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CONTENTS
I) AN INTRODUCTION TO LAW AND CANADA’S LEGAL SYSTEM........................................................................................ 4
1. What Is Law? .................................................................................................................................................................................... 4
Relationship between the law and politics: ........................................................................................................................ 4
2. What are the basic theories and philosophies of law? ................................................................................................... 5
3. What are the purposes of law in society? ............................................................................................................................ 6
Institutions that create law: ............................................................................................................................................................ 8
1. Courts ........................................................................................................................................................................................... 10
2. Legislatures ............................................................................................................................................................................... 12
3. Delegate Bodies ....................................................................................................................................................................... 14
Systems of Law.................................................................................................................................................................................... 16
1. Civil Law ........................................................................................................................................................................................... 17
Weaknesses:.................................................................................................................................................................................... 18
2. Common Law ................................................................................................................................................................................. 18
Justification for the doctrine of Stare Decisis ........................................................................................................................ 21
The Nature and Roles of courts.................................................................................................................................................... 22
5 roles of the court: ...................................................................................................................................................................... 23
Adversary system: ........................................................................................................................................................................ 25
The Court System in Canada ......................................................................................................................................................... 26
Who appoints the judges? ......................................................................................................................................................... 27
The Court Process in the Context of Litigation ................................................................................................................ 28
Lawsuit Expenses ......................................................................................................................................................................... 30
II) THE CANADIAN CONSTITUTION ............................................................................................................................................... 31
Where do you find the Canadian constitution? ..................................................................................................................... 32
The Nature of a Constitution ......................................................................................................................................................... 32
Sources of the Constitution: the institutions that create constitutional law in Canada ...................................... 33
Authoritative sources of the constitution: .............................................................................................................................. 34
Persuasive sources are important to the constitution but are not enforced ........................................................... 36
Selected Topics in Canadian Constitutional Law ................................................................................................................. 37
Federalism in Canada.................................................................................................................................................................. 37
Is there federalism in Canada? ..................................................................................................................................................... 38
Stance 1: We are a federal country because: .................................................................................................................... 38
Stance 2: We are not a federal country because: ............................................................................................................ 40
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Why do we have the style of federalism that we have? ............................................................................................... 42
Other forces at work: .................................................................................................................................................................. 43
Responsible Government ............................................................................................................................................................... 44
Responsible government is the single most important achievement for 3 reasons: ...................................... 45
The most important is the 3rd reason because................................................................................................................. 45
Other legislative institutions: .................................................................................................................................................. 45
1982 Revisions:................................................................................................................................................................................... 47
Constitutional Amendment Process .......................................................................................................................................... 47
The Charter of Rights ....................................................................................................................................................................... 50
III) THE MAJOR FORMS OF BUSINESS ORGANIZATION IN CANADA ............................................................................... 53
Advantages of Sole Proprietorships: .................................................................................................................................... 54
Disadvantages of Sole Proprietorships: .............................................................................................................................. 54
Agency principle ........................................................................................................................................................................... 60
A limited partnership .................................................................................................................................................................. 62
Limited Liability Partnerships ................................................................................................................................................ 62
Two types of companies: ................................................................................................................................................................ 66
Limitation on the separate entity principle: ..................................................................................................................... 67
Methods of incorporation (see textbook): (22:40) ........................................................................................................ 68
Component parts of the constitution: .................................................................................................................................. 68
Public companies vs. private companies: (41;30).......................................................................................................... 70
Apparent authority is manifested in 3 major ways: (47:20)........................................................................................... 72
Director’s Duties: (Oct 31) ............................................................................................................................................................. 74
Minority Shareholder Protection: ......................................................................................................................................... 76
IV) THE LAW OF TORTS ....................................................................................................................................................................... 79
The Nature of Torts (Nov 5) .......................................................................................................................................................... 80
Intentional Torts (9:15) .................................................................................................................................................................. 80
Damages (remedy): (20:18) .......................................................................................................................................................... 83
The Tort of Negligence..................................................................................................................................................................... 84
Professional Liability (Chapter 4) (November 14) ............................................................................................................. 86
Five Basis of Liability (some of which relate purely to the statutes that create the governing
organization) (19;00) ................................................................................................................................................................ 87
Standard of Care: .......................................................................................................................................................................... 89
V) THE LAW OF CONTRACT ............................................................................................................................................................... 90
Six Elements of a Contract: ............................................................................................................................................................ 91
1. The Offer ...................................................................................................................................................................................... 91
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2. Acceptance (Nov. 20 – 3:25) .............................................................................................................................................. 95
3. Consideration (17:00) .......................................................................................................................................................... 97
4. Intention to create legal relations (34:00)................................................................................................................ 100
5. Capacity (39:45) ................................................................................................................................................................... 101
6. Legality of the Contract (44:30) .................................................................................................................................... 101
Impugning a Contract (50:00) (Nov.21) ............................................................................................................................... 102
Grounds to impugn a contract: (16:30) ........................................................................................................................... 107
Enforcement of Contractual Rights and Problems of Enforcement .......................................................................... 112
Discharge of a Contract (Nov. 28) ............................................................................................................................................ 118
Effect of Breach and Remedies (17:00) ................................................................................................................................. 120
Property (Dec 3) ................................................................................................................................................................................... 131
PERSONAL PROPERTY ................................................................................................................................................................. 131
bailment ......................................................................................................................................................................................... 132
Intellectual Property ................................................................................................................................................................ 132
Real Property .................................................................................................................................................................................... 134
Negotiable Instruments (16:30) .................................................................................................................................................... 140
bankruptcy .............................................................................................................................................................................................. 149
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I) AN INTRODUCTION TO LAW AND CANADA’S LEGAL SYSTEM
a) What is Law in Philosophical Terms
3 questions to answer:
i)
What is Law?
ii)
What are the basic theories and philosophies of law?
iii)
What are the purposes of law in society?
1. WHAT IS LAW?
Law is ubiquitous, it is everywhere, and you bump into it everywhere. Law is a subset of rules and are
differentiated in the formalities of documentation and enforcement. Sanctions means that you are
subject to punishment and they differentiate law and rules.
Humes distinguished between physical and normative laws. Physical laws are laws of nature in
physics, chemistry and biology. For example, the law of gravity or law of inertia. Normative laws are some
of the rules governing human conduct made by humans. For example, the law of stealing: one should not
steal, but not that you can’t physically steal. Rather it indicates or commends that you shouldn’t steal and if
found guilty you suffer the consequences. You may break the law and suffer the consequences, because it is
a decision of free will. Therefore, physical laws cannot be broken, but normative ones can.
Humes also distinguished between normative rules. Some normative rules were law because they
created a code of behaviour with sanctions. Laws are created by formal processes of enforcement and
adjudication.
How are sanction created? There are 2 sanctions for drinking and driving: 1) the criminal code and 2)
the highway and traffic act (provincial). They are created by politicians.
RELATIONSHIP BETWEEN THE LAW AND POLITICS:
Laws are not value neutral, they manifest from the political/philosophical values of the law
maker. Generally they emerge from the law makers. Legal philosophies are basically dressed up political
philosophies. The process that leads to law (most significant) is the legislature (at least in Canada). For
example, the highway traffic act is made by legislature.
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There are two parts of the legislature:
1) legislative assembly who are elected to position and are politicians and
2) the monarch: Queen Elizabeth II, governor general (federal),
3) and lieutenant government (provincial). The monarch approves the bill by the legislative assembly.
Essentially the laws are the crystallized product of the political process. Law is not unique,
detached or discrete. Politics govern through law.
2. WHAT ARE THE BASIC THEORIES AND PHILOSOPHIES OF LAW?
Legal philosophy is jurisprudence – manifestation of politics. There are 3 different schools of
jurisprudence:
a. natural law
b. legal positivism
c. legal realism
a. Natural law is made up of 2 subcategories who are both trying to ask the same question: “What should
the law be?”
i.
Old school gets its origins from Thomas Aquiness and Edmond Burk (founder of modern
conservatism). This school states that the law should be based on eternal fundamental truths
inspired by God. These truths or moral principles are perceived in history, customs and scriptures
and should be replicated in society. They are metaphysically created.
ii. Deistic natural law believes that it rests NOT on Devine inspiration, but on the assumption
that rational people, by applying their inheritabilities of reason and logic to their perception of
the world, will arrive at basic principles of justice. It is man’s faculty of reason. Believers of this
school are Thomas Pane, Thomas Jefferson, Pierre Trudeau, and John Lock. Basic principles should be
common to us, even though they usually aren’t.
b. Legal positivism is only concerned with “What is the law?” It is like a social science because it
doesn’t evaluate the law. It wants to be value neutral. It identifies legal principles. The founder of
positivism is August Compt (founder of sociology). Sociology emerged because scholars in the humanities
were jealous of scientists getting all the praise and notoriety. They suggested focusing on the scientific
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method (methodology), breaking down the methods and isolating one variable for testing and applying it to
the humanities. They applied the scientific method and got sociology. They felt that the only things
tested through this methodology is considered fact (i.e. Fact value distinction), otherwise it is merely
thoughts and values.
There are 2 steps to the process:
1) locate the holder of power (sovereign) and
2) identify and interpret the law as created by the sovereign authority under different methods and
different cases.
c. Legal realism is concerned with “Why is the law what it is?”, “Why decisions are made?” They don’t
look at what are the rules, but they have to be positivists in order to look at why is the law created. Use
scientific techniques as to why the law is created. Therefore, use positive techniques (scientific method) to
discover this. More Complete Positivists.
3. WHAT ARE THE PURPOSES OF LAW IN SOCIETY?
Law has many purposes in society. Law provides consistency and guidelines for individuals to follow.
It essentially regulates society. It is “freedom from violent conflict… essential characteristics of society”
(according to the text). Therefore, it is providing order. The law provides order for our relationships in
society more than just protection of a person, but other aspects of fair relations between people (i.e.
economic and property allocation matters).
There are a few different views of a just society.
a. Liberal Capitalist Society: economic analogue of liberalism
•
Market economy: driven by profit and exchange (trading, buying and selling) freedom
without government intervention in exchange. (or limited)
•
Private property: you have to have something to trade, but is it socially just? 2% of the
population owns 95% of the property. How is capitalism just? Maybe because it is the best
of the alternatives
b. Marxism (NDP):
•
Believe in an equality of condition, no one gets more than the other
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•
Formula: from each according to ability to each
•
Private property and capitalism are tools of economic oppression
•
Exploited, believe in the eradication of private property
c. Jeremy Bentham:
•
Principle of utility: the greatest happiness of the greatest number
•
Problems: how do you measure happiness? A lot of subjective flexibility
d. Social Engineering: Roscoe Pound
•
Scientific study of people’s needs and expectations and of prevailing values, more rational
adjustments of the rights given to competing interests could be made to improve the lot of
society.
•
Reflects a Bentuamite influence
•
Obtains its values or criteria for change from the scientific study of the community
There are 3 questions:
1. Does the law influence the development of society or is it a reflection of changing value in
society?
•
Ex. New laws, sexual orientation reflect changing values, family values changed (easy to get a
divorce)
•
However, even if society does not have these values, the law affects the values of society
•
Ex. Law has changed our views on drinking and driving laws and consequences are more
severe, as well with new smoking laws
•
Laws are often created by vanguards and lobbyists
2. Can scientific method be used to improve the quality of law making or are scientific
methods neutral instruments to be used by social groups?
•
Ex. Climate Change issue
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•
Scientific methods often misused, abused, misinterpreted.
3. If scientific methods can be effective in exposing society’s ills is there a danger that they
will destroy the myths upon which society depends?
•
Myths: similar cases are treated similarly (process does not discriminate against people) there
isn’t corruption, there isn’t bias.
•
Ma’at is the origin of the goddess of justice. The ancient Greeks called her Themis. Roman
goddess of justice was known as Justitia.
•
However, sentencing and probability of conviction are much higher for minorities therefore you
can destroy myths
•
Scientific study can destroy the myths
•
Other myths: generally speaking only the guilty are convicted
INSTITUTIONS THAT CREATE LAW:
i)
Courts
ii)
Legislatures
iii)
Delegate Bodies
Substantive law: the rights and duties which each person has in society and may be enforced through the
judicial process. It is concerned with liabilities.
Public law: concerned with the conduct of government and with relations with government on one side
and private persons on the other. It is divided into several subcategories criminal, constitutional,
administrative laws. Defending the government in a criminal court case would be the Crown Attorney.
Procedural law: the process through which liabilities can be enforced. Individuals protecting their rights
and duties.
Private law: composes the rules governing the laws between private person when disputes arrive, the
persons involved may go to the court to have their rights (liabilities) decided by the rules of private law.
These rules are the basis substance of contract law, tort law, property law and civil law.
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Civil law: relies on code
Common law: relies on precedent cases.
[discursive:
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1. COURTS
The courts are a mechanism of settlements of disputes and are the most formal method. Judges determine
facts and apply legal principles. (Called adjudication)
•
Look to the courts for guidance
•
create legal principles (primary creator of law in society)
•
institution of dispute resolution however there are other institutes that do this as well called ADR’s.
1. arbitrators: always get fee in advance because loser will not be happy
2. mediator: appointed by statue or agreement, can only suggest a solution
3. conciliation: gets the party talking but can’t suggest anything
4. settlement: disputes resolved but not by the courts, however they pay attention to
methods resolved by the courts
a) this is the best method because it is formalized and others pay attention to it
b) another function of the courts is creating common law
•
all provinces are common law except Quebec (sources based on previous cases)
•
all states as well except for Louisiana because it was a French settlement
•
Common Law is decided on the basis of previous principles (precedence) Stare Decisis
•
there are case reports that explain the judges reasoning for the verdict as well as the facts,
discussion of the laws and the holding
•
Plaintiff (the one suing) goes to court to fix a wrong by getting a remedy (money for damages,
etc)
•
Expositions of law as pronounced by a court of law. Decided cases are recorded and
documented so that later lawyers can extract principles from the judges decision.
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•
In this the judge has created a legal principle called a ratio decidendi: the narrowest and
necessary legal principle upon which the decision was based. The most basic element of
the principle of law. It is not specifically said and you have to interpret and identify it. It is the
key creative element of the courts.
•
The principles are called common law ® "judge made" (expositions of law as pronounced by
the court of law.)
•
2 types of cases (sept 17)
1. Cases regarding legislation, i.e. statues or subordinate legislation
Interpreting legislative instruments and seeking to discern the intent of the legislation
and effect of law as formulated by legislation. Based on the word of the statute; courts
want to determine the nature of the legislation and the judge makes final decision.
Family Property Act (formerly marital property act)
Made to include conjugal (living as family à what does that mean?) cohabitation
with minimum of 3 years. Property split up 50/50.
Intestate Succession Act ® to die without a will. Property is distributed among the
family members. This process or a will needs to be probated by a lawyer. (Probate - to
prove and read the will and fulfill it)
2. Judge made/Common law: Court rather than interpreting and applying legislatively
created law is declaring the law in areas untouched by legislation. The law established
by the courts in this matter is the core of what is known as judge made or common law.
Here the courts are themselves making authoritative pronouncements of the law, in the
context of resolving disputes, without the existence of legislative enactive laws whose
intent the courts are generally bound to follow subject to the process of interpretation.
The courts and judges are themselves making the law. Judges had lots of power to
determine the principles of the law. Their views were biased of value of both
philosophical and social. They were liberal-capitalists. This was common until the ~20th
centruy.
It is further subdivided into 2 categories:
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a) the common law courts
b) the law of equities
COMMON LAW COURTS:
In feudal times, the king was the fountain of justice (the king created all the laws) in early times.
This jurisdiction was exercised by the king himself. The king was said to have a court, but it was a court of
advisors and hadn’t been segregated with duties. This was during the Feudal System times. The king
appointed member to do cases in different areas. In 1066 there was the battle of the Normans vs. AngloSaxons (William the Conqueror). The Norman’s conquered England, but retains aspects of the AngloSaxons system where the Lord had control of all his subordinates below him. Retained it for political
control of property. William imposed the feudal system. Judges dispensed law that was common to all
people in England. It became distinct of the king’s court. It did not however strip the king of all judicial
authority, he retained an overriding residual authority to administer law outside the common law courts.
It was however, only invoked when the common law courts were unable to uphold justice. The king was
approached for equity. The king retained an overriding residual ability to maintain justice outside of the
common law system. There were too many cases so he appointed the chancellor to deal with these cases.
It was called the Court of Chancery or the Court of Equity. Equity principles overruled common law
principles, because equity principles evolved of lack of common law principles. Cases could take up
to 60 or 70 years.
In 1865, in response to Charles Dickens commentary on court systems, Blique House, (also wrote
Christmas Carol, Great expectations) they created the Judicature Act: one set of courts simultaneously
(equity and common law). This is still applicable in Manitoba Courts. Both bodies of principles remained
separate, however, both are considered during court cases, where equity law still upholds common law.
This was applied to Canada and Manitoba.
Courts have appointed judges who need a law degree, practicing for about 10+ years. This means they are
chosen from a narrow group. This is a more reactive process, by means of waiting for a case to occur.
2. LEGISLATURES
•
The legislatures produce laws known as statutes or acts. Are proactive. Need to be 18+ and win
election.
•
11 legislatures in Canada.
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•
Halsbury defines it as: a statute or act of parliament has been defined in the English law as a
pronouncement by the sovereign in parliament. That is to say made by the Queen (monarch) by
and with the advice and consent of both Houses of Parliament, or in certain circumstance the House
of Commons alone, the effect of which is either to declare law or change the law.
•
A bill is a draft of a statute. This definition applies mutatis mutandis, which means with
necessary changes being made, to statutes of Canadian parliament and provincial legislature.
There are 3 institutions that make up parliament
1) In the UK:
i. Monarch – Queen
ii. Upper house – House of Lords: weren’t appointed, but is being changed by Toni Blair. He is
stripping hereditary peers with appointed life peers from the labour force. They will be
considered designated members of lords because they are not titled. It’s modelled after the
Canadian senate.
iii. Elected assembly – House of Commons (Lower House)
2) In Canada
i. Monarch – Queen or monarchical representative (governor general David Johnston); is
recommended.
ii. Upper house – senate: completely appointed, no social prestige, no credibility, used to be a
senator for life
iii. Elected assembly – House of Commons (MP’s, approve all statutes) We elect our MP’s
3) Provincial Legislature (MB)
i. Monarch – Queen or representative (lieutenant governor John Harvard)
ii. Upper house – doesn’t exist, it was abolished in 1873, but was called the legislative council
(Quebec was the last province to have one)
iii. Legislative assembly – legislative assembly: inhabited by politicians, statues generally started
in the elected assembly.
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Monarch
UK
CDN
Provincial
Queen Elizabeth II
Queen Elizabeth II
Queen Elizabeth II
(Governor General)
(Lieutenant Governor)
Upper House
House of Lord
Senate
[No long Exists]
Lower House
House of Common
House of Commons
Legislative Assembly
American Constitutional Structure ® is exactly like the British Bicameral Model that existed in 1776, but
the king is now the President and is elected into power.
-House of Congress
- Senate (two senators from each state no matter the population)
- House of Representatives (based by rep by population)
You need all three bodies to pass legislation. In Canada the Monarch has no authority. The Prime minister
has more power over the lower house while maintaining executive power.
3. DELEGATE BODIES
•
Delegate bodies produce Subordinate Legislation.
•
Defined as: legislation made by a person or body, other than the sovereign in parliament by
virtue of powers conferred either by statute (delegated legislation) or by legislation (subdelegation), which itself is made under statutory powers. Frequently referred to delegated
legislation in the former case and sub delegated legislation in the latter.
•
The influence can be overestimated. In terms of volume in legislations it constitutes by far the
largest number of laws emanating from government today. In terms of effects it regulates,
organizes and directs a broadening sphere of social conduct by the specific implementation of the
general legislative policies embodied in enabling statues. Very powerful and dominant. Cabinet has
this power often.
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•
There are thousands of bodies for example, school boards, municipalities, police depts, fire depts,
crown corps, CRTC, etc.
•
Statutes give them power and are very brief, the regulation is very in-depth. Frequently the
recipient of power is the cabinet. Federal = Governor in council. The problem with this is that the
cabinet has so much power now, the legislature has none left. Executive Dominance: delegation to
cabinet of subordinate legislation. Canada’s system has the worst aspect of the US and UK systems.
•
Subordinate legislation has various names: regulation, orders, rules, bylaws or ordinances (created
by delegate bodies). Subordinate does not mean that they have any less power, it only means it was
been delegated by the legislation.
•
They have a quasi-judicial role: they need to resolve disputes, hear grievances, produce regulations
•
There are 2 principles of law that form administrative law.
1. Delegate bodies can only create legislation within the jurisdiction given by statutes. Anything
else is ultra vires (beyond the power/jurisdiction) is void (has no force or effect). Intra vires means
within the power, the jurisdiction.
2. Delegates can’t delegate – delagatus non potest delagare – can’t further delegate their power. For
example, in estate law you appoint an executor, they can’t delegate their powers, unless legislation
allows them, they have to attend to them personally.
•
Until the 20th century, the most significant institution creating law was the courts (Judge(s)). Judge
can only create laws when a dispute arises. Law creation by Judges are reactive, and not proactive.
•
In the early 20th century, the delegate bodies exploded and the relative roles of significance
reversed. Legislatures act proactively, not having restricting of the Courts.
o
Why did this occur? (Estor Brown) Courts vs. Legislature. The historical emergence
of legislation of the chief instrument of innovation.
1. In order for courts to make law they must wait for an appropriate dispute to arise.
o
The other is proactive; they can make law, giving the advantage to the legislature.
o
Judges were conservative, relatively uneducated, non-proactive, non-elected, narrow in
background.
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2. Previously there wasn’t a great demand for laws.
1. No legislature needed to organize non-existent social services
2. Court resolution worked quite well because there wasn't a enormous necessity for it and
there weren't too many laws needed at the time.
3. Bolstered by scholars (historical inertia)
4. Legislative process was difficult, expensive, sophisticated, intellectual
§
Suddenly with the industrial revolution there was a big change in society. The
legislature, because they were proactive, they could immediately act to the
problems of the industrial society, however, the courts, because they were
conservative, couldn’t/didn’t react lost their dominant position.
3. Society finally had sufficient wealth to support an ongoing legislature function. Ironically, it
was the industrial revolution that fuelled the wealth and allowed for the problems to occur. It
required more legislation and aided it come about. The industrial revolution provided both the
wealth and problems.
SYSTEMS OF LAW
•
Black’s law dictionary: a system is an orderly combination or arrangement as of particulars
parts or elements into a whole, especially such combinations according to some rationale or
principle. The genesis organization and application of legal principles judges use to adjudicate
cases in the context of court action, not including principles from simple statutes.
•
The essence of a system is the rationale and/or principle according to which various related
matters are arranged. When we speak of legal systems in contradistinction from one another, we
mean to differentiate that rationale or principle around which laws and legal decisions are ordered.
•
Principles judges use to adjudicate cases not including legislation
•
The genesis and organization of the principles the Judges utilize to adjudicate cases.
In Europe there are 2 great legal systems.
i) Civil Law
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ii) Common Law
1. CIVIL LAW
•
more ancient of the two systems.
•
Europe: everywhere but England, Whales and Ireland, where they have the common law system.
•
America’s: everywhere except Guyana.
•
Louisiana, in the US, because it was colonized by the French and Spanish.
•
Mexico uses civil law.
•
Canada we have basically the common law system except for Quebec, because they were colonized
by the French. Even though Quebec was conquered by England in 1759 in the battle of the planes of
Abraham (General Wolf for the English, General Montcalm for the French.) It became part of the
British Empire in the treaty of Paris in 1763. (English had choice from Guatalu) However in 1774
the Quebec act allowed for the continuation of the Quebec system (civil code). Regarded by one of
the intolerable acts for the Americans. The British allowed the civil law system to continue.
•
Everything is so nicely articulated, instead of trying to figure out the principles yourself.
•
The essence of the civil law system is the existence of the code.
•
The modern system owes it genesis to the Roman/Byzantine Empire, in particular the empire of
Justinian in the 6th century AD. The Roman Empire divided into two empires. Justinian wanted one
set of codes to be used throughout the empire.
•
According to Black’s legal dictionary codification means: the process of collecting and
arranging the laws of a country or state into a code, that is into a complete system of positive
law; scientifically ordered and promulgated by a legislative authority. It became known as
Justinian’s code. The creation of code, and the utilization of the code for the adjudication of cases.
•
It was replaced in 1804, when Napoleon Bonaparte created a replacement code. Known as the
Napoleonic Code. The modern civilian countries update the code more frequently. They have
ongoing tribunals that update the code on an ongoing basis.
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•
Always refer to a code to access a principle to settle a dispute. Only if the code does not
cover the new problem is the court free to settle the problem from the introductory general
principles (in the front of the code book).
•
There is no doctrine of precedence in the civil law system. Later courts, in the civilian court,
may decide in a similar case that a just result is a reverse to the original decision. Each Judge can
select the principles that they see fit regarding a case they adjudicate. This is regarded as the
critical weakness in the civil law system. It’s a deductive system.
WEAKNESSES:
1) There is an absence of doctrine of precedence, which removes certainty from the law.
2) In new areas of development where there aren’t specific principles; the application of the general
principles is illusory.
To ameliorate these difficulties, certain practical amendments have been made.
1) There are frequent revisions to the code, so in newly developing areas of the law there are up to date
principles. These revisions are usually based on decided cases.
2) There is a growing tendency by the courts to apply precedence. Lawyers argue them; judges read them,
with the result that nevertheless precedents are applied with upon commitment greater certainty and
predictability.
2. COMMON LAW
•
Common law system: applies to court created law, how they are applied. It applies to certain
statutory laws as well.
•
It originated in England, Whales and Ireland and current former British colonies. The English in the
middle ages had to device a different system to solve disputes because England essentially was cut
off from Europe, because it’s an island. Consequently it wasn’t influenced by the factors that
influence mainland Europe. The problem was that the judges in the Anglo-Saxons courts had to
solve disputes, but where did the principles come from? Some came from the church, the king.
However they said it had come from time and memorial and then they’d make it up. There was an
oral history but not many people could read at the time. Why did they do that? Because it gave
them a level of legitimacy. They spoke of precedent cases. When mercantilism became prominent,
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it demanded more certainty and assurance and the doctrine of precedence was begun to be
recorded. Eventually it was based on precedence that was organized and it became
preferable over the civil law system.
•
The doctrine of stare decisis (doctrine of precedence – stand by previous decisions) has been used
for 1000 years, but only in the 19th century did it become a rule of law that needed to be followed.
The only binding principle is the ratio decidendi (The narrowest and necessary legal principle
upon which the decision is based). Obiter Dktum, a statement by the way, it’s not binding.
•
Rupert Cross’s jurisdiction – every court is bound to follow any case decided by the court above it in
the hierarchy of course, and the pellet courts (appeal) are bound by their own decisions, except in
the Supreme Court of Canada. However, it does not indicate, the only binding part of the case, the
ratio.
•
A few things had to evolve before the system could be effective:
1. Literacy amongst the general population and judges themselves.
2. A system of publishing precedent cases (law reports), essential the discussion of the judge’s
findings and discussion of law.
3. Wide spread distribution of these printings. started in the Tutor period (1485 – 1650) with
Henry VIII. During this era, the doctrine of precedence started to work in an effective way.
From the myth came a fully functioning legal system. The creator of the law is the
precedence where as in civil law the creators are the courts/judges.
“Law Reports”: published reasons for judgements given by a judge
•
Has individual case reports
1. Summary of facts
2. Discussion of law
3. Resolution of case
The doctrine of stare decisis has two aspects:
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1) Definitional or Substantial:
•
the principle of law is found in the precedence called the ratio decidendi: the narrowest and
necessary legal principle upon which a legal decision was based.
•
In the case report there is the judges’ review.
•
The binding aspect of the case is the ratio decidendi. It is up to the reader to determine what the
ratio is.
•
Always therefore subject to argument and debate until the court tells us what the ratio is in another
case. In the civil law system is clearly articulates what the precise principle is, so there isn’t the
certainty that some commentators make about the common law system. It also allows flexibility for
some judges that aren’t as well informed but it undermines the certainty that the doctrine of
precedence should contain. Obiter dictum: statements by the way.
2) Structural:
•
What precedent cases do we follow?
•
The answer was provided by Rupert Cross, he wrote a book called precedence in legal law and
described the structural component of the stare decisis as: every court is bound to follow any
case decided by a court above it in the hierarchy of courts and appellate courts are bound by
their own decisions save and except the court of Canada and the house of lords. The only part
of the case that is binding is the ratio decidendi. Order: trial court, appellate court, appeals court,
final
•
The case must be relevant and on point. There is a hierarchy of courts.
•
The Manitoba courts do not have to follow decisions made in Ontario because it’s not in our
jurisdiction. We do not also have to follow decisions made by The Hague (world courts) in Holland.
Hierarchy of Jurisdiction:
1) Provincial courts – narrow jurisdiction, ex. Family court, juvenile court, small claims court (up to
7,500), traffic court, bylaw court , all appointed by provincial government
2) Court of queen’s bench (appointed by the federal government)
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3) Court of intermediate appeal (court of Manitoba appeal) – must be exercised in 30 days
4) Supreme court of Canada- the final appellate court for all jurisdictions in Canada. It serves a
unifying function. If something comes from Quebec then it’s heard from the 3 Quebec judges,
however those judges can do cases from the common law system.
5) JCPC (the judicial committee of the Privy Council) ended in 1949 and still can be binding
precedence in Canada.
Common law: The progress of legal history is the slow revelation and refinement of refutable principles.
This is the metaphysical justification.
JUSTIFICATION FOR THE DOCTRINE OF STARE DECISIS
1) Historical: classical – it is based on principles metaphysically inspired that have the appearance of
change because they are being applied to modern cases. It is only the application of old principles
to new circumstances that give the appearance of change. They do not make law but declare what
it is. Change comes from the legislature.
2) Modern: best annunciate by Samuel Freedmon who was one of Manitoba’s two best judges (Brian
Dickson). Freedmon wrote many articles on the doctrine of stare decisis. Those wedded to the
rigorous application of the doctrine of stare decisis insist that it produces the 3 C’s: certainty,
consistency, and continuity.
a. Certainty: we must know what the law is
b. Consistency: equality of treatment should be sought with similar cases being treated
similarly
c. Continuity: we must avoid the disastrous inconvenience of introducing doubt into the law
through judicial departures from precedent. Linked to this is the reliance principle: that
is the principle that people order their affairs in reliance on judicial decisions
(principles declared by judges) and therefore their interest should be adversely
affected if judges altered principles. People order their affairs on the bases of these
decisions therefore interests would be inversely affected if judges departed from decisions.
Some problems exist with the doctrine:
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1) Because you follow pre-existing decisions, if one of these courts make an error and makes a bad
principle, it will persist for a long time.
2) The principles or ratios themselves in the common law system aren’t that clear, they are interpreted and
interpolated. Very seldom are those ratios clarified, which creates a level of uncertainty which the civil law
system doesn’t have.
Emergence from custom to law:
Historically the doctrine of stare decisis operated on a rule of custom. It was not till the 19th century that
the House of Lords accepted the doctrine of stare decisis and proclaimed it law. The reason why it was
accepted was complex:
1) industrial revolution - requiring certainty, people dealing with commercial contracts, more wealth.
2) intellectually rationally and positivism was becoming ascendant
3) commercial printing (printing press) had become even more developed and greater distribution systems
were available.
Convergence of systems:
Interestingly, the civil law system and common law systems are growing in similarity. You’ll find the law
almost the same within Canada and Quebec systems. There is a convergence of reality, because there is
pressure on the two systems.
•
Common law looks more like civil law systems and vice versa.
•
The civil law system now uses precendences.
•
In the common law system we simultaneously find a greater use of codes, for example the criminal
code, human rights code, fire code, the partnership act, the sale of goods act.
•
We have also seen that the final appellate courts are not bound by their precedence’s, the ability of
courts to distinguish cases on their facts gives the courts more freedom.
THE NATURE AND ROLES OF COURTS
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Courts are an institution of dispute resolution. Their unique feature is that they make law simultaneously.
There are other institutions that make law and resolve disputes: arbitration, mediation, reconciliation,
settlement.
5 ROLES OF THE COURT:
1. Arbitror of the constitution: Canada is a quasi federal country in a federal system: it means that
there’s government of two levels each of which are independent and each is assigned different jurisdiction.
These two levels were created in 1867 by the British North American act changed to the constitution act of
1867.
•
Federal parliamentary powers are GST, military, post office, currency, national defence, weights &
measures, trade & commerce, penitentiaries
•
Provincial government controls health care, education, taverns, highways and liquor.
•
The act that sets out the jurisdictions was made in 1867, but there are going to be disputes over
jurisdiction over things that they didn’t have back then.
•
The courts have ultimately taking over arbitrating these disputes. They have assumed it and both
parties have respected it.
•
Inter-jurisdictional matters (not examinable), for example Attorney General of Manitoba vs.
Attorney general of Canada over liquor taxes. Someone wanted to get the taxes on liquor being
served on the airlines while flying over Manitoba. Supreme court decided that there are 3 strata of
airspace: right over the person that owns the ground, then provincial, then federal and hadn’t
decided what altitude each occupied, however said the plane were in federal airspace.
2. Interpreter of legislation:
•
They give meaning to terms in the context of disputes.
•
When they are interpreting legislation they have various approaches:
1. plain meaning approach – dictionary definition,
2. mischief/liberal approach – purposive, they look at the object of the statutes in the context it
was created
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3. golden rule – use plain approach and if necessary go to the liberal approach
3. Protector of human rights & civil liberties: (traditionally refers to the freedom of the individual in
politics and religion.)
•
•
These terms have embraced
o
freedom of expression, both of speech and the press,
o
freedom of association and assembly,
o
freedom to practice and preach one’s religion,
o
freedom from arbitrary arrest, and
o
the right to a fair trial.
The courts assume the role of protecting civil liberties, and have changed over time. In 1960 during
Diefenbaker government, a bill of rights was passed in statutory form by the government of Canada,
encapsulated in statutory form both rights and freedoms and the need for their protection.
However importantly it was not entrenched, the courts didn’t have the final decision making
power.
•
In 1982 their dreams came true when the Trudeau government gave the charter of rights. It is
entrenched which gives ultimately the supreme court of Canada final decision making power as
well as the power to give those terms meaning. Protects private people over government and
parties.
4. Arbitror of disputes between private persons: all about private law, people go to court to have their
disputes resolved. This gave rise to contract law, tort law, family law etc…
5. Arbitror of public law disputes: government on one side, include criminal law, constitutional law and
administrative law.
Alternative Dispute Resolutions (ADR’s) are becoming more and more prevalent.
Arbitration: exists when an individual other than judge in court make decisions. Arbitration are mandated
by statutes.
Mediation: Where an individual is appointed to attempt to resolve the dispute and suggestion a final
decision, but they don’t have final decision authority. They work often in domestic law and the labour
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relations act. Judicially assisted mediation
Conciliation: Can’t even suggest resolution, they can just facilitate the parties talking about relevant issues
to start the dialogue.
Settlement: Negotiating to come to a resolution. A settlement is a contract. It does require some
knowledge of law. Basis of negotiation would be to take past settlement amounts from similar cases to use
as a base line for future resolution.
Why did ADR’s develop?
•
It’s faster to go through an ADR because trials and court procedures are very slow.
•
It is financially cheaper for both the system and the participants.
•
It also includes the choices of the decision makers as opposed to having a judge who might not have
background in particular cases.
•
Confidentiality is also another appealing aspect of ADR because court records are published and
made public.
ADVERSARY SYSTEM:
•
Characteristic of the courts system, not really a system.
•
In civil disputes it means that it is generally up to the parties, not the court to initiate and
prosecute litigation to investigate the pertinent facts and to present proof and legal
argument to the decision-making tribunal. It is about enlightened self-interest (selfishness) and
fits with the capitalist approach.
•
The courts function in general is limited to adjudicating the issues submitted to it by the parties or
the proof presented by them and to apply appropriate procedural sanctions upon the motion of a
party.
Presentation and prosecution is done by the party with the court (which is acting a passive arbiteur)
2
assumptions:
1) The factual proof and appropriate law is more likely to emerge from bilateral investigation
and presentation motivated by the strong pull of self interest then from judicial
investigation motivated only by official duty. In some cases, the prosecutor is the judge and
therefore there is an inherent bias. Example, OJ Simpson case, said there was a rush to judgement
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that they didn’t investigate other alternatives. There is an element in the adversary system of
individualism much like capitalism. Capitalism is the use of self-interest to generate wealth.
Most capitalism systems have adversary system. The more extreme the capitalism system, the
more extreme the adversary system seems to be.
2) The moral force, legitimacy, and acceptability of a decision will be greatest when it is made
by one who does not have and does not appear to have the kind of psychological
commitment to the result that is implied in initiating and conducting a case. Legitimacy
means that we have the day in court to argue our case and even though the result isn’t what we
want, you were able to represent yourself.
3) The legitimacy of the decision is greater when litigants can either represent themselves or consult
council.
WHY DOES THE ADVERSARY SYSTEM NOT ALWAYS WORK?
1) People aren’t of equal means (poor, middle class, rich). If you’re rich, you can hire better council to
represent you. You can hire better expert witnesses.
2) Lying and covering up evidence
3) Self interests can create abuses of procedures. In ’96/’97 the OJ Simpson case was thought to be
unfair because OJ had lots of money. (However it was really that he had only 8 million dollars and the LA
County invested 60 million dollars.) In every case there is an unequal means issue. Jerome Frank: one
hires George Forman and the other person gets Peewee Herman.
In Manitoba we don’t have a pure adversary system, lawyers have duties to the court. For example, the
lawyer won’t do the case if he knows the client did it and is going to lie. Secondly judges will move the case
along. They are involved in the court process. This seems to make up for the deficiencies in the adversary
system.
THE COURT SYSTEM IN CANADA
•
Court system is organized according to the constitution (BNA act of 1867).
•
The provinces (provincial legislatures) have jurisdiction over the administration of justice including
the organization and operation of police forces and the system of courts.
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•
Federal parliament under section 96 has the exclusive right to appoint and pay all county court and
superior court judges, though the former are now phased out.
•
There are 3 tiers of court in Canada:
1. Courts of 1st instance (trial courts) which is divided into:
A. Provincial court (ex. traffic court, small claims court [up to 10,000], youth court,
bylaw court) – established by provincial legislature (judges appointed by the
province)
B. Court of Queen’s bench – as the superior court it has plenary jurisdiction over trial
(judged appointed by feds). The person that brings the lawsuit is called the plaintiff
and the defending person is the defendant. This is where the matter is first heard
and an attempt is made to resolve the dispute. If you are not happy with the
decision you have an automatic appeal.
2. Court of appeal - the individual who is appealing the case is called the appellant and the person
defending the appeal is called the respondent. Anyone can appeal. Here you don’t hear
evidence, only principles of law. If you are still dissatisfied you then must be granted appeal
to the
3. Supreme Court of Canada, It was created in 1875 pursuant to the provision in the constitution.
It didn’t however become the final appellate court until 1949. Until then the JCPC was the final
appellate court, could appeal directly. Tribunal in the UK, all members were judges, one report
and could easily find ratio. It is a leave court ® you need special approval and application.
Federal Court system. The exchequer court dealt with taxes. This court became the federal court.
They expanded the jurisdiction to cover patent cases, environmental issues etc.
WHO APPOINTS THE JUDGES?
•
The supreme court of Canada is appointed by the prime minister.
•
Generally the judges appointed will think the same way as the prime minister
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•
In the 1981 reference case this was most apparent when the prime minister voted his friends in.
On the court there were 9 judges, 7 appointed by Trudeau and 2 left from Diefenbaker. The result
was a 7 to 2 split.
•
Canada is a federal country so the prime minister appoints people to hear disputes between the
federal legislature and provincial legislature’s cases.
Another court structure called the federal court created pursuant to the federal court act and replaces the
exchequer court, which means the tax court, in 1970. However the jurisdiction was expanded beyond tax
to trademarks, patents, copyrights, and . The problem is that it creates a lot of chaos because you don’t
know what to sue and sued in the wrong court. There are 3 divisions: federal court of trial division, federal
court of appellate division, Supreme Court of Canada.
Statutes of Limitation: people may appeal the decisions made up to 2 years for torts and 6 years for
contracat matters. Because of the effect of evidence eroding, decisions can change.
THE COURT PROCESS IN THE CONTEXT OF LITIGATION
1) Who may sue?
All legal persons may sue, even corporations. If you are incompetent or under 18 then your guardian can
sue.
2) Must have standing: if you have a special interest to be vindicated (prevents frivolous claims.)
3) Class action: one individual represents a group or class of individuals with the same issues, this helps
stop clogging of the courts. You have one litigant who prosecutes the action. Now we have the Class
Proceedings Act if there is a common interest, not an exactly same interest. Ex) Ralph Nader vs the
automotive industry. In 2002 MB passed the class proceedings act.
Procedural law: how to engage the law and how to move it along to achieve the remedy in respect to
substantive law (dealing with liability). Purpose of the court process is to discourage a case from going
to trial and to settle it before the court.
Process of a Lawsuit
1. To engage the court:
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•
Plaintiff issues a statement of claims – it is served to the defendant, describe the wrong-doings, the
remedy sought. Has to be served within 6 months.
•
Includes the name of the plaintiff and the identity, the defendants name and the identity, all the
material fact you rely upon (must be fact).
•
There are service rules contained in the Queen’s Bench rules, normally there is a bailiff to serve the
document and sign it.
•
If person avoids service you can get an order of substitutional service for real delivery of service
and the court will tell you what to do: place ads in the newspaper or mail to the last address.
•
If they are outside the province they have 40 days.
2. Defendants issue/file a statement of defence
•
You have 6 months to serve it or it becomes nullified.
•
If the defendant does not file this within 20 days then the plaintiff automatically wins. 20 days to
respond to make a statement of defense. It can be connected with a counter claim, an opportunity
to counter sue.
•
This statement is a statement of the facts.
•
If the statement of claim is not clear then they can ask for better particulars through a formal or
informal process.
•
Case conference (Case management) – see a judge in chambers and the judge organizes the next
step to promote settlement, applies to all family matters and civil matters under $50,000 then the
judge asks if you want the case to be mediated by the judge, otherwise the judge will set up the
next step. The judge is essentially the pilot of the case. The judge will ask if the parties have
discussed in settlement and why they haven’t done so. They attempt to divert the case from going
to trial because it is costly and time consuming to the system.
3. Examination for Discovery
•
Documentary Discover - Each side gets to ask the other side relevant questions, so both sides have
the opportunity to have all the information of the case.
•
You are more likely to achieve settlement because you know what the other side has for evidence.
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•
Examinations for discovery - There is a court reporter attend, both sides attend and the information
is read into evidence. Achieves several purposes, get a basis for cross examination, get to test the
medal of the opposite side, see if they are credible, and institute the evidence.
4. Pre-trial conference
•
A judge who will not hear the case meets with the parties in their chambers to discuss the case and
the weaknesses in their arguments.
•
The lawyers submit briefs on the matter and the judge then in advance gives you an idea of what
will happen in order to try and achieve settlement.
•
Gives the litigants an idea of whether or not you have a strong case.
•
If the pre-trial conference fails then the judge will set a trial date.
5. Trial
•
The plaintiff puts in their case first witnesses and evidence, then the defendant puts in their case
and there is cross examination.
•
The plaintiff has a chance to respond to new issues made.
•
Trials can take days, weeks, months and the whole process can take years (8 – 10 years is not
uncommon).
LAWSUIT EXPENSES
•
Lawsuits are expensive in many ways: financial costs and emotional costs.
•
The courts in Canada award costs to the winner, because the winner shouldn’t have to have gone to
court to settle.
•
It is rather a portion of the costs; they have a chart that says what each service actually costs.
•
Lawyers charge on 1 of 2 basis:
1. hourly rate, which can range between 150 and 500 an hour, (it doesn’t really dictate quality
though),
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2. contingency agreement, paying the lawyer on the basis of the percentage of the money obtained
through the settlement. Normally it’s between 25% and 40% depending on what stage the
settlement takes place. However, you must pay the disbursements on a normal basis. Tend to
be a fairly hefty proportion, because you are overpaying the lawyer because there is a risk for
the lawyer of not receiving any money if they lose.
•
We do have a legal aid system in Manitoba to help the poor.
•
(exam?) Lawyers are known as barristers and solicitors. In England there are two different
professions, you’re either one or another. Barristers go to court and solicitors do everything else
including hiring your clients. Therefore there is a split bar in England. There is a good reason for it
because very few people can effectively do both. In Manitoba lawyers are both barristers and
solicitors.
II) THE CANADIAN CONSTITUTION
•
The constitution reflects the relationship between law and politics.
What is the constitution?
•
It creates the organs, institutions of the country that both create law and administer law.
•
Cheffins: (pg. 3) of the constitution: “A constitution must
1. First provide for the creation of the basic organs and institutions of public authority.
2. Second, it must define the powers possessed by each of the public institutions and in some respects
define the relationships between these various institutions.
3. Third, a constitution must provide for the processes by which law is created, and at the same time
provide for the limitations on the power (assumption that freedom exists unless the act is
specifically prohibited) exercised by the officials of public institutions. Thus a constitution assigns
legal responsibility, defines the limits of authority, and establishes the processes which must be
followed before this authority can be exercised.
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4. Furthermore, a constitutional document must provide for a method of change, both of political
leadership (1) and of the basic constitutional framework (2), the latter by way of amendment to
the constitution”.
•
Laws make up part of the constitution but they reflect political values and in turn define the political
process. 2) had to divvy up the powers of the provincial legislatures and the federal department.
3)Need approval of the various levels of legislature. 4) Have to be able to change the constitution, and
political leadership.
WHERE DO YOU FIND THE CANADIAN CONSTITUTION?
•
Canada’s constitution (current) is found, according to Cheffins, “in Canada it is necessary to look at a
whole series of statutes and other legal documents to ascertain how, at least to some extent, power is
allocated in the Canadian system. However, as will be demonstrated later, many of the rules with respect
to the functioning of authority in a constitutional system are not defined in authoritative legal documents
but rather are the result of consensus among the actors in a political and constitutional system”.
•
The Canadian constitution isn’t neatly contained in any specific document. It’s a myriad of documents.
•
Fundamental constitution document: BNA act 1867 - MISLEADING.
o
Says that the Queen and then the governor general have the executive power and sometimes the
Privy Council (created to assist the monarch in use of executive authority, but they have never met).
o
However, the prime minister has the real executive power and yet he isn’t mentioned in the
constitutional document. It’s a convention that the monarch follows the decisions of the prime
minister.
o
Many parts of the constitution are
1. not from written and or authoritative sources or documents, and
2. Concomitantly not legally enforceable ® conventions
•
Much of the constitution isn’t law! They are made up of many rules which aren’t enforced by the courts.
THE NATURE OF A CONSTITUTION
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A constitutional lawyer, DesSmith provides a precise definition: constitutions are primarily about the
political power, the location, the conferment, the distribution, exercise and limitation of power among the
organs of the state.
Cheffins talks about the limitation of power:
•
the principle of constitutionalism, about having restraints on the governors, it is the assumption of
freedom unless an act is specifically prohibited.
•
This in turn results in the limitation on governors;
•
Constitutionalism: legitimate actors in the political system have only such authority as is vested in
them by law and that any attempt to move beyond the peripheries of these authorities is illegal or
ultra vires: beyond the power, and therefore void.
•
Case of DuPlessis: no official has any authority to act unless empowered by statute.
SOURCES OF THE CONSTITUTION: THE INSTITUTIONS THAT CREATE
CONSTITUTIONAL LAW IN CANADA
Definitions:
i)Authoritative sources: create constitutional rules which are law because they are enforceable in the
courts.
ii)Persuasive sources: create rules of the constitution which are not a part of the constitution. Meaning,
the courts won’t enforce them because they are not law.
iii)Entrenchment: page 71 of Cheffins: “by entrenchment we mean there are certain provisions in the
constitution which are beyond the normal control of either the federal parliament or the provincial
legislatures. That is to say, certain provisions of the constitution are regarded as so significant and so
important that they can only be changed by an extraordinary process”.
•
Prior to 1982 that extraordinary process included the agreement by the UK parliament, after
1982 you must resort to one of 2 amending formulae. It’s a resort to a different process. Since
1982 nothing has changed, because it is so difficult of a process that they can’t pass anything.
iv)De Jure: at law (Queen)
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v)De Facto: in fact (PM)
vi)Patriated: amendment process for entrenched parts of constitution are wholly domestic.
AUTHORITATIVE SOURCES OF THE CONSTITUTION:
1) Legislatures: create statutes that are constitutionally relevant to Canada
a. UK parliament has produced legislation/statutes of significance to Canada.
•
2 most important statutes:
1. BNA Act 1867: created Canada (the statutes united these colonies into a
country), it laid out the framework of our constitution: courts created,
supreme court created.
2. The constitution act 1982: the charter of rights were created as well as it
allowed for a domestic amending process.
b. Canadian parliament:
•
some is entrenched:
1.
election act,
2. the Canadian bill of rights,
3. all the statutes creating other provinces (6 other provinces - otherwise
anyone in the parliament could obliterate the opposition by getting rid of
one of the provinces.) First was Manitoba, so it was established by the
Manitoba precedence. The last province confederated was Newfoundland.
4. The supreme court of Canada is also entrenched,
§
Quebec is entitled to 3 Supreme Court judges even though their
population is declining, but the Quebec province would have to agree to
change it.
c. Provincial legislatures:
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•
all of them have created constitutional law, section 92(1) of BNA act 1867 and
section 45 of the Constitution act 1982
•
- provides the legislature of each provinces to make laws of the constitution laws
of the province.
•
Each province has the ability to make constitutional law, none of it is entrenched
except the office of the lieutenant governor in section 45 of the Constitution act
1982.
•
To change any offices requires unanimous provincial consent and the consent of
the federal parliament. The provinces are active in changing their constitutions.
•
Major change was the elimination of the upper house.
2) Courts – produce constitutional law in accordance with common law.
•
Interpret constitutional statutes.
•
Prior to 1982 they focused on the constitution of the division of power; since 1982 the main
focus has been interpreting the charter.
•
Once they have given meaning to the charter, thereby creating law, then it is then only
amendable through one of the amending formulae.
3) Royal prerogatives:
•
although the royal prerogatives are defined by the court, their authority rests in the
historical recognition of the crown and its prerogatives legal rights. Since the
constitution act of 1982 entrenches the monarchy and the offices of governor general
and lieutenant governor, any change in the powers would need the use of the
appropriate amending formulae.
•
The Royal Prerogative itself is the residue of the legal power residing in the crown and passing
through the crown to the crown’s representatives.
•
Royal Prerogatives are the contemporary residue of those ancient powers not taken away from
statute and include the power to:
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a. appoint the first minister,
b. dismiss the first minister,
c. dissolve the elected assembly,
d. declare war, and the power to appoint ambassadors.
What were these ancient powers? Back 1100 years, the monarch was an absolute monarch, where the
monarch can declare what the law was and could also render judicial decisions. In 1066 William the
Conqueror came over and became the monarch’s absolute powers. The big erosion happened in 1215 with
the Magna Charta (“Big Charter”), which forced the king into surrendering some of his powers. The
baroness forced the king to give up his powers; he could no longer raise taxes. He lost control over his own
money, so that slowly to get additional funds he was held with extortion until he gave up more powers to
get the money.
Prerogative powers give a level of discretion; they are there to protect the democracy when the ministers
are not acting appropriately. Ironically the ancient residue exists for the preservation of democracy.
PERSUASIVE SOURCES ARE IMPORTANT TO THE CONSTITUTION BUT ARE NOT
ENFORCED
1) 1st convention (not really a source) –
•
some of the most important principles of the constitution are referred to as conventions,
which guide political actors in how they function but are not enforced by the court and
are thus conventions of the constitution.
•
They are not contained in any written enforceable document but instead are generally accepted
traditions and principles of how participants in the process should function at particular times.
•
The supreme court of Canada in 1981 defined the conventions in the case “Reference ReAmendment of the Constitution of Canada”. In contra distinction to laws of the constitution they
are neither created by the courts nor enforceable by the courts.
•
The Supreme Court suggested however that some conventions are more important then
most constitutional laws.
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•
The court in the same case held that conventions are a part of the constitution and the
constitutional conventions plus constitutional law equals the total constitution of the
country.
2) There are other persuasive sources:
i)
Learned authors writings: ex. Cheffins, Peter Hogg
ii)
Parliamentary rules/privilege or custom of parliament
iii)
Relevant judicial decision from other jurisdictions
SELECTED TOPICS IN CANADIAN CONSTITUTIONAL LAW
FEDERALISM IN CANADA
1. What is federalism?
1) K.C. Wheare wrote the seminal work the federal government and he defined the federal principles: is
the method of dividing powers so that the general and regional governments are each within a sphere
coordinate and independent. The existence of federal principles in a country allows it to be regarded as a
federal state. In a federal country governmental power is distributed between a central authority
sometimes called a national authority or federal authority and several regional authorities sometimes
called provinces or states. It is distributive in such a way that every individual is subject to two
authorities.
2) In a federal system, if we are truly federal, the two authorities are coordinate that means in essence
that neither is legally subordinate to the other.
•
In a unitary state, government power is vested in one national authority; there are a municipal
government with powers over their localities but differ because they are legally subordinate to
the national authority; can amend, control or take away there power. An example of a unitary
state is the United Kingdom, governed by one parliament.
•
In a federal state it is common to speak of different levels of government. The notion of equality of
status does not necessarily extend beyond the legal format. (In Manitoba, we are all immediately
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subject to the laws of the federal government and the laws of the provincial legislature and we
notice this every time we buy something: PST and GST.)
3) The key point: it is the legal guarantee of a legal autonomy (not legally subordinate) to each of
the regional authorities in respect of the areas which constitute their jurisdiction, however
dispirit in size and wealth those regional authorities may be, which justifies their description as
coordinate with the central authority.
Doctrine of Paramouncy: req’s that federal law prevails, but regional authorities are not legally
subordinate.
4) There are 2 corollaries:
1. To be truly federal, a final arbitrator of constitution is required which neither level of government
alone can control or appoint.
2. A method of constitutional amendment in areas related to the division of power is required which
neither level of government can control.
IS THERE FEDERALISM IN CANADA?
STANCE 1: WE ARE A FEDERAL COUNTRY BECAUSE:
1. We are subject to the laws of 2 authorities and jurisdictions assigned to both – in the BNA act
of 1867 there were two jurisdictions created.
a. Provincial areas of jurisdiction: property rights, education, health care
i. Notwithstanding Act - it allow s the legislature to be able to exclude themselves
from the effect of judges appointed federally using the Charter to trespass on
provincial jurisdiction. to preserve the sense of federalism.
b. Federal legislation: military security, post office, taxes, weights and measures.
2.
The statutes are entrenched.
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3.
The existence of the amending formulae that requires provincial participation and specifically
the division of rights further strengthens this argument, because in 1982 there was an argument
that the federal government could do it alone.
4. The colonies are to be federally united (was written in the BNA act of 1867 by the fathers of
confederation.)
(end October 1)
5. There were judicial decisions that consolidated federal realities:
a. 2 most important decisions were given by the JCPC
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i. Hodge v THE QUEEN 1883:
•
The ratio: the provinces are not delegates of the federal parliament; the
provincial legislatures are in their own spheres supreme. (substantiated
federalism.)
•
The existence of the JCPC made us more federal because it was a truly an
independent arbitrator.
•
Now it is the supreme court of Canada appointed by the prime minister with the
result that we are less federal. They have attempted to erode federalism because
in key economic decisions they always align with the federal government.
o
The liquidator of the Maritime Bank of Canada v. the Receiver General of
New Brunswick (called the Maritime Bank case in an exam) in 1892.
o
The ratio: the lieutenant governor is not merely a federal official
rather the lieutenant governor processed all the prerogative powers
of the crown.
However despite these decisions of the JCPC there is more than a little doubt that Canada is a federal
country; in fact the better view is that Canada is not a federal country because it does not measure up to the
federal principles and corollaries.
STANCE 2: WE ARE NOT A FEDERAL COUNTRY BECAUSE:
•
Wheare: Canadian constitution is quasi federal in law and predominantly federal in practice: meaning
that Canada isn’t federal, at best in law its quasi federal. Canada acts like a federal country
•
Cheffins says on pg. 119: “What Wheare is saying is that in constitutional theory the central
government is given sufficient powers to control the autonomy of the provincial governments and thus
the principle of “equal and coordinate status” is not sustained in the black letter law of Canada’s
constitution. He goes on to make it clear, though, that the centralizing features of the Canadian
constitution which undermine the federal principle have so fallen into disuse that in practice Canada is
a genuine federal state”.
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1. Power of Disallowance (Section 90 of BNA act 1867)
a. the federal government is given the power to disallow any act passed by a provincial
legislature, which is essentially a straight veto power.
2. Section 58 BNA 1867 – the federal government is given the power to appoint the lieutenant
governor of each province and
Section 92 (1) BNA 1867 – provinces are denied the ability to alter the office of lieutenant
governor, who has a significant impact on provincial legislature.
3. Power of reservation
a. Section 57 BNA 1867 -the federally appointed lieutenant governor of each province can, on
instruction from the federal government, reserve provincial bills for the consideration
of the governor in council in Ottawa. They can send a bill straight to the parliament
b. In recent years, the use of power of disallowance and the power of reservation have been
frequently disused.
c. The power of disallowance was used 112 times to disallow the provincial act, but the last
disallowance took place in 1942.
d. The power of reservation was used 70 times, the last one taking place in 1961.
Declaratory power (Section 91(29) and Section 92(10c))
e. the federal parliament was given the power to unilaterally bring local works within
exclusive federal legislative jurisdiction, simply by declaring them to be “for the general
advantage of Canada”. The parliament can take away the power of the province if it is in the
best interest of the country.
f.
This is tantamount to jurisdictional expropriation.
g. It has been used on numerous occasions, but not since the early 1960, important to matters
with railways, grain matter, atomic energy, bridge, cannels.
4. Remedial legislation by the federal government in the event that Roman Catholics and
Protestants are deprived of their traditional rights to religious education. (Section 93 BNA
act)
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a. This power has never been used, but it still exists. Tupper tried to use this and Laurier had
prevailed ( a French Catholic ) and didn't use it. Manitoba wanted to disallow French
Catholics to practice their religious education.
Ont. Hydro (1993) DOCTRINE OF DESUETUDE ® Provincial argument said that even though the powers
are not used, they still exist and have standing. It was proved by the Supreme Court.
5. Federal government power to appoint judges of the superior court (and above) and in
addition Section 101 allowed the federal government to create the final appellate court of
Canada and appoint the judges (Section 96). JCPC no longer exists so Supreme Court is final
appellate court.
a. This is inconsistent because the arbitrators should not be controlled by one level of
government.
6. Charter of rights
a. The judiciary is empowered to trespass on provincial legislative jurisdiction if the provincial
legislation doesn't meet the Charter. Judges interpreting a charter of unknown advent could
trench on provincial legislation.
b. Judges can compromise a great deal of provincial jurisdiction and they are federally
appointed.
7. The amendment process
a. The 1982 amendment has made the process more federal as the formulae to amend
the entrenched aspects of constitution are beyond the control of either level of
government. Prior to 1982, the process could be dominated by federal parliament.
WHY DO WE HAVE THE STYLE OF FEDERALISM THAT WE HAVE?
1. Constitution 1867 reflects the values of the individuals that created it at the time. We must
understand the times of when the act was created and the reasons for Canadian confederation.
Some of the reasons were:
2. The threat from the US invasions
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o
US had invaded Canada before in the war of 1812. They were looking for more resources and
they had the idea of Manifest Destiny through the Munroe Doctrine.
o
Canada launched a pre-emptive attack and won by Issac Brock.
o
Also in 1776 and 1777 Benedict Arnold was the leading American general and lead the attack
on Ottawa with Benjamin Franklin.
o
People were worried because there was a real threat and danger.
o
The civil war had just ended (1860) and they feared that the Americans would just move the
war north. Americans thought one country would be stronger.
3. Economic reasons: need for larger markets.
o
In 1840s the British dismantled their mercantile system (vertical integrated industry) and
wanted their colonies to work on an international level. Canada did not have preferred access to
large markets anymore.
o
We wanted an advantage by creating free trade with the United States.
o
Treaty of reciprocity was created. A preferred access with US.
o
In 1864 the 10 year treated was terminated by the American because they were mad at Canada.
o
With confederation we could have a larger domestic market by creating our own country.
4. Existence of common history and traditions, the growth of nationalism on the international
scale. Assembling of larger states into one nation as a whole.
o
Canada is actually older than Italy and Germany and Australia, so why do we insist on saying
we’re young, because it excuses making mistakes.
OTHER FORCES AT WORK:
5. Former British colonies and in the years prior to confederation developed distinct political and
economic existences which they did not want to see submerged in a larger union. (especially New
Brunswick and Nova Scotia)
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6. French, Roman Catholic population of Quebec (as opposed to the rest of the colonies in North
America)
o
The French Canadians rightly worried that a larger union without a federal structure,
allowing for region linguistic and religious control would result in their
homogenization.
o
A federal system would liberate the French Canadians from at least, at the local level,
English Canadian control which had existed in the province of the Canada’s
7. The sheer size of the composed country
o
The various maritime colonies at the time of confederation had a perception of remoteness
from central Canada and therefore the desire to preserve some local authority and
governmental power.
o
Ontario’s interest has always sided with a strong central government; they made sure that
the central government was provided with the legal weapons to ensure its ultimate
dominance over the provinces, since they knew that they were the most populated
province.
o
Cheffins on 119 “much of what federalism is about is economic. Federalism is an attempt by
regional governments to retain some control over their local economic destinies, which they
often feel are in conflict with national policy. In fact, many of the political tensions in Canada
since its inception have been struggles between central Canada’s economic interests and those
of its regional hinterland. Add the fact that Quebec is largely French-speaking, and one can
see that the two main threads running through the stream of federal-provincial relations have
been those of cultural identity and economic self interest”.
There is federalism in Canada, because John A. Macdonald made sure the deck was stacked in favour of
Ontario, they had sufficient legal weaponry if they needed to use it, because of their size. This shows that
this reflects political values. They would be able to control the provinces legal and economic interests.
RESPONSIBLE GOVERNMENT
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RESPONSIBLE GOVERNMENT IS THE SINGLE MOST IMPORTANT ACHIEVEMENT FOR 3
REASONS:
1. It is an example of how significant conventions are to the constitution,
2. It illustrates how important constitutional principles were inherited from Great Britain and the preconfederation period, and
3. ***It is the mechanism which ensures the democratization of executive government in the
country. Linked the exectutive officials to
THE MOST IMPORTANT IS THE 3RD REASON BECAUSE
•
In any governmental system you need executive authority, which surrounds the operation of laws
and government, the executive has a great deal of authority.
•
In our system it is vital, because they can lead to the declaration of war, control of the budget, elect
judges, has been the recipient of a great deal of delegate power through statute, they can generate a
lot of subordinate legislation.
•
In a democracy you want concentrations of power to reflect the democratic power of the people.
o
US solved the problem of executive power; they have three levels of government: president,
senate, congress.
o
George bush has tremendous power; the American constitution is the reflection of the
British constitution except they elect their president and senate (democratized).
o
We democratize our executive but in a more subtle way. PM is the head of the executive
and the House of Commons.
o
PM has total control between elections, appoints the Cabinet, is the sole advisor to the
monarch.
OTHER LEGISLATIVE INSTITUTIONS:
1. Judiciary
2. Legislatures that make laws (statutes),
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3. Executive – power invested in the monarch or representative (in 1867).
•
This is the “De jure” authority (by the law) according to section 9 of the BNA act of 1867.
Section 9, the Queen is in charge. Section 10, Governor General. Section 11, Privy Council.
o
The monarchical representative federally is the governor general, and provincially
is the lieutenant governor.
•
The “de facto” executive (means the real deal, in fact) is the cabinet and is said to be the only
active part of the Privy Council, called the prime minister or premier.
•
Responsible government provides the linkage between the legislative institutions
and the executive institutions and ensures an element of democratization to
executive government at least in selection principle, (de facto executive) at least to
the degree that the legislative branch is selected according to democratic principles.
Responsible government: the appointment of persons to the executive who sit in the elected assembly and
who have the support of the elected assembly. An analogue to this is that the monarch or representative in
giving ascent must follow the advice of the executive rather than his or her own personal predilection (bias).
Responsible government has been actualized by two conventions - (highlights the role of the prime
minister) (existed in 1849 for Nova Scotia and New Brunswick government)
1. The leader of the political party with the largest number of seats in the house of commons is
appointed prime minister or premier and is asked to form a cabinet by the monarch or monarchical
representative (the selection of the PM reflects the democracy of the legislative assembly).
2. The monarch or representative must act under the advice of the prime minister in consenting to
legislation or exercising prerogative and executive powers, with exceptions. They insure that to a
certain level those executive powers are democratized. It is the de facto executive that exhibits the
power and the prime minister. That executive power is at least somewhat democratic. We don’t
directly vote for the head of our executive, like the Americans.
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1982 REVISIONS:
The 1982 constitution act altered the constitutions, because it
1. Provided for a domestic amending process for entrenched aspects of the constitutions, this was to
patriate the constitution.
2. Provided for a charter of rights.],
3. Provided an additional subsection with respect to the division of powers. Section 92(A) Cheffins pg.
5 – allowed the province to tax exports,
4. Provided there be a conference for the rights of aboriginal people,
5. Provisions for equalization payments (for regional disparities)
6. It also allowed the UK parliament to promise to sign off, would never legislate for Canada again
(signing off clause), and
7. Changes made to all the names of the constitutional statutes, part of Trudeau’s desire to limit the
connection with UK history.
CONSTITUTIONAL AMENDMENT PROCESS
•
Did not create a new constitution.
•
Significant changes came from the amendment process.
•
The process became wholly domestic.
•
Section 92 Provincial legislature was able to make amendments to their constitution as long as it
had not affect on the office of the lieutenant governor.
•
Prior to 1982 certain parts of the constitution had to be changed through the UK parliament (only
the entrenched aspects). Now much of the Canadian constitution could be amended in Canada (the
federal parliament could change their constitution Section 91(1)).
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•
The parts of the constitution which could not be altered were entrenched, pg. 71 Cheffins: “by
entrenchment we mean, there are certain provisions in the constitution, which are beyond the normal
control of either the federal parliament or the provincial legislature that is to say that certain
provisions of the constitution are so significant and so important that they can only be changed by an
extraordinary process”.
•
Prior to 1982 the extraordinary process was the imperial parliament.
o
o
Section 91(2) enumerates the entrenched acts of the constitution; there were very few:
§
Division of powers,
§
Linguistics rights of French and English people.
§
Statutes creating provinces.
There was a need to have an independent body in control so that the quasi federal
government would not be destroyed by one party or another.
o
The formal authority was the imperial parliament; however the imperial parliament
was tightly ruled by conventions of the constitution, which made the imperial
parliament essentially an instrument of Canadian will.
o
These conventions required:
§
Firstly an initiative from the Canadian government, a letter to British parliament
§
Joint resolution of the senate and the house of commons, and
§
Unanimous provincial consent; however there was a case that only substantial
consent was efficient. Though the constitution had to be legally amended by UK, it
was controlled by Canada.
•
The process was altered completely in 1982. How was it altered?
1. The amendment process was said to be patriated, it became whole domestic with no need to
seek the formal amendment from the imperial parliament, Patriate: the amending process
with respect to entrench aspects of the constitutions is made wholly domestic.
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2. The British statutes with constitutional relevance to Canada were entrenched in their
totality. All statutes with British relevance was entrenched,
3. Certain Canadian statutes were entrenched,
4. Two domestic amending formulae were defined to replace the imperial parliament:
a) General Procedure: defined in section 38:
i) Resolution of the Senate and the House of Commons,
ii) Resolution of the legislative assemblies with at least 2/3 of the provinces with 50% of
population called the 7-50 rule. Applies to the Charter of Rights as well.
b) Unanimity Provision: separates out certain things that are so important that the general
procedure isn’t applicable, requires the unanimous approval of all the provinces (10). Section 41
describes the subject matters to which it is applicable (all are entrecnched):
i) monarchy (pg. 228 Cheffins), and its representatives at the provincial and federal level,
ii) assurance that no province will have less members in the house of commons than it has of
senators,
iii) the use of the English and French languages,
iv) the composition of the supreme court,
v) the requirement that the amending formulae cannot be changed except with the unanimous
agreement of all 11 legislatures.
Experience with the amending formulae is that nothing is easy, these methods are so difficult. There were
two approaches to change by the federal government:
1. Meech lake accord
a. Make change to make all changes to be unanimous only, ironically, failed to get
acceptance unanimously (Manitoba and Newfoundland).
2. Charlottetown accord (by Prime Minister Brian Mulroney)
a. Quebec never approved the accords.
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b. Mulroney wanted to get Quebec into the constitutional family, but Quebec wanted the
ability to veto.
c. Brian Mulroney in a compromise wanted to say that all provinces could have veto, but then
it would be entirely a unanimity provision instead of the 7/50 rule.
d. Through the Charlottetown accord, he decided to add a distinct society clause for Quebec,
but it failed, so nothing has changed.
e. The irony of the inflexibility is that it is easier for the province to leave then
amending the constitution (“Clarity Act”)
THE CHARTER OF RIGHTS
•
Contained in the constitution of 1982 is part of the constitution and therefore entrenched (section
52 is the empowering part).
o
•
“Inconsistency Clause”
The charter is part of the supreme law and if it doesn’t measure up then it is of no importance or
effect.
•
The charter is the standard to which we measure law, and the judiciary determines inconsistencies.
•
It gives the power to the judiciary because they determine if something measures up to the
charter, amendment is virtually impossible.
•
•
It contains (in section 1-37 of the act 1982)
o
the freedom of conscious religion
o
freedom of thought and press
o
freedom of association,
o
mobility rights.
The charter is very vague, for example what is a mobility right? This gives Judges maximum power
to
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•
Application section 32
•
Section 24 of text
•
The charter of rights represents a massive transfer of power from the legislature to the judges,
because
1. They have the last word,
2. Judges can give it any meaning they wish, especially at the supreme level,
3. Transfer of power applies to all provincial and federal levels, and
4. If someone’s rights are violated the judges can give any solution/remedy they feel is
appropriate. Judges aren’t elected, so once appointed they can be there for 30 or 40 years.
It’s virtually impossible to get rid of them and yet they are making political and social
decisions.
THE CHARTER HAS LIMITATIONS –
•
In the preamble: they are subject to reasonable limits and it is up to the judiciary to identify what
those reasonable limits are, also allows certain parts of the charter to be declared inoperative
(notwithstanding clause).
•
Restall’s paper: charter is somewhat revolutionary and inappropriate with 4 basic reasons ---EXAM
1. Revolutionary to the extent that it is a revolution of constitutional principle: judiciary is not
electorally responsible to any constituency, principles of parliamentary supremacy and
democracy are eroded, because we have Judges making major political judgements.
2. Revolutionary because of its unknown and radical impact Cheffins pg 131 “ even experience
American constitutional lawyers and judges might flinch….never before have judges been
handed so much responsibility with so little analysis of the subtleties of what was being done”,
3. The charter of rights violates the constitutional and cultural principle of federalism to the
extent it is in Canada. It is centralizing and homogenizing creating generalized
national cultural standards in areas formerly under exclusive provincial jurisdiction,
and
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4. Cultural revolution, because the charter is inconsistent with the basic political, cultural
and philosophical nature of the country. It is simultaneously a subtle homogenizing,
centralizing, and Americanizing influence. (talked about in Restall’s paper)
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III) THE MAJOR FORMS OF BUSINESS ORGANIZATION IN CANADA
One binding theme: the concept of liability – legal liability is a right that is enforceable by the law for which
a remedy may be obtained in court.
Liability: a debt or obligation. A right that is recognized by law that can be enforced by a person, by a court
process, that can result in a court ordered remedy.
Statutory liabilities: require people to pay. Ex. Income Tax.
a) Sole Proprietorships
•
Is not a legal entity separate from its owner and consequently limited liability does not exist. It is a
consequence of the separate entity principle.
•
Income is added to the income of the sole proprietor for income tax purposes.
•
It is the most common and simplest form of business entity, easy to set up and dissolve.
•
It exists whenever an individual carries on business for his or her own account without either the
medium of an incorporated company, or the participation of other individuals except as employees.
•
All benefits flowing from the business accrue to the exclusive enjoyment of the sole
proprietor. Conversely the sole proprietor is directly and personally liable for all the
business liabilities of the sole proprietorship contractual or otherwise, therefore all
business and personal assets of the sole proprietor can be seized in fulfillment of the sole
proprietorship business obligations and liabilities.
•
This is because the sole proprietor is not a legal entity separate from its owner unlike a corporation
vis-a-vis its shareholders.
•
Income is added to personal income and the aggregate is taxed at the appropriate rate.
•
If you carry on business in your own name then you do not have to register the business name.
Otherwise you can’t use a name that can be confused with one that already exists or one that is
inappropriate on public grounds.
•
The key is that the sole proprietor has unlimited liability, all his or her assets are at risk for
business liabilities, which is a dangerous position to be in.
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ADVANTAGES OF SOLE PROPRIETORSHIPS:
•
Ability to make all business decisions
•
Right to all profits
•
Right to deal with all assets without interference
•
Simple to set up, very inexpensive
DISADVANTAGES OF SOLE PROPRIETORSHIPS:
•
Unlimited Liability: sole proprietor is liable for all the liabilities of the business and all non business
assets are exposed to creditors of the business.
PROPHYLACTIC (PREVENTATIVE) ACTIONS TO PROTECT YOURSELF:
1. Best prophylactic: insurance.
2. Put your investments in creditor proof assets; one’s that creditors can’t attack. Certain type of
investments that can’t be touched by creditors.
3. In advance of going into a business ensure that you make a legitimate business and estate plan to
redistribute your property and if it is desirable, transfer assets to other individuals.
o
Must be an absolute transfer done well in advance of going into business.
o
If you go bankrupt, the trustee can review transactions of up to 5 years.
o
The question is to who you will transfer the assets to.
§
Don’t transfer to the spouse because in the case of a separation the spouse can take
it. After a lengthy lawsuit you may be able to get 50% of all property.
§
Certain things aren’t divisible in marriage; property acquired prior to the marriage
(only the incremental amount) or property acquire through inheritance.
§
Property exempt from the division in the marriage act would be dangerous to
transfer. For example, if Mulroney had acquired the property before the marriage
and then transferred it to the spouse, then he would not have to share the property
instead of getting it all in the case of separation.
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§
If you transfer to your parents and they pass away and their will is wrong then other
beneficiaries can get your property.
§
You can achieve some protection through a prenuptial agreement: determines the
allocation of property and support payments in the event of divorce.
§
You want a prenuptial agreement when you have more money and prospects than
the other spouse. When are you opposed to a prenuptial agreement? on a moral
basis or you are the one with less money. The problem with a prenuptial with
Mulroy is that it undermines protection from creditors. You should probably do a
combination of all possibilities.
§
Family Property Act: extends to cohabitants of 3 years with conjugal relations.
b) Cooperatives
•
Examples: Co-op, all credit unions, Mountain Equipment co-op, Red River Co-op
a. Very prominent in west Canada and the prairies
•
They are designed to provide their members with good or services at a cost lower than the
cost of similar goods and services in the market place. Or it may be organized for the
purpose of selling goods in such a way that will maximize returns to the members. It is
essentially about eliminating the middle men in the economy.
•
They try to sell their product as directly to the consumers as possible. Similarly consumers attempt
to buy as directly from the producers as possible, because the goods can be delivered cheaper.
a. It was created because they were forced to pay high prices of the goods and services from
the only producers from Ontario. Buying elsewhere meant that there would be lots of tariffs.
•
In our economy, usually the control of the organization is related to the quantum of investment and
is designed for profit maximization. Co-operatives forever have very contrasting characteristics.
They were progressive political idea.
Basic principles:
1. Each member has one vote regardless the number of shares held and the capital contributed
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2. There are no proxy votes; you need to be there at the meeting to vote
3. There’s no fixed rate of return on capital
4. Profits not required to operate the co-operative are paid to the members in accordance with the
quantity of goods purchased or sold through the organization by the member. They are
especially good in western Canada because the middle agents are all from eastern Canada,
geographic situation.
c) Partnerships
•
Once popular because it was very difficult to incorporate in the 18 hundreds.
•
What is a partnership: definition is found in the partnership act, section 1 – “a partnership is the
relation which subsists between persons carrying on a business with the view of profit”.
•
It is important because of the consequence of finding the partnership exists. There are various
liniments (features):
a. There is the element of agreement which is implicit, the absence of the agreement isn’t fatal
if partners have acted as partners or there has been a partnership by estoppel. The courts
look at the subsistence of the relationship.
b. The need for a business is said to include every trade, occupation or profession, but does
not include every activity carried on for profit.
i. Courts have highlighted: a sharing of the profits of a business though not sufficient by
itself is highly indicative of the existence of a partnership especially if there is no
alternative method of payment.
ii. Additional evidence, which is in conjunction with the sharing of profits, includes:
1. The contribution of capital - property or money
2. An active role in the business
3. The existence of the ongoing business as opposed to an isolated transaction.
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•
It’s also possible to become a partnership by estoppels: precluded from denying, where you hold
yourself out to be a partner even though you’re not or if you allow someone to say they are your
partner you can be held to be a partner if you do not protest it.
•
The chief consequence of becoming a partner is the partner’s unlimited liability to outsiders
who have dealt with the partnerships. As one author indicates, “in many respects a partnership
might accurately be described as a multiple proprietorship. The general partnerships resemble a sole
proprietorship in that it is not a legal entity separate from its partners.”
•
The negative reality is further compounded by the legal principle that all partners are agents of
the partnership, so that means that each individual partner can go and create liabilities of
the partnership. In a sole proprietorship you have control over the liabilities being created.
•
The other issue is the reality that all partners are agents for the partnership, so they can create
liabilities for which you will be responsible. The partner has the right to seek compensation for
the liability of the partnership. All partners are both principles and agents of the partnership. (read
CHAPTER 19)
•
If you want limited liability there must be a separate entity.
•
A partner is only liable to the liabilities that the firm made during the time you were in the
partnership, if you terminate properly.
a. The proper way is to:
i. publish a notice that the partnership is dissolve and
ii. provide actual notice to people who have dealt frequently and recently with your
firm.
•
Several results:
a. A partner may not sue the partnership, although there may be actions between the partners
b. A partner may not be an employee of the partnership
c. The separate assets of each partner, whether a corporation or an individual, are at risk to
satisfy the contractual and other liabilities of the partnership. In other words partners do
not enjoy the limited liability of a shareholder of a corporation.
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i. Each partner is jointly and separately liable for the liability of the business; any
creditor can sue all or one of the partners of the extent of the liability.
ii. If you are a partner you should take on the prophylactic approach described for the
sole proprietorship.
Agent: distinguishing feature, he or she can create contractual liability for the principle, agents usually
exist by contract, but you can have them by estoppels. They do contractual work. He must always disclose
that he is an agent; they a per (for) the principal. To be
a. Not real agents: real estate agent, sports agent, fashion agency; they are just representatives
i.
To be a true agent you need to be able to sign contracts on behalf of the principal
b. Agents: stock broker, lawyers, a person can get the power of attorney
Principal: enters into an agency contract with parameters. The agent enters into a deal with a third party.
If the agency contract is functioning properly then the liability exists between the principal and the third
party. An example is a stock broker.
Note: Always have partners who are wealthier than you. Choose someone who has more to lose than you
do.
Implied terms of the partnership act: a term that does not exist in a contract but nevertheless the courts
will insert it into the contract even though the parties never agreed to it.
Agency law: the relationship between the principal and agent according to which the principal has
authorized the agent to enter into contract with third parties in the principal's behalf.
a. They are created by getting into a contract, either by verbal or written, and clearly define the
boundaries of the agency, the matter to which the agent can bind the principal; what kind of
contracts can they make
b. Remuneration for the agent
1. Common law implied laws - courts over time have completed or created implied terms, for
example, wrongful dismissal cases: every employee is entitled to reasonable notice.
2. Statutorily implied terms in respect to the partnership act.
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•
Partnerships generally are a consensual relationship or specifically contracted relationship
and there are various terms that are implied under the partnership relationship, safe and
except those that have discussed alternate terms.
•
Examples: section 27 –
i. all partners may take part in the management of the partnership,
ii. need the consent of all existing partners before you bring in a new partner,
iii. all partners are liable to share equally in contributions to capital, in losses and in
profits of the partnership.
iv. No partner is entitled to remuneration in acting in partnership business.
•
Section 32 is a fiduciary like paragraph - in the position of a trustee or agent and
therefore part of the partnership - partners are liable for all liabilities derived from them for
any transaction of the partnership or any use of them of the partnership property, name, or
business connection. If you do all the work, because you are using all property of the
partnership then you have to share the profits.
•
Section 33 is a non competition paragraph, also a fiduciary paragraph - if a partner
competes with the partnership he or she must pay over to the firm (partnership) an account
for all profits made for him or her in that business. You do get into vagueness of what is
competition and is resolved on case by case basis.
All partners are agents and therefore act as fiduciaries.
•
Section 29 - if there is no fixed time period upon the duration of the business, any
partner may terminate the partnership at any time on given notice of this intention to do so
to all other partners. Becomes a partnership at will.
•
Section 30 - if the partnership ends but still continues business, notice is required.
•
Section 36 - there will be dissolution of the partnership by a death or mental
incapacity of one of the partners.
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Implied terms are ultimately alienated if you enter into a partnership agreement, normally 20 to 30 pages
that deals with provisions of all the implied terms and changes them to the liking of all the partners.
Similarly the partnership agreement can refine those terms and make them to your satisfaction, to suit you.
AGENCY PRINCIPLE
Agent: distinguishing feature, he or she can create contractual liability for the principal, agents usually
exist by contract, but you can have them by estoppels. They do contractual work. He must always disclose
that he is an agent; they a per (for) the principal. To be
a. Not real agents: real estate agent, sports agent, fashion agency; they are just representatives
i.
To be a true agent you need to be able to sign contracts on behalf of the principal
b. Agents: stock broker, lawyers, a person can get the power of attorney
Principal: enters into an agency contract with parameters. The agent enters into a deal with a third party.
If the agency contract is functioning properly then the liability exists between the principal and the third
party. An example is a stock broker.
Implied terms of the partnership act: a term that does not exist in a contract but nevertheless the courts
will insert it into the contract even though the parties never agreed to it.
Agency law: the relationship between the principal and agent according to which the principal has
authorized the agent to enter into contract with third parties in the principal's behalf.
a. They are created by getting into a contract, either by verbal or written, and clearly define the
boundaries of the agency, the matter to which the agent can bind the principal; what kind of
contracts can they make
b. Remuneration for the agent
•
Power of attorney: happens when someone is chosen to do the bidding of a person incapable to carry
out day to day legal tasks. They get the power of agency which is general or limited. They are
determined by statute. Ie. For elderly or people out of town. The agent should be acting in the best
interest of the donor while taking care of issues.
•
Ratification: if an agent exceeds the authority it has to make contracts, then the principal is not held
liable, but the principal can ratify the contract to dissolve. If the principal does not ratify the contract
made, then the pseudo-agent is held liable for the contract.
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•
Agent by estoppels: a bar or barrier which prevents a person from denying the truth of certain facts
when this person by words or conduct has lead another person to believe that certain facts are true
and to act and rely upon these facts. The agent has done this, the
i.
Apparent authority: the agent has no real authority but appears to have authority to act on
behalf of the principal on account of the past matter of transacting business or on account of
certain practices in the trade. Similar to partnership by estoppel
ii.
Holding Out: the principal has used words or behaved in a manner that represented the
other person as the other principals agent. Or the agent says he is an agent and the principal
doesn't do anything to stop it.
•
Agency by necessity: when the agent enters into contracts with a third party for the benefit of the
principal without the consent of the principal, and to limit losses that the principal could experience.
(exists in limited cases)
•
To test the agency of the principal: the principal in such cases is responsible of the agent (the
contractual liability), if a mythical reasonable person, could reasonable assume that the agent is
acting within the scope of actually authority then the principal is bound by the act of the agent.
o
•
Ie, salvaging goods.
Termination of agency: if not mentioned in the contract, it is terminable by notice.
Duties of the agent to the principal (can be implied to the contractual relationship):
1. Agent must comply with the contact establishing the agency or he is liable
2. Agent must be diligent in reprising
3. Duty of care implied: whether paid or not, must be careful
4. Duty of personal performance: can't sub delegate the tasks
•
Fiduciary: a person that is in the position of the trustee, they have a duty of loyalty to the principal and
must be scrupulous and candid to the loyalty of the trustee. Agents are the original fiduciary. A person
having duty created by his undertaking primarily for another's benefit. Acting on behalf of another.
Fiduciary duties:
1. Personal performance
2. Don't find yourself in conflict of interest and take advantage of the situation
3. Cannot take secret commissions
4. Complete good faith; cannot place yourself for conflict of interest between agent and
principal. Bonafides = faithfulness. You can’t take advantage of a conflict of interest.
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5. Agent cannot act on behalf of third party and principal at the same time
6. Agent cannot intercept opportunities of the principal unless the principals grants
permission to the agent.
Duties of the principal to the agent:
Remuneration: an agent has the right to be paid by the principal. Can be specified in contract, if not
then paid by quantum meruit: judge determines the seriousness of the role. you are entitled to be
paid
Reimbursed for expenses (42;45)
A LIMITED PARTNERSHIP
A Limited Partnership is distinguished from a partnership because of its structure.
•
There are certain partners that have limited liability called limited partners and of you must have at
least one general partner.
•
The worrisome thing is that if a limited partner participates in a manager function can convert
himself into a general partner with unlimited liability.
•
It is not utilized as much because the tax advantages were eliminated in the early 90’s.
LIMITED LIABILITY PARTNERSHIPS
•
Relatively new concept:
•
Partnership amendment act - it makes provision for limited liability partnerships and it received
royal ascent on august 9th 2002 and was proclaimed February 25th 2003.
•
Def’n: Provides protection for the personal assets of an innocent partner from professional liability
claims arising from the negligence or misconduct of another partner, associate, or employees in
whose work the innocent partner was not involved.
•
Texas 1991: first LLP statute following claims from law, accounting firms in late 1980’s (savings
and loans companies)
o
Collapse of law/accounting firms
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•
•
o
Adopted LLP legislation in 1991
o
Ontario adopted in 1998 then other provinces followed
3 Professionals
o
Lawyers
o
Chartered Accountants
o
Certified General Accountants
Once registered a partner in LLP is not liable for:
o
Debts
o
Obligations/liabilities of partnership
o
Another partner
That arise from negligence, wrongful acts or omission, malpractice, or misconduct (mali fides –
bad faith) of another partner or an employee, agent, or representative of a partnership
occurring in the ordinary course of professional practice.
•
Limitations (you can lose this protection)
o
If partner knew of negligence and failed to take reasonable steps
o
Negligence was committed by an employee, agent, representative of the partnership for
whom the partner was directly responsible in a supervisory role
•
This form of liability is what is called a “partial shield” – it protects innocent partners from the
negligence, wrongful acts etc…. of others in the firm but does not provide any protection for
contractual or trade debts.
•
The LLP model which extends protection to contractual or trade debts is call the “full shield” and
only Saskatchewan has this.
•
Notwithstanding the protection given to innocent partners, interest in partnership is still available
to creditors (same with insurance) but cannot go after personal assets
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d) Corporation (October 29)
-Macro level it emboldens investors. Meaning people are more willing to participate in economic
activity because their assets are not at risk. Agency principles manifest themselves through
corporate law.
Gatekeeper Liabilities are attached to statues. About 400 of them. Makes directors personal
liable to stakeholders. These liabilities have a broader brush and regulate more conduct. Most
Directors duties are responsible for….
-If it’s so dangerous to be a director who is going to be a director?
-You have to remember those prophylactic guards. Credit proof your assets. Consider propert
transfer etc.
•
Not the most numerous, but the most dominant.
•
Separate entity principle: a corporation is a separate person from the investors (investor
shareholders), because so, the investors are not responsible for the actions of the corporation, gives
limited liability to the shareholders. The investors can't be sued for the entity of the corporation.
•
Reason: corporations have a separate existence, are separate entities and are legal persons.
•
They can’t do much though by themselves because they are artificial, they must act through human
agents. There is an importation of agency law, because they act through human agents and all the
activities are conducted by human agents, so it was a natural process to adopt this.
Various characteristics:
1. Limited liability is the critical feature of the corporation and is the feature that makes it so popular the natural consequence of being a separate entity
•
Limited liability means that a shareholder is only liable to lose his or her investment and or the
amount of the shares for which he or she has not paid. A sound protection of assets for the
shareholders
•
The ability to routinely incorporate in business and have limited liability is one of the most
important economic achievements of North American culture, because it has emboldened investors
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(they are not risking all their assets) and because it has generated as much wealth as the industrial
revolution.
2. Tax Advantage: (1) payments of salary to spouse and children is easily facilitated through the
corporation, (2) dividends sprinkling: giving dividends to family members who are in the lower tax
brackets for lower marginal tax rates (3) Small Business Tax Deduction: eligible for tax savings for
corporate tax rate (MB ® 11% for less than $500,000 profit) (although this can’t be spent on
yourself, but it can be used as a tax shelter) (4) preferential tax breaks for dividends (5) capital gains
exemption for the sale of shares for the first $750,000 (tax free capital gain) (6) Estate Freeze: allows
you to pass active shares to your heirs without tax consequences. (7) IPP Individual Pension Plan –
you can put more into this pension plan than an RRSP with similar tax treatment, and it doesn’t die
with you, it stays in the company)
3. Management: a partnership is unsuitable for a situation with a lot of investors. Shareholders on the
other hand have no authority to participate in management. Their essential right is to elect the board
of directors once a year.
4. Transfer of ownership: it can sometimes be difficult in a partnership, a shareholder has no such
difficulty (transfers of corporations are allowed and your relationship is ended.)
5. Continuous existence: it’s an artificial entity that can live for every, which is an advantage. If
someone dies, the corporation does not have to dissolve. There are annual fees that are required to be
paid.
6. Loyalty: partners cannot compete with the partnership because of fiduciaries duties; shareholders do
not hold any such loyalty because they are not fiduciaries. You can have shares in competing
corporations as a shareholder.
7. Separation of ownership and management: there are 2 types of organizations: small companies
and large companies and depending on this it will affect the type of ownership/management
disputes. If compensation packages are too big for managers in large companies (usually publicly
traded), shareholders get upset because it lowers the growth of the stock as well as lowers dividends.
In small companies, there are few owners, and oppression of the minority shareholder occurs – we
refer to their position as being “locked in and frozen out” – you can’t sell it to anyone other than your
fellow shareholders who will only buy your shares at a highly discounted price, and they also use the
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BoD powers to fire you so you have no say in the company and you can’t get rid of your shares
without suffering a major loss.
8.
TWO TYPES OF COMPANIES:
i) Large companies: (14:00)
•
Generally publicly traded, but they have role specialization due to our advance technology.
•
Owners do not have the specific skills to operate and manage the companies, so there is a
distinction of managers and owners.
•
There is a difference and rivalry between shareholders and managers. (De minimus a trifling,
ridiculous)
•
The big topic is executive compensation because it affects shareholders. Shareholders are
interested in capital gains and dividends.
•
Managers want to have salaries, pension benefits, etc. for their benefits.
•
Why are these two parties in competition? The money has to go to one or the other. If the
compensation is too generous then it’s coming out of the shareholders profits.
ii) Small companies:
•
Classically are not publicly traded and are exempt from the requirement of the securities act.
•
Generally there are owners that are actively participating in management or outright labour of the
corporation. The shareholder/management issues are quite different.
•
The real problem is referred to as “oppression of the minority shareholders”:
§
a minority shareholder is “locked in and frozen out” – they can’t sell their shares except at a
very discounted price because nobody wants to pay to be a minority shareholder (take their
place), but are frozen out because they have no influence on management with a minority.
§
We usually resolve this issue by way of provisions in a shareholders agreement: a
contract between shareholders. This gives protection.
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§
The most important clause is the shot gun clause: make an offer to the other party at a
price per share and it’s their choice of whether they buy or whether they sell.
§
However, the shot gun clause isn’t always fair to everyone:
2. if one party is undercapitalized (have no money) you can’t realistically buy them
out.
3. In those cases the price per share will be determined by someone else so that the
undercapitalized will be considered.
LIMITATION ON THE SEPARATE ENTITY PRINCIPLE:
•
(19:30)
•
The courts are somewhat against meddling with this principle historically because it has resulted in
a great deal of prosperity (Salomon’s case – 1897)
•
§
Affirming the complete separation of the shareholders and the corporation
§
The shareholder can only lose what they have invested
To ignore the separate entity principle means to pierce the corporate veil:
§
they will do it in
1. Taxation situations - statutory piercing, must share the first $400,000. Sole
Proprietor Taxed 45%, Corporation taxed 11% preferred rate. Money must stay in
the corporation, however, when withdrawn; it is taxed as personal income. An
associated group must share the lower tax rate.
2. For the residence of the corporation and the controlling shareholders (not where it
is formed but where the controlling shareholders reside).
3. Agency principles - whether they are an agency or shareholders, but they need a
written agreement, and
4. In certain situations of fraud, in particular the Patton case - they won’t allow the
separate entity principle to be an instrument of fraud.
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METHODS OF INCORPORATION (SEE TEXTBOOK): (22:40)
1) The royal charter corporation: created through the use of the royal prerogative - residue of
unilateral powers of the monarch. Historically the crown used them to create companies for a fee, one
of the ways through which the monarchs actually raised money. Example: Hudson Bay Company in
1760. Aren’t formed anymore because the royal prerogative has been terminated.
2) Special act Corporation (Statutes): for major public works. This method is still employed in created
crown corporations (CPR, CNR, MPI). Special statutes create corporations.
3) General (routine) acts: acts that business or other people can resort to create a corporation
according to the procedure laid out. Three basic types of general acts:
a. English system of registration,
b. Letter paten system, and
c. Certificate of incorporation. In the BNA act you can have federal companies and provincial
companies, there is a split jurisdiction and they have different acts, Canada Corporation act and
Corporations Act, respectively. The major difference is that federal companies are more
expensive and may be protected with your name across Canada.
HOW DO YOU ORGANIZE A COMPANY IN MANITOBA? (25:50)
1) Do a corporate name search to ensure the name is available, can create your own name or they can
give you a number. It costs 35$ to search the name. Hardest challenge to find a unique name.
2) You then also must create and submit to the corporation branch the articles of incorporation,
based on Section 6 of MB Corporations Act, including: name of the company, corporate head
office, nature of business, types of shares and their characteristics, the first directors, and
the incorporators. Like the entrenched aspect of the corporation (restrictions on business that it
can carry on).
3) Must submit a fee of 300$, for an extra 100$ they can give you preferred service overnight.
COMPONENT PARTS OF THE CONSTITUTION:
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1) Articles of incorporation (constitution of a company): if you want to change it you need a 2/3
majority of every class of shares, including the above and any restriction on the type of business
that can be carried out. This part is entrenched.
2) Bylaws – not entrenched and instead can be changed by a simple majority of shareholders. Initially
the first directors create bylaws, but must be ratified by the shareholders at the first meeting. It
provides the regulation for general governance corporation.
1. Charges Board of Directors with affairs
2. Quorums for director and shareholders meetings
3. Notice provisions and votes
4. Officers of corporations: duties assigned
5. Signing authority
6. Fiscal year of corporation
According to the constitution there are 3 types of participants
1. Shareholders: are the investors, purchase shares with money or capital and they have very few
rights in the corporation.
i. On an annual basis they are eligible to vote for directors and
ii. They must have the ability to participate in the approval of changes made to the corporation
including all of its undertaking or changing or amending the articles of incorporation.
iii. There are different types of shareholders: voting rights, dividend rights, and redemption
value rights (by back shares at a certain price).
iv. The bulk of the articles of incorporation revolve around the classes characteristics.
v. Different classes of shares:
1. Voting or non voting
2. Prescribed dividend rate
3. Redemptions gives corporation the opportunity to buy back the shares from share
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4. Retraction the shareholder can force the corporation to buy the shares from them
5. Etc.
vi. In general there are two types of shares:
1. common shares which generally have the right to vote and no predetermined
dividend right or rate and rank last,
2. preferred shares: don’t vote, entitled to dividends to a % of return and rank ahead of
common shareholders if there is a surplus on dissolution.
vii. Best is to assign certain people to a certain class in order to discriminate the shareholders
but it will give members different level of dividends based on income level.
2. Directors: are charged with the management of the corporation, they are the agents through which
the corporation acts.
i. They exercise the power of the corporation, they adopt the initial bylaws. Under section
100, directiors need not be shareholders.
ii. The directors annually elect the officers of the corporation
3. Officers: run the corporation on a daily basis, need not be directors, are elected annually.
PUBLIC COMPANIES VS. PRIVATE COMPANIES: (41;30)
•
There is no definition in the corporation act.
•
One can say that they are public if there is a distribution to the public of their shares and they are
involved in sales in the stock market.
•
Under the security act, a public company is required to do a filing. Public company is defined by
not being what is defined as a private company under the security act. To prevent fraud on
potential investors in public trading or distribution of shares. As a private company you are
exempt from many of the costly actions as required by the securities act.
•
(43:15) Private company is defined as a company in whose instrument of incorporation or articles
the: (in the incorporation of articles)
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1. right to transfer its shares is restricted,
2. the number of its shareholders is limited to not more than 50, and
3. any invitation to the public to subscribe for its securities is prohibited (no advertising), this is a
violation.
•
Otherwise you have to prescribe to the securities act which is expensive.
(November 03)
THE MANAGEMENT AND OPERATION OF A CORPORATION – AGENCY LAW (45:30)
Agency is a relationship between the principal and its agent according to which the principal has hired and
authorized the agent to enter into contracts with third parties in their name. Insurance and real estate agents
are not real agents, lawyers, however are. They are merely sales representatives.
Expressed agreement: written or oral.
Agency law plays a role not only in corporations but business organizations.
•
It is appropriate in corporate law because corporations are artificial entities and must act through
human agents
•
Board of directors: one of the consequences is that each director is a fiduciary because they are
an agent.
•
We also see in corporate law the principles of law called “apparent authority of an agent” –
creation of an agency by estoppel – precluded from denying, where an agent may acquire apparent
authority from a past manner of transacting business by the principal or from trade custom.
o
Such circumstance may make it appear to third parties that the agent has authority for the
contract at hand, in fact however he or she does not have any real express authority for the
purpose.
o
Normally in an agent situation there is expressed authority, they know exactly what they
are supposed to do.
o
Sometimes it appears to the outside world that there is authority where none exists, this are
called agency by estoppel – precluded from denying.
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o
There are two types:
1. Apparent authority – an agent may acquire apparent authority from a past manner
of transacting business, business by the principal or trade custom.
•
Such circumstances may make it appear to third parties that the agent has
authority for the contract at hand. In fact, however, he or she does not have
any real or expressed authority for that purpose.
•
There exists no understanding between the putative (alleged) agent and the
principal to grant this authority.
•
An example of trade custom is a stock broker or lawyer. They have
apparent authority to enter in all sorts of contracts on your behalf.
2. Holding Out – you are representing yourself or allowing someone to represent you.
Two ways:
1. If someone is representing to the world that they are someone’s agent and
the person knows and doesn’t say anything otherwise OR
2. You represent someone to be your agent.
Text book: “generally speaking a corporation is liable for the acts of its agents under the ordinary rules of
agency. An officer of a corporation acting within his or her usual authority but without express authority may
bind it to contracts made with third parties. Corporation may ratify acts made by unauthorized agents on its
behalf.”
•
Implicit is the role of the law of agency and in particular apparent authority. In an agency
relationship, generally, there are two parties: principals and agents who establish their
relationship through a contract. If the agent does their duties properly, there’s no mali fides, then
the liability will be with the principal and third party.
APPARENT AUTHORITY IS MANIFESTED IN 3 MAJOR WAYS: (47:20)
1) The effect of publicly filed documents:
•
At one time, the public was deemed to have notice of the contents of filed documents whether they
had read then or not.
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•
If the documents prohibited either the corporation or one of its officers from carrying out
certain acts, a third party could not rely upon what otherwise might be the officer’s
apparent authority to perform those acts.
•
That rule could lead to substantial injustice and has now been abolished by statute.
2) Indoor management rule:
•
At times there are requirements in a corporation’s constitution and governing act that
require certain acts to be performed in a specific manner if they are to be valid.
o
For example, under bylaws, all contracts must be in writing or signed by each board of
directors.
•
What happens to contracts that don’t meet the requirements?
o
If they are invalid then that is a punishment for the people who enter into contracts
with the corporation. The corporation could do it on purpose.
•
What is the effect upon an innocent third party if the corporate act has been performed in an
irregular manner?
o
The seminal authority on this point is the well known case of Royal British Bank v.
Turquand.
o
The ratio in this case was that in the absence of notice of the irregularity or of
suspicious circumstances everything which appears regular on its face may be relied
upon by an outsider and will bind the company.
o
Few interesting points:
1. “Suspicious circumstances” depends on the facts of each case,
2. Notice of irregularity – it is a danger to know too much about the internal aspects of the
organization, if you notice the irregularity and say nothing about it then the contract can
be invalid.
•
Indoor management rule manifests or is a variation of apparent authority.
3) Pre-Incorporation Contract:
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•
A corporation cannot ratify a pre-incorporation contract – a contract made in the name of a
corporation before it comes into existence.
•
The individual who purported to contract on behalf of the corporation could not be held to the
contract either, since the intention was to contract with the corporation.
•
Based on provincial statutes:
a) The corporation is bound by the contract and is entitled to the benefits thereof as if the
corporation had been in existence at the date of the contract and had been a party thereto, and
b) A person who purported to act in the name of or on behalf of the corporation ceases to be
bound by or entitled to the benefits of the contract.
DIRECTOR’S DUTIES: (OCT 31)
•
The equity owners are called shareholders - only participate really in the corporate governance
once a year in the election of the board of directors.
•
The directors are in charge with the management of the corporation and do not have to be
shareholders.
•
Duties of the directors are owed to the corporation, not the shareholders.
•
One of the ways that directors’ activity is controlled is through director’s duties.
•
The law generally upholds a vacuum; they have authority but no restrictions on authority.
Consequently so long as the directors were acting appropriately to the corporation then they were
protected.
•
The law doesn’t like this, so over the last 1000 years, fiduciaries have had duties and if they fail to
follow these duties then they are liable to someone. Definition of fiduciary from Black’s law
dictionary, “the term is derived from roman law and means (as a noun) a person holding a character
of a trustee or a character analogous to a trustee in respect to the trust and confidence involved in it
and the scrupulous (high level ethics) good faith and candour (honesty) which it requires.” Secondary
definition: “a person having duty created by his undertaking, to act primarily for another’s benefit
in matters connected with such undertaking.”
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•
Essentially the common law duties revolve around 2 things:
1) Care and skill:
a. a director is bound to exercise reasonable care and that means that he she or it cannot
be negligent in carrying out duties.
b. No greater diligence is required of a director then is required of the average person.
c. There are 2 exceptions: accountants or lawyers are subjective to a higher standard. If
you are a professional on a board you must look out because you are expected to
conduct yourself with a greater degree of carefulness.
2) Good faith (bona fides):
a. If you are in a conflict of interest you must act properly. 2 types of bona fides:
i. Disclose an interest in contracts with the company – what you should do is to
disclose the interest before the board and not act in any discussions or voting. At
the very least remain silent and don’t participate.
ii. Interception of corporate opportunity – you hear about some great opportunities
or financial schemes. You can’t go out and steal the deal; that’s an interception of
corporate opportunity. Essence of the principle: you have to act in the best interest
of the corporation or client, or don’t take what’s not yours. If you do you will have
to give up any benefits received as a result and may have to pay for damages.
RESTALL’S PAPER - EXAM:
•
These common law duties that evolved from equity have now been incorporated in the corporation
act in section 115 and 117.
•
However, the potential liabilities of director’s have been expanded beyond merely what are the
common law duties in this section (Restall’s paper).
•
There is a new variety of director’s liabilities most of which are called “gatekeeper” liabilities - the
attempt to control wrong doing of companies by making the director’s liable through duties. The
liabilities consist of financial and penal nature for directors. This protects the government's
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revenue from thecorporations. Some of these duties are owed to a series of individuals depending
on the statutes: (about 400) it’s owed to shareholders, employees, creditors etc…
Examples of potential liabilities:
•
Board of director’s not remitting EI, CPP or income taxes,
•
Debts that are liable to employees for up to 6 months worth,
•
Environmental legislation that can give you jail time.
•
The Supreme Court has indicated that director’s remain liable even if they quit, during a time of
crisis.
•
All liabilities apply to non-share corporations or not-for-profit corporations.
From a societal standpoint, corporations created a lot of prosperity because they were able to obtain
limited liability.
As a result the people that will be members of board of directors won’t be the best because reasonable
people won’t take the job. This damages the potential for prosperity.
Slowly and inevitably reasonable people will not be a part of the board of directors.
MINORITY SHAREHOLDER PROTECTION:
•
Traditional minority shareholder protection is derivative action – a shareholder can sue the board
of directors in the name of the company for the wrong done to the company,
•
It is seldom used because the courts require very high deposit monies, require costs being
deposited in advance and as a result few shareholders are willing to do this.
•
A more common method for minority shareholder protection is oppression remedy of the
corporation act: appeal to the court that they have been oppressed and unfairly treated and entitled
to a remedy. The judge can choose the remedy and there is no limitations to it given by the court.
Long process and the uncertainty of results.
o
Some possible remedies:
§
The court can dissolve the company and disperse the capital on their own means
§
Court can order the forced purchase of shares
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•
In the 1970s amendments were made to help shareholders:
1.
Disclosure of company affairs •
entitled to the financial statements
•
and document of record
•
and if you have 5% of shareholder you can apply to the court for an inspector,
2. Shareholders could attend
3. Changes also allow a minimum of 5% to requisition a shareholders' meeting, and
4. Gave shareholders the right to vote to make a change and only to do it by a special voting
majority, more than 2/3.
5. Proxy votes were allowed and made it permissible for shareholders to have other people
vote for them. This has given the managers more control because they get the proxies.
•
“Fundamental changes” was instituted - changing articles of corporation etc… need 75% majority
of each class of shares.
•
Best Protection ® Unanimous Shareholder Agreements:
1. Employment opportunities
2. Ensure special majorities for certain actions to occur
§
I.e. taking on loans
3. Capital Control
4. Board of Director Elections and determine the duties of the directors
5. Share Control Clause
§
“Shot gun clause” ® there needs to be no reason to activate it
•
Could send a double edged offer to sell or buy at a price per share.
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•
To not get exploited they can create the Fair Market Value Provision, which
the share price is determined by a arbitrator
Criteria for selection between the basis forms of business entities (27:00) – seem to push the
corporation as the desired form
1) Limited liability and the nature of the business – if there are substantial risks that are uninsurable
you should incorporate
2) Tax planning – implications and benefits of corporation
3) Desirability of perpetual existence – ensure that there is continuity
4) Estate planning – the estate is the property you own upon your death and there are various
methods to minimize the taxes that are payable
5) Number of proposed proprietors
6) Relationship of proposed proprietors
7) Borrowing requirements available terms and relationship of proposed lenders
8) Available government grants (for Canada) – sometimes the government prescribes what type of
organization you can utilize
9) Employee ownership – sometimes as an incentive you would like to give them a share of the
business, like employee stock options for positive re-enforcement
10) Costs – more expensive to set up one type over another
11) Flexibility of structure – sometimes it's important to amend the structure over time, effects not only
the structure but the agreement (corporations quite inflexible)
12) Income tax consideration – tax consequences and issues
13) Applicable government requirements – some requirement prevent some individuals from forming
different types of organizations, ex. Only CAs, CGAs and lawyers can have an LLP. Ex. Chiropractors
cannot incorporate.
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IV) THE LAW OF TORTS
Liability: a legal right enforceable by and against legal persons by way of court process where court can
apply a remedy. With liability there needs to be a remedy to be a liability.
In its simplest form, a tort is an act or omission of circumstances, that cause an injury to someone or their
property, where the person performing the act has no lawful excuse to do so. The purpose of tort law is to
compensate the injured party for the loss suffered by the tortuous act, rather than punish the wrong
doer. While many torts have a criminal aspect to them, such as assault or fraud, tort law, does not
normally attempt to do more than provide compensation for injury.
Each type of liability can be broken down into constituent elements and it is naturally up to the plaintiff by
the way of proof that those constituent elements exist; they must establish this to the applicable standard
of proof.
In tort law the applicable standard of proof is the balance of probability. In civil matters each element
much be established in the balance of probability. Certainty of 50% + 1 only required for standard of proof.
Three elements: 1) causation, 2) intention and 3) proscribed harm that must be proven.
The standard of proof in criminal matters is “beyond the reasonable doubt” means above 95%
certainty. They can render different results, because even though the evidence is basically the same, there
are different standards of proof. Example OJ Simpson case. Also showed that under the same context you
can have civil liability and criminal liabilities, they are not mutually exclusive.
Four Areas of Common Law:
1. Tort
2. Contract
3. Property
4. Restitution
Modern Tort
Intention of act or negligent.
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THE NATURE OF TORTS (NOV 5)
•
Torts are the first category of liability and are defined by the textbook: “is concerned with the ever
expanding variety of harm suffered by individual incident to all activities necessarily carried on in our
increasingly complex society”.
•
From the CMA notes “a tort in its simplest form is an act or omission in some circumstances that
causes injury to someone or their property where the person performing the act has no lawful excuse
to do so. The purpose of tort law is to compensate the injured party for the loss suffered by the
tortuous act rather than punish the wrongdoer and while many torts have a criminal aspect to them
such as assault or fraud, tort law does not normally attempt to do more than provide
compensation for injury.”
•
Objective of tort law, according to the definition, is compensation of the victims and should not
engage in punishment.
•
In tort law, one can’t use insanity, intoxication as defences. All that is required is intent – children
can be liable for tort.
•
To hold someone liable, they need to be at fault: a blameworthy mental condition. They
perpetrated the act that cause the harm with intent or they were negligent. (All but not abuses)
INTENTIONAL TORTS (9:15)
•
Intentional torts are: an intentional act proscribing intentional harm; cannot be reflexive or
defensive; those torts which are caused with intention.
o
Can't be liable (intent) for being:
§
Reflexive
§
Automaton: not as conscious state
§
Somna ambulens: sleep walking
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•
Tort Feasor: the one who perpetrates the tort.
•
Torts usually follow the criminal court because they tort prosecutor will allow the criminal
prosecutor find all the evidence and do most of the work in setting up and then the torts will take it
from there.
•
There are various types including: the tort of battery, deceit, false imprisonment.
•
Elements are threefold: intention, causation, and proscribed harm.
•
For every intentional tort these three elements must be proven.
1. Intention
•
Must be a voluntary act committed by the defendant, it cannot be a reflex or an automaton
(someone without mental consciousness, for example in a sleep walking state, because it’s not a
voluntary act).
•
Intention must be differentiated from motive.
o
Intention is the desire to bring about certain immediate consequence.
o
Motive is described as the underlying objective. Defendant's mind must prompt the bodily
movement to create the harm
o
Intent is more direct than motive. Deals with the immediate intent to cause harm. Difficult
for the plaintiff to address this.
•
Presumption: it is understood by the court that the defendant has the intent to cause the harm and
is responsible to prove otherwise and rebut it.
•
The difficulty for the plaintiff is that it is awfully difficult to prove intention on the part of the
defendant. The court aids this by assuming intention exists, that you intend the naturally
consequences of your act, therefore the plaintiff doesn’t have to prove the element and it reverses
the owness of proof. The plaintiff is taken to have established the element and proven it and
it is up to the defendant to enter proof to reverse the presumption or conclusion.
•
Presumption: this is where the plaintiff proposes
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2. Causation
•
Means it must be the operative cause (close in time with no intervening acts), nothing to do with
motive.
•
Fairly-direct cause.
•
They don’t get into psychological analysis of what’s going on.
3. Various Proscribed Harms:
•
Examples:
o
Battery (touching),
o
Assault (putting someone in apprehension of a touching),
o
Deceit (fraud, the false assertion of fact with knowledge of its falsity or at any rate not an
honest belief in its truth),
o
False Imprisonment (anyone who intentionally confines another within fixed boundaries),
o
Intentional Infliction of Mental Suffering - Wilkinson case: told someone as a joke that their
husband had suffered an accident. Damages were awarded.
If all elements are proven then the plaintiff is entitled to compensation to place victim in the position
he/she was in had the tort not occurred. However damages will not be rewarded if the defendant is
successful in proving that a defence exists – a defence is where there is an excuse for the defendant so that
liability which would normally result is excused or conduct which would ordinarily result in liability would be
excused if a defence exists.
- A defense is Absolution: conduct that would normally result in liability, the conduct is excused. All
the elements are present but the defendants conduct is excused, and is absolved of any liability
- Ex. Of defense: consent (if you agree to battery, like a fight) – there are limits to consent, like in a
boxing match, the opposing boxer can’t bite your ear. Another example of a defense is self-defense
– limit is that it cannot be excessive. Another example is legal authority – police need to pat you
down, physically touching you which is a battery but it is excused.
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Injunction: a court order to get the tort feasor to stop with the persistent tort
There are a variety of excuses which would absolve the defendant from the liability, including:
a) Self defence with extreme limits - no other reasonable way of escaping, has to be reasonable
force,
b) Consent – agree to enter into an activity (ex. Boxers), but there are levels to consent so that it
can’t be to excessive force, and,
c) Defence of Legal Authority – some individuals are charged with responsibilities and as a result
they have authority to perform acts that would otherwise be torts (ex. Police), unless they
exceed the reasonable force necessary.
DAMAGES (REMEDY): (20:18)
•
The remedy that is available if there is tort liability is referred to as damages and it is money.
•
The purpose is to compensate the individual, to place the victim in the same position had the tort
not occurred.
•
There are three categories of damages that exist:
1. Special Damages – are those losses that can be calculated with accounting accuracy up
until a particular date, usually the date of the trial or date of the judgement, example, loss
of wages, loss of profit from business, medical expenses. Can be calculated with accuracy.
2. General damages – losses that cannot be calculated with accounting certainty; there is
a level of conjecture (estimation). For example: future medical costs, future income loss,
pain and suffering – look up precedence from other cases, because they cannot be calculated
accurately. No formula which tells you how much pain is how much money.
WHY IS THE REWARD MUCH HIGHER IN THE US THAN IT IS IN CANADA? (EXAM QUESTION)
I.
Pain and suffering rewards in Canada have been subject to a limit by the
Supreme Court in 1982 of 100,000 – they feel for the victims but any reward
is arbitrary. Since then it has been indexed to inflation and the current
maximum is 350,000 – 375,000.
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II.
Juries make tort awards in the United States; in Canada these do not exist,
juries tend to be more emotional and as a result will award larger sums, and
III.
Americans have jurisprudence that allows for higher rewards of punitive
damages that can also be rewarded by the juries (not judges. Juries are more
empathetic to damages).
3. Punitive (exemplary) damages – are ordered, are discretionary, and given when the
defendant is guilty of conduct that can be described as vindictive, aggravated or
penal. Usually the defendant is acting in a contemptuous fashion so the behaviour is very
bad and inappropriate. They place the injured party in the same situation that he or she
would have been in had the tort not occurred. It needs to relate to reckless behaviour.
Remember criminal law is about punishment and tort law is about compensation.
THE TORT OF NEGLIGENCE
•
Damages are also applied to the tort of negligence
•
The tort of negligence is really about a standard of conduct.
•
When someone is liable in negligence they are liable in having failed in living up to the required
standard of conduct which is applicable to all activities in society. – ex. Not shovelling your
drive way and someone slips and gets hurt on it.
•
Negligence applies to every behavior or conduct in which you can be involved. It is potentially
present everywhere
•
There are various approaches to establishing the tort of negligence, the best is contained in Linden,
who indicates there are 6 elements required:
1. The defendant’s conduct must be negligent - in breach of the standard of care set by law.
2. The claimant must suffer some damage,
3. The damage suffered must be caused by the negligent conduct of the defendant,
4. There must be a duty recognized by law to avoid this damage,
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5. The conduct of the defendant must be a proximate cause of the loss or stated in another way
the damage should not be too remote a result of the defendant’s conduct,
6. The conduct of the plaintiff should not be such as to bar his or her recovery - he or she must
not be guilty of contributory negligence and he or she must not voluntarily assume the risk.
•
A course of action arises for negligence if the 6 elements are present.
•
No intention is required in the tort of negligence.
•
Tortfeasor: the perpetrator of the tort.
1. The standard of care: is that the law places a duty on every person to conduct all activities
taking reasonable care not to injure others or their property. Whether a person has acted
with reasonable care is a question of foresee-ability of harm. If a reasonable person would foresee
that by failing to be careful in his or her activity, he is likely to injure another, then he is under a
duty to take due care. If he or she does not, that individual is liable for the injury inflicted. The
standard of care is summed up as: whether a reasonable person would reasonably foresee danger or
harm to another or their property and whether the steps taken, if any, to avoid this danger of harm
were reasonably sufficient. The irony is that sometimes you can anticipate that there is a risk of
harm and you take measures to prevent it and if those measures are insufficient you will still be
liable. The reasonable person standard has been increasing and it is a very high standard; it is not
the average person (the average person’s standard is pretty low). Textbook definition of a
reasonable person is “someone who is anticipatory, always thinking of others, careful.” There is a
clear bias to find someone liable because the standard is so high. Ex. You see ice on your driveway
and go put salt down on your drive way, but it isn’t enough and someone slips and injures
themselves, you are still liable.
2. There must be some damage suffered by the plaintiff – economic harm and intentional infliction
of mental suffering are both recognized as types of harms by negligence law.
3. Causation – fortunately the courts have not been trapped into endless philosophising; instead they
have adopted a common sense approach. The most common test is the “but for” test, sometimes
called the “sine qua non” test. If the accident would not have occurred but for the defendant’s
negligence then his conduct is A cause of the injury, however it doesn’t have to be THE cause.
4. Duty of care: to whom the standard of care must be owed – however negligent the defendant is,
they will not be liable unless they owe a duty to the other person. In 1932 there was the case of
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Donahue v. Stevenson which established the neighbour principle which clarified to whom we owe
a duty, to a limited extent. We owe a duty to be careful to those we can describe as a neighbour of law
- persons who are so closely and directly affected by my act that I ought reasonably to have them in
contemplation when I am directing my mind to the acts or omissions which are called into question.
It has raised the bar in terms of tort law. The case was over drinking a half a decomposed
snail in a bottle of ginger beer. The House of Lords crafted the neighbour principle that allowed
persons to sue the company (the case of Donahue v. Stevenson). In tort law the ultimate consumer
did not have a contract with the producer and thus could not sue them in tort, however they
couldn’t blame anyone else and the producer. You used to not owe a standard of care to the world.
5. Damage should not be too remote a result of a defendant’s conduct - the damage must be a
reasonably foreseeable consequence of the act. Thin skull cases - situations where for example
an individual negligently strikes another person on the job and the individual has a rare bone
disease and their jaw bone completely shatters. The defendant said that they couldn’t be
responsible, but that if the type of damage could be expected then you have to take your victim as
you find them. Defendant would still be liable for the fact that they injured the jaw.
6. Plaintiff’s conduct cannot bar recovery:
a. Contributory Negligence: if the individual contributed to their own injury then the
plaintiff could not succeed, even if they were 1% responsible. Ex. In a car accident and not
wearing a seat belt, plaintiff was 100% responsible because they weren’t wearing their seat
belt). Modern law has changed through the contributory negligence statute: wherein
judges can allocate responsibility and liability. Or wearing summer shoes in the winter and
slipping on someones sidewalk. The judge might find you 20% liable if they slipped.
b. Volenti Non Fit Iniuria: assume risks in certain hazardous activities. Ex. Playing hockey,
assume the risk that an errant puck might hit you in the head. This element doesn’t seem to
be an element, but actually a defence for the tort of negligence.
PROFESSIONAL LIABILITY (CHAPTER 4) (NOVEMBER 14)
•
What is a professional?
o
Examples: accountant, lawyer, doctor, engineer, dentist, architect, chiropractors (traditional
professionals) –refined conduct, accreditation, prosperous, a degree of education.
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o
•
Sports players and university credentials – not really professionals.
What do these occupations have in common? There are 2 aspects:
o
They are a member of an occupation that is governed by a self regulating society,
created by statute, governed by members of the occupation and set delegate body controls
on admonition, education, furthering education, standards and discipline.
o
Text book says: “professionals are people whose skills are described as having a significant
intellectual content and draw on an underlying developing body of theory affecting the
practice of their profession. Members of each profession are usually certified to offer their
services to the public under a system of licensing administered by one or more governing
bodies of the profession. Accordingly, clients view professionals as having specialized
knowledge and skills that they are prepared to pay for and rely on.” They were created
historically to protect the consumer, because you want certain standards created so that
the client knows they are dealing with a credible person. As professionals there is
potential liability.
o
Good definition as according to Restall (14:45): An occupation that is regulated by a delegate
body that is created by statute, and the director of the body are elected by the members of the
profession, and the delegate body sets the standards for minimum education, furthering
education and conduct and has the ability to discipline those in the profession.
•
The educational requirements of being a member of the profession
•
Code of conduct in respect to professional activity
•
Admission to the profession
•
Discipline in respect of members of the profession who violate the
subordinate legislation established by the delegate body
FIVE BASIS OF LIABILITY (SOME OF WHICH RELATE PURELY TO THE STATUTES THAT CREATE
THE GOVERNING ORGANIZATION) (19;00)
1. Criminal liability – can be held criminally for one’s acts ex. Theft. The courts would deal with the
member and then separately the delegate body would do the take it to their own court. as well.
2. Professional liability – in breach of the code of conduct and can be disciplined, which is really
violating regulations,
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3. Contractual liability (20:45) – whether explicit or implicit there is an implied promise that the
service of the professional will be rendered with due care and any breach of contract can be
rewarded with damages.
a. Sometimes you must sue in contract because statute determines the time that you must
issue a lawsuit within a period of time, tort law 2 years and contract law 6 years. So this is
used usually as a backup to the tort claims, because they would have missed the tort
deadline in time for the tort in court.
b. What jurisdiction laws should you follow if you are dealing with multiple provinces?
Conflicts of law - in tort law it is usually the site of the tort, where it occurred; in contract
law it looks at the proper law of contract. However, the safest way is to put it into the
contract which law will govern the contract.
4. Fiduciary (role of a trustee) liability – someone in a position of trust. They have ascribed to them
certain duties:
a. to perform duties with care and skill and
b. bona fides (good faith). Can’t act for two parties at once.
5. Tort Liability – two types intentional and negligence
Tort law has been the engine of liability. The usual basis of tort liability for professionals is negligence,
not intentional. There is more negligence than ever before because:
a. The practicing of the professions is becoming more complex so there is a greater
chance of making an error,
b. There is a tendency now because of economic pressure for professionals to take on more
clients and files (greater competition for the same income), so there is a greater chance of
error, and then there’s a greater chance that the client will sue,
c. Because of instantaneous communication through technology, there is an expectation for
immediate results so professionals act more hurriedly and more errors occur.
d. With the advent of contingency fees, it is much easier to retain a lawyer to sue professionals.
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e. The culture has changed, professionals were revered and now they are seen as normal
people who make errors. (HE SAID THESE)
f.
Clients are more sophisticated, not willing to accept the word of the professionals, and
tend to be more litigious; they are more demanding and aggressive towards professionals,
g. Professionals now are insured and there’s a tendency for court remedies to become
inflated therefore encouraging more litigation. The legal reason for the expansion of
professional liability relates to the application of more liberal tort principles to
professionals. The result is that more professional will find themselves at fault and held
liable for their errors in court.
h. Normal rules of negligence law are now being applied to professionals (previously
they had exceptions).
i. Rule of Donoghue v. Stevenson: the duty of care is established in Donahue v.
Stevenson would apply for accountants – application of the Neighbour Principle. It
took until 1979 with Ross v. Contors before it was applied in Canada for lawyers. A
solicitor wrongly filed a will and missed out on some benefactors and the dead
person couldn’t
ii. A series of rules stemming from the English case Hedley, Byrne v. Heller - pure
economic loss was deemed sufficient to ground a claim in negligence against a
professional. The only harm recognized previously was if it was physical.
Negligence misstatements causing economic loss were sufficient. Allows economic
loss only. Shows that neglected representation can create only economic loss.
iii. Specialization: Hodgens against the hydro Nepean. Sometimes a professional takes a
task which is beyond the usual skills of his professional practice. The standard of
care is becoming more refined for specialized tasks. You must live up to the
standard of care of the specialist.
6. Liability in respect to the standards of their profession as administered by the professional
body or society. The start of answering the types of liabilities.
STANDARD OF CARE:
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The basic rule with respect to the standard of care: “a professional must exercise the same degree of skill and
possess the same level of knowledge as is generally expected as a members of that profession, i.e. he/she must
live up to the reasonable standards of that profession.” People used to be able to say that they screwed up in
their job trying to do something above their specialties, and falling back on saying that others would do the
same with the same skills. How do you determine what a reasonable standard as a profession is? Based on
Hodgins v. Hydro-electric Commission in the township of Napean - there it was stated by chief justice
Glassin that sometimes a professional undertakes a task that is beyond the usually skills of his profession.
He cannot then fall back upon the normal professional standard. The degree of skill and knowledge must
be commensurate with the task undertaken. Courts retain ownership over the Standard of Care.
V) THE LAW OF CONTRACT
•
Contracts are ubiquitous, i.e. everywhere. Everything we do has to do with contracts.
•
Contracts create liability and are the crucible of capitalism by reflecting laissez-faire
philosophy. Contract is an agreement enforceable at law. Individualism prevailed.
•
Desire for certainty sometimes certainty is more important than justice. When we’re dealing with
money, we want certainty beyond anything else.
•
Contracts are entered into voluntarily (but limited, practical definition of “voluntary” ie. Cannot
voluntary do something under duress)
•
Black’s law dictionary says that a contract is: “a promissory agreement between two or more persons
that creates, modifies, or destroys a legal relation.”
•
A better definition is from the CMA lesson notes: “a contract is an agreement that requires the
mutual ascent of at least two parties to do something or conversely, to refrain from doing something.
The parties then by their mutual ascent or agreement create certain rights and duties that did not
exist in their particular relationship before that point in time. If these rights and duties can be
enforced by the courts of law, the parties have as between themselves created certain rules of conduct
which they are obliged to observe in their actions. They have in effect voluntarily created legal
obligations or laws governing their relationship for their own purposes. The legal rules the parties
must follow to establish their own rights and duties are called the laws of contract.”
o
It indicates that:
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1. contracts are about agreements the courts will enforce,
2. that it is about at least two parties or more, there can’t be an agreement with
yourself,
3. Contracts must be mutually agreed upon, and the court will enforce that contract.
there is an implication that there is an exchange, but the exchange can almost be
negative exchange with respect to behaviour, and
4. Idea that through contracts, as between the parties, you can make your own law.
There is a freedom to contract, you have that freedom so long as you are not
violating any law or public policy
•
An exchange is considered a contract. In order to create a contract you need to establish six
elements, other agreements exist that aren’t contracts if the elements do not all exist.
•
These elements ultimately, if the contract is broken, have to be established to the balance of
probability.
•
Contracts define the dynamics of the relationship between the parties. They elevate the relationship
to law. This is an aspect of freedom.
SIX ELEMENTS OF A CONTRACT:
1.
2.
3.
4.
5.
6.
Offer
Acceptance
Consideration
Capacity
Intention to Create Legal Relations
Legality of the Contract
All the elements need to be present to prove a court case
1. THE OFFER
•
“An offer is a tentative promise made by one party, the offeror, subject to a condition or containing a
request to the other part, the offeree. When the offeree accepts to offer by agreeing to the condition or
request, the offer is transformed into a contract. The promise is no longer tentative: the offeror is
bound to carry out his promise while the offeree is bound to carry out the condition or request.”
o
The person who makes the offer is the offeror, the recipient is the offeree
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o
Once the offer is accepted, it becomes a contract
•
The contract metamorphoses from the offer; when the offer is accepted you have a contract.
•
The offer is the most significant element of a contract.
•
The offer is the contract in draft. If there is an acceptance you are bound, so must think about it
carefully. There is not much that can be done to get out of the contract once the offer has been
accepted.
•
The distinction between an offer and the invitation to do business (i.e. the invitation to elicit an
offer) –
1. Through advertisements; stores are making invitations to elicit an offer from you at that
price which they then will accept.
2. (EXAM Question) (51:00) The case of Pharmaceutical Society of Great Britain v. Boots Cash
Chemist stands in the propositions regarding displays in stores and advertisements in the
newspaper. They came to the conclusion for policy reasons rather than logic. There would
be too many cases otherwise and would clog the courts. They decided that the mere fact
that a customer picks up a product from the shelves in this case doesn’t amount to an
acceptance of an offer to sell. It is an offer by the customer to buy, and there is no sale
until the buyer’s offer to buy is accepted by the acceptance of the price. This was
created for certainty and efficiency. The decision is that: Advertisements are invitations to
elicit an offer (ie. Any item in the store with a price tag on it). The consumer is making the
offer by picking up an item with the price tag on it. It is illogical but the conclusion was
decided on in order to ensure certainty.
•
When an offer lapses, it is not accepted. It may lapse for a number of reasons:
1. The offeree fails to accept the offer within the time specified in the offer,
2. When the offeree fails to accept the offer in a reasonable time if the offeror has not specified
any time limit (NOTE: always time-limit your offer – don’t leave it up to the judge!),
3. An offer lapses when any of the parties dies or becomes insane prior to acceptance.
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•
Revocation Principles: an offeror may revoke (withdraw) an offer at any time before acceptance
even when it has been promised to hold the offer open for a specified time. There are two ways to
keep an offer open and enforceable:
1. When the offer is made under seal,
2. If an option contract is created – a contract whereby someone promises to keep the option
open for agreement.
•
Fundamental Breach: occurs when a fundamental portion of a contract is breached. The
exception of liability clause no longer applies.
o
•
If offeree rejects the offer, it is terminated. Can now only revise it.
A volley of offer or counter offer – usually when contractual agreements take place there is
bargaining that takes place; there is a volley of offers going back and forth.
o
An offer by one side must be unqualifiedly accepted by the other side of all the terms
without variation.
o
If you vary one term then you do not have an acceptance even if they say it is
accepted.
o
All terms should be understood when an offer is put forward and the offeree though
interested varies some features, this is not an acceptance but a counter offer.
o
Further the original offer does not revive if the counter offer in turn is also rejected, the
offeree can accept the former offer only if the offeror agrees to renew it.
OTHER RULES REGARDING THE OFFER
1) An offer can be communicated in writing, orally or by gestures (auction, hailing a cab) but they must be
unequivocal.
2) An offer cannot be accepted by the offeree until he/she has first learned of it (can’t be forced into a
contract by people who do work for us without our knowledge) In order for an offer to exist, the offer must
be okayed by the offeree. An offeree cannot accept an offer that has not been communicated to the offeree.
There also needs to be cognition of the communication by the offeree
3) Standard form contracts –
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•
A contract used repeatedly usually for a repeated provision of a service or product stating
limitations of liability clauses and insurance clauses.
•
Root: contracts in ticket form, outline the terms of the contract.
•
The general public is presented through the terms of the contract and they can take it or leave it
and there is no negotiation
•
Courts didn’t like them because of the absence of bargaining, but also because of the providers of
the service went too far to protect themselves.
•
The courts created exceptions called standard form contracts to help the consumers.
•
The principles the courts devised, important especially in relation to the exception of liability
clauses, says that “if the person does not know of the terms of the contract he/she cannot be bounded
by it unless reasonable steps were taken to bring the contractual terms to his/her attention.” The
courts wanted the public to be aware of the terms of the contracts.
Contra preferentum – the courts read the contract against the interest of the party that created it, if two
interpretations are possible. Applies when contracts are ambiguously written. See fundamental breach re:
standard form contracts. The Judge will work against the party that formed the contract.
Ways to Terminate an Offer: (talked about in Offer section)
1. Rejection: Offeree rejects and terminates the offer. Reject the offer with care, as it may be the only
offer you’ll get as it is generally offensive to the offeror.
2. Counter-offer: A response to an offer where you vary one or more terms. Amounts to the rejection
and termination of the original offer. Better to illicit information, and have the offerer amend their
offer in your favour.
3. Lapse: an offer lapses (is no longer open for acceptance) if:
a. The offeree fails to accept within the time specified in the offer.
b. The offeree fails to accept within a reasonable time if no time is specified.
c. One of the parties dies or becomes mentally incompetent prior to acceptance.
4. Revocation: A withdrawl of the offer by the offeror which prevents its acceptance. It must be
communicated to the offeree in order for the revocation to be effective. The communication must
be by the offeror or by some reliable source. Revocation by mail, to be effective, need only arrive at
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the address of the offeree, unless the offeree, knows or ought to know the revocation will not reach
the offeree at that address.
2. ACCEPTANCE (NOV. 20 – 3:25)
•
Acceptance must be made in a positive unequivocal form whether by words or conducts; if by
conducts, the conducts must be unequivocally to the offer made.
•
Offeror in general has full control over the mode and method of acceptance and therefore can state
the required methods of communications of acceptance and invalidate or prohibit others
specifically the offeror can require actual receipt by mail or any mode requirement or alternatively
can require a performance of an act instead of an acceptance. The offeree must communicate
acceptance to the offeror. Communication means perception and cognition.
Communication rules:
1) Offeror in general has full control over the mode and method of acceptance and therefore can state
the required methods of communications of acceptance and invalidate or prohibit others
specifically the offeror can require actual receipt by mail or any mode requirement or alternatively
can require a performance of an act instead of an acceptance.
a. Carlyle vs. Karbolic: the smoke ball case: If you do the act, you have essentially accepted the
contract. The offeror states what constitutes acceptance. Performance, in this case, was
sufficient. “unilateral contract”
b. This puts the power in the offeror, in terms of mode and method of acceptance. This is
useful because then you control the organization of your firm and run you affairs the way
you would like.
2) (7:50) An offeror will not be bound unless and until he or she receives the acceptance and
before he or she revokes
a. Two exceptions: know for final with revocation
i. The mail exception – when an offeror chooses the mail as the means of acceptance
then the mail exception applies. The acceptance is effective when and where the
mail is deposited in the mail box; when a properly addressed and stamped letter is
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place in the mail, i.e. the time of mail, applies when the mail is a reasonable response
otherwise it is the time of receipt of the letter, that should be actual receipt. If in the
context the mail would be reasonable then it will be the method of acceptance; also
if the offeror states a preference for mail service it again will be the method of
choice. You don’t need actual knowledge / cognition in this circumstance.
•
if another method is chosen other than the post, such as
ii. Telegram acceptance. For instantaneous methods it is the actual rule of
communication and cognition. You want to make sure that people confirm the
acceptance. For example with email, it is not good enough that someone opens an
email, you must prove that they have in fact read it as well. Often has issues of proof
to confirm the person has in fact read it.
3) Reasonable person’s test.
The certainty of an contract – some believe that it is a separate element. (15:30)
•
A contract and therefore its preceding offer must be certain in its wording, it cannot be vague or it
will be void. Sometimes there is an agreement to agree, it is uncertain and makes the contract
uncertain. You can have a formula or an arbitrator to make the decision but not an agreement to
agree. A quality of the offer. For example, in buying something, the price cannot be listed as “TBD”
•
Courts are generally inclined to accept interpretations to contracts because they want to fulfill their
objective intent.
Rules of Acceptance (not lectured)
1. The offerer, in general, has full control of the method of acceptance. Therefore, can state the
method of acceptance and invalidate or prohibit others. Can state methods of acceptance and
prohibit others (ex. Req’d actual receipt by mail)
2. If offeree selects mail, mail exception applies. Acceptance is only effective when and where it is
deposited (in Manitoba)
3. If offeror merely states a preference for a mail or a postal service is a reasonable means of
communicating acceptance, because it was used or suggested by the offeror and acceptance is
effective when and where it was deposited in the mailbox.
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4. If some other method other than post is stated as preferred (ex. Phone, email, in person), offeree
may still accept by post but offeror is not bound unless and until acceptance reaches offeror, and
prior to offer’s lapse there must be actual knowledge of it, and not just mailed.
a. Law of contract, in general, is in place where offeror learns of acceptance, subject to other
principles.
What law governs a particular contract?
•
“Lex Causae” – governing law: determined by principles of conflict of law
•
Select governing law into the contract. Always select the law you know.
o
Revocation by Mail: it need only arrive at destination (not necessarily known by receiver)
§
Revocation can occur at any time other communication is received by offeree, even
if it is hearsay (Didansen v. Hobbs)
o
Courier Service: follow same rules as mail service
o
Instantaneous forms of communication: (email, phone, fax) actual receipt is necessary.
§
Azindia case, it proved that that a response is needed to confirm the receiving of the
fax.
3. CONSIDERATION (17:00)
•
Consideration is the essence of the contract because contracts are ultimately an exchange or
bargain.
•
Each and every party to a contract, for it to be valid, must give up consideration.
•
“Consideration is the price for which the act or other party is bought. So long as the promisor
bargains for the other party to do something – or to promise to do something – that they otherwise
would not do, the promisor will have received consideration.”
Three categories of property or action that can form consideration:
1. Property
a. Personal Property: 2 types
i. chattels – anything tangible and
ii. choses in action – intangible – contractual right and promise (ex. cheque), a right to
sue
1. If you want to transfer a choses in action it is called an assignment.
b. Real property (i.e. land)
2. Services – ex. Labour, restraint on behaviour (ex. Non-compete clause)
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3. Money (a sort of property, but seems to stand alone now)
•
Most large transactions usually are not immediate, it’s in the future and usually what is being
exchanged is the promise for the future delivery of things
GRATUITOUS PROMISE
•
A promise without a returning consideration is gratuitous and not enforceable by laws of contract.
There needs to be an exchange made of somesort.
•
Contracts without consideration, i.e. with an element missing, are void.
Various manifestations of the gratuitous promise; rules: (EXAM QUESTION)
1) Past consideration
a. Is no consideration, a reward for an act previously gratuitously done is not binding.
There has to be an exchange because a contract is based on an exchange. Reciprocity
does not make anything binding.
2) Existing legal duties and consideration
a. When party A is bound by the existing contractual duty to party B, a later promise by B
to pay A something extra to perform the same obligation, is not binding.
b. The usual common law contract that established this principle: sailors would be hired to
make a transport trip and then decide later that they want to increase their pay, the
captain agrees, but later he only pays them the original amount. If the sailor promises
to do another duty then the sailor would have to be paid higher. If the sailor just
wanted to get paid and not work then they would have to use a nominal form of
consideration: small amount of money, ex. $1, a peppercorn, the seal (stamp).
Captains promise becomes gratuitous as the sailors were doing no additional work and
had already agreed to do the work under the contract they originally had. Say the sailor
performs additional work or agrees to work an extra ten minutes a day, then the
contract would be binding.
c. Seal: element of consideration has been covered
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i. Nominal (token) forms of consideration are sufficient for common law. Giving a
dollar or a seal to confirm
ii. For equity law, substantial considerations. Dollar, peppercorn seal is
insufficient. If seeking an equitable remedy you need a transfer of a substantial
consideration.
iii. The individual who gives the seal is understood to have given consideration, and
any gratuitous promises signed by the offeree are binding. If the sailors had the
captain sign a document with the increase in pay with the seal after their name,
it would have converted the gratuitous promise into enforceable agreements.
d. You convert a gratuitous contract into an enforceable agreement through one of these
methods. Courts do not investigate the consideration, but just the fact that it exists.
Equity investigates if the consideration is substantial. They don’t investigate the quality
of your bargain but require something more than a seal to substantiate a binding
promise.
3) The rule in Foakes and Beer –
a. The ratio of that case is that a creditor’s gratuitous reduction of debt for a payment
is not enforceable. The reason is no consideration was exchanged. In Foakes & Beer,
Foakes owes Beer $2,000 due to decision on a previous court case (essentially a
contract), and parties agree that if Foakes pays Beer $500 at once and gives the
remainder of the principal in instalments, Beer would forgive the interest on the debt.
After the $2000 has been fully repaid, Beer brings suit again Dr. F, alleging that the
agreement to forgive interest was entered without consideration, since the
consideration consisted only in Foakes doing what he was already bound to do in paying
the principal of the debt. - - Debt repayment is not a valid consideration. It is something
Beer was already obligated to do under law. The partial payment of a debt is not
consideration, therefore. Example, you are loaned $1,000 but the person needs the
money really badly so they say make one payment and I’ll forgive the final two
payments. Then the lender can sue the person for the money. The person who was
lent the money must use some form of nominal consideration to cover their butt;
seal the contract, make the payment 1 day early. It’s not the seal itself that has
consideration but that the other party has given up consideration.
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i. If the creditor takes a gratuitous reduction of payment then he is not able to
collect the remaining balance after.
ii. The rule in Foakes and Beer has been somewhat replaced: If the creditor takes a
gratuitous reduction of payment (accepts a lesser sum) then he is not able to
collect the remaining balance after.
iii. Rule of Foakes and Beer has been replaced by statute
[The remaining three elements are presumed to exist]
4. INTENTION TO CREATE LEGAL RELATIONS (34:00)
•
In order to have a contract there has to be the intention on the part of both parties to be legally
enforceable agreement. The law presumes that it exists. The plaintiff does not have to prove this
step; it is up to the defendant to rebut their existence.
•
The presumption is most easily refuted in family situations, rather than third party situations.
o
Example, your mother invites you over for dinner and promises to make the meal, but you
can’t come for dinner because you have other plans. Your mother sues you; there is an offer
made by the mother, there is acceptance, the consideration on the mothers part is a promise
to make the meal, and the son promises to show up for dinner. It is up to the son to rebut
the presumption that there was intention to create legal consequences.
o
Instead, the son needs to borrow money from his mother, 20 years later the mother wants
to retire and needs the money. The mother takes him to court, but the son could say that it
was more of a gift because it was around the birthday time. If you are the borrower you
want to keep the situation very informal.
•
With this element and when money is involved, it is better to be stricter when dealing with family
than strangers, as the presumption is more easily rebuttable that the intent was to form a legally
binding contract in family matters. When dealing with closer relatives you want to make it formal
and make sure you make a contract.
•
We see this issue come up in family businesses or where family is employed or when money is leant
between family members
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5. CAPACITY (39:45)
•
Capacity is the ability of the parties to bind him or herself in contract.
•
Each party to the contract must have capacity; mental competency; able of assessing the
consequences of making a contractual promise that will create enforceable rights and obligations.
o
You need to know the nature and consequence of your act.
•
It is possible to have no capacity; if there isn’t capacity, the contract is void.
•
There are various types of limited capacity; the contract isn’t void but voidable.
•
There are various types of incapacity:
1. No capacity; no ability to assess contract, being in a vegetative state.
2. States of diminished (limited) capacity;
§
Minors – the age of majority, common law: 21, in Manitoba: 18
•
A contract is unenforceable against the minor but is enforceable against the
other side. It is voidable by the minor. Also, a minor can sue you but you
can’t sue them.
•
Acceptance: minors must pay a reasonable price for necessaries purchases,
but they need not pay the contract price, based on Quantum Meruit bases
(reasonable price) as assessed by the court. Minors also can go into
beneficial contracts of service, basically apprenticeship. To get work, 16
and over can get into labour contracts; 15 can do so with guardian and
principal consent.
§
Lunatics and drunkards. Contracts can be avoided if, after they retain sanity or
sobriety, they promptly repudiate the contract. If they wait, the contract will not be
void.
6. LEGALITY OF THE CONTRACT (44:30)
•
The object of the contract must be legal. In essence the contract and or any of the activities
contemplated there under or any of its terms cannot offend public policy (court’s view of what
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is appropriate for society and will not enforce any contracts inappropriate for society) or violate
any law (statutory, subordinate legislation or common law principle). There is a presumption that
is does not violate any law nor offend public policy.
•
If the presumption is wrong the contract is void meaning that it was never formed at all.
o
If VOID, court assists parties to prior conditions (ex. Guy gets his car back and other guy
gets his money back)
o
If VOID & ILLEGAL, court will refuse any assistant to any party who has knowingly agreed to
an illegal purpose. You can’t sue on it and retain your property.
•
They can be illegal by common law or public policy – philosophy by the court, for example
prostitution.
Restraint of Trade
•
Free open market, is the optimal situation in our economy. So they do not like to enforce it, because
it diminishes competition. (The Non-Competition Clause). These clauses have to be limited.
•
The court will only enforce only if it is well defined, geographically, and time defined.
•
Employment contract.
IMPUGNING A CONTRACT (50:00) (NOV.21)
•
To impugn a contract (assault, impeach, attack) means you are attacking its integrity.
•
As between the plaintiff and the defendant, the defendant is the one who wants to impugn the
contract, because they are the ones needing to avoid it.
o
They want to attack the contract because the plaintiff is suing the defendant, but if the
defendant can come to the conclusion that the contract was not valid then they wouldn’t be
sued.
•
There are various grounds to impugn the contract. If the contract is valid then the plaintiff will be
successful, however the defendant will be successful if they can prove that the contract is void,
voidable or unenforceable.
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•
When the defendant is attacking (impugning) a contract there are 4 results:
Valid
Void
Missing element and/or
Voidable
Unenforceable
Misrepresentation
Statutes of frauds
Non est factum
Duress
Sale of goods act
Mistake of subject
Undue influence
Illegality
uncertainty
matter
Mistake of identity
Diminished capacity
VOID CONTRACTS:
•
The idea to void a contract is a common law concept.
•
The grounds for rendering a contract void are very narrow.
•
Text says: “To decide that a contract is void is to say it was never in law formed at all, in this sense
calling an agreement is a contradiction of terms. If it is void there is no contract”.
o
Once said to be a void contract, there will be no transfer of title or property, and party A, the
vendor would receive the title back.
•
The consequence: the key point or effect is that a party to a void contract can apply to the
court for the return of any property transferred under the agreement. Title or ownership of
the property at common law would not pass and cannot pass under a void contract and the
holder of the title would be in a position to recover the goods even if they had been
transferred to a subsequent third party for value who was innocent.
o
Your typical void contract is: as between party A (Vendor) and B (Purchaser), no title is
passed and A can always re-obtain the good from party B (the rogue: thief). The issue then
becomes, what happens if B has transferred or sold the car to an innocent third party for
value? A can obtain it from C or if there is a D, E, F, or G, A can always get it back. C can sue
B, but they would rather have the good. So A and C are competing over the only thing that
has value.
o
Three Parties: Vendor A, Rogue B, ISTP4V C.
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•
ISTP4V (Innocent Subsequent Third Party for Value)
•
Missing an element
•
Uncertainty (relating to the offer and the absence of capability being accepted)
•
Non est factum – not my mark
•
Mistake to subject matter or identity
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VOIDABLE CONTRACTS:
•
In response to the unfairness of void contracts, equity law came in and created voidable contracts
which would be supplementary to the common law, because they would not deem the contract
void.
•
Equity recognized new considerations of fairness. Under voidable contracts, C will generally
triumph.
o
Party C, the ISTP4V, would not be wanted to be made taken advantage of and would end up
with the property in the end; the losses would stay as they after the contract would be
deemed voidable. The party B can still pass title to other third parties for value, when the
contract is voidable, but A can stop this by rescinding the contract. (it is not a void contract
until it is rescinded)
o
Remains in force until it is declared otherwise, title may pass under it from one to one
contracting party to the other. The recipient of the title may then transfer this title to an
innocent third party for value, and that is can obtain good title to the goods. Even though
the requiring title holder by means the initial contraction voidable.
•
The voidable contract in contrast to the void contract is important where a misapprehension
or misrepresentation would render it unfair if the contract terms were enforced against him
or her.
•
So to get a voidable contract rescinded (or made void) one needs to:
o
It is ultimately a remedy, and it is declared by the court to be rescinded. It takes some time
to get it done because it goes through the whole litigation process.
o
It can be done informally by communicating that the contract is rescinded and sending them
a notice of it. It is void then and there.
•
For example, where a party enters into a contract under a threat.
o
Under common law that would still be a contract.
o
But equity is to make up the deficiencies of common law and developed other
circumstances to void the contract.
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o
Examples: threat of violence or the misrepresentation of a material fact related to the
contract. Under a voidable contract the contract exists and if goods are involved the
title may pass to the buyer until such time as the parties subject to the pressure or
deception takes steps to have the court return the goods or resolve the matter.
o
•
The point is that the seller has a shot at getting the good back.
This distinction between void and voidable contract is specifically important when an innocent
subsequent third party for value is involved.
o
Void agreements: no title passes and consequently an ISTP4V cannot obtain a good title
from a person that obtained the goods under a void agreement.
o
Voidable contracts: will remain enforced until it is declared otherwise (rescission). Title
may pass under it from one contracting party to the other. The recipient of the title, may
then transfer the title to an innocent third party and the innocent third party may obtain a
good title to the goods even though the intermediate title holder acquired the title by means
that render the initial transaction voidable. Equity took a broader view to fairness; party
A is viewed as the party that could have stopped this contractual problem of
occurring so they prefer party C. They also use more liberal grounds to impugn a
contract which helps party A.
In summary, we can say that
•
Where a contract concerns the two original parties it may not matter whether the contract is
void or voidable, in either event the court may reward the property back to the original party,
•
If the property has been transferred to an ISTP4V the individual may recover it only when
the contract is void. Party A can prevent property from passing if the voidable contract is
rescinded prior to the ISTP4V obtaining an interest in it. How do you rescind (set aside) a contract?
Get a court order, the problem with that is it takes a long time to obtain. You are better off notifying
the second party that you are rescinding the contract. The text book talks about title which means
ownership.
GROUNDS TO IMPUGN A CONTRACT: (16:30)
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VOID
1) Missing one of the 6 common law elements or uncertainty – relates to an offer being vague
2) Non est factum – is a narrow ground, which has to do with old medieval grounds and translated means
“not my doing”.
a. Originally individuals could be fooled to enter into written contracts when they were not
literate or they would be misled to what is the nature of the written document. There were
attempts to broaden this to be a misrepresentation, those efforts failed and the House of
Lords return them to their original basis for illiterate individuals
3) Mistakes – usually an error in judgement, perception, calculation, or recall. but it is very difficult to
make sense of how the law deals with mistakes. Very few mistakes are recognized by the courts to
render a contract void.
a. Two types of mistakes render a contract void;
i. Mistake of identity thinking that you are selling to someone else (identity fraud) –
for example the woman sold her car to someone she thought was a movie star.
ii. Mistake as to subject matter is more difficult – you believe that you are selling
something different then what the other person thinks they are getting. Not really a
mistake, more like the offer is uncertain.
b. Others are held voidable: mistakes to terms of the contract or even subject matters where
one party knows but the other is unaware of its existence or meaning. One party is aware of
the error of the other party. It’s akin to misrepresentation.
4) Errors in recording contracts or transcription; Often an agreement is made in verbal negotiations
and then an error is transcribed onto paper. In such a case the party can apply to the court for an order
of rectification and will be granted if 3 elements are met:
a. The courts are satisfied that there was a complete agreement between the parties, free from
ambiguity and not conditional on further adjustments,
b. The parties did not engage in further negotiations to amend the contract,
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c. The change in the written document appears to be an error in recording and is most easily
explicable as such.
VOIDABLE (22:15)
1) Misrepresentation can occur both inside and outside contractual situations (meaning prior to the
contract), for example in tort law.
•
Within the context of contracts there are two possible type of misrepresentation:
1. Those manifested inside the contract (You buy a car and say that it can only have travelled
100,000 miles but find out later that it has 200,000 miles) and
2. Those that are outside the contract but that induce the party to enter into the contract.
§
The more difficult case is where a misrepresentation occurred during negotiations
meaning the misstatement could reasonably be expected to influence the
decision of the innocent party in favour of entering into the contract. The
remedies available depend on the types of misrepresentation: 1) innocent
misrepresentation – only can rescind the contract, 2) negligent and 3) fraudulent
misrepresentation
•
Fraudulent for both these two you can be rewarded damages. There is a trend in the decision
where courts are finding that these misrepresentations are actually terms of the contract.
a) Opinion vs. fact: misrepresentation based on only false assertion with facts is voidable;
misstatements of opinions are not voidable. Because you have to understand the nature
of the misrepresentation, a misrepresentation is a false assertion relating to statements of
face whereas mere statements of opinion are not misrepresentation and afford no remedy.
§
I.e. claiming to have the best burger in Winnipeg (which is opinion) – just be careful
not to say it’s worth something or that it has a certain value, as then you are
encroaching on fact territory
•
RECAP: Misrepresentation is either
a) Contained in the contract – breach of the contract and is an easy law suit, because they
haven’t lived up to the term of the contract and there is a tendency of the court to find created
ways to make misrepresentations part of the contract.
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b) Not a term of the contract but rather a representation that has induced an individual to
enter into the contract. It is determined by the objective test, the reasonable person standard.
If the answer is yes, then the contract is voidable. It depends on the misrepresentation,
a. If it is an innocent misrepresentation – the party believed that the information was true,
then it can be rescinded, or
b. If it is a negligent misrepresentation – the rescission will be rewarded along with
damages, or
c. Fraudulent misrepresentation – a party deliberately attempts to deceive the other party,
damages for deceit and rescission will be granted.
The idea of CAVEAT EMPTOR (34:40) (buyer take care) - a buyer of goods must take them with their
defects unless some fact about their quality has been misrepresented. The purchaser needs to do the
research and investigate to find out more about the product. It’s not opposed to misrepresentation.
Misrepresentation is about a fact, unless from an expert opinion. Unless it is mentioned in the contract,
there can be no remedy awarded for apparent misrepresentation. VICKI
Contracts of utmost good faith (uberimma fides): there is duty for one to give full details about a
purchase which is reverse of caveat emptor. Places greater owness on one party and makes failure
to give information tantamount to a misrepresentation. Required in:
1. Contract of insurance: the purchaser needs to give all the information about the health
and other pertaining info to the insurer.
2. Securities contract: all relevant information is needed to be given.
Doctrine of Merger: States that warrants cease to exist after closing so we must create a clause to correct
this.
Material representation – Three types of misrepresentation
1. Innocent
2. Negligent
3. Fraudulent
2) Undue influence: (37:30)
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•
“The domination of one party over the mind of the other party to such a degree as to deprive the latter
of the will to make an independent decision. The contract formed as a result of undue influence is
voidable at the option of the victim. The victim may only avoid the contract if he or she acts promptly.
If he or she acquiescence or delays hoping to gain some advantage, the court will deny assistance.”
•
There are three elements in undue influence:
1. Prove that there is a special relationship between the victim and the dominator based
on special knowledge and skill causing the victim to place confidence or trust and care in
the dominator. For example, a stock broker, family members, lawyer-clients, banker-client,
accountant-client, homecare workers, health care workers.
2. The party alleging undue influence must satisfy the court that the circumstances were
such that the domination was probable. If element 1 was proven this is usually simple to
establish.
3. Reversal of the burden of proof. If both 1 and 2 exists, the burden then shifts to the
dominant party. If the contract is to be salvaged the dominant party must then prove that
undue influence was not exerted by him or her.
o
To determine this the court looks at few factors:
i.
The degree of domination plausible in light of psychological circumstances and
personality of the parties
ii.
The extent of the benefit
iii.
Check if there was independent legal advice (ex. This is why your stock broker tells
you that you should get independent legal advice, to make sure the contract is bullet
proof)
iv.
Personality type of the individuals
v.
History of the individuals
3) Duress: illegitimate pressure. Various types will render the contract voidable, for example, threatening
physical force or actual exertion of physical force or economic duress – which is very narrowly
defined.
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Rectification
1. The court must be satisfied agreement between the parties, free from ambiguity
2. The parties did not engage in further negotiation to amend the contract
3. The change in written document appears to be error in recording and easily explicable in such.
ENFORCEMENT OF CONTRACTUAL RIGHTS AND PROBLEMS OF ENFORCEMENT
(Requirement of Writing, Ambiguous Meaning, Privity of Contract)
Unenforceable contracts include other arguments that defendants can use to impugn a contract.
1. Requirement of writing: some contracts in certain jurisdictions must be in writing to be enforceable.
In common law, no contracts have to be in writing. Statutory contracts need to be in writing. There are
two kinds of statutes that will require written contracts:
§
The Statute of Frauds: was passed in 1677 by the English parliament and it was designed
essentially to ensure that frauds were not perpetrated in the courts through the lack of sufficient
written evidence of the concluded contract. In other words people were lying in court. The English
parliament developed this requirement so that there would be less lying and there would be less
fraud, therefore greater certainty. It’s everywhere else in Canada except in Manitoba and BC.
However you should know this still in case you move or are dealing with other jurisdictions.
Written evidence would make more certain that the liars would not win the cases.
§
The statute of Frauds was repealed in Manitoba in 1986
(EXAM QUESTION) THE STATUTE OF FRAUD INDICATES THAT CERTAIN TYPES OF CONTRACT
ARE UNENFORCEABLE BECAUSE THEY ARE NOT IN WRITING. WHAT ARE THE TYPES OF
CONTRACTS THAT ARE AFFECTED:
a) Promise by an executor or administrator to answer for damages out of his or her
own estate,
b) Guarantee of the debt of another, doesn’t include an indemnification,
c) Agreement made in consideration of marriage, prenuptial agreement (depends
on where you are actually getting married)
d) Agreement concerning an interest in land,
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e) Agreement not to be performed for 1 year,
f) Ratification of an infants contract, a minority contract.
WHAT DOES WRITING MEAN? (EXAM QUESTION)
If a contract falls within the scope of the statue of fraud there must be a memorandum in
existence containing the critical terms, or essential terms of the contract
§
The identity of the parties, the subject of the consideration, possession date include, must be
signed by the parties, but doesn’t have to be in one document, can be included in several
documents.
§
Only the party to be sued needs to sign it but sometimes that’s hard to predict in advance, so it
should be signed by both parties.
§
o
You can satisfy the requirement of writing even with paper towel and a felt marker.
The effect of the statute within its scope is that the contract is rendered unenforceable. That means
that both parties are unable to obtain a remedy under it;
§
However it is not void and may still affect legal relationships between the parties. That
means for example, that if something was transferred, the transfer is effective and the court will
not help put the transfer back into its original position.
o
The courts have developed methods for limiting the statute of fraud:
§
Doctrine of part performance – enforces contracts concerning land if the plaintiff can show
that they initiated performance of the contract with reliance on it, and then the courts would
accept evidence of part performance in lieu of evidence in memorandum.
•
Contract must regard land
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Act of performance must suggest the existence of a contract respecting land
(in a clear, unambiguous way. A deposit is too vague – a sales receipt will be
sufficient) Take possession of the land.
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Plaintiff must be the party performing the act (suffering the loss, hardship).
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§
The Sales of Goods Act: only concerns and only applicable to the sales of chattels in Manitoba over
$50. With regards to illegality, the contract can affect property relationships, but the courts will not
get involved. A receipt is sufficient to prove that there has been a contract. Doctrine of substantial
performance: it is equity’s attempt to limit the unfair potential of the statute of frauds – passed
because parliament was worried that liars were victorious in courts. However the statute of fraud
can be an instrument of fraud when all parties to the contract don’t know if its existence and can be
an instrument of unfairness, though it was designed to protect bona fides performance. The
doctrine of part performance was made to blank the negative effects of the statute of fraud–
applies to land transaction and indicates that if a party has begun performance of a contract in
reliance on it then the court would accept evidence of performance as evidence in lieu of written
memorandum.
b) Interpretation of contracts (ambiguous meaning) (:
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Suddenly when someone is being sued, he or she will find, even after years of abiding to the contract,
that some of the contract has become unclear.
•
The defendant is trying to find the contract uncertain so that it will be void.
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The courts have developed ways to define contracts because they have a bias to find a way to hold the
contract enforceable.
•
The courts will look at the terms of a contract to determine what a reasonable person would
understand the terms to mean.
•
Very seldom will the courts deem a contract between two parties void when there is a dispute. They
will instead use the following:
•
They’ve also created two other ways to interpreting the contract:
1. The literal meaning approach – restricts interpreting to the dictionary meaning, however there
is often more than one, therefore dictating certainty and
2. The liberal approach – looks to the intent of the parties in drafting their agreement. It stresses
the circumstances surrounding the contract, negotiations leading up to the contract and the
knowledge of the parties and any relevant facts as due by the reasonable person. In other
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words, it stresses context. Generally the courts combine the two approaches. They take the
approach that will render the contract effective. This, however, creates uncertainty. It
minimizes the importance of the words actually used, and judges have more ambiguity in
interpreting terms by speculating about what the parties’ intents where when the terms were
chosen. It allowed judges to determine relationships as they see fit.
Other rules used to interpret disputed terms in contracts:
Parol Evidence Rule (53:50): an important rule of evidence
•
Designed to create certainty in contracts. Prevented later changes from being made
•
About the ability to enter in or submit something to the fact finder to consider. Where there is a
situation of bargaining and negotiation where the parties have put in a final form of agreement, the
parol evidence rule states – a term previously agreed upon by the parties but not included in
the final written form of the contract will not later be permitted to add to or contradict the
contract.
•
In the context, parol means extrinsic to or outside the written agreement.
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The rule applies both to an oral agreement which is being reduced to writing and to a written
agreement which is being reduced to a formal document under seal.
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The rule operates only to exclude the introduction of terms of the contract not found in the
written agreement. It’s like the statute of frauds, but sometimes it can be a weapon of injustice
when people aren’t aware of it.
•
Exceptions to the rule:
1. It doesn’t apply if a party can show the written contract was never to embody all of its
terms,
2. It doesn’t exclude evidence of amending agreements reached subsequent to the written
agreement,
3. It doesn’t exclude collateral agreements (separate, additional agreements)
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4. It doesn’t exclude condition precedence.
Other Terms (rules of interpretation):
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Contra Preferentum the courts read the contract against the interest of the party that created it, if there
are two interpretations are possible. Requires that the contract be constructed against the party
preparing it. The draftsperson has a certain latitude of language that they could later take advantage of,
therefore, it will be construed by the court to the disadvantage of the draftsperson.
•
Judicial Notice: some things in a contract doesn’t have to be proven
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Agreements to agreements are uncertain
o
Contract is void
o
Arbitrator clause can save contract
•
Incompleteness (failures to include date in which a lease begins – agreement will fail)
•
Implied terms in interpreting contracts (certain terms are implied into a contract)
o
Two types:
1. Statutorily implied terms, - Terms implied by statutes. ex. In the Partnership Act, each
partner has equal say in the management of the business. It is implied in the contract and
not required to be explicitly stated
2. Common law implied terms, – in certain situations, judges will imply terms into the
contracts which the parties have not even thought of. Ex. To fire someone you must give
them reasonable notice, or else it is considered “wrongful dismissal” –Term of reasonable
notice
o
“an implied term is a term that parties have not expressly included in their agreement but which
in the opinion of the court they would as reasonable people have included when they made their
contract and they thought of the possibility of the subsequent difficulty arising. They are usually
the result of long established customs or by precedence.”
EXAM: FOR EXAMPLE, THE REASONABLE NOTICE PROVISION, WHICH IS IMPLIED INTO
EMPLOYMENT CONTRACTS AND ESSENTIALLY THE COURTS HAVE IMPLIED THE TERM INTO NONCOLLECTIVE BARGAINING –
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o
If an employer wants to terminate an employee, then they must give the employee reasonable
notice.
o
As well, employees have to give reasonable notice to employers. The issue is when there is no
just cause for immediate dismissal.
o
What constitutes reasonable notice? Various factors: length of service, type of occupation, the
state of the economy (generally and in respect to their occupation), and age of employees.
o
It is usually between 2 and 4 weeks’ notice for every year of service, to a maximum of 2 years,
determined in the UGG v. Wallace case.
o
It also indicates that if an employee’s dismissal is handed in a mali fides manner, the length of
notice can be extended.
o
You also have the option of giving the equivalent of notice; you can give severance. Employers
are putting in their contract shorter notice periods, or when they are terminating, sometimes
they will give you a choice of cash up front for 6 months or you will get paid as if you were
working for 1 year.
•
Doctrine of Fundamental Breach allowed exception of liability clauses in standard form contracts to be
negated if there was a fundamental breach in contract – ie. If one side substantially failed in delivering
their end of the contract. In the Tarcon Contractors VS. BC Transportation & Highways case, this
doctrine was defeated. We don’t have to worry about this.
3) Doctrine of privity (59:00) –
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A contract cannot as a general rule confer rights or oppose obligations arising under it on
any person except parties to a contract.
o
No one except a party in the contract can acquire rights under it
o
No one except a party to a contract can be subjected to the liabilities to it.
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People have a freedom to sign into a contract if they so please. They have an option and choice.
•
How do you become a party of the contract? –
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a. promises must be made to you, as offeree and offeror, and you have to give up consideration
and then you can sue for promises not kept up to you.
b. The promise has to be made to you.
•
Only a party of a contract can sue.
•
There is a certain exception – an insurance contract – where the others are NOT exceptions.
o
a trust (but it isn’t really a contract anyway)
o
novation (this is actually new contract being made).
o
Under an insurance contract, a beneficiary has a right to enforce the benefits of a contract
even though they are not a party to the contract.
DISCHARGE OF A CONTRACT (NOV. 28)
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Discharge of contract means to cancel the obligation, make the contract null and inoperative.
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Discharge through other means than breach.
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When a contract is discharge, the obligation is at an end, the consideration has been
exchanged, and the obligations have been satisfied.
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There are various methods of discharge:
1. Discharge by performance – everyone follows the contract, can also occur over time. Tender
of performance – one party attempts to perform but the other party refuses, this attempt to
perform is the tender whether it is accepted or rejected by the other party. I.e. Give $20k to a
guy for a car, expecting him to not even give you the car as promised. One advantage of tender,
to be alleged of breach of contract. Primary reason for tendering is for evidence, but it is
dangerous to tender on your own, you should have solicitors because the money will be
guaranteed to come back.
2. Discharge by agreement:
a) The waiver – formally discharges both parties, the parties agree between themselves that
the contract doesn’t have to perform, if one person has performed then the waiver is
ineffective, it becomes a gratuitous promise that they fulfill.
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b) Substituted agreement – A new agreement; replace the first agreement where one of the
clauses is that the first agreement is discharged - also novation: substituted agreement with
a new party.
a. Accord and Satisfaction – when a party does not want to perform agreed in the
terms of the contract, they can make an offer of a cash payment in a way to buy out
their contract and responsibility
b. Option to Terminate – the ones offering the contract can buy the parties contract
and essentially get rid of them. It is a term in the contract when initially signed.
c) The contract provides for its own dissolution – sometimes parties perceive of the possibility
of an inability or unwillingness to perform in certain situations and they include a term
allowing for those circumstance.
a. Condition precedent is a future or uncertain event which must either happen or
not happen before the promissor’s contractual liability is established. For example,
condition precedence is that the house is subject to mortgage financing. You
actually have to make the best effort, due diligence. ABCDEFGH
b. Condition subsequence is an uncertain event that happening of which brings the
promissor’s contractual liability to an end, one or both or all of the parties have
reserved an out in certain circumstances. For example, in employment contract
there is an objectionable misconduct clause; in leases, so that the landlord can
terminate the lease.
3. Discharge by frustration – courts excuse persons for failure to perform their contracts in a
wide variety of circumstance where the inability to perform is not their fault. This is called
frustration. There are two basic types of frustration:
a) Where performance has become literally impossible. For example, a concert hall is
rented, for specific date with a part payment. However, days before, the concert hall
burns down. Even with suspicion of arson, however, the contract is frustrated, and
the contract is discharged.
b) Where performance is physically possible but performance would have a far
different meaning for the parties then that which they conceived at the time of their
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agreement. For example, during war when individuals don’t want to be in the
physical location of the war.
o
The results of frustration: the contract is discharged and the parties are
relieved of further performance, any benefits already exchanged fall
where they lie.
o
There’s a bit of rough justice and as a result the English parliament also
passed the Frustrated Contracts Act: which allows for the reallocation
of the benefits already exchanged.
EFFECT OF BREACH AND REMEDIES (17:00)
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A breach occurs when one party fails to live up to provisions of the contract.
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Not every breach can discharge a contract and no breach automatically discharges the contract.
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The effect of a breach is based on the terms of the breach.
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3 Basic Types:
1. Warranties –minor contractual term where you only receive damages. Injured party can only
sue for the difference in value (minor term)
2. Conditions- breach of essential terms of the contract that allows the innocent party to an
election where:
a) The affirm the contract and sue for damages or
b) Elect to discharge the contract and sue for damages. The problem is that sometimes you
don’t know if it is a condition or warranty. The safest course is usually in the contract to
define what a condition is and what a warranty is.
3. Fundamental terms – Super charged condition, when it is breached, allows the grieved party,
as if it is same options as the condition, but they have an effect of negative or negate exception
of liability clauses.
Types of breaches (how a contract is broken):
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A. Express Repudiation of Liability – expressed repudiation of one party to another that they will not
perform as promised, the innocent party has an election. The promise can treat the contract as at an
end and sue for damages. Secondly, party can insist on performance until latest date contemplated in
the contract, thereby allowing damages to build up.
B. Non Performance –One party makes a promise where they make it impossible to fulfill. Ex. Selling a
good to person but selling it to someone else before the possession date
C. Failure of Performance – where there’s a failure to perform at all or you’re tendering actual
performance that is not equivalent to the promise.
a. Types of failures:
i. Failure to perform at all – total failure,
ii. Grossly inadequate performance, does not measure up to the promise.
iii. Failure in a minor particular. The result is depending on the type of failure and the
term. A warranty, no matter how you breach it the other party will only get damages. A
condition, in order for the innocent party to have an election it must be a total failure or
grossly inadequate.
IF YOU BREACH A CONDITION IN A MINOR PARTICULAR, THE DOCTRINE OF SUBSTANTIAL
PERFORMANCE APPLIES (EXAM) – COURTS ARE WILLING TO RECOGNIZE SUBSTANTIAL
PERFORMANCE BY THE PROMISOR THOUGH DEFECTIVE OR INCOMPLETE IN MINOR RESPECTS TO
KEEP THE OTHER PARTY BOUND. A PARTY IN BREACH CAN ONLY HAVE DAMAGES AWARDED
AGAINST IT BUT IT IS OTHERWISE DENIED THE ELECTION TO DISCHARGE THE CONTRACT. IN
ESSENCE, IT INSURES THAT A BREACH OF A CONDITION IN A MINOR RESPECT IS NOT FATAL; IT
MAKES THE CONDITION EQUIVALENT TO A WARRANTY.
Remedies:
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If plaintiff wins – they can obtain a remedy.
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Two categories
o
common law remedies
o
Equity remedies.
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Common law remedies are damages. (24:30)
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In common law it is to place the party in the condition they would have been in if the contract had
been fulfilled.
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In tort law compensation is translated into the objective or measurement of damages to place the
innocent party in the same position they would have been in if the tort had not occurred.
•
Expected Damages: In tort law compensation is translated into the objective or measurement of
damages to place the innocent party in the same position they would have been in if the tort had
not occurred.
o
How to measure the position would be in that situation, so it is needed to determine the
profit aspect to see where they could have been:
§
Cost of performance
§
Economic loss analysis
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Contract law was derived from tort law.
•
Basic remedies:
•
o
Rectification
o
Damages – a money award
Restriction to on damages in common law (26:00):
o
The duty to mitigate: “a person who has sustained a loss as a result of a breach of contract
must do what he, she, or it can to mitigate (limit) the extent of the loss. The damages it can
recover at law will not include what might have reasonably avoided.” It prevents economic
waste.
o
The principle of remoteness – the issue is just like tort, whether the damages were
reasonably foreseeable at the time of the contract. It is best to communicate the use
of the product at the time of the contract. Only liable as the party in breach, for damages
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that flow naturally from the breach and are regarded as a lightly consequence of failure that
the parties thought of it when the contract was made.
§
Ex. using something or someone for another obscure purpose they should be made
aware of it at the beginning of the contract.
•
In terms of categories of damages there are various categories: same categories as tort law. Special
damages, punitive damages, general damages. (29:00)
o
Expectation damages
o
If a contract is breached we are worried about lost profit, so general damages includes
these expected damages.
§
Cost of performance vs. economic loss (PV house against the American coal
Company – the PV houses were equivalent to the Beverly Hill Billies who discovered
oil. They allowed the American coal company to mine their property but the family
wanted to move back. So they put in a clause that the company must put the land
back into its original position and spend whatever they would have to do it (cost of
performance). However the company didn’t restore the property. The issue was
the ACC said that if they spent the money to rehabilitate the land it would cost
more than the fair value of the farm. So they wanted to write a check for the
value of the farm. The Supreme Court decided that the ACC was right. The Supreme
Court used the economic loss instead of the cost of performance).
§
There are other heads of damages: reliance damages, mental anguish (equivalent of
pain and suffering in tort law) –
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1978 in the Garvise v. Swantours case in England: Ratio was that in a
proper case, damages for mental distress can be recovered in contract just
as damages for such can be recovered in tort. Such case as a contract for
holidays or other cases of contracts for entertainment or enjoyment.
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Liquidated damages – refers to a term in a contract where the parties agree
in advance to the amount to be paid in damages if there is a breach. The
court will only enforce it if there is a general attempt to mitigate the loss.
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•
Nominal damages – the plaintiff is right but it’s not worth any amount of
damages.
Equitable remedies:
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Stems from the court of Chancery, reacting to shortcomings in the common law, in result to money
not being good enough.
•
The remedies given by equity, it is deemed to be in personam, meaning that if an equitable remedy
is given and is not respected by the other party, then the court can fine or imprison that party. (In
common law, this does not happen)
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Some of the basic elements:
1. The plaintiff must have clean hands – they cannot be guilty of unethical conduct,
2. The plaintiff cannot have acquiescence – no long delays, must act promptly upon becoming
aware of the misconduct,
3. Refuse to intervene if there is a Third party for value,
4. Requires substantial consideration – the seal is insufficient.
Three Types of Equitable Remedies:
1. Specific Performance
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Where the court orders the defendant to do a specified act, usually to complete a transaction.
•
Specific performance is available in respect of land and air looms and unique material – otherwise
damages would be sufficient.
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You must prove that damages are inadequate because the material is unique.
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Equitable remedies are good because they’ll get involved in enforcement, because if you don’t
respond to an equitable remedy you will be held in contempt of court and can be fined or
imprisoned
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2. Injunction
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A court order restraining a party to act in a particular manner.
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In contract law it restrains a party from committing a breach.
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For example, in the sale of a business contract, the vendor is prohibited from competing, noncompetition clause. If they compete you can get an injunction. Usually they are time-limited (3
years).
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In order for it to be available you need a negative covenant that is a promise not to do something.
•
No injunction will be ordered if there are unacceptable consequences – i.e. an individual is
prevented from working all together
o
(Warner Bros against Nelson – Nelson was Betty Davis. Signed an employment agreement
that sated she couldn’t act for any other company, but she went to England and worked for
another company. Betty Davis said that it wasn’t valid because she couldn’t work, but the
court said that she could do anything else like waitress etc… So Betty Davis lost). It has to
be a total prohibition.
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3. Rescission
• Where the contract is set aside and the court puts the parties back in the original position (precontact position). Sometimes it’s impossible to rescind, for example if the good doesn’t exist
anymore.
VI) PARTICULAR KIND OF CONTRACTS
The source of the principles can either be statute or common law
The sale of goods act
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Passed in 1893 in the UK parliament through a statute.
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All jurisdictions in the common law have adopted this act. The Manitoba act is an exact replication.
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The concept known as caveat emptor (“let the buyer beware”) – this is the principle of law
according to which absent any terms in the contract to the contrary, the buyer assumes the
risk for the condition of the objects purchased. Text book, “caveat emptor does not mean in law
or in Latin that the buyer must take a chance, rather it means the buyer must take care. He must be
reasonable cautious where in circumstances where the buyer can and does exercise personal
judgment. CE is however not a rigid rule but a flexible general principle subject to limits put on it by
common sense and customary business practice. It is applied when goods are in existence and are
specific items that may be inspected by the buyer and where the seller has made a misrepresentation
about them. In these circumstances, CE is a sensible rule. The buyer has the opportunity of exercising
his judgment in examining the goods and if he distrusts his own judgment or has doubts he/she may
choose to bargain for an express term stating the goods have a particular quality requirement”.
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Caveat emptor encourages buyers to take care, however certain exceptions are required to prevent
abuse by unscrupulous sellers especially if there is reliance on the seller by the buyer or an
inability by the buyer to inspect the goods.
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The sale of goods act has created or codified terms which are to protect the buyers and form
exceptions to the doctrine of caveat emptor.
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•
The sale of goods act is in many ways a limitation on caveat emptor. In fact, it is not, the socalled exceptions are consistent with the doctrine, because they refer to certain situations
where the purchaser can’t investigate what they are receiving or they are relying on the
seller for information. Caveat emptor applies to the qualities of goods.
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Application: it applies to the sale of “goods” - two types of property: real property (land) and
personal property (chattels - goods or choses in action – contractual rights). Goods are considered
to be all chattels personal, other than things in action and money.
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It does not apply to the sale of services. If both, must determine if it is a sale of material and
labour.
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Another requirement is that the contract needs to be in writing if it deals with goods in excess of
$50 dollars, an invoice is considered sufficient.
Implied conditions:
1. Section 13 (Seller’s Title) – caveat emptor does not apply to the ownership of goods, because
inspection by a buyer does nothing to indicate who owns the goods. In offering to sell goods, the
seller impliedly represents that he has the right to do so; the implied condition.
2. Section 14 (Description) – it is an implied condition that goods sold by description will conform to
the description.
3. Section 15 (Suitability and Quality/Fitness) – there is an implied condition that the goods are of a
type that is suitable for the purpose for which they are bought, but only (1) when the buyer expressly
or implicitly tells the seller about the particular purpose for which the goods are to be used or (2)
makes known that he relies on the seller’s skill or judgment or (3) the seller normally sells these
goods in the course of business. If the buyer has examined the goods, there is no implied
condition as regards to defects that such examination ought to have revealed.
4. Section 16 (Sale by Sample) – there is an implied condition that when a sample of the goods to be
sold has been provided, the actual goods supplied will correspond to that sample in type and quality.
§
Bulk must match sample.
§
Buyer will have reasonable opportunity of comparing bulk with sample.
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§
Goods will be free from any defect rendering them unmerchantable that would not
be apparent upon reasonable inspection of the sample. Does not apply if defect was
in sample!
5. Relationship between Title and Risk (common law rule). Most important relates to the Essentially:
1. Risk of damage follows title,
2. Transfer of title and risk do not necessarily occur at the moment the contract is formed,
3. Possession does not imply ownership. So whoever has title bears the risk.
a. See 5 Rules from Section 20 page 307-309
i. Most important is Rule 1: Unconditional Contract for sale of specific goods in
deliverable state, property in goods passes to buyer when contract is make,
immaterial whether time of payment/delivery or both is postponed (Buy a suit
and pick it up later, you could be sued for the payment of the suit even if store
burned down).
Remedies for the seller:
1. Lien – a right of a person in possession of property to retain that property against the claim of the
owner, until the debt is satisfied.
a. However, the right is based upon possession and is extinguished when possession passes
in good faith to the buyer. Delivery terminates seller’s possession. Only exists when:
i. Contract does not state the buyer is to have credit so the payment may be
required upon delivery.
ii. Goods have been sold on credit and the term of the credit has expired without
payment being made and seller still has possession.
iii. Buyer becomes insolvent before delivery.
2. A stoppage in transit – the right of a seller to order a carrier not to deliver to the buyer, if the
buyer becomes insolvent. This remedy disappears once the goods are delivered.
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a. The carrier is bound to obey instructions. If not, the carrier is liable for damages. Allows
the seller who may not have title or possession to exercise control of goods when carrier
is not part of the contract.
3. Resale – after exercising a right of lien or stoppage in transit, an unpaid seller may give notice to
the buyer and resell the goods to a third party. It can also be used when a buyer commits a
breach by refusing to accept goods. If the seller has made a diligent effort to obtain a good
price on resale but obtains a lower price than that promised in the original contract, he
may sue the original buyer for the deficiency.
Specific Goods: exist at time of formation of contract, identified, agreed upon as being subject matter of
contract.
Ascertained Goods: not specific goods. Any goods that satisfy contractual description of the goods may be
supplied.
AGENCY LAW
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Agency Law is apparent in the Partnership Act and the Corporations Act (Apparent Authority)
•
Agency: relationship in which one person known as the “agent” is authorized to bring another
party for whom he acts, aka “principle” into contractual relations with third parties, thereby
creating contractual liability. In addition, the principle will be liable for the agent’s torts.
o
Core: agent able to create contractual liability with third parties for which the agent is not
liable.
§
•
Ex: power of attorney, stock broker, lawyer (by estoppel), accountants
How to create agency relationships:
o
Express Agreements: oral, written with definite understanding between principle and
agent
o
Agency by ratification: acts as agent when they know they have no authority but hope
ratification of contract will occur in future. If it doesn’t, alleged agent becomes liable.
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o
Agency by Estoppel: when a person allows another to believe a certain state of affairs
exists with the results that others rely on that belief. The person will afterwards be
prevented from stating the true state of affairs was different. (Precluded from denying) Use
Reasonable Person Standard to determine Agency by Estoppel.
§
Apparent Authority: agent has no real actual authority exists but acquiescing agent
gives impression that he is an agent.
§
o
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Holding Out: indicate an individual is an agent when no authority exists.
Agency by Necessity
Agent’s Duties:
o
Obedience of lawful orders
o
Competence: agent must use care, skill diligence otherwise the principle can retaliate
against the agent.
o
Personal Performance: “Delegates can’t delegate” (agent must perform duties)
o
Good Faith: loyalty, trust. Agent must place interest of principle above all else. You can’t
take secret profits by intercepting information.
•
•
Principle’s Duties
o
Commission: often not negotiated – Quantum Meruit: get a reasonable price for work.
o
Costs: reimburse for costs.
Third Parties:
o
Principle alone liable for contracts but agents should always describe themselves as agents!
o
When agent is liable alone (describes himself as a principle) the agent alone has rights and
responsibilities to third parties.
o
Sometimes the agent or the principle is liable
§
Agent makes no mention of being principle or agent.
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§
Third party has the option of holding A or P liable for performance of contract but
can only sue one of them.
PROPERTY (DEC 3)
Property → the relationship between a person and an inanimate object (usually)
The normal kind of property that is commonly known is land and the things affixed to the land
Title → legal ownership of the property
PERSONAL PROPERTY
When there is some kind of relationship with property and ownership, there are two kinds of personal
property:
1. Choses in action → right to sue of some sort
2. Choses in possession (Chattel) → they are corporeal (tangible, visible, movable) things. Usually
the owner is the one in possession unless there is some kind of agreement to allow someone else to
have a lesser ownership of it. It can become part of the land by being affixed to it (process called
affixation)
a. When does a chattel become a fixture?
i. Reynolds v. Ashbeon and Sons case (1904). A chattel becomes a fixture to property by
implication of law and this conversion of it does not depend upon agreement and is
not accomplished by conveyance. A chattel is converted to reality, even if it is
attached without the content of the owner.
Five Factors that determine a Chattel to be a fixture:
1. Nature of the article
2. The mode of attachment
3. The circumstance it was attached
4. The purpose to be served
5. The position of the parties.
A chattel is not affixed, in a leased property, if the trade fixtures are put in place by
commercial technicians they don’t become fixtures and can be taken out.
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ii. Severance → the process to make a fixture a chattel again; remove the title as
“fixture” for the chattel.
BAILMENT
Bailment → exists when one person takes temporary possession of personal property that is owned by
another. Title and possession is being split. The agreement will be for the bailee to return the property to
the bailor.
•
•
For the bailment to occur there needs to be:
o Directive delivery
o Constructive delivery: not actual delivery but tantamount
Ex.) instead of delivering the car, you just hand over the keys instead which signifies the
same thing.
Consequences of the bailment:
o The title of the property always stays with the bailor but the possession can be to the bailee,
when leased, for example.
§ The bailee needs to have permission to transfer the possession to someone else or it
needs to be accustomed to the industry.
o The liability is in the hands of the bailee if anything happens
§ The key is standard of care; the trend is applying it as negligence.
• Common carriers and innkeepers have a higher standard of care.
INTELLECTUAL PROPERTY
Choses in Action → an intangible right; in essence, a right to sue. It is a claim one person ahs against
another. It is only a right under contract. They can also be transferred like personal property, this is called
an assignment.
Intellectual Property includes:
•
•
•
•
•
•
Copyright
Patents
Trademarks
Industrial design
Trade secrets
Confidential information
It is under federal jurisdiction and
governed by federal statutes. But some
of them have preexisting sanctions
attached to them that still persist
today.
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Why are they called Intellectual Property?
•
•
All these area deal with ideas and creative work. Must be contrasted to other forms of personal
property because if it is stolen or wrongly misused it still exists as its original intent was, but still be
returned to the owner but the value could’ve been significantly diminished.
When the property is decided in negotiations, there is a protection that is called confidentiality
agreements.
Types of Intellectual Property:
•
•
•
•
Copyrights → the pertaining to this gives a right to copy. It gives the right of the creator of any such
works, ideas, etc. First developed in statutes, but then created Copyright Act, the federal
government has the power over. Lasts for about 50 years.
o It covers only the original work of the creator. The expression is what is needed to be
protected not the idea itself. Literature video, music. The main concern is that the work is
generated or performed, then it is automatically under copyright.
o If someone produces original work under employment, then the employer owns the
copyright.
o Once the copy right has been created the owner can assign it or lease it to someone else. The
court will see that the copyright belongs to the creator unless to the contrary. They have the
moral rights and can keep the integrity of the work; the rights can’t be assigned but only
waived.
o Infringement → a person tries to obtain a benefit or use by the sale, use, reproduction or
distribution.
§ Plagiarism is most common in academics.
§ Remedies
• In common law → injunction
• Damages in tort
• Obtain damages according to the tort of passing off where by all profits must
be disgorged.
Patents → no common law history. A government produced monoly that gives the inventor the
right to sell, produce or otherwise profit from a specific invention. Patent Act. Invention msut be
new and has not been introduced to Canada or anywhere within the last year. Patents from other
countries are not allowed to be “re-patented” anywhere else. Granting for patent lasts for about 20
years.
Trademarks → any term, symbol, design, or combination that identifies a specific business,
company, or product that distinguishes it from the competition. Registered trademarks are
protected under the Federal Trademarks Act. It helps protect the goodwill. This allows the owner of
the trademark to use it anywhere in Canada but only for 15 years (but it is renewable). Popular in
franchises and the selling of businesses.
Confidential secrets → no statutes for it but it is under protection from the provincial courts. The
mere ideas are not property and cannot be subject s theft of ideas.
o Cadbury Schwipes inc v FBI food: ideas are not property. But it still is a choses in action so it
is up to be sued. It dealt with the idea how Caramilk was able to get the caramel into the
chocolate bar.
o Recipes, industry secrets, client lists are not subject to theft but they can be sold and can be
of value for owner.
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o
Protection of confidential information: best way is to impress on the other party the
fiduciary status for that information, so that if they break their fiduciary duties they can be
sued. You convert the fiduciary status into a contractual status and the duties are
specifically defined in the contract.
REAL PROPERTY
Real Property → land and everything permanently attached to it. At common law, real property includes
buildings constructed on the land, any of the minerals below in the land and any of the airspace above it. It has
been changed over time in statutes; they have diminished over times ex) Manitoba is the owner of the
minerals in the land, with some exceptions.
•
•
•
•
•
•
•
•
The origin of “real” property comes from the remedies that one can obtain when property rights
were interfered with. Instead of getting damages and no land back then it was changed as to get the
property back. Real action, gave back the property. Dates back to the feudal system
In current times, the real property is under control of provincial statutes, such as zoning.
Much of the legislation in land law was derived from feudal England (which was brought to England
in 1066 by William the Conqueror)
Feudalism was essentially a protection racket and pyramid scheme – after Rome fell, the barbarians
were looting and pillaging, so people in these vulnerable areas needed a mechanism to defend
themselves; feudalism emerged. Feudal system required that people who occupied land would
transfer their ownership of their land to the king in return for protection. The king needed to raise
arms to protect all these people which was expensive, so he had various landed aristocrats (prince,
viscount, bard, duke, knight) to hold the land from him in return for military service. Lesser people
below these individuals would hold land all the way down to serfs. Basic concept is no one owns
the land except the crown. Various landed aristocrats would hold the land.
The last Anglo-Saxon aristocrat was Robin of Loxley. All the other nobility were French.
Originally real property in Manitoba was controlled exclusively by the common law (and then also
the Tort of Nuisance). In the 20th century, by-laws emerged
In current times, the real property is under control of provincial statutes, such as zoning.
In time, the complex feudal land system was simplified by the courts to two types of land
ownership. Needed to simply because taxation was so complicated. Two types of ownership:
“estates in time” “interest lesser than estates”
Estates In Time - 3 types: Freehold estates (fee simple estate and life estate) and leasehold estate
Three types of ownership:
1. Fee simple estate(KNOW THIS): is the estate in land that can represent the greatest interest in time
in land that a person may possess, and that can be conveyed or passed by will to another or in case
of intestate (to die without a will) the land goes to the heirs. It is extremely important to look at the
land and see the time granted, because while the crown still owns the land that if someone has fee
simple land, they have a certain amount of time to be on the land and/or make changes on it. The
land rarely reverts to the crown because the land can be freely transferred through sale, will or
inheritance and only when the none of the methods have been exhumed and the owner dies , does
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the land then revert back to the crown, this is called escheat. This holds true of all property in
Canada.
2. Life estate: most extensive in time, which a person in possession of the (fee simple) land might
grant to someone else, apart from the fee simple. It is a free-hold estate (indeterminate of time) that
may be held by a person other than the owner of the fee simple for a particular life time usually of
the tenant themselves. If one does the transfer of the fee simple in this manor they are able to live
and use the land as they please for their entire lifetime but the ownership is given to another. Ex)
usually the case with farmer families.
a. What happens after the life estate is up (the tenant dies):
i. Reversion → when the grantor of the life estate reserves the balance of the fee
simple for himself and his heirs. It reverts back to the grantor or his heirs after the
life estate ends.
ii. Remainder → when the land goes to a 3rd party after the life estate is up
b. Problems with life estate:
i. It is hard to determine who does the maintenance, repairs, cleaning of the land. In
common law, the life tenant is not responsible for structural repairs of the building,
but they are responsible for normal upkeep (cleanliness, paying taxes and
insurance).
ii. It is hard to market them (hard to find a buyer)
3. Lease hold estate: it is specified for a limited time (agreed upon) and at the end of the term, the land
reverts back to the land owner. The lease may be short or long term; it may be periodic or
continual as a month to month lease with rights of notice. The lesee is the tenant. The grantor is the
lessor.
To own land concurrently (by two or more people at a time), there are 2 methods to do so:
1) Tenants in common: if the transmission of the property doesn’t specify joint tenancy, you are
automatically tenants in common. The parties each hold an equal part of the property and split the
income evenly. It is not possible for one to fence off the other and use the property isolated from
each other (each tenant is entitled to use the whole property) unless it is agreed upon. One of the
tenants can transfer their ownership to a 3rd party without the consent of the other tenant in
common. If one of the tenants dies, the ownership transfers over to their heir or beneficiary who
continues to hold their interest with the other tenants in common.
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2) Joint tenancy: the right of survivorship, which is a presumption, means that the ownership transfers
to the other co-tenants. Created by an express agreement among the tenants. The feature that
distinguishes a joint tenancy from a tenant in common is the right of survivorship, which is a
rebuttable presumption, means that the interests of a deceased joint tenant passes on to the
surviving joint tenant or tenants instead of the heirs or beneficiaries of the deceased joint tenant.
The interest doesn’t form part of their estate. Frequently used with spouses.
a. Probate: the process of carrying out the will and the fees are based on the percentage of the
value of the property. This is avoided by having joint tenancy; property automatically
passes to the other joint tenant without having to go through the probate process.
b. Severance: Turning the joint tenancy into a tenants in common. Most common type is an
agreement between the parties. You must give notice to the other tenants that severance is
occurring. Can also be done through notification or by mortgaging your interest. You cannot
sever a joint tenancy through your will.
Condominiums:
•
Solution to the issue of the lack of houses and property for people to live in, especially in the urban
center.
•
Condominium Act → prevent the granting of fee simple estate in individual units of a multiple unit
building (which includes high rises, apartments, duplex, roadhouses). Applies to residential and
commercial buildings.
o
Overview of a condominium: there are multiple individual unit owners who have individual
fee simple titles. The unit title covers (the unit owners own) the unit and a percentage of the
common elements (everything but the unit itself; hallways, elevators, sidewalks, lobby, pool,
parking lot, etc.) which are owned and operated by the condominium corporation and is
governed by the unit holders who have the same percentage vote in the condominium
corporation as they have in the common elements. The unit holders are equivalent to the
shareholders. The condominium corporation can charge tenants “condo fees” to operate the
common elements and build up a contingency fund for disasters. Restall really hates condos.
“Interest Less than estates”: (5:30)
•
None of these rights give exclusive possession like freehold and leasehold do.
•
Easement: is a right enjoyed by one land owner over the land of another for a special purpose
rather than the general use and occupation of the land. This is enforced by a contract. Typically
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easements are attached by agreement. Purchasers of the land acquire the easements with it. This is
enforced by a contract. In order to get an easement there needs to be dominant tenement (the piece
of land that is to benefit from the easement) and a servient tenement (land subject to the
easement). Once the easement is established, it binds subsequent owners and runs with the
property.
o
Right of way: most common easement; being able to cross over someone’s land.
§
Rights and obligations:
•
The passerby cannot stay on that part of the land, build anything, obstruct
others from using it, or leave anything behind
•
No one can interfere with the path for the passerby and if done so, the
passerby can take legal action.
o
Prescriptive easement: Common law easement. The land owner requires an easement over
adjoining land without a grant or contract from the other land owner it is granted by
prescription. If an individual habitually exercises a right over the land for a very long time
and that right could have been granted an easement, it is presumed that he has that grant
after twenty years. Has to be exercised continuously without interruption by the ownership.
o
Mineral Rights: Originally they were a part of the fee simple. In Manitoba you can get a
separate title for mineral rights.
§
Until 1890 in MB, mineral rights and sand and gravel rights were granted with the
fee simple title.
§
After 1890, they were not granted.
§
1890-1930, mineral rights weren`t granted but sand and gravel still were.
§
After 1930, no mineral rights and no sand and gravel rights were granted with the
fee simple.
§
When the crown owns the mineral rights, they have a different regime for the
exploration and mining of the minerals. Getting an exploration lease or mining lease
from the province and it actually costs a lot in government fees. If someone doesn`t
own the mineral rights for their land, you can get an exploratory lease or a mining
lease on their land (in rural MB).
o
Statutory easement: hydro lines have these kinds of easements granted for them; as well as
phone lines.
o
Restrictive covenant: When there is a sale of land but the vendor wishes to constrict the use
of the land after which it is sold. A form of contract that the court would enforce and it came
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from equity courts. It is about preventing certain use of land. (Ex. Can build houses larger
than xx ft., or build certain point close enough to the property land.) This created the early
version of zoning. Subject to privity because covenant runs with the property. The method
to enforce the covenant is the injunction. The court will withhold negative covenants
(refrain from doing something) but not positive covenants. Court of chancery. (Spoke lots
on this, but no notes…)
o
Sometimes to string cables and power lines across peoples’ properties
Property, in law, refers to the relationship between a party and property.
Ownership of property is called title.
It is possible have simultaneous property where the original owner can lease property to another person.
Evidence of Ownership of Land:
•
In olden times, land titles were a paper document issued by the crown to the title holder that was
passed along with sale to new title holders. Problem was if it was destroyed or simply deteriorated
with time
•
Registry system emerged in 17th century – transfers of land were recorded in a public registry, with
a duplicate given to the owner. New purchasers of land would need to search through the registry
for the prior 40 years to see any interests that were held in the land. Any interests prior to that
were not valid due to statutes? VERIFY
•
Problem with registry system is searching documents is labor intensive, and an error in a document
that went undetected that is later discovered (ie. someone`s interest changes, but it is not noted in
the registry), can cause problems.
•
In MB we have the Torrens System, adopted in the late 19th century. Most of the western provinces
have copied this system. The distinctive feature: each new transaction concerning a piece of land is
submitted for registration then the land titles office carefully examines the document before
approving it. At the time of recording the land titles office brings all outstanding interest in land up
to date and certifies them as being correct. The government guarantees the accuracy of the title, as
shown on the record, and summarizes it. The great advantage for the purchaser is they don`t have
to search back 40 years as land titles gives you a complete a current up to date statement title that
is guaranteed.
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NEGOTIABLE INSTRUMENTS (16:30)
•
Andrei Pollard: “Credit rests on confidence; confidence in the people and the system”
•
Negotiable Instrument: means to transfer funds between parties to a transaction without the
immediate and physical exchange of cash. It is of maximum importance in an economy of
sophistication.
o
Create a debtor-creditor relationship and forms a contract. Typically have a lender and a
borrower.
o
First utility is as a replacement for cash. With large sums in business, otherwise we would
have wheelbarrows of cash.
o
Secured transactions offer convenience to the borrowers and lenders.
o
Gives greater certainty to certain types of assignments. People can better depend on NI
o
Not all financial instruments are NI.
o
Three types in text:
§
Promissory Notes – prepared by the debtor, it is the simplest form of commercial
credit relations. It is really just a promise to pay. Commonly used in commercial
transactions
o
§
Cheques
§
Bills of Exchange (only worry about its existence)
§
Mortgage
The rules that govern negotiability distinguish the NI from others. The method that they
can be transferred from a creditor to a third party with debtor remaining liable on the
instrument. By way of background negotiable instruments are a way of form of personal
property.
•
A NI is a form of personal property. They are a type of chose in action that has special importance in
the world of commerce. Written documents such as bank draft, promissory notes or a cheque that
is evidence of a right in some kind of intangible form are NI’s. It is a contract containing a promise
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expressed or implied to pay a specific sum of money to the bearer or to a specific person thus a NI
can be used to transfer ownership of intangible rights from one person to another. NI are written
documents used to transfer rights found in the document. Various types of negotiable instruments
exist. NI are used as replacements for cash.
o
NI’s are contracts, but they are usually part of consideration for a larger contract.
o
Expressed or implied promise to pay specific sum of money to the order of a specific person
or bearer, thus a NI can be used to transfer ownership of intangible rights from one person
to another.
o
Can be transferred or assigned by the payee to the third party. Transfer of contractual
rights is referred to as an assignment
o
The transfer process with respect to NI’s is call negotiation. Negotiation is thus a subset of
assignment. Through negotiation, the payee has assigned their rights to a third party.
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•
Rules for Non NI:
o
Notice to promissory of the assignment. (let them know)
o
Assignee can only receive rights assignor has and is subject to the equities of them (parties
to the original contract).
o
Assignee and assignor must join to sue a defaulted promissory. (therefore it reduces
certainty as it doesn’t work exactly like cash)
o
•
These rules do not apply to the negotiate of an Negotiable contract
Rules for NI (from the Bill of Exchange Act):
o
Holder need not give notice to the promisor that rights have been transferred. (That they’ve
taken over ownership of the chose in action) . (They can just cash the cheque or assign it to
someone else without notice)
o
The Third Party can obtain better title than the assignor. Not subject to equities between
original parties. (original creditors fraud in obtaining an instrument is ignored. Innocent
subsequent party even under a voidable contract)
o
•
Subsequent holder can sue debtor by him/herself.
Criteria for Negotiability (25:00): (How is a contract defined as a negotiable instrument. Requires
7 elements to be present. It is not a negotiable instrument if it does not possess all these criteria):
1. Promise/order must be in writing.
2. Obligation must be for money payment(s) (can’t be for 3 dozen carrots).
3. Sum of face of instrument must be for a certain fixed sum.
4. Promise/order must be unconditional.
5. Instrument must be payable at a fixed or determinable time or upon demand.
6. The whole instrument (complete sum) must be negotiated (not just part of it).
7. The Instrument must be signed by drawer/payer (the debtor).
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o
NOTE: Signor of cheque is personable liable unless it is clear that they act in representative
capacity (use the word PER:). Latin for the word “for”
§
Instrument is not negotiable if it does not meet above criteria, but could still be a
contract.
§
Must be endorsed (signed on the reverse side) and physically delivered to the new
holder to transfer it.
§
By endorsing a cheque, it becomes a “Bearer Instrument”
§
Money used to be a Bearer Instrument as the bearer would be paid in gold if they
turn in the paper bill
•
How to Negotiate (27:15):
o
Assignment: transfer of a contractual right, almost anything applies
§
Deals with Choses in Action (a right, obligation that can be enforced in courts)
§
Cannot transfer liabilities
§
Subject to original terms of contract (primary weakness)
§
Rules for assignment, if going to assign a chose in action or general contractual
right:
•
You have to give notice to the promisor
•
The assignee can only receive the right the assignor has and is subject to
equities with the existing parties to the contract
•
o
The assignee and assignor must join to sue for the faulty promisor.
Endorsement & Delivery: payable to A to negotiate, A must endorse it and deliver it to the
new holder.
§
Sign on reverse side.
§
Can become a bearer instrument (so don’t sign in advance cheques made out to
you).
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•
Promissory Notes: NI unconditional, in writing, paying specific sum, paid on demand, unlike Bill of
Exchange, a PN is prepared by the maker (debtor). Unsecured loan instrument.
o
Doesn’t have to be accepted by the debtor. Can sue on face of note.
NEW NOTES
•
Secured Transaction is a loan with the security interest. A Security Interest places the secured
object (the collateral) within the legal control of the lender. That can be 1 of 2 possibilities
1. The lender actually has title to it. Ex. Chattel mortgage, ill lend you 10,000 but I want to make
sure you’re paid.
2, Chattel mortgage = transfers title
•
A security Interest is another type short of ownership, is the right to obtain ownership. It gives the
lender certain immediate rights.
•
Collateral, means in law, additional. It means an additional contract. Secured contracts are this.
•
When you buy a car, you will sign a lease which is a collateral contract. That secured piece of
property is a secured piece of property.
2 types of secured transactions
•
Personal Property: in general secured creditors have priority….
o
Examples of secured transactions in respect to personal property
o
Conditional sales contract. Seller retains interest or actual title to the goods. Generally it
means the transfer of the title to the buyer is conditional on the buyer’s completion of
schedules installment payments. The lender can sue or repossess
o
Chattel Mortgage the debtor has possession but title in the good is transferred to the
creditor. Title is actually transferred. The lender can just go and cease it.
•
Both are Negotiable Instruments
The Personal property and securities act. (1980)
•
1. To define a secured parties remedies against the debtor
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•
2. To create one system of registration for all secured interests.
•
3. To define priorities between a secured party and subsequent 3rd parties for value, subsequent
secured parties, and general creditors who will have priority.
Financing statement (record of debt)
Covers all transactions that create a security interest in personal property consented to by the creditor and
the debtor. The SI in the system is secured by a financing statement. Registration at the personal Security
Act has the effect of prioritizing claims. In order to achieve priority in determinant to this statute you must
meet three concepts.
Priority is determined by 3 concepts:
4. Creation
5. Attachment
6. Perfection (takes performance or files the financing statement)
a. The first party to complete all 3 steps has priority
Leases are conditional sales contracts in different name.
Consignments can be used as an indirect mode of security device.
Bill of Sale, is evidence of ownership. This is often used in buying a car or boat privately. Usually also a
written contract of sale where the vendor acknowledges sale to the purchaser for a price. A bill of sale can
be used as a security device. Ex. A borrower makes a bill of sale to the lender and they don’t pay, the lender
can keeps it. Kind of like pawning something
Share hypothecation: to pledge property as security or collateral as debt. Common form is the pawning of
something by delivering the object to someone. This is usually used to secure a private share purchase. In
this type of arrangement the physical shares are pledged and physically transferred to the vendor and
endorsed (they are made out to the vendor) title remains the purchasers the title remaining to them…..
Floating Charge [general security agreement]
Has 2 aspects which covers all property owned by the borrower
1st: There’s a real property mortgage in it.
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2nd: A floating charge as it pertains to persnlty. Its useful because often in various business, the borrower
has to have the ability to continue to do business to buy and sell things. Ex car dealership a lot of the value
in business is inventory which can be used for collateral.
The borrower is free to business , to buy and sell, what would be collateral under this [g s a] only upon
default does this floating charge become a fixed encumbrance. The date of priority is the date of
registration.
Real Estate:
Traditional Mortgage
•
Mortgages are usually utilized to finance acquisition of homes, can also be used for personal
property.
•
It is an instrument of debt which uses a land as a security for debt
•
Mortgagee is the lender mortgagor is the borrower. Takes ownership either as a transfer in
property or a floating charge in the land title system.
•
In the land title system (the torrens system) the money lender doesn’t take the title in MB. It does
give the money lender the right upon default to force the sale of the house. If it isn’t sold at a public
auction, it moves to called foreclosure. If the borrower defaults the lender will have the right to sell
the property. Protect the borrower’s potential equity of the public property.
•
If the sale of the property does not occur the lender can then foreclose and take title of the property.
If you take title you can’t sue the lender.
CERTAINTY OF CONTRACT LAW: INCLUDE THE NEGOTIABLE INTRUMENTS
(LONG ANSWER QUESTION)
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2) Insurance: there are specialized rules both by common law and by statute. Insurance is a
contract where you protect yourself from risk of loss. Types: house insurance, life
insurance, health insurance, car insurance. Definition – “in its simplest terms is a method of
shifting risk of loss that is a method of purchasing against the potential of loss. Not only
does insurance shift the risk of loss against the person purchasing the protection, it also
spreads the risk among a number of parties who have agreed to take a share in the risk.”
Advantages: money can be collected in advance to create a fund available to pay claims; the
amount collected can be calculated so that it is related to the risk assumed. Insurance
companies run on a profit basis and provide protection. Mutual companies operate so that
profits are retained by policy holders. What separates insurance from a bet, because a
wager is not a legal object according to the elements of a contract? It seems that the person
is betting that they will die and the insurance company is betting that the person will live.
The reason given is the insurable interest – “exists where the insured derives a financial
benefit in the continuing existence of the insured object or suffers a financial loss from the
loss of the object. Compensation will be paid by the insurer to the individual named as a
beneficiary”. (EXAM QUESTION)
April 9, 2003
Insurance Law – insurance in its simplest form is a method for shifting a risk of loss; that is
a method of purchasing protection against a possible loss. Not only does insurance shift the
risk of loss from the person purchasing, but among a group of parties who have agreed to
share the risk.
Types of contract terminology: An insurance policy is written evidence of an insurance
contract. The insurance company in the insurer and the premium is the consideration paid
by the insurer for the coverage, as indicated through the insurance contract the risk is
transferred from the insured to the insurer. A typical insurance agent isn’t a true agent;
they are a sales agent, except for short term policies called binders. Insurance brokers are
not agents either; they are individuals finding the lowest cost for the coverage available. An
amendment is called a rider. Each province is a regulatory statute, so it is provincially
governed. Types: life, disability, property etc… What separates the contract of insurance
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from a wager is what is called insurable interest. Subrogation – when an insurer has
compensated the insured by paying a claim for a loss the insurer is entitled to step into the
shoes of the insured and sue the person liable for the loss.
Contracts of insurance are contracts of up-most good faith, in the fact that the insured has a
duty to reveal all pertinent information to the insurer, an exception to caveat emptor. Can
be run on two bases: for profit or as a mutual insurance company. Mutual insurance
companies are organized so that profits are returned to the property holders. There is a
process of demutualization, where policy holders are given shares of the corporation, for
the sake of raising funds and becoming more efficient.
3. Employment law - contract of employment: there are implied terms both by a) statute –
workers compensation, minimum wages and b) common law - reasonable notice provision.
In addition there can be negotiated terms including: the duration of the contract, the
consideration you are being paid, duties involved. Other important terms: non competition
clause – after you have been employed for a period time you can’t compete as an employer
of another business or your own business. If you ask for too much as an employer then the
court will strike down and void the non competition clause. They additionally have a clause
that you have to keep all the company secrets. Vicarious liability for employees – “the
courts have developed the principle of vicarious liability whereby an employer is liable to
compensate persons for harm caused by an employee in the course of employment. The
employee remains personally liable for the tort but often the best chance for recovery by
the victim lies against the employer.” You have to give reasonable notice but sometimes
there can be dismissal for just cause that doesn’t require reasonable notice: a type of
serious misconduct or obvious disobedience. However, there is a necessity to document
and give the employee a bit of a chance. Chronic illness creates frustration of the
employment arrangement.
4. Read Leasing for short answer question maybe
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BANKRUPTCY
Creditor proofed assets, pension, insurance products, RESPs
This is a federal statute, and has a number of functions:
•
•
•
•
Sets up a uniform practice in bankruptcy and insolvency procedures, to make it as
inexpensive as possible.
It sets out methods for reorganizing a debtors business by working out an
arrangement with creditors through ADR’s
It attempts to provide for an equitable distribution of the debtors assets among the
creditors. Pay people as fairly as possible.
It release the debtor to begin again
Bankruptcy and Insolvency act passed in 1992, the act applies to three groups:
Bankruptcy: Legal Status
•
is a status declared by the courts. You’re not bankrupt until a court makes it official.
Insolvency: Financial Status
•
Don’t have enough money to pay bills as they are due.
•
Debts outweigh assets
1) Insolvent persons – potential bankrupts,
2) Persons who declare themselves bankrupt, and
3) Persons who have been placed into bankruptcy by their debtors.
Three differing procedures:
1) Proposal: An agreement between the debtor and his or her creditors to allow the
debtor to reorganize their affairs so that bankruptcy can be avoided. The insolvent
individual is trying to make a deal with the debtors: more time, lower amount of
debt, a lower level of interest, or a combination of the three. there are two kinds:
•
Consumer Proposals: made only by the individual whose debts, not including
the debts secured by mortgage on a principle residence, total less than
$75,000. Formal acceptance by the creditor is only needed under special
circumstances, usually under objection. There are certain benefits of
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consumer proposal, no termination of leases, acceleration of installment of
payments and the interruption of services by utility. If creditor rejects the
proposal, the individual is automatically considered bankrupt.
•
Commercial Proposals: If the creditors reject the proposal the individual or
business is bankrupt.
o
Thing you need to have to get bankruptcy:
§
You need to have the majority of each class of secured
creditors (2/3’s)
§
Court must approve the proposal
§
Then the proposal is binding on all the unsecured and
secured creditors who accepted the proposal
§
Secured creditors who have not accepted are not bound
§
If the creditors reject the proposal, the individual/person is
automatically considered bankrupt
2) Voluntary Assignments: Voluntarily assigning yourself into bankruptcy and a trustee
takes over your affairs. If the creditors put the individual in bankruptcy, they do so
by petitioning the court for a receiving order. If proven bankrupt, then the orders
are put in the hands of the trustee who will govern the assets and affairs. Trustee
gets legal ownership over the assets. If one is to earn any income in that period they
are to pay a certain percentage to the trustee. The court may order a discharge
where some of the payments need not be paid in the end. Doesn’t require approval
of consent from the creditors.
The person needs to be insolvent,
You need to get a bankruptcy trustee,
Put documents to file an assignment with the courts
•
To obtain a receiving order they must prove the insolved indebtor has
committed an act of bankruptcy in the last six months and that they are due
for at least a $1,000.
•
What are acts of bankruptcy?
o
Fraudulent transfer of assets or money
o
Fraudulent preferences
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Absconding of funds
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Failure to pay debts as they come due
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•
Role of the trustee (officer of the court, but not lawyer):
o
Retain the property and assets that the indebtor has gotten rid of
(that is defrauding the creditors)
§
Recover settlements (gifts of gratuitous promises in the last
year before bankruptcy)
§
Looks at transfers in the last five years. Fraudulent
preference: is a payment or a transfer of property to a
creditor within the last three months prior to bankruptcy in
order to give that creditor the benefit over other creditors.
§
Reviewable transaction: made within the last twelve months,
not at arm’s length (relatives or business), not for fair market
value,
o
Prove that the debtor has done certain things to avoid paying of the
creditors.
o
Then distribute the assets to the creditors accordingly: first to the
secured creditors who have priority with respect to the asset they
have a security interest (a debt that allows the lender to seize the
property if there is failure to pay. Ex. Mortgage), then to the trustee
to pay the other creditors, preferred creditors paid in the order
listed: employees for back wages up to $2,000, the pro rata basis
(getting so many cents per dollar being owed)
3) Petition for a Receiving Order: A way by receiving order, this is where the creditors
obtain an order by the court placing the insolvent debtor into bankruptcy. In order
to do so the debtor must have committed an act of bankruptcy within the last 60
months and has to be greater than $1,000. Once there is an assignment or receiving
order a trustee is assigned by a court, they have control over all your affairs. Acts of
bankruptcy include: fraudulent preferences, fraudulent transfers of assets or money,
absconding of funds, failure to pay debts as they come due.
The trustee will sell your assets so that the creditors can be paid, they will seek to recover
property that the debtor no longer owns when there was a:
1) settlements – gifts made by the debtor within the year prior to bankruptcy and in
some cases within the last 5 years, if the trustee can prove that at the time they were
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unable to pay debts without the property in question. Trustee can look at their
assets at the time they needed to pay their debts, and if the gift was given when they
could have paid back debtors, it can be declared by the trustee.
2) Fraudulent Preferences– payment or transfer of property to a creditor by an
insolvent debtor in the last 3 months prior to bankruptcy in order to give that
creditor an advantage over other creditors, where the creditor was aware of the
impending bankruptcy. Is it fair that they paid all debt back to one creditor over
others. It is a fraudulent preference. Creditors have to be paid back on a tiered
system.
3) Reviewable Transaction – occurs 12 months prior to bankruptcy where there isn’t
an arm’s length transaction and fair market value doesn’t have to be paid. In
addition, during the period of bankruptcy they must pay monthly payments to the
trustees that are income dependent. (KNOW THIS)
At the end of the process, the claims of the creditors are paid in order:
1) secured creditors – must be fully paid by funds available. The trustee can sell the assets
and the surplus remains with the trustee for payment to the other creditors. Any deficit in
funds in such a situation, creates a general creditor position for that secured creditor.
2) preferred creditors – the trustee, employees, expenses and fees of the bankruptcy fee.
The trustee’s fee’s get paid out first. In the event that they die, the payments for the process
of the funeral are paid first as well.
3) distributions to unsecured creditors (General Creditors) – get whatever is left
distributed equally. Where there is like a 10 cents on the dollar return. Once the creditors
are paid, there is an application to the court for a discharge and all your debts go away,
except if you fraudulently misrepresented things those may be continued and student loans
continue, alimony payments and arrears continue as well. It’s easier to take prophylactic
action, you can go broke and still can protected assets; creditor proof assets like RSP’s.
Superior preferred creditors
o
Unpaid sellers
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Interim financing creditors – labeled as super priority credit and get paid out first.
o
Wager earners
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Exam: make sure you know the difference between arms length and not at arms length.
The difference:
Not at arms length means you have a close relation. Relative/best friend
Arms length means you have no relation, someone you’re not that close with.
Difference between a limited partnership and a limited liability partnership. Always on
exam
Exam:
Readings; ch 1,2, 24, 25, 26 ,27, 17(agency), Directors duties, 3,4(tort profession), 5-13,
20,21 (property), bailment 15. Negotiable instruments 19, 28, 29,
Did not assign chapter on chapter on mortgages. 23
Constitution cheffins text and his paper entirety
Comprehensive exam. Greater weight on topics since midterm
Approx. 25 short answer ½ - 4
4 long answer
70 points total
Big themes. Anticipate questions
1 or two 2 new questions as essays
Write in blue or blank ink.
Old exams are on reserve! 925-2525 don’t e-mail him. Call him.