Chapter 1 Risk Management and Sources of Law.pdf Format

7/29/2019 Chapter 1 Risk Management and Sources of Law.pdf Format

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1.1Copyright 2011 Pearson Canada Inc.

Managing The Law, 3/eChapter 1. Risk Management and Sources of Law

The Nature of LawA Law is a rule that can be enforced by the courts (distinguishfrom moral obligation).

Duty to Rescue Scenario: You are in a canoe, all alone. You see

a person thrashing about in the water, about 100 feet away, in

distress. The water is cold, and you do not have a life jacket.

You are an adequate swimmer. What do you do, for the person in distress? Do you have a moral obligation to save the person- if so, why?

What is the source of that obligation.

Do you have a legal obligation to rescue the person? If Yes,what is the source of that obligation?

What is the consequence of a failure to comply with any moralobligation in the circumstances, as set out? What is the

consequence of a failure to comply with any legal obligation in

the circumstances, as set out?


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Chapter 1 Overview Sources of law:1) the Constitution2) the Parliament and the legislatures3)

The Courts

Relevant for Consumers generally but particularly relevant forBusiness people.

Legal Education plays a critical role in Risk Management: theprocess of identifying, evaluating and responding to thepossibility of harmful events (i.e. avoid getting sued).


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Why Study Law?

Examples of questions that may arise in Business:Contract Law

does a contract for products and services have to be in writing? Is an Offer to Lease a vacant store in a shopping mall a valid contract? Is a contract with a Minor a valid contract: does the validity of this

contract depend upon the purpose of the contract?

Employment Law

Do I have to warn my employee of her poor performance, before I fireher?

Tort Law

If somebody slips and falls on the icy sidewalk outside my store, am Ilegally liable?

uMy competitor wrote a letter and circulated it in my community, allegingthat the products that I sell are defective: can I sue my competitor to havehim stop the circulation of this letter?

uAs an auditor, do I need to be concerned as to the audience for theinformation in my financial statements?

What about Other obligations must I comply with municipalrestrictions?


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Concept of Risk Management A Business person must manage legal risks: Risk Management is the

process of identifying, evaluating and responding to the possibility of

harmful events.

1. Identify the Riski.e. What

s the likelihood that I

ll get sued, if I continue to sell adefective product?

2. Evaluate the Risk:What is the likelihood of liability? Is it worthwhile to manage the

risk or should I simply accept the risk?

How serious is the risk that I will get sued? Is it likely thatthe lawsuit would be successful, against my company?

3. Response to the Risk:Reaction to the risk: What should I do, about the risk? What are

my options?


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Forms of Risk ManagementForms of risk management:(1)Risk avoidance:elimination of risk

withdraw dangerous product from market(2) Risk reduction:

minimization of risk

i.e. modify product to reduce dangerPractical example: A bank manages its risk inlending monies on a commercial mortgage by

registering an interest (i.e. a lien) on title: if the bankdoes not get its monies back, it may seize the

property and sell it, to recoup its monies.


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Forms of Risk Management contd

(3)Risk shifting:Transfer the risk to someone else

Use an exclusion clauses,Hire an independent contractorBuy liability insurance for losses caused by danger(4)Risk acceptance:Accept the risk

Do nothing: when is this a suitable strategy?


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Examples of Risk Management3 Methods to Manage Risk

1. Insurance : a contract in which one party agrees, in exchange for a

price, to pay a certain amount of money if another party suffers a loss.

Insurance basically shifts the risk.

i. Liability insurance [Note: Duty to Defend Concept]

ii. Property insurance i.e. motor vehicle insurance

2. Exclusion and limitation clauses: These are clauses which are

contractual terms that change the usual rules of liability or that limit the

amount of compensation available.

u At a ski resort, you will have to sign a waiver that you will not sue forinjuries no matter what.u At a parking lot, there may be a sign stating that customers park at

their own risk and the parking company is not liable for property

damage that occurs on site.




Methods to manage Risk

3. Incorporation: An individual who chooses to act in a

personal capacity may be held personally liable for any debts

or liabilities incurred by the business.

To avoid some of those risks, many businesses are set upas companies or corporations. The result is that it is the

company itself and not the directors or shareholders that

may be held liable for the debts.

Note: the concept oflimited liability means directors andshareholders are not usually liable for debts of thecompany. But, employees, directors and officers may still

be held personally liable for the torts they commit.




The Nature of Law rules and lawsA law is a rule that can be enforced by the courts.

all laws are rules but not all rules are laws rule against handling soccer ball is not law

Distinguish between morality and law moral wrongs are informally sanctioned

If you cheat on your partner, is that a moral wrongor a legal wrong? What is the consequence?

legal wrongs are formally sanctionedImprisonment or damages are a penalty for a legal

wrong


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Copyright 2011 Pearson Canada Inc.


Jurisdiction refers to a geographical area that uses the same set oflaws.

There are 2 types of legal systems:

1. Civil law jurisdictions can be distinguished from common lawjurisdictions. These trace their history to ancient Rome, France, etc.2. Common law jurisdictions trace their history to England.Some types of laws are the same across Canada, i.e. criminal laws and

constitutional laws. (i.e. There is a federal Criminal Code that applies to

all Canadian citizens) All provinces in Canada rely upon the common law system, other than

the province of Quebec which uses the civil law system.

Note: *Civil Law refers to a legal system as per above but it also refers to Private Law as distinguished

from Public Law.

Civil Law and Common Law


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The Law


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A Map of the Lawpublic law vs. private law

Public law: matters of public concern

Includes constitutional law, administrative law,criminal law, and tax law.Note: Criminal law and tax law are federal in

nature, the Criminal Code is applicable across

Canada. Private law: matters of private concern Includes the law of torts, the law of contracts,

and the law of property.


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Public Law1. constitutional law rules governing basic operation of law and politics. Constitutional Law determines who is entitled to create

and enforce laws and it establishes the fundamentalrights and freedoms that Canadians enjoy.

2. Administrative law

rules governing creation and operation of agencies,boards, tribunals, and commissions that exercise

delegated authority. Administrative law is concerned with the creation and

operation of the regulatory bodies, agencies,commissions and tribunals that derive power from

being delegated or assigned responsibility fromgovernment.


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Public Law 3. criminal law Deals with offences against the state. It is concerned

with people who break rules that are designed to protectsociety as a whole (i.e. prescribes punishment for

assault) It is applicable across Canada.


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Public LawCriminal continued:crimes in the business world:

white collar crimes (committed by people in suits) corporate crimes (committed by a company itself)

a company can now be convicted under the Criminal Code on thebasis of acts performed by directors, officers, managers, partners,employees and agents s.217.1

Note: A singular act may be both a criminal act and a tort (a type ofprivate wrong). If Mark punches John, Mark may be convicted ofassault and also may be sued by John civilly for damages.

4. Tax law

Is concerned with the rules that are used to collect money for publicspending.


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Private LawPrivate Law is concerned with rules that apply in privatematters. (Note: private law can also apply to governments -(i.e. a private person can sue government).

3 Categories:

1. Tort

Rules governing wrongs against personsThis can be sub-divided into:

i) intentional torts (ie. assault and false

imprisonment);

ii) business torts such as deceit and conspiracy; andiii) negligence (i.e. I dont shovel my icy sidewalk andyou slip and fall and sue me)


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Private Law2. contract law

Rules governing creation and enforcement ofagreements

This can be sub-divided into:i)sale of goods;

ii)use of negotiable instruments;

iii) real estate transactions;

iv) the operation of corporations; and

v) employment relationships


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Private Law

3. property law

rules governing acquisition, use, and disposition ofproperty

This can be sub-divided into:

i) real property which involves lands and things affixedto land

ii) personal property; and

iii) intellectual property.

Note: There are also several areas of law that deals with all forms ofproperty like the law of succession and the law of trusts


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Sources of LawHierarchy of Sources of Law:

1) Constitution: The Constitution Act, 19822) Legislation: law created by Parliament or the

legislature i.e. the Criminal Code of Canada

3) Courts: courts interpret legislation and makedecisions, these decisions form law called

common law.


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The Constitution Provides basic rules for legal and political systems

General rule: every law in Canada must be

consistent with the Constitution. If it is notcompatible, the law is of no force or effect

(section 52)

Difficult to amendamending formula requires consent of both

Parliament and 2/3 of all provinces with at

least 50% of population.


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Federalism Canada is a federal country: it has 2 levels of government(provincial and federal)

1. Federal government

represents entire country

Parliament located in Ottawa governs the country as awhole; composed of two parts: MPs who are electedand the Senators who are appointed.

Queen of England (because Canada began life as aBritish Colony).


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Federalism

2. Provincial and territorial government

represents province and territory Members elected (MLAs) that sit in the Legislative

Assembly (elected)

The leader of party forming government is thepremier


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Division of Powers The Constitution creates division of powers

Areas of authority are divided into federal or provincialauthority:

(1) Section 91 specifies matters under Federal control,

such as: crime, bankruptcy, copyright, etc.

(2) Section 92 specifies mattes under Provincial

control: property, civil rights, etc.

Federal government holds residual power(areas notspecifically allocated to federal or provincial

responsibility will fall within federal authority (i.e.

telecommunications)


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Division of Powers

Doctrine offederal paramountcy: this doctrinedetermines which law is pre-eminent if there is a

conflict between a federal statute and a

provincial statute (it will be the federal)

ultra vires legislationThis is legislation which is created outside scope of

governments authority, it literally means beyond the

power). Such legislation is of no force or effect (section52).


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Charter of Rights and Freedoms Introduced in 1982, when it was written into the

Constitution

Introduced to protect basic rights and freedoms: Fundamental freedoms include freedom of conscience

and religion (section 2);

Freedom of mobility protected (section 6) Equality rights protected (section 15) every individual is equal before and under the law

and has the right to the equal protection and equal

benefit of the law without discrimination


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Charter continued

Prohibited grounds of discrimination includerace, sex and religion, but not poverty.

interests notprotected by Charter: economic andproperty interests

Note application of Charter: It is not applicable to

private disputes.

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Limitations on CharterRights1. The Charter was introduced to govern the relationshipbetween the individual and the state (section 32) So, theCharters rights and freedoms have full effect only if a personis complaining about governments behavior. It does not

apply directly to disputes involving private parties.

2. The Charterdoes not generally apply against corporations. It probablydoes not apply in favor of private corporations. In other words, a privatecorporation would probably not succeed in bringing an allegation that a

piece of legislation was infringing a Charter right. (This is related to No. 1above).

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Charter

3. Charterrights are subject to reasonable limitations

Section 1 states rights and freedoms are subject tosuch reasonable limits prescribed by law as can be

demonstrably justified in a free and democraticsociety.

So, although a particular legislation may infringe uponan individuals Charter right, the infringement may bedeemed to be acceptable, because the infringement isconsidered reasonable in all the circumstances.

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Charter

4. The Charteris subject to the notwithstanding clause The government can override some rights and

freedoms.

An individuals Charter rights may be infringed by aparticular legislation, however, the government canget away with the infringement because thegovernment has invoked the notwithstanding clause.

Note: this clause (s.33) is used very rarely.

uQuebec used section 33 to enact a law that violated theCharters right to freedom of expression, to enact Bill101, a Bill which prohibited the use of languages otherthan French on outdoor signs.

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CharterRemedies section 52: Constitution as supreme law

If a law is law inconsistent with Charter, it is of no forceor effect.

What are the remedies if a Court finds that a law isinconsistent with the Charter? Refer to Section 24:

enforcement of rights and freedoms:

1) Declaration:A Court may simply declare (i.e. announce) the Charter

has been violated. The legislature then must find a

solution to the problem.

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CharterRemedies2 ) Injunction:A Court may impose an injunction that requires the government

to address the problem in a certain way.

3)Striking down:A Court may strike down or eliminate the statute, this may take

effect immediately or may be temporarily suspended.

4)Severance, reading down or reading in:A Court may save a statute by re-writing part of it, or if only part

of a statute is offensive, that part may be severed or cut out, or if

a statute is written too broadly, it may be read down so that it

applies only where it can be justified. In contrast, if a statute is

written too narrowly, a court may read in a broader

interpretation.

5.DamagesA Court may award damages to aggrieved party.

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CharterDialogueThe Process:

Parliament creates laws through legislation Courts identify Charterviolations Parliament may respond by amending or enacting laws to conform

with Charter

Doctrine of Parliamentary Supremacy While Judges are required to interpret constitutional and statutory

documents, they must also obey them.

Members of Parliament are elected and accountable. Judges are appointed and unaccountable.Should ultimate authority therefore rest with parliament?

How does this impact the decision of a Court to strike down, read in,or sever an offending portion of a statute?

Managing The Law 3/e


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Legislation laws created by Parliament or legislature

statutes, regulations, by-laws,legislative process : Introduction of Bill, majoritysupport through series ofreadings, finalized by RoyalAssent.



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Courts The 1st source of law is the Constitution (which includesthe Charter).

The 2nd source of law is legislation. This is law that iscreated by Parliament or the Legislature.

The 3rd source of law is the Courts. The Courts interpret and apply legislation and create and

apply common law.

Statutes often permit an entity other than Parliament orthe legislature to make rules without the need to gothrough the entire legislative process: these regulations

are subordinate legislation. i.e. Parliament created the

CRTC and gave it power to regulate broadcasting in

Canada.



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Courts An important type of subordinate legislation involves

municipalities.

The Constitution gives the provinces the power to createmunicipalities and when a province creates a municipality

it gives that new body the authority to pass by-laws, which

is a type of subordinate legislation that is created by amunicipality.

By-laws are used to license business, impose some sorts oftaxes, plan commercial developments and regulate parking.



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The Common Lawcommon law

Means the legal system inherited fromEnglandcompare: civil law inherited from ancient Rome

Also refers to the law made by Judges inCourt when they interpret legislation.



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Common Law and Equity historical developmentsPhase I: law

only one set of courts in England, rules often rigid and harshPhase II: law and equity

King of England asked Chancellor, his legal and religiousadvisor to act on his behalf. The Chancellor got busy and

appointed others. This new court was less concerned with

rigid rules and more concerned with justice, their decisions

were based one quity (fairness), and the court became knownas the court of equity.

Phase III: fusion

law and equity combined into single court so every court todayis a court of law and a court of equity.



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Equity Nature of equity traditional equity

disputes resolved by conscience of king or chancellor modern equity

disputes resolved by rules (essentially same as law) occasional differences remain between law and equity (e.g.damages at lawspecific performance at equity)

equitys trust property held for benefit of another person

trustee holds legaltitle to property beneficiary enjoys equitable title to property



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Chapter 1 Risk Management and Sources of Law.pdf Format

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