T'h
DOROTHY DuPLESSIS
SHANNON O'BYRNE
PHILIP KING
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~DIAN Bl
LORRIE ADAMS
STEVEN ENMAN
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~DIAN Bl
1~HELAW
ANADIA~ ~
NESS A r ~
WCANADIAN ~
BUSINESS
AND THE LAW
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JU IHI DIIIO\ SIX
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SEVENTH EDITION
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Contents
Preface
The Legal Envir onment o f Bu siness
10
Chap t er 1: Kn owledge of Law as a Bu siness Asset
11
Chap t er 2 : Th e Can adian Legal Syst em
32
............ .
Chap t er 3 : Managi ng Legal Risks
65
Chap t er 4: Disp ut e Resolu ti on
88
Con tracts
..... 120
Chap t er 5 : An I n trod ucti on t o Contract s
..... 121
Chap ter 6 : For min g Con tractu al Rel ati onshi p s ........................................... 133
Chap ter 7 : The Terms of a Con tract .................................................... 164
Chap t er 8 : Non -Enforcement of Contract s . . . . . . . . . . . . . . . . .
Chap t er 9 : Ter mination and Enforce men t of Con tracts
. .... 190
...... 2 16
Business Torts ....................................................................... 245
Chap t er 10 : I ntrodu ction t o Tort Law ................................................... 246
Chap t er 11: The Tort of Negligence
..... 266
Chap t er 12 : Oth er Torts
..... 291
Structurin g Business Acti vi ty .......................................................... 3 19
Chap t er 13 : The Agency Rel ati onshi p
.................................................. 320
Chap t er 14: Business Forms and Arrangemen t s . . . . . . . . . . . .
Chap t er 15 : The Corporat e For m : Or ganizati onal Matters
. .... 346
...... 379
Chap t er 16 : The Corporat e Form : Operati onal Matters ................................... 405
Property
. . .. .. ... .. . . .. . .. .. .. ... . 440
Chapter 17: Introduction to Property Law
. . 4 41
Chapter 18 : Intellectu al Prop er ty . . . . . . .. . .. .... .
. . 469
Chap ter 19 : Real Property
. .. . . .. .. .. . .. . .. . .. .. . . .. .. .. . .. .. . . .. .. .. . .. .... .. .. . . .. .. 509
Employ ment and Professional Rel ati onships . . . . . . .
Chap ter 20: The Employm en t Relationship
. . . ... ... ... . .. .... ... .. . . 536
. .. ..... 537
Chapter 2 1: Ter minating the Employmen t Relation ship .. .
. . 574
Chap ter 22: Profession al Servi ces
. . 602
..
The Sale of Goods, Consu mer Protection an d Compe tition Law . . .. . .. .. .. . .. . .. . .. . .. . .. .. 626
Chapter 1: The Sale of Goods ........................................................ .
Chap ter 2 : Consumer Protection and Competi tion Law
18
Fin ancing th e Busi ness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Chap t er 3 : Bu siness and Banking
50
Chap ter 4: Th e Legal Aspects of Cr edit
73
Chapter 5 : Bankruptcy and Insolvency ................................................. 97
Transference of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................... 120
Chapter 6 : Insurance ................................................................. 121
Glossary
............................................................................ 147
How to Read a Ci tati on
CaseIaw Reporters
.. 160
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................... 161
.. 162
I ndex
II
PREFACE
In Canadian Business and the Law, Seventh Edition, legal knowledge is regarded as
a business asset that builds competitive advantage for the inruvidual and the orgaruzation allke. This text demonstrates how the law can protect persons and their
property as well as resolve disputes. The text also shows that the law facilitates
personal and commercial interactions. In short, the law provides both opportunities to be capitalized on and r isks to be managed.
Canadian Business and the Law is written from the perspective that the law
plays an integral role in all business decisions. Furthermore, it systematically
advocates a r isk management approach as the optimum way of dealing with legal
considerations in the business world. A risk management model is introduced in
Part One and apphed in every subsequent part of the book. Topical coverage is
o rgamze d as follows:
Part One establishes the rationale for students' study of business law. It
accounts for what the law is, where it comes from, and how the law
regulates business. It also establishes risk management as the recurring
theme of the book and the study of business law.
Parts Two and T hree recognize that the legal issues a businessperson
is most llkely to face are in the areas of contract law and tort law. Part
Two, Contracts, and Part Three, Business Torts, provide a practical and
contextualized analysis of these important areas. Here students acquire
not only an essential legal grounding in contract and tort principles, but
also the basic background for the specialized topics ruscussed later in
the book. These two essential parts of the book are carefully written so
that contracts and torts can be read and taught in whichever sequence is
preferable to the user.
The fundamentals of contract law are examined in depth in Part Two to
allow for application in context in later parts, which deal with topics such
as agency, partnership, employment, and insurance. By applying the law to
particular relationships, students gain insight into d1e kinds of contracts
that will figure prominently in their professional lives.
In our experience, students best understand the law when it is related to core
subject areas in the business curriculum, including finance, human resources,
sales, and marketing. For this reason, the remairung parts of the book look at the
functional areas of business and consider legal issues in relation to those activities.
Part Four concerns the selection and use of the form of business.
Part Five examines the creation, acquisition, use, and protection of
property.
Part Six analyzes the acquisition and use of human resources.
Part Seven focuses on the selling and marketing of goods and ser vices.
Part Eight addresses financing the business activity.
Part Nine explores the transference of r isk through the use of insurance.
Our work in Canadian Business and the Law focuses on meeting a number of
objectives:
Our most important aim is to explain the basic legal principles and
concepts in a business context that is engaging and relevant for all readers.
Nfl
The second objective is to reinforce that all aspects of the legal
environment necessitate active management. We offer a model for
identifying, evaluating, and managing legal risk in Chapter 3. Examples of the model's application to business enterprises and a risk
management orientation are reflected in the treatment of legal subjects
throughout the text.
The third objective is to convey legal information in contexts geared to the
practical application of knowledge. A Business Law in Practice scenario
opens each chapter with a business situation containing both legal and
managerial implications. Questions posed by the opening scenario give
students rurection and purpose and encourage critical thinking as they
read the chapter. As a means of testing the students' comprehension
and analytical skills, the scenario is revisited later in the chapter with
suggested responses to the opening questions.
The practical application of legal knowledge is reinforced through boxes
provided throughout the text entitled Business Application of the Law.
These provide examples of the impact of the law on business enterprises.
By illustrating how legal issues arise in the business environment and how
these issues are managed, this feature helps students develop a concrete
understanrung of why the law matters in a business context.
The fourth goal of the text is to recognize the importance of legal
considerations inherent in the emergence of new technologies,
internationalization and globalization of the economy, as well as ethical
and environmental concerns, all of which cut across traditional legal
subjects. Based on our contextualized approach to teaching and learning,
these topics or unifying themes are integrated throughout the body of the
text and through features entitled Technology and the Law, International
Perspective, Ethic.al Considerations, Business and Legislation, and
Environmental Perspective.
The fifth goal is to provide a pedagogically effective framework for the
presentation of jurucial decisions. Our special Case format begins with
a description of the business context surrounrung the legal dispute in
question, followed by a concise statement of the relevant facts that led
to the legal conflict. Next, a statement of the legal issues is provided as
a summary of how the court resolved the conflict. The feature concludes
with several questions that students are asked to consider in order
to deepen their understanding of the case under study. This feature
focuses on context and relevance. Jurucial rulings are summarized and
supplemented with brief excerpts of judicial language.
The Landmark Case and Business and Legislation features provide an
account of pivotal case law and historical legislative initiatives, which can
be essential to grasping contemporary law.
Finally, an Ethical Considerations feature assists the student in assessing the
sometimes uncomfortable compromises that the law forges between competing
interests. As demonstrated in the chart on the inside front cover, the textbook
organizes coverage of the international, environmental, ethics, and technology
themes because of their importance to the modern business world . We have
increased both the depth and the breadth of these four themes according to
strands, or markers, to illustrate the range of topics tllat tlle text covers. The
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2
comprehensive chart is also designed to assist instructors in creating their
lectures. At a glance, instructors can access the textbook's many themed boxes
and locate material according to the subject they wish to address, such as ethics
in consumer relations or ethics in relation to employees.
What's New in This Edition
In this edition, we continue to build on the strengths of the textbook. The content is Canadian, current, business oriented, and focused on risk management. In
addition to enhancing t11e thematic approach as noted above, we present students
with new, real-world examples of the application of the law as well as the latest
Canadian cases and legislation.
This new edition introduces aboriginal law as a sustained topic as well as, in
Chapter 2, aspects of Indigenous laws. There are many reasons for these additions,
including the Final Report of the Truth and Reconciliation Commission of Canada
(2015); the impor tance of reconciliation through inclusivity and curr iculum
reform; the relevance of Indigenous and aboriginal legal matters to education in
business schools at large; and the significance of Indigenous laws and aboriginal
law to business on a variety of fronts.
Some of the other key additions and changes to this edition are:
New ca ses. Many new cases have been added . Examples include: Churchill
Falls (Labrador) Corporation Ltd v Hydro-Quebec, 2016QCCA 1229, leave to
appeal to the SCC granted, 2017 Can LU 21420 (SCC) (Chapter 5); Rosas v
Toca, 2018 BCCA 191 (Chapter6); Downerv Pitcher, 2017 NLCA 13
(Chapter 8); Deloitte & Touche v Livent Inc (Receiver of), 2017 SCC 63
(Chapters 11 and 22); Tondat v Hudson's Bay Company, 2017 ONSC 3236,
aff'd 2018 ONCA 302 (Chapter 12); Fairview Donut Inc v TDL Group Corp,
2012 ONSC 1252, (2012] OJ No 834, aff'd 2012 ONCA 867, (2012] OJ
No 5775 leave to appeal refused, (2013] 2 SCR viii (note) (2013] SCCA
No 47 (Chapter 14); Finkelstein v Ontario (Securities Commission), (2018)
ONCA 61, (2018] OJ No 489 (Chapter 15); Midwest Properties Ltdv
Thordarson, 2015 ONCA 819, 128 OR (3d) 81, leave to appeal dismissed
2016 CanLII 30455 (SCC) (Chapter 16); Menni/lo v Intramodal inc, 2016
SCC 51, (2016] 2 SCR 428 (Chapter 16); Tsilhqot'in Nation v British
Columbia, 2014 SCC 44, (2014] 2 SCR 257 (Chapter 17); Diageo Canada Inc
v Heaven Hill Distilleries et al, 2017 FC 571, (2017] FCJ No 598 (Chapter 18);
Keenan (cob Keenan Cabinetry) v Canac Kitchens, 2016 ONCA 79, (2016] OJ
No 455 (Chapter 20); Howard v Benson Group Inc, 2016 ONCA 256, 129 OR
(3d) 677, leave to appeal refused, (2016] SCCA No 240 (Chapter 21);
Canada (Commissioner of Competition) v Thane Canada Inc (2018),
CT-2018-001 (Chapter 24); Re Redwater Energy Corporation, 2016 ABQB 278
(CanLI!) (Chapter 27); and Ledcor Construction Limited v Northbridge Indemnity
Insurance Company, 2016 SCC 37, (2016] 2 SCR 23 (Chapter 28).
New legislation. We have highlighted new, amended, and proposed
legislation relevant to business, including the regulation of dron es
(Chapter 1); the regulation of r ide-sharing and ride-booking enterprises
such as Uber (Chapter 1); the regulation of the sale and marketing of
vaping products (Chapter 2); the proposed introduction of regulations
mandating plain and standardized packaging for tobacco products
(Chapter 2); franchises in British Columbia (Chapter 1 4); crowdfunding
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3
regulations (Chapter 15); national securities regulation (Chapter 16); the
t ransition of accountants in Canada to the new chartered professional
accountant (CPA) designation (Chapter 22); reducing email spam
(Chapter 24), and new and revised legislation governing payday loans
(Chapter 26).
New real-world examples. This new edition discusses, for example, how
a local craft brewery resolved a trademark ruspute with one of the
largest craft breweries in the United States (Chapter 1); Volkswagen's
diesel emissions scandal (Chapter 3); third party funding of litigation
(Chapter 4); the effect on business by Canada's Anti-Spam Legislation
(Chapter 6); how a Telus customer responded after r eceiving a $24 000
cell phone bill (Chapter 7); how a business was adversely affected
by online defamation (Chapter 12); an agent's authority to enter an
agreement to share a prize (Chapter 13); responsibility for a partner's
debts (Chapter 14); Bombardier and dual-class shares (Chapter 15);
a hospital's claim of ownersh ip over its patient's excised tissue
(Chapter 1 7); ownership and regulation of water r ights (Chapter 1 7);
cybercrime and cyber insurance (Chapter 1 8); offensive names in sports
(Chapter 1 8); the global reach of Canadian injunctions (Chapter 18);
director, corporate, and taxpayer liability for environmentally
contaminated land (Chapter 1 9); Tim Hortons and Ontario's minimum
wage (Chapter 20); sexual harassment in the workplace (Chapter 20);
bad behaviour outside of the workplace (Chapter 21); social media and
just cause for dismissal (Chapter 21); aggravated and punitive damages
in the employment context (Chapter 21); the liability of aurutors to
m isled creditors (Chapter 22); convictions for price fixing and other
anti-competitive behaviour (Chapter 24); and the abandonment of
contaminated oil wells in Western Canada (Chapter 27).
Updated and revised real-world examples from previous editions. Examples
include the liability faced by business for privacy violations (Chapter 1); data
breaches at Yahoo, Ashley Madison, and Equifax (Chapter 3); legal rufficulties
encountered by Cana.man mining companies (Chapter 3); class action
lawsuits in the area of privacy, inclurung Facebook and Ashley Madison
(Chapter 4); securities class actions (Chapter 15); death in the workplace
and criminal sentencing (Chapter 16); corporate social responsibility
(Chapter 16); class actions for unpaid overtime (Chapter 20); cryptocurrency
such as Bitcoin and other new methods of electronic payment (Chapter 25);
genetic testing and insurance legislation (Chapter 28); and pollution
exclusion in commercial general liability policies (Chapter 28).
New content concerning Indigenous laws and aboriginal law. Examples
include an account of Indigenous peoples and constitutional law
(Chapter 2); the Crown's duty to consult and accommodate aboriginal
peoples (Chapter 4); an explanation of aboriginal title and important
developments with respect to the use of lands that are subject to
unresolved land claims (Chapter 17); and an examination of section 89 of
the Indian Act (Chapter 26).
New material on negotiable instruments. The ruscussion of negotiable
instruments has been significantly enhanced and expanded, especially on
the topics of bills of exchange, pro1nissory notes, and defences.
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4
New and updated d1apter openers (Business Law in Practice) for Chapters
4, 11, 17, 20, 21, 23, and 24.
New and revised end-of-chapter material. We have added or replaced
questions in the Questions for Review, Questions for Critical Thinking,
and Situations for Discussion features.
Canadian Business and the Law, Seventh Edition, is offered as a modern resource
for learning the fundamentals of business law from a business and risk management perspective. Rather than simply providing a summary of the law, it presents
traditional business law topics in a manner that resonates with commercial reality.
If you have any suggestions for improvements, additions, or clarifications, please
let us know:
Dorothy Du Plessis
Shannon O'Byrne
Philip King
Lorrie Adams
ddupless@unb.ca
sobyrne@ualberta.ca
king@pklaw.ca
adamsl14@macewan.ca
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5
INTEGRATED
PEDAGOGICAL SYSTEM
Basic legal principles and concepts are explained and reinforced through extensive
pedagogy designed to help students proceed and learn the material.
Chapter Objectives
outline the learning
goals of each chapte\
·1
A Business Law in Practice
scenario opens each cha pt er
with a business situation
containing both legal and
managerial im plications. A
special section before the
Chapter Summary called
Business Law in Practice
Revisited reviews the questions
posed in the scenario with
suggested responses.
KNOWLEDGE or LAW
AS ABUSINESS ASSH
iUSIHESSLAW IN PRACllCE
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TECHNOLOGY AND TH£ LAW
ElECTAONIC CONTRACTING
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Bigg v Boyd Gibbin$ Ltd, (1971)
2 All ER 183 (CA)
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Dfc.ktn1o n v Dodds, U.876]
2 Ch D 46 ! (CA)
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DOSINESi AND LlOISLATION
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MAPU LODG£ fARNS. COMVICTION
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The special Case format
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is at issue. Readers are
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they read the court's actual
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ends w ith questions for
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CHAPTER STUDY
Key Terms and Concepts
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7
End-of-chapter materials
include Key Terms and
Concepts w ith page
references. Que.s tions
fo r Review. Questions
for C rit ical Thi nking. and
Sit uations fo r Discussio n.
Q uest ions fo r Review will
help students to check
their und erstanding o f
chapter topics. Questions
for Critical Thinking and
Situations for Discussion
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NEL
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9
MINDTAP
CHAPTER
Knowledge of Law
as a Business Asset
CHAPTER
The Canadian
Legal System
CHAPrER
Managing Legal Risks
CHAPTER
Dispute Resolution
with the importance of the law to
business and, in Parts Two to Nine, it presents fundamental legal principles in their relevant business contexts. The text contends that those engaged in business
need to manage the legal environment as much as any
other aspect of their business. Part One provides the
basis for that management by introducing the foundations of business law and the concept of legal risk management. It emphasizes the importance of knowing the
law, complying with the law, avoiding unexpected le gal
problems, and regarding law not as an obstacle but as a
means of facilitating commercial activity and competitive advantage.
THIS TEXT DEALS
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10
OBJECTIVES
BUSINESS LAW IN PRACTICE
After studying this chapter.
you should have an understanding of
Lionel Garfield, who grew up on a large farm in Ontario, decided to
go into the chicken processing business for himself. When a local
Ontario poultry producer announced his retirement, Lionel jumped
at the opportunity to purchase the business- including buildings
and equipment. Lionel looked forward to a prosperous future.
First on his list of things to do was to rebrand the operation with
the hope of increasing sales over what the vendor had managed to
achieve. The previous owner had been winding his business down
over the last number of years and barely had a presence in the industry anymore. Lionel thought it best to start fresh with a new name.
Having an unusual sense of humour and wishing to come up with
something unique, Lionel decided to carry on business under the
name of "Chelsea Chickens." Because he was most emphatically not
a fan of the English football tean1 called Chelsea, Lionel thought
that calling his business the "Chelsea Chickens" was therefore clever
and funny, and gave him a distinctive business name to boot. Lionel
then began to advertise in the industry under the name "Chelsea
Chickens" and erected a large s ign outside his poultry farm with big,
bold letters stating "Home of the Famous Chelsea Chickens." He also
built a website featuring this business name as well as ordered letterhead and related office supplies with the name "Chelsea Chickens"
being prominently displayed throughout.
The success of Lionel's business was slow but sure. He received an
increasing number of orders for broiler (male meat) chickens because
of his growing reputation for quality and reliability. And then, suddenly, everything seemed to go downhill:
• the role of law in guiding
conduct
• the importance of legal
knowledge in the business
environment
• the challenges posed
by business ethics and
their relation ship to leg al
requirements
a lawyer for a chicken processing corporation in northern
Canada, Chelsee Eggs and Poultry Ltd, has demanded that
Lionel stop doing business under the name of "Chelsea
Chickens" because it is misleading customers into thinking
that Chelsea Chickens is somehow associated with Chelsee
Eggs and Poultry Ltd. This includes re-doing his website
as well as removing his large and expensive "Home of the
Famous Chelsea Chickens" sign. Lionel is aghast since he had
no intention of confusing anyone. He simply wanted a catchy
business name that had a humorous story belllnd it.
a client of Lionel's business is angry because Lionel,
uncharacteristically, has failed to deliver an order of processed
chicken. Though this was a breach of contract, Lionel has
NEL
11
concluded that the deficiency was not his fault. He had done everything
possible to deliver but an unavoidable mechanical breakdown in his
production facility meant that a few orders could not be processed on time.
a potential customer was touring Lionel's production facility when she
slipped and fell on the freshly mopped floor in the holding barn. The
customer suffered a serious concussion and will be off work for at least
half a year.
about 100 chickens froze to death when Lionel transported them on a
flatbed trailer from the holding barn to a farm customer about two hours
away in ver y cold conditions. Lionel has been charged under the Health of
Animals Act' for causing undue suffering to birds.
Given these mounting problems, Lionel does not know which way to turn.
1. How does the law affect Llonel's business?
2. What are the purposes of the laws that affect Lionel's business?
3. What has gone wrong with Lionel's business and why?
Law in the Business Environment
The law impacts virtually every aspect of society, in duding the business environment. It 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. As Lionel starts
his business, for example, he will be involved in a number of transactions and
events with significant legal implications. For instance, to advance hi s chicken
processing business, Lionel has to decide whether to form a corporation, operate
as a sole proprietor, or find partners. He also has financing decisions to make:
should he borrow money, use his own funds, or perhaps sell shares in his venture?
While his operation is starting out small, he may ultimately have to hire many
employees. Lionel also has to market his business in order to build and maintain
a customer base. All of these decisions have legal aspects, whether Lionel recognizes that or not.
By understanding the role of law in the multitude of business decisions that
people like Lionel must make, an entrepreneur can maximize the protection that
the law extends while avoiding its pitfalls. Put another way, knowledge of the law
is a business asset that can assist owners and managers in reaching their goals
and objectives. This is because business law:
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 busine.ss ventures.
seeks to ensure that losses are borne by those who are
responsible for them.
facilitates planning by ensuring compliance with commitments.
Of course, a businessperson can function w ith little or no understanding
of tl1e law. This lack of knowledge, however, may result in failure to maximize
1 SC 1990, c 21 . ro1 mo1e disOJssiOn abOtJl tegis\.)tiOo, sat'.! (:tl<lpt~r 2
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12
Business law
A sd o• establ1sl1ed rules
governing commercial
relationships. including
~he enforcement of
ngl1lS
Trademark
A word symbol. design.
or any comb1na:1on of
these used to d1st1ngu1sh
a person's products or
services from those of
others
opportunities or jn losing out on them altogether. For example, a business that
neglects to protect its intellectual property may have its ideas taken with impunity
by a competitor; a business that ignores employment and human rights laws may
be forced to reverse human resource decisions or pay compensation to wronged
employees; and a business that fails to explore djfferent modes of carrying out
busjness may suffer unnecessary losses. Perhaps even more seriously, legal ignorance or intentional defiance of the law may result in the business or its owner
being subjected to regulatory and judicial sanctions, including being fined, forced
to pay penalties, or closed down altogether.
INTERNATIONAL PERSPECTIVE
Brewing Co's trademark. A trademark, as discussed further in Chapter 18, is a word, symbol,
design, or any combination of these used to distin·
guish a person's products or services from those of
In July of 2016, a New Brunswick corporation
others. When someone infringes another's tradeopened a craft brewery in Fredericton called Gray
mark, an important concern is that members of
Stone Brewing. Wes Ward is a director of that corthe public will be confused into thinking that there
poration. About a week after the opening, Ward
is an association between the two businesses when
received a phone call from Greg Koch, CEO of
there is none. As the Supreme Court of Canada has
Stone Brewing Co. wrud1 is based in San Diego and
stated, trademarks assure consumers "that they are
ranked as one of the largest craft breweries in the
buying from the source from whom they think they
United States. Korn advised Ward that the name
are buying and receiving the quality wruch they
and logo of Gray Stone Brewery infringed on Stone
associate with that particular trade-mark." 2
According to Ward and as reported in the
Daily Gleaner: "We had a conversation. He [Korn]
was very nice. He said, 'I know this is coming out
of left field. Hopefully, we can come to a solution. I have a couple of ideas.'" One solution
Koch suggested was for Gray Stone Brewing to
change its name to Graystone Brewing. Despite
the costs for the New Brunswick corporation to
alter its signage, logos {including on beer cans),
legal documents, and social media presence as
well as T-shirts and other merchandise associated with the business, Ward still favoured
doing so. In part , trus was because he wanted
~ to avoid the consjderable costs associated with
~ taking the djspute through the legal system. As
0
Ward stated to the media: "The fact that [Stone
~ Brewing] has offered us the chance to put the two
15
~ words together was qujte nice" and noted that
~ some people "would have just sent us a lawyer's
letter and we'd have to deal with it."
The Gmy Stone Brewery in Fredericton, NB
CANADIAN CRAFT BREWERY CHANGES
NAME IN LIGHT OF POSSIBLE
TRADEMARK INFRINGEMENT
2 M•11ellncv 3894207Canadalnc. 2006 SCC 22 al pora 2L 12006! l SCR 772.
NEL
13
Ward also learned a lesson in the importance
of managing legal risks proactively. He noted,
with disappointment, his assumption that conducting a name search would automatically
include a trademark search.3 And Ward expressed
relief that Koch of Stone Brewing was willing to
pursue a cooperative approach to the problem- a
hallmark, Ward observed, of the "special bond"
between brewers internationally.
Critical Analysis: 1h e globalization and internationalization of business means that the
actions of a small brewery in New Brunswick
may well infringe on the rights of a very much
larger American corporation thousands of kilometres away. How would knowledge of the law
by Ward have avoided the conflict between Grey
Stone Brewing and Stone Brewing Co.? How did
knowledge of the law by both parties help resolve
this conflict?
So urcE:: Adam Bowe. ·~w Brev;eiy 1n rrE!dencton F"orcCd 10 Tw oek
Nam<!. Lo go, Due 10 Tra.iemark. lnlrir\Qi'!imnr. The OMy CJea-1&
(S Aug usl 2016 J A3.
Rules and Principles
Broadly defined, the law is a set of rules and principles intended to guide conduct
in society, primarily by protecting persons and their property, facilitating personal
and commercial interactions, and providing mechani sms for dispute resolution.
Protecting Persons and Their Property
Probably the most familiar purpose of the law is to provide protection. Those who
violate the Criminal Code of Canada- such as by breaking into another person's
house, assaulting someone, or committing a commercial fraud- are subject to
criminal sanctions, such as fines or imprisonment.
As another example of a legal obligation, businesses are required to adequately
protect their customers' personal information due to the regime established by
Canada's Personal Information Protection and Electronic Documents Act (PIPEDA).4
PIPEDA is legislation passed by the federal government. One of its goals is to
regulate how the private business sector collects, uses, and discloses personal
information acquired from its customers- a particularly important matter in a
technological era.' Personal information has been defined by the courts as information that is "uniquely and directly connected to one person."6 According to the
Privacy Commissioner, such information includes "age, name, ID numbers,
income, etlmic origin, or blood type" as well as credit reports and medical reports,
to name several examples. 7 In short, PIPEDA imposes national privacy standards
3 1"01 rrr..'>1E! dlSCussonon 11¥! steps invoh<a1 1n r(\(.lhOn to 11\\':01poral!ng s<:eCMp1er 15
4 SC 2000, c S !PJPE'OA}. No te that PIPfOA has oe€<~ afr1~nded by l l'M'.! 0.'gital P11vacy Ac! SC ~ 1 5 c 32 wnich,.
v1ne n in fo1ce. requires l'ltlsiness to o!scbse d~tt) 01eaches 10 t~ Prr,,acy CommiSsioner or lace signi f'k:a~ t
tines. See sec1on 10 lllJ, wh1Ch ameMs PIPfDA to inct u<lt"! the idlov11 1'v~r "An or9an1.ZatiOl'l shal report lo
1he Comml!isoner any brcocn or secunly safeguards involvu)Q personal m tormaton unde1 •lS con1rot 1l 1L
iS reasoMI*? ii\ lhe C i 1cumsla!'\C~S to OOlieve 1M 1 t~t.'! breach crE!<"itesa rE!at riSkot signiticant M1m to an
ioo1vdua!: This ru4e, amo119 ot ~rs, \Y ll lak<.'? ettecl on November !, 2018 Sc?e Government o t Canada, PC
2fil8·369. 12018) C Goz II. 810
5 See stact iOn 3 ot PJPfDA. :b.d.
6 See Loon's f u1nltu1e Lift'IJted v Alb&ra (Jnfatlr'lt#10:'t i'N'ld PtNacy CCY'fJmssJorte1J. 20U ABCA 94 a t para 47, {2011J
45 Alla LR 15th) L
Prw~ CommissiOner o f CanOOa, 'P1Vacy Tootkll ror ~sioossas·, onli!'\E! <rttos/,\v..>1w.prw.9c.c a/en/
orw<Y..y• top cs/orNOCy-t.;,v1s·in-(;() ra°"'/t r-e ·~ n.on.'.'b ,nfo1maton- tnotecto n-and·et:ct ronic.Cocu l'rY.! rt s-a\':t · o '(>OOa/
1 Office of 100
p ·~da·cornp(iance• t-etplgu :de_o19f>
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14
Law
Th ese( of rules and
pnnc1ples gu1d1ng
conduct 1n society
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on businesses that apply in most Canadia n provinces" and includes an "overriding
obligation", in the words of the Privacy Commission er, that the collection, use,
and disclosure of personal information be limited to what "a reasonable person
would consider are appropriate in the circumstanc es...
Those who believe that their privacy has been breached under PIPEDA may
make a complaint to the Pr ivacy Commission er. The Privacy Commissio ner is
independen t from governmen t and is mandated to try to resolve such complaints.
A person can also apply to court for a remedy, including damages. This is discussed
in the box below.
BUSINESS AND LEGISLA TION
BREACH OF PRIVACY
Breaches of privacy under PIPEDA encompass a
broad range of activity. Some breaches can be
trifling and largely inoffensive. f.or example, in
one case, an individual (Mr. Randall) complained
because the gym to which he belonged divulged
to his employer how often he used his gym
membersh ip-a benefit partially paid for by the
employer. 10 The Privacy Commission er determined
that the complaint was well founded because the
gym had disclosed Randall's personal information (in the form of his fitness centre usage)
without his consent." It recommend ed specific
improveme nts to the gym's privacy procedures
and documentat ion. 12 RandalJ then took the step
of suing the gym for the aclmowledged breach of
privacy, seeking $85 000 in damages. However,
the court refused to award any damages at alJ
because the disclosure did not cause any injury
or loss to Mr. Randall, was itself minimal, and
was not the result of bad faith but a simple
misundersta nding.'-'
By way of contrast, some breaches of privacy are
more offensive and cause distress, anxiety, or
embarrassm ent in their victims. For example, a
woman who had recently given birth at a
Scarborough, Ontario, hospital filed a complaint
with the Privacy Commissioner because a company
selling registered education savin~ plans (RESPs)
had contacted her as a potential customer. This is
not problematic in itself; the issue arose because
the woman's maternity patient u1formation (name,
contact information , and dates of hospital visits)
were stolen by a hospital employee and handed over
to an employee of the RESP company in exchange
for money. Maternity patient information was
being acquired and used by the employee to obtain
sales leads. The Privacy Commission er determined
that the complaint was welJ founded because
personal information had been divulged and
recommended changes to the RESP company
procedures, including how it could better ensure
respect for privacy. '4 Additionally, a $400 million
class action is being pursued against the hospital on
8 NOie l'lal W'~M: P'CW""IC::(:s ~ Cf'WICIQia l"IC! f ow••\ Wqd:)' CO'T'IOa•.aol:e PJP!DA 'fq nows Al~ta ~''°"""
Jnfa~.ion Pao:::~ Act SA 2001 c P--651. S• I S."'t Cm."1t>.a l.P£1$C)fi.a# J.n/onnMxJr. Prorect.on: Act sac
2003, c 631, <l"'° O.~oe<: (A.r; kt llcsp:-ctortg Ute Praloct.on OI Pason31. frt!otm1!ot ift rhe PtNdte SN:ror RSC
c P·3:tJJ '" M >n tob.l prvocy teq \t."'lt.on h.lS l'Elen assc•nt<?<I lo bo.Jt ~not y<?t "t.ora. See Person3J Jnformbr100
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~\es Rep1~c>nl.ll·~ fo1 t!o\e l.J$cof Pbl·Q!'llS. PerSO!lal ll')lo1rri.1to:\Ptirct\MCO r1om• Rouge Vatk'!y hO!t.P•ldt
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N!l
15
behalf of over 8000 maternity patients. As
discussed in Chapter 4 in more detail, a class action
is a lawsuit launched by someone who represents a
class of persons having similar claims against the
same defendant. Megan Ware, who gave birth to
her son James in 2010 at the hospital in question,
reports tl1at her privacy was breached by the
hospital. She joined the class action suit and said
this to the Toronto Star: "You're vulnerable. The
vulnerability that you feel when you don't really
know where your information- myinformation, as
well as my child's information- has ended up."15
Another maternitypatient whose records were also
stolen, Tanya Taylor (pictured in this box with one
of her children), admitted to the press that she was
feeling "paranoid" as she prepared to give birth to
her next child due to worry that she was at risk of
another privacy breach. However, Taylor also stated
her belief that the hospital had "taken steps to
ensure I don't have to go through that again.
Hopefully it works." 16 In 2016, two employees
involved in privacy breach (a former maternity
ward nurse and an RESP broker) pleaded guilty to
criminal charges. As reported by the Toronto Star,
Tan)'l Taykir, pit:tt1red with her daughter, IM1S the victim of a privacy
breach while a maternity patient.
they were sentenced to "three monilis' house
arrest, part of six-month conditional sentences, as
well as two years' probation and 340 hours of
community service:·n
Critical Analysis: [n what way does PIPEDA
protect tl1e public? Do you iliink iliat PIPEDA
encourages people to be too sensitive about their
personal information? Why or why not?
The law offers protection in two related ways: (1) it sets rules to safeguard
interests, and (2) it sets penalties and oilier consequences for breacl1 of iliose rules
to ensure accountability and encourage future compliance. For example, contract law
permits Lionel to enter into a binding agreementwitha supplier, thereby protecting
his interests in having a product when he needs it. If a supplier fails to deliver a
product in breach of contract, Lionel can sue that supplier for damages, iliereby
ensuring that the party who has committed the breach is held financiaHy accountable.
Likewise, the law safeguards those who deal with Lionel's business. Lionel must
perform his contracts on time. He must not discriminate in hiring practices. He must
not disregard health and safety regulations or animal welfare legislation governing
his operation. He must pay his creditors. In sum, Lionel, and those with whom he
deals, are obliged to abide by ilie law on a variety of fronts, since failure to comply
can have severe consequences, including financial penalties and legal prosecution.
15 Joet CastvlOOd. "Rou9~ V<A.@; Faces $400M (l()SS•ActiOn. La-.... Sutt Ovt!1 P1<vacy Bfe~ t·( To100:0 Star !25 June
2014), onune <hnps .//,vww.tnes1.a11:.om/rv;iv1S,/gtaf2014/06/25/rO!Jge_v~ey_l.Y.:es_400m_c:'-lssocton
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16 Sa1at'h.loyce
2016), o nune
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< hnps .//\vww. the s\t)r.co
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Nfl
16
Breach of contract
"aiture ,o comply w1;h a
contrac:ual promise
ETHICAL CONSIDERATIONS
MAPLE LODGE FARMS' CONVICTION
Maple Lodge Farms, one of the largest crucken
producers in Canad a, was sentenced by an
Ontario court for violating the Health of Animals
Act."' Maple Lodge Farms had inhumanely transported chjckens and many died from exposure to
cold weather. According to the court in relation
to some of the deaths:
Although Maple Lodge Farms took some steps
to protect the birds from the elements by tarp ing which was standard at the time. they failed
to take reasonable steps to leave some o uter
crates empty (of birds! to defray the frigid air
intake venting into the trailer. They also failed to
adequately monitor the trailer in the holding
barns. while the birds were still on the trailer. to
ensure they did not suffer unduly pending their
processing o n the (slaughter! line.19
In relation to other chjcken deaths, the court
summarized the matter as follows: "Regrettably,
Maple Lodge Farms ... decided that commercial
imperatives trumped animal welfare ...."20 And
byway of general comment, the court relied on a
quote frequently attributed to Gandru: "The
greatness of a nation and its moral progress can
be judged by the way its animals are treated." 21
In sentencing the corporation, the court
observed that for those offences to which Maple
Lodge Farms admjtted guilt or on which it was
found guilty, "twenty-five thousand four hundred
and fifty chickens (25 450) died inhumanely by
undue exposure to weather or inadequate ventilation during transport."22 The court went on to fine
Maple Lodge Farms $80 000 and placed the corp er
ration on probation for three years. A condition of
What are the rep!ltational costs to Maple Lodge Farms for its
recent convictions and how can those be managed?
the probation requires the company to spend at
least $1 million to make substantial improvements
to its vehicles and facilities. The court's stated goal
was that Maple Lodge Farms would set the model
for the industry via anticipated innovations in how
birds would be transported in the future.23
Online, Maple Lodge Farms has expressed
concern: "We acknowledge the seriousness of
these charges [under the Health of Animals Act]
and the moral obligation we have to better the
conditions for the chickens we process." 24
Two animal rights groups- the Canadian
Coalition for Farm Animals (CCFA) and Animal
Allian ce of Canada (AAC) - have spoken out
against Maple Lodge Farms, noting as follows:
"Economics over animal welfare was a dear
theme wh ich emerged from the trial. Maple
Lodge Farms failed to ensure proper animal welfare for the birds, ind uding not properly training
its drivers, and not following Canada's voluntary
Codes of Practice or the company's Standard
Operating Procedures for bird welfare."25
18 Supra no1e L
19 R v Maple Lodge Farm~ 2013 ONCJ S35 al para 456
20 Jbtd a1 pa1a 468.
21 Jmd at pa1a l
22 R v 1"'1ple LOdge Fatm.< 2014 ONCJ 212 al para 13.
23 Ibid al Mras 54-57.
24 Ma~ LO.ige rarrru;, "Our Journey to lmprov~d B11d V/etl~re· (unda!Gd), On!1ne <http//\"l\'l'WJ'Tl~lp4et0dge la11ns
.corn/v1p·oonti'!nl/uptOOOs/20l6/04/0u1-.k>u mey.-to·lmp1oved·Bi1d~WeUare..Jutyl22016.pdt>
25 See CCrA•AAC. ·£cooomies0v(?f Animat V/dlar~ Preducliol\ T1a1'SPort. t)nd St2rughter ofChic:~ns ;nCa~a
!2014r l21Ma•ch2014). 001100· <'nttp//w..v,,y.t.Jmaoolood.<:a/pdl%2011!\k.s/Map6a%20LOOge,...20rarmX20
report pdf>
NEL
17
Maple Lodge continued to have diffi culty
complying with animal welfare laws, however.
While still on probation for the events described
above, the company held thousands of hens in
an unheated barn over a 1 2-hour period on a
cold day in January. According to the Federal
Court of Appeal, the hens "experienced prolonged, undue suffering due to Maple Lodge
Farms' omissions.'"6 Additionally, an animal
r ights group released a video taken by hidden
camera allegedly showing horrifying animal mistreatment at Maple Lodge Farms. In response,
an d as reported by CBC, CEO Michael Burrows
posted a video on Maple Lodge Farms' website
stating: "The activities shown are really disturbing to us as I'm sure they are to you", he said.
"We have a zero tolerance policy for any violation of animal welfare polici es. We hold ourselves and everyone we work with to these high
standards of care ." 27
Critical Analysis: What is the role of businesses
to ensure the humane and ethical treatment of
animals in their care? What is the role of government to ensure the humane and ethical treatment of animals by businesses?
The law is also important for responding to new and emerging hazards, as the
following box illustrates.
BUSINESS AND LEGISLATION
REGULATING RECREATIONAL DRONES
Drones (sometimes called "unmanned aerial
vehicles") were once associated only with the military but now are widely available to anyone who
wants to fly them for enjoyment.18 Recreational
drones are posing increasing concerns, however,
on both privacy and safety fronts. For example,
a Vancouver resident reports encountering a
drone outside the win dow of h is 36th floor
condo, with its camera pointing directly at him.
Unl1appy with this invasion of privacy, tl1e resident called the police."' (In Virginia, a 65-yearold woman watdled a drone hovering over her
property and claims she used her shotgun to
blast the drone out of the sky.) 30
What kinds ofdtmgers are posed by drones?
26 See M~~ Lodge fa1ms Udv CMadfan Food fnspe:11on Agency 2017 rCA at para 79
27 CBC ~ws, "MtJ~e Lodg" Fa1ms P1obes .ti.UagOO MtSlrea1 '1"!1nl or ChlCk.<.'!ns- t30 March 2015J, onlioo
<hlt p Ifwvmc.0<:c.a/~wsfca!'OOa/lo1onto/map(e-t009e ·fa1ms· protes ·a!~ed
mistraatment·ol-chk:kens· l.3014864:- Rep•Ojuced tty pe1m:ss10:\of CBC Lieeru;·ng
See a!soG!ob<lt f\k!v1s. "Mapk'! Looge ra1msC£O Rosp.:'>!lds 10 HlddenCamoraSh0\>11~
Al~ed AbtJse at rocl1ly· f30 Ma1cn: 2015), 0"1 1oe <http l/9101::>.ll~S.C.'.ll/vloeo/1911763/
m()~ ·bdge·larms-c~o· resoor'lds •hidde!l*-carn.~ra·video-snowing -~e~d·atxae-at ·facifity>.
28 Rya'\ Browne, ·oroocs· Ha.-1 OiSruotive Ara Tooy aOO ¥/Ml Is Being Ck>ne lo Regu~1e Thl:>m?", C NBC.14 .}Jly
2017J, on1111e <hllP //\V..V>N.cntx. com/2017/07/04/drones•OON<liSruot ive.ere·t hey'•.and~wna t·iS· be 1ng•done
10-rogutatt?· them.htrnt>
29 CBC ~ws, ·01oneCaughl Peepirlg ln10Var.couve1 Aparlmenr U8 ..0.Ugust 2014) on1 1ne <hllp//\'"'''"·c.b<:..ca/
nev1slc.anada/br 1tiSh·oCOUmba/dro~ ·cau.gl\L·peeping •into-'Vancouver ·a~rt!'l"lent•l27'4020S>
30 Jute ~:ey el at ·v1rg1ni.l V!/oman. Stlys She SMl Oa,...n Orooo", 4 vvash;ngtof) l26 August 2016J, on4:1ne
<htlP /.'w11~w ntx.v1ash1 n-;1ton eom/oows/bcatN,191na •V/ornao•Sl'tools·OOv(!l· Oro!le Net'li1 ·AC.IOr·RObert
·DuvtJIS•Horne·391423411 .htm1>
Nfl
18
At airports, drones are a particularly dangerous
risk. Most seriously, a SkyJet plane travelling to
Quebec City's Jean Lesage International airport
was struck by a drone in October of 2017. 3 '
Transport Minister Marc Garneau, himself a
former astronaut, said his fear that a drone would
hit a plane and result in a catastrophic accident "is
the kind of nightmare scenario that keeps me
awake at night." 32 In response to safety and privacy
concerns, the federal government has put in place
some stricter interim rules pending formal
regulations. 33 According to Garneau: "The
government certainly doesn't want to restrict
drones so much that we hinder innovation because
it's so important to our economy and standard of
living. But like any new technology, drones must
be used with care. And we cannot wait until
something bad happens before we act."34
New federal rules, for example, govern recreational drones weighing over 250 g and under
35 kg. The rules, as summarized by the federal
government, include the following:
Fly your drone:
• below 90 m above the ground
at least 30 m away from vehicles, vessels and
the public (if your drone weighs over 250 g
and up to 1 kg)
at least 76 m away from vehicles. vessels and
the public (if your drone weighs over 1 kg and
up to 35 kg)
at least 5.6 km away from aerodromes (any
airport. seaplane base or area w here aircraft
take off and land)
at least 1.9 km away from heliports or
aerodromes used by helicopters only
outside o f controlled o r restricted airspace
at least 9 km away from a natural hazard or
disaster area
away from areas w here its use could interfere
with police o r fi rst responders
during the day and not in clouds
within your sight at all times
within 500 m o f yourself
o nly if clearly marked w ith your name. address
and telepho ne number"
Individuals face fines of up to $3000 for
violation.
Critical Analysis: Should drones be regulated?
What are tl1e pros and cons of doing so?
Facilitating Interactions
The law facilitates personal interactions by providing rules concerning marriage,
adoption, and the disposal of property upon the owner's death, to name a few
examples. The law also facilitates commercial activity by providing rules governing
the marketplace. TI1e law of contract, for example, provides a way for parties to
enter into binding agreements, tl1ereby creating a measure of security and
31 Misha Ca,ev1Sk.1. ·01one Sln~s Comrnerc;a1 AHCfalt in Quebec Ca roe.at.(
crv Nevis us October 20171
on1:100 CTVNews.c:a <hnps //w<11<11 c1vntN1s.c.a/c.aMdafarooo..s1rik:es·comm{?1Ci:j-airciah·in·<::iuebec
-garlle.OO· l .3633035>. Beyo!\d lhis, lhe mOOia 1e;Y.)1LS 1hat 100 ~mbe1 o f if\S l()~S ll\C'.aMdaol drones llying
100 dose 10 pLln~ Ms tq:XEXI since 2014 See CP, "M1nis1er £ntt:::1s New Ru\es fo1 Orones-.£dmonton Jou1n;,1
117 Maren 2017), NP4.
32 il'>d.
33 Transport CaM:ia, 'lnter:m 01da No.<) Respacl!nc) ~ Use ol Moo~ Airerair 131May201SJ, C.aM:ia Gazetl(',,
Pail l Votume 152, Num!X!r 24, ontine <http//w,..-v1.9ai:eni!.gc calrp·pr/pl /2018/2018·06·16/hll'l'l1/notice
-Av<s·eng i"ll fri# 006>. ror fu1lher diScussiO~ of 1ci9utati0n of tile 1ec1001ion.11 d1000 .sec101 mo1e9enerat-;, seQ
Anne Ma11e Ma::Oonatd. "Nev,. RQgulalOos 11')Cafl<)ja lor toe U$E;?' of Drones· funaa1edontu"-'! postJ CBC Cklc
Zone -= nnp J/v1.t1w ~ oc.cafdoc20n.atlea1u1e ~d rone-'<Y"IS -ca l\OC!a>.
34 Rotx'!fl fife, ·0113\.Ya To~J9nens Rutes fo1 Oper.ltiog RecrQ<HiO:\alt 01o")es-.C1ot.-eand M>N 116 March 2017J,
0!11100 <hi tps/Joe la tnegb be.l nd ma I.co mlr.ews/pd itcs/ouav..a· toughens· rule s~ro 1·opa 'at 1"Q· re: real ioMI
-drones/articie 34318007/?rer- n1tp //\'A'l\Y.tM9boeano!Ticli1.com&>. Rep10duced b'y pe1 miSs+on of
The Globe and Mal
35 Tna Gove1nrmn1 ot ('.al)Ad:l R(;le•ence ITranspcrt CaM.ia), "flying Your Drooo ~lety a!'Y.l l egauy· ldate
mo.11~ 23 .l.lty 2018), online <nups·f/w.t1'11 tc.9c.ca/en/s~1V.C~sfavQt on/drone..st)fery/flying
-oro~sa f~·~g~y.ht l\'11> See atso Sean Tind<'ie., ·M~pp1ng the Sh1fli!\g Regutatory La:'ldsc.a~ or Dione
Usl<'! in C.an<>C<f. and The Lav..ye1's ();)!¥CS J..."loua1y 2018), part or leitiS~xtS Caooaa onlioo <tttos //
www 1 ne~wyersoaity.ca/artc5es/S497/mapp1ng· l he·sh lting~re9ui.i101~a!ldscape-of-dro~ ·use•in<anOO~>
NEL
19
certainty in their bufilness operations. Contract law allows business enterprises
to plan for the future and to enforce their expectations.
Although the law addresses failed relations- as when one party does not meet
its contractual obligations or gives negligent legal advice- it is not primarily about
conflict. Rather, the law functions to prevent disputes and to facilitate relationshlps. It provides certainty for Lionel's commercial agreements and enables hlm to
engage in transactions that nlight otherwise be unstructured and unpredictable.
Nor is the law primarily about rules that constrain commerce. Though the law
does forbid certain activities- such as false advertising and operating without a
business licence- its more filgnificant role is facilitative. Legal rules provide defirution and context to doing business. For example, assume that Lionel wants to enter
into a long-term relationship with a particularly reliable local supplier. Contract law
allows him to accomplish this end by providing a mechanism through which Lionel
and the supplier can describe- and enforce- their commitments to each other.
Th erefore, Lionel can agree in advance with hls supplier on what kind of product
is to be provided, how mud1, at what price, over what period of time, and when.
TI1e creation of certainty in bufilness relationshlps is one of the most important
contributions that law can make to the commercial arena. While the necessity of
creating certainty means that some anticipated contracts founder when it comes
to formalizing their content, the law has not necessarily failed. It more likely
means that the businesspeople involved were not as dose to being in agreement
as they had in itially assumed . Further discussions, perhaps through lawyers, have
simply identified problems that, although hidden, were always there.
No contract can recite and provide for all contingencies; the.r e will be some
issues left unstated, but often the parties themselves find ways of overcoming
these onlissions. Generally, they will be guided by the need to achieve the original
intent behind the contractual relationshlp, with the objective of dealing fairly with
the unexpected orunaddressed event that has just occurred. In this way, the bufilness relationshlp "fills in the blanks" in the contractual arrangement. If one or
both of the parties involve the legal system, a judge will apply established rules
governing contracts to resolve the issue. TI1e influence of the law on the business
environment does not have to be exacting and literal. In fact, parties to a bufilness
contract do not always observe their agreement to the letter, preferring to maintain their relationshlp rather than sue for breach of contract. For example, assume
that Lionel has a five-year contract with a reputable supplier of chlcken feed.
Owing to poor planning, the supplier will be unable to make its delivery on time
and has advised Lionel of a three-day delay. Although he may be annoyed at the
default, Lionel stands to lose more than he would gain from suing, particularly if
the supplier is otherwise reliable and the two have a solid working relationship.
TI1ere is no good reason to risk this relationshlp and devote resources to litigation,
that is, the process involved in suing someone. In thi s way, the contract between
Lionel an d the supplier provides the legal backdrop to their relationshlp- by
defining rights and obligations- but it is the business relationshlp that determ ines whether strict legal rights will be insisted upon. This is an important reality
that affects how the law actually operates in the bufilness environment.
Providing Mechanisms for Dispute Resolution
Whether a conflict can or even should be resolved outside the formal legal system
depends on the circumstances. If Lionel hires an on-filte manager who proves to
be incompetent, it is in the interests of hls enterprise to term inate the person's
Nfl
20
Contract law
Rules ha. make
agreements bind 1ng
and then°fore.
iac1ht3te planning and
the enforcement of
expectations
Litigation
The process involved
when one person sues
another
Howean parties n?sol.ve a business disp!ite wit.ho!lt g:Jing to mu.rt?
Mediation
A process ~hrough
which ~he pa mes to
a d1spui:e endeavour
to reach a resolution
with the assistance of a
neutral person
Arbitration
A process •hrough
wh1 ch a neutral party
makes a dec1 s1on
(usually b1nd1ng) that
resolves a dispute.
employment. While Lionel may have a case to fire the employee outright, he m ight
also consider offering a small severance package to reduce the possibility of being
sued for wrongful clisnlissal.36 This is a judgment call, but the t ime and money
saved in avoicling a court battle may more than offset the cost of the severance
package. Conversely, it may be that the employee has had his hand in the till and
has stolen from the business. Lionel is in a different situation now. He not only
must ensure that the employee leaves the company immecliately but also will probably want to involve tl1e police and try to recover what tl1e employee has taken.
In these kinds of circumstances, a full-blown legal conflict is much more likely and
appropriate.
When one party fails to keep a contractual commitment, suing that person may
seem to be the best and only response. This is particularly trne when someone feels
badly treated and believes that an essential principle is at stake in tl1e conflict .
However, the desire to stand up for this principle at all costs is a short-term way
of thinking that should be resisted . Maintaining a good business relationship with
the party in breach- or at least m inimizing the financial costs of the dispute- is
often much more important than proving yourself to be right in a court of law.
Questions to ask include:
are legal proceedings absolutely necessary, at least right now?
• is there a way to resolve the problem from a larger, relationship-preserving
perspective, rather than from a strictly legal yjewpoint?
Solutions to a legal dispute exist at various levels of formality. The first logjcal
step is forthe parties to try to come to a resolution between themselves and produce, if necessary, a formalized settlement agreement. If thi s solution does not
work, the legal system offers mediation and arbitration as ways of avoiding
NEL
21
litigation.37 Thus, the law provides a number of mechanisms for settling disputes
short of a courtroom battle.
Sometimes, however, one business will commence legal action against
another and take the matter to court . Perhaps there had been no previous
agreement between the parties to refer disputes to arbitration and they have no
desire to do so now; perhaps one of the parties refuses to accept mediation;
perhaps one of the parties is tremendously unfair and cannot be reasoned w ith;
or perhaps the dispute has reached the point at which a court ruling i s the only
way to end the matter once and for all. It is essential to a workable business
environment that the last-resort solution provided by the litigation process be
available to the clisputants. In this way, the liability of one business to another
can be established .
How and Why the Law Works
There are any number of ways to resolve a clispute, inclucling trial by ordeal (as
in the notorious Salem witch trials of seventeenth century America); pistol duel
(prevalent in France and England until the nineteenth century); and even modernday drive-by shootings. What these methods lack, however, is accordance with
modern ideas of what is just, fair, and reasonable.
Canada's legal system stands in opposition to such inequitable, arbitrary, and
violent alternatives. While our legal system is far from perfect, it possesses
essential improvements over its predecessors because it determines liability in
accordance with certain principles and processes that are regarded as just. This
is because the Canadian legal system demands that both the process for
determining liability and the rules or laws that are applied in that process are
impartial, fair, and free from bias. 1hese goals are ambitious, however, and
impossible to fully achieve. For example, a judge can never be fully impartial
because she arrives in court with her own personal background which, in turn,
forms and impacts upon her perspectives. As an appeal court judge recently
stated in another context: ''.Judges are no clifferent than butchers, bakers, and
candlestick makers. All are human bejngs with djfferent backgrounds and life
experiences, clifferent views of the world, and clifferent philosophies."38 And, in
fact, these differences can be very helpful in advancing the development of law
in a healthy way.39
To understand how the Canaclian legal system operates, consider an exan1ple
in which Lionel is sued by his customer for breach of contract because he failed
to deliver product on time and the matter has now come before a judge. Lionel's
customer, as the party who has initiated the complaint of breach of contract, is
obligated to prove his case. 1he judge, in turn, is obligated to be as objective as
possible in determining whether the customer has proven his case. Part of the
judge's job is to determine what the agreement between the parties actually was,
as well as the law governing the matter. The judge must then apply this law as
impartially as possible to the situation. In order that the outcome of the customer's
dispute with Lionel be seen as just, the law that the judge ultimately relies on must
37
38
ro1 fu!lher<hSCtJSSiO!lOI the-se CO')Cepts, .see Chapter 4
RvCashikarryi, 2017 ABCA 194 at Ml~ 12. Tht!: state'T'lenlt)rOSe in l heCO:'\L&I Ol lhe ~dq e advocating 101 l he
raOOom ass•;;Jnmenl ol appcUa1e µdgas 10 case-s.
39 lb:d at par() 15.
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22
Liability
Legal responsibility for
the event or loss that
has occurred
also be fair and reasonable. For example, it is a rule
of law that a party who suffers a breach of contract
is entitled to be put in the position that he or she
would have been in had the contract been fulfilled .
If the customer can prove that, as a result of Lionel's
bread1, he lost business, for example, a court may
well award damages for loss of profit. The rationale
behi nd the rule is simple: Lionel has broken his
contractual promise, albei t unintentionally. Lionel
must therefore assume responsibility for any direct
and foreseeable fin ancial consequences that his
customer experiences as a result.
As noted earlier, the law is significant because
~
~~~·~~~~~~~~..... . 8
it offers a mechanism for achieving the goals of
This man said that he had been locked in a car trunk over a debt
protection, facilitation, and dispute resolution in
oi.l!d to his attackers. He was freed by firefighters. H01<1 is this
a var iety of contexts. For example, bankruptcy
method ofdisput.e resolr1tion inconsistent lllith dte mlues informing
law
is the veh icle for ensuring that all those
the Canadian jttsti<.e syst.em?
affected by a failed business are treated fairly,
reasonably, and according to a set of agreed-upon
rules. Anti-discrimination law confronts bigotry by providing remedies to those
who are treated unjustly and p rejudicially. Tort law ensures that those who
wrongfully cause injury to another are held financially accountable. And the legal
system at large provides a vast machi nery for resolving conflict.
Knowledge of the Law as a Business Asset
Legal risk
management plan
A comprehensive action
plan for dealing w1 th the
lega l risks involved in
operating a business
Entrepreneurs like Lionel can use the law to protect and advance their business
interests. Conversely, they can cause themselves much anxiety, grief, and financial
loss by ignoring the law.
For example, the law of occupiers' liability holds Lionel responsible for the head
injuries suffered and income lost by his potential customer who slipped on a wet
floor on his premises.4 0 Likewise, the law forbids Lionel from using a business
name similar to that of the northern Canadian company ("Chelsee Eggs and
Poultry") if that misleads the public into thi nking that the two businesses are
somel10w related. Though Lionel did not intend to mislead the public, this is no
defence to any action launched by Chelsee Eggs and Poultry.41
Lionel's negative experience with the law- while perhaps a Ii ttle bit extremeillustrates the point that knowledge of the law is a business asset. Had Lionel
taken more time to inform himself about the laws governing his operations, as
well as about the consequences for failing to abide by them, his business experience presumably would have been much more positive and profitable.
An effective way to avoid Lionel's mistakes is to implement a legal risk
management plan. This means identifying the legal r isks associated with a
business and implementing concrete measures for managing those r isks. The
objective is to identify and plan for risks before they occur.41
40 ro1 dtScussiOI\ 01occup:-e1f C;ab1 ty, soe Ch.lpt~' 12.
41 ro1 discussion or passing oft, sae CMp1e1 12.
42 Set:! Chapter 3 for a riSk. !'NM9eme1u modet.
23
NEL
Law and Business Ethics
From the perspective of reputation and profitability, it is not enough for a commercial enterprise simply to comply Mth the law. Business ethics also provide an
increasingly important over lay. Business ethics concern moral p ri nci pies and values that seek to determine right and wrong in the business world. On this basis,
while it is ethical for a business to comply wjth the law, ethics may demand even
more. Business ethics require entrepreneurs to conform to principles of commercial morality, fairness, and honesty. Entire books have been written about the
ethical problems or dilemmas that a business m ight face.43 However, from an
introductor y perspective, it is useful to consider how ethics impacts on business
decisions from a number of vantage points:44
Business ethics
Moral principles and
values tha: seek to
de:ermi n•2 ngllt and
wrong 1n the business
world
Business to Consumer: How far should a company go in extolling the virtues
of its product? When does sales talk become deception?
Business to Society: To what lengths should a company go to enhance
shareholder return? To reduce costs, should a business employ chlld labour
in those countries where it is legal to do so? What if the child's income is
essential to the family's survival?
Business to Employee: Should a business monitor employee emails and
Internet use on company computers?
Business to Business: Short oflying or fraud, is it ethical to bluff during
business negotiations? When does bluffing become a form of corruption?
Indeed, skirting ethical norms can lead to lost revenue, bad publicity, public
demonstrations, and condemnation.
ETHICAL CONSIDERATIONS
UBER
Uber, headquartered in San Francisco, is internationally known for its ride-booking and r idesharing application (or app) for smartphones.
Uber forms part of what is called the disruptive,
sharing economy because it perm its people to
"bypass traditional businesses"- in this case, the
taxi cab industry- and "to rent or buy from one
another instead ."45
Canada's taxi industry regulations, generally set by municipalities across the country,
are strict and costly to fulfill. The commendable goal of these regulations is to protect the
public interest and, as part of that mand ate,
regulators enact rules which impose insurance
requirements (so as to protect the customer
and others should the cab be in an accident) as
well as taxi price levels, vehi cle safety standards, and m inimum service requirements. 4 6
43 See, lor gx.arnoCe, Rober! Se,ay CJnadltln Busmess i>rrd Soc.el)' Cth1cs Mid Respa"ts~li:y, 3d ed lWh11by, ON
McGr.Yw•Hlt Ryerson. 2013), Rober! La1me1 £rh1<:s in the WorkpJace. Se1ected Rmdtngs :n B:Jsmes.s £:h;cs, 2d
ed {Betmoni. CA· \l\/OOS\..'Crtn T"'°mson Le~i ning, 2002).
44 Tne~ va'lt::ige 001n1.S a1e d<Hwed lrom t~ \...Ork ot la1m<:H, 1bd
45 Sunl Johal b Noah Zo!'\, f.>oJ1o..-y /vlaking la rhe ShbfNlg £c01ontt !Toronto; Monat Centre, 2015) at b, ontine
<hit ps fl mow.')tCi'.! n11e ~a/v1p.../l06_ pot ICymt) ki!'\g_ for_ the_sM rn'):)_(!COOO my.pd f >
46 CornoetilOn Bur.:?au Canada, /llloderniz1ng Regu.l.;)llon 1n theC<N1hdNNl T.:>x .Vldustry (Olla-..Ya ComOOl!l•On
Bureau of CaM<Ja. 2015) at 1- 2
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24
There are also limits on the number of cabs
permitted on the road through taxi licences
(also known as plates or medallions) 47 wh ich a
cab must have to legally operate. While prices
have dropped recently, plates at their peak in
Toronto coul d run up to $360 000. 48
Uber's business model is constructed on
Uber's claim that taxi regulations do not apply to
it because it is not a cab company but a transportation service company which simply connects
passengers to drivers.49 This helps to drive down
costs since, for example, Uber operators do not
incur the significant costs of a taxi plate. 50 And
lower costs have, of course, contributed to Uber's
phenomenal popularity- the company claims
40 million active users a month worldwide. 51
When Uber began operating in Toronto, tl1e
City pushed back against Uber's position that it
was not bound by rules governing the cab industry. Tracey Cook, executive clirector of Municipal
Licensing and Standards for Toronto, stated at a
201 4 press conference that Uber was operating
"without lawful authority" and that its unregulated status potentially endangered the public. 51
In this regard, she referenced allegations of lack
of driver training, inadequate insurance, and
price gouging due to its unregulated fare
structure.53
Uber's approach to the Toronto market was
seemingly brash: enter the market and then
openly operate "outside the law" while hoping to
force a regulatory change. 54 This is called regulatory arbitrage and is described by law professor
Brishen Rogers in this way:
You follow some rules and try to skirt around
some others and you break some others. And
you know, Uber's calculation. and I have to sort
o f admire their chutzpah in some ways. is simply
that their product is good enough that sometimes if they break the rules they'll be able to
change the rules. because the consumers will
want them to be in the city so badly. And that
has happened.55
A protest by taxi driwrs against Uber
47 JbJd al 2
481b/d
49 Ct.-'01ge Siedel ·Business SchOot Learf\illQ Goots· TM L\?g.¥. and Reg1J!t)IOfY Conleitl c t 01gan;z~1 0~ to a
Gb~1 £conomy', {20!7J 34 Journ/IJ Of Legal Srud1e! fduc<ntan 325 al 335- 336.
50 CBC Nevis. "Ube1 Is H<!re to Sla'y' M<ry'Or· C\ect Ma-yor John Tory Says· U9 November 2014), Onl:iOO -:.nup//
w..vw.cbC.~/news/cal\OO.l/t1.)1onto/uber·is· M1e · tO·S~· I010~lo-~01·e\ec l•jOhn· tOry· s.'Jjy!i· 12840295>
51 Kla Kolrattcneva, "Uber Nev.' Has 4 0 MUon t-bnth(y R"iaers V/orth..,dt( fortune fTedlJ 119 Oct 2016), Ontine
<http//fo1tuf')(!.COm/2016/10/20/uoe1·app· ri0ers/,
52 James Armstiong, "Toronto At t~mpling to St\ul Cbv1n Uber VV1tllin City limits·. ClOb;)I_ Meo-is
ll B NCM!mbef 2014), Onl:1ne <hllp://g!obalOO\.YSc.a/news/l 67S342/c!ly· to-al\noUnc:e-.devek>p!'r'enlS
•r<.':~10 in.g ·uoe1· se1vce- !n· to1onlo/>
53 Jt>d.
54 Ower Moore. "(oogam~ Approoch1ng for Ut:ier Operating ·outside the Lavi in Toronto·, Gabe and MaJI
!28 Maren 2016), 0~ 1~ <nt1ps·//\•1\vw.tllegtoeeaodmal.com/noosl101on1o/ube1•may· oe-ie9uta1ed.Jnto
-submissi0:\larlide29404 359/>. Rep1odua?O by oermissiOn cl TM Gtobe afld Ma~.
55 JbJd.
NEL
25
It would appear that Uber's gambit is producing results. 1his is because the City of Toronto
has rolled out Uber-friendly regulations. According to Sunil Johal,
into such allegations led by former U.S. Attorney
General Eric Holder. The report was critical of
Ube r 's corporate culture and included a recommendation that Uber "reformulate its written
cultur al values because it is v ital that they
reflect more positive and inclusive behaviours."61
Under this r ecommend at ion, the r eport
included a statement that Uber "eliminate those
values wMch have ... been used to justify poor
behavior" including values represented by the
following slogans: "Let Builders Build, Always
Be H ustlin', Meritocracy and Toe-Stepping,
and Pr in cipled Confrontation . . . ."61 On a
related front, a European commentator has
observed upon Uber's failure to present itself
"in a stable and socially responsible way." 63 [n
light of these and otl1er serious matters, Uber's
founder and CEO, Travis Kalan ick, was replaced
in August of 2017.
UberXdrivers will now be required to file documentation. such as criminal record checks and
insurance certificates. directly with the city
rather than with Uber as had been the case previously. and obtain a city licence. But Uber drivers won't be required to have cameras in their
car, undertake training courses or have rates
regulated by the city (other than a small change
to the base fare).56
There are also new rules that have relaxed
somewhat the regulation of taxis. 57
Though other cities will likely follow suit and
permit Uber to operate according to a restructured
set of rules, Ube r's problems are not behin d it.
According to Chris Mills, "Despite a $60 billion
valuation, Uber has yet to turn a cent of profit,
it's lacking any senior leadersMp, [and] cash is
being burned through at an alarming rate . .. ."58
As well, Uber has been accused of fostering a
tox ic work environment, including sexual
harassment and discrimination,59 homophobia,
as well as threats of violence and sexual assault
in the workplace. 60 In June of 2017, Uber
released the results of an internal investigation
Critical Analysis: Uber 's business model of
refusing to follow rules governing the taxi industry has been described as either "disruptive or
illegal, depending whom you ask." 64 Which view
do you hold and why? [s i tan acceptable business
practice to break the law? What are the ethical
considerations of doing so and how might this
impact on or reflect corporate culture?
56 Noreen Ahmed•Ulah. "New Re9uk-1lO"!> Moon Business as Usual 101 Uoer, Says U cf T £x.perr. U of T Nr.."'Ws
!9 tv\)'y 2016),orti~: <hllps //W1muto10010.CA/news/nev1·r~glA<lli0ns·~n--business~sua4: '(Jber·~S·u•t•etpe1 l>
U~d by oermissiOn ol Sunl Johat
57 JbK/.
58 Ch1·S MIS. ·uoefs Next C£0 Has Sil< Huge Prob41:'.!ms to Fot". BGR {23JtJne 201 7J,onu~ <hllP 1/bgr
conV2017/06/23/ube1·r~v1·~o·b19:1est•p1obte~s-aMtySiS/>
See too BbOmbarg, ·uoe(s Rev~ooe SoiK.e<J
70X Last Cut.titer But It Siu Losl Tons or Money· f-o11une t.24 May 20181. o~ioo · <hllp://lor1one
co rn/2018/0 5/24/ube1• 1ev(!nues-s.-Aes<11 rve rs<;ua rt~r / >
59 Selena Larson. ·uoar P$eads 'N1Lh Those Ot'!h~1 tog 1ne Apo ¥le ie Hur11ng·, CNN Tech t23 reoruary 201n,
o nl:tOO < hup ff mo!le)'c. nnc.o m/2017/CY212 3/technob9y/d~ete-u be r• ~ xuat-ha!aSS r'ne nl/inclex .hll'li >
60 M ike ISMc:, 1!\Side Uoefs Aggressive, U:')res11ain<id Work Ptace Culture· The New York nmes !22 ~eb-ruary
2017}, ontine· <hit ps//w,v<N nyhmes.conV2017/02/22/1ech!')Ot<>gy/uber•v£rk.~ce ·CUttor<.'!.hlm!>.
61 Anila B<takftshMn b Deirdre Bosa "Uber CE:O T1av1s Kabnick to Take f,fre Av.-ay Fl'Om lhe Compar"ry· CNBC
113 .lJ ne 2017J, Online -:l'lup l/111wwc.~bc.com/2011/06/1 3/urter · tdde• 1epo1L·1ecomrnt'!OOa1i0ns.i'111'1i>
0
0
62 Jbd.
63 Soo P1otessor rerd1nand Ouaenl'w:>etter, ~uoted in Tom Kus~r. "£nd ol !he Rooo tor Ubers BrashCE:o·
Fin:mcNJJ Po.st fdmonton 122 ..lJne 2017J a1 B9
6 4 Pat1ickCA1!\ "Toronto Taxi Li(;(!f\C<.'! Priet'!sA•e Ptummetiog Is Uber to B\c)mt'!rGlob~ /'l/avs t.22Jano.Ja:y 2015J,
o~:fle <hltp//gtObal()&IS.calOC\... s/1 780260/toron10-tax1·l~occ·:>1iCt'!S•a1e·~Jmmel!ng•is-t.1ber•tO•~rne/>.
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26
BUSINESS LAW IN PRACTICE REVISITED
1. How does the law affect Lionel's business?
As Lionel starts his business, he will be involved in a number of transactions and
events with significant legal implications, including the following:
Business form. Does Lionel want to operate his business alone as a sole
proprietor, would he prefer to work w ith partners, or is he interested in
incorporating? Each business vehicle has its own set of rules, which Lionel
must find out about. For instance, the incorporation process is strictly
dictated by federal and provincial law.""
Business name. Lionel must be sure to choose a nan1e that is not
confusingly similar to the name of another business. Even if he chooses
such a name inadvertently, he will be subject to legal consequences,
including be.ing sued for damages by the individual or company that has
built up goodwill in the name in question.ti6
Financing considerations. lf Lionel decides to borrow his operating
capital from the bank, he must enter into a specialized form of contract
known as a promissory note. In this contract, he prom ises to repay the
loan, with interest, according to a schedule.67 If Lionel decides that he
wants to raise money by selling shares, he will defin itely have to
incorporate a company. As well, should Lionel's company end up selling
shares to the public, it will have disclosure obligations under securities
legislation.68
Property. If Lionel decides to expand, he must determinewhetherto buy,
build, or lease additional prem ises for his business operation. Each option
involves a unique set of laws.69 Furthermore, many aspects of tl1e property
used in Lionel's business are regulated through health legislation and fire
regulations, to nan1e two exan1ples. Additionally, if customers are injured
on his premises, Lionel may be held liable and be required to pay
damages.70
Services. Lionel may ultimately hire staff to run his business. He must
become aware of the laws concerning unjust dismissal and employment
equity, as well as human rights legislation that prohibits discrimination. 71
Marketing. In promoting his business to the public, Lionel must be sure to
abide by laws prohibiting false and misleading advertising, 72 as well as
trademark and copyright law, to nan1e two examples.
Selling. Lionel must be sure to provide a reasonable level of service to his
customers.
Just as Lionel must devote resources to monitoring any staff that he might
have, attending to proper bookkeeping, and keeping his loans in good standing, he also must spend time managing the legal elements of hi s business
65 ror a discussion or the ioco1p0raton cnocess, see Ct)t)Oter 15
601b/d
67 Fo1 a dtScussiOI\ 01 cr0011,, see Chapter 26
68 ror a discussion of secun11es tav1,
~e
Chaplen 15.
69 ror a dlSOJssiO!l or real estal(! t.-w1, set:! Ch.clotar 19
70 rcr diSOJssion cf occopier's t1aOl1ty ~"'· see Chapter 12.
71 ror a discussion 01 emp40yment l<)v;, ~e Chaplors 20 aOO 21.
12 ror a dlSOJssiO!l of m.:int.eling tarw, ~e Chc':lplers 23 and 24
NEL
27
environm ent. Sin ce the law affects Lionel's business from a variety of perspectives, he is much better off accepting this responsibility from the outset, rather
than fighting a rear-guard action. Once he understands the law, Lionel can take
simple, proactive steps to ensure that he complies with it; just as importantly,
he can plan for the future. A properly devised risk management plan is an
invaluable tool to achieving this end.
2. What are the purposes of the laws that affect Lionel's business?
One of the most important functions of law in the business environment is to
facilitate planning, particularly- though not exclusively- through contract law.
Business law also has a protective function in that it seeks to ensure that those
who cause a loss are held financially responsible and otherwise accountable for
thei r actions, including through the crimi nal justice system. Finally, the law provides a series of mechanisms and rules for dispute resolution, thereby making an
essential contribution to certainty in the marketplace.
3. What has gone wrong with Lionel's business and why?
The Business Law in Practice scenario provides a lengthy illustration of the kinds
of penalties and liabilities Lionel faces for neglecting the legal rules that govern
hi s enterprise and failing to manage against their violation.
CHAPTER SUMMARY
Law is involved in all aspects of business, whether the entrepreneur is aware of it
or not. The law protects persons and their property, facilitates commercial interactions, particularly through contract law, and provides mechanisms for dispute
resolution.
Though not perfect, the Canadian legal system has much to recommend it.
The system strives for just outcomes by demanding that both the process for
determining liability an d the rules or laws that are applied in that process are
fair, objective, and free from bias. No justice system, of course, can consistently
accomplish all these goals.
Indeed, there are serious limitations to what the law can realistically achieve
when a legal problem arises; thus, it is imperative that a business adopt a proactive approach in managing the legal aspects of its environment through a legal
r isk management plan. TI1is chapter has emphasized the idea that knowledge of
the law is an essential business asset. Informed owners and managers can protect their businesses by ensuring compliance with legal requirements. They can
capitalize on the planning function of law to ensure the future of their business
by entering into contracts. They also can seek enforcement of legal rules against
those who do business or have other interactions with the enterprise. In thi s
way, the property, contractual expectations, and profitability of the business are
made more secure. Business ethics- while sometimes but not always coextensive
with legal requirements- are also increasingly important to running a successf ul business.
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28
CHAPTER STUDY
Key Terms and Concepts
ubitration (p. 12)
breach of contract (p. 7)
business ethics (p. 15)
business law (p. 3)
contract law (p. 11)
law (p. 5)
legal risk manage ment plan (p. 14)
liability (p.13)
litig ation (p. 11)
mediation (p. 12)
trademark (p. 4)
Questions for Review
1. What is the function of law?
2. How does the law offer protection?
3. How does the law facilitate business activity?
4. In what ways does the law facilitate certainty in
the marketplace?
5. Does the nature of the business relationship
affect the enforcement of legal rights?
6. How does the law resolve disputes?
7. Does dispute resolution always involve going to
court?
8. In what way is knowledge of the law a business
asset?
9. How might a lack of knowledge of the law
negatively impact a business?
10. How does contract law facilitate interactions?
11. Why should a business put a legal risk management plan in place?
12. Why is it important that certain activities,
such as the recreational use of drones, be
regulated?
13. What is the role of business ethics?
Questions for Critical Thinking
1. The law is sometimes made subject to the criticism that it does not necessarily forbid unethical behaviour and is therefore too narrow in
scope. What is the relationship between ethics
and law? Are ethical responsibilities the same as
legal responsibilities?
2. When is a lawsuit the best response to a legal
dispute? What is at r isk?
3. Knowledge of the law is a business asset. How
can you acquire this asset short of becoming a
lawyer? How is ignorance of the law a liability?
4. Courthouses throughout the world, including in
Canada, sometimes feature a statue of a woman
who represents or symbolizes justice. In certain examples, she is blindfolded and carrying
both a sword and scales of justice. According to
sources, the blindfold is a symbol of impartiality; the sword is a symbol of "power, authority,
protection"; and the scales "imply a just balance", among other explanations.73 Describe
and give examples of how these qualities are
present in the Canadian justice system and how
they are not.
5. Because tanning beds are a cause of melanoma
or skin cancer, the vast majority of Canadian
provinces have legislation regulating their use.
One common model that the legislation follows
is to require warning signs on the tanning salon
premises and prohibit those who are under the
age of majority (i.e., the age at which someone
becomes an adult for legal purposes) from using
tanning beds altogether. This ranges from 18
to 1 9 years of age, depending on the province.
Another possible model would not outright ban
underage tanning. Instead, written parental consent would be required. Should the government
try to protect young people from the dangers of
73 la'.... L .b1.')ry ..bnnat ·au~ liO~ and ..O.nsv..ers· cotumns {1980) 73
l l 1b1 .} 744 ()00 U971) 64 L Li0-1.J. 249. ~e lOOJua1Ui ~S'lik. .& Del\nlS
Cu1 lis.ReµtesMt1ngJustice !New HavQn Y.ak? University P1ess. 2011.l
14. Why are business ethics important?
29
NEL
tanning or should the matter be left unregulated
and up to the individual consumer? [f you think
the matter should be regulated, which model
described above do you prefer and why?
6. Was it a good idea for Maple Lodge Farms {discussed in the Ethical Perspectives Box in this
chapter) to fight charges under the Health of
Animals Act for failing to prevent undue suffering by exposing chickens to the cold during
transport? What are the risks of doing so?
What are the risks of admitting guilt?
Situations for Discussion
1. Joe has recently opened a bar and adjoining
restaurant, specializing in seafood. It is named
"The Finny Friends" after a restaurant that Joe
had visited in Toronto several years ago. ln
accordance with the law, Joe has a liquor licence
from the provincial liquor-licensing authority
tllat limits tlle seating capacity in the bar to 30.
As Joe's bar becomes increas ingly popular, he
begins to regularly allow over 60 patrons in at
one time. Eventually he is caught, and-having
already received two warnings-his operation is
closed down for 30 days. Joe is flabbergasted at
ilie severity of the penalty. Soon thereafter, Joe
is contacted by a lawyer for The Finny Friends
Restaurant in Toronto. The lawyer says that
Joe has 48 hours to take down h is restaurant
awning, modify his social media presence, and
destroy anytlling else with the name "The Finny
Friends" on it {including menus, invoices, placemats, and napkins) or he will bring an application for a court order to that effect. To make
matters worse, a health inspector is on Joe's
doorstep saying that there have been several
recent reports of food poisoning originating
from Joe's restaurant. What has gone wrong in
Joe's business and why?
2. Sam owns a small gas station in Alberta. He is
very angry that a customer has failed to pay her
outstanding account with his business, despite
nwnerous reminders from him and promises
from her that she would to do so. His idea is
to print up a poster and tape it to the main
entrance of the gas station. Th e poster would
contain a photograph of the derelict customer
and her name, as well as stating "PAY YOUR
OVERDUE ACCOUNT" in bold, upper case font.
"It's ilie only way [have to get through to my
no-good customer. Plus it's the truth. She does
owe me money. Quite a bit in fact", Sam told a
friend. Does this plan involve Sam disclosing personal information? Should he go allead with the
plan? ,. Explain.
3. Peter is a fudge maker of some renown and
obviously requires a reliable supplier of sugar.
His current sugar supplier has been very
dependable but recently, is delivering latesometimes days at a time. Peter is concerned
iliat the supplier has entered into too many
supply contracts wiili a variety of businesses
and cannot fill his orders on a timely basis. Peter
knows the sugar suppUer is in breach of his contract for delivering late but wants to avoid a fullblown legal battle. What alternative approaches
might address Peter's problem more effectively?
4. Several provinces across Canada, including
Ontario, Marutoba, and Saskatchewan, have
proposed or passed legislation that prevents
children from buying or renting video games
that are expressly vfolent or sexual, as determined by a ratings board. Businesses found
sellingiliese games to minors face penalties
iliat range from fine.s to having their business
licences revoked. 75 How effective do you th ink
government regulation is in limiting children's
access to violent video games? Are there better
ways of achieving these types of goals? ls it
the role of government to provide legal consequences for ilie underage renting or purchase of
violent video games?
5. Olivia owns a convertlence store and has
invested a lot of money in gambUng machines
for the store. Recently, ilie government passed
a law banning the machines from tlle store
immediately, aliliough pubs are allowed to
continue operating iliese machines. ls this law
fair? Does it violate any of the common values
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associated with the law? Would it make a difference if the law applied only to new businesses?
Would it make a difference if the government
provided compensation to the convenience
stores affected, or phased in the law to allow for
a period of adjustment?
6. A businessman who worked in the dry-cleaning
business for almost three decades received a
jail sentence for repeatedly breaching environmental protection laws related to the improper
storage of a cancer-causing agent called perchloroethylene used in the dry-deaning process.
His operation did not follow rules requiring the
chemical, as well as its waste water and residue,
to be stored in a closed container. The businessman's lawyer said that his client was embar·
rassed by the infraction but simply got too busy
to supervise this aspect of operations. Do you
agree with a law that can send an individual to
jail even though there is no proof that anyone
fell ill from the infraction and no proof that the
individual intentionally disregarded the law?76
76 Tony Btais, ·ory Oeaner Geis House A1r~sr, (dmon:ott Jou1nat
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