Chapter 1: Knowledge of Law as a Business Asset
Law in the Business Environment
The law impacts virtually every aspect of society, including the business
environment. The law affects most business decisions – from development of the
basic business idea through to its implementation, and all the attendant matters in
between, including financing, hiring, production, marketing, and sales.
Business law: a set of established rules governing commercial relationships,
including the enforcement of rights
 Defines general rules of commerce
 Protects business ideas and more tangible forms of property
 Provides mechanisms that permit businesspeople to select their
desired degree of participation and exposure to risk in business
ventures
 Seeks to ensure that losses are borne by those who are responsible for
them
 Facilitates planning by ensuring compliance with no commitments
Rules and Principles
Law: the set of rules and principles guiding conduct in society
 Protecting Persons and Their Property
o Those who break the Criminal Code of Canada – such as breaking into
another person’s house, assaulting someone, or committing a
commercial fraud – are subject to criminal sanctions, such as fines or
imprisonment
o Businesses are legally required to adequately protect their customers’
personal information due to the regime established by the Personal
Information Protection and Electronic Documents Act
o Business is required by law to treat humanely any animals in its care.
Failure to do leads to prosecution under animal welfare statuses and
even then Criminal Code of Canada
o The law protects the members of society in two ways:
 It sets rules with penalties in order to encourage compliance
 It seeks to make those who break the law accountable for their
misconduct
o Breach of Contract: failure to comply with a contractual promise
 Facilitating Interactions
o The law facilitates personal interactions by providing rules concerning
marriage, adoption, and the disposal of property upon the owner’s
death for example
o Age of majority: the age at which a person becomes an adult for legal
purposes. In Canada, this ranges from 18-19 years of age, depending
on the province
o Contract law: rules that make agreements binding and therefore
facilitate planning and the enforcement of expectations
o The law functions to prevent disputes and to facilitate relationships
o Litigation: the process involved when one person sues another
 Providing Mechanisms for Dispute Resolutions
o Mediation: a process through which the parties to a dispute endeavor
to reach a resolution with the assistance of a neutral person
o Arbitration: a process through which a neutral party makes a decision
(usually binding) that resolves a dispute
o Liability: legal responsibility for the event or loss that has occurred
How and Why the Law Works
 Legal risk management plan: a comprehensive action plan for dealing with
the legal risk involved in operating a business
Law and Business Ethics
 Business ethics: moral principles and values that seek to determine right and
wrong in the business world
 Consider how ethics impacts on business decisions form a number of vantage
points:
o Business to consumer: how far should a company go in extolling the
virtues of its product? When does sales talk become deception?
o Business to society: to what lengths should a company go to enhance
shareholder return?
o Business to employee: should a business monitor employee emails and
Internet use on company computers?
o Business to business: short of lying or fraud, is it ethical to bluff during
business negotiations?
Chapter 2: The Canadian Legal System
Introduction
The Canadian legal system is the machinery that compromises and regulates the
government. Government in turn is divided into three branches:
 The legislative branch creates law in the form of statues and regulations
 The executive branch formulates and implements government policy and law
o Government policy: the central ideas or principles that guide
government in its work, including the kind of law it passes
 The judicial branch adjudicates on disputes
Constitutional law: the supreme law of Canada that constrains and controls how the
branches of government exercise power
 Charged with upholding “the values of a nation” – tied to the political
philosophy known as liberalism: a political philosophy that emphasizes
individual freedom as its key organizing value
The Canadian legal system: the machinery that comprises and governs the
legislative, executive, and judicial branches of government
The legislative branch of government passes laws that impact on business
operations.
 The executive branch implements and generates policy that may be directed
at business
 The judicial branch provides rulings that not only resolve existing legal
conflicts but also impact on future disputes
The Canadian Constitution
 Canadian constitution is not contained in one document – located in a variety
of places, legislative and political, written and unwritten.
 Written elements of the Constitution include the Constitution Act, 1867 - part
of which divides legislative power between the federal and provincial
governments – and the Canadian Charter of Rights and Freedoms – which
identifies the rights and freedoms that are guaranteed in Canada
 Constitutional Conventions: important rules that are not enforceable by a
court of law but that practically determine how a given power is exercised by
government
The Legislative Branch of Government
The legislative branch of government creates a form of law known as statute law:
formal, written laws created or enacted by the legislative branch of government
 Familiar example of statute law is the Criminal Code of Canada, which
prohibits a variety of offences, such as assaults, theft and fraud.
 Three levels of government – the federal, provincial, and municipal levels –
make legislation in Canada
 Parliament, the federal legislative branch, is composed of the House of
Commons and the Senate
 For legislation to become a law, it must first be passed by the house of
commons, and then approved by the Senate
Statute Law and Jurisdiction
Each level of government has the jurisdiction to pass laws within its proper
authority or sphere
The Constitution Act, 1867

Federal Government
- Parliament
- House of commons
- Senate
Law-making jurisdiction
provided by s.91 of the CA
Provincial Government
Legislature
Law-making jurisdiction
provided by s.92 of the CA
Territorial Governments
Limited self-government
Subject
Municipal Government
Law-making jurisdiction
provided by the provincial
legislature
Executive jurisdiction: jurisdiction that one level of government that holds
entirely on its own and not on a shared basis with another level
 Concurrent jurisdiction: jurisdiction that is shared between levels of
government
 Paramountcy: a doctrine that provides the federal laws prevail when there
are conflicting or inconsistent federal and provincial laws
 Ratify: to authorize or approve
 Treaty: an agreement between two or more states that is governed by
international law
 Bylaws: laws made by the municipal level of government
The Executive Branch of Government
The executive branch of government has a formal, ceremonial function, as well as a
political one
 Formal executive: the branch of government responsible for the ceremonial
features of government
 Political executive: the branch of government responsible for day-to-day
operations, including formulating and executing government policy, as well as
administering all departments of government
 The chief executive of the federal government is the prime minister, while the
chief executive of the provincial government is the premier. Other members
include cabinet members, civil servants, and the agencies, commissions, and
tribunals that perform government functions
 Cabinet: a body composed of all ministers heading government departments,
as well as the prime minister or premier
 Regulations: rules created by the political executive that have the force of law
The Judicial Branch of Government
 Judiciary: a collective reference to judges
It may seem surprising that the judiciary is a branch of government, given that
the judiciary is supposed to be independent of government
 Judges: those appointed by federal and provincial governments to adjudicate
on a variety of disputes, as well as to preside over criminal proceedings
System of Courts
 Each provincial and territorial system of courts has three basic levels: trial,
intermediate appeal, and final appeal
 Trial courts are two types: inferior and superior
o Inferior court: a court with limited financial jurisdiction whose judges
are appointed by the provincial government. Criminal, family, and civil
cases
 Small claims court: a court that deals with claims up to a
specified amount
o Superior court: a court with unlimited financial jurisdiction whose
judges are appointed by the federal government
 Supreme Court of Canada: the final court for appeals in the country

Canadian Charter of Rights and Freedoms (1982): a guarantee of specific
rights and freedoms enshrined in the Constitution and enforceable by the
judiciary
Everyone has the following fundamental freedoms:
 Freedom of conscience and religion
 Freedom of thought, belief, opinion and expression, including freedom of the
press and other media of communication
 Freedom of peaceful assembly
 Freedom of association
Sources of Law
There are four sources of law in Canada: constitutional convention, statute law, the
royal prerogative, and common law.
 Royal prerogative: historical rights and privileges of the Crown, including the
right to conduct foreign affairs and to declare war
 Common law: rules that are formulated in judgments
 Precedent: an earlier case used to resolve a current case because of its
similarity
 Equity: rules that focus on what would be fair given the specific
circumstances of the case, as opposed to what the strict rules of common law
might dictate
Classifications of Law
 Domestic law: the internal law of a given country, which includes both statute
and case law
 International law: law that governs relations between states and other
entities with international legal status
 Substantive law: law that defines rights, duties, and liabilities
 Procedural law: the law governing the procedure to enforce rights, duties, and
liabilities
 Public law: areas of the law that relate to or regulate the relationship between
persons and government at all levels
o Tax, constitutional, and administrative law
 Private law: areas of law that concern dealings between persons
o Tort, property, and company law
Administrative law: rules created and applied by those having governmental powers

Chapter 5: An Introduction to Contracts
Contract Law
A contract is a deliberate and complete agreement between two or more competent
persons, not necessarily in writing, supported by mutual consideration, to do some
act voluntarily. A contract is enforceable in a court of law.
There are certain elements of a contract, discussed below:
An agreement is composed of an offer to enter into a contract and an
acceptance of that offer. Items contained in an agreement are referred
to as terms.
 Complete states that the agreement must be complete.
 The agreement must be deliberate; both parties must want to enter
into a contractual relationship. Formally, this concept is known as
intention to create legal relations.
 An agreement must also be voluntary, freely chosen and cannot
involve coercion or other forms of serious unfairness.
 Be two or more competent parties. There must be at least two parties
entering the contract.
 Supported by mutual consideration: a contract involves a bargain or
exchange between the parties involved. Meaning each party must give
something of value in exchange for receiving something from the
other party. Therefore the contract must be supported by mutual
consideration.
 Not necessarily in writing. An oral contract is enforceable, although
written contracts are preferred. In most Canadian jurisdictions there
are certain kinds of contracts – those involving an interest in land –
that must be in writing in order to be enforceable.
Once a contract is entered, both parties are able to rely on the terms that were
negotiated, and use them to plan accordingly.
Dispute resolutions:
 Taking the matter to court and suing for losses sustained
Contract law is put in place to ensure that each party gets what they expected out of
the deal. Most of the time, the rules governing a contract are based on common law.

Creating the Contract
Contractual relationships typically begin with communication, which could arise in
countless forms. Contract law is governed by the objective standard test: the test
based on how a “reasonable person” would view the matter. The kind of contract the
ends up getting created is influenced by ones bargaining power. It is almost
impossible for parties to have equal bargaining power because one party will
typically have more experience, knowledge, market leverage, or other advantages.
Contract law was constructed on the assumption that those who negotiate and enter
into contracts have equal bargaining power: the legal assumption that parties to a
contract are able to look out for their own interests.
Performing or Enforcing the Contract
Contract law is narrow in scope; its emphasis is often on a specific transaction and
isn’t traditionally focused on retaining business relationships. This is why
businesses regularly breach contracts. Although contracts are legally binding
commitments, it is not always the best economic decision for a party to keep that
commitment. Contract law has some flexibility, since it requires contractual
obligations to be performed or compensation to be paid for non-performance.
Chapter 6: Forming Contractual Relationships
The Contract
 Before a contract can be put into place, there must be an agreement –
takes the form of offer and acceptance
o Offer: a promise to perform specified acts on certain terms
o Only a complete offer can form the basis of a contract. An offer
doesn’t have to meet the standard of perfect clarity and
precision in how it is expressed. An offer can meet the requisite
standard even if it leaves certain matters to be decided in the
future.
 Invitation to treat: an expression of willingness to do business
 Standard form contract: a “take it or leave it” contract, where the
customer agrees to a standard of set terms that favours the other side.
 There are two sides of a contract:
o Offeror: the person who makes an offer.
o Offeree: the person to whom an offer is made.
Termination of offer:
 Revocation: the withdrawal of an offer. The Offeror can revoke an offer any
time before acceptance simply by notifying the Offeree.
 Option agreement: an agreement where, in exchange for
payment, an Offeror is obligated to keep an offer open
for a specified time. If the Offeror withdraws the offer
before the option agreement permits, they have
committed a breach of contract, and the Offeree can sue
for damages.
o Lapse: the expiration of an offer after a specified or reasonable
period.
o Rejection: the refusal to accept an offer
o Counteroffer: the rejection of one offer and proposal of a new
one.
o Death or Insanity: an offer generally dies if the Offeror or
Offeree dies. However, there could be a term within the offer to
specify otherwise.
Acceptance
 Acceptance: an unqualified willingness to enter into a contract on the terms in
the offer.
 Communication of Acceptance:
o In order for the acceptance to be legal, the Offeree must communicate
– by words or conduct – an unconditional assent to the offer in its
entirety. This can be conveyed in a number of ways: in person, in
writing, by mail, by fax, by email, by telephone, and by other actions.
o Acceptance is effective only when communicated – once it reaches
both parties.
 An exception to this rule is the “postbox rule” – if it is clear that
the Offeror intends the postbox rule to apply to their offer, then
acceptance is effective at the time of mailing the acceptance,
rather than at the time of delivery.
Consideration
 Consideration: the price paid for a promise.
o Consideration is a key ingredient that distinguishes a legally
enforceable promise from one that is not legally enforceable.
 Gratuitous promise: a promise for which no consideration is given.
o Promissory Estoppel: a doctrine whereby someone who relies
on a gratuitous promise may be able to enforce it.
Promise Enforceable without Consideration
 Promise under seal: a practice used to authenticate written agreements by
putting hot wax beside the signature on a document and placing an imprint
in the wax that is unique to the person who signed it.
 The seal is taken as evidence of serious intent by the promisor.
Intention to Contract
 Business Agreements
o Most agreements in the commercial world are intended to be
contractual; the common law recognizes this through a rule stating
that in the marketplace, the intention to contract is presumed.
 Rebuttable Presumption: a legal presumption in favour of one
party that the other side can seek to rebut or dislodge by
leading evidence to the contrary.
 Family Agreements
Common law presumes that promises between family members are non-contractual.
Chapter 8: Non-Enforcement of Contracts
The Importance of Enforcing Contracts
There are a number of legal doctrines that are exceptions to the general rule that a
contract, once formed, is enforceable. This is on the basis of there being:
 An unequal relationship between the two parties
 Misrepresentation or important mistakes concerning the contract
 A defect within the contract itself
Voidable Contract: a contract that, in certain circumstances, an aggrieved party can
choose to keep in force or bring to an end.
Void Contract: a contract involving a defect so substantial that it is of no force or
effect.
Contracts Based on Unequal Relationships
 Legal capacity: the ability to make binding contracts
o Age of majority: the age at which a person becomes an adult for legal
purposes
o Mental incapacity: in order for the contract to be formed freely and
voluntarily by both parties, both must be able to understand the
nature and consequences of their agreement. If members of the
parties were to be mentally impaired through illness or intoxication,
and the other party was aware of their state, they may be able to avoid
the contract at their option.
 Duress: contracts that are made as a result of one of the parties being
threatened with physical harm are not enforceable
o Duress is now broader, and includes economic duress: the threat of
economic harm that coerces the will of the other party and results in a
contract
 Undue Influence: unfair manipulation that compromises someone’s free will
o Undue influence operates in two circumstances:
 Actual pressure
 Presumed pressure
 Unconscionable Contract: an unfair contract formed when one party takes
advantage of the weakness of another
o Inequality between the Parties
o An improvident bargain or proof of exploitation
Misrepresentation and Important Mistakes
 Misrepresentation: a false statement of fact that causes someone to enter a
contract





Recession: the remedy that results in the parties being returned to their precontractual positions
Ingredients of an actionable misrepresentation: a statement must be proven
to be
o False
o Clear and unambiguous
o Material to the contract
o One that actually induces the aggrieved party to enter into the
contract
o Concerned with a fact and not an opinion, unless the speaker claims to
have special knowledge or expertise in relation to an opinion
Categories of Actionable Misrepresentation:
o Fraudulent misrepresentation: the speaker has a deliberate intent to
mislead or makes the statement recklessly without knowing or
believing that it is true
o Negligent misrepresentation: the speaker makes the statement
carelessly or negligently
o Innocent misrepresentation: the speaker has not been fraudulent or
negligent, but has misrepresented a fact
Mistake: an error made by one or both parties that seriously undermines the
contract
Common mistake: both parties to the agreement share the same fundamental
mistake
Contracts Based on Defects
 Illegality:
o Illegal contract: a contract that cannot be enforced because it is
contrary to legislation or public policy
o Illegal by statute:
 The Criminal Code
 The Federal Competition Act
 Ontario’s Real Estate and Business Brokers Act
o Contrary to Public Policy: at common law, contracts are contrary to
public policy when they injure the public interest
 Public policy: the community’s common sense and common
conscience
 Non-solicitation clause: a clause forbidding contract with the
business’ customers
 Non-competition clause: a clause forbidding competition for a
certain period of time
 Writing as a Requirement: as a general rule, contracts do not have to be in
writing in order to be enforceable
o Contracts of guarantee
Guarantee: a promise to pay the debt of someone else, should
that person default on the obligation
 A guarantee must generally be evidenced by writing
o Contracts not to be performed within a year
o Contracts for the sale of goods
o Contracts dealing with land
 Contracts concerning land generally must be evidenced in
writing in order to be enforceable.

Chapter 9: Termination and Enforcement of Contracts
Termination and Enforcement of Contracts
 Termination through:
o Performance: when both parties have fulfilled their contractual
obligations to each other, they have performed the contract
 Vicarious performance: performance of contractual obligations
through others
o Agreement: parties are always free to voluntarily bring their contract
to an end. They may decide to:
 Enter into a whole new agreement – novation: the substitution
of parties in a contract or the replacement of one contract with
another.
 Vary certain terms of the contract
 End the contract
 Substitute a party
 Assignment: the transfer of a right by an assignor to an assignee
o Frustration: when a contract is frustrated, it is brought to an end
 Termination of a contract by an unexpected event or change
that makes performance functionally impossible or illegal
o Breach
Enforcement of Contracts
 Balance of probabilities: proof that there is better than 50% chance that the
circumstances of the contract are as the plaintiff contends
 Privity of contracts: the plaintiff has to establish that there is a contract
between the parties
 Breach of contract: the plaintiff must prove that the other party has failed to
keep one or more promises or terms of the contract
o Condition: an important term that, if breached, gives the innocent
party the right to terminate the contract and claim damages
o Warranty: a minor term that, if breached, gives the innocent party the
right to claim damages only
o Innominate term: a term that cannot be easily classified as either a
condition or a warranty
o Fundamental breach: a breach of contract that affects the foundation
of the contract
o Anticipatory breach: a breach that occurs before the date for
performance
 Entitlement to a remedy: the plaintiff must demonstrate that it is entitled to
the remedy claimed or is otherwise deserving of the court’s assistance
o Damages: monetary compensation for breach of contract or other
actionable wrong
o Expectation damages: damages that provide the plaintiff with the
monetary equivalent of contractual performance
o Punitive damages: an award to the plaintiff to punish the defendant for
malicious, oppressive, and high-handed conduct
o Duty to mitigate: the obligation to take reasonable steps to minimize
the losses resulting from a breach of contract or other wrong
o Interlocutory injunction: an order to refrain from doing something for
a limited period of time
o Unjust enrichment: occurs when one party has undeservedly or
unjustly secured a benefit at the other party’s expense
Restitutionary quantum meruit: an amount that is reasonable given the benefit the
plaintiff has conferred
Chapter 10: Introduction to Tort Law
Defining Tort Law
Tort: A harm caused by one person to another, other than through breach of
contract, and for which the law provides a remedy
 Trespass to land: wrongful interference with someone’s possession of land
 Deceit or fraud: a false representation intentionally or recklessly made by one
person to another that causes damage
 Negligence: unreasonable conduct, including a careless act or omission, that
causes harm to another
One of the key objectives of tort law is to distinguish between a situation in which
the loss suffered by an injured individual should remain uncompensated and one in
which responsibility for the loss should be “shifted” to another party considered
responsible for causing the loss, known as a tort-feasor
 Tort-feasor: person who commits a tort
How Torts are categorized
 Intentional tort: a harmful act that is committed on purpose
 Assault: the threat of imminent physical harm
 Battery: intentional infliction of harmful or offensive physical contact
Liability in Tort
There are two kinds of liability in tort law: primary and vicarious
Primary liability arises due to one’s own personal wrongdoing
Vicarious liability: the liability that an employer has for the tortious acts of an
employee committed in the ordinary course or scope of employment
When a person is injured due to the tortious conduct of more than one person, those
culpable are known as joint tort-feasors: two or more persons whom a court has held
to be jointly responsible for the plaintiff’s loss or injuries
Contributory negligence: a defence claiming that the plaintiff is at least partially
responsible for the harm that has occurred


Damages in Tort
The purpose of damages
 The primary goal of a tort remedy is to compensate the victim for loss caused
by the defendant - generally a monetary judgment
 Less common alternatives are equitable remedies, such as injunction – a
court order requiring or prohibiting certain conduct
 Financial compensation means the defendant is ordered by the court to pay a
sum of money to the successful plaintiff
 Worker’s compensation legislation: legislation that provides no-fault
compensation for injured employees in lieu of their right to sue in tort
Pecuniary and Non-Pecuniary Damages
Under Canadian law, the losses for which damages are awarded are categorized as
being pecuniary or non-pecuniary
 Non-pecuniary Damages: compensation for pain and suffering, loss of
enjoyment of life, and loss of life expectancy
 Pecuniary Damages: compensation for out-of-pocket expenses, loss of future
income, and cost of future care
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 defendant’s reprehensible conduct
Chapter 11: The Tort of Negligence
The Law of Negligence
 Ch. 10 defined the tort of negligence as a carless act that causes harm to
another
 Reasonable care: the care a reasonable person would exhibit in a similar
situation
Steps to a Negligence Action
Step 1: does the defendant owe the plaintiff a duty of care? If yes, proceed to
the next step
o Duty of care: the responsibility owed to avoid carelessness that causes
harm to others
o A defendant owes a duty of care to anyone who might be reasonably
affected by the defendant’s conduct, known as the neighbor principle
o Stage 1: is there a prima facie duty of care? – At first sight or on first
appearances
o Stage 2: are there residual policy considerations outside the
relationship of the parties that may negate the imposition of a duty of
care?
 Step 2: did the defendant breach the standard of care? If yes, proceed to the
next step
o In general, the defendant’s conduct is judged according to the
standards of behaviour that would be observed by the reasonable
person in society
o A reasonable person: the standard used to judge whether a person’s
conduct in a particular situation is negligent
 Step 3: did the defendant’s careless act (or omission) cause the plaintiff’s
injury? If yes, proceed to the next step
o While the legal test for causation is sometimes debated, courts
generally ask the following question: would the harm not have
occurred but for the defendants actions?
o Causation: the relationship that exists between the defendant’s
conduct and the plaintiff’s loss or injury
 Step 4: was the injury suffered by the plaintiff too remote? If not, the plaintiff
has proven negligence
o At this point, the court asks: even if there is an obligation to take
reasonable care and it was breached, how far will the legal liability of
the defendant stretch?
o Remoteness of damage: the absence of a sufficiently close relationship
between the defendant’s action and the plaintiff’s injury
o Thin skull rule: the principle that a defendant is liable for the full
extent of a plaintiff’s injury even when a prior vulnerability makes the
harm more serious that it otherwise might be
o 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
Defenses to a Negligence Action
 Contributory Negligence
o Refers to unreasonable conduct by the plaintiff that contributed – or
partially cause – the injuries that were suffered
o This defence recognizes that both the defendant and the plaintiff may
have been negligent

Voluntary assumption of risk: the defence that no liability exists as the
plaintiff agreed to accept the risk inherent in the activity
o A complete defence to the lawsuit, and the plaintiff will be awarded
nothing by a judge even though the defendant had been negligent
Negligent Misstatement
Negligent Misstatement or negligent misrepresentation: an incorrect statement made
carelessly
 The plaintiff’s loss is due to the defendants physical actions but due to the
defendant’s careless oral or written statements
 Professional: someone engaged in an occupation requiring the exercise of
special knowledge, education and skill
Negligence and Product Liability
The law imposes a standard of care on manufacturers in relation to the design,
manufacture, or the sale of their products
 Product liability: liability relating to the design, manufacture, or sale of the
product
 Product liability cases often involve contract law as well
The Negligence Standard vs. Strict Liability
Strict liability in tort makes the defendant liable for the plaintiff’s loss even though
the defendant was not negligent, and by definition, had exercised reasonable care
 Strict liability: the principle that liability will be imposed irrespective of proof
of negligence
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Chapter 12: Other Torts
Introduction
Tort actions relevant to businesses can be conveniently divided between those that
arise because a business occupies a property and those that arise because of the
actual business operations
Torts and Property Use
Tort actions may arise in relation to property in a number of ways, most commonly
when the occupier of the property harms others
 Occupier: someone who has some degree of control over land or buildings on
that land
Occupiers’ Liability
Occupiers’ liability describes the liability that occupiers have to anyone who enters
onto their land or property
Liability at Common Law
 The liability of the occupier for mishaps on property is not determined by the
ordinary principles of negligence, rather liability is determined by classifying
the visitor as a trespasser, licensee, invitee, or contractual entrant
 Contractual entrant: any person who has paid (contracted) for the right to
enter the premises
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 onto the property and whose
presence is either unknown to the occupier or is objected to by the occupier
The Tort of Nuisance
 Nuisance: any activity on an occupier’s property that unreasonably and
substantially interferes with the neighbor’s rights to enjoyment of the
neighbor’s own property
 Trespass to land: wrongful interference with someone’s possession of land
Torts from Business Operations
Torts involving customers:
 Assault and battery
o An assault is the threat of imminent physical harm by disturbing
someone’s sense of security
o Battery is the actual physical contact or violation of that bodily
security
 False imprisonment: unlawful detention or physical restraint or coercion by
psychological means
o Legal authority: the authority by law to detain under section 494 of
the Criminal Code
 Deceit: a false representation intentionally or recklessly made by one person
to another that causes damage

Business-to-business Torts
 Passing off: presenting another’s goods or services as one’s own
 Interference with contractual relations: incitement to break the contractual
obligations of another
 Injurious or malicious falsehood: the utterance of a false statement about
another’s goods or services that is harmful to the reputation of those goods
or services
 Defamation: the public utterance of a false statement of fact or opinion that
harms another’s reputation
o Justification: a defence to defamation based on the defamatory
statement being substantially true
o Qualified privilege: a defence to defamation based on the defamatory
statement being relevant, without malice, and communicated only to a
party who has a legitimate interest in receiving it
o Fair comment: a defence to defamation that is established when the
plaintiff cannot show malice and the defendant can show that the
comment concerned a matter of public interest, was factually based,
and expressed a view that could honestly be held by anyone
o Responsible communication on matters of public interest: defence that
applies where some facts are incorrectly reported but (1) the
publication is on a matter of “public interest” and (2) the publisher
was diligent in trying to verify the allegation
o Absolute privilege: a defence to defamation in relation to
parliamentary or judicial proceedings
Chapter 13: The Agency Relationship
The Nature of Agency
 Agency is a relationship that exists when one party represents another party
in the formation of legal relations
 Agent: a person who is authorized to act on behalf of another
 Principal: a person who has permitted another to act of her behalf
 These legal relationships are as binding on the principal as if that person had
directly entered them herself
Agency Defined
Agency relationships, like contractual relationships in general, operate for the most
part with a few difficulties – agents simply represent principals in transactions with
others
Two key relationships:
 The agent-principal relationship
 The outsider-principal relationship
Outsider: the party with whom the agent does business on behalf of the principal
 The complications resulting from these relationships have necessitated rules
of law to regulate and resolve them – the law of agency: the law governing
relationships where one party, the agent, acts on behalf of another, the
principal
Chapter 14: Business Forms and Arrangements
Forms of Business Organization
Choosing how to own a business is a critical decisions because it determines in large
part who:
 Is financially liable for the business
 Shares in business profits and other assets
 Makes and is accountable for management decisions
The Sole Proprietorship
The sole proprietorship: an unincorporated business organization that has only one
owner
Financial Liability
 Any obligation of the business becomes the sole proprietor’s personal
obligation
 The breach of contract: the sole proprietor would be the one getting sued, and
it would be their assets at risk
 Unlimited liability: unrestricted legal responsibility for obligations
o Regardless of what the owner has invested in their business, their
personal assets may be seized to pay the outstanding debts of the
business
Profit sharing
The sole proprietor not only bears the risk of failure, but also enjoys the advantage:
all the profits after taxes accrue to the sole proprietor alone
Decision Making
 The sole proprietor, having no partners and no board of directors to report
to, can make business decisions very quickly and independently
 Disadvantages: few people are good at everything, yet the sole proprietor is
responsible for every aspect of the business, from buying and selling to
financing and advertising
 Another consideration is what to do in the sole proprietor’s absence
Sources of Capital
 Limited sources of capital
 Without business partners, limited to whatever assets are available
Taxation
 Because the sole proprietorship is not a legal entity separate from the owner,
there are no formal or specialized tax rules governing it – profits and losses
are simply reported on the owner’s personal income tax
Transferability
 A sole proprietorship cannot be transferred or sole to another because it has
no legal status
 Assets associated with it though – such as inventory – are transferrable
Regulations
 Minimal legal requirements for establishing and conducting this form of
business organization – one simply commences business activity
 They are subject to the same general legislation as any other business form
o The registration of licensing of the business
o Requirements vary from province to province
 In addition to the regulations put in place by the federal and provincial
governments, municipalities often impose their own registration or licensing
requirements
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A sole proprietor who wishes to use a name other than their own for
conducting the business must register the name at the local registry office or
other government office designated by the province, where such records are
kept and made available to the public
Also subject to the laws of general application
o Local zoning laws, provincial taxes, health legislation, those who hire
employees must comply with all applicable legislation
A sole proprietor (unlike a public corporation) is not required to publish the
business’s financial statements
The Partnership
The partnership: a business carried on by two or more persons with the intention of
making a profit
The rules governing partnerships come from 3 sources: partnership legislation,
contract law, and agency law
Financial Liability
 Each partner is fully responsible for all the debts and obligations of the
partnership and not just for some appropriate proportion
 Joint liability: liability shared by two or more parties where each is personally
liable for the full amount of the obligation
 Each partner’s personal assets can be seized and sold through the judicial
process if the partnership assets are insufficient to satisfy partnership
obligations
Profit sharing
It is the partners themselves who decide how profits and other firm assets are to be
divided, if they fail to agree on this point, partnership legislation requires them to
share profits equally
Decision Making
 Because a partnership comprises two or more persons pooling their
resources, the management base is potentially strong
 If one person is sick or unable to devote sufficient attention to the business,
the other partners are in place to carry on
 The downsides is that managing the business will require consultation
among the partners, and they may not always achieve consensus
 A dispute or disagreement between the partners can be extremely disruptive
 Although the partners may have determined that they will have authority in
different areas, instances are bound to arise in which responsibility overlaps
Sources of Capital
 Partnerships provide more sources of capital compared to a sole
proprietorship
 The partnership looks to each partner for a capital contribution and can rely
on the creditworthiness of each one to secure financing from other sources,
such as the bank
Taxation
The partnership is not a separate legal entity and therefore any income from
the partnership is allocated to the partners and they must in turn include it
on their individual tax returns
Transferability
 The partnership does not provide for the ready transfer of interest from one
owner to another
 Partners do not individually own or have a share in specific partnership
property
 Each partner has an interest in all partnership property
Agency and the Partnership Act
 Partnership law is based in large part on contract law, agency law, and
provincial partnership legislation, known in every jurisdiction as the
Partnership Act
 The legislation in place in the common law provinces provides mandatory
rules with respect to:
o When a partnership exists
o What the relationship of partners is to outsiders
 These acts have optional rules with respect to
o The relationship of partners to one another
o How and why a partnership ends
When a partnership exists
 According to the Partnership Act, a partnership exists when two or more
people “carry on a business in common 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
 The partnership act also sets out a number of circumstances that point
toward there being a partnership but not conclusively so
The Relationship of Partners to One Another
 If people become partners, the Partnership Act provides that they also
become one another’s agents as well as the agents of the firm in matters
relating to the partnership’s business
 It also means that partners owe fiduciary duties to one another, which
require a partner to put the interests of their partners above their own
 Persons who wish to be associated in partnership should have a partnership
agreement, preferably one drafted by a lawyer
o Provides the parties with significant freedom to define their
relationship
Relationships of Partners to Outsiders
 While partners are to enter into a partnership agreement in order to set out
the rights and obligations between them, this will not modify the relationship
between partners and outsiders, which is governed specifically by the
Partnership Act and generally by partnership law, including agency law

A partner is an agent of the firm – and there are therefore responsible for
contracts entered into with actual or apparent authority
 The Partnership Act and agency law also make partners responsible for one
another’s mistakes
 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
 Each partner is individually as well as collectively responsible for the entire
obligation
How and why a partnership ends
 The Partnership Act provides for the termination of a partnership under
certain circumstances:
o If entered into for a fixed term, by the expiration of the term
o If entered into for a single venture or undertaking, by the termination
of that venture or undertaking
o By any partner giving notice to the others of their intention to dissolve
the partnership
o Following the death, insanity, or bankruptcy of a partner
 Nevertheless, these provisions may be varied by agreement
 On dissolution of a partnership, partnership legislation provides a
process for dealing with partnership property – it must be applied in
payment of the debts and liabilities of the partnership first and then to
payment of what is due to the partners. In the event that the partnership
property is insufficient to satisfy all of the firm’s obligations, partners
must individually contribute to the obligations in proportion to their
entitlement to profits or in another agreed-upon proportion
 After all of the firm’s debts are satisfied, any excess is applied, in the
following order to:
o Repayment of loans made to the firm by partners
o Repayment of capital contributed by the partners
o Payment of any surplus to partners according to their
respective rights to profits
Regulations
 Partnerships are bound by all rules of general application, including
the obligation to comply with laws concerning licensing, employment,
tax collection, and public health
 Most provinces require the filing of a declaration of partnership that
contains information on the partners, the partnership name, and the
duration of the partnership
o Failure to do so isn’t fatal but it can impede legal actions filed in
the name of the partnership and can result in fines
Partnership Variations
There are two variations of the partnership: the limited partnership and the limited
liability partnership
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Limited Partnership
 Limited partnership: a partnership in which the liability of some partners is
limited to their capital contribution
 This vehicle has been used mostly as an investment device
o Limited partners put money into a business in return for tax breaks
and profits
o The general partner manages the investment for a fee and carries the
responsibility – assuming the limited partners have not made
guarantees or commitments beyond their investment
 Cannot be created informally – limited partnership requires a written
agreement that must be registered with the appropriate provincial body
 General partners have substantially the same rights and powers as partners
in ordinary partnerships; limited partners have more narrowly defined rights
o They have the right to share in profits and have the right to have their
contribution returned on dissolution, but the cannot take place in the
management of the partnership – they lose their status of limited
partners and just become general partners
Limited Liability Partnership
 Limited liability partnership (LLP): a partnership in which the partners have
unlimited liability for their own malpractice but limited for other partners’
malpractice
 It is designed to address concerns of professionals who are not permitted to
use incorporation as a means of achieving limited liability
 An LLP has the characteristics of a general partnership, with specific
limitations on the liability of partners
o The limitation on liability (the liability shield) varies depending on the
jurisdiction
o Alberta, Manitoba, Quebec, and Nova Scotia provide a partial shield
that protects a partner from liabilities arising from the negligent or
wrongful acts of her employees or partners, but continues to hold the
partners liable for their own acts and omissions, and the partnership
assets continue to be available with respect to the acts and omissions
of all partners
o In Saskatchewan, New Brunswick, BC, Ontario, Newfoundland and
Labrador, and NWT the legislation provides a full shield that not only
protects partners from the negligent or wrongful acts of her partners
or employees, but also protects
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Chapter 22: Professional Services
Businesses and Professional Services
Professional: someone engaged in an occupation, usually governed by a professional
body, requiring the exercise of specialized knowledge, education, and skill
 Relationships and obligations
o The legal or ethical obligations that employed professionals owe the
business vary according to the capacity in which they are hired
o In principle, the legal obligations of employed professionals are the
same as those who work in private practices outside the firm
 They are in a fiduciary relationship with their employer, where
elements of trust, confidence, and reliance on the
professionals’ skill, knowledge, and advice exists
 They can be liable for negligence, and their employers can be
vicariously liable for their actions
 Ethical obligations
o Professionals’ ethical obligations are especially important to
employers
o Professionals retaining membership in their profession continue to be
bound by the rules of professional conduct and codes of ethics of their
professional bodies
o Ethical conflicts or dilemmas tend to arise when the business in under
stress
 Hiring professionals in-house
Responsibilities of Professionals to Clients and Others who rely on Their Work
Responsibilities in Contract
Professional responsibilities in any given engagement are defined, in part, by
contract
 Retainers: an advance payment requested by a professional from a client to
fund services to be provided to the client
Responsibilities in Tort
 General Responsibility
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 Responsibility to Third Parties