October 7th, 2014
Make sure to memorize the negligence table of page 136
Negligence is by far the most important area of tort liability for businesspeople and
professionals. It involves inadvertent or unintentionally careless conduct causing injury or
damage to another person or his property.
- Negligence involves a failure on someone’s part to live up to a duty to be careful to
someone else.
Product Liability – Revisit ginger beer care: The Donoghue case established that if a product
was designed in such a way as to get into the hands of the consumer without intervening
inspection or modification, a duty of care did exist.
- Now, with the prevalence of pre- packaged and complicated manufactured goods, there is
even less likelihood that a problem will be disclosed by intermediate inspection. It is thus
much more difficult for a manufacturer to deny the existence of a duty of care. This duty,
if coupled with evidence of a breach of that duty, will impose liability on the producer of
the product.
The expansion of tort liability has introduced considerable uncertainty into the area of
professional liability.
- The standard of care expected from an expert is a little different from that expected from
a non- expert. Experts must live up to the standard of a reasonable person in the
circumstances.
- Standard is not lowered for novices; they are expected to have adequate supervision.
- Standard determined by testimonies of peers concerning what they would have done in
the specific situation.
Insurance is used to reduce risk for a business: triangular relationship between insured, insurer,
and beneficiary. This topic starts on page 165, read and make notes.
Pg. 174 is a good tool for studying.
Case 1. Roper vs. Gosling pg. 176
1. Potential arguments:
 Voluntary Assumption of Risk
 Contributory Negligence
Was not evident to her that he was drinking, and she asked him if he was capable of driving prior
to getting into the car.
Case 2.
Did the auditors owe a duty to Mr. Dixon? The auditors were not aware that someone would rely
on them; the client was open-ended and used the statements without authorization. The claim
was dismissed. Would have been different had they known the statements would be used by
users to make business decisions.
Chapter 6 – Contracts
Contracts are voluntary exchanges of promises, which create obligations that can be enforced
and remedied by the courts.
- Mutual agreement to commit themselves to a transaction: offer and acceptance.
- A valid contract creates a situation in which parties to the contract can predict, with some
certainty, their future relationship because each party knows that the courts will hold
them to their agreement.
Elements of a valid contract:
1. Consensus
2. Consideration
3. Capacity
4. Legality
5. Intention
Also:
- Requirement of form and/or writing
- Defects/flaws –mistake: Innocent or fraudulent or Non Est Factum (“didn’t know what I
was signing”)
- Undue influence
- Duress
Freedom of contracts is the theory behind all contracts, but the above flaws show that not
everyone is free to make the decision and free to enter into contracts, i.e. bullied intimidated into
signing, aren’t aware of what they are signing, etc.
Types of Contracts:
A formal contract is one that is sealed by the party to be bound by it.
A simple contract, also called a parol contract, may be verbal or written, but is not under seal.
An express contract is one in which the parties have expressly stated their agree-ment, either
verbally or in writing.
An implied contract is inferred from the conduct of the parties.
A valid contract is one that is legally binding on both parties.
A void contract does not qualify as a legally binding contract because an essential element is
missing.
A voidable contract exists and has legal effect, but one of the parties has the option to end the
contract.
A bilateral contract is one in which both parties make commitments and assume obligations.
There is no exchange of promises in a unilateral contract.
A valid offer contains all of the terms to be included in the contract; all that is required of the
other party is to give its consent or denial. The offer is a tentative promise on the part of one
party to do whatever is set out, providing that the other party consents to do what is requested in
return. For an offer to be accepted, it has to be enforced as soon as it is accepted.
Statute of Frauds on pg. 228-232
Won’t ask about Postbox Rule
October 14th, 2014
Contracts – have 5 elements listed in textbook on page 204
 Exchange of promises.
 The more elements in a contract, and the more time to the fulfillment of the contract, the
more risk.
Won’t be anything on the midterm about promissory estoppel.
Case 6-1
Was there really a contract? Have to look at whether there was an offer, acceptance, etc. Ensure
elements were included, and if they weren’t mentioned, there most likely wasn’t an issue with it.
Midterm
4 questions:
Short answers and case situations with several questions – 2 hours
Up to chapter 7
Law in Canada
Imp of constitutions act and charter
Different courts in Canada, and distinction between their cases
Negligence or intentional/unintentional torts
Contracts
October 28th, 2014
Elements of a valid contract:
1. Intention – serious intention to create a legally binding agreement.
2. Consensus – must have a mutual agreement, evidence by a valid offer and acceptance.
3. Consideration – commitment or price paid by each party to the contract.
Capacity – parties must be capable and not limited in capacity (minors, intoxication,
corporations, bankrupts, etc.)
4. Legality – object and the consideration must be legal and not against public
consideration.
It’s against the law for a lawyer to encourage a client to take a lawsuit for their own reasons, so
that the lawyer will have more work, etc. Contract that obstruct justice, hurt public interest, etc.,
are illegal.
End of chapter 7:
ALSO:
a) Verbal contracts can be valid, but is there a requirement of form and/or writing?
b) Defects and flaws: Mistake, non est factum, misrepresentation, undue influence, and
duress. Anything to do with land dealings and guarantees (for credit) has to be in writing.
CHAPTER 8:
Factors affecting the contractual relationship:
Misrepresentation: false statement of fact that persuades someone to enter into a contract (i.e. a
misleading statement that induces a contract).
 The false statement can be made fraudulently, when the person making the statement
knew it was false;
 Negligently, when the person should have known the statement was false, but carelessly
provided information that was untrue;
 Or completely innocently, when the misrepresentation is made without fault, made
honestly and without carelessness, by a person who believed it to be true.
The statement that forms the basis of the misrepresentation must be an allegation of fact. Only
statements made about the current state of things that prove to be incorrect can be considered
misrepresentation. Can't be an opinion or a promise, has to be a fact. However, an opinion by an
expert may be misrepresentation.
Silence or non-disclosure: by itself is not usually actionable, because for misrepresentation to
take place there must be some actual communication of information, unless there is a duty to
disclose.
 I.e. some special situations where the person contracting is required to disclose certain
information.
 For example, insurance contracts require the parties acquiring insurance to disclose a
great deal of personal information that affects the policy. People who apply for life
insurance are required to disclose if they have had heart attacks or other medical
problems.
 These are often referred to as utmost good faith contracts.
Duress – involves threats of violence or imprisonment (economic disadvantage not enough) —
contract is voidable in this case.
Undue Influence – when pressure from a dominant, trusted person makes it impossible to
bargain freely – the resulting contract in also voidable. Usually involved vulnerable people.
 Presumption based on a special relationship – In certain categories of relationships the
courts will presume the presence of undue influence, and if the presumption is not
rebutted the contract will be set aside.
 Presumption based on unique circumstances – If the relationship involved does not
fall into one of the protected classes listed above, there still can be a presumption of
undue influence on the basis of unique circumstances (undue pressure from
circumstances). Page 247; list.
 Undue influence determined from facts – In the absence of a relationship that gives rise
to the presumption, it is still possible for a victim to produce actual evidence to satisfy the
court that undue influence was, in fact, exerted and that there was coercion. This can be
difficult to prove, since the victim must show that a relationship of trust developed and
that this trust was abused. When the person trying to enforce the contract took advantage
of the fact that he or she was being relied on for advice, the courts may find that there
was undue influence.
Unconscionable Transactions – permits the court to set aside a contract in which one party has
been taken advantage of, because of such factors as desperation caused by poverty or intellectual
impairment that falls short of incapacity.
1. Must be shown that the bargaining positions of the parties were unequal;
2. That one party dominated and took advantage of the other, and;
3. That the consideration involved was grossly unfair.
Mistake – misunderstanding that destroys consensus and results in a void contract. Has to go to
the very root of the contract, i.e. there is no complete agreement between them. Mistake must be
serious, and careless party will be responsible when the mistake is the result of negligence.
 Shared Mistakes – two parties are in complete agreement, but they have both made the
same mistake regarding some aspect of the contract, has to be part of some fundamental
aspect of the subject matter of the contract for the court to be willing to review the
transaction.
Misunderstanding – a different type of mistake occurs when the parties have a
misunderstanding about the terms of the agreement itself and neither party is aware of the other’s
different understanding.
Non Est Factum – Where one of the parties is unaware of the nature of the document being
signed, the courts will, in rare circumstances, declare the agreement to be void on the basis of
non est factum (“It is not my act”); if the mistake goes to the very nature of the document
being signed.
 E.g. if a person were led to believe she was guaranteeing a note and was, in fact, signing
a mortgage agreement on her home, she could argue that there was no consensus between
the parties and no contract.
Case 1 on page 270:
 When did this come to their attention and what has happened in the meantime? If it came
to their attention in a reasonable amount of time, and they hadn’t done any building on
the land, that would have been a factor. Important: neither party was aware of the
mistake; therefore the court will rectify the agreement.
Employment is an element on contract law, will discuss after chapter 8 and 9.
November 4th, 2014
Privity of Contract – The contracting parties have created a private agreement, and outsiders to
it can neither enforce it nor be bound to perform its terms.
Privity of Contract and Assignment: Only the original parties to a contract are bound by its
terms. A person cannot impose liability upon another who is not party to an agreement,
EXCEPT:
1. Trusts – legal entity where the trustee holds for the beneficiary (trustee has the ‘utmost
good faith’ (UGF) – high duty to the beneficiary)
2. Agency – Chapter 11 (UGF to the principal) – Agent acts as an intermediary to the
principal to perform certain tasks
3. Partnership Act – one partner can bind partnership (UGF to the partner): two or more
people (or entities) that join together in a business with an objective to make a profit
4. Formal contracts under seal
5. Real property-buyer takes subject to previously recorded encumbrances, if not removed
6. Statutory rights, such as insurance
7. Previously disclosed contractual obligations
8. Assignment
9. Negotiable instruments
Just as a person buying goods under a contract is then free to resell them, so can a person entitled
to receive a benefit under a contract transfer that benefit to a third party (see Figure 8.3). This is
called the assignment of contractual rights, and the benefit transferred is known as a chose in
action. (265)
The qualifications that have to be met to establish a statutory assignment are as follows:
1. First, the assignment must be absolute, meaning that it must be both unconditional and
complete. The full amount owed must be assigned without any strings attached.
2. Second, the assignment must be in writing, signed by the assignor.
3. And third, the original party obligated to pay must be notified in writing of the
assignment.
Only when all these requirements are met will the assignee be able to sue directly; otherwise, he
still must join the assignor in any attempt at collection.
Chapter 9:
Contracts can come to an end or be discharged by:
1. Performance – Will anything short of exact performance satisfy? Tender generally counts
as performance. E.g. If you don’t have a written, specific contract how will the contractor
know exactly how to satisfy the contract?
2. Breach – Improper/inadequate performance or refusal to performance; warranty-minor
term, condition-major term, substantial performance (97%)
3. Agreement between the parties to end or modify
4. Or frustration – unanticipated event that can end the contract, out of control of the parties
and makes performance impossible. Self-induced frustration is not frustration; it is a
breach of contract.
The major problem associated with frustration is to determine who shall suffer the
loss when the contract is discharged. Under common law, the general principle was “ Let
the loss lie where it falls.” In other words, the party who had done work or pro-vided
services before the frustrating event would bear the loss.
REMEDIES for breach of contract:
Damages (most common remedy) – victim of breach compensated as if contract had been
properly performed, but watch for: remoteness/reasonably foreseeable, contractual limitations,
mitigations, and contractual limitations (e.g. liquidated damages: When the contract specifies the
amount of damages to be paid)
Equitable remedies (hard to come by):
- Specific performance – court orders defaulting party to perform its obligations— if
damages are not suitable or adequate
- Injunction – application to the court for a court order that would prevent the defendant to
keep doing what they’re doing. Can be temporary until trial, or permanent.
- Accounting – involves forensic accounting; order for the defendant to supply the records,
which are examined by an accountant, and aim to show the profits the plaintiff should
have received.
- Quantum meruit – payment as much as earned; if the contract was fully performed, what
should the plaintiff have been paid
Chapter 10
Employment law is apart of contract law, but:
NOTE: elements of common law, contract law, agency law, and statute law overlap in
employment law.
- Employment relationship is established when an employee enters an agreement (oral,
written, implied) with an employer where the employee agrees to perform services (i.e.
told what to do and how to do it) for the employer in return for wages/pay.
- Differs from agency or partnership as employer has the right to direct: 1) the work to be
done; and 2) the way the work is done.
“Fourfold Test” for employment:
1. Control (inconclusive by itself) – Is the employee controlled by the employer?
Traditional test to determine whether an individual is an independent contractor or an
employee. An individual, who is told not only what to do, but also how to do it, is classed
as an employee. But if the person doing the work is free to decide how the job should be
done, the position is more likely that of an independent contractor.
2. Ownership of tools – did they bring their own tools to perform the work?
3. Risk of loss
4. Chance of profit
“Organization Test” examines the nature of the relationship to the business. Is the employee an
integral part of the business? When the services performed by an individual are an integral part
of the organization, the worker is likely an employee.
Obligations of employer include
- Payment of wages or salary
- Safe working conditions
Obligations of employee
- Competent work
- Honesty, loyalty and courteous
- Punctuality
-
Action in employer’s best interests
Fiduciary obligations in some cases – includes duty to act in good faith, make full
disclosure, and not take corporate opportunities for one’s own benefit.
How long do these contracts last?
- Could be a set timeframe
- Each party has the right to end the contract with reasonable notice (contract may stipulate
amount of notice to be given).
- The employer’s right to terminate even with proper notice is restricted somewhat by
provincial and federal human rights legislation and by the Charter of Rights and
Freedoms, which prohibit such action when it amounts to discrimination on the basis of
gender, religion, colour, physical disability, or other protected ground.
-
When there is Just Cause (serious breach of employment contract), there is no
requirement for an employer to give any notice.
Unjust dismissal – without cause or notice
Constructive dismissal – employer termination of a contract by a substantial, unilateral
change in the terms or conditions of employment
Remedy: reinstatement, money damages
Mitigation: obligation to lessen financial loss
Related legislation:
Trade Union Act
Labour Standards Act/Code
Workers Compensation Act – type of insurance plan to compensate workers if they are injured
on the job (for jobs with physical demands/danger)
Occupational Health and Safety Act – required employer to provide safe working environment
Smokefree Places Act
Human Rights Act
Pay Equity Act – equal pay for equal work
Professional/Trades legislation Licensing
Federal:
Charter of Rights and Freedoms
Criminal Code of Canada s.425
Income Tax Act
Employment Insurance Act
November 18th, 2014
Looks like we’ll get to the end of chapter 13 for the final exam.
Collective Bargaining:
- In Canada, trade union legislation is provincial jurisdiction (“property & civil rights”). In
Nova Scotia, legislation is the Trade Union Act.
-
1.
2.
3.
4.
Objective – to remove collective bargaining from the common law and to deal with it
administratively.
Collective Agreement – An agreement in writing, made between an employer and a
union certified or recognized as the bargaining unit of the employees. It contains the
terms and conditions under which work is to be performed and sets out the rights and
duties of the employer, the employees, and the Union. Contract must be for at least one
year. The timeline for when a new agreement should be made should be set out.
Four Stages: page 329-30
Organization – employees organize themselves; need 40% of employees to apply for
certification.
Certification – union is designated as exclusive bargaining representative for a unit of
employees. The textbooks says an applicant can apply for and receive certification if it
can show that 50 percent of the workforce has joined the union.
Negotiation – union and employer bargain for terms of the collective agreement. Once a
union is certified as the bargaining agent for the bargaining unit, it has exclusive
authority to bargain on behalf of the employees in the unit. Employees can no longer
negotiate “ their own deal” with the employer.
Administration – operating under the Collective Agreement.
Page 327: Four types of disputes that can come up with a union workplace:
1. Recognition Disputes – disputes arising between unions and employers during the
organization process.
2. Interest Disputes – disagreement between the union and employer about what terms to
include in their collective agreement.
3. Rights Dispute – disagreement over the meaning or interpretation of a provision
included in a collective agreement that is in force.
4. Jurisdictional Dispute – a dispute between two unions over which one should represent a
particular group of employees or over which union members ought to do a particular job.
Labour tribunals regulate the process, i.e. these boards take the place of courts, as they have the
advantage of expertise in labour matters. Look and act like courts, but they are not: they are part
of the executive branch of government and can be used as an instrument of government policy.
Being a member of a union, the employee then makes a contract with the union of the
organization and gives up the right to sue the employer except in the case of the collective
agreement.
A strike is the withdrawal of services by employees. Although a strike usually consists of
refusing to come to work, or intentional slowdowns, other forms of interference with production
may also be classified as strikes.
A lockout is action taken by the employer to prevent employees from working and earning
wages.
Once a strike or lockout is underway, one of the most effective techniques available to trade
unions is picketing:
-
-
-
As with striking, the use of picketing is severely limited and controlled. Picketing
involves strikers standing near, or marching around, a place of business, trying to
dissuade people from doing business there.
Picketing is permissible only when a lawful strike or lockout is in progress. Employees
who picket before proper notice has been given, or somewhere not permitted under the
labour legislation, are in violation of the law.
A picketer responsible for communicating false information to those who might cross the
picket line can be sued for defamation.
When the information communicated does not try to discourage people from crossing the
picket line, or dealing with the employer, the action may not qualify as picketing.
Picketing must be peaceful and merely communicate information. Violence will not be
tolerated. A tort action for trespass may follow the violation of private property. If
violence erupts, the assaulting party may face criminal and civil court actions. When
picketing goes beyond the narrow bounds permitted in common law and legislation, the
employer can resort to the courts or labour relations boards to get an injunction to limit or
prohibit the picketing.
Case 10-3: A requirement to return to work will not always be made by the courts unless it is
seen to be something a reasonable person would do.
Chapter 11:
AGENCY – a service relationship where one individual (a principal) uses the services of another
(an agent) to carry out a specific task on his/her behalf (often the formation of a contract with a
third party). Agency can be created by express agreement, by conduct, and in rare case by
necessity.
Duties of an agent:
- Only duty is to the principal
- Duty of utmost good faith
- Must place principal’s interest above their own
- Must keep principal’s information confidential
- Must keep principal informed of all information
- Must maintain the level of any specialized skills
- Must account for any money received and keep goo records
- Must obey lawful instructions
- Cannot act for both parties without expressed consent of principal and third party
Duties of principal:
- Pay agent fees
- Reimburse proper expenses
Other notes:
- Law deems notice to the agent as notice to the principal
- If agent acts within scope of his/her authority, the act will bind the principal
-
Performance of contract will be by principal and third party. Agent doesn’t have any
rights under the contract,
PARTNERSHIP – a legal relationship between two or more persons, for the purpose of carrying
out business with a view to profit.
NOTE:
- Partners share equally profits/losses
- Business carried in firm name
- Utmost good faith obligation to other partner(s)
- Contractual relationship
- Mutual trust
- One partner can bind the others
- Unlimited liability to third parties – personal assets exposed
- Subject to Partnership Act – sets out the basics of a partnership if the parties do not
have an agreement
- Partner cannot compete with partnership
- No secret profits
- Accounting required
Other notes:
Every partner is an agent for the other:
- Law deems notice to one partner as notice to the partnership
- If partner acts within scope of his/her authority, the act will bind the partnership
- Partnership agreement is recommended (!!!!)
Page 363-4 – Figure 11.2 on page 364: three types of business organizations: sole proprietorship,
partnership, and corporation:
- Also, not-for-profit, holding companies, and joint ventures.
- Limited partners, LLP (page 366-7, 380, standard partnership acts)
**Chart on page 381
Chapter 11:
Corporation – a separate legal entity created by legislation:
- Separate from its shareholders
- Properly authorized agent may bind the company
- Shareholders do not own specific assets, but a share interest in the corporation evidenced
by a share certificate (document: name of company, owner of the share, the number of
shares, and signed by corporate officers with a seal)
- Shareholders have limited liability for debts of the corporation
- Officers and directors report to shareholders
- Directors have utmost good faith obligation to the shareholders
- Directors have duty to use care and skill
- Only have powers set out in incorporation documents or ultra vires
-
There are different classes of shares – common shares (include the right to vote),
preferred shares (do not have the right to vote, limits the ability to influence the direction
of the company)
NOTE:
- Knowledge of corporate powers is important
- Ultra vires – ‘outside their jurisdiction’ – if a company carries out an activity that is
outside their jurisdiction, it is void
Competing interests:
- Directors’ power to manage (give themselves bonuses) vs. the protection of shareholders’
investments
- What kind of risks are the directors taking? What are they doing to protect the
shareholder’s interest? A lot of abuse of corporate power
With corporations, it is easier to raise money (sell shares or take out secured loans).
November 25th, 2014
Sole Proprietorship:
 Individual
 Simplest form of organization
 Enters into contract alone
 Sole decision-maker
 Relatively easy to transfer interest to another
Partnership:
 Two or more individuals
 Operation is governed by Partnership Act
 Each partner is an agent of all other partners in partnership business activity
 Each partner is a manager and a decision-maker
 Change in partners is difficult (retirements, etc.)
Corporation:
 Separate legal entity
 Created and controlled by Corporations Legislation (Federal and Provincial)
 Corporation acts through officers and board of directors as its agents
 Board of directors manage corporation
 The transfer of share interest is a simple transaction
Why do companies need so much regulation? There isn’t a great deal of need for disclosure in
small companies, however the more shares that are available, the less information will be
available to individual shareholders. Therefore, there is a greater need for disclosure.
When a victim sues:
 Sole proprietorship: sole proprietor faces unlimited liability
 Partnership: partner faces unlimited liability for obligations of firm or other partners
 Limited partnership: limited partner faces only loss of investment (limited liability only)



Limited liability partnership: only partner directly responsible faces unlimited liability
Corporation: shareholders face only the loss of investment
Corporation with personal guarantee: guarantor liable for debt to victim
The debts and liabilities remain with the corporations. Generally, shareholders, directors, and
other participants are not liable, but courts may sometimes “lift the corporate veil” in certain
situations and make shareholders liable (e.g., criminal activity, fraud, environment offenses)
Shareholders ELECT directors who APPOINT officers.
Strategies to manage liability risk:
1. Diligence
 Regularly attend board meetings
 Keeping informed and acting when put on notice
 Conducting risk assessment
 Establishing compliance policy and monitoring systems, including timely reporting and
education
 Seeking advice
 Being sensitive to conflict of interest
2. Indemnification
3. Insurance
4. Resignation
Know about shareholders, franchises, flexibility, shareholder’s agreement,
Interests in land:
 Real property - Land and anything permanently attached.
 Chattels –Personal property (furniture, vehicles, etc.)
 Fixtures – chattels attached to the land
Fee simple – an estate in land that represents the greatest interest that a person may possess,
convey or pass on to another by deed, will, or intestacy.
Deed – written or printed instrument effecting legal disposition of interest in land; must be
signed, sealed and delivered.
Leasehold Estate – grant of the right of possession of property for a period of time, in return for
payment of rent to the landowner
Life interest – an interest in land in which the right to possession is based upon a person’s
lifetime.
Easement – a right to use property of another person, usually for a particular purpose (i.e.
utilities)
Right of Way – a right to pass over the land of another usually to gain access to one’s property.
Dominant tenement – a parcel of land to which a right of way or easement attaches for its
benefits.
Servient tenement – the parcel of land that is burdened by the right of way or easement
Restrictive covenant – a means by which an owner of property may continue to exercise some
control over its use after the property has been conveyed to another (runs with the land).
Mineral Rights – rights to minerals below the surface (in N.S., held by Crown). Crowns can
grant exploration permits, mining leases, etc.
Riparian rights – common law right of riparian owners to take water for own use; cannot
interfere with flow to downstream users.
Adverse Possession – continuous, open, notorious possession inconsistent with the title of the
true owner for a period of time (20-40 years)
Joint Tenancy – interests are identical in time, interest and possession; undivided interest; right
to survivorship
Tenancy-in-common – interests do not need to be equal; no right of survivorship
The Law of Mortgages: A mortgage is a legal document; agreement between a debtor and
creditor in which title of the debtor’s property is transferred to th creditor as security for debt.
The mortgagor retains possession of the premises until the debt is paid or default occurs.
Four covenants by mortgagor to mortgagee:
1. pay the mortgage payments;
2. Pay the taxes;
3. Keep the premises insured;
4. Not to commit “waste”
Foreclosure – statutory process whereby mortgagees can apply to court to take possession of
property on default of mortgagors, to sell the property in sheriff’s sale, and take judgment against
a debtor.
Misterm:
 5 questions, 10 pts. each.
 1 question of short answers, 4 cases