous power; the American constitution is the


reflection of the British constitution except they elect their president and
senate (democratized).

We democratize our executive but in a more subtle way. PM is the head of


the executive and the House of Commons.

PM has total control between elections, appoints the Cabinet, is the sole
advisor to the monarch.

OTHER LEGISLATIVE INSTITUTIONS:


1. Judiciary
2. Legislatures that make laws (statutes),
3. Executive power invested in the monarch or representative (in 1867).

This is the De jure authority (by the law) according to section 9 of the BNA
act of 1867. Section 9, the Queen is in charge. Section 10, Governor
General. Section 11, Privy Council.
o

The monarchical representative federally is the governor general, and


provincially is the lieutenant governor.

The de facto executive (means the real deal, in fact) is the cabinet and is
said to be the only active part of the Privy Council, called the prime minister
or premier.

Responsible government provides the linkage between the


legislative institutions and the executive institutions and ensures
an element of democratizion to executive government at least in

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selection principle,(de facto executive)at least to the degree that
the legislative branch is selected according to democratic principles.
Responsible government:the appointment of persons to the executive who sit in the
elected assembly and who have the support of the elected assembly. An analogue to this
is that the monarch or representative in giving ascent must follow the advice of the
executive rather than his or her own personal predilection (bias).
Responsible government has been actualized by two conventions - (highlights the role of
the prime minister) (existed in 1849 for Nova Scotia and New Brunswick government)
1. The leader of the political party with the largest number of seats in the house of
commons is appointed prime minister or premier and is asked to form a cabinet by
the monarch or monarchical representative (the selection of the PM reflects the
democracy of the legislative assembly).
2. The monarch or representative must act under the advice of the prime minister in
consenting to legislation or exercising prerogative and executive powers, with
exceptions. They insure that to a certain level those executive powers are
democratized. It is the de facto executive that exhibits the power and the prime
minister. That executive power is at least somewhat democratic. We dont directly
vote for the head of our executive, like the Americans.

1982 REVISIONS:

The 1982 constitution act altered the constitutions, because it


1. Provided for a domestic amending process for entrenched aspects of the
constitutions, this was to patriate the constitution.
2. Provided for a charter of rights,
3. Provided an additional subsection with respect to the division of powers. Section
92(A) Cheffins pg. 5 allowed the province to tax exports,

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4. Provided there be a conference for the rights of aboriginal people,
5. Provisions for equalization payments (for regional disparities)
6. It also allowed the UK parliament to promise to sign off, would never legislate for
Canada again (signing off clause), and
7. Changes made to all the names of the constitutional statutes, part of Trudeaus
desire to limit the connection with UK history.

CONSTITUTIONAL AMENDMENT PROCESS

Did not create a new constitution.

Significant changes came from the amendment process.

The process became wholly domestic.

Section 92 Provincial legislature was able to make amendments to their


constitution as long as it had not affect on the office of the lieutenant governor.

Prior to 1982 certain parts of the constitution had to be changed through the UK
parliament (only the entrenched aspects). Now much of the Canadian constitution
could be amended in Canada (the federal parliament could change their
constitution Section 91(1)).

The parts of the constitution which could not be altered were entrenched,
pg. 71 Cheffins: by entrenchment we mean, there are certain provisions in the
constitution, which are beyond the normal control of either the federal parliament
or the provincial legislature that is to say that certain provisions of the constitution
are so significant and so important that they can only be changed by an
extraordinary process.

Prior to 1982 the extraordinary process was the imperial parliament.


o

Section 91(2) enumerates the entrenched acts of the constitution; there were
very few:

Division of powers,

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Linguistics rights of French and English people.

Statutes creating provinces.

There was a need to have an independent body in control so that the quasifederal government would not be destroyed by one party or another.

The formal authority was the imperial parliament; however the


imperial parliament was tightly ruled by conventions of the
constitution, which made the imperial parliament essentially an
instrument of Canadian will.

These conventions required:

Firstly an initiative from the Canadian government, a letter to British


parliament

Joint resolution of the senate and the house of commons, and

Unanimous provincial consent; however there was a case that only


substantial consent was efficient. Though the constitution had to be
legally amended by UK, it was controlled by Canada.

The process was altered completely in 1982. How was it altered?


1. The amendment process was said to be patriated, it became whole domestic
with no need to seek the formal amendment from the imperial parliament,
Patriate: the amending process with respect to entrench aspects of the
constitutions is made wholly domestic.
2. The British statutes with constitutional relevance to Canada were entrenched
in their totality. All statutes with British relevance was entrenched,
3. Certain Canadian statutes were entrenched,
4. Two domestic amending formulae were defined to replace the imperial
parliament:

a) General Procedure: defined in section 38:

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i) Resolution of the Senate and the House of Commons,
ii) Resolution of the legislative assemblies with at least 2/3 of the provinces with
50% of population called the 7-50 rule. Applies to the Charter of Rights as well.
b) Unanimity Provision: separates out certain things that are so important that the
general procedure isnt applicable, requires the unanimous approval of all the
provinces (10). Section 41 describes the subject matters to which it is applicable
(all are entrecnched):
i) monarchy (pg. 228 Cheffins), and its representatives,
ii) assurance that no province will have less members in the house of commons
than it has of senators,
iii) the use of the English and French languages,
iv) the composition of the supreme court,
v) the requirement that the amending formulae cannot be changed except with the
unanimous agreement of all 11 legislatures.
Experience with the amending formulae is that nothing is easy, these methods are so
difficult. There were two approaches to change by the federal government:
Attempt by the Mulroney gov. to change the constitution
1. Meech lake accord All provinces would get a veto, so he wanted to get
rid of the 7-50 rule
a. Make change to make all changes to be unanimous only, ironically,
failed to get acceptance unanimously (Manitoba and Newfoundland).
2. Charlottetown accord (by Prime Minister Brian Mulroney)
a. Quebec never approved the accords.
b. Mulroney wanted to get Quebec into the constitutional family, but Quebec
wanted the ability to veto.

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c. Brian Mulroney in a compromise wanted to say that all provinces could have
veto, but then it would be entirely a unanimity provision instead of the 7/50
rule.
d. Through the Charlottetown accord, he decided to add a distinct society clause
for Quebec, but it failed, so nothing has changed.
e. The irony of the inflexibility is that it is easier for the province to
leave then amending the constitution (Clarity Act)

THE CHARTER OF RIGHTS

Contained in the constitution of 1982 is part of the constitution and therefore


entrenched (section 52 is the empowering part).
o

Inconsistency Clause

The charter is part of the supreme law and if it doesnt measure up then it is of no
importance or effect.

The charter is the standard to which we measure law, and the judiciary determines
inconsistencies.

It gives the power to the judiciary because they determine if something


measures up to the charter, amendment is virtually impossible.

It contains (in section 1-37 of the act 1982)


o

the freedom of conscious and religion

freedom of thought and press

freedom of association,

mobility rights.

The charter is very vague, for example what is a mobility right? This gives Judges
maximum power

Application section 32

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Section 24 : anyone whose rights or freedoms have been infringed or denied may
apply to get a remedy

The charter of rights represents a massive transfer of power from the legislature to
the judges, because
1. They have the last word,
2. Judges can give it any meaning they wish, especially at the supreme level,
3. Transfer of power applies to all provincial and federal levels, and
4. If someones rights are violated the judges can give any solution/remedy they
feel is appropriate. Judges arent elected, so once appointed they can be
there for 30 or 40 years. Its virtually impossible to get rid of them and yet
they are making political and social decisions.
THE CHARTER HAS LIMITATIONS

In the preamble: they are subject to reasonable limits and it is up to the judiciary to
identify what those reasonable limits are, also allows certain parts of the charter to
be declared inoperative (notwithstanding clause).

Restalls paper: charter is somewhat revolutionary and inappropriate with 4 basic


reasons ---EXAM
1. Revolutionary to the extent that it is a revolution of constitutional principle:
judiciary is not electorally responsible to any constituency, principles of
parliamentary supremacy and democracy are eroded, because we have
Judges making major political judgements.
2. Revolutionary because of its unknown and radical impact Cheffins pg 131
even experience American constitutional lawyers and judges might
flinch.never before have judges been handed so much responsibility with
so little analysis of the subtleties of what was being done,
3. The charter of rights violates the constitutional and cultural principle of
federalism to the extent it is in Canada. It is centralizing and

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homogenizing creating generalized national cultural standards in
areas formerly under exclusive provincial jurisdiction, and
4. Cultural revolution, because the charter is inconsistent with the basic
political, cultural and philosophical nature of the country. It is
simultaneously a subtle homogenizing, centralizing, and Americanizing
influence. (talked about in Restalls paper)

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III) THE MAJOR FORMS OF BUSINESS ORGANIZATION IN CANADA


One binding theme: the concept of liability legal liability is a right that is enforceable
by the law for which a remedy may be obtained in court.
Liability: a debt or obligation. A right that is recognized by law that can be enforced by a
person, by a court process, that can result in a court ordered remedy.
a) Sole Proprietorships

Is not a legal entity separate from its owner and consequently limited liability does
not exist. It is a consequence of the separate entity principle.

Income is added to the income of the sole proprietor for income tax purposes.

It is the most common and simplest form of business entity, easy to set up and
dissolve.

It exists whenever an individual carries on business for his or her own account
without either the medium of an incorporated company, or the participation of other
individuals except as employees.

All benefits flowing from the business accrue to the exclusive enjoyment
of the sole proprietor. Conversely the sole proprietor is directly and
personally liable for all the business liabilities of the sole proprietorship
contractual or otherwise, therefore all business and personal assets of the
sole proprietor can be seized in fulfillment of the sole proprietorship
business obligations and liabilities.

This is because the sole proprietor is not a legal entity separate from its owner
unlike a corporation vies a vies its shareholders.

Income is added to personal income and the aggregate is taxed at the appropriate
rate.

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If you carry on business in your own name then you do not have to register the
business name. Otherwise you cant use a name that can be confused with one
that already exists or one that is inappropriate on public grounds.

The key is that the sole proprietor has unlimited liability, all his or her
assets are at risk for business liabilities, which is a dangerous position to
be in.

ADVANTAGES OF SOLE PROPRIETORSHIPS:

Ability to make all business decisions

Right to all profits

Right to deal with all assets without interference

Simple to set up, very inexpensive

DISADVANTAGES OF SOLE PROPRIETORSHIPS:

Unlimited Liability: sole proprietor is liable for all the liabilities of the business and
all non-business assets are exposed to creditors of the business.
PROPHYLACTIC (PREVENTATIVE) ACTIONS TO PROTECT YOURSELF:

1. Best prophylactic: insurance.


2. Put your investments in creditor proof assets; ones that creditors cant attack.
Certain type of investments that cant be touched by creditors.
3. In advance of going into a business ensure that you make a legitimate business and
estate plan to redistribute your property and if it is desirable, transfer assets
to other individuals.
o

Must be an absolute transfer done well in advance of going into business.

If you go bankrupt, the trustee can review transactions of up to 5 years.

The question is to who you will transfer the assets to.

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Dont transfer to the spouse because in the case of a separation the


spouse can take it. After a lengthy lawsuit you may be able to get 50%
of all property.

Certain things arent divisible in marriage; property acquired prior to


the marriage (only the incremental amount) or property acquire
through inheritance.

Property exempt from the division in the marriage act would be


dangerous to transfer. For example, if Mulroney had acquired the
property before the marriage and then transferred it to the spouse,
then he would not have to share the property instead of getting it all in
the case of separation.

If you transfer to your parents and they pass away and their will is
wrong then other beneficiaries can get your property.

You can achieve some protection through a prenuptial agreement:


determines the allocation of property and support payments in the
event of divorce.

You want a prenuptial agreement when you have more money and
prospects than the other spouse. When are you opposed to a
prenuptial agreement? on a moral basis or you are the one with less
money. The problem with a prenuptial with Mulroy is that it
undermines protection from creditors. You should probably do a
combination of all possibilities.

Family Property Act: extends to cohabitants of 3 years with conjugal


relations.

b) Cooperatives

Examples: Co-op, all credit unions, Mountain Equipment co-op, Red River Co-op
a. Very prominent in west Canada and the prairies

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They are designed to provide their members with good or services at a


cost lower than the cost of similar goods and services in the market place.
Or it may be organized for the purpose of selling goods in such a way that
will maximize returns to the members. It is essentially about eliminating
the middlemen in the economy.

They try to sell their product as directly to the consumers as possible. Similarly
consumers attempt to buy as directly from the producers as possible, because the
goods can be delivered cheaper.
a. It was created because they were forced to pay high prices of the goods and
services from the only producers from Ontario. Buying elsewhere meant that
there would be lots of tariffs.

In our economy, usually the control of the organization is related to the quantum of
investment and is designed for profit maximization. Co-operatives forever have
very contrasting characteristics. They were progressive political idea.

Basic principles:
1. Each member has one vote regardless the number of shares held and the capital
contributed
2. There are no proxy votes; you need to be there at the meeting to vote
3. Theres no fixed rate of return on capital
4. Profits not required to operate the co-operative are paid to the members in
accordance with the quantity of goods purchased or sold through the
organization by the member. They are especially good in western Canada
because the middle agents are all from eastern Canada, geographic situation.
c) Partnerships

Once popular because it was very difficult to incorporate in the 18 hundreds.

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What is a partnership: definition is found in the partnership act, section 1 a


partnership is the relation which subsists between persons carrying on a business
with the view of profit.

It is important because of the consequence of finding the partnership exists. There


are various liniments (features):
a. There is the element of agreement which is implicit, the absence of the
agreement isnt fatal
b. The need for a business is said to include every trade, occupation or
profession, but does not include every activity carried on for profit.
i. Courts have highlighted: a sharing of the profits of a business though
not sufficient by itself is highly indicative of the existence of a
partnership especially if there is no alternative method of payment.
ii. Additional evidence, which is in conjunction with the sharing of profits,
includes:
1. The contribution of capital - property or money
2. An active role in the business
3. The existence of the ongoing business as opposed to an isolated
transaction.

Its also possible to become a partnership by estoppels:precluded from denying,


where you hold yourself out to be a partner even though youre not or if you allow
someone to say they are your partner you can be held to be a partner if you do not
protest it.

The chief consequence of becoming a partner is the partners unlimited


liability to outsiders who have dealt with the partnerships. As one author
indicates, in many respects a partnership might accurately be described as a
multiple proprietorship. The general partnerships resemble a sole proprietorship in
that it is not a legal entity separate from its partners.

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Several results:
a. A partner may not sue the partnership, although there may be actions
between the partners
b. A partner may not be an employee of the partnership
c. The separate assets of each partner, whether a corporation or an individual,
are at risk to satisfy the contractual and other liabilities of the partnership. In
other words partners do not enjoy the limited liability of a shareholder
of a corporation.
i. Each partner is jointly and separately liable for the liability of the
business; any creditor can sue all or one of the partners of the extent
of the liability.
ii. If you are a partner you should take on the prophylactic approach
described for the sole proprietorship.

The negative reality is further compounded by the legal principle that all partners
are also agents in addition to being principles of the partnership, so that
means that each individual partner can go and create liabilities of the
partnership. In a sole proprietorship you have control over the liabilities being
created.

The other issue is the reality that all partners are agents for the partnership,
so they can create liabilities for which you will be responsible. The partner
has the right to seek compensation for the liability of the partnership. All partners
are both principles and agents of the partnership. (read CHAPTER 19)

If you want limited liability there must be a separate entity.

A partner is only liable to the liabilities that the firm made during the time you were
in the partnership, if you terminate properly.
a. The proper way is to:
i. publish a notice that the partnership is dissolved and

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ii. provide actual notice to people who have dealt frequently and recently
with your firm.
Implied terms of the partnership act:a term that does not exist in a contract but
nevertheless the courts will insert it into the contract even though the parties never
agreed to it.
1. Common law implied laws - courts over time have completed or created implied
terms, for example, wrongful dismissal cases: every employee is entitled to
reasonable notice.
2. Statutorily implied terms in respect to the partnership act.

Partnerships generally are a consensual relationship or specifically contracted


relationship and there are various terms that are implied under the
partnership relationship, safe and except those that have discussed alternate
terms.

Examples: section 27
i. all partners may take part in the management of the partnership,
ii. need the consent of all existing partners before you bring in a new
partner,
iii. all partners are liable to share equally in contributions to capital, in
losses and in profits of the partnership.
iv. No partner is entitled to remuneration in acting in partnership
business.

Section 32 is a fiduciary like paragraph - in the position of a trustee or


agent and therefore part of the partnership - partners are liable for all
liabilities derived from them for any transaction of the partnership or any use
of them. If you do all the work, because you are using all property of the
partnership then you have to share the profits.

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Section 33 is a non competition paragraph, also a fiduciary paragraph if a partner competes with the partnership he or she must pay over to the
firm (partnership) an account for all profits made for him or her in that
business. You do get into vagueness of what is competition and is resolved
on case by case basis.

Section 29- if there is no fixed time period upon the duration of the
business, any partner may terminate the partnership at any time on given
notice of this intention to do so to all other partners. Becomes a partnership
at will.

Section 30 - if the partnership ends but still continues business,


notice is required.

Section 36 - there will be dissolution of the partnership by a death or


mental incapacity of one of the partners.

Implied terms are ultimately alienated if you enter into a partnership agreement, normally
20 to 30 pages that deals with provisions of all the implied terms and changes them to the
liking of all the partners. Similarly the partnership agreement can refine those terms and
make them to your satisfaction, to suit you.

A LIMITED PARTNERSHIP
A Limited Partnership is distinguished from a partnership because of its structure.

There are certain partners that have limited liability called limited partners and of
you must have at least one general partner.

The worrisome thing is that if a limited partner participates in a manager function


can convert himself into a general partner with limited liability.

It is not utilized as much because the tax advantages were eliminated in the early
90s.

LIMITED LIABILITY PARTNERSHIPS

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Relatively new:

Partnership amendment act - it makes provision for limited liability partnerships and
it received royal ascent on august 9th 2002 and was proclaimed February 25th 2003.

Defn: Provides protection for the personal assets of an innocent partner from
professional liability claims arising from the negligence or misconduct of another
partner, associate, or employees in whose work the innocent partner was not
involved.

Texas 1991: first LLP statute following claims from law, accounting firms in late
1980s (savings and loans companies)

Collapse of law/accounting firms

Adopted LLP legislation in 1991

Ontario adopted in 1998 then other provinces followed

3 Professionals
o

Lawyers

Chartered Accountants

Certified General Accountants

Once registered a partner in LLP is not liable for:


o

Debts

Obligations/liabilities of partnership

Another partner

That arise from negligence, wrongful act or omission, malpractice, or misconduct


(mali fides bad faith) of another partner or an employee, agent, or
representative of a partnership occurring in the ordinary course of professional
practice.

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Limitations
o

If partner knew of negligence and failed to take reasonable steps

Negligence was committed by an employee, agent, representative of the


partnership for whom the partner was directly responsible in a supervisory
role

This form of liability is what is called a partial shield it protects innocent


partners from the negligence, wrongful acts etc. of others in the firm but does not
provide any protection for contractual or trade debts.

The LLP model which extends protection to contractual or trade debts is call the full
shield and only Saskatchewan has this.

Notwithstanding the protection given to innocent partners, interest in partnership is


still available to creditors (same with insurance) but cannot go after personal assets

d) Corporation (October 29)

Not the most numerous, but the most dominant.

Separate entity principle: a corporation is a separate person from the investors


(investor shareholders), because so, the investors are not responsible for the
actions of the corporation, gives limited liability to the shareholders. The investors
can't be sued for the entity of the corporation.

Reason: corporations have a separate existence, are separate entities and


are legal persons.

They cant do much though by themselves because they are artificial, they must act
through human agents. There is an importation of agency law, because they act
through human agents and all the activities are conducted by human agents, so it
was a natural process to adopt this.

Various characteristics:
1. Limited liability is the critical feature of the corporation and is the feature that
makes it so popular - the natural consequence of being a separate entity

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Limited liability means that a shareholder is only liable to lose his or her investment
and or the amount of the shares for which he or she has not paid. A sound
protection of assets for the shareholders

The ability to routinely incorporate in business and have limited liability is one of the
most important economic achievements of North American culture, because it has
emboldened investors and because it has generated as much prosperity as the
industrial revolution.

2. Tax Advantage:(1) payments of salary to spouse and children is easily facilitated


through the corporation, (2) dividends sprinkling: giving dividends to family members
who are in the lower tax brackets for lower marginal tax rates (3) Small Business Tax
Deduction: eligible for tax savings for corporate tax rate (MB 11% for less than
$500,000) (4) preferential tax breaks for dividends (5) capital gains exemption for the
sale of shares for the first $750,000 (6) Estate Freeze: allows you to pass active
shares to your heirs without tax consequences.
3. Management: a partnership is unsuitable for a situation with a lot of investors.
Shareholders on the other hand have no authority to participate in management.
Their essential right is to elect the board of directors once a year.
4. Transfer of ownership: it can sometimes be difficult in a partnership, a shareholder
has no such difficulty (transfers are allowed and your relationship is ended.)
5. Continuous existence: its an artificial entity that can live for ever, which is an
advantage. If someone dies, the corporation does not have to dissolve. There are
annual fees that are required to be paid.
6. Loyalty: partners cannot compete with the partnership because of fiduciaries duties;
shareholders do not hold any such loyalty because they are not fiduciaries. You can
have shares in competing corporations.
7. Separation of ownership and management: there are 2 types of organizations:
small companies and large companies and depending on this it will affect the type of
ownership/management disputes.

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TWO TYPES OF COMPANIES:


i)

Large companies: (14:00)

Generally publicly traded, but they have role specialization due to our advance
technology.

Owners do not have the specific skills to operate and manage the companies, so
there is a distinction of managers and owners.

There is a difference and rivalry between shareholders and managers. (De minimus
a trifling, ridiculous)

The big topic is executive compensation because it affects shareholders.


Shareholders are interested in capital gains and dividends.

Managers want to have salaries, pension benefits, etc. for their benefits.

Why are these two parties in competition? The money has to go to one or the other.
If the compensation is too generous then its coming out of the shareholders profits.

ii)

Small companies:

Classically are not publicly traded and are exempt from the requirement of the
securities act.

Generally there are owners that are actively participating in management or


outright labour of the corporation. The shareholder/management issues are quite
different.

The real problem is referred to as oppression of the minority shareholders:

a minority shareholder is locked in and frozen out they cant sell their
shares except at a very discounted price because nobody wants to pay to be
a minority shareholder (take their place), but are frozen out because they
have no influence on management with a minority.

We usually resolve this issue by way of provisions in a shareholders


agreement: a contract between shareholders. This gives protection.

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The most important clause is the shot gun clause: make an offer to the
other party at a price per share and its their choice of whether they buy or
whether they sell.

However, the shot gun clause isnt always fair to everyone:


2. if one party is undercapitalized (have no money) you cant realistically
buy them out.
3. In those cases the price per share will be determined by someone else
so that the undercapitalized will be considered.

HOW DO YOU ORGANIZE A COMPANY IN MANITOBA? (25:50)


1) Do a corporate name search to ensure the name is available, can create your own
name or they can give you a number. It costs 35$ to search the name. Hardest
challenge to find a unique name.
2) You then also must create and submit to the corporation branch the articles of
incorporation, based on Section 6 of MB Corporations Act, including: name of the
company, corporate head office, nature of business, types of shares and their
characteristics, the first directors, and the incorporators. Like the entrenched
aspect of the corporation (restrictions on business that it can carry on).
3) Must submit a fee of 300$, for an extra 100$ they can give you preferred service
overnight.

LIMITATION ON THE SEPARATE ENTITY PRINCIPLE:

(19:30)

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The courts are somewhat against meddling with this principle historically because it
has resulted in a great deal of prosperity (Salomons case 1897)

Affirming the complete separation of the shareholders and the corporation

The shareholder can only lose what they have invested

To ignore the separate entity principle means to pierce the corporate veil:

they will do it in
1. Taxation situations - statutory piercing, associated corporations must
share the lower tax rate on the first $500,000. Sole Proprietor Taxed
45%, Corporation taxed 11% preferred rate. Money must stay in the
corporation, however, when withdrawn; it is taxed as personal income.
An associated group must share the lower tax rate.
2. For the residence of the corporation and the controlling shareholders
(not where it is formed but where the controlling shareholders reside).
3. Agency principles - whether they are an agency or shareholders, but
they need a written agreement, and
4. In certain situations of fraud, in particular the Patton case - they wont
allow the separate entity principle to be an instrument of fraud.

METHODS OF INCORPORATION (SEE TEXTBOOK):(22:40)


1) The royal charter corporation: created through the use of the royal prerogative residue of unilateral powers of the monarch. Historically the crown used them to
create companies for a fee, one of the ways through which the monarchs actually
raised money. Example: Hudson Bay Company in 1760. Arent formed anymore
because the royal prerogative has been terminated.
2) Special act Corporation (Statutes): for major public works. This method is still
employed in created crown corporations (CPR, CNR, MPI). Special statutes create
corporations.

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3) General (routine) acts: acts that business or other people can resort to create a
corporation according to the procedure laid out. Three basic types of general acts:
a. English system of registration,
b. Letter paten system, and
c. Certificate of incorporation. In the BNA act you can have federal companies and
provincial companies, there is a split jurisdiction and they have different acts,
Canada Corporation act and Corporations Act, respectively. The major
difference is that federal companies are more expensive and may be protected
with your name across Canada.

PUBLIC COMPANIES VS. PRIVATE COMPANIES:(41;30)

There is no definition in the corporation act.

One can say that they are public if there is a distribution to the public of their shares
and they are involved in sales in the stock market.

Under the security act, a public company is required to do a filing. Public


company is defined by not being what is defined as a private company
under the security act. To prevent fraud on potential investors in public

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trading or distribution of shares.As a private company you are exempt from
many of the costly actions as required by the securities act.

(43:15) Private company is defined as a company in whose instrument of


incorporation or articles the: (in the incorporation of articles)
1. right to transfer its shares is restricted,
2. the number of its shareholders is limited to not more than 50, and
3. any invitation to the public to subscribe for its securities is prohibited (no
advertising), this is a violation.

Otherwise you have to prescribe to the securities act which is expensive.

AGENCY PRINCIPLE
Agent: distinguishing feature, he or she can create contractual liability for the principle,
agents usually exist by contract, but you can have them by estoppels. They do contractual
work. He must always disclose that he is an agent; they a per (for) the principal. To be
a. Not real agents: real estate agent, sports agent, fashion agency; they are just
representatives
i.
To be a true agent you need to be able to sign contracts on behalf of
the principal
b. Agents: stock broker, lawyers, a person can get the power of attorney
Principal: enters into an agency contract with parameters. The agent enters into a deal
with a third party. If the agency contract is functioning properly then the liability exists
between the principal and the third party. An example is a stock broker.
Agency law: the relationship between the principal and agent according to which the
principal has authorized the agent to enter into contract with third parties in the principal's
behalf.
a. They are created by getting into a contract, either by verbal or written, and clearly
define the boundaries of the agency, the matter to which the agent can bind the
principal; what kind of contracts can they make
b. Remuneration for the agent

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Power of attorney: happens when someone is chosen to do the bidding of a person


incapable to carry out day to day legal tasks. They get the power of agency which is
general or limited. They are determined by statute.Ie. For elderly or people out of
town. The agent should be acting in the best interest of the donor while taking care of

issues.
Ratification: if an agent exceeds the authority it has to make contracts, then the
principal is not held liable, but the principal can ratify the contract to dissolve. If the
principal does not ratify the contract made, then the pseudo-agent is held liable for the

contract.
Agent by estoppels: a bar or barrier which prevents a person from denying the truth
of certain facts when this person by words or conduct has lead another person to
believe that certain facts are true and to act and rely upon these facts. The agent has
done this, the
i.
Apparent authority: the agent has no real authority but appears to have
authority to act on behalf of the principal on account of the past matter of
transacting business or on account of certain practices in the trade. Similar to
ii.

partnership by estoppel
Holding Out: the principal has used words or behaved in a manner that
represented the other person as the other principals agent. Or the agent

says he is an agent and the principal doesn't do anything to stop it.


Agency by necessity: when the agent enters into contracts with a third party for the
benefit of the principal without the consent of the principal, and to limit losses that the
principal could experience. (exists in limited cases)
To test the agency of the principal: the principal in such cases is responsible of the
agent (the contractual liability), if a mythical reasonable person, could reasonable
assume that the agent is acting within the scope of actually authority then the

principal is bound by the act of the agent.


o Ie, salvaging goods.
Termination of agency: if not mentioned in the contract, it is terminable by notice.

Duties of the agent to the principal (can be implied to the contractual relationship):
1.
2.
3.
4.

Agent must comply with the contact establishing the agency or he is liable
Agent must be diligent in reprising
Duty of care implied: whether paid or not, must be careful
Duty of personal performance: can't sub delegate the tasks (delegates cant
delegate)

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5. Duty of good faith (bona fides) 1) the agent cannot act on behalf of the principle
and a third party at the same time. 2) Cannot make a profit off the transaction

without permission from the principle,


The agent is a Fiduciary: a person that is in the position of the trustee, they have a
duty of loyalty to the principal and must be scrupulous and candid to the loyalty of the
trustee. Agents are the original fiduciary.. A person having duty created by his
undertaking primarily for another's benefit. Acting on behalf of another.

Fiduciary duties:
1.
2.

Personal performance
Don't find yourself in conflict of interest and take advantage of the

situation
3.
Cannot take secret commissions
4.
Complete good faith; cannot place yourself for conflict of interest
between agent and principal
5.
Agent cannot act on behalf of third party and principal at the same
time
6.

Agent cannot intercept opportunities of the principal unless the

principals grants permission to the agent.


Duties of the principal to the agent:
Remuneration: an agent has the right to be paid by the principal. Can be specified
in contract, if not then paid by quantum meruit: you are entitled to be paid
Reimbursed for expenses (42:45)
THE MANAGEMENT AND OPERATION OF A CORPORATION AGENCY LAW (45:30)
Agency is a relationship between the principal and its agent according to which the
principal has hired and authorized the agent to enter into contracts with third parties in
their name. Insurance and real estate agents are not real agents, lawyers, however are.
They are merely sales representatives.
Expressed agreement: written or oral.
Agency law plays a role not only in corporations but business organizations.

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It is appropriate in corporate law because corporations are artificial entities and


must act through human agents

Board of directors: one of the consequences is that each director is a fiduciary


because they are an agent.

Text book: generally speaking a corporation is liable for the acts of its agents under the
ordinary rules of agency. An officer of a corporation acting within his or her usual
authority but without express authority may bind it to contracts made with third parties.
Corporation may ratify acts made by unauthorized agents on its behalf.

Implicit is the role of the law of agency and in particular apparent authority. In an
agency relationship, generally, there are two parties: principals and agents who
establish their relationship through a contract. If the agent does their duties
properly, theres no mali fides, then the liability will be with the principal and third
party.

We also see in corporate law the principles of law called apparent authority of
an agent creation of an agency by estoppel precluded from denying, where
an agent may acquire apparent authority from a past manner of transacting
business by the principal or from trade custom.
o

Such circumstance may make it appear to third parties that the agent has
authority for the contract at hand, in fact however he or she does not have
any real express authority for the purpose.

Normally in an agent situation there is expressed authority, they know


exactly what they are supposed to do.

Sometimes it appears to the outside world that there is authority where none
exists, this are called agency by estoppel precluded from denying.

There are two types:


1. Apparent authority an agent may acquire apparent authority from
a past manner of transacting business, business by the principal or
trade custom.

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Such circumstances may make it appear to third parties that the


agent has authority for the contract at hand. In fact, however,
he or she does not have any real or expressed authority for that
purpose.

There exists no understanding between the putative (alleged)


agent and the principal to grant this authority.

An example of trade custom is a stock broker or lawyer. They


have apparent authority to enter in all sorts of contracts on your
behalf.

2. Holding Out you are representing yourself or allowing someone to


represent you. Two ways:
1. If someone is representing to the world that they are someones
agent and the person knows and doesnt say anything otherwise
OR
2. You represent someone to be your agent.

APPARENT AUTHORITY IS MANIFESTED IN 3 MAJOR WAYS:(47:20)


1) The effect of publicly filed documents:

At one time, the public was deemed to have notice of the contents of filed
documents whether they had read then or not.

If the documents prohibited either the corporation or one of its officers


from carrying out certain acts, a third party could not rely upon what
otherwise might be the officers apparent authority to perform those acts.

That rule could lead to substantial injustice and has now been abolished by statute.

2) Indoor management rule:

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At times there are requirements in a corporations constitution and


governing act that require certain acts to be performed in a specific
manner if they are to be valid.
o

For example, under bylaws, all contracts must be in writing or signed by each
board of directors.

What happens to contracts that dont meet the requirements?


o

If they are invalid then that is a punishment for the people who enter
into contracts with the corporation. The corporation could do it on
purpose.

What is the effect upon an innocent third party if the corporate act has been
performed in an irregular manner?
o

The seminal authority on this point is the well known case of Royal British
Bank v. Turquand.

The ratio in this case was that in the absence of notice of the
irregularity or of suspicious circumstances everything which appears
regular on its face may be relied upon by an outsider and will bind
the company.

Few interesting points:


1. Suspicious circumstances depends on the facts of each case,
2. Notice of irregularity it is a danger to know too much about the internal
aspects of the organization, if you notice the irregularity and say nothing
about it then the contract can be invalid.

Indoor management rule manifests or is a variation of apparent authority.

3) Pre-Incorporation Contract:

A corporation cannot ratify a pre-incorporation contract a contract made in the


name of a corporation before it comes into existence.

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The individual who purported to contract on behalf of the corporation could not be
held to the contract either, since the intention was to contract with the corporation.

Based on provincial statutes:


a) The corporation is bound by the contract and is entitled to the benefits thereof
as if the corporation had been in existence at the date of the contract and had
been a party thereto, and
b) A person who purported to act in the name of or on behalf of the corporation
ceases to be bound by or entitled to the benefits of the contract.

DIRECTORS DUTIES: (OCT 31)

The equity owners are called shareholders - only participate really in the corporate
governance once a year in the election of the board of directors.

The directors are in charge with the management of the corporation and do not
have to be shareholders.

Duties of the directors are owed to the corporation, not the shareholders.

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One of the ways that directors activity is controlled is through directors duties.

The law generally upholds a vacuum; they have authority but no restrictions on
authority. Consequently so long as the directors were acting appropriately to the
corporation then they were protected.

The law doesnt like this, so over the last 1000 years, fiduciaries have had duties
and if they fail to follow these duties then they are liable to someone. Definition of
fiduciary from Blacks law dictionary, the term is derived from roman law and
means (as a noun) a person holding a character of a trustee or a character
analogous to a trustee in respect to the trust and confidence involved in it and the
scrupulous (high level ethics) good faith and candour (honesty) which it requires.
Secondary definition: a person having duty created by his undertaking, to act
primarily for anothers benefit in matters connected with such undertaking.

Essentially the common law duties revolve around 2 things:


1) Care and skill:
a. a director is bound to exercise reasonable care and that means that he
she or it cannot be negligent in carrying out duties.
b. No greater diligence is required of a director then is required of the
average person.
c. There are 2 exceptions: accountants or lawyers are subjective to a higher
standard. If you are a professional on a board you must look out because
you are expected to conduct yourself with a greater degree of carefulness.
2) Good faith (bona fides):
a. If you are in a conflict of interest you must act properly. 2 types of bona
fides:
i. Disclose an interest in contracts with the company what you
should do is to disclose the interest before the board and not act in any
discussions or voting. At the very least remain silent and dont
participate.

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ii. Interception of corporate opportunity you hear about some
great opportunities or financial schemes. You cant go out and steal
the deal; thats an interception of corporate opportunity. Essence of
the principle: you have to act in the best interest of the corporation or
client, or dont take whats not yours. If you do you will have to give
up any benefits received as a result and may have to pay for damages.
RESTALLS PAPER - EXAM:

These common law duties that evolved from equity have now been incorporated in
the corporation act in section 115 and 117.

However, the potential liabilities of directors have been expanded beyond merely
what are the common law duties in this section (Restalls paper).

There is a new variety of directors liabilities most of which are called


gatekeeper liabilities - the attempt to control wrong doing of companies by
making the directors liable through duties. The liabilities consist of financial and
penal nature for directors. This protects the government's revenue from
thecorporations. Some of these duties are owed to a series of individuals
depending on the statutes: (about 400) its owed to shareholders, employees,
creditors etc

Examples of potential liabilities:

Board of directors not remitting EI, CPP or income taxes,

Debts that are liable to employees for up to 6 months worth,

Environmental legislation that can give you jail time.

The Supreme Court has indicated that directors remain liable even if they quit,
during a time of crisis.

All liabilities apply to non-share corporations or not-for-profit corporations.

From a societal standpoint, corporations created a lot of prosperity because they were able
to obtain limited liability.

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As a result the people that will be members of board of directors wont be the best
because reasonable people wont take the job. This damages the potential for prosperity.
Slowly and inevitably reasonable people will not be a part of the board of directors.

MINORITY SHAREHOLDER PROTECTION:

Traditional minority shareholder protection is derivative action a shareholder can


sue the board of directors in the name of the company for the wrong done to the
company,

It is seldom used because the courts require very high deposit monies,
require costs being deposited in advance and as a result few shareholders are
willing to do this.

A more common method for minority shareholder protection is oppression


remedy of the corporation act: appeal to the court that they have been oppressed
and unfairly treated and entitled to a remedy. The judge can choose the remedy and
there is no limitations to it given by the court. Long process and the uncertainty of
results.
o

Some possible remedies:


The court can dissolve the company and disperse the capital on

their own means


Court can order the forced purchase of shares

In the 1970s amendments were made to help shareholders:


1. Disclosure of company affairs

entitled to the financial statements

and document of record

and if you have 5% of shareholder you can apply to the court for an
inspector,

2. Shareholders could attend

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3. Changes also allow a minimum of 5% to requisition a shareholders'
meeting, and
4. Gave shareholders the right to vote to make a change and only to do it by a
special voting majority, more than 2/3.
5. Proxy votes were allowed and made it permissible for shareholders to have
other people vote for them. This has given the managers more control
because they get the proxies.

Fundamental changes was instituted - changing articles of corporation etc


need 75% majority of each class of shares.

Best Protection Unanimous Shareholder Agreements:


1. Employment opportunities
2. Ensure special majorities for certain actions to occur

I.e. taking on loans

3. Capital Control
4. Board of Director Elections and determine the duties of the directors
5. Share Control Clause

Shot gun clause there needs to be no reason to activate it

Could send a double edged offer to sell or buy at a price per


share.

To not get exploited they can create the Fair Market Value
Provision, which the share price is determined by a arbitrator

Criteria for selection between the basis forms of business entities(27:00) seem
to push the corporation as the desired form
1) Limited liability and the nature of the business if there are substantial risks that
are uninsurable you should incorporate

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2) Desirability of perpetual existence ensure that there is continuity
3) Estate planning the estate is the property you own upon your death and there are
various methods to minimize the taxes that are payable
4) Number of proposed proprietors
5) Relationship of proposed proprietors
6) Borrowing requirements available terms and relationship of proposed lenders
7) Available government grants (for Canada) sometimes the government prescribes
what type of organization you can utilize
8) Employee ownership sometimes as an incentive you would like to give them a
share of the business, like employee stock options for positive re-enforcement
9) Costs more expensive to set up one type over another
10)

Flexibility of structure sometimes it's important to amend the structure over

time, effects not only the structure but the agreement (corporations quite inflexible)
11)

Income tax consideration tax consequences and issues

12)

Applicable government requirements some requirement prevent some

individuals from forming different types of organizations, ex. Only CAs, CGAs and
lawyers can have an LLP.

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COMPONENT PARTS OF THE CONSTITUTION:


1) Articles of incorporation (constitution of a company): if you want to change it
you need a 2/3 majority of every class of shares, including the above and any
restriction on the type of business that can be carried out. This part is entrenched.
2) Bylaws not entrenched and instead can be changed by a simple majority of
shareholders. Initially the first directors create bylaws, but must be ratified by the
shareholders at the first meeting. It provides the regulation for general governance
corporation.
1. Charges Board of Directors with affairs
2. Quorums for director and shareholders meetings
3. Notice provisions and votes
4. Officers of corporations: duties assigned
5. Signing authority
6. Fiscal year of corporation
According to the constitution there are 3 types of participants
1. Shareholders: are the investors, purchase shares with money or capital and they
have very few rights in the corporation.
i. On an annual basis they are eligible to vote for directors and

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ii. They must have the ability to participate in the approval of changes made to
the corporation including all of its undertaking or changing or amending the
articles of incorporation.
iii. There are different types of shareholders: voting rights, dividend rights, and
redemption value rights (by back shares at a certain price).
iv. The bulk of the articles of incorporation revolve around the classes
characteristics.
v. Different classes of shares:
1. Voting or non voting
2. Prescribed dividend rate
3. Redemptions gives corporation the opportunity to buy back the shares
from share
4. Retraction the shareholder can force the corporation to buy the shares
from them
5. Etc.
vi. In general there are two types of shares:
1. common shares which generally have the right to vote and no
predetermined dividend right or rate and rank last,
2. preferred shares: dont vote, entitled to dividends to a % of return and
rank ahead of common shareholders if there is a surplus on dissolution.
vii. Best is the assign certain people to certain class in order to discriminate the
shareholders but it will give members different level of dividends based on
income level.
2. Directors: are charged with the management of the corporation, they are the
agents through which the corporation acts.

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i. They exercise the power of the corporation, they adopt the initial bylaws.
Under section 100, directiors need not be shareholders.
ii. The directors annually elect the officers of the corporation
3. Officers: run the corporation on a daily basis, need not be directors, are elected
annually.
(November 03)

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IV) THE LAW OF TORTS


Liability: a legal right enforceable by and against legal persons by way of court process
where court can apply a remedy. With liability there needs to be a remedy to be a liability.
In its simplest form, a tort is an act or omission of circumstances, that cause an injury to
someone or their property, where the person performing the act has no lawful excuse to
do so. The purpose of tort law is to compensate the injured party for the loss
suffered by the tortuous act, rather than punish the wrong doer. While many torts
have a criminal aspect to them, such as assault or fraud, tort law, does not normally
attempt to do more than provide compensation for injury.
Each type of liability can be broken down into constituent elements and it is naturally up to
the plaintiff by the way of proof that those constituent elements exist; they must establish
this to the applicable standard of proof.
In tort law the applicable standard of proof is the balance of probability. In civil
matters each element much be established in the balance of probability. Certainty of 50%
+ 1 only required for standard of proof. Three elements: 1) causation, 2) intention and 3)
proscribed harm that must be proven.
The standard of proof in criminal matters is beyond the reasonable doubt
means above 95% certainty. They can render different results, because even though
the evidence is basically the same, there are different standards of proof. Example OJ
Simpson case. Also showed that under the same context you can have civil liability and
criminal liabilities, they are not mutually exclusive.
Four Areas of Common Law:
1. Tort
2. Contract
3. Property
4. Restitution
2 Modern Torts

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Intentional or negligence.

THE NATURE OF TORTS (NOV 5)

Torts are the first category of liability and are defined by the textbook: is
concerned with the ever expanding variety of harm suffered by individual incident
to all activities necessarily carried on in our increasingly complex society.

From the CMA notes a tort in its simplest form is an act or omission in some
circumstances that causes injury to someone or their property where the person
performing the act has no lawful excuse to do so. The purpose of tort law is to
compensate the injured party for the loss suffered by the tortuous act rather than
punish the wrongdoer and while many torts have a criminal aspect to them such as
assault or fraud, tort law does not normally attempt to do more than provide
compensation for injury.

Objective of tort law, according to the definition, is compensation of the victims


and should not engage in punishment.

In tort law, one cant use insanity, intoxication as defences. All that is required is
intent children can be liable for tort.

To hold someone liable, they need to be at fault: a blameworthy mental condition.


They perpetrated the act that cause the harm with intent or they were negligent.
(All but not abuses)

2 types of Torts: Intentional and Negligence

INTENTIONAL TORTS (9:15)

Intentional torts are: an intentional act proscribing intentional harm; cannot be


reflexive or defensive; those torts which are caused with intention.
o

Can't be liable (intent) for being:

Reflexive

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Automaton: not as conscious state

Somna ambulens: sleep walking

Tort Feasor: the one who perpetrates the tort.

Torts usually follow the criminal court because they tort prosecutor will allow the
criminal prosecutor find all the evidence and do most of the work in setting up and
then the torts will take it from there.

There are various types including: the tort of battery, deceit, false imprisonment.

Elements are threefold: intention, causation, and proscribed harm.

For every intentional tort these three elements must be proven.

1. Intention

Must be a voluntary act committed by the defendant, it cannot be a reflex or an


automaton (someone without mental consciousness, for example in a sleep walking
state, because its not a voluntary act).

Intention must be differentiated from motive.


o

Intention is the desire to bring about certain immediate consequence.

Motive is described as the underlying objective. Defendant's mind must


prompt the bodily movement to create the harm

Intent is more direct than motive. Deals with the immediate intent to cause
harm. Difficult for the plaintiff to address this.

Presumption: it is understood by the court that the defendant has the intent to
cause the harm and is responsible to prove otherwise and rebut it.

The difficulty for the plaintiff is that it is awfully difficult to prove intention on the
part of the defendant. The court aids this by assuming intention exists, that you
intend the naturally consequences of your act, therefore the plaintiff doesnt have
to prove the element and it reverses the owness of proof. The plaintiff is taken

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to have established the element and proven it and it is up to the
defendant to enter proof to reverse the presumption or conclusion.

Presumption: this is where the plaintiff proposes

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2. Causation

Means it must be the operative cause (close in time with no intervening acts),
nothing to do with motive.

Fairly-direct cause.

3. Various Proscribed Harms:

Examples:
o

Battery (touching),

Assault (putting someone in apprehension of a touching),

Deceit (fraud, the false assertion of fact with knowledge of its falsity or at any
rate not an honest belief in its truth),

False Imprisonment (anyone who intentionally confines another within fixed


boundaries),

Intentional Infliction of Mental Suffering - Wilkinson case: told someone as a


joke that their husband had suffered an accident. Damages were awarded.

If all elements are proven then the plaintiff is entitled to compensation to place victim in
the position he/she was in had the tort not occurred. However damages will not be
rewarded if the defendant is successful in proving that a defence (sometimes called
privileges) exists a defence is where there is an excuse for the defendant so that
liability which would normally result is excused or conduct which would ordinarily result in
liability would be excused if a defence exists.
There are a variety of excuses which would absolve the defendant from the liability,
including:
a) Self defence with extreme limits - no other reasonable way of escaping, has to
be reasonable force,
b) Consent agree to enter into an activity (ex. Boxers), but there are levels to
consent so that it cant be to excessive force, and,

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c) Defence of Legal Authority some individuals are charged with responsibilities
and as a result they have authority to perform acts that would otherwise be torts
(ex. Police), unless they exceed the reasonable force necessary.

DAMAGES (REMEDY): (20:18)

Injunction: a court order to get the tort feasor to stop with the persistent tort

The remedy that is available if there is tort liability is referred to as damages and it
is money.

The purpose is to compensate the individual, to place the victim in the same
position had the tort not occurred.

There are three categories of damages that exist:


1. Special Damages are those losses that can be calculated with
accounting accuracy up until a particular date, usually the date of the
trial or date of the judgement, example, loss of wages, loss of profit from
business, medical expenses.
2. General damages losses that cannot be calculated with accounting
certainty; there is a level of conjecture (estimation). For example:
future medical costs, future income loss, pain and suffering look up
precedence from other cases, because they cannot be calculated.

WHY IS THE REWARD MUCH HIGHER IN THE US THAN IT IS IN CANADA? (EXAM


QUESTION)
I.

Pain and suffering rewards in Canada have been subject to a


limit by the Supreme Court in 1982 of 100,000 they feel for the
victims but any reward is arbitrary. Since then it has been
indexed to inflation and the current maximum is 300,000.

II.

Juries make tort awards in the United States; in Canada these do


not exist, juries tend to be more emotional and as a result will
award larger sums, and

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III.

Americans have jurisprudence that allows for higher rewards of


punitive damages that can also be rewarded by the juries.

3. Punitive (exemplary) damages are ordered, are discretionary, and


given when the defendant is guilty of conduct that can be described
as vindictive, aggravated or penal. Usually the defendant is acting in a
contemptuous fashion so the behaviour is very bad and inappropriate. They
place the injured party in the same situation that he or she would have been
in had the tort not occurred. It needs to relate to reckless behaviour.

THE TORT OF NEGLIGENCE

The tort of negligence is really about a standard of conduct.

When someone is liable in negligence they are liable in having failed in living up
to the required standard of conduct which is applicable to all activities in
society.

There are various approaches to establishing the tort of negligence, the best is
contained in Linden, who indicates there are 6 elements required:
1. The defendants conduct must be negligent - in breach of the standard of
care set by law.
2. The claimant must suffer some damage,
3. The damage suffered must be caused by the negligent conduct of the
defendant,
4. There must be a duty recognized by law to avoid this damage,
5. The conduct of the defendant must be a proximate cause of the loss or stated
in another way the damage should not be too remote a result of the
defendants conduct,
6. The conduct of the plaintiff should not be such as to bar his or her recovery he or she must not be guilty of contributory negligence and he or she must
not voluntarily assume the risk.

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A course of action arises for negligence if the 6 elements are present.

No intention is required in the tort of negligence.

Tortfeasor: the perpetrator of the tort.

1. The standard of care: is that the law places a duty on every person to
conduct all activities taking reasonable care not to injure others or their
property. Whether a person has acted with reasonable care is a question of
foresee-ability of harm. The issue with standard of care is: whether a reasonable
person would reasonably foresee danger or harm to another or their property and
whether the steps taken, if any, to avoid this danger of harm were reasonably
sufficient. The irony is that sometimes you can anticipate that there is a risk of
harm and you take measures to prevent it and if those measures are insufficient
you will still be liable. The reasonable person standard has been increasing.
(November 10th)//
2. There must be some damage suffered by the plaintiff physical or economic
harm are both recognized as types of harms by negligence law.
3. Causation fortunately the courts have not been trapped into endless
philosophising; instead they have adopted a common sense approach. The most
common test is the but for test, sometimes called the sine qua non test: If the
accident would not have occurred but for the defendants negligence then
his conduct is A cause of the injury, however it doesnt have to be THE
cause.
4. Duty of care: to whom the standard of care must be owed however negligent the
defendant is, they will not be liable unless they owe a duty to the other
person. In 1932 there was the case of Donahue v. Stevenson which established
the neighbour principle which clarified to whom we owe a duty, to a limited
extent. We owe a duty to be careful to those we can describe as a neighbour of law
- persons who are so closely and directly affected by my act that I ought reasonably
to have them in contemplation when I am directing my mind to the acts or
omissions which are called into question.
It has raised the bar in terms of tort law. The case was over drinking a half a
decomposed snail in a bottle of ginger beer. The House of Lords crafted the
neighbour principle that allowed persons to sue the company (the case of Donahue
v. Stevenson). In tort law the ultimate consumer did not have a contract with the

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producer and thus could not sue them in tort, however they couldnt blame anyone
else and the producer. You used to not owe a standard of care to the world.
5. Damage should not be too remote a result of a defendants conduct - the damage
must be a reasonably foreseeable consequence of the act. Thin skull cases situations where for example an individual negligently strikes another person on the
job and the individual has a rare bone disease and their jaw bone completely
shatters. The defendant said that they couldnt be responsible, but that if the type
of damage could be expected then you have to take your victim as you find them.
Defendant would still be liable for the fact that they injured the jaw.
6. Plaintiffs conduct cannot bar recovery:
a. Contributory Negligence: if the individual contributed to their own injury
then the plaintiff could not succeed, even if they were 1% responsible.
Modern law has changed through the contributory negligence statute:
wherein judges can allocate responsibility and liability.
b. Volenti Non Fit Iniuria: assume risks in certain hazardous activities. This
element doesnt seem to be an element, but actually a defence for the tort of
negligence.

PROFESSIONAL LIABILITY (CHAPTER 4) (NOVEMBER 14)

What is a professional?
o

Examples: accountant, lawyer, doctor, engineer, dentist, architect (traditional


professionals)

Sports players and university credentials not really professionals.

What do these occupations have in common? There are 2 aspects:


o

They are a member of an occupation that is governed by a self regulating


society, created by statute, governed by members of the occupation and
set delegate body controls on admonition, education, furthering education,
standards and discipline.

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o

Text book says: professionals are people whose skills are described as
having a significant intellectual content and draw on an underlying
developing body of theory affecting the practice of their profession.
Members of each profession are usually certified to offer their services to the
public under a system of licensing administered by one or more governing
bodies of the profession. Accordingly, clients view professionals as having
specialized knowledge and skills that they are prepared to pay for and rely
on. They were created historically to protect the consumer, because you
want certain standards created so that the client knows they are
dealing with a credible person. As professionals there is potential liability.

Good definition as according to Restall (14:45): An occupation that is


regulated by a delegate body that is created by statute, and the director of
the body are elected by the members of the profession, and the delegate
body sets the standards (subordinate legislation) for admission, minimum
education (for admission AND continuing education), furthering education
and conduct and has the ability to discipline those in the profession.

Professional Liability is growing because:


o

More tasks, and more complicated tasks

There is a greater delegation of tasks (52:19)

Practical reasons?

FIVE BASIS OF LIABILITY (SOME OF WHICH RELATE PURELY TO THE STATUTES


THAT CREATE THE GOVERNING ORGANIZATION)
1. Criminal liability can be held criminally for ones acts ex. Theft. The courts would
deal with the member and then separately the delegate body would do the take it
to their own court. as well.
2. Professional liability in breach of the code of conduct and can be disciplined,
which is really violating regulations,

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3. Contractual liability whether explicit or implicit there is an implied promise that
the service of the professional will be rendered with due care and any breach of
contract can be rewarded with damages.
a. Sometimes you must sue in contract because statute (Statute of limitation)
determines the time that you must issue a lawsuit within a period of time,
tort law 2 years and contract law 6 years. So this is used usually as a backup
to the tort claims, because they would have missed the tort deadline in time
for the tort in court.
b. What jurisdiction laws should you follow if you are dealing with multiple
provinces? Conflicts of law - in tort law it is usually the site of the tort, where
it occurred; in contract law it looks at the proper law of contract. However,
the safest way is to put it into the contract which law will govern the contract.
4. Fiduciary (role of a trustee) liability someone in a position of trust. They have
ascribed to them certain duties:
a. to perform duties with care and skill and
b. bona fides (good faith).
5. Tort Liability two types: intentional and negligence
Usually tort is grounds for negligence; becoming more popular because (52:19):
a. The practicing of the professions is becoming more complex so there
is a greater chance of making an error,
b. There is a tendency now because of economic pressure for professionals to
take on more clients and files (greater competition for the same income),
so there is a greater chance of error, and then theres a greater chance that
the client will sue,
c. Clients are more sophisticated, not willing to accept the word of the
professionals, and tend to be more litigious; they are more demanding and
aggressive towards professionals,

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d. Professionals now are insured and theres a tendency for court
remedies to become inflated therefore encouraging more litigation.
The legal reason for the expansion of professional liability relates to the
application of more liberal tort principles to professionals. The result is that
more professional will find themselves at fault and held liable for their errors
in court.
e. Normal rules of negligence law are now being applied to
professionals (previously they had exceptions).
i. Rule of Donoghue v. Stevenson: the duty of care is established in
Donahue v. Stevenson would apply for accountants application of the
Neighbour Principle. It took until 1979 with Ross v. Contors before it
was applied in Canada for lawyers. A solicitor wrongly filed a will and
missed out on some benefactors and the dead person couldnt
ii. A series of rules stemming from the English case Hedley, Byrne v.
Heller - pure economic loss was deemed sufficient to ground a claim in
negligence against a professional. The only harm recognized
previously was if it was physical. Negligence misstatements causing
economic loss were sufficient. Allows economic loss only. Shows that
neglected representation can create only economic loss.
iii. Hodgens against the hydro Nepean (~1:00:00).
6. Liability in respect to the standards of their profession as administered by
the professional body or society. The start of answering the types of liabilities.

STANDARD OF CARE:
The basic rule with respect to the standard of care: a professional must exercise the
same degree of skill and possess the same level of knowledge as is generally expected as
a members of that profession, i.e. he/she must live up to the reasonable standards of that
profession.People used to be able to say that they screwed up in their job trying to do
something above their specialties, and falling back on saying that others would do the
same with the same skills. How do you determine what a reasonable standard as a
profession is? Based on Hodgins v. Hydro-electric Commission in the township of Napean -

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there it was stated by chief justice Glassin that sometimes a professional undertakes a
task that is beyond the usually skills of his profession. He cannot then fall back upon the
normal professional standard. The degree of skill and knowledge must be commensurate
with the task undertaken. Courts retain ownership over the Standard of Care.

V) THE LAW OF CONTRACT

Contracts are ubiquitous, i.e. everywhere. Everything we do has to do with


contracts.

Contracts create liability and are the crucible of capitalism by reflecting


laissez-faire philosophy. Contract is an agreement enforceable at law.

Blacks law dictionary says that a contract is: a promissory agreement between
two or more persons that creates, modifies, or destroys a legal relation.

A better definition is from the CMA lesson notes: a contract is an agreement that
requires the mutual ascent of at least two parties to do something or conversely, to
refrain from doing something. The parties then by their mutual ascent or
agreement create certain rights and duties that did not exist in their particular
relationship before that point in time. If these rights and duties can be enforced by
the courts of law, the parties have as between themselves created certain rules of
conduct which they are obliged to observe in their actions. They have in effect
voluntarily created legal obligations or laws governing their relationship for their
own purposes. The legal rules the parties must follow to establish their own rights
and duties are called the laws of contract.
o

It indicates that:
1. contracts are about agreements the courts will enforce,
2. that it is about at least two parties or more, there cant be an
agreement with yourself,
3. Contracts must be mutually agreed upon, and the court will enforce
that contract. there is an implication that there is an exchange, but

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the exchange can almost be negative exchange with respect to
behaviour, and
4. Idea that through contracts, as between the parties, you can make
your own law. There is a freedom to contract, you have that freedom
so long as you are not violating any law or public policy

An exchange is considered a contract. In order to create a contract you need to


establish six elements, other agreements exist that arent contracts if the elements
do not all exist.

These elements ultimately, if the contract is broken, have to be established to the


balance of probability.

Contracts define the dynamics of the relationship between the parties. They elevate
the relationship to law.

SIX ELEMENTS OF A CONTRACT:


1. THE OFFER

An offer is a tentative promise made by one party, the offeror, subject to a


condition or containing a request to the other part, the offeree. When the offeree
accepts to offer by agreeing to the condition or request, the offer is transformed
into a contract. The promise is no longer tentative: the offeror is bound to carry out
his promise while the offeree is bound to carry out the condition or request.

The contract metamorphoses from the offer; when the offer is accepted you
have a contract.

The offer is the most significant element of a contract.

The offer is the contract in draft. If there is an acceptance you are bound, so
must think about it carefully. There is not much that can be done to get out of the
contract once the offer has been accepted.

The distinction between an offer and the invitation to do business (i.e. the invitation
to elicit an offer)

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1. Through advertisements; stores are making invitations to elicit an offer from
you at that price which they then will accept.
2. (EXAM Question) The case of Pharmaceutical Society of Great Britain v. Boots
Cash Chemist stands in the propositions regarding displays in stores and
advertisements in the newspaper. They came to the conclusion for policy
reasons rather than logic. There would be too many cases otherwise and
would clog the courts. They decided that the mere fact that a customer picks
up a product from the shelves in this case doesnt amount to an acceptance
of an offer to sell. It is an offer by the customer to buy, and there is no
sale until the buyers offer to buy is accepted by the acceptance of
the price. This was created for certainty and efficiency.

When an offer lapses, it is not accepted. It may lapse for a number of reasons:
1. The offeree fails to accept the offer within the time specified in the offer,
2. When the offeree fails to accept the offer in a reasonable time if the offeror
has not specified any time limit (NOTE: always time-limit your offer dont
leave it up to the judge!),
3. An offer lapses when any of the parties dies or becomes insane prior to
acceptance.

Revocation Principles: an offeror may revoke (withdraw) an offer at any time


before acceptance even when it has been promised to hold the offer open for a
specified time. There are two ways to keep an offer open and enforceable:
1. When the offer is made under seal,
2. If an option contract is created a contract whereby someone promises to
keep the option open for agreement.

Fundamental Breach: occurs when a fundamental portion of a contract is


breached. The exception of liability clause no longer applies.
o

If offeree rejects the offer, it is terminated. Can now only revise it.

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A volley of offer or counter offer usually when contractual agreements take


place there is bargaining that takes place; there is a volley of offers going back and
forth.
o

An offer by one side must be unqualifiedly accepted by the other


side of all the terms without variation.

If you vary one term then you do not have an acceptance even if
they say it is accepted.

All terms should be understood when an offer is put forward and the offeree
though interested varies some features, this is not an acceptance but a
counter offer.

Further the original offer does not revive if the counter offer in turn is also
rejected, the offeree can accept the former offer only if the offeror agrees to
renew it.
OTHER RULES REGARDING THE OFFER

1) An offer can be communicated in writing, orally or by gestures (auction, hailing a cab)


but they must be unequivocal.
2) An offer cannot be accepted by the offeree until he/she has first learned of it (cant be
forced into a contract by people who do work for us without our knowledge)
3) Standard form contracts

A contract used repeatedly usually for a repeated provision of a service or product


stating limitations of liability clauses and insurance clauses.

Root: contracts in ticket form, outline the terms of the contract.

The general public is presented through the terms of the contract and they can take
it or leave it and there is no negotiation

Courts didnt like them because of the absence of bargaining, but also because of
the providers of the service went too far to protect themselves.

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The courts created exceptions called standard form contracts to help the
consumers.

The principles the courts devised, important especially in relation to the exception
of liability clauses, says that if the person does not know of the terms of the
contract he/she cannot be bounded by it unless reasonable steps were taken to
bring the contractual terms to his/her attention. The courts wanted the public to
be aware of the terms of the contracts.

Contra preferentum the courts read the contract against the interest of the party that
created it, if two interpretations are possible. Applies when contracts are ambiguously
written. See fundamental breach re: standard form contracts.

2. ACCEPTANCE (NOV. 20 3:25)

Acceptance must be made in a positive unequivocal form whether by words or


conducts; if by conducts, the conducts must be unequivocally to the offer made.

Offeror in general has full control over the mode and method of acceptance and
therefore can state the required methods of communications of acceptance and
invalidate or prohibit others specifically the offeror can require actual receipt by
mail or any mode requirement or alternatively can require a performance of an act
instead of an acceptance.

Communication rules:
1) Offeror in general has full control over the mode and method of acceptance and
therefore can state the required methods of communications of acceptance and
invalidate or prohibit others specifically the offeror can require actual receipt by
mail or any mode requirement or alternatively can require a performance of an act
instead of an acceptance.
a. Carlyle vs. the smoke ball case: If you do the act, you have essentially
accepted the contract. The offeror states what constitutes acceptance.
Performance, in this case, was sufficient.

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b. This puts the power in the offeror, in terms of mode and method of
acceptance. This is useful because then you control the organization of your
firm and run you affairs the way you would like.
2) (7:50) An offeror will not be bound unless and until he or she receives the
acceptance and before he or she revokes
a. Two exceptions:
i. The mail exception when an offeror chooses the mail as the means of
acceptance then the mail exception applies. The acceptance is
effective when and where the mail is deposited in the mail box; when a
properly addressed and stamped letter is place in the mail, i.e. the
time of mail, applies when the mail is a reasonable response otherwise
it is the time of receipt of the letter, that should be actual receipt. If in
the context the mail would be reasonable then it will be the method of
acceptance; also if the offeror states a preference for mail service it
again will be the method of choice.

if another method is chosen other than the post, such as

ii. Telegram acceptance. For instantaneous methods it is the actual rule


of communication and cognition. You want to make sure that people
confirm the acceptance.
3) Reasonable persons test.

Termination of an offer
1. Rejection of the offer by the offeree terminates the offer. Reject the offer with care.
2. Lapse:
a. An offer may lapse, no longer available for acceptance.
b. An offer may lapse, when the offeree fails to accepts within a reasonable
period of time, no time specified in the offer.
c. An offer lapses, if one of the parties dies or goes insane.
3. Counter-offer. Terminates the original offer. Better to illicit information, and have
the offerer amend their offer in your favour.
4. Revocation.

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The certainty of an offer some believe that it is a separate element. (15:30)

A contract and therefore its preceding offer must be certain in its wording, it cannot
be vague or it will be void. Sometimes there is an agreement to agree, it is
uncertain and makes the contract uncertain. You can have a formula or an
arbitrator to make the decision but not an agreement to agree. A quality of the offer.

Courts are generally inclined to accept interpretations to contracts because they


want to fulfill their objective intent.

Rules of Acceptance
1. The offerer, in general, has full control of the method of acceptance. Therefore, can
state the method of acceptance and invalidate or prohibit others.Can state methods
of acceptance and prohibit others (ex. Reqd actual receipt by mail)
2. If offeree selects mail, mail exception applies. Acceptance is only effective when
and where it is deposited (in Manitoba)
3. If offeror merely states a preference for a mail or a postal service is a reasonable
means of communicating acceptance, because it was used or suggested by the
offeror and acceptance is effective when and where it was deposited in the mailbox.
4. If some other method other than post is stated as preferred (ex. Phone, email, in
person), offeree may still accept by post but offeror is not bound unless and until
acceptance reaches offeror, and prior to offers lapse there must be actual
knowledge of it, and not just mailed.
a. Law of contract, in general, is in place where offeror learns of acceptance,
subject to other principles.
What law governs a particular contract?

Lex Causae governing law: determined by principles of conflict of law


Select governing law into the contract. Always select the law you know.
o Revocation by Mail: it need only arrive at destination (not necessarily
known by receiver)
Revocation can occur at any time other communication is received by
o
o

offeree, even if it is hearsay (Didansen v. Hobbs)


Courier Service: follow same rules as mail service
Instantaneous forms of communication: (email, phone, fax) actual
receipt is necessary.

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Azindia case, it proved that that a response is needed to confirm the


receiving of the fax.

3. CONSIDERATION (17:00)

Consideration is the essence of the contract because contracts are


ultimately an exchange or bargain.

Each and every party to a contract, for it to be valid, must give up consideration.

Consideration is the price for which the act or other party is bought. So long as
the promisor bargains for the other party to do something or to promise to do something
that they otherwise would not do, the promisor will have received consideration.
Three categories of property or action that can form consideration:
1. Property
a. Personal Property: 2 types
i. choses in possession are chattels tangible and
ii. choses in action intangible contractual right and promise (ex.
cheque), a right to sue
1. If you want to transfer a choses in action it is called an
assignment.
b. Real Estate property (i.e. land)
2. Services, Labour.
3. Money (also is a sort of property)

Most large transactions usually are not immediate, its in the future and usually
what is being exchanged is the promise.
GRATUITOUS PROMISE

A promise without a returning consideration is gratuitous and not enforceable by


laws of contract. There needs to be an exchange made of some sort.

Contracts without consideration, i.e. with an element missing, are void.

Various manifestations of the gratuitous promise; rules: (EXAM QUESTION)


1) Past consideration

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a. Is no consideration, a reward for an act previously gratuitously done is not
binding. There has to be an exchange because a contract is based on an
exchange. Reciprocity does not make anything binding.
2) Existing legal duties and consideration
a. When party A is bound by the existing contractual duty to party B, a later
promise by B to pay A something extra to perform the same obligation, is
not binding.
b. The usual common law contract that established this principle: sailors
would be hired to make a transport trip and then decide later that they
want to increase their pay, the captain agrees, but later he only pays
them the original amount. If the sailor promises to do another duty
then the sailor would have to be paid higher. If the sailor just
wanted to get paid and not work then they would have to use a
nominal form of consideration: small amount of money, ex. $1, a
peppercorn, the seal (stamp).
c. Seal: element of consideration has been covered
i. Nominal (token) forms of consideration are sufficient for common
law. Giving a dollar or a seal to confirm
ii. For equity law, substantial considerations. Dollar, peppercorn seal
is insufficient. If seeking an equitable remedy you need a transfer
of a substantial consideration.
d. You convert a gratuitous contract into an enforceable agreement through
one of these methods. Courts do not investigate the consideration, but
just the fact that it exists. Equity investigates if the consideration is
substantial.
3) The rule in Foakes and Beer
a. The ratio of that case is that a creditors gratuitous reduction of debt
for a payment is not enforceable. The reason is no consideration was
exchanged. Example, you are loaned $1,000 but the person needs the

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money really badly so they say make one payment and Ill forgive the final
two payments. Then the lender can sue the person for the money. The
person who was lent the money must use some form of nominal
consideration to cover their butt; seal the contract, make the
payment 1 day early. Its not the seal itself that has consideration but
that the other party has given up consideration.
i. If the creditor takes a gratuitous reduction of payment then he is
not able to collect the remaining balance after.

[The remaining three elements are presumed to exist]

4. INTENTION TO CREATE LEGAL RELATIONS (34:00)

In order to have a contract there has to be the intention on the part of both parties
to be legally enforceable agreement. The law presumes that it exists. The plaintiff
does not have to prove this step; it is up to the defendant to rebut their existence.

The presumption is most easily refuted in family situations, rather than third party
situations.
o

Example, your mother invites you over for dinner and promises to make the
meal, but you cant come for dinner because you have other plans. Your
mother sues you; there is an offer made by the mother, there is acceptance,
the consideration on the mothers part is a promise to make the meal, and the
son promises to show up for dinner. It is up to the son to rebut the
presumption that there was intention to create legal consequences.

Instead, the son needs to borrow money from his mother, 20 years later the
mother wants to retire and needs the money. The mother takes him to court,
but the son could say that it was more of a gift because it was around the
birthday time. If you are the borrower you want to keep the situation
very informal.

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With presumption and money, it is better to be stricter when dealing with family
than strangers.

5. CAPACITY (39:45)

Capacity is the ability of the parties to bind him or herself in contract.

Each party to the contract must have capacity; mental competency; able of
assessing the consequences of making a contractual promise that will create
enforceable rights and obligations.
o

You need to know the nature and consequence of your act.

It is possible to have no capacity; if there isnt capacity, the contract is void.

There are various types of limited capacity; the contract isnt void but voidable.

There are various types of incapacity:


1. No capacity; no ability to assess contract, being in a vegetative state.
2. States of diminished (limited) capacity;

Minors the age of majority, common law: 21, in Manitoba: 18

A contract is unenforceable against the minor but is enforceable


against the other side. It is voidable by the minor.

Acceptance: minors must pay a reasonable price for necessaries


purchases, but they need not pay the contract price, based on
Quantum Meriut bases (reasonable price) as assessed by the
court. Minors also can go into beneficial contracts of service,
basically apprenticeship. To get work, 16 and over can get into
labour contracts; 15 can do so with guardian and principal
consent.

Lunatics and drunkards.

6. LEGALITY OF THE CONTRACT (44:30)

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The object of the contract must be legal. In essence the contract and or any of
the activities contemplated there under or any of its terms cannot offend
public policy(courts view of what is appropriate for society and will not enforce
any contracts inappropriate for society) no violates any law. There is a
presumption that is does not.

If the presumption is wrong the contract is void meaning that it was never formed at
all.
o

If VOID, court assists parties to prior conditions

If VOID & ILLEGAL, court will refuse any assistant to any party, with recovery
of property

They can be illegal by common law or public policy philosophy by the court, for
example prostitution.

Restraint of Trade

Free open market, is the optimal situation in our economy. So they do not like to

enforce it, because it diminishes competition. (The Non-Competition Clause)


The court will only enforce only if it is well defined, geographically, and time

defined.
Employment contract.

IMPUGNING A CONTRACT (50:00) (NOV.21)

To impugn a contract (assault, impeach, attack) means you are attacking its
integrity.

As between the plaintiff and the defendant, the defendant is the one who wants
to impugn the contract, because they are the ones needing to avoid it.
o

They want to attack the contract because the plaintiff is suing the defendant,
but if the defendant can come to the conclusion that the contract was not
valid then they wouldnt be sued.

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There are various grounds to impugn the contract. If the contract is valid then the
plaintiff will be successful, however the defendant will be successful if they can
prove that the contract is void, voidable or unenforceable.

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When the defendant is attacking (impugning) a contract there are 4 results:


Valid

Void

Voidable
Misrepresentation

Unenforceable
Statutes of frauds

Non est factum


Mistake of subject

Duress
Undue influence

Sale of goods act


Illegality

matter
Mistake of identity

Diminished capacity

Missing element
and/or uncertainty

VOID CONTRACTS:

The idea to void a contract is a common law concept.

The grounds for rendering a contract void are very narrow.

Text says: To decide that a contract is void is to say it was never in law formed at
all, in this sense calling an agreement is a contradiction of terms. If it is void there
is no contract.
o

Once said to be a void contract, there will be no transfer of title or property,


and party A, the vendor would receive the title back.

The consequence: the key point or effect is that a party to a void contract
can apply to the court for the return of any property transferred under the
agreement. Title or ownership of the property at common law would not
pass and cannot pass under a void contract and the holder of the title
would be in a position to recover the goods even if they had been
transferred to a subsequent third party for value who was innocent.
o

Your typical void contract is: as between party A and B, no title is passed and
A can always re-obtain the good from party B (the rogue: thief). The issue
then becomes, what happens if B has transferred or sold the car to an
innocent third party for value? A can obtain it from C or if there is a D, E, F, or
G, A can always get it back. C can sue B, but they would rather have the
good. So A and C are competing over the only thing that has value.

Three Parties: Vendor A, Rogue B, ISTP4V C.

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ISTP4V (Innocent Subsequent Third Party for Value)

Missing an element

Uncertainty (relating to the offer and the absence of capability being accepted)

Non est factum not my mark

Mistake to subject matter or identity

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VOIDABLE CONTRACTS:

In response to the unfairness of void contracts, equity law came in and created
voidable contracts which would be supplementary to the common law, because
they would not deem the contract void.

Equity recognized new considerations of fairness. Under voidable contracts, C will


generally triumph.
o

Party C, the ISTP4V, would not be wanted to be made taken advantage of and
would end up with the property in the end; the losses would stay as they after
the contract would be deemed voidable. The party B can still pass title to
other third parties for value, when the contract is voidable, but A can stop
this by rescinding the contract. (it is not a void contract until it is rescinded)

Remains in force until it is declared otherwise, title may pass under it from
one to one contracting party to the other. The recipient of the title may then
transfer this title to an innocent third party for value, and that is can obtain
good title of the goods. Even though the requiring title holder by means the
initial contraction voidable.

The voidable contract in contrast to the void contract is important where a


misapprehension or misrepresentation would render it unfair if the contract terms
were enforced against him or her.

So to get a voidable contract rescinded (or made void) one needs to:
o

It is ultimately a remedy, and it is declared by the court to be rescinded. It


takes some time to get it done because it goes through the whole litigation
process.

It can be done informally by communicating that the contract is rescinded


and sending them a notice of it. It is void then and there.

For example, where a party enters into a contract under a threat.


o

Under common law that would still be a contract.

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o

But equity is to make up the deficiencies of common law and developed other
circumstances to void the contract.

Examples: threat of violence or the misrepresentation of a material fact


related to the contract. Under a voidable contract the contract exists
and if goods are involved the title may pass to the buyer until such
time as the parties subject to the pressure or deception takes steps
to have the court return the goods or resolve the matter.

The point is that the seller has a shot at getting the good back.

This distinction between void and voidable contract is specifically important when
an innocent subsequent third party for value is involved.
o

Void agreements: no title passes and consequently an ISTP4V cannot obtain a


good title from a person that obtained the goods under a void agreement.

Voidable contracts: will remain enforced until it is declared otherwise


(rescission). Title may pass under it from one contracting party to the other.
The recipient of the title, may then transfer the title to an innocent third party
and the innocent third party may obtain a good title to the goods even
though the intermediate title holder acquired the title by means that render
the initial transaction voidable. Equity took a broader view to fairness;
party A is viewed as the party that could have stopped this
contractual problem of occurring so they prefer party C. They also
use more liberal grounds to impugn a contract which helps party A.

In summary, we can say that

Where a contract concerns the two original parties it may not matter
whether the contract is void or voidable, in either event the court may reward
the property back to the original party,

If the property has been transferred to an ISTP4V the individual may


recover it only when the contract is void. Party A can prevent property from
passing if the voidable contract is rescinded prior to the ISTP4V obtaining an
interest in it. How do you rescind (set aside) a contract? Get a court order, the

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problem with that is it takes a long time to obtain. If A wishes to rescind the contract
before party C gets an interest in the title, you are better off notifying the second
party that you are rescinding the contract. The text book talks about title which
means ownership.

GROUNDS TO IMPUGN A CONTRACT: (16:30)


VOID
1) Missing an element or uncertainty relates to an offer being vague
2) Non est factum is a narrow ground, which has to do with old medieval grounds and
translated means not my doing.
a. Originally individuals could be fooled to enter into written contracts when
they were not literate or they would be misled to what is the nature of the
written document. There were attempts to broaden this to be a
misrepresentation, those efforts failed and the House of Lords return them to
their original basis for illiterate individuals
3) Mistakes an error in judgement or perception but it is very difficult to make sense of
how the law deals with mistakes.
a. Two types of mistakes render a contract void;
i. Mistake of identity thinking that you are selling to someone else
(identity fraud) for example the woman sold her car to someone she
thought was a movie star.
ii. Mistake as to subject matter is more difficult you believe that you are
selling something different then what the other person thinks they are
getting. Not really a mistake, more like the offer is uncertain.
b. Others are held voidable: mistakes to terms of the contract or even subject
matters where one party knows but the other is unaware of its existence or

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meaning. One party is aware of the error of the other party. Its akin to
misrepresentation.
4) Errors in recording contracts or transcription; in such a case the party can apply
to the court for an order of rectification and will be granted if 3 elements are met:
a. The courts are satisfied that there was a complete agreement between the
parties, free from ambiguity and not conditional on further adjustments,
b. The parties did not engage in further negotiations to amend the contract,
c. The change in the written document appears to be an error in recording and
is most easily explicable as such.
VOIDABLE (22:15)
1)Misrepresentation can occur both inside and outside contractual situations, for
example in tort law.

Within the context of contracts there are two possible type of misrepresentation:
1. Those manifested inside the contract (You buy a car and say that it can only
have travelled 100,000 miles but find out later that it has 200,000 miles) and
2. Those that are outside the contract but that induce the party to enter into the
contract.

The more difficult case is where a misrepresentation occurred during


negotiations meaning the misstatement could reasonably be
expected to influence the decision of the innocent party in
favour of entering into the contract. The remedies available
depend on the types of misrepresentation: 1) innocent
misrepresentation only can rescind the contract, 2) negligent and 3)
fraudulent misrepresentation

Fraudulent for both these two you can be rewarded damages. There is a trend in
the decision where courts are finding that these misrepresentations are actually
terms of the contract.

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a) Opinion vs. fact: misrepresentation based on only false assertion with facts is
voidable; misstatements of opinions are not voidable. Because you
have to understand the nature of the misrepresentation, a misrepresentation
is a false assertion relating to statements of face whereas mere statements
of opinion are not misrepresentation and afford no remedy.

I.e. claiming to have the best burger in Winnipeg

RECAP: Misrepresentation is either


a) Contained in the contract breach of the contract and is an easy law suit,
because they havent lived up to the term of the contract and there is a
tendency of the court to find created ways to make misrepresentations part of
the contract.
b) Not a term of the contract but rather a representation that has induced
an individual to enter into the contract. It is determined by the objective
test, the reasonable person standard. If the answer is yes, then the contract is
voidable. It depends on the misrepresentation,
a. If it is an innocent misrepresentation the party believed that the
information was true, then it can be rescinded, or
b. If it is a negligent misrepresentation the rescission will be rewarded
along with damages, or
c. Fraudulent misrepresentation a party deliberately attempts to deceive
the other party, damages for deceit and rescission will be granted.

The idea of CAVEAT EMPTOR(34:40) (buyer take care) - a buyer of goods must take them
with their defects unless some fact about their quality has been misrepresented. The
purchaser needs to do the research and investigate to find out more about the product.
Its not opposed to misrepresentation. Misrepresentation is about a fact, unless from an
expert opinion. Unless it is mentioned in the contract, there can be no remedy awarded for
apparent misrepresentation.
Contracts of utmost good faith (uberimma fides): there is duty for one to give full
details about a purchase which is reverse of caveat emptor.

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1. Contract of insurance: the purchaser needs to give all the information
about the health and other pertaining info to the insurer.
2. Securities contract: all relevant information is needed to be given.
Doctrine of Merger: States that warrants cease to exist after closing so we must create
a clause to correct this.
2) Undue influence:(37:30)

The domination of one part over the mind of the other to such a degree as to
deprive the latter of the will to make an independent decision. The contract formed
as a result of undue influence is voidable at the option of the victim. The victim
may only avoid the contract if he or she acts promptly. If he or she acquiescence or
delays hoping to gain some advantage, the court will deny assistance.

There are three elements in undue influence:


1. Prove that there is a special relationship between the victim and the
dominator based on special knowledge and skill causing the victim to place
confidence or trust and care in the dominator. For example, a stock broker,
family members, lawyer-clients, banker-client, accountant-client, homecare
workers.
2. The party alleging undue influence must satisfy the court that the
circumstances were such that the domination was probable. If
element 1 was proven this is usually simple to establish.
3. Reversal of the burden of proof. If both 1 and 2 exists, the burden then
shifts to the dominant party. If the contract is to be salvaged the
dominant party must then prove that undue influence was not exerted by him
or her.
o

To determine this the court looks at few factors:


i.

The degree of domination plausible in light of psychological


circumstances and personality of the parties

ii.

The extent of the benefit

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iii.

Check if there was independent legal advice

3) Duress: illegitimate pressure. Various types will render the contract voidable, for
example, threatening physical force or actual exertion of physical force or
economic duress which is very narrowly defined.

ENFORCEMENT OF CONTRACTUAL RIGHTS AND PROBLEMS OF


ENFORCEMENT
(Requirement of Writing, Ambiguous Meaning, Privity of Contract)
Unenforceable contracts include other arguments that defendants can use to impugn a
contract.
1. Requirement of writing: some contracts in certain jurisdictions must be in writing to
be enforceable. In common law, no contracts have to be in writing. Statutory
contracts need to be in writing. There are two kinds of statutes that will require written
contracts:

The Statute of Frauds: was passed in 1677 by the English parliament and it was
designed essentially to ensure that frauds were not perpetrated through the lack of
sufficient written evidence of the concluded contract. The English parliament
developed this requirement so that there would be less lying and there would be
less fraud. Its everywhere else in Canada except in Manitoba and BC. However you
should know this still in case you move or are dealing with other jurisdictions.
Written evidence would make more certain that the liars would not win the cases.

(EXAM QUESTION) THE STATUTE OF FRAUD INDICATES THAT CERTAIN TYPES OF


CONTRACT ARE UNENFORCEABLE BECAUSE THEY ARE NOT IN WRITING.
WHAT ARE THE TYPES OF CONTRACTS THAT ARE AFFECTED:
a) Promise by an executor or administrator to answer for damages out
of his or her own estate,
b) Guarantee of the debt of another, doesnt include an
indemnification,
c) Agreement made in consideration of marriage, prenuptial
agreement (depends on where you are actually getting married)

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d) Agreement concerning an interest in land,
e) Agreement not to be performed for 1 year,
f) Ratification of an infants contract, a minority contract.
WHAT DOES WRITING MEAN? (EXAM QUESTION)
If a contract falls within the scope of the statue of fraud there must be a
memorandum in existence containing the critical terms, or essential terms of
the contract

The identity of the parties, the subject of the consideration, possession date
include, must be signed by the parties, but doesnt have to be in one document,
can be included in several documents.

Only the party to be sued needs to sign it but sometimes thats hard to predict in
advance.

The effect of the statute within its scope is that the contract is rendered
unenforceable. That means that both parties are unable to obtain a remedy under it;

However it is not void and may still affect legal relationships between
the parties. That means for example, that if something was transferred, the
transfer is effective and the court will not help put the transfer back into its
original position.

The courts have developed methods for limiting the statute of fraud:

Doctrine of part performance enforces contracts concerning land if the


plaintiff can show that they initiated performance of the contract with reliance on
it, and then the courts would accept evidence of part performance in lieu of
evidence in memorandum.

Contract must regard land

Act of performance must suggest the existence of a contract


respecting land (in a clear, unambiguous way. A deposit is too

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vague a sales receipt will be sufficient) Take possession of the
land.

Plaintiff must be the party performing the act (suffering the loss,
hardship).

The Sales of Goods Act: only concerns and only applicable to the sales of chattels in
Manitoba over $50. With regards to illegality, the contract can affect property
relationships, but the courts will not get involved. A receipt is sufficient to prove
that there has been a contract. Doctrine of substantial performance: it is equitys
attempt to limit the unfair potential of the statute of frauds passed because
parliament was worried that liars were victorious in courts. However the statute of
fraud can be an instrument of fraud when all parties to the contract dont know if its
existence and can be an instrument of unfairness, though it was designed to protect
bona fides performance. The doctrine of part performance was made to
blank the negative effects of the statute of fraud applies to land transaction
and indicates that if a party has begun performance of a contract in reliance on it
then the court would accept evidence of performance as evidence in lieu of written
memorandum.

b) Interpretation of contracts (ambiguous meaning) (:

Suddenly when someone is being sued, he or she will find, even after years of abiding
to the contract, that some of the contract has become unclear.

The defendant is trying to find the contract uncertain so that it will be void.

The courts have developed ways to define contracts because they have a bias to find a
way to hold the contract enforceable.

Contra preferentum

Theyve also created two other ways to interpreting the contract:

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1. The literal meaning approach restricts interpreting to the dictionary meaning,
however there is often more than one, therefore dictating certainty and
2. The liberal approach looks to the intent of the parties in drafting their
agreement. It stresses the circumstances surrounding the contract, negotiations
leading up to the contract and the knowledge of the parties and any relevant
facts as due by the reasonable person. Generally the courts combine the two
approaches. They take the approach that will render the contract effective.
This, however, creates uncertainty.
Parol Evidence Rule (53:50): an important rule of evidence

Designed to create certainty in contracts

About the ability to enter in or submit something to the fact finder to consider.
Where there is a situation of bargaining and negotiation where the parties have put
in a final form of agreement, the parol evidence rule states a term previously
agreed upon by the parties but not included in the final written form of
the contract will not later be permitted to add to or contradict the
contract.

In the context, parol means extrinsic to or outside the written agreement.

The rule applies both to an oral agreement which is being reduced to writing and to
a written agreement which is being reduced to a formal document under seal.

The rule operates only to exclude the introduction of terms not found in
the written agreement. Its like the statute of frauds, but sometimes it can be a
weapon of injustice when people arent aware of it.

Exceptions to the rule:


1. It doesnt apply if a party can show the written contract was never to embody
all of its terms,
2. It doesnt exclude evidence of amending agreements reached subsequent to
the written agreement,

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3. It doesnt exclude collateral agreements (separate, additional agreements)
4. It doesnt exclude condition precedence.
Other Terms (rules of interpretation):

Contra Preferentum: the courts read the contract against the interest of the party that
created it, if there are two interpretations are possible.

Judicial Notice: some things in a contract doesnt have to be proven

Agreements to agreements are uncertain


o

Contract is void

Arbitrator clause can save contract

Incompleteness (failures to include date in which a lease begins agreement will fail)

Implied terms in interpreting contracts


o

Two types:
1. Statutorily implied terms,
2. Common law implied terms

an implied term is a term that parties have not expressly included in their
agreement but which in the opinion of the court they would as reasonable
people have included when they made their contract and they thought of the
possibility of the subsequent difficulty arising. They are usually the result of
long established customs or by precedence.

EXAM: FOR EXAMPLE, THE REASONABLE NOTICE PROVISION, WHICH IS IMPLIED


INTO EMPLOYMENT CONTRACTS AND ESSENTIALLY THE COURTS HAVE IMPLIED THE
TERM INTO NON-COLLECTIVE BARGAINING
o

If an employer wants to terminate an employee, then they must give the


employee reasonable notice.

As well, employees have to give reasonable notice to employers. The issue is


when there is no just cause for immediate dismissal.

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o

What constitutes reasonable notice? Various factors: length of service, type of


occupation, the state of the economy (generally and in respect to their
occupation), and age of employees.

It is usually between 2 and 4 weeks notice for every year of service, to a


maximum of 2 years, determined in the UGG v. Wallace case.

It also indicates that if an employees dismissal is handed in a mali fides manner,


the length of notice can be extended.

You also have the option of giving the equivalent of notice; you can give
severance. Employers are putting in their contract shorter notice periods, or
when they are terminating, sometimes they will give you a choice of cash up
front for 6 months or you will get paid as if you were working for 1 year.

3) Doctrine of privity(59:00)

A contract cannot as a general rule confer rights or oppose obligations


arising under it on any person except parties to a contract.

No one except a party in the contract can acquire rights under it

No one expect a party to a contract can be subjected to the liabilities to it.

People have a freedom to sign into a contract if they so please. They have an option
and choice.

How do you become a party of the contract? promises must be made to you, as
offeree and offeror, and you have to give up consideration and then you can sue for
promises not kept up to you.

Only a party of a contract can sue.

There is a certain exception an insurance contract where the others are NOT
exceptions.
o
o

a trust (but it isnt really a contract anyway)


novation (this is actually new contract being made).

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DISCHARGE OF A CONTRACT (NOV. 28)

Discharge of contract means to cancel the obligation, make the contract


null and inoperative.

Discharge through other means than breach.

When a contract is discharge, the obligation is at an end, the


consideration has been exchanged, and the obligations have been
satisfied.

Tendering

There are various methods of discharge:


1. Discharge by performance everyone follows the contract, can also occur
over time. Tender of performance one party attempts to perform but the other
party refuses, this attempt to perform is the tender whether it is accepted or
rejected by the other party. One advantage of tender, to be alleged of breach of
contract. Primary reason for tendering is for evidence, but it is dangerous to
tender on your own, you should have solicitors because the money will be
guaranteed to come back.
2. Discharge by agreement:
a) The waiver formally discharges both parties, the parties agree between
themselves that the contract doesnt have to perform, if one person has
performed then the waiver is ineffective, it becomes a gratuitous promise
that they fulfill.
b) Substituted agreement A new agreement; replace the first agreement
where one of the clauses is that the first agreement is discharged - also
novation: substituted agreement with a new party.
a. Accord and Satisfaction when a party does not want to perform
agreed in the terms of the contract, they can make an offer of a cash
payment in a way to buy out their contract and responsibility

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b. Option to Terminate the ones offering the contract can buy the parties
contract and essentially get rid of them. It is a term in the contract
when initially signed.
c) The contract provides for its own dissolution sometimes parties perceive of
the possibility of an inability or unwillingness to perform in certain situations
and they include a term allowing for those circumstance.
a. Condition precedent is a future or uncertain event which must either
happen or not happen before the promissors contractual liability is
established. For example, condition precedence is that the house is
subject to mortgage financing. You actually have to make the best
effort, due diligence.
b. Condition subsequence is an uncertain event that happening of
which brings the promissors contractual liability to an end, one or both
or all of the parties have reserved an out in certain circumstances. For
example, in employment contract there is an objectionable misconduct
clause; in leases, so that the landlord can terminate the lease.
3. Discharge by frustration courts excuse persons for failure to perform their
contracts in a wide variety of circumstance where the inability to perform is
not their fault. This is called frustration. There are two basic types of
frustration:
a) Where performance has become literally impossible. For example, a
concert hall is rented, for specific date with a part payment. However,
days before, the concert hall burns down. Even with suspicion of
arson, however, the contract is frustrated, and the contract is
discharged.
b) Where performance is physically possible but performance would have
a far different meaning for the parties then that which they conceived
at the time of their agreement. For example, during war when
individuals dont want to be in the physical location of the war.

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o

The results of frustration: the contract is discharged and the


parties are relieved of further performance, any benefits
already exchanged fall where they lie.

Theres a bit of rough justice and as a result the English


parliament also passed the Frustrated Contracts Act:
which allows for the reallocation of the benefits
already exchanged.

EFFECT OF BREACH AND REMEDIES (17:00)

A breach occurs when one party fails to live up to provisions of the contract.

Not every breach can discharge a contract and no breach automatically discharges
the contract.

The effect of a breach is based on the terms of the breach.

3 Basic Types:
1. Warranties minor contractual term where you only receive damages as
remedy. Injured party can only sue for the difference in value (minor term)
2. Conditions- breach of essential terms of the contract that allows the innocent
party to an election where:
a) They affirm the contract and sue for damages or
b) Elect to discharge the contract and sue for damages. The problem is that
sometimes you dont know if it is a condition or warranty. The safest course
is usually in the contract to define what a condition is and what a warranty is.
3. Fundamental terms Super charged condition, when it is breached, allows the
grieved party, as if it is same options as the condition, but they have an effect of
negative or negate exception of liability clauses.

Types of breaches (how a contract is broken):

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A. Express Repudiation of Liability expressed repudiation of one party to another
that they will not perform as promised, the innocent party has an election. The promise
can treat the contract as at an end and sue for damages. Secondly, party can insist on
performance until latest date contemplated in the contract, thereby allowing damages
to build up.
B. Non Performance One party makes a promise where they make it impossible to
fulfill. Ex. Selling a good to person but selling it to someone else before the possession
date
C. Failure of Performance where theres a failure to perform at all or youre tendering
actual performance that is not equivalent to the promise.
a. Types of failures:
i. Failure to perform at all total failure,
ii. Grossly inadequate performance, does not measure up to the promise.
iii. Failure in a minor particular. The result is depending on the type of failure
and the term. A warranty, no matter how you breach it the other party
will only get damages. A condition, in order for the innocent party to have
an election it must be a total failure or grossly inadequate.
IF YOU BREACH A CONDITION IN A MINOR PARTICULAR, THE DOCTRINE OF
SUBSTANTIAL PERFORMANCE APPLIES (EXAM) COURTS ARE WILLING TO
RECOGNIZE SUBSTANTIAL PERFORMANCE BY THE PROMISOR THOUGH DEFECTIVE
OR INCOMPLETE IN MINOR RESPECTS TO KEEP THE OTHER PARTY BOUND. A PARTY
IN BREACH CAN ONLY HAVE DAMAGES AWARDED AGAINST IT BUT IT IS OTHERWISE
DENIED THE ELECTION TO DISCHARGE THE CONTRACT. IN ESSENCE, IT INSURES
THAT A BREACH OF A CONDITION IN A MINOR RESPECT IS NOT FATAL; IT
MAKES THE CONDITION EQUIVALENT TO A WARRANTY.

Remedies:

If plaintiff wins they can obtain a remedy.

Two categories
o

common law remedies

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o

Equity remedies.

Common law remedies are damages. (24:30)

In common law it is to place the party in the condition they would have been in if
the contract had been fulfilled.

In tort law compensation is translated into the objective or measurement of


damages to place the innocent party in the same position they would have been in
if the tort had not occurred.

Expected Damages: In tort law compensation is translated into the objective or


measurement of damages to place the innocent party in the same position they
would have been in if the tort had not occurred.
o

How to measure the position would be in that situation, so it is needed to


determine the profit aspect to see where they could have been:

Cost of performance

Economic loss analysis

Contract law was derived from tort law.

Basic remedies:

Rectification

Damages a money award

Restriction to on damages in common law (26:00):


o

The duty to mitigate:a person who has sustained a loss as a result of a


breach of contract must do what he, she, or it can to mitigate (limit) the
extent of the loss. The damages it can recover at law will not include what
might have reasonably avoided. It prevents economic waste.

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o

The principle of remoteness the issue is just like tort, whether the
damages were reasonably foreseeable at the time of the contract. It
is best to communicate the use of the product at the time of the
contract. Only liable as the party in breach, for damages that flow naturally
from the breach and are regarded as a lightly consequence of failure that the
parties thought of it when the contract was made.

Ex. using something or someone for another obscure purpose they


should be made aware of it at the beginning of the contract.

In terms of categories of damages there are various categories: same categories as


tort law. Special damages, punitive damages, general damages. (29:00)
o

Expectation damages additional types of damages

If a contract is breached we are worried about lost profit, so general


damages includes these expected damages, as well as placing the
victim back in the position they were in if the case did not occur. 2
types include:

Cost of performance vs. economic loss (PV house against the American
coal Company the PV houses were equivalent to the Beverly Hill
Billies who discovered oil. They allowed the American coal company to
mine their property but the family wanted to move back. So they put
in a clause that the company must put the land back into its original
position and spend whatever they would have to do it (cost of
performance). However the company didnt restore the property. The
issue was the ACC said that if they spent the money to
rehabilitate the land it would cost more than the fair value of
the farm. So they wanted to write a check for the value of the farm.
The Supreme Court decided that the ACC was right. The Supreme
Court used the economic loss instead of the cost of performance).

There are other heads of damages: reliance damages, mental anguish


(equivalent of pain and suffering in tort law)

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1978 in the Garvise v. Swantours case in England: Ratio was


that in a proper case, damages for mental distress can be
recovered in contract just as damages for such can be recovered
in tort. Such case as a contract for holidays or other cases of
contracts for entertainment or enjoyment.

Liquidated damages refers to a term in a contract where the


parties agree in advance to the amount to be paid in damages if
there is a breach. The court will only enforce it if there is a
general attempt to mitigate the loss.

Nominal damages the plaintiff is right but its not worth any
amount of damages.

Equitable remedies:

Stems from the court of Chancery, reacting to shortcomings in the common law, in
result to money not being good enough.

The remedies given by equity, it is deemed to be in personam, meaning that if an


equitable remedy is given and is not respected by the other party, then the court
can fine or imprison that party. (In common law, this does not happen)

Some of the basic elements:


1. The plaintiff must have clean hands they cannot be guilty of unethical conduct,
2. The plaintiff cannot have acquiescence no long delays, must act promptly upon
becoming aware of the misconduct,
3. Refuse to intervene if there is a Third party for value,
4. Requires substantial consideration the seal is insufficient.

Three Types of Equitable Remedies:

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1. Specific Performance

Where the court orders the defendant to do a specified act, usually to complete a
transaction.

Specific performance is available in respect of land and air looms and unique
material otherwise damages would be sufficient.

You must prove that damages are inadequate because the material is unique.

Equitable remedies are good because theyll get involved in enforcement, because
if you dont respond to an equitable remedy you will be held in contempt of court
and can be fined or imprisoned

2. Injunction

A court order restraining a party to act in a particular manner.

In contract law it restrains a party from committing a breach.

For example, in the sale of a business contract, the vendor is prohibited from
competing, non-competition clause. If they compete you can get an injunction.
Usually they are time-limited (3 years).

In order for it to be available you need a negative covenant that is a promise not to
do something.

No injunction will be ordered if there are unacceptable consequences i.e. an


individual is prevented from working all together
o

(Warner Bros against Nelson Nelson was Betty Davis. Signed an


employment agreement that sated she couldnt act for any other company,
but she went to England and worked for another company. Betty Davis said
that it wasnt valid because she couldnt work, but the court said that she
could do anything else like waitress etc So Betty Davis lost). It has to be a
total prohibition.

3. Rescission

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Where the contract is set aside and the court puts the parties back in the original
position (pre-contact position). Sometimes its impossible to rescind, for example if
the good doesnt exist anymore.

VI) PARTICULAR KIND OF CONTRACTS

The source of the principles can either be statute or common law


The sale of goods act

Passed in 1893 in the UK parliament through a statute.

All jurisdictions in the common law have adopted this act. The Manitoba act is an
exact replication.

The concept known as caveat emptor (let the buyer beware) this is the
principle of law according to which absent any terms in the contract to
the contrary, the buyer assumes the risk for the condition of the objects
purchased. Text book, caveat emptor does not mean in law or in Latin that the
buyer must take a chance, rather it means the buyer must take care. He must be
reasonable cautious where in circumstances where the buyer can and does
exercise personal judgment. CE is however not a rigid rule but a flexible general
principle subject to limits put on it by common sense and customary business
practice. It is applied when goods are in existence and are specific items that may
be inspected by the buyer and where the seller has made a misrepresentation
about them. In these circumstances, CE is a sensible rule. The buyer has the
opportunity of exercising his judgment in examining the goods and if he distrusts
his own judgment or has doubts he/she may choose to bargain for an express term
stating the goods have a particular quality requirement.

Caveat emptor encourages buyers to take care, however certain exceptions are
required to prevent abuse by unscrupulous sellers especially if there is reliance on
the seller by the buyer or an inability by the buyer to inspect the goods.

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The sale of goods act has created or codified terms which are to protect the buyers
and form exceptions to the doctrine of caveat emptor.

The sale of goods act is in many ways a limitation on caveat emptor. In


fact, it is not, the so-called exceptions are consistent with the doctrine,
because they refer to certain situations where the purchaser cant
investigate what they are receiving or they are relying on the seller for
information. Caveat emptor applies to the qualities of goods.

Application: it applies to the sale of goods - two types of property: real property
(land) and personal property (chattels - goods or choses in action contractual
rights). Goods are considered to be all chattels personal, other than things in
action and money.

It does not apply to the sale of services. If both, must determine if it is a sale
of material and labour.

Another requirement is that the contract needs to be in writing if it deals with


goods in excess of $50 dollars, an invoice is considered sufficient.

Implied conditions:
1. Section 13 (Sellers Title) caveat emptor does not apply to the ownership of
goods, because inspection by a buyer does nothing to indicate who owns the goods.
In offering to sell goods, the seller impliedly represents that he has the right to do so;
the implied condition.
2. Section 14 (Description) it is an implied condition that goods sold by description
will conform to the description.
3. Section 15 (Suitability and Quality/Fitness) there is an implied condition that
the goods are of a type that is suitable for the purpose for which they are bought, but
only (1) when the buyer expressly or implicitly tells the seller about the particular
purpose for which the goods are to be used or (2) makes known that he relies on the
sellers skill or judgment or (3) the seller normally sells these goods in the course of
business. If the buyer has examined the goods, there is no implied condition
as regards to defects that such examination ought to have revealed.

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4. Section 16 (Sale by Sample) there is an implied condition that when a sample of
the goods to be sold has been provided, the actual goods supplied will correspond to
that sample in type and quality.

Bulk must match sample.

Buyer will have reasonable opportunity of comparing bulk with


sample.

Goods will be free from any defect rendering them unmerchantable


that would not be apparent upon reasonable inspection of the sample.
Does not apply if defect was in sample!

5. Relationship between Title and Risk (common law rule). Most important relates
to the Essentially:
1. Risk of damage follows title,
2. Transfer of title and risk do not necessarily occur at the moment the contract is
formed,
3. Possession does not imply ownership. So whoever has title bears the risk.
a. See 5 Rules from Section 20 page 307-309
i. Most important is Rule 1: Unconditional Contract for sale of specific
goods in deliverable state, property in goods passes to buyer when
contract is make, immaterial whether time of payment/delivery or
both is postponed (Buy a suit and pick it up later, you could be sued
for the payment of the suit even if store burned down).

Remedies for the seller:


1. Lien a right of a person in possession of property to retain that property against
the claim of the owner, until the debt is satisfied.

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a. However, the right is based upon possession and is extinguished when
possession passes in good faith to the buyer. Delivery terminates sellers
possession. Only exists when:
i. Contract does not state the buyer is to have credit so the payment
may be required upon delivery.
ii. Goods have been sold on credit and the term of the credit has
expired without payment being made and seller still has possession.
iii. Buyer becomes insolvent before delivery.
2. A stoppage in transit the right of a seller to order a carrier not to deliver to
the buyer, if the buyer becomes insolvent. This remedy disappears once the
goods are delivered.
a. The carrier is bound to obey instructions. If not, the carrier is liable for
damages. Allows the seller who may not have title or possession to
exercise control of goods when carrier is not part of the contract.
3. Resale after exercising a right of lien or stoppage in transit, an unpaid seller
may give notice to the buyer and resell the goods to a third party. It can also be
used when a buyer commits a breach by refusing to accept goods. If the seller
has made a diligent effort to obtain a good price on resale but obtains a
lower price than that promised in the original contract, he may sue the
original buyer for the deficiency.

Specific Goods: exist at time of formation of contract, identified, agreed upon as being
subject matter of contract.
Ascertained Goods: not specific goods. Any goods that satisfy contractual description of
the goods may be supplied.

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PROPERTY (DEC 3)
Property the relationship between a person and an inanimate object (usually)
The normal kind of property that is commonly known is land and the things affixed to the
land
Title legal ownership of the property

PERSONAL PROPERTY
When there is some kind of relationship with property and ownership, there are two kinds
of personal property:
1. Choses in action right to sue of some sort
2. Choses in possession (Chattel) they are corporeal (tangible, visible, movable)
things. Usually the owner is the one in possession unless there is some kind of
agreement to allow someone else to have a lesser ownership of it. It can become
part of the land by being affixed to it (process called affixation)
a. When does a chattel become a fixture?
i. Reynolds v. Ashbeon and Sons case (1904). A chattel becomes a
fixture to property by implication of law and this conversion of it does
not depend upon agreement and is not accomplished by conveyance.
A chattel is converted to reality, even if it is attached without the
content of the owner.
Five Factors that determine a Chattel to be a fixture:
1. Nature of the article (Was it made to be a fixture or not)

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2. The mode of attachment
3. The circumstance it was attached
4. The purpose to be served by the Chattel and the
attachment
5. The position of the parties.
*If something is nailed, wired, glued, etc., then it is a fixture
A chattel is not affixed, in a leased property, if the trade fixtures are
put in place by commercial technicians they dont become fixtures and
can be taken out.
ii. Severance the process to make a fixture a chattel again; remove
the title as fixture for the chattel.

BAILMENT
Bailment exists when one person takes temporary possession of personal property that
is owned by another. Title and possession is being split. The agreement will be for the
bailee to return the property to the bailor (the lender).

For the bailment to occur there needs to be:


o Directive delivery
o Constructive delivery: not actual delivery but tantamount
Ex.) Instead of delivering the car, you just hand over the keys instead
which signifies the same thing.
Consequences of the bailment:
o The title of the property always stays with the bailor but the possession can
be to the bailee, when leased, for example.
The bailee needs to have permission to transfer the possession to
someone else or it needs to be accustomed to the industry.
o The liability is in the hands of the bailee if anything happens
The key is standard of care; the trend is applying it as negligence.
Common carriers and innkeepers have a higher standard of care.
Involuntary Bailees must also live up to Standards of care.

INTELLECTUAL PROPERTY
Choses in Action an intangible right; in essence, ie. a right to sue. It is a claim one
person has against another. It is only a right under contract. They can also be transferred
like personal property, this is called an assignment.
Intellectual Property includes:
It is under federal jurisdiction
and governed by federal
Copyright
statutes. But some of them have
preexisting sanctions attached to
them that still persist today.

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Patents
Trademarks
Industrial design
Confidential information (eg. Trade secrets)

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Why are they called Intellectual Property?

All these area deal with ideas and creative work. Must be contrasted to other forms
of personal property because if it is stolen or wrongly misused, it still exists as its
original intent was and can still be returned to the owner but the value couldve
been significantly diminished.
When the property is decided in negotiations, there is a protection that is called
confidentiality agreements.

Types of Intellectual Property:

Copyrights the pertaining to this gives a right to copy. It gives the right of the
creator of any such works, ideas, etc. First developed common law, then in statutes,
but then created Copyright Act, the federal government has the power over. Lasts
for about 50 years.
o It covers only the original work of the creator. The expression is what is
needed to be protected, not the idea itself. Literature works, musical works,
sound recordings. The main concern is that when the work is generated or
performed, then it is automatically under copyright.
o If someone produces original work under employment, then the employer
owns the copyright.
o Once the copy right has been created the owner can assign it or lease it to
someone else (licensing its use). The court will see that the copyright belongs
to the creator unless to the contrary. The creator has the moral rights and can
keep the integrity of the work; moral rights cant be assigned, but they can
be waived.
o Infringement when a person tries to obtain a benefit by the sale, use,
reproduction or distribution of copyrighted material (without consent)
Plagiarism is an example of infringement and is most common in
academics.
Remedies
In common law injunction
Damages in tort
Obtain damages according to the tort of passing off where by all
profits must be disgorged.
Patents no common law history. A government produced monopoly that gives the
inventor the right to sell, produce or otherwise profit from a specific invention. Also
extends to the idea, in contrast to copyrights. Patent Act. Invention must be new
and has not been introduced to Canada or anywhere within the last year. Patents
from other countries are not allowed to be re-patented anywhere else. Granting
for patent lasts for about 20 years. Employers are also entitled to employers of
employees upon creation, and patents can be assigned or licensed.
o Patent Act requires:
Must be unique and distinguishable from other products
Must have some utility/perform some useful function
Must be possible to construct it on the basis of information
supplied to the patent office
o Infringement is also possible; remedies include:

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Injunction
Damages including profits obtained from infringement

Trademarks any term, symbol, design, or combination that identifies a specific


business, service, or product that distinguishes it from the competition. Registered
trademarks are protected under the Federal Trademarks Act. It helps protect the
goodwill. This allows the owner of the trademark to use it anywhere in Canada but
only for 15 years (but it is renewable). Popular in franchises and the selling of
businesses.
o Trademarks must be registered to be recognized in court upon infringement.
Industrial Designs eg. Coke bottles
Confidential secrets no statutes for it but it is under protection from the
provincial courts. The mere ideas are not property and cannot be the subject of
theft of ideas.
o Cadbury Schwipes Inc. v FBI food: ideas are not property. But it still is a
choses in action so it is up to be sued. It dealt with the idea how Caramilk
was able to get the caramel into the chocolate bar.
o Recipes, industry secrets, client lists are not subject to theft but they can be
sold and can be of value for owner.
o Protection of confidential information: best way is to impress on the
other party the fiduciary status for that information, so that if they break their
fiduciary duties they can be sued. You convert the fiduciary status into a
contractual status and the duties are specifically defined in the contract.

REAL PROPERTY LAW


Real Property land and everything permanently attached to it. At common law, real
property includes buildings constructed on the land, any of the minerals below in the land
and any of the airspace above it. It has been changed over time in statutes; they have
diminished over times ex) Manitoba is the owner of the minerals in the land, with some
exceptions.

The origin of real property comes from the remedies that one can obtain when
property rights were interfered with. Instead of getting damages and no land back
then it was changed as to get the property back. Real action, gave back the
property. Dates back to the feudal system
In current times, the real property is under control of provincial statutes, such as
zoning.
Feudal System: came in time of William the Conqueror. The king owned all land.
The feudal system is a combination pyramid scheme and protection racket. There
is a pyramid of ownership where the king distributes land and collects dues. The
distribution is a protection racket for the people.

Three types of ownership:

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1. Fee simple estate: is the estate in land that can represent the greatest interest in
time in land that a person may possess, and that can be conveyed or passed by will
to another or in case of intestate (to die without a will) the land goes to the heirs. It
is extremely important to look at the land and see the time granted, because while
the crown still owns the land that if someone has fee simple land, they have a
certain amount of time to be on the land and/or make changes on it. The land rarely
reverts to the crown because the land can be freely transferred through sale, will or
inheritance and only when none of the methods have been exhumed and the owner
dies, does the land then revert back to the crown, this is called escheat. This holds
true of all property in Canada.
2. Life estate: most extensive in time, which a person in possession of the land might
grant to someone else, apart from the fee simple. It is a free-hold estate
(indeterminate of time) that may be held by a person other than the owner of the
fee simple for a particular life time usually of the tenant themselves. If one does the
transfer of the fee simple in this manor they are able to live and use the land as
they please for their entire lifetime but the ownership is given to another. Ex)
usually the case with farmer families.
a. What happens after the life estate is up (the tenant dies):
i. Reversion when the grantor of the life estate reserves the balance of
the fee simple for himself and his heirs. It reverts back to the grantor
ii. Remainder when the land goes to a 3rd party after the life estate is
up
b. Problems with life estate:
i. It is hard to determine who does the maintenance, repairs, cleaning of
the land
ii. It is hard to market them
3. Lease hold estate: it is specified for a limited time (agreed upon) and at the end
of the term, the land reverts back to the land owner. Short or long term; periodic or
continual.
To own land concurrently, there are 2 methods to do so:
1. Tenants in common: can be mentioned in a special agreement between the parties
or can be written as part of the grant. The parties each hold an equal part of the
property and split the income evenly. It is not possible for one to fence off the other
and use the property isolated from each other unless it is agreed upon. One of the

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tenants can transfer their ownership to a 3 rdparty without the consent. If one of the
tenants dies, the ownership transfers over to the heir or by will.
2. Joint tenancy: the right of survivorship, which is a presumption, means that the
ownership transfers to the other co-tenants.
a. Probate: the process of carrying out the will and the fees are based on the
percentage of the value of the property. This is avoided by having joint
tenancy.
Condominium:

Solution to the issue of the lack of houses and property for people to live in the

urban center.
Condominium Act prevent the granting of fee simple estate in individual units of
a multiple unit building (which includes high rises, apartments, duplex, roadhouses).
Applies to residential and commercial buildings.
o There are multiple individual unit owners who have individual fee simple
o

titles.
The fee simple title includes the ownership from the drywall and inwards.
There is a notion similar to shareholders in the sense that the property on the
outside is owned by each title holder but only of some percentage
(percentage owner) (sidewalks, drives, pools, hallways, etc.)

Less than estates: (5:30)

Easement: is a right enjoyed by one land owner over the land of another for a
special purpose. This is enforced by a contract. In order to get an easement there
needs to be dominant tenement (a piece of land that is to benefit from the
easement) and a servient tenement (land subject to the easement). Once the
easement is established, it binds subsequent owners and runs with the
property.
o Right of way: most common easement; being able to cross over someones
land.
Rights and obligations:
The passerby cannot stay on that part of the land, build

anything, obstruct others from using it, or leave anything behind


No one can interfere with the path for the passerby and if done
so, the passerby can take legal action.

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o

Prescriptive easement: the land owner requires an easement over adjoining


land without a grant or contract. If an individual habitually exercises a right
over the land for a very long time and that right could have been granted an

easement, it is presumed that he has that grant after twenty years.


Mineral Rights: in the province of MB, any deposits of minerals or oil the
province is the owners of it. Getting an exploration lease or mining lease from
the province and it actually costs a lot in fees and taxes. This was put in place
1890.
Those property rights granted pre-1890, the rights of the minerals and
oil stay with the property since then. Today people are benefitting from

this kind of exception.


Statutory easement: hydro lines have these kinds of easements granted for

them; as well as phone lines.


Restrictive covenant: a form of contract that the court would enforce and it
came from equity courts. It is about preventing certain use of land. (Ex. Can
build houses larger than xx ft., or build certain point close enough to the
property land.) This created the early version of zoning. Subject to privity
because covenant runs with the property. The method to enforce the

covenant is the injunction.


Sometimes to string cables and power lines across peoples properties

Property, in law, refers to the relationship between a party and property.


Ownership of property is called title.
It is possible have simultaneous property where the original owner can lease property to
another person.

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NEGOTIABLE INSTRUMENTS (16:30)

Negotiable Instrument: means to transfer funds between parties to a transaction


without physical exchange of cash.
o

Gives greater certainty to certain types of assignments. People can better


depend on NI

Not all financial instruments are NI.

Three types:

Promissory Notes

Cheques

Bills of Exchange

The rules that govern negotiability distinguish the NI from others. The
method that they can be transferred from a creditor to a third party with
debtor remaining liable on the instrument.

A NI is a type of chose in action that has special importance in the world of


commerce. Written documents such as bank draft, promissory notes or a cheque
that is evidence of a right in some kind of intangible form are NIs.It is a contract
containing a promise expressed or implied to pay a specific sum of money to the
bearer or to a specific person thus a NI can be used to transfer ownership of
intangible rights from one person to another. NI are written documents used to
transfer rights found in the document.
o

Expressed or implied promise to pay specific sum of money to the order of a


specific person or bearer, thus a NI can be used to transfer ownership of
intangible rights from one person to another.

Can be transferred or assigned by the payee to the third party.

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o

The transfer process is call negotiation.

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Rules for Non NI:


o

Notice to promissory of the assignment

Assignee can only receive rights assignor has and is subject to the equities of
them (parties to the original contract).

Assignee and assignor must join to sue a defaulted promissory.

Rules for NI (from the Bill of Exchange Act):


o

Holder need not give notice to the promisor that rights have been
transferred.

The Third Party can obtain better title than the assignor. Not subject to
equities between original parties.

Subsequent holder can sue debtor by him/herself.

Criteria for Negotiability (25:00):


o

Promise/order must be in writing.

Obligation must be for money payments.

Sum of face of instrument must be for a certain fixed sum.

Promise/order must be unconditional.

Instrument must be payable at a fixed or determinable time or upon demand.

The whole instrument (complete sum) must be negotiated (not just part of it).

The Instrument must be signed by drawer/payer/debtor.

NOTE: Signor of cheque is personable liable unless it is clear that they act in
representative capacity (use the word PER).

Instrument is not negotiable if it does not meet above criteria, but


could still be a contract.

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How to Negotiate (27:15):


o

Assignment: transfer of a contractual right, almost anything applies

Deals with Choses in Action (a right, obligation that can be enforced in


courts)

Cannot transfer liabilities

Subject to original terms of contract (primary weakness)

Rules for assignment, if going to assign a chose in action or general


contractual right:

You have to give notice to the promisor

The assignee can only receive the right the assignor has and is
subject to equities with the existing parties to the contract

The assignee and assignor must join to sue for the faulty
promisor.

Endorsement & Delivery: payable to A to negotiate, A must endorse it and


deliver it.

Sign on reverse side.

Can become a bearer instrument (so dont sign in advance cheques


made out to you).

Promissory Notes: NI unconditional, in writing, paying specific sum, paid on demand,


unlike Bill of Exchange, a PN is prepared by the maker (debtor).
o

Doesnt have to be accepted by the debtor. Can sue on face of note.

CERTAINTY OF CONTRACT LAW: INCLUDE THE NEGOTIABLE


INTRUMENTS

(LONG ANSWER QUESTION)

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2) Insurance: there are specialized rules both by common law and by statute.
Insurance is a contract where you protect yourself from risk of loss. Types:
house insurance, life insurance, health insurance, car insurance. Definition
in its simplest terms is a method of shifting risk of loss that is a method of
purchasing against the potential of loss. Not only does insurance shift the
risk of loss against the person purchasing the protection, it also spreads the
risk among a number of parties who have agreed to take a share in the risk.
Advantages: money can be collected in advance to create a fund available to
pay claims; the amount collected can be calculated so that it is related to the
risk assumed. Insurance companies run on a profit basis and provide
protection. Mutual companies operate so that profits are retained by policy
holders. What separates insurance from a bet, because a wager is not a legal
object according to the elements of a contract? It seems that the person is
betting that they will die and the insurance company is betting that the
person will live. The reason given is the insurable interest exists where the
insured derives a financial benefit in the continuing existence of the insured
object or suffers a financial loss from the loss of the object. Compensation
will be paid by the insurer to the individual named as a beneficiary. (EXAM
QUESTION)
April 9, 2003

Insurance Law insurance in its simplest form is a method for shifting a risk
of loss; that is a method of purchasing protection against a possible loss. Not
only does insurance shift the risk of loss from the person purchasing, but
among a group of parties who have agreed to share the risk.

Types of contract terminology: An insurance policy is written evidence of an


insurance contract. The insurance company in the insurer and the premium
is the consideration paid by the insurer for the coverage, as indicated through
the insurance contract the risk is transferred from the insured to the insurer.
A typical insurance agent isnt a true agent; they are a sales agent, except for

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short term policies called binders. Insurance brokers are not agents either;
they are individuals finding the lowest cost for the coverage available. An
amendment is called a rider. Each province is a regulatory statute, so it is
provincially governed. Types: life, disability, property etc What separates
the contract of insurance from a wager is what is called insurable interest.
Subrogation when an insurer has compensated the insured by paying a
claim for a loss the insurer is entitled to step into the shoes of the insured
and sue the person liable for the loss.

Contracts of insurance are contracts of up-most good faith, in the fact that
the insured has a duty to reveal all pertinent information to the insurer, an
exception to caveat emptor. Can be run on two bases: for profit or as a
mutual insurance company. Mutual insurance companies are organized so
that profits are returned to the property holders. There is a process of
demutualization, where policy holders are given shares of the corporation, for
the sake of raising funds and becoming more efficient.

3. Employment law - contract of employment: there are implied terms both


by a) statute workers compensation, minimum wages and b) common law reasonable notice provision. In addition there can be negotiated terms
including: the duration of the contract, the consideration you are being paid,
duties involved. Other important terms: non competition clause after you
have been employed for a period time you cant compete as an employer of
another business or your own business. If you ask for too much as an
employer then the court will strike down and void the non competition clause.
They additionally have a clause that you have to keep all the company
secrets. Vicarious liability for employees the courts have developed the
principle of vicarious liability whereby an employer is liable to compensate
persons for harm caused by an employee in the course of employment. The
employee remains personally liable for the tort but often the best chance for
recovery by the victim lies against the employer. You have to give
reasonable notice but sometimes there can be dismissal for just cause that

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doesnt require reasonable notice: a type of serious misconduct or obvious
disobedience. However, there is a necessity to document and give the
employee a bit of a chance. Chronic illness creates frustration of the
employment arrangement.

4. Read Leasing for short answer question maybe

BANKRUPTCY
Creditor proofed assets, pension, insurance products, RESPs
This is a federal statute, and has a number of functions:

Sets up a uniform practice in bankruptcy and insolvency procedures, to


make it as inexpensive as possible.
It sets out methods for reorganizing a debtors business by working out
an arrangement with creditors
It attempts to provide for an equitable distribution of the debtors
assets among the creditors
It release the debtor to begin again

Bankruptcy and Insolvency act passed in 1992, the act applies to three
groups:
1) Insolvent persons potential bankrupts,
2) Persons who declare themselves bankrupt, and
3) Persons who have been placed into bankruptcy by their debtors.
Three differing procedures:
1) Proposal: The insolvent individual is trying to make a deal with the
debtors: more time, lower amount of debt, a lower level of interest, or
a combination of the three. there are two kinds:
Consumer: made only by the individual whose debts, not
including the debts secured by mortgage on a principle
residence, total less than $75,000. Formal acceptance by the
creditor is only needed under special circumstances, usually
under objection. There are certain benefits of consumer

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proposal, no termination of leases, acceleration of installment of
payments and the interruption of services by utility. If creditor
rejects the proposal, the individual is automatically considered

bankrupt.
Commercial: If the creditors reject the proposal the individual or
business is bankrupt.
o Thing you need to have to get bankruptcy:
You need to have the majority of each class of

secured creditors
Court must approve the proposal
Then the proposal is binding on all the unsecured

and secured creditors who accepted the proposal


2) Place yourself into bankruptcy through an assignment voluntarily. If the
creditors put the individual in bankruptcy, they do so by petitioning the
court for a receiving order. If proven bankrupt, then the orders are put
in the hands of the trustee who will govern the assets and affairs.
Trustee gets legal ownership over the assets. If one is to earn any
income in that period they are to pay a certain percentage to the
trustee. The court may order a discharge where some of the payments
need not be paid in the end.
To obtain a receiving order they must prove the insolved
indebtor has committed an act of bankruptcy in the last six

months and that they are due for at least a $1,000.


What are acts of bankruptcy?
o Fraudulent transfer of assets or money
o Fraudulent preferences
o Absconding of funds
o Failure to pay debts as they come due
Role of the trustee (officer of the court, but not lawyer):
o Retain the property and assets that the indebtor has
gotten rid of (that is defrauding the creditors)
Recover settlements (gifts of gratuitous promises in

the last year before bankruptcy)


Looks at transfers in the last five years. Fraudulent
preference: is a payment or a transfer of property
to a creditor within the last three months prior to
bankruptcy in order to give that creditor the benefit
over other creditors.

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Reviewable transaction: made within the last


twelve months, not at arms length (relatives or

business), not for fair market value,


Prove that the debtor has done certain things to avoid

paying of the creditors.


Then distribute the assets to the creditors accordingly:
first to the secured creditors who have priority with
respect to the asset they have a security interest (a debt
that allows the lender to seize the property if there is
failure to pay. Ex. Mortgage), then to the trustee to pay
the other creditors, preferred creditors paid in the order
listed: employees for back wages up to $2,000, the pro

rata basis (getting so many cents per dollar being owed)


3) A way by receiving order, this is where the creditors obtain an order by
the court placing the insolvent debtor into bankruptcy. In order to do
so the debtor must have committed an act of bankruptcy within the
last 60 months absconding with funds, not orderly repaying its debts,
and has to be greater than $1,000. Once there is an assignment or
receiving order a trustee is assigned by a court, they have control over
all your affairs.
The trustee will sell your assets so that the creditors can be paid, they will
seek to recover property that the debtor no longer owns when there was a:
1) settlements gifts made by the debtor within the year prior to
bankruptcy and in some cases within the last 5 years, if the trustee can
prove that at the time they were unable to pay debts,
2) Fraudulent Purchases: give a creditor payments to make them better
off,
3) Reviewable Transaction occurs 12 months prior to bankruptcy where
there isnt an arms length transaction and fair market value doesnt
have to be paid. In addition, during the period of bankruptcy they
must pay monthly payments to the trustees that are income
dependent.

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At the end of the process, the claims of the creditors are paid in order: 1)
secured creditors must be fully paid by funds available, 2) preferred
creditors the trustee, employees, 3) distributions to unsecured
creditors(general creditors) where there is like a 10 cents on the dollar
return. Once the creditors are paid, there is an application to the court for a
discharge and all your debts go away, except if you fraudulently
misrepresented things those may be continued and student loans continue.
Its easier to take prophylactic action, you can go broke and still can
protected assets; creditor proof assets. You can't get rid of alimony, and
student debt when you are bankrupt.

Secured Transaction: Not covered in these notes but covered in class. Read
textbook
A security statement is secured by a finance statement. Under the statute
the following three points will give you priority if you have: creation,
attachment and perfection. Leases are forms of secure transaction. A bill
of sale is a form of secured transaction and evidence. Pledging of property is
a form of hypothecation.
Floating charges descends and crystallizes and attaches to fixed goods.

Final Exam
Textbook: Chapters 1 and 2, 24,25,26, 17, 3, 4, 5,6,7,8,9,10,11,12,13, 20, 21,
15, 19, 29,
25 Short Answers and 4 or 5 Essays, 2 and half hours to write it. A total of 70
marks.
343 Drake
204-925-2525

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