Business Law Comprehensive

8/10/2019 Business Law Comprehensive

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CH1 LAW, SOCIETY AND BUSINESS

THE ROLE OF LAW

How do we define law?

-law is needed to protect persons, property & society; prohibits conduct society believes to be harmful to others

-law also prescribes day to day rules (i.e. traffic laws)

-law gives govt power to act for benefit of society

-police, firefighters, education, taxes

-we expect govt to obey rule of law: principle to treat all persons equally

-law regulates individuals interactions [civil law]

-facilitates bargaining b/c we can rely on courts to enforce agreements

WHO MAKES LAW?

Law comes from:

a) Constitution- a basic law; habitually obeyed by citizens and regarded as legitimate

-a higher law that governs all other lawsb) legislation- statute law (i.e. Acts); passed by parliament and by provincial legislatures in compliance w/ constitution

i) subordinate legislation - rules passed by statute by a body designated in statute (i.e. federal/prov cabinet) or

admin body (i.e. CRTC)

aka: regulations: rules implemented by govt as result of au thorization given in statute

ii) administrative rulings- rulings handed down by admin bodies created by legislation to hear complaints by

individuals

c)court decisions- judgments handed down by judges after hearing a case in court [aka case law]

CH2 MACHINERY OF JUSTICE

CLASSIFYING LAW

Public and private law is subdivided into topics: substantive & procedural

Substantive law: rights and duties that each person has in society

i.e. right to own property, to vote, sell property

Procedural law: law that deals with the protection and enforcement of substantive rights and duties

Substantive is the what and procedural is the how law is enforced LEGAL SYSTEMS: CIVIL LAW AND COMMON LAW

regions of the world under each system

civil law europe, Africa, south American

-system of law w/ comprehensive code derived from Romans

-if courts cant apply code to solve a case, they must apply its general principles (thus, similar cases can have

very different outcomes if courts dont agree with prior code a pplications)

common law England, Canada, united states, Australia


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- Case based system of law, uses recorded reasons given by courts for their decisions

The Need for Consistency and Predictability

-consistency can reduce the number of disputes that go to court b/c parties can anticipate court rulings

COMMON LAW: THE THEORY OF PRECEDENT

Certainty vs. Flexibility

-common law judges try to follow rulings of already decided cases

Stare decisis - to stand by previous decision

-but, in some cases, stare decisis is nonsensical

-thus stare decisis is not absolute; judges can distinguish current case from precedent by dwelling on small differences,

this way they can adjust to different circumstances and values

Accommodating Change

Overrule- to declare a precedent no longer binding

-to overrule a precedent, it must be addressed by a court higher than the one who established the precedent

Hierarchy: Supreme, Appeal, First instance(trial)-courts hesitate to overrule precedents established at the same level, goes against consistency and predictability

THE SOURCES OF LAW

The variety of sources

-judge- made law is the oldest form of law, but govts also makes laws

-govt law comes from statutes from parliament and provinces

Subordinate legislation- law created by administrative agencies w/ authority given by a statute

Statutes

-legislature can enact statutes to codify existing case law precedents in an area

-so instead of looking through 10 cases to determine the full law, we just show it on 1 statute

-courts are often summoned to interpret statutes for individual cases

Strict interpretation - courts tend to apply provisions of a statute only where the facts of the case are specifically

covered by the statute

-courts can take a literal definition of words as interpretation (statutory) or they can use liberal approach ; and consider

the context, the intent of the law

-courts are encouraged to take a liberal approach, not statutoryActive legislation: Administr ative Law and Government programs

-active legislation gives govt power to carry on a program, levy taxes, and provide revenue for a stated statute purpose

i.e. to build a hospital

Case Law: Judge-made Law

The common law- collection of case law precedents

-statute law is growing, but most laws are still case law precedents


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Settlement Out of Court

Advantages

-majority of serious grievances are resolved by settlement

Settlement- out of court procedure where one party pays or performs an act so the other party waives all rights

arising from the grievance

-settlement is fast and avoids court fees, reduces uncertainty

-the courts provide a final compromise for parties who cant settle, court rulings also clue parties into their likelihood of

success.

Procedure before trial

-well defined procedures help courts work efficiently

-most litigation proceeds through courts via an action

-most actions start by

Issuing: commencing lawsuit by filing a copy of the statement of claim w/ court office

Serving: providing copy of issued claim to each defendant-the statement of claim describes the reason for the action (aka cause of action)

-even after clai m is served, case doesnt go to trial immediately

Pre-Trial procedure:

a) Defendant gives notice to court and plaintiff that he intends to contest the action by filing an appearance [notice

of intent to contest action]

-plaintiff gives statement of claim, setting out the facts that given rise to her cause of action

-defendant replies w/ statement of defence, agreeing or disagree with facts

b) documents are assembled to form the pleadings

pleadings- documents filed by each party to an action providing info it intends to prove in court

-must give sufficient notice of evidence, cant spring parties with surprise evidence

c)some provinces provide for various forms of examination for discovery

examination for discovery- processes allowing either party to examine the other in order to narrow the issues

-helps guide parties on whether to proceed w/ trial

d) parties conference with a mediator to review issues in dispute and attempt to settle as many issues as they can so any

eventual trial will be shorterThe Trial

-in trials, the burden of proof is on plaintiff

-the standard of proof is the balance of probabilities or more likely than not

Hearsay is not admissible evidence

-credibility of oral evidence cant be properly assessed when it is secondhand

Appeals

-appeals must be made in 30 days or less


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-appeal court reviews evidence forwarded from trial court

-appeal court can also review proceedings if a party says the trial judge erred in instructing jury or in admitting or

excluding certain evidence

Costs

Who provides funds for the court system?

-govt pays expense of sustaining courts, incl. salaries of judges, clerks and building maintenance

-litigants pay for specific charges such as writs, or registering a judgment

Solicitor-client fees

-litigants pay for their own lawyers

Legal aid - situation where govt pays for legal services to low income litigants

-clients pay a lawyer a solicitor client fee - pymt for time lawyer spends talking with client and giving advice

Party and party costs- an award that shifts some litigation costs to the losing side

-the winner shouldnt have to pay for the court fees

Total costs of litigation-s/c fee (solicitor client) is almost always greater than the award of PnP (party and party) costs

ALTERNATIVE DISPUTE RESOLUTION (ADR)

Arbitration- an arbitrator adjudicates the matter and parties agree to be bound by the decision

-parties design their own process; rules, forum, arbitrator and even applicable laws

Mediation- a neutral 3 rd party tries to assist both parties to reach a settlement

-mediator has no power to make a binding decision

Advantages of ADR

i) Speed- faster than courts

ii) Cost- speed saves money

iii) Choice- parties choose mediator/arbiter who they believe is suited to resolve the issue

iv) Confidential- parties can agree to keep dispute private

v) Friendly- less adversarial than litigation

CH3 LAW OF TORTS

BASIS FOR LIABILITY

FAULT-blameworthy or culpable conduct that to the law is unjustifiable b/c it disregards othersSTRICT LIABILITY-liability that is imposed regardless of fault

VICARIOUS LIABILITY- liability of an employer to compensate for harm caused by an employee

-more and more courts are holding employers liable for damaging acts of employees even when workers are told not to

commit damaging acts:

a)workers dont have as much money as bosses to pay for damages

b)fairness; if the boss profits from the activity, he should be liable for any loss

INTENTIONAL TORTS-torts involving conduct that wasnt accidental


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Nuisance

Public nuisance- interference w/ lawful use of public amenities

i.e. blocking roads, emitting dangerous substances publicly

-actions are normally taken by govt

Private nuisance - interference w/ an occupiers use and enjoyment of her land

i.e. excess noise, noxious fumes

-law doesnt give occupier right to absolute freedom from nuisances, courts must weigh competing interests and degree

of interference, the occupiers enjoyment of the land and the economic importance of the offending activity

Assault and battery

Assault-threat of violence to a person

Battery- unlawful physical contact with another

False Imprisonment and Malicious Prosecution

False imprisonment - unlawfully restraining another person-physical restraint is not necessary, fear caused by a st ore clerk yelling STOP THIEF! is false imprisonment

-but someone who alerts the police about suspected crime isnt liable for false imprisonment even if the crime is

unfounded

-BUT, if the clerk didnt have honest belief that a crime had been committed, hes guilty of malicious prosecution

Malicious prosecution - causing a person to be prosecuted for a crime w/o honest belief of its occurrence

Defamation - making an untrue statement that injures the reputation of another

Two forms: a) libel - written defamation b) slander - spoken defamation

-defamation requires publication , the communication of offending statements to someone other than the one defamed

-defamation invalid if offending statements are true

-statements made in parliamentary debate, proceedings in law and in royal commissions have absolute privilege

Absolute privilege- complete immunity from liability for defamation

-absolute privileges are granted to promote candid discussions

-sometimes people have qualified privilege

Qualified privilege- immunity from liability for defamation provided a statement was made in good faith

i.e. reference letter writing

NEGLIGENCE-carelessness causing injury to a person or his property

Requirements of negligence:

a) Defendant owed a duty of care (is the activity one that ought to create a duty?)

b) Defendant breached duty of care (did defendants conduct fall below standard required?)

c) Defendants breach caused injury to plaintiff


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Duty of care-a relationship so close that one must take reasonable steps to avoid causing harm to the other

-plaintiff must show that defendant owed him a duty of care

-generally, a duty arises where the defendant could reasonably have foreseen a risk of harm to the plaintiff

-sometimes, courts have upheld duties owed to parties who arent directly injured

i.e. negligent driver owed duty to the parent of the plaintiff for causing her shock

Standard of Care- the level of care that a person must take in the circumstances

-everyone must take reasonable care to avoid causing foreseeable injury to ppl or property

-court also considers the likelihood harm will result from the activity and its potential severity

-while considering social utility and feasibility of eliminating the activitys r isk

-where risk of injury is small, it may be unnecessary to not take every possible precaution vv

-But, remember, negligence is based on fault, it is possible to not be liable for a standard breach causing injury if it can

be shown that the offence occurred w/o fault on defendant

Causation - for action in negligence to succeed, plaintiff must also show that the breach of duty caused injury

-no matter how blameworthy, someone wont be held liable for damage he did not directly cause

i.e. tourist falls from boat into ice water and dies, boater owed duty to attempt to rescue and didnt do it, he still aint

liable b/c even if he tried to rescue, tourist wouldve been dead anyways

-the closer in time someone is injured to the action causing the injury, the more likely the defendant will be found to

have caused the injury vv

Remoteness of damage

-DFD (defendant) might not be fully liable if the actual damage caused by the act wasnt foreseeable by a reasonable

mind

Burden of Proof

-usually PT (plaintiff) has to prove all elements of the case, but sometimes they may not know how it occurred

-if PT can show that the DFDs behavior was likely the cause of the injury, then burden of proof shifts to DFD to show he

wasnt at fault

The plaintiffs ow n conduct

-sometimes even if DFD was negligent, PT is largely responsible for his own injury

-in the old days, courts applied contributory negligence

Contributory negligence- negligence of injured party that contributes to her own injury

-now, judges attribute liability to both DFD and PT

i.e. its partly your fault you broke your neck b/c you didnt wear a seatbelt


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Injunction- order restraining a person from doing or continuing a particular act

Mandatory injunction- order requiring person to do a particular act

CH4 PROFESSIONAL LIABILITY: LEGAL DILEMMA

LIABILITY OF PROFESSIONALS

-professional liability is considered under: Contracts, Fiduciary Duty, Tort Duty

Contractual Duty

-an agreement to give professional service to client contains a promise (expressly stated or not) to perform the services

with due care

-a breach of that promise is a contract breach, client can sue for damages

Fiduciary Duty - a duty imposed on a person who stands in a special relation of trust to another

-a pros duty expands beyond contractual duty.. a fiduciary duty can exist, even where services are free of charge

Relationships with fiduciary obligation generally possess:a) The fiduciary has scope for exercise of some discretion or power

b) Fiduciary can unilaterally exercise power which affects the beneficiarys legal or practical interests

c) Beneficiary is peculiarly vulnerable or is at the mercy of fiduciary holding the power

i.e. lawyer, doctor

-a pro with fiduciary duty has duties beyond a contract or tort; he must act honestly, in good faith and only in the best

interest of the client

i.e. accountant cant use client info to make investments for client w/o consent

-fiduciary cant plac e himself in a conflict of interest and has a duty not to profit at the clients expense

LIABILITY FOR INNACURATE STATEMENTS

Misrepresentation

-if a person makes an untrue statement, knowing it is untrue, or without believing its truth honestly, with the intent to

deceive, then it is fraudulent and is the tort of deceit - making false statement to mislead another

-the victim of deceit (if relying reasonably on the statement) can recover losses from the deceitful one

-deceit also applies if someone deliberately conceals or withholds informationSimilar; fraudulent misrepresentation - false statement made to cause injury to another

Negligent misrepresentation - incorrect statement made without due care for its accuracy

Hedley Byrne Principle

-firm A asks their bank (BA) if a potential client (X) is credit worthy. BA asks Xs bank (BARBAR). BARBAR said yes. It turns

out X wasnt credit worthy and A suffered big losses.

-courts held BARBAR liable even though they had a disclaimer in their correspondence


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Result: negligent misstatements can render people liable for losses to a 3 rd party (someone outside of a contract

or fiduciary duty)

Testing for existence of a duty to care

i) Is there a sufficiently close relationship b/w plaintiff and defendant that the defendant should know

carelessness will damage the plaintiff?

ii) Are there any considerations that would reduce on limit the scope of the duty to the plaintiff?

-thus for liability; information must only be used for the purpose which the information was generated

i.e. an auditors report is to show shareholders how the firm is being managed, not to guide investment decisions .. the

auditors owe no duty to anyone who uses it for investment

-HB principle requires an existence of duty.. AND that the plai ntiffs reliance on the information was reasonable

Ch5 Formation of a Contract: Offer and Acceptance

NATURE OF A CONTRACT

-contracts start w/ a promise, but not all promises are enforceable by law

NATURE OF AN OFFER-contract doesnt exist until offer made by party and accepted by another

Offer - a tentative promise by one party subject to a condition or request to another party

An invitation is not an offer; a merchant is not obligated to sell to everyone who reads an ad (its supply may be limited)

he is the offeree

Both parties must be aware of the offer and counter offers, else any coincidental acceptance under the same terms still

dont qualify as an acceptance

COMMUNICATION OF AN OFFER

-form of offer isnt important as long as its sense is understood

i.e. opening a taxi cab door is an offer

offer can be oral, writing, or gesture

-offeree cant accept an offer until he is aware of it

i.e. joe finds Tams lost dog, joe didnt know there was a reward, he did it out of kindness, he isnt entitled to reward

-law on whether party using services/good constitutes accepting an offer differs across provinces.

OFFERS MADE VIA WRItTEN DOCUMENT TO OFFERREE:

Standard form contracts: risks and benefits

Standard form contract - offer presented in a printed document, the terms cant be changed and must be accepted as is

i.e. theater tickets, railways, parking

-standard forms are practical to prevent every patron from bargaining for hours

Protection against Standard Form Contracts


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1. If business is regulated by govt board, its terms are subject to approval

2. Some segments of the public are offered special protection i.e. consumers

3. For unregulated activity, the public receives as much protection as the courts can find in contract laws

All terms binding?- if offeree convinces courts that she wasnt aware of a certain term, then the offerer must prove that

it made sufficient efforts to make the offeree aware of it, else the offeree is not bound by it

Contract terms on a sign must be evident to offeree AT the time of making contract

LAPSE AND REVOCATION OF OFFER

Lapse - termination of offer when offeree fails to accept within specified or reasonable time

How an offer may lapse:

1. Not accepted within specified time

2. Not accepted within reasonable time (if not specified)

3. Either party dies or becomes insane prior to acceptance

Revocation Offeror may revoke an offer any time before acceptance, even if he promised elsewise. He must provide notice to make

it effective

Must revoke before it is accepted

If offeree has sufficient reason to believe that the offer may have been revoked even without notice, the courts will

consider it revoked

Options

Offeree Powers

Can bind offeror to keep offer open for a specified time:

1. Obtaining written offer under seal

2. Option; pays money to offeror for exclusivity rights and/or valid acceptance times

REJECTION AND COUNTER-OFFER BY OFFEREE

-only when both parties accept the terms unequivocally, there exists a contract

An inquiry whether this is the best offer by the offeree isnt a rejection, the offer st ill stands

Elements of AcceptancePositive nature

-must be made in some positive form (word, conduct)

-if acceptance is via conduct, conduct must refer unequivocally to the offer made

-a conduct may comply with a means of acceptance in an offer but still not constitute as acceptance

i.e. offer: if some one named Bob Johnson walks their dog at the mall tomorrow, then he agrees to sell me his car for $2.

Silence as Acceptance


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Only if:

1. If parties have habitually used this method to communicate acceptance

2. Agreed in advance that silence is sufficient

Communication to Offerer

-generally, offeree must communicate acceptance to offeror

-sometimes offeree can accept an offer if offeror asks offeree to perform an act to implying acceptance

If a consumer mistakenly pays for unrequested services he may request a refund

Performance of conditions stated by offeror is an acceptance (smokeball influenza example 109); an offer can also be

made to an INDEFINITE number of people unknown to the offeror

Moment of Acceptance

Business Negotiations: Tenders

Inviting Tenders- seeking offers from suppliers

-purpose of tenders: obtain offers from tenderers for a fixed qty of G&S over stated period or explore market ofavailable suppliers and develop best terms for proceeding w/ project

-if a tenderer submission is sent, it is considered acceptance, the invitor must consider all submissions by law or be

in contract breach

A contract EXISTS when the offeree ACCEPTs, prior to that, theres no contract

Standing offer- an offer that may be accepted as needed from time to time

i.e. city doesnt have to give snow removal company a fixed some for fixed qty of snow removal, no one knows how

severe the winter will be.. the city can make specific requisitions as needed over the winter

-snow removal company has the right to withdraw from standing agreement if they find the terms

unsatisfactory

TRANSACTIONS BETWEEN PARTIES AT A DISTANCE FROM EACH OTHER

Modes of Acceptance

-when parties are distant, Ree can only accept in the way proposed by Ror

Postal rule- acceptance by mail is complete when a properly addressed and stamped letter of acceptance is dropped

in the mail.. effect is not instantaneous when offeror REVOKES via post however, it must be received by offereeReceived: arrived at address

For instant methods of acceptance, like phone,fax; the offeror must receive the acceptance or he isnt bound .. email

however, is in effect the moment the recipient is capable of retrieving it

-if Ror states expressly how acceptance is to be communicated then it must be done in that manner

-if Ror merely states a preference for acceptance by means other than post, than Ree can still accept via post

-Ror isnt bound unless the acceptance reaches him before lapse

Modes of Revocations


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-revocation by instantaneous means of communication is subject to same rules of acceptance (stated above)

-but, revocation by post is effective only when notice is actually received by Ree, not when it drops in the mailbox

-thus, Ree can accept a binding contract formed after revocation has been mailed but not yet received

-but what does received mean?

-generally, unless offeror knows or ought to know that the revocation wont reach Ree at her usual address,

delivery at that address establishes the fact and time of revocation, and Ree is deemed to have notice from that time

-if Ror can show that his revocation by post/courier/fax arrived at Rees address, it is effective.

Jurisdiction of Contract

Acceptance by mail- where the mailbox is

Phone/email/fax- where and when t eh offeror receives the acceptance

Bilateral action- both parties are bound from the moment the offeree indicates intention to perform

Bilateral contract- offeror and offeree trade promises and are bound to perform

UNCerTAINTY IN THE WORDING OF AN OFFER

Ambiguous and Uncertain terms- not enforced by courtsAmbiguous terms: fair, favorably consider, satisfactory

-courts tend to try to make contracts enforceable where they can be interpreted as such:

i.e. if terms can be calculated or interpretable in local customs or trades

Ch6 Formation of Contract

MEANING OF CONSIDERATION

-an accepted offer wont be recognized as enforceable contract unless it has consideration

Consideration - the price for which the promise or the act of the other is bought

-in unilateral contract, the price paid for the offerors promise is the act done by the offeree

-in bilateral contract, price paid for each partys promise is the promise of the other

Showing consideration- an alteration in actions taken for a promise of another

Gratuitous Promises - a promise made w/o bargaining for or accepting anything in return

-not a contract and not enforceable in law

Charities suing pledgers who dont perform:

Courts can find consideration if charity began a project in response to the donors promise, BUT it must find proof

that the doing of the project was implicated by the donor* conditional on his grant

*if some considerational act was SUGGESTED by the CHARIT Y, it doesnt count! i.e. well name a unit after you

IT IS GRATUITOUS

Consideration Adequacy


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Even if found that the consideration the promisee made is doesnt really have much value, as long as it was made

honestly in good faith, it is binding. Else, no one can be truly sure if their considerations are truly adequate and

result in constant lawsuits over the matter.. contrary to the basic principles of law (I wont sue you if you pay me..

but I couldnt sue anyways yet I didnt know)

MOTIVE CONTRASTED W/ CONSIDERATION: PAST CONSIDERATION

Motives have no effect on the binding of a contract. I can offer to pay you (the war veteran) out of respect. But I

dont. You cant sue me because you paid no consideration and my sense of morals to pay you is not bin ding. No

sense of bargain, no deal.

RELATION b/w EXISTING LEGAL DUTY AND CONSIDERATION

-if A has existing contractual duty to B, a later promise by B to pay A something extra is not binding

-A was already bound to perform and would be breaching contract i f he doesnt

-Whether a contract is binding for a police officer receiving payment or not for their services depends whether the

promise makes him go beyond his normal duties. If not, then it is in conflict with public policy

Gratuitious Reduction of debt

-If creditor offers to reduce debt by accepting an item, the item is considered to be worth the remainder of the debt

stated and he cant sue later for the remaining balance. If he agrees to tak 900 in settlement of a 1000 debt.. he can

sue for the balance later successfully!!

A third party can offer to buy the debt off a creditor, and it will hold in court

EQUITABLE ESTOPPEL

Evolution of the Principle

-suppose Bob makes gratuitous promise to Joe. Joe incurs some related expense related to the promise. Later, Bob is

unable to perform.. Joe is entitled to nothing, a gratuitous promise remains gratuitous

Promissory estoppel- courts exercise of estoping a promisor from claiming that she wasnt bound by a gratuitous

promise where reliance on the promise caused injury to the promisee (only works in defense against a claim by a

promisor)

EFFECT OF A REQUEST FOR GOODS OR SERVICES

-when strangers or friends solicit services to be performed, the law implies a promise to pay

-but, a promise to pay isnt implied when services are performed b/w family or close friends

-even if price aint mentioned, there is an implication for payment at a reasonable price i.e. quantum meruit ; amount a

person merits to be paid for goods are services provided to the person requesting them

-the parties can negotiate a price but once its been agreed to, neither party can ask the court to fix a different price


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Past consideration binding

-not binding; jack promises to pay frank b/c frank gave jack a great dinner. Jack promised AFTER

-binding; jack promises to pay frank b/c frank gave jack dinner at jacks request. Jack was already bound, they just

decided later what the price is

USE OF A SEAL

Document under seal - a promise recorded on a document sealed by wax, showing that the promisor agrees with the

information therein

-today sometimes just the word seal on the document is sufficient

-a seal, or the word seal must be on the document at the time the party signs it

-a promise made under seal does not require consideration to be binding

-a seal says I fully intend to be bound by this promise.. promise must still be legal though

-promises made under seal are irrevocableINTENTION TO CREATE LEGAL RELATIONS

-even if a valid offer is accepted with consideration, there is no contract YET, unless both sides also intended to make a

legally enforceable agreement

-law usually presumes both sides have legal contract intentions in most instances

-if presumption is not made, courts must inquire into the state of minds of the parties at the time of the agreement

-a DFD (defendant) can refute the legal intention assumption by using the reasonable bystander test:

-if to a reasonable bystander, the conduct of the parties seem to lack an intention to make an agreement, then

there is no binding contract

i.e. Reasonable Bystander test works best in arrangements b/w friends, family

-contractual terms stating that neither party can sue each other in a breach are enforced by the courts

CH7 FORMATION OF A CONTRACT: CAPACITY TO CONTRACT and LEGALITY OF OBJECT

Meaning of capacity to contract

Legal capacity - competence to bind oneself legally

i.e. a 4 yr old dont have the capacity to bind herself to pay $100 for a game

repudiate - reject or declare intention to not be bound by somethingMinors (or Infants)

Minor - a person who hasnt attained the age of majority according to the law of his province

Age of majority - age at which person is deemed as an adult according to law of his province

-generally, a contract made by minor is unenforceable against her but enforceable by her against the other party!

-regardless of whether other party is aware she is a minor or not

-but.. for necessities, courts waive a minors immunity from liability (or else no one would sell food to minors)

Necessaries and Beneficial Contracts of Service


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-a minor is liable to pay for necessaries , but she isnt bound to pay the contract price, but instead, a reasonable price on

the basis of quantum meruit .. unless contract price is reasonable

Necessaries: food, clothing, lodging, medical attention, legal advice, transportation (only for going to and from work;

transit)

-minors are bound by beneficial contracts of service : contracts of employment or apprenticeship where they are the

beneficiary and not exploited

Contracts Creating No Liability for a Minor

-minor can always repudiate contract for non necessaries even when non necessaries are beneficial to him

-minor isnt liable for necessaries that he ordered but hasnt received

i.e. he can repudiate contract of sale before goods are delivered [sale of goods act]

-on repudiation, all property is to be returned to original owner

-a merchant can bind the minors parents liable only if he obtains express authority from the parents

Contracts indirectly affecting a minor

-minor who already benefit ed from contract for non necessaries cant recover money already paid, but can repudiateremaining liabilities

-minors contracts that arent binding can be altered via statutues

i.e. minors will be bound by education loan liabilities

-a minors freedom fr om liability is contractual only, minor still liable for torts

-person suing minor for damages must show that the tort was caused by the minor who committed acts outside the

scope of the contract

-tort alone aint enough for successful suing

Contractual Liability of Minors Upon Attaining Majority

-when minor becomes age of majority, she becomes liable for obligations that couldnt be enforced on her when she

was minor

-new obligations part of voidable contracts : contracts that can be rendered null at the option of one of the

parties

-two types of voidable contracts

-type 1: features an interest of a permanent, continuous nature

-she must repudiate such contracts promptly upon coming of age or shell be liable as if she had entered into itafter coming of age

i.e. contract of land, car, cell phone, gym

-accepting the benefits of continuous contracts constitutes accepting the contract after coming of age

-type 2: non-continuous contract;

-isnt binding on minor unless she expressly ratifies it after aging up

Ratify - acknowledge and promise to perform

-courts can find certain contracts to be unlawful and completely void regardless of ratification


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OTHER PERSONS OF DIMINISHED CONTRACTUAL CAPACITY

-law treats people of unsound mind, incapacitated via drugs/drinks like they are minors

-theyre bound to pay reasonable price for necessaries; other contracts are voidable at discretion but

enforceable by them against other party

-the drunk person must prove that he wasnt capable of rational decisions at time of agreement and that the other party

was aware of it

-irrational person wanting to avoid the contract must act quickly upon becoming rational, else repudiation is void

ABORIGINALS- idian, inuit, Metis

-native reservations cant be claimed by creditors o r anyone else unless approved by Indian Minister

-indians not living on reservation have some contractual capacity as any other citizen

ROLE OF LEGALITY IN FORMATION OF A CONTRACT

-contracts are void if they are deemed illegal

-parties can opt out of contracts if they can prove that presuming a contracts legality is incorrect

DIFFERENCE B/W a VOID and AN ILLEGAL CONTRACT-if a contract is found void, courts try to restore the parties to their positions prior to the contract

-if only one part of a contract is void, court can sever that part and hold the contract still legal

-court wont help a party who knowingly entered into an illegal contract though

-no legal parts of an illegal contract will be upheld and enforced

-no hard rule, generally, the more r eprehensible a contract, the more likely itll be illegal

AGREEMENTS IN RESTRAINT OF TRADE

-most common challenges against business agreements are that they restrain trade, or reduce competition

-even if contract has a restrictive covenant (a term in restraint of trade) that is against public policy, it may not

invalidate the whole contract.. the rest of the contract may still be upheld

-parties found to be in contract which is against public policy can try to prove to the court that the te rms dont aversely

affect the public interest

Agreements b/w vendor and purchaser of a business

-courts must support non compete clauses that maintains a businesss goodwill, or else a purchaser wont pay for the

goodwill and create inefficiencies

-thus, goodwill protection terms is one type of restrictive covenant that isnt always against public interest -courts consider nature of business, size of regional areas & length of time in determining whether terms are against

public interest or not

-if the scope of the restrictive covenants are too wide, rather than narrow the scope, court might void it altogether to

prevent greediness

CH8 GROUNDS UPON WHICH a CONTRACT MAY BE IMPEACHED: MISTAKE

The narrow meaning of mistake

-avoiding a contract b/c a party made a mistake is very difficult


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-if people were allowed to escape contracts too easily, ppl cant rely on them

Two main types of mistakes: a) mistake about the terms of a contract

b)Mistakes in assumptions about important facts related to a contract although not part of contract itself

Void and Voidable contracts

Consequences of a Void Contract

Void- contract was never formed at all

i.e. A sold apple to B, sale was void, so A recovers apple, B recovers money

BUT, what if B sold apple to C? Sale is still void, B never owned the apple legally

-then C must give apple to A, else be liable to A for conversion tort

-what if courts say A selling to B wasnt void? And B sold to C? Then A has no claim against C, any claims for damages will

need to be from B (if any)

Consequences of a Voidable ContractVoidable- contracts a court may set aside in an attempt to restore parties to original positions

-principles of equity can declare a contract voidable and order that it be rescinded, restoring sender to original position

-it can order B to return the apple

-if B sold to C though, C was innocent.. fairness says C shouldnt owe anything

-requires C to be innocent, unaware of B trying to scam A and resell , and have paid a price for the item

Mistakes about the terms

Words used inadvertently

-if A made a terminology mistake in a contract that was accepted by Bob reasonably relying on it, then the contract is

binding, its As fault for making the mistake

-sometimes Court may allow a mistake to rescind a contract, if a reasonable party could easily tell that there was

a mistake in a term of the contract

Errors in recording an agreement

-two parties orally agree on a contract intending later for it to be formalized in a written contract-when the written contract is prepared, certain terms get left out or edited

-the party who wants to revert to the original agreed upon terms can request a rectification

Rectification - correction of a written document to reflect accurately the contract made by the parties

Rectification request will succeed if the following are met:

a) Court is satisfied that there was an agreement b/w the parties, free from ambiguity and not conditional on

further events


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-but right to rescind is waived if the subject matter of the case i.e. apple, has perished or is consumed

Consequences of Misrepresentation in Contracts

-when frank relied on an innocent misrepre sentation and learns of the true facts, the contract is voidable at the victims

option

-option to voidable must be exercised promptly or it will lost

-if victim incurred expenses in performing the contract or paid the other party before learning of her right to rescind, she

can be entitled to indemnity/compensation ; money reward to supplement recission for loss in contract performance

The purpose of recission is to restore the parties as close as possible to their pre-contract positions

Sale of land

-recission right for innocent misrepresentation is lost once title to property is transferred and transaction completed:

i) buyers are expected to search the title and satisfy themselves by inspection of the property that it is as represented

in the contract-if not satisfied, they are expected to exercise recession BEFORE time of transaction completion

ii) there is the danger that an outstanding right to recission wouldnt be apparent to a third party who investigated the

ownership of the land and relied on the registered title

Misrepresentation by omission or silence

-in chapt5 we presume a signer of a contract accepts all the terms.. but presumption can be rebutted when the partied

is rushed to sign it w/o a chance to read or understand it and when the other party has good reason to suspect the

signer might not fully understand the contract

-misrepresentation also includes failure to disclose pertinent information b/c one party has special info unavailable to

the other

-if the special info is material, the party with info has a duty to inform the other about it

Utmost good faith - a duty owed when a special measure of trust is placed on a party by another

Contracts of insurance

-requires utmost good faith-insurer relies on applicant to disclose pertine nt info about the applicants circumstances so insurer can decide to accept

or reject the applicant

-insurer can withhold benefit payment if the applicant withheld information

Undue influence

Special relationships


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Undue influence - domination of one party over the mind of another to a degree as to deprive the weaker party of the

will to make an independent decision

-a contract formed under undue influence is voidable at the victims option

-must be exercised promptly or option waived

-undue influence usually arises in special relationship where one party has special skills or knowledge: lawyer,doctor

parent

Dire circumstances

-undue influence arising when one party is temporarily in dire straits and agreeing unfair terms

Burden of proof

-party alleging undue influence must prove to court that domination was probable

-easier to prove when special relationship existed

-if victim showed probable undue influence, the DFD must prove undue influence wasnt exerted

Constructive fraud - unconscientious use of power by party to take advantage of weakness in another-important factors: degree of domination, extent of advantage received

Arrangements b/w husband & wife - UI (undue influence), is harder to prove b/w husband/wife than other relationships

b/c law assumes that sometimes they want to confer benefits to their spouse

-UI easier to prove when one spouse is an expert and the other is not

Importance of independent legal advice

-dominant party can tell other party to obtain independent legal advice about his rights and duties before making

agreement

-helps to refute claim of undue influence

-testimony of independent lawyer is conclusive evidence

Threat of prosecution - UI can arise from fear of prosecution

Inequality of bargaining power - courts have been more willing to rescind unconscionable contracts

Unconscionable contracts - contracts b/w parties of unequal bargaining power that result in an unfairly

advantageous bargain for the powerful partyLoan transactions

-unconscionable contracts often occur in loans

-borrower is in financial distress and agrees to pay ridiculous rate of interest, unconscionable

-it is illegal to charge interest over 60% per year

-the loan itself is NOT void, just the interest payments, lender can still recover principal

Duress - actual or threatened violence or imprisonment as a means of coercing party to enter into contract


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-contracts under duress are voidable at victims option

-threat doesnt have to be aimed directly at party being coerced, can be family spouse, p arent or child

CH10 Interpretation of Contracts

Where there is disagreement about contract, court will seek the most reasonable meaning

2 approaches

Strict restricts interpretation to the ordinary meaning of the words

Liberal- looks to the intent of the parties and surrounding circumstances, doesnt ignore the words used though

Which approaches they use depends on ambiguity of the terms

Where there is conflicting testimonies- courts seek corroboration from 3 rd party if possible.. will choose a stance as

a last resort based on credibility.

Special usage lingo - considered enforceable, court may decide whether a word was used in a lingo manner

though. Courts interpret lingo strictly against the party who suggested it so he doesnt get to choose which mean ing

he wants to his advantage

Special contracts - standard form contract ambiguous terms- courts will prefer interpretation of the non draftingparty (protect the consumer).. must be reasonable though

Purpose of courts - give importance to contracts, promot e its integrity, so itll try to give meaning to ambiguous

terms

Parol evidence rule- rule preventing a party from later adding a term previously agreed upon but not in the final

written contract

-if made by error, rectification is possible, but if not omitted by error.. too bad

Exclusions of PER

Written form only part of whole contract

Evidence about formality of contract (duress, legality, capacity)

Subsequent Oral agreements (even if it renders contract null)

Collateral agreements with separate consideration

Condition Precedent (this contract is void if I dont get paid by Canada)

Implied term- something not expressly included but wouldve been had they thought about it

x- I ask tires for my truck. You show me tires, but they arent suited for my tru ck. It was obvious I wanted tires for MY

truck. It is implied, you fail in courts.

CH9 REQUIREMENT OF WRITING

Distinction b/w substance and form

Benefits of a written record

Substance- terms of a contract

Form- medium where contract is held (cd, paper, tape).. may not exist (stored in the mind)


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Statute of Frauds- required written evidence in land disputes after civil war to reduce perjured testimonies

Types of Contracts affected by the Statute of Frauds

A promise to answer for the debt, default, or miscarriage of another

Distinction between guarantee and indemnity

Guarantee- a conditional promise to pay only if the debtor default

Indemnity- a promise by a third party to be primarily liable to pay the debt

-a guarantee must be in writing to be enforceable, a promise to indemnify is outside the statute and is enforceable w/o

writing

Agreement made in consideration of marriage

-pertains to matters like arrangements about asset transfers brought into marriage as common property

-must be in writing for enforceability

Contract concerning interest in land-agreements to repair, build, obtain room or board are outside the statue

-agreements to permit water extraction, lease land, house or building are within statute

Agreement not to be performed by either party within 1 yr

-memories fail over long run, so writing helps prove it

Ratification of Infants contracts

-in some provinces, ratification of infact contracts must be in writing

Requirements for a written memorandum

-suppose a contract falls under the statute.. the writing form of the contract must contain a memo featuring a signature

signed by the party to be charged

All essential terms must be included

-memo must contain all essential terms of contract including party identities

-for guarantees, the consideration need not appear in writingSigned by defendant

-plaintiffs signature aint important

Effect of the statute on contracts within its scope

-an unenforceable contract is not a void contract, it can still affect the legal relations b/w the parties

Recovery of money paid under a contract


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-both parties in an unforceable contract can still perform but if they dont, recovery of any down pymt will depend on

which party repudiates

i.e. mike pays bob 5000 down for land w/o writing, later, mike finds better land and refuses to pay bob.. mike aint

entitled to get his 5000 back.

Recovery for goods and services

-a party who accepted goods and services under unenforceable contract b/c of statute cant keep benefit w/o paying

Effect of a subsequent written memorandum

-a written memorandum can come into existence after a contract is formed and memo will satisfy sttue, as long as

memo comes into existence before action is brought on the contract

Defendant must expressly plead the statute

-DFD who gets sued on oral contract must expressly plead the statute as a defence, else court will ignore statute

-dfd must then prove the contract was a valid oral contract

Effort on a prior written contract

-an oral contract can vary or dissolve a written contract even tho ugh oral contract couldnt be enforced-oral contract w/I statute is effective as long as a party doesnt have to bring an action to have it enforced

Consumer protection legislation

-Consumer Protection Act protects buyers of goods and services in all provinces

-many varying written forms are required across jurisdictions

CH11 INTERPRETATION OF CONTRACTS

Interpretation of express terms

Two approaches to interpretation

a) Strict plain meaning approach- restriction of interpretation to dictionary meaning of a word

b) Liberal approach- approach that looks to the intent of the parties and surrounding circumstances, minimizing

the importance of the words actually used

How courts apply the approaches

-courts decide based on circumstances of the case, which approach is appropriate

How courts choose b/w conflicting testimony-courts try to corroborate each parties testimony from a third party or from party actions

-last resort; courts choose one persons testimony based on credibility, taking circumstances into account

Parol Evidence Rule

Meaning of the rule

-before an agreement is made, parties often negotiate then put the final agreement in writing

-assuming no term was erroneously omitted:


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Privity of contract

Third party- a person who is not one of the parties to a contract but is affected by it

General rule is a contract doesnt confer benefits or impose obligations on a 3 rd party to a contract

-to succeed in an action, plaintiff must prove privity of contract with the DFD; that is, prove theyre both parties to the

same contract

i.e. A owes B 100, A offers apple to C if C pays B 100 for A. If C doesnt pay:

B cannot sue C, must sue A. B and C dont have privity

Suppose B is included in contract b/w A and C. Now theres privity

-but B still cant sue C b/c she didnt give any consideration for Cs promise

-thus, consideration must be given by the party seeking to enforce a contract

Liability of seller - selling a good implies the good is suitable for purpose of the consumerIf it is not, buyer can sue for breach

-third parties cannot sue due to lack of privity

Liability of Manufacturer

Family has no right vs merchant but manufacturer may be liable for negligence

Merchant cant tell if product is safe or not, manufacturer caused product to be dangerous

Vicarious performance - 3rd party performs on behalf of promisor but promisor remains responsible for proper

performance.

-when is vicarious performance okay; when personal performance is not expected by promise

-if promisor performs vicariously when it was expressed or implied they are to perform personally, promisee may sue for

breach for whatever loss resulted

Employer may only be vicariously liable for third partys tort, if tort was committed by 3 rd DURING employment

Trusts

How trust is createdTrust- arrangement that transfers property to a person who administers it for the benefit of another

Constructive trust- a relationship that permits a third party to obtain performance of a promise included in a contract

for his benefit. Privity is ignored if court accepts this argument

Other exceptions to the privity of contract rule

Insurance


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-the requirement of equity that assignor and debtor(s) be made parties to the assignees action is fair where the

assignor retains an interest in the contract

Statutory assignments

the need for reform

-sometimes the assignor doesnt want to retain any rights under the contract, and assigns all of it to the assignee

The Judicature Act permits an assignee to sue the promisor w/o including the assignor provided:

a) The assignment was absolute (unconditional & complete)

b) In writing

c) Promisor received notice in writing

-assignments complying with the Judicature act are called statutory assignments , all else are equitable assignments

Notice to the promisor

Effect of notice on the promisor-ALL assignments require that notice be given to the promisor, but it doesn t mean promisor consent is required

-if promisor continues to pay assignor, they can be sued

Effect of Notice from Contending Assignees

-assignments are an exception to privity of contracts, someone outside of original party of contract has a claim

-more than one person can be an assignee of the same right

-but who is entitled to payment?

-the one who first gave notice to the debtor is entitled payment

-if the second assignee is aware of the first assignees assignment, then he cant accept pymt from debt or, else be

accessory to fraud.

CH13 DISCHARGE OF CONTRACTS

Discharge by Performance

Nature of Discharge by performance

-people expect contracts to be discharged by performance

-both parties must complete performance for a full discharge-a bilateral contract (a promise for a promise) has 3 stages:

-neither party performed promise

-when one party has performed

-both parties performed

-only after this stage is the contract discharged via performance

-performance can be services rendered, goods delivered, cash payment or a combo

Tender of performance- an attempt by a party to perform


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-equates to breach of contract

Effect of frustration

Harshness of common law

-til now, we assumed that frustration discharges the contract and frees both parties from any performance duty

-but what if one party already performed substantially more than the other? Thered be injustice!

Statutory reform

Frustrated contracts act- when a frustrating event occurs, the act provides for allocation of losses b/w parties where

money was paid on account by one party to the other or was due but unpaid

-in either situation may the performing party retain or recover any sum in excess of the pymt made or due,

when its loss had been greater

-the other party party may recover any amount by which its pymt exceeds the performing partys allowed loss

-act also authorize a court to award the performer a just proportion of any valuable benefit received by other

party regardless of deposit payment

-BUT, when a party expends time and money in performance but other party i) made no deposit a nd ii) hasnt yetreceived benefit for performance. the first party has no remedy and must bear full loss

Discharge by operation of Law

-bankruptcy and insolvency act dischrages a bankrupt debtor from contractual liabilities after processes of bankruptcy

completed

-debtor must be able to qualify for certificate stating bankruptcy was caused by misfortune and not misconduct though

-a debt or other obligation that has been neglected by creditor for a long time becomes statute barred - creditor loses

right to bring action on it

-Limitations act bars a right of action if promisee fails to pursue right within specified reasonable time

CH13 BREACH OF CONTRACT AND REMEDIES

-breach can sometimes be a method of discharge, note:

i) not every breach may discharge a contract

ii) breach doesnt discharge a contract automatically; even when breach is sufficient, the suffering party must elect to

discharge

-breach must be of either the whole contract or an essential term of it rendering the purpose of the agreement defeated

and further performance pointless

-minor breach might entitle sufferer to damages but not entitle sufferer to abandon their own obligations

-if minor breach, contract still binding on both parties; major breach, sufferer has right to discharge

Condition - essential term of a contract

Warranty - non-essential term of a contract


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How a breach may occur

A party to a contract may break it

a) By expressly repudiating its liabilities

b) By acting in a way that makes its promise impossible to perform

c) By failing to perform at all or tendering an acutal performance falling short of its promise

Express Repudiation - declaration by one party to the other that it doesnt intend to perform as promised

1-the promisee can treat the contract as having ended, find another party to perform and sue for damages sustained

from original party

-promisee must alert the breacher that the contract is terminated and theyre reserving right to sue

2- promisee can insist on performance, and still have right to sue for non performance by time stated on contract but

runs the risk that intervening events gives promisor an excuse for non-performance.

i.e. War

anticipatory breach - breach that occurs in advance of the time agreed for performance of a contract

one party renders performance impossible

-requires a willful or negligent act by promisor for a breach; doesnt include involuntary acts to forces beyond its control

-a deliberate or negligent act rendering performance impossible amounts to repudiation

Failure of Performance

Types of Failure

-usually becomes apparent only when time for performance arrives

-can be: total failure to perform, inadequate performance, or very minor

-the extent of failure affects the nature of remedies available to injured party

-trouble arises when its time to determine whether the failure was sufficient to relieve injured party from their

obligations

-its wise for injured party to seek legal advice before claiming to be discharged of obligations or risk being sued for

wrongful repudiation

Where performance is done via installments, injured party can only discharge itself of obligations if:

i) Reasonable to believe future performance will be equally defective

ii) Is either the expected deficiency or actual deficiency to date important relative to the whole performance

promised?

The Doctrine of Substantial Performance - performance that doesnt comply in some minor way w/ the contract terms

-the promisor is liable for small damages for defective performance

-key is, promisee is not allowed to bail from their own obligations


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Exemption Clauses - clause in a contract that exempts a party from liability

purpose

-include exemption clause into contract, excluding itself from any liability for the risk and transferring the risk of harm to

its customer

Advantages- permit g oods suppliers to keep price low since supplier doesnt have to increase prices to protect itself

against risk of liability to customer

-if supplier is sued anyways, supplier can refer to exemption clause to disclaim liability

-if supplier uses it in standard form contracts, it will normally have an advantage over customers

CH15 REMEDIES FOR BREACH

Types of remedies

-injured party may have several other remedies available:

i) damages

ii) equitable remedies- specific performance, injunction, recissioniii) Quantum meruit

Damages - money award to compensate injured party for loss caused by other partys breach

Purpose of an award of damages

-aims to place injured party in the same position as if contract had been completed; not intended to punish other party

Prerequisites for an award of damages

-to qualify for recovery, damage arising from breach must flow naturally from breach

i.e. the loss resulting from the brea ch must be within the foreseeable limits of what the parties would have expected as

a likely consequence of a failure to perform had they thought about it when they drew up their contract

-damages arent usually awarded to compensate an injured party for some unusual or unexpected consequence of

breach

-generally, a seller of goods has a better idea of the consequences of late supply to the buyer than does a carrier of the

goods

-the critical test is to determine, based on past dealings b/w the parties and their actual and supposed knowledge of the

promisor at the time of contract (not at time of breach!), --its managers should reasonably have expected such a loss tobe a result of breach by the promise.. if so, damages may be awarded against it to compensate for the loss

Measurement of damages

Liquidated damages - an amount agreed to be paid in damages by a party to a contract if it should commit a breach

-liquidated damage clauses will be upheld if it was made faithfully whether it is greater or less than the actual damage

Penalty clause - an exorbitant amount of damages arising from breach of contract intended to scare the party into


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performance

-if court determines that its meant to frighten the party, it will disregard clause in awarding damages based on

an assessment of actual loss suffered

Nominal damages

-a court can award nominal damages to acknowledge breach where the loss sustained is negligible

-if plaintiff still has to pay court costs it discourages an action though

Types of damages

Expectation damages - amt awarded for breach of contract based on expected profits

-in tort, the only conceivable time for measuring damage is during the wrongdoing

-in breach, the time to determining the amount of damages that were foreseeable is also the time of making the

contract, at the moment of agreement, the promisor becomes liable to uphold the promise; it is on the basis of

reasonable forseeable liability that the promisor has bargained for the price

Expectation damages - amount awarded for breach based on expected profits

-why? Because the objective is to place the aggrieved party in the position it would have been in had performance

occurred

Consequential damages

-consequential damages arise from secondary, one stage removed from immediate breach effects

-nevertheless, they can be serious and reasonably forseeable so DFD may be held liable

i.e. seller doesnt deliver, buyer cant sell.. it suffers forgone sales that seller must reimburse buyer for

i.e. bad heating installation damaging a stadium and cancelling a concert will be paid for by heating company, both are

forseeable

general damages - an amount court may award over and above specific losses for harm, that cant be calculated in

precise money terms but that court feels is needed to compensate injured

i.e. bad plastic surgery

reliance damages

i.e. consultant contracts to help a firm and conducts research to prepare

-firm cancels the contract at last second .. consultant finds a similar firm to work for (thus, cant recover

expectation damages)

-but consultant still wasted time on the first cancelled job, it may recover reliance damages for expenditures and

effort


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Cooling-off period- a specified period following a contract of sale during which a buyer may terminate the contract by

giving written notice to the seller

Unsolicited goods; pressure selling can be in form of sending goods not ordered by consumer and hoping they pay

-consumer protection statutes state that using unsolicited goods do not amount to acceptance of sellers offer

Telemarketing

-agents must disclose their principals, purpose of call, the kind and value of product being promoted, terms relating to

delivery of the product

-they cant offer prizes pending receipt of payment, cannot sell products for a price grossly above FMV

Acceleration clause - a contract term where an unpaid balance of a price becomes 100% payable immediately upon

default by the buyer; clause is limited in many provinces

Equitable Remedies - special non monetary remedies given only when damages alone will not adedquately compensate

for a loss i.e. specific performance

requirements- plaintiff must not himself be found to have acted unethicallyb)plaintiff must not have unreasonably delayed in bringing an action

c)court will refuse to intervene on equitable principles if it would affect an innocent purchaser

d)when plaintiff has not paid a substantial consideration for the defendant's promise (seal, and or nominal sum not

enough)

e)party must be able to be awarded against had he been a defendant. I.e. won't work on minors, since minors can void

contracts, so court won't grant minor awards either

specific performance - order requiring defendant to do a specified act, usually to complete transaction

each piece of land is not viewed as inherently unique as was the view in the past.. specific performance not always

granted for land purchases

SP for the vendor of land may be granted: reasons:giving parties mutual remedies are desired, and vendor would still

have to search for new buyer and maintain land otherwise

SP rarely granted for sale of goods barring one of kind goods, heirlooms, shares etc

Injunction -court order restraining a party from acting in a particular manner

-prohibits a party from committing a breach

requirement: negative covenant- a promise not to do something (may be implied)-sometimes used in place of SP if it doesn't require proactivity by courts (supervision), whereas SP might

Interlocutory Injunction - temporary restraining order, restrains immediate harm done from breach of contract

Injunction against employee - rare, leaves employee unemployed.. used more often when employee has important

trade secrets

RECISSION- when plaintiff wants not the effects of a completed contract but to return to the condition before it was

made

-not applicable if good, service or product already consumed or significantly used/deteriorated


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if contract rescinded non legally, and the market price changed, courts can enforce recission under the new prices

causing extra profits or losses (quantum meruit)

if contractor abandons project before completion, he can't recover anything

Enforcing a Judgement

if debtor doesn't pay or is in financial peril, the creditor (plaintiff) may seize as much of the debtor's property as is

necessary to satisfy the judgment. If assets insufficient, there is no further remedy . Debtor cannot be arrested

CH13 BREACH OF CONTRACT and REMEDIES

METHODS OF ENFORCING JUDGMENT

-when PT obtains judgment for sum of money, he becomes a judgment creditor and DFD becomes judgment debtor

-the judgment debtor is NOT a criminal , cant be imprisoned assuming she doesnt commit a crime

-usually after a judgment, the judgment creditor requests a levy execution to seize and sell a debtors chattels right

away

-an execution order gives sheriffs authority to seize and sell chattels after a grace period

-creditor can also get a garnishee order where the debtors boss pays creditor some of debtors wages CH14 SALE OF GOODS

SALE OF GOODS ACT (SOGA)

-all provinces adopted the SOGA

Goods

-for SOGA to apply, the subject matter of the contract must be goods

goods - all chattels personal, other than things in action and money

-property is divided in 2 classes: real & personal

-real property is confined to interests in land (not a good).. all other property is personal property

-personal property divided into two categories: choses things in action, and goods or chattels

-in contrast to choses in action, which have a value b/c they represent binding obligations, goods have intrinsic

value, from utility they provide

Ownership and Possession

-separation of ownership and possession occur often in contracts for SOGs

-when contract is a sale that passes title to buyer immediately, possession remains w/ the seller for some time

afterwards-in contrast, in instalment sales contracts, a vendor often keeps title to goods as security for payment of the

price while possession passes to the buyer

TERMS IN A CONTRACT OF SALE

Statutory protection for the buyer: implied terms

Conditions and warranties

-condition in SOGA means a major contract term, the breach of which relieves injured party from duty to perform the

contract


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-warranty in SOGA means a non -essential term, the breach of which doesnt relieve injured party from performance

duty

-injured party must still perform, but can sue for damages

-SOGA have implied terms that apply unless theres an express provision to the contrary in the contract

-in some provinces, certain implied terms cannot be excluded ever

Sellers title

Caveat emptor let buyers beware, the buyer takes upon the risk

-caveat emptor applies to the quality of goods, not their ownership

-in offering to sell goods, the seller implies that he has the right to do so in law

Implied term as to title - implication that the seller has a right to sell the goods

i.e. Scoot sells car to Jimbo, but Oscar is the true owner of the car. Scoot didnt have the right to sell. Jimbo can sue

Scoot for breach of an implied condition of title

description

implied term as to description - implication that goods sold by description will conform to the description-description applies to a generic characteristic of the goods (i.e. blouses offered for sale are cotton, not nylon) and not

to words of praise (these blouses will last a lifetime!)

-where a sample is provided, the characteristics of the sample are considered to form part of the description

Suitability and quality

-SOGA has two exceptions to rule that buyers must exercise care as to the suitability and quality of the goods:

a) implied term of fitness; protects buyer who has a specific purpose in mind for the goods

-to use this protection, buyer must declare the specific purpose if it is not one of the general uses for such goods and

buyer relies on the sellers skill and judgment

i.e. Jack buys yarn from store to use as a cable for an elevator in his barn, yarn snaps, injuring him. Jack cant sue b/c he

i) didnt state the purpose for which he intended to use the yarn so he didnt rely on sellers judgment and ii) the use of

the yarn was not normal use

b) implied term of merchantable quality; implication that the goods are in reasonable condition and free from defects

that would make them unsuitable for use

-goods of merchantable quality should be in such a state that a buyer, having found the goods in reasonably sound

condition, would buy them without reduction below current market price and w/o special guarantees-reasonably needs emphasis, theres no warranty that goods are entirely free from defect

-whether goods were defective at time of sale becomes a question of fact

i.e. a new car developing transmission problems after 2 months is likely to have been defective all along, but a car that

ran well for 5 years before fault couldve been fine at time of sale

sale by sample

-implied term that goods correspond with sample- implication that, when a sample of goods to be sold has been

provided, the actual goods supplied will correspond to that sample in type and quality


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SOGA; where a contract exist for sale by sample:

a) The bulk will correspond w/ sample in quality

b) Buyer have reasonable opportunity of comparing the bulk w/ the sample

c) Goods will be free from any defect rendering them unmerchantable that would not be apparent on reasonable

examination of the sample

Payment

-when sale contract gives no guidance about payment terms, court assume delivery and pymt are concurrent conditions;

the transaction is presumed to be cash sale

-But, this presumption can be rebutted by contract circumstances

i.e. pymt is accepted by credit card, buyer is entitled to delivery of goods promptly, before payment by credit card firm

-courts interpret the time set for payment as a warranty unless expressly stated to the contrary

-consequently, seller aint entitled to rescind sale contract simply because pymt wasnt made on time

Delivery

-there are 3 kinds of terms relating to delivery: term relating to quantity to be delivery, time of delivery, place of delivery-a term specifying quantity of goods to be delivered is a condition; if broken, buyer can reject the goods

-regardless whether delivered quantity is higher or lower

-buyer can choose to accept delivery but must pay for what she takes at the contract rate

-time specified for delivery is usually a condition, so if goods arent delivered on time, buye r can rescind contract

-if parties agree that goods are to be delivered ASAP w/o specifying time, then delivery must occur w/I a

reasonable time

-place of delivery is usually the sellers place of business, but parties can choose a different place

FOB free on board means seller will place the goods at that location free on board

-when CIF price is quoted, the seller arranges insurance and shipping of the goods to the buyer

Risk of loss

-if buyer and seller dont expressly agree when risk of loss (via damage or destruction of goods) passes from seller to

buyer, it is necessary to imply such a term

i.e. in FOB & CIF contracts, normally goods remain at sellers risk until delivered to carrier

i.e. in COD, normally seller retains risk until carrier delivered them to buyer

-when there is no expressed term, and implied terms cant be derived, AND damage does occur, the party that has titleusually suffers the loss

TITLE TO GOODS

When does title pass?

Specific goods - goods in existence and agreed on as the subject matter of the sale

-the first 4 rules in SOGA relate to title passing for specific goods

-the rules apply unless a contrary intention of the parties can be inferred from their conduct or customary trade practice

Rule 1


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-if title hasnt passed, seller entitled to retain out of the down pymt, any damages for non acceptance that he can prove

-if seller can prove damages exceed down pymt, he can sue for extra damages too

Remedies of the buyer

-in contracts, a buyers usual remedy is to claim damages

-if delivery is merely delayed and buyer still accepts goods, the measure of damages is the value the goods wouldve had

if they had be delivered on time, less their actual value when delivered

-an alternative to claiming damages, buyer can claim equitable remedy of specific performance or of recession

CH27 THE NATURE OF A CORPORATION AND ITS FORMATION

THE NATURE OF A CORPORATION

Characteristics of Corporations and Partnerships

Liability

-a corp is liable for its own debts

Limited liability- liability of shareholders (sholders hereafter) is limited to the amount of their capital contribution

-limited liability is one of the main advantages of incorporationTransfer of ownership

-a partner cant release herself unilaterally from her liabilities simply by retiring

-she must bargain for her release w/ partners and creditors

-a sholder has no liabilities for corporate debts

-sholders can also transfer their ownership by transferring shares to another guy

Management

-sholders have no authority to bind their corp to contractual obligations, only officers of the corp can do that

-partnerships (PNS hereafter) requires unanimity on major business decisions which can stalemate a firm

-in a corp, mgmt is delegated to Board of Directors who decides things via votes

-this separation of ownership and mgmt lets investors invest money for possible returns w/o taking any extra

risks beyond their contribution or needing to manage the corp

Duty of good faith

-partners owe each other a duty of good faith or fiduciary duty

-sholders owe no such duty to the corp

-sholders can carry on independent businesses and deal freely with the corp as if he was a strangerContinuity

-without special provisions, death or bankruptcy of a partner dissolves a partnership

-a corp exists independently of any sholder

-a corp continues unless dissolved by court or voluntary resolution of sholders, or removed for regulatory

violations

Consequences of separate corporate personality

Separate existence: Salomons Case


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CASE

-Salomon incorporated his shoe business, holding vast majority of shares

-after he sold his business to the corporation; the shoe industry overall tanked, the corp was bankrupt

-a trustee appointed to wind it up, trustee said the corp was a sham and Salomon should be responsible for corp debts

-House of Lords said it was no sham, either the corp was a legal entity or it wasnt

-salomon didnt try to be deceptive and complied with all appl icable laws, the corp is responsible for its own

debts

-when a corp suffers financially, a sholder, even a sole sholder doesnt have a claim for damages ahead of the claims of

creditors

CH19 NEGOTIABLE INSTRUMENTS

NATURE AND USES OF NEGOTIABLE INSTRUMENTS

Types of instruments

-Bill of Exchange Act governs 3 types of negotiable instruments: bills of exchange, promissory notes, cheques

Promissory notes - written promise to pay a specified sum of money to another party at fixed or determinable futuretime or on demand

-the maker is the payer who signs and delivers a promise note

Cheque - a bill of exchange drawn against a bank and payable on demand

-the bank on which the cheque is drawn is the drawee bank

PREREQUISITES FOR LIABILITY

-until an instrument is delivered, a drawer, promisor has no liability. They can even tear it up after signing it as long as it

hasnt been delivered

-delivery can be actual instrument gets issued directly by promisor to payee

-can be constructive payee gives notice that instrument is complete and ready for delivery4

NEGOTIABILITY- special quality possessed by negotiable instruments as a distinct class of assignable contract

Meaning of negotiability

a) Negotiable instrument can be transferred from one holder to another w/o promisor being advised about each

new holder; promisor becomes liable to each successive holder

b) An assignee can sometimes acquire a better right to sue on the instrument than its predecessor (assignor) had

c)

A holder can sue in its own name any other party liable on the instrument w/o joining any of the remainingparties

-the above qualities give negotiable instruments a lot of transferability that regular assignments lack

-ease of transfer enables negotiable instruments to be useful for business b/c transferees can rely on them

-for negotiable instruments to maximize transferability, they must meet these criteria:

a) the promise or order must be in writing, else transferee has no evidence of the promise

b) obligation must be for money pymt only, needing no further inquiry into its value

c) must be sum certainexplicitly state the value to be paid, not pay you the balance owing for your services


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d)must be payable at a fixed or determinable future time or on demand

e) negotiation must be of the whole instrument not for part of the whole amount

METHODS OF NEGOTIATION

By endorsement and delivery

-an order instrument is expressed to be payable to Mack or to the order of Mack

-to negotiate it, Mack must endorse and deliver it to a new holder

-endorsement ca n be different forms, but essentially its the signature of the payee

-a party who purchases an order instrument w/o proper endorsement has very little legal rights

-a new holder cant acquire a better legal right than the transferor until it has the transferors endorsement on the

instrument.. a new holder has a right to require transferor to make the needed endorsement

By delivery only

-endorsement isnt needed for an instrument in bearer form

-its in bearer form when it is made payable to bearer or to Mack Co. & bearer or when no payee is named

and a space is left for insertion of a name-its also bearer form when its payable to an abstraction i.e. Pay to Petty Cash or to fictitious person

-an order instrument becomes a bearer instrument when the named payee endorses it without any qualifying words

-unless and until a subsequent payee endorses it payable to order, it can be negotiated by delivery alone

-order instruments are safer b/c attempts to negotiate it dishonestly is a criminal offence of forgery

-since bearer instrument can be negotiated by delivery only, a thief can negotiate it without resorting to forgery

-businesses rarely prepare bearer instruments, but as we noted, order instruments can be converted to bearer form

ENDORSEMENT

Types of endorsement

Endorsement in blank

-payee on an order instrument signs name and nothing more; makes it payable to bearer

Special endorsement

-payee specifies the next person to whom pymt is to be made

i.e. Pay to Homer (signed) Jack Finn

restrictive endorsement

-endorsing something for deposit only, the payee makes it non -negotiable-even if stolen, thief cant convert it to cash! Only gets deposited

Qualified endorsement

-payee transfers rights in a way that denies liability as endorser i.e. Jim Bond, without recourse

-anyone giving value for the instrument has notice that no remedy is available against Jim should the payee default

-firms that factor their accounts receivable sometimes qualifies endorsements, so whoever buys their receivables have

no recourse against the firm


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Anomalous endorsement -an endorsement that isnt added for the purpose of negotiating an instrument but as a

guarantee to make it easier for the drawer to obtain credit on the bill

-a credit worthy party acts as a guarantor to a less creditworthy party

-bills of exchanges instruments featuring anomalous endorsements are called accommodation bills

LIABILITY OF PARTIES

An endorser

Dishonor- failure by party primarily liable to pay the instrument according to its terms

-recall, an endorser is liable to any holder for the amount of the instrument should the primary liable party dishonor it

-BUT, we should note that the endorser must receive prompt notice of the dishonor else hes free from liability

-if an order instrument is negotiated several times, a particular endorsers liability extends to any subsequent endorser

as well as the current holder

-he has no liability to prior endorsers indeed they are liable to him

-the holder can choose which endorser to require payment from when the instrument is dishonored

-assuming each of them got timely notice of dishonor-in turn, an endorser whos held liable has recourse against any prior endorser but not against subsequent ones

-ultimately, the first endorser will likely be the one ending up paying

-when instrument has a forged endorsement, the drawer and any endorser prior to forgery are free from liability

-the only holder who can recover from an endorser is one who qualifies as a holder in due course

-when such a holder suffers a loss arising from forgery, unless the forger can be caught, the loss will ultimately

be borne by the person who got the instrument immediately after the forgery

-unless a holder duly presents the instrument for payment, endorsers wont have any l iability to him

-accordingly, an instrument payable on demand must be presented in a reasonable time after endorsement

-an instrument not payable on demand must be presented on the day its due

Holder in due course

-for a holder of a negotiable instrument to acquire something more than the transferor himself had, the holder must

satisfy the following:

1. holder must have taken the instrument complete and regular on its face

2. holder must have acquired it before it was overdue and without notice of any previous dishonor

Documents

Business Law Comprehensive