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Chapter 5 An Introduction to Contracts

Copyright 2011 by Nelson Education Ltd.

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Key Elements of a Contract

Considerations impacting upon whether contract enforceable


Complete Negotiations finished? Certainty? Deliberate Voluntary Duress? Between two or more competent persons Minor? Sane? Intoxicated? Not necessarily in writing

Offer Acceptance Consideration Intention to create legally binding relations

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Key Factors in Contractual Relationships


KEY FACTORS
objective standard test - how a reasonable person would view the conduct of the parties
Equal bargaining power - legal assumption that parties to a contract are able to look after their own interests courts normally not entitled to assess the fairness or reasonableness of the contractual terms the business parties have chosen occasionally courts will come to the assistance of the weaker party and set contract aside
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Key Factors in Contractual Relationships


KEY FACTORS Equal bargaining power - legal assumption that parties to a contract are able to look after their own interests
courts normally not entitled to assess the fairness or reasonableness of the contractual terms the business parties have chosen occasionally courts will come to the assistance of the weaker party and set contract aside
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Contract Law Defined


CONTRACT LAW IN CONTEXT
Contract law is only one relevant factor in a commercial transaction The parties must consider the following:
business relationships economic reality reputation management

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Chapter 6 Forming Contractual Relations

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Forming Contractual Relations


OBJECTIVES:
How negotiations lead to a contractual relationship How negotiations can be terminated The legal ingredients of a contract How contracts can be amended or changed

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Legal Ingredients of a Contract


1. OFFER

2. ACCEPTANCE

CONTRACT
3. CONSIDERATION

4. INTENTION

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Legal Ingredients of a Contract


1. OFFER
a promise to enter into a contract on specified terms, as soon as the offer is accepted only a complete offer can form the basis of a contract

a) INVITATION TO TREAT an expression of willingness to do business

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Legal Ingredients of a Contract


Figure 6.1 Legal Analysis of the Retail Purchase
DISPLAY OF GOODS (invitation to treat)

CUSTOMER TAKES ITEM TO CASH REGISTER (offer to purchase at sticker price)

CLERK TAKES PAYMENT (acceptance of offer)


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Standard Form Contract


STANDARD FORM CONTRACT
a take it or leave it contract customer agrees to a standard set of terms which favours the other side the law expects people to take care of themselves. critical to read and understand the contract before signing it
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The Parties to a Contract


OFFEROR
the person who makes an OFFER

OFFEREE
the person to whom an OFFER is made

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Termination of an Offer
AN OFFER MAY BE TERMINATED BY:
Revocation: withdrawal of an OFFER Lapse: expiration of an OFFER after a specified or reasonable period Rejection: the refusal to accept an OFFER Counteroffer: turning down an OFFER and proposing a new one in its place Death or Insanity
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Termination of an Offer
REVOCATION
the OFFEROR can revoke an OFFER at any time before acceptance upon notifying the OFFEREE of withdrawal upon revocation the OFFER ceases to exist .

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Termination of an Offer
LAPSE
offer may expire on a specified date offer ends and can no longer be accepted if no expiry date is specified, then it remains open for a reasonable time reasonable time depends on the circumstances of the case
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Termination of an Offer
REJECTION
offer is automatically terminated if rejected by offeree

COUNTEROFFER
a form of rejection it is a rejection of original offer and a proposal of a new offer in its place

DEATH OR INSANITY
offer generally dies if the offeror or offeree dies as a general rule, someone who becomes insane would not be bound
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Legal Ingredients of a Contract


2. ACCEPTANCE
an unqualified willingness to enter into a contract on the terms in the offer communication unconditional assent to the offer in its entirety for example, personally, in writing, or by fax, e-mail, or telephone, or by conduct

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Legal Ingredients of a Contract


COMMUNICATION OF ACCEPTANCE
if a method of acceptance is specified then this method is mandatory if not specified, then in any manner that is reasonable in the circumstances acceptance can be indicated by conduct
see Landmark Case, Carlill v. Carbolic Smoke Ball Co., on page 129

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Legal Ingredients of a Contract


3. CONSIDERATION
a price must be paid for a promise each party must give something of value for receiving something of value from the other may be other than money, goods for example, as long as something of value gratuitous promise a promise for which no consideration no contract
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Promises Enforceable without Consideration


PROMISE UNDER SEAL once a Seal is affixed it is evidence of serious intent and acknowledgement that the contract is enforceable no further consideration is necessary example Contracts of Guarantee PROMISSORY ESTOPPEL someone who relies on a gratuitous promise may be able to enforce it usable only as a defence to legal claims made by the promise-breaker necessary factors reliance on anothers promise to change your position, and you are above reproach PARTIAL PAYMENT OF A DEBT at common law a gratuitous promise to accept a lesser amount left the creditor free to sue for the balance in some provinces, this has been altered by statute, so that creditor cannot sue for balance once a lesser amount has been accepted

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Legal Ingredients of a Contract


4. INTENTION TO CONTRACT
promise at issue must have been intended to be a contractual one if a business relationship, intention is presumed by the courts family arrangements - common law presumes promises are non-contractual but presumption is subject to rebuttal
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Electronic Business Contracts


ELECTRONIC CONTRACTING
Uniform Electronic Commerce Act (UECA)
removes barriers to electronic commerce basis for provincial and federal electronic commerce legislation provides that acceptance of an offer can be made electronically

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Electronic Business Contracts


UNIFORM ELECTRONIC COMMERCE ACT
OFFER may be expressed electronically ACCEPTANCE may be expressed electronically COMMUNICATION OF ACCEPTANCE UECA doesnt specify when an Acceptance becomes effective

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Electronic Business Contracts


ELECTRONIC CONTRACTING
governed by the same rules as all contracts When does Offer and Acceptance occur in the digital environment? separate agreement between electronic trading partners solves this problem

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Chapter 7 The Terms of a Contract

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The Terms of a Contract


TERMS
Express term a provision of the contract that states or makes explicit one partys promise to another Implied term a provision that is not expressly included in a contract but that is necessary to give effect to the parties intention a judge may imply terms in a contract to make the contract workable

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The Terms of a Contract


IMPLIED TERMS Why? Business Efficacy to make the contract workable Contractual quantum meruit
Sources Customs in the trade of the transaction Previous dealings between the parties Statutory requirements
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Interpretation of Contracts
HOW COURTS INTERPRET CONTRACTS
Rules of construction guiding principles for interpreting or constructing terms of a contract Parole evidence rule rule that limits the evidence a party can introduce concerning the contents of the contract Business efficacy judge is entitled to imply terms necessary to make the contract workable Contractual quantum meruit awarding one party a reasonable sum for the goods and services provided under

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The Terms of a Contract


TERMS
Previous dealings if the parties have contracted in the past, it may be possible to imply that the current contract contains the same terms Statutory requirements Sale of Goods Act makes certain provisions mandatory in contracts, unless specifically excluded by the contract Entire contract clause term in the contract in which the parties agree that their contract is complete as written

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Contractual Terms for Managing Risks


CHANGED CIRCUMSTANCES
circumstances may arise that prevent a party from performing its contractual obligations law permits the use of contractual terms as a buffer against future, uncertain events to limit liability

CONDITIONAL AGREEMENTS
condition subsequent a condition that, when it occurs, brings an existing contract to an end condition precedent a condition that, until it occurs, suspends the parties contractual obligations to perform their contractual obligations

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Managing Liability
LIABILITY MAY BE MANAGED BY:
limitation of liability clause a term of a contract that limits liability for breach to something less than what would otherwise be recoverable exemption clause a term of a contract that identifies events causing loss for which there is no liability liquidated damages clause a term of a contract that specifies how much one party must pay the other in the event of breach
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Terms of a Contract
STANDARD FORM CONTRACTS
a contract in which the main terms cannot be changed through negotiations Common for obtaining a credit card, renting a car, buying insurance or signing a guarantee of anothers debt Parties are expected to protect their own interests and ensure they understand the terms before accepting them
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Technology and the Law


SHRINK-WRAP CLICK-WRAP and BROWSE-WRAP AGREEMENTS
Shrink-wrap agreement an agreement whose terms are enclosed with a product such as prepackaged software Click-wrap agreement an agreement that appears on a users computer screen when a user attempts to download software or purchase goods (also referred to as a license) Browse-wrap agreement user agrees that-by virtue of accessing the website-he or she is bound by the terms of use associated with the website
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Chapter 8 NonEnforcement of Contracts

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The Importance of Enforcing Contracts


EXCEPTIONS TO THE GENERAL RULE THAT A CONTRACT IS ENFORCEABLE
an unequal relationship between the parties misrepresentation important mistakes a defect within the contract itself

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Contracts Based on Unequal Relationships


LEGAL CAPACITY
the ability to make binding contracts

MINORS
General rule minors are not obligated by the contracts they make usually voidable at the option of the minor alone minors are obligated by contracts for essentials know as necessaries.

MENTAL INCAPACITY
Parties must understand the nature and consequences of the agreement. Those impaired through illness, alcohol, or drugs may not appreciate the nature and consequence of actions.
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Contracts Based on Unequal Relationships


DURESS
the threat of physical or economic harm that results in a contract

UNDUE INFLUENCE
unfair manipulation that compromises someones free will the contract is voidable at option of the victim

UNCONSCIONABILITY
unfair contract formed when one party takes advantage of the weakness of another
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Misrepresentations and Important Mistakes


MISREPRESENTATION
a false statement of fact that causes someone to enter into a contract - it must be proven that the statement is
False clear and unambiguous material to the contract- significant to the decision of whether or not to enter into the contract one that actually induces the aggrieved party to enter into the contract concerned with a fact and not an opinion
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Misrepresentations and Important Mistakes


MISTAKE
an error made by one or both parties that seriously undermines a contract rarely proven parties usually not successful the court is entitled to set the contract aside as a remedy

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Contracts Based on a Defect


ILLEGAL CONTRACT
a contract that cannot be enforced because it is contrary to legislation or public policy

ILLEGALITY
a contract is illegal if it:
a) is contrary to a specific statute and/or b) violates public policy
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Contracts Based on a Defect


ILLEGAL BY STATUTE
contravenes legislation, for example:
Criminal Code Competition Act Real Estate and Business Brokers Act

CONTRARY TO PUBLIC POLICY


contracts that are considered to injure the public interest International perspective securing contracts illegally paying bribes to a foreign official
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Writing as a Requirement
STATUTE OF FRAUDS REQUIRES THAT
CERTAIN CONTRACTS MUST BE IN WRITING TO BE ENFORCEABLE For example:
guarantees- a promise to pay the debt of someone else contracts not to be performed within a year contracts dealing with land

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Technology and the Law


E-Signatures most provinces have provided for electronic signatures according to various rules for example Ontario Electronic Commerce Act, 2000 Federally, PIPEDA provides for a secure electronic signature under the 2005 Secure Electronic Signature Regulations

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Chapter 9 Termination and Enforcement of Contracts


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Termination and Enforcement of Contracts


TOPICS
Termination of Contract
by performance by agreement by frustration

The methods of enforcing contracts The concept of privity Remedies for breach of contract

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Termination and Enforcement of Contracts


TERMINATION: AN OVERVIEW
performance both parties complete their contractual obligations agreement the parties are always free to voluntarily bring the contract to an end frustration unforeseen event makes performance impossible or illegal breach a serious breach can release the innocent party from continuing with contract
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Termination through Performance


PERFORMANCE
performance is complete when all implied and express promises have been fulfilled does not necessarily mean relationship ends parties may continue to do business by means of new, continuing and overlapping contract vicarious performance - performance of contractual obligations through others

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Termination by Agreement
PARTIES MAY AGREE TO:
parties may decide to end the contract vary certain terms of the contract substitute a party transferring one partys rights and obligations to someone else; a limited form of novation parties enter into a whole new contract, known as novation
Novation the substitution of parties in a contract or the replacement of one contract with another

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Transfer of Contractual Rights


Figure 9.1, page 204 ASSIGNMENT OF CONTRACT
the transfer of a contractual right by an assignor to an assignee
Step 1 Creditor Debtor Relationship C(creditor) D(debtor) Step 2 Assignor-Assignee Relationship C(assignor) A(assignee) Step 3 Assignee Debtor Relationship A(assignee) D(debtor)
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Termination by Frustration
FRUSTRATION Termination of a contract by an unexpected event or change that makes performance functionally impossible or illegal Must establish:
was dramatic and unforeseen neither party had assumed risk of the matter occurring arose without being either partys fault makes performance functionally impossible or illegal
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Force Majeure Clauses


FORCE MAJEURE
Attempt to address risk of unforeseen events the parties contractually define for themselves in advance what events would frustrate the contract eg) fire, earthquake, war etc.

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Enforcement of Contracts
Non-performance of contractual obligations may result in breach of contract and a lawsuit BALANCE OF PROBABILITIES - proof that there is a better than 50% chance that the circumstances of a contract are as the plaintiff contends

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Enforcement of Contracts
PLAINTIFF MUST DEMONSTRATE THREE ELEMENTS ON THE BALANCE OF PROBABILITIES:
1.
2. 3.

Privity of contract there is a contract between the parties


only the parties to a contract can enforce the rights and obligations it contains

Breach of contract the other party failed to keep a promise or term in the contract Entitlement to a remedy plaintiff must demonstrate he/she is entitled to the remedy claimed
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Termination by Breach
CLASSIFCATION OF THE BREACH 1. BREACH OF CONTRACT
Condition an important term, which, if breached, gives the innocent party the right to terminate the contract and claim damages Warranty a minor term, which, if breached, gives the innocent party the right to claim damages only

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Termination by Breach
2. BREACH OF CONTRACT
Innominate term a term that cannot easily be classified as either a condition or a warranty Exemption or limitation of liability clause clause limiting or excluding liability for breach Fundamental breach a breach of contract that affects the foundation of the contract such a breach may render the entire contract, including the exclusion clause, inoperative Anticipatory breach a breach that occurs before the date for performance
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Termination by Breach
3. ENTITLEMENT TO A REMEDY
Damages monetary compensation for breach of contract or other actionable wrong Defendant is responsible for reasonably foreseeable damages suffered by the plaintiff pain, suffering, and emotional distress are not generally accepted as being a consequence of breach of contract

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Termination by Breach
RESTRICTIONS ON DAMAGES
Remoteness
1. damages could have been anticipated 2. damages reasonably foreseeable

Duty to mitigate the obligation to take reasonable steps to minimize the losses resulting from a breach of contract or other wrong

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Equitable Remedies
EQUITABLE REMEDIES
Where damages are an inadequate remedy for breach of contract

Specific performance - court order for the party who breached the contract to do exactly what the contract obligated him to do

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Equitable Remedies
Injunction promise not to engage in specified activities Interlocutory injunction order to refrain from doing something for a limited period of time Rescission to restore the parties to the situation they were in before the contract was formed

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Equitable Remedies
Restitutionary Remedies
Unjust enrichment occurs when one party has undeservedly or unjustly secured a benefit at the other partys expense

Restitutionary quantum meruit


An amount that is reasonable given the benefit the plaintiff has conferred
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Chapter 10 Introduction to Tort Law

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Introduction to Tort Law


TOPICS:
Definition of Tort The differences between a civil action and a criminal action The purpose of tort remedies/damages Managing potential liability in tort

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Tort Law Defined


TORT
harm caused by one person to another, other than through breach of contract, and for which the law provides a remedy tort-feasor a person who commits a tort

HOW TORTS ARE CATEGORIZED


intentional torts a harmful act that is committed on purpose Torts committed through negligence - unreasonable conduct, including a careless act or omission, that causes harm to another
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Tort Law Defined


EXAMPLES OF INTENTIONAL TORTS assault the threat of imminent physical harm battery-intentional infliction of harmful or offensive physical contact intentional interference with contractual relations EXAMPLES OF NEGLIGENCE negligent misstatement/negligent misrepresentation negligence claims arising from product liability

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Tort Law Defined


TORT LAW
Type of Action
assault and battery as tort

AND CRIMINAL LAW


Type of Action
aggravated assault as a crime

Commencing the Action


claim based on tort of assault and battery

Commencing the Action


Crown Attorney prosecutes crime

Proving the Action


must prove on the balance of probabilities

Proving the Action


Crown must prove guilt beyond a reasonable doubt

Outcome
pay compensation for injuries caused
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Outcome
fine, imprisonment, or both

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Liability in Tort
NO-FAULT SYSTEMS Workers Compensation legislation provides no-fault compensation for injuries, instead of a right to sue in tort LIABILITY AND JOINT TORT-FEASORS Joint tort-feasors two or more persons whom a court has held to be jointly responsible for the plaintiffs loss or injuries
LIABILITY AND CONTRIBUTORY NEGLIGENCE Contributory Negligence a defense claiming that the plaintiff is at least partially responsible for the harm that has occurred
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Liability in Tort
PRIMARY AND VICARIOUS LIABILITY Two kinds of liability in tort law: primary arises due to ones own personal wrongdoing vicarious liability the liability that an employer has for the tortious acts of an employee committed in the ordinary course of scope of employment
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Damages in Tort
PURPOSE OF DAMAGES to compensate a victim for loss caused by the defendant TYPES OF DAMAGES pecuniary damages compensation for out-ofpocket expenses, loss of future income and cost of future care nonpecuniary damages compensation for pain and suffering, loss of enjoyment of life, and loss of life expectancy
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Damages in Tort
DAMAGES IN TORT punitive damages an award to the plaintiff to punish the defendant for malicious, oppressive, and high-handed conduct
aggravated damages compensation for intangible injuries such as distress and humiliation caused by the defendants reprehensible conduct

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Managing Tort Risk


Awareness of potential risks and liabilities Employee policies and codes of conduct **Ignoring tort risk may result in lawyer fees and amount of judgment awarded to the successful plaintiff losing insurance coverage losing a hard earned business reputation
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Chapter 11 The Tort of Negligence

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The Tort of Negligence


TOPICS:
The conduct that the law of negligence addresses The principles of the law of negligence The defenses in a negligence action The common kinds of negligence actions that businesses face The difference between negligence and strict liability
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What is Negligence
NEGLIGENCE a careless act that causes harm to another CARELESSNESS a failure to show reasonable care REASONABLE CARE the care a reasonable person would exhibit in a similar situation

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Steps to Negligence Action


1. DOES THE DEFENDANT OWE THE PLAINTIFF A DUTY OF CARE? Duty of care the responsibility owed to avoid carelessness that causes harm to others Neighbour anyone who might reasonably be affected by anothers conduct Prima Facie- at first sight or on first appearance
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Steps to Negligence Action


COURTS MUST CONSIDER is the harm that occurred a reasonably foreseeable consequence of the defendants act? is there a relationship of sufficient proximity between the parties such that it would not be unjust or unfair to impose a duty of care on the defendant?

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Steps to Negligence Action


2. DID THE DEFENDANT BREACH THE STANDARD OF CARE? Reasonable person
the standard used to judge whether a persons conduct in a particular situation is negligent

Standard of Care
the standards of behaviour that would be observed by the reasonable person in society

Specialized Standard of Care


the standard of care exhibited by average persons with the requisite specialized training
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Steps in a Negligence Action


3. DID THE DEFENDANTS CARELESS ACT OR OMISSION CAUSE THE PLAINTIFFS DAMAGE? Causation the relationship that exists between the defendants conduct and the plaintiffs loss the harm would not have occurred but for the defendants actions

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Steps in a Negligence Action


4. WAS THE DAMAGE SUFFERED BY THE PLAINTIFF TOO REMOTE? Remoteness of Damage
the absence of a sufficiently close relationship between the defendants actions and the plaintiffs loss

Thin Skull Rule


defendant is liable for the full extent of the plaintiffs loss even where a prior vulnerability makes the harm more serious than it otherwise might be

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Steps in a Negligence Action


Pure Economic Loss financial loss that results from a negligent act where there has been no accompanying property or personal injury damage to the person claiming the loss

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Defenses to a Negligence Action


DEFENSES TO A NEGLIGENCE ACTION 1. contributory negligence - unreasonable conduct by the plaintiff that contributed to, or partially caused, the injuries suffered 2. voluntary assumption of risk no liability exists as the plaintiff agreed to accept the risks inherent in the activity

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Negligent Misstatement
(or Negligent Misrepresentation)
negligent misstatement (or negligent misrepresentation) an incorrect statement made carelessly; negligence taking the form of words
professional someone engaged in an occupation requiring the exercise of specialized knowledge, education and skill third party one who is not a party to an agreement

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Negligence and the Service of Alcohol


SERVICE OF ALCOHOL commercial establishments owe a duty of care to impaired patrons
establishments can be liable to members of public who are injured by the conduct of one of their drunken customers liability may be imposed on employers in the context of office parties based on employers larger duty to provide a safe working environment

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The Negligence Standard Versus Strict Liability


STRICT LIABILITY the principle that liability will be imposed irrespective of proof of negligence use of strict liability limited in Canada but not in
liability in contract vicarious liability

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Chapter 12 Other Torts

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Other Torts
TOPICS: The range of torts that are relevant to business organizations How torts arise from the use of property How torts arise from business operations How a business can manage the risk of liability in tort

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Torts and Property Use


OCCUPIERS LIABILITY occupier any person with a legal right to occupy premises or has some degree of control over land or buildings on that land occupiers liability describes the liability that occupiers have to anyone who enters onto their land or property

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Torts and Property Use


OCCUPIERS LIABILITY liability at common law determined by classifying the visitor as a contractual entrant, invitee, licensee, or trespasser contractual entrant any person who has paid (contracted) for the right to enter the premises

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Torts and Property Use


LIABILITY AT COMMON LAW invitee any person who comes onto the property to provide the occupier with a benefit licensee any person whose presence is not a benefit to the occupier but to which the occupier has no objection trespasser any person who is not invited and whose presence is either unknown to the occupier or is objected to by the occupier
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Torts and Property Use


LIABILITY UNDER OCCUPIERS LIABILITY LEGISLATION Legislation provides for a high duty of care equivalent to the negligence standard duty owed to entrants who are on the property with express or implied permission (at common law, contractual entrants, invitees, licensees) occupier must not create deliberate harm or damage to trespassers increased responsibility if trespassers are children
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Torts and Property Use


SLIP AND FALL liability for negligence as well as under occupiers liability legislation customer may fall on ice, snow or on floors inside a store Business that fails to take reasonable care to reduce risk will be found liable

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Torts and Property Use


DEFENSES TO ACTIONS BASED ON OCCUPIERS LIABILITY duty to take reasonable care does not apply to risks voluntarily assumed (volenti non fit injuria) but the defendant must show that the plaintiff assumed both the physical and legal risks involved exclusion of liability clauses contributory negligence
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The Tort of Nuisance


NUISANCE addresses conflicts between neighbours stemming from land use any activity on an occupiers property that unreasonably and substantially interferes with the neighbours rights to enjoyment of her property typically does not arise where the intrusion is only temporary
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Trespass and Property


TRESPASS protects a persons possession of land from wrongful interference.
the act of coming onto another persons property without the occupiers express or implied consent important for resolving boundary/title disputes and protecting property rights an injunction to stop trespassing is often the remedy of choice
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Torts and Business Operations


TORTS INVOLVING CUSTOMERS false imprisonment unlawful detention or physical restraint or coercion by psychological means victim must have been prevented from going where he has a lawful right to be occurs most often in retail selling; arises where any person detains another without lawful justification
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Torts and Business Operations


TORTS INVOLVING CUSTOMERS (contd) assault and battery usually occur consecutively but can also occur independently assault threat of imminent physical harm by disturbing someones sense of security battery actual physical contact or violation of that bodily security deceit misrepresentations that are made fraudulently or recklessly, causing loss
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Business-to-Business Torts
TORTS INVOLVING OTHER BUSINESSES passing off presenting anothers goods or services as ones own interference with contractual relations incitement to break the contractual obligations of another

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Business-to-Business Torts
TORTS INVOLVING OTHER BUSINESSES defamation the public utterance of a false statement of fact or opinion that harms anothers reputation libel written slander oral

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Business-to-Business Torts
DEFAMATION defendant has made a statement to at least on other person about the plaintiff the statement presents the defendant in an uncomplimentary light. the statement would have had the effect of lowering the plaintiffs reputation in the mind of a reasonable person hearing it
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Defamation Defense
QUALIFIED PRIVILEGE- defamatory statement being relevant, without malice, and communicated only to a party who has a relevant interest in receiving it ABSOLUTE PRIVILEGE- freedom of expression is so vital in such venues that no successful defamation action can be brought FAIR COMMENT- permits person to offer commentary on matters of public interest despite the commentary being defamatory
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Technology and the Law


E-TORTS: DEFAMATION ON THE INTERNET defamation by e-mail defamation on Web sites electronic defamation can be established by the discovery or tracing of electronic words to their author

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Injurious or Malicious Falsehood


INJURIOUS OR MALICIOUS FALSEHOOD the utterance of a false statement about anothers goods or services that is harmful to the reputation of those goods or services requires plaintiff to establish that statements were false and published (uttered) with malice or improper motive

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Managing Risk for Diverse Commercial Torts


OCCUPIERS LIABILITY RISK MANAGEMENT PLAN are there dangers on the property? Are adequate warnings and protections given to visitors? are there known trespassers, in particular children, who come onto the property? what could be done to eliminate or reduce the risk flowing from the dangers?
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Managing Risk for Diverse Commercial Torts


OCCUPIERS LIABILITY RISK MGT. PLAN (contd) Has the occupier complied with all relevant legislative obligations? E.g., provincial workers health and safety legislation, municipal bylaws regarding snow and ice removal Is adequate insurance in place?
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Managing Risk for Diverse Commercial Torts


BUSINESS DESIGN AND CONSUMER GOODS RISK MANAGEMENT PLAN QUESTIONS:
Do staff understand that they cannot innovate by copying others? Is a program in place to review new product ideas, including all aspects of design, to ensure there is no passing off? Is a climate in place that allows a manager to step in and say, This cannot be done because I believe we have crossed the line.?
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Chapter 14 Business Forms and Arrangements

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Business Forms and Arrangements


TOPICS:
The characteristics of the major forms of business organizations The advantages and disadvantages of the major forms of business organizations The legal consequences of a partnership Methods of arranging business activity

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Sole Proprietorship
SOLE PROPRIETORSHIP: An unincorporated business organization that has only one owner Owner has unrestricted legal responsibility for obligations Oldest, simplest form of business organization No legislation pertaining to sole proprietorship as such
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Sole Proprietorship
BUSINESS OBLIGATIONS ARE PERSONAL OBLIGATIONS Unlimited liability-unrestricted legal responsibility for obligations Bank loan- owner must repay the loan The breach of contract- owner personally liable for breach

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Sole Proprietorship
PROS:
Simplicity Speed and independence Profit motive Lower costs

Tax benefits
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Sole Proprietorship
CONS: Unlimited personal liability Working alone Limited access to capital Limited life span Tax disadvantages

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Partnership
PARTNERSHIP A business carried on by 2 or more persons with the objective of making a profit Similar to a sole proprietorship, in that neither has a legal personality or legal existence separate from the people who comprise them

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Partnership
RULES GOVERNING PARTNERSHIP

SOURCES
Partnership legislation (in place in every province) Contract law Agency law

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Partnership
FINANCIAL LIABILITY Partners are fully responsible for all debts of the partnership Joint liability liability is shared by 2 or more parties (partners) where each is personally liable for the full amount of the obligation Creditors can proceed against the partner with the most assets
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Partnership
THE PARTNERSHIP ACT
Provides mandatory rules with respect to existence of partnership and what the relationship of partners is to outsiders The Partnership Act- a partnership exists when two or more people carry on business with a view towards profit The statutory definition of partnership covers people who expressly intend to be partners as well as people who may not necessarily intend to be partners but act as if they were

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Partnership
THE PARTNERSHIP ACT (contd)
Relationship to each other the Partnership Act provides that partners are agents of one another as well as agents of the firm in matters relating to the partnership business Partners also owe a fiduciary duty to each other

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Partnership
RELATIONSHIP BETWEEN PARTNERS Partnership Act provides for:
All partners are to share equally in the capital and profits of the

business and contribute equally to the losses Property acquired shall be used exclusively for the partnership Partner shall be indemnified by the other partners for any liability incurred on behalf of the partnership A payment made by a partner in excess of his agreed subscription shall earn interest

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Partnership
RELATIONSHIP BETWEEN PARTNERS (cont)
Each partner may take part in the management of the business

No partner is entitled to remuneration for acting in the partnership business No new member admitted without consent of all partners Disputes may be decided by a majority-must have consent of all the members Partnership books shall be kept on partnerships place of business No simple majority may expel any partner
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Partnership
RELATIONSHIP BETWEEN PARTNERS AND OUTSIDERS Joint and several liability- individual and collective liability for a debt. Each liable party is individually responsible for the entire debt as well as being collectively liable for the entire debt

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Partnership
PARTNERSHIP AGREEMENTS

Agreement should address the following issues:


Creation of the partnership Capital contribution Decision making Profit distribution Changes to partnership Dissolution of partnership

Agreement should be periodically reviewed and updated


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Partnership
HOW AND WHY A PARTNERSHIP ENDS
Act provides for termination If entered into for a fixed term, by the expiration of the term If entered into for a single venture, by the termination of that venture By any partner giving notice to the others of intention to dissolve the partnership following the death, insanity, bankruptcy of a partner
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Partnership
PROS: Simplicity Lower costs Greater access to capital Profit motive Tax benefits

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Partnership
CONS: Unlimited personal liability Loss of speed and independence Limitations on transferability Profit sharing Tax disadvantages

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Managing Partnership Risks


TO MANAGE RISK Choose partners with care Educate partners on their authority, its limits, and consequences of exceeding them Monitor activities of partners Notify clients and customers of the departure of partners to prevent Insure against liabilities for wrong-doing
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Partnership Variations
LIMITED PARTNERSHIP A partnership in which the liability of some of the partners is limited to their capital contribution At least one partner has unlimited liability while others have limited liability General partners have unlimited liability Limited partners have a liability limited to the amount that they have contributed to the partnership capital
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Partnership Variations
LIMITED LIABILITY PARTNERSHIP (LLP) A partnership in which the partners have unlimited liability for their own malpractice but limited liability for other partners malpractice Designed to address concerns of professionals who are not permitted to use incorporation as a means of achieving limited liability

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The Corporation
Corporation is a distinct legal entity in law and capable of assuming its own obligations
SHAREHOLDER a person who has an ownership interest in a corporation DIRECTOR a person elected by shareholders to manage a corporation LIMITED LIABILITY responsibility of obligations restricted to the amount of investment DIVIDEND a division of profits payable to shareholders
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The Corporation
PROS: Limited liability Flexibility Greater access to capital Continuous existence Tax benefits Transferability Potentially broad management base
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The Corporation
CONS: Higher costs Public disclosure Greater regulation Dissolution Tax disadvantages Possible loss of control Potential bureaucracy
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Business Arrangements
FRANCHISE an agreement whereby an owner of a trademark or trade name permits another to sell a product or service under that trademark or trade name Disclosure requirements- franchisors are required to deliver a disclosure document to prospective franchisees 14 days prior to franchisee entering into binding agreements or paying money

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Business Arrangements
Franchisees have the right to rescind or cancel the franchise agreement within certain time periods if they do not receive a disclosure document Fair dealing and good faith- parties to a franchise agreement have the duty of fair dealing in the performance and enforcement of the agreement Right of association- franchises have the right to associate with one another and form or join an organization of franchisees
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Business Arrangements
JOINT VENTURE - a grouping of two or more businesses to undertake a particular project STRATEGIC ALLIANCE a cooperative arrangement among businesses that may involve joint research, technology sharing or joint use of productions DISTRIBUTORSHIP OR DEALERSHIP a contractual relationship where one business agrees to sell anothers product
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Business Arrangements
SALES AGENCY an arrangement in which a manufacturer or distributor allows to sell products on its behalf PRODUCT LICENSING an agreement whereby the owner of a trademark or other property right, grants to another the right to manufacture and distribute products associated with the trademark or other proprietary rights

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Chapter 15 The Corporate Form: Organizational Matters


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The Corporate Form: Organizational Matters


OBJECTIVES:
A corporation as a legal person The distinction between federal and provincial incorporation The share structure of a corporation The selection of a corporations name How a corporation is created How the corporation is financed How securities are regulated
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The Corporate Form


THE CORPORATION DEFINED Predominant business vehicle in modern commerce because it is a separate legal identity The corporation alone is responsible for its own debts and other liabilities Should the corporation fail to make good on its obligations, the shareholders are not responsible

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Stakeholders in the Corporation


STAKEHOLDER one who has an interest in the corporation
CORPORATE RELATIONSHIPS
SHAREHOLDERS
ELECT
BOARD OF DIRECTORS

SELECTS (hires) OFFICERS


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Pre-Incorporation Issues
ISSUES TO CONSIDER: Whether to incorporate federally or provincially What types of shares will be available and to whom What to name the corporation

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Shares and Shareholders


SHARE STRUCTURE A share represents an ownership interest in the issuing corporation Classes of shares may include a combination of various rights and privileges
voting rights financial rights preference rights cumulative rights redemption rights
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Availability of Shares
Widely held corporation- shares are normally traded on the stock exchange (available to the general public) Closely held corporation- does not sell its shares to the public Securities legislation- corporations are subject to regulations in those provinces in which the securities are issued or traded

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A Corporate Name
CORPORATE NAME
All jurisdictions require a company to be identified by a name or designated number Must be distinctive Must not cause confusion with any existing name or trademark Must include a legal element Must not include any unacceptable terms NUANS report- a document that shows the result of a search for a business name
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Process of Incorporation
Newly upgraded automated search (NUANS) report Articles of Incorporation Notice of registered office Notice of directors Filing fee payable to the Receiver General of Canada

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Process of Incorporation
ARTICLES OF INCORPORATION- defines the basic characteristics of corporations and set out the basic features of the corporation including:
Name and place of corporations registered office

Class and number of shares Any restrictions on the transferring of shares The number of directors Restrictions on the business that can be carried on Any other provisions that an incorporator requires to customize the corporation

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Organizing the Corporation


FIRST DIRECTORS CALL AN ORGANIZATIONAL MEETING TO:
Make bylaws Adopt forms of share certificates and corporate records Authorize the issue of shares and other securities Appoint officers Appoint auditor Make banking arrangements Transact any other business
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Financing the Corporation


DEBT FINANCING
Corporation may raise money by borrowing Bonds document evidencing a debt owed by the corporation, often used to refer to a secured debt Debentures a document evidencing a debt owed by the corporation, often used to refer to an unsecured debt Securities shares and bonds issued by a corporation

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Financing the Corporation


EQUITY FINANCING-SHARES ARE USED TO: Raise money for the corporation Issued to investors in exchange for price Provide flexible means of raising capital Provide opportunity to benefit from corporations growth

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Securities Legislation
SECURITIES LEGISLATION
To provide the mechanism for the transfer of securities To ensure that all investors have the ability to access adequate information in order to make informed decisions to ensure that the system is such that the public has confidence in the marketplace To regulate those engaged in the trading of securities To remove or punish those participants not complying with established rules

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Securities Legislation
ANY CORPORATION WISHING TO SELL SECURITIES TO THE PUBLIC MUST: Register File a prospectus a statement by the issuing company of prescribed information Insider trading restrictions insiders must report any trading they have engaged in

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Securities Legislation
INSIDER TRADING RESTRICTIONS Insider a person who has a special relationship with a corporation Insider trading transactions in shares based on confidential information of a material nature Tippee a person who acquires confidential information from an insider

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Chapter 16 The Corporate Form: Operational Matters


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The Corporate Form: Operational Matters


TOPICS:
The liabilities of a corporation The duties and liabilities of corporate directors and officers The rights and liabilities of shareholders and creditors How the corporation is terminated
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Operational Matters
CORPORATE LIABILITY
Liability in tort primary liability and vicarious liability
Primary corporation is regarded as the entity that actually committed the tort in question Identification theory a corporation is liable when the person committing the wrong is the corporations directing mind Vicarious liability liability when the tort has been committed by an agent or employee who is not otherwise a directing mind of the corporation Same principle applies whether a natural employer a human being, or an artificial employer a corporation

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Operational Matters
CORPORATE LIABILITY Agency law generally determines when a corporation is liable on a contract Outsiders can now generally rely on the apparent authority of agents the corporation would be liable on the contract To avoid personal liability, contracts signed should clearly indicate that the person is signing on behalf of the corporation and is not signing in a personal capacity
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Operational Matters
CRIMINAL AND REGULATORY LIABILITY Criminal liability judiciary adapts the identification theory. The person who committed the crime was a directing mind of the corporation CRIMINAL CODE PROVISIONS Liability for organizations Elements of a crime New legal duty Penalties-some with no prescribed limits
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Operational Matters
REGULATORY OFFENSES an offence contrary to the public interest Corporation and sometimes even its directors and officers face penalties, including civil liability for damages Corporation faces liability in areas of taxation, human rights, pay equity, employment standards, consumer protection, unfair or anticompetitive business practices, occupational health and safety, and environmental protection
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Directors and Officers


DUTIES OF DIRECTORS AND OFFICERS Fiduciary duty Self-dealing contracts a contract in which a fiduciary has a conflict of interest Corporate opportunity a business opportunity in which the corporation has an interest Duty of competence- directors and officers must meet a general standard of competence
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Directors and Officers


LIABILITIES OF DIRECTORS AND OFFICERS Liability in tort may be liable for own tortious conduct Liability in contract director not generally liable for the corporations contracts Liability by statute personal liability for breaching various statutes Indemnification- the corporate practice of paying litigation expenses of officers and directors for lawsuits related to corporate affairs
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Directors and Officers


AVOIDING RISK OF PERSONAL LIABILITY Make all decisions informed decisions Do what is necessary to learn about matters affecting the company Identify problems within the company Stay apprised of and alert to the corporations financial and other affairs Regularly attend directors meetings Ensure they receive of reliable professional advice
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Shareholders
SHAREHOLDER LIABILITY No duty to act in the best interests of the corporation Generally no responsibility for the debts and liabilities of the corporation Lifting the corporate veil determining that the corporation in not a separate legal entity from its shareholders (Salomon principle)

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Shareholders
SHAREHOLDER RIGHTS Three broad categories
the right to vote the right to information financial rights

Rights are allocated by directors when issuing different classes of shares

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Shareholder Rights
DIFFERENT CLASSES OF SHARES Common share a share that generally has a right to vote, to share in dividends, and to share in proceeds on dissolution Preferred share a share or stock that has a preference in the distribution of dividends and the proceeds on dissolution

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Shareholder Rights
RIGHT TO VOTE INCLUDES RIGHT TO: Annual general meeting of shareholders Be given notice of the meeting Attend the meeting Ask questions Introduce motions Proxy a person authorized to exercise a shareholders voting rights
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Shareholder Rights
RIGHT TO INFORMATION INCLUDES RIGHT TO: Inspect the annual financial statement Apply to the court to have an inspector appointed if it can be shown there is serious concern about mismanagement Inspect certain records, including minute books Know whether directors have been purchasing shares of the corporation
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Shareholder Rights
FINANCIAL RIGHTS INCLUDE: Right to receive any dividend declared by the corporation Cumulative dividend rights of preferred shareholders Share in the assets of a corporation on dissolution

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Shareholder Remedies
A DISSATISFIED SHAREHOLDER MAY: Sell her shares Exercise dissent and appraisal rights Bring a derivative action a suit by a shareholder on behalf of a corporation to enforce a corporate cause of action Bring an oppression action a statutory remedy available to shareholders and other stakeholders to protect their corporate interests (oppression remedy)
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Shareholder Remedies
REMEDY UNDER AGREEMENTS: Shareholder agreement an agreement that defines the relationship among people who have an ownership interest in a corporation Unanimous shareholder agreement an agreement among all shareholders that restricts the powers of the directors to manage the corporation

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Managing Risk Through Shareholders Agreements


Agreements- allows the shareholders to define their relationship in the following areas:
Management of the company Protection for the minority shareholders Control over who will be the other shareholders Provision of the market for shares Capital contribution Buy-sell arrangements in the event of a dispute Mechanism for terminating an agreement
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Creditor Protection
LEGISLATIVE PROVISIONS PROTECTING CREDITORS CANDIAN BUSINESS CORPORATIONS ACT FORBIDS:
Corporation paying dividends to shareholders if doing so would jeopardize its ability to pay own debts as they fall due (liquidity test) Paying dividends if that would make the company insolvent Directors who consent to such a dividend are personally liable to restore to the corporation any amounts so paid
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Termination of the Corporation


CORPORATION MAY BE TERMINATED BY: Winding up the process of dissolving a corporation lapse neglect to file annual report or to follow other reporting requirements court order shareholder wrongfully treated and this is the only way to do justice bankruptcy usually leads to dissolution of the corporation
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Chapter 20 The Employment Relationship

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The Employment Relationship


TOPICS:
The basic elements of the employment relationship The ways in which the law affects recruitment practices The content of a typical employment contract The legal issues relating to the terms and conditions of employment

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The Employment Relationship


THE EMPLOYMENT RELATIONSHIP A contractual relationship whereby an employer provides remuneration to an employee in exchange for work or services Independent contractor a person who is in a working relationship that does not meet the criteria of employment Usually doctors and lawyers provide services in the capacity of independent contractor
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Employee Versus Independent Contractor


BASED ON VARIOUS TESTS, INCLUDING The degree of control exercised over the individual by the employer- more direction and supervision provided by employer, more likely the relationship is employment The ownership of tools, chance of profit, and the risk of loss from performance of the requested service The degree of integration of the work into the companys activities
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Implications of an Employment Relationship


IMPLICATIONS Employee has certain statutory rights and benefits such as paid holidays and overtime Employee may sue for wrongful dismissal, but this avenue is not available to an independent contractor Employer is responsible for the torts of an employee in the course of employment, but not for those of an independent contractor in the course of carrying out the contract
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Risk in Hiring
RISKS IN HIRING - critical to business success or failure Vicarious liability employer is liable when an employee commits a wrong while carrying out assigned duties or authorized tasks. Negligent hiring if the employer is careless in hiring, training, or supervising there may be an action against the employer in negligence due to the actions of employee
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The Hiring Process


STEPS IN THE HIRING PROCESS Develop job descriptions Advertise the positions Have candidates complete an application form or submit a rsum Short-list candidates Check backgrounds or references Interview selected applicants
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The Hiring Process


EFFECT OF HUMAN RIGHTS REQUIREMENTS ON HIRING Human rights legislation prohibits discrimination in hiring on certain grounds
Marital status Race Colour Physical or mental disability Religion or creed Sex Age
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Discrimination
DEFINED Treating someone differently on the basis of a prohibited ground Adverse effects discrimination discrimination that occurs as a result of a rule that appears neutral but in its effects is discriminatory Systemic discrimination discrimination that results from the combined effects of many rules, practices, and policies
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Discrimination
DEFENSES TO DISCRIMINATION Bona fide occupational requirement (BFOR)
a defense that excuses discrimination on a prohibited ground when it is done in good faith and for a legitimate business reason

Duty to accommodate
the duty of an employer to modify work rules, practices, and requirements to meet the needs of individuals who would otherwise be subjected to unlawful discrimination

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Discrimination
PENALTIES Failure to avoid or eliminate discriminatory practices can result in a complaint to the Human Rights Commission Board of inquiry investigates the complaint If complaint is valid, it can order the employer to stop its practices, hire a particular individual, pay monetary compensation, write a letter or apology, reinstate employee or institute an affirmative action plan
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Discrimination
AVOIDING DISCRIMINATION IN HIRING Job description Advertisements Application forms Interviews

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Employment Equity
EMPLOYMENT EQUITY LEGISLATION Laws designed to improve the status of certain designated groups requires employers to take positive steps to make the workplace more equitable Employment Equity Act targets the underrepresentation of women, Aboriginal peoples, people with disabilities, and visible minorities in the workforce
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Formation of the Employment Contract


OFFER OF EMPLOYMENT Must be reasonably certain to constitute an offer in law Need not be in a particular form or in writing Once made, the offer is capable of acceptance until it is terminated

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The Employment Contract


CONSIDERATIONS PRIOR TO MAKING AN OFFER Prior to making an offer, the employer should determine whether the candidate has any obligations to his/her most recent employer Could result in legal action against the new employer for: Inducing breach of contract Restrictive covenants Fiduciary obligations
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The Employment Contract


FIXED OR DEFINITE TERM CONTRACT A contract for a specified period of time, which automatically ends on the expiry date INDEFINITE-TERM CONTRACT A contract for no fixed period which, can end on giving reasonable notice EXPRESS AND IMPLIED TERMS Express terms have been agreed upon by the parties Implied terms are what the courts believe the parties would have agreed to
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The Employment Contract


CONTENT OF AN EMPLOYMENT CONTRACT
Names of the parties Date on which contract begins Position and description of the work to be performed Compensation (i.e., salary, wages, bonuses) Benefits (i.e., vacation, vacation pay etc.) Probation period, if any Duration of the contract, if any Evaluation and discipline procedures

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The Employment Contract


CONTENT OF AN EMPLOYMENT CONTRACT
Company policies or reference to employee policy manual Termination provisions Recital of management rights (i.e., employer has a right to make changes to job duties and responsibilities) Confidentiality clause, if appropriate Ownership of intellectual property, if appropriate Restrictive covenant, if any Entire agreement clause (i.e., the written contract contains the whole agreement)

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The Employment Contract


EMPLOYMENT STANDARDS LEGISLATION

Laws that specify minimum standards in the workplace including: Hours of work and overtime Minimum wage Vacations and vacation pay Termination and severance Statutory (paid) holidays Maternity and parental leave
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The Employment Contract


SAFETY AND COMPENSATION Workers compensation legislation is designed to address accidents and injuries in the workplace Provides for a type of no-fault insurance Employers are required to pay into a fund Workers who have job related injuries, accidents or illnesses are compensated Economic safety schemes -Employment Insurance Act and Canada (and Quebec) pension plan
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Workplace Discrimination
WORKPLACE HARASSMENT
Any unwanted physical or verbal conduct that offends or humiliates the victim and detrimentally affects the work environment or leads to adverse job-related consequences for the victim including: Threats intimidation verbal abuse unwelcome remarks jokes about race, religion, sex, disability, age displaying sexist, racist, or offensive pictures sexually suggestive remarks or gestures unnecessary physical contact physical assault including sexual assault

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Pay Equity
PAY EQUITY Provisions designed to ensure that female and male employees receive the same compensation for performing similar or substantially similar work Designed to redress systemic discrimination in compensation for work performed

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Drug and Alcohol Testing


TESTING POLICIES - generally accepted that, in most cases, an employer test an employee for alcohol and drug use where there is a reasonable suspicion
A company needs to show that the policy is a bona fide occupational requirement policy must have been developed honestly and in good faith and be reasonably necessary to ensure the safe, economical, and efficient performance of the job
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Workplace Privacy
COLLECTION AND DISSEMINATION OF INFORMATION legislation gives individuals the right to control the collection and use of personal information Privacy Act- regulates the collection and use of personal information held by the federal government Surveillance and searches- surveillance of employees with video cameras or closed-circuit television is sometimes used to prevent, detect, or investigate fraud, theft and harassment
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Technology and the Law


MONITORING E-MAIL IN THE WORKPLACE monitoring the use monitoring the content Personal Information Protection and Electronic Documents Act (PIPEDA) Personal information should not be collected, used, or disclosed without the prior knowledge and consent of the individual concerned.
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The Union Context


LEGISLATION Both federal and provincial governments have legislation that guarantees the right of most employees to join trade unions Certification the process by which a union is recognized as a bargaining agent for a group of employees

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The Union Relationship


LABOUR RELATIONS Labour Relations Board a body that administers labour relations legislation Collective bargaining a mechanism by which parties enter a collective agreement or contract Collective agreement the employment agreement reached between the union and employer setting out the bargaining unit employees terms and conditions of employment
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Chapter 21 Terminating the Employment Relationship

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Terminating the Employment Relationship


TOPICS:
How the employment relationship ends The differences among dismissals for just cause, dismissals with notice, constructive dismissals, and wrongful dismissals The issues arising from a wrongful dismissal suit The components of a termination settlement
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Ending the Relationship


EMPLOYER MAY END RELATIONSHIP BY Summarily dismissing, or firing, an employee Gives the employee notice of termination Acts in such a manner that the employment relationship becomes untenable

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Dismissals for Just Cause


JUST CAUSE Employee conduct that amounts to a fundamental breach of the employment contract, for example Employer may dismiss an employee without notice- exists when the employee is guilty of on one or more of the following:
serious misconduct habitual neglect of duty incompetence conduct incompatible with duties or prejudicial to the employers business willful disobedience in a matter of substance
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Dismissals for Just Cause


A minor infraction by an employee is insufficient to justify dismissal The cumulative effect of many minor instances may be sufficient The cumulative effect must be such that there is a serious impact on the employment relationship

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Serious Misconduct
SERIOUS MISCONDUCT Intentional, harmful conduct of the employee that permits the employer to dismiss without notice Progressive discipline policy a system that follows a sequence of employee discipline from less to more severe punishment Condonation employer behaviour that indicates to the employee that misconduct is being overlookedemployer must be fully aware of the wrongful behaviour
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Habitual Neglect of Duty and Incompetence


HABITUAL NEGLECT OF DUTY Persistent failure to perform employment duties INCOMPETENCE Lack of ability, knowledge, or qualification to perform employment obligations

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Conduct Incompatible and Willful Disobedience


CONDUCT INCOMPATIBLE Personal behaviour that is irreconcilable with employment duties or prejudicial to the employers business WILLFUL DISOBEDIENCE Deliberate failure to carry out lawful and reasonable orders

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Other Causes
OTHER BASES FOR TERMINATION WITHOUT NOTICE Harassment including sexual harassment Disruption of corporate culture Consumption of alcohol or drugs in the workplace Drug abuse Each situation must be analyzed on its facts

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Non-Cause and Near Cause


Situations arise whereby what appears to a good reason for terminating an employee is not necessarily just cause Reasonable notice a period of time for an employee to find alternative employment prior to dismissal In the absence of just cause, the employer is required to give notice or pay in lieu of notice

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Dismissal With Notice


REASONABLE NOTICE PERIODS Primary factors in determining the period of notice:
Age Length of service Availability of employment Status of the employee

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Dismissal With Notice


OTHER FACTORS THAT TEND TO LENGTHEN NOTICE INCLUDE: A high degree of specialization Inducement to join an organization Company policy Custom and industry practice Personal characteristics Economic climate
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Constructive Dismissal
CONSTRUCTIVE DISMISSAL Employer has no entitlement to make a fundamental change to an employment contract without the employees consent
Employer conduct that amounts to a breach of a fundamental term of the employment contract Fundamental term a term that is considered to be essential to the contract Employee may accept the change and create a new employment contract or refuse to accept the change, quit, and sue
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Constructive Dismissal
MINIMIZING THE RISKS OF TRIGGERING A CONSTRUCTIVE DISMISSAL LAWSUIT Questions to consider
Is the change to a fundamental term? Is the change fundamental? Why is the change being made? Will the employee accept the change? Are there contractual provisions that permit the contemplated change? Employers must deal with complaints of bad behaviour
Copyright 2011 by Nelson Education Ltd.

Continued...

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Wrongful Dismissal Suit


WRONGFUL DISMISSAL SUIT ARISES WHEN Employee claims no just cause Employee given notice, but claims notice is inadequate Can also arise from a constructive dismissal

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Wrongful Dismissal Suit


MANNER OF DISMISSAL A bad faith dismissal may make an employer vulnerable to additional damages Wrongful dismissal damages court determines how many months notice a successful claimant is entitled to may also receive out-of-pocket loses. A deduction is made for income from a new job or employment insurance received during the notice period

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Duty to Mitigate
MITIGATION Duty requires that an employee take reasonable steps to find comparable or similar employment Does not require an employee to take or look for a lower-level job Failure to mitigate will result in a deduction from the damage award

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Termination Settlements
NEGOTIATIONS offer should be fair to employee could include cash, benefits, counseling, and a reference release a written or oral statement discharging another from an existing duty once employee accepts a termination package, it is customary to have the employee sign a release

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Negotiation of Settlement
Termination settlements- costs associated with a wrongful dismissal suit can be high. Employer may offer a termination settlement rather than dismiss for just cause Severance pay- an amount owed to a terminated employee under employment standards Release- a written or oral statement discharging another from an existing duty

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The Union Relationship


COLLECTIVE AGREEMENT PROVIDES A PROCESS FOR SETTLING DISPUTES ARISING FROM THE AGREEMENT Grievance and arbitration Grievance process a procedure for resolving disputes contained in union contracts Seniority- usually provide that an employer cannot promote, demote, transfer, lay off or recall without giving some consideration to seniority
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The Union Relationship


DISCIPLINE AND DISCHARGE General rule is that an employer may not discipline or discharge an employee without just cause Penalty imposed by an employer through arbitration will depend upon:
The record and service of employee Provocation Any special economic hardship imposed on employee by the penalty
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The Union Relationship


DISCIPLINE AND DISCHARGE The seriousness of the offence Premeditation Uniform enforcement of policies and rules Circumstances negating intent Condonation The arbitrator has the authority to mitigate or soften the severity of the penalty imposed by the employer
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The Union Relationship


DISCIPLINE AND DISCHARGE Arbitrator in assessing whether the penalty is appropriate will consider
the record and service of the employee provocation any special economic hardship imposed on the employee by the penalty the seriousness of the offence premeditation uniform enforcement of policies and rules circumstances negating intent condonation
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Chapter 23

Sales and Marketing: The Contract, Product, and Promotion


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Sales and Marketing: The Contract, Product, and Promotion


TOPICS:
The scope of marketing law The rights and obligations in a contract of sale The legal obligations associated with the product component of marketing The legal obligations associated with the promotion component of marketing
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Marketing Practices: Product and Promotion


MARKETING LAW
All areas of law that influence and direct the creation, promotion, pricing, and distribution of goods, services, or ideas Regulated by all three levels of government: federal, provincial and municipal

OBJECTIVES OF MARKETING LAW


To protect consumers from physical harm To foster fair competition To protect consumers from unfair selling practices
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Contract of Sale
KEY ASPECTS The terms of the contract relating to the product Remedies for breach of those terms The transfer of ownership of the goods Principles relating to the delivery of the goods

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Contract of Sale
TERMS RELATING TO THE CONTRACT Caveat emptor let the buyer beware or let the buyer take care Sale of goods legislation in Canada- is a specialized branch of contract law. It is governed by legislation and, where the legislation is not relevant, by the common law rules of contract provides a measure of protection for the purchaser
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Legislation
SALE OF GOODS ACT Only applies to the sale of goods: personal property in its tangible, portable form as well as items attached to land that can be severed Protects buyers because it implies terms into a contract for the sale of goods Classifies them and provides remedies to the purchaser based on how the breached term has been classified
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Classification of Terms
TERMS ARE EITHER Conditions important or essential to the purpose of the contract OR Warranties a minor term that is not classified as a condition under sale of goods legislation

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Conditions and Warranties


CONDITIONS IMPLIED INTO A SALES TRANSACTION BY SALE OF GOODS ACT: The seller has the right to sell the goods The goods will be reasonably fit for the intended purpose The goods will be of merchantable quality The good will correspond to the sample The goods are equivalent to their description
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Conditions and Warranties


WARRANTIES IMPLIED INTO A SALES TRANSACTION BY SALE OF GOODS ACT: The buyer will have and enjoy quiet possession of the goods (third parties will not claim rights against them) The goods are free from liens and encumbrances in favour of third parties that were not declared or known to the buyer at the time the contract was made
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Sale of Goods Act


REMEDIES FOR PURCHASOR Breach of condition may give the innocent party the right not only to sue for damages, but also to reject the goods and treat the contract as ended Breach of warranty legislation permits the buyer to maintain an action for damages or ask the court to reduce the purchase price but the buyer must continue with the contract
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Sale of Goods Act


LIMITATIONS OF SALE OF GOODS LEGISLATION Generally only applies to goods, not land or services Requires privity of contract Permits contracting out of the implied terms Does not address pre-contractual representations made by the vendor

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Sale of Goods Act


CONSUMER PROTECTION LEGISLATION All provinces have supplemented legislation that prevent the express exclusion of implied conditions and warranties Ontario has enacted legislation to address consumer rights and unfair trade practices such as false, misleading and unconscionable representation

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Sale of Goods
TRANSFER OF TITLE Sale of Goods Act sets out a series of rules that determine when title changes in the absence of terms in a contract Specific goods goods that are identified and agreed on at the time a contract of sale is made Unascertained goods goods not yet set aside and identifiable as the subject of the contract at the time the contract was formed
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Sale of Goods
REMEDIES Damages for nonacceptance damages to which a seller is entitled if a buyer refuses to accept goods prior to title shifting Action for the price the sellers claim when the title to the gods has shifted to the buyer
Continued...

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Delivery of Goods
Bill of lading a shipping document that serves as a contract between the seller and the carrier Stoppage in transitu - the right of a seller to demand that goods be returned by a shipper at the sellers expense even after title has transferred, provided the purchaser is insolvent

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Contractual Shipping Terms


C.I.F. - cost, insurance, and freight seller is responsible for arranging the insurance and shipping F.O.B. - free on board the buyer specified the type of transportation to be used, and the seller arranges and delivers the goods to that shipper C.O.D. - cash on delivery the purchaser is obliged to pay for the goods on delivery
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The Product
BASIC PRINCIPLES Anything a business sells Includes goods, services, or ideas DESIGN AND MANUFACTURE Governments impose minimum standards for many goods and services where they consider it to be in the public interest to reduce the risk or harm Governments also impose standards for patent protection and product design
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Product Packaging and Labelling


LABELLING OF PREPACKAGED GOODS Minimum labelling requirements set out in Consumer Packaging and Labelling Act (CPLA) Must comply with laws concerning safety, honesty and accuracy including product warnings Hazardous Products Act provides at least 23 categories of restricted products that must be labelled in a specific manner or meet certain standards to be legally sold in Canada
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Promotion
INDUSTRY STANDARDS AND LEGISLATION Advertising Standards Canada (ASC) established to promote public confidence in its products and services ASC provides detailed code of industry guidelines Mechanism for public complaints concerning violations of the code, as well as business-tobusiness complaints
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Promotion
Canadian Broadcast Standards Council (CBSC) Specialized codes related to sexual stereotyping and violence The Television Bureau of Canada (TBC) must approve all television commercials before broadcast

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Promotion
FALSE OR MISLEADING ADVERTISING Promotion of goods is regulated by legislation
Promotional statements that either are false or have the ability to mislead a consumer as to their truth Competition Act defines false or misleading advertising

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Competition Act
UNDER THE COMPETITION ACT Prohibited offenses offenses under the Competition Act that are criminal in nature Reviewable matters offences under the Competition Act that are assessed according to a civil burden of proof and resolved by voluntary agreement or by order of the Competition Tribunal

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Competition Act
COMPLAINTS AND DEFENCES Competition Bureau investigates suspected cases of false or misleading Serious offenses may lead to criminal charges Civil track the process by which the Competition Bureau may order a halt to deceptive practices and/or an administrative penalty

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Competition Act
DEFENSES The best defense is that the elements of the offence have not been proven Due diligence a defense based on adopting reasonable steps to avoid the violation of a legal duty

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Competition Act
PERFORMANCE CLAIMS Statements about the performance of a product or a service may fall within the general provisions of misleading advertising It is reviewable conduct under the Competition Act to make a representation about a quality of a product that is not based on an adequate and proper test

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Tests and Testimonials


TESTS Competition Act requires that the tests be carried out prior to the promotion TESTIMONIALS Testimonials will be acceptable provided they are accurately stated and reasonably current, and provided the persons in the testimonials have actually used or evaluated the product
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Promotion Through Selling Practices


BAIT AND SWITCH Advertising a product at a very low price to attract customers, then encouraging them to accept another product that is usually more expensive UNFAIR PRACTICES Illegal business practices that exploit the unequal bargaining position of consumers

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Chapter 24

Sales and Marketing: Price, Distribution, and Risk Management


Copyright 2011 by Nelson Education Ltd.

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Sales and Marketing: Price, Distribution, and Risk Management


TOPICS:
The legal obligations associated with the price component of marketing The legal obligations associated with the distribution (place) component of marketing The role of risk management and corporate compliance in marketing

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Price
PRICING PRACTICES BETWEEN PRODUCER AND COMMERCIAL PURCHASER The federal Competition Act prohibits unfair pricing practices, including those involving the producer and its (commercial) purchaser Objective is to create a level playing field with respect to channel power Channel power the ability of one member of the marketing or distribution channel may exert over one another
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Price
PRICING CONSPIRACIES Competition Act -addresses market manipulation through conspiring with direct competitors to control prices For a criminal offence to be proven, must be established an agreement or a conspiracy to set prices and that the agreement unduly lessened competition and the fact that it unduly lessened competition must be established Penalties include a term not exceeding five years in prison or a fine not exceeding ten million dollars or both
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Price
BID RIGGING Conspiring to fix the bidding process to suit the collective needs of those submitting bids Investigations are common Can take on the form of agreements to submit bids on a rotating basis or to split a market geographically

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Price
ABUSE OF DOMINATE POSITION Reviewable conduct consisting of anticompetitive acts by a dominant company that lessons competition PRICE DISCRIMINATION The offence of failing to provide similar pricing terms and conditions to competing wholesalers or retailers for equivalent volume sales at an equivalent time Criminal offense under the Competition Act
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Price
PREDATORY PRICING The practice of setting unreasonably low prices to eliminate competition Competition bureau refers complaints under the reviewable abuse of dominance provisions to the Competition Tribunal PRICE MAINTENANCE Reviewable conduct because it is an attempt to drive the final retail price of goods upward and impose recriminations upon noncompliant retailers
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Price
PRICING PRACTICES BETWEEN SELLER AND CONSUMER Sale or bargain prices- a reviewable offence for the seller to state that price is less than ordinary (on sale, reduced, clearance) when it is not An advertiser may claim a price to be ordinary if the price reflects items sold at a substantial volume within a reasonable period of time Offered the product for sale in good faith for a substantial period of time
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Pricing Practices Between Seller and Consumer


SALE ABOVE ADVERTISED PRICE - civil provision that prohibits the sale of a product at a price higher than that advertised unless the price was a mistake which was immediately corrected DOUBLE TICKETING - the offence of failing to sell at the lower of the two prices appearing on a product

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Distribution (Place)
DISTRIBUTION- movement of goods and services from producers to customers Includes the process of ensuring that goods get into the consumers hands - that is, shipping and transportation How corporations are structured, including merger decisions resulting in horizontal or vertical integration, is part of the broad notion of distribution

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Organizational Structure
MERGERS, ACQUISITIONS, AND TAKEOVERS Competition Act provides for a two step merger review process Key issue- does merger or proposed merger prevent or lessen, or is likely to substantially prevent or lessen, competition

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Multilevel and Pyramid Selling


MULTILEVEL MARKETING A scheme for distributing products or services that involves participants recruiting others to become involved in distribution PYRAMID SELLING An illegal form of multilevel selling under the Competition Act

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Discriminatory Distribution Practices


REFUSE TO DEAL Conduct that is reviewable under the Competition Act because the seller refuses to sell to a purchaser on the same terms as offered to the purchasers competitors EXCLUSIVE DEALING Conduct that is reviewable under the Competition Act because the seller agrees to sell to the purchaser only if the purchaser buys from it exclusively
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Discriminatory Distribution Practices


TIED SELLING Conduct that is reviewable under the Competition Act because the seller will sell to the purchaser only if the purchaser buys other, less desirable goods as well ANTI-COMPETITIVE BEHAVIOUR Conduct that restricts competition and is reviewable under the Competition Act

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Direct Marketing
DOOR-TO-DOOR SELLING The act of selling in person directly to a customers residence typical legislation requires licensing and cooling off periods during which they may cancel the contract TELEMARKETING Retailer advertises a product and makes it available through telephone orders, and outbound calls, where the focus is unsolicited calls to consumers in their homes Deceptive telemarketing is a criminal offence
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Online Sales
ONLINE SALES Applying provisions of the Competition Act Applying privacy legislation Security Application of existing law Establishing principles for protecting e-commerce customers

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Development in Online Marketing and Sales


Legislation allows for the use of information only with the consent of the individual who provides it Online customers can refuse requests for information not necessary to complete transaction Collecting organizations cannot provide consumer information to others Canadian Radio- television and Telecommunications Commission developed Canadian Mandatory Do-Not-Call List Consumers register their phone numbers Telemarketer must subscribe to the list and refrain from calling the registered number
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Risk Management in Marketing


RISK MANAGEMENT IN MARKETING - requires four step risk management approach Maximize safety of products Knowledge of standards for both the production and labelling of goods Ensure promotional statements are honest and clear Legitimate pricing policies and distribution channels

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Risk Management in Marketing


RISK MANAGEMENT IN MARKETING Guidelines for sales and shipping staff for all pricing and distribution practices Provide information about aspects of shipping of goods Establish an informed and responsive customer relations process Adequate insurance coverage

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