Canadian Business and the Law [7 ed.] 0176795081, 9780176795085

Table of contents :
Brief Contents
Preface
PART ONE: The Legal Environment of Business
Chapter 1: Knowledge of Law as a Business Asset
Chapter 2: The Canadian Legal System
Chapter 3: Managing Legal Risks
Chapter 4: Dispute Resolution
PART TWO: Contracts
Chapter 5: An Introduction to Contracts
Chapter 6: Forming Contractual Relationships
Chapter 7: The Terms ofa Contract
Chapter 8: Non-Enforcement of Contracts
Chapter 9: Termination and Enforcement of Contracts
PART THREE: Business Torts
Chapter 10: Introduct ion to Tort Law
Chapter 11: The Tort of Negligence
Chapter 12: Other Torts
PART FOUR: Structuring Business Activity
Chapter 13: The Agency Relationship
Chapter 14: Business Forms and Arrangements
Chapter 15: The Corporate Form: Organizational Matters
Chapter 16: The Corporate Form: Operational Matters
PART FIVE: Property
Chapter 17: Introduction to Property Law
Chapter 18: Intellectual Property
Chapter 19: Real Property
PART SIX: Employment and Professional Relationships
Chapter 20: The Employment Relationship
Chapter 21: Terminating the Employment Relationship
Chapter 22: Professional Services
PART SEVEN: The Sale of Goods, Consumer Protection, and Competition Law
Chapter 23: The Sale of Goods
Chapter 24: Consumer Protection and Competition Law
PART EIGHT: Financing the Business
Chapter 25: Business and Banking
Chapter 26: The Legal Aspects of Credit
Chapter 27: Bankruptcy and Insolvency
PART NINE: Transference of Risk
Chapter 28: Insurance
Glossary
Index

Citation preview

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DOROTHY DuPLESSIS SHANNON O'BYRNE PHILIP KING

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LORRIE ADAMS STEVEN ENMAN

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NESS A r ~ WCANADIAN ~ BUSINESS AND THE LAW r

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Contents

Preface The Legal Envir onment o f Bu siness

10

Chap t er 1: Kn owledge of Law as a Bu siness Asset

11

Chap t er 2 : Th e Can adian Legal Syst em

32

............ .

Chap t er 3 : Managi ng Legal Risks

65

Chap t er 4: Disp ut e Resolu ti on

88

Con tracts

..... 120

Chap t er 5 : An I n t rod ucti on t o Contract s

..... 121

Chap ter 6 : For min g Con tractu al Rel ati onshi p s ........................................... 133 Chap ter 7 : The Terms of a Con tract .................................................... 164 Chap t er 8 : Non -Enforcement of Contract s . . . . . . . . . . . . . . . . . Chap t er 9 : Ter mination and Enforce men t of Con tracts

. .... 190 ...... 2 16

Business Torts ....................................................................... 245 Chap t er 10 : I ntrodu ction t o Tort Law ................................................... 246 Chap t er 11: The Tort of Negligence

..... 266

Chap t er 12 : Oth er Torts

..... 291

Structurin g Business Acti vi ty .......................................................... 3 19 Chap t er 13 : The Agency Rel ati onshi p

.................................................. 320

Chap t er 14: Business Forms and Arrangemen t s . . . . . . . . . . . . Chap t er 15 : The Corporat e For m : Or ganizati onal Matters

. .... 346 ...... 379

Chap t er 16 : The Corporat e Form : Operati onal Matters ................................... 405

Property

. . .. .. ... .. . . .. . .. .. .. ... . 440

Chapter 17: Introduction to Property Law

. . 4 41

Chapter 18 : Intellectu al Prop er ty . . . . . . .. . .. .... .

. . 469

Chap ter 19 : Real Property

. .. . . .. .. .. . .. . .. . .. .. . . .. .. .. . .. .. . . .. .. .. . .. .... .. .. . . .. .. 509

Employ ment and Professional Rel ati onships . . . . . . . Chap ter 20: The Employm en t Relationship

. . . ... ... ... . .. .... ... .. . . 536

. .. ..... 537

Chapter 2 1: Ter minating the Employmen t Relation ship .. .

. . 574

Chap ter 22: Profession al Servi ces

. . 602

..

The Sale of Goods, Consu mer Protection an d Compe tition Law . . .. . .. .. .. . .. . .. . .. . .. . .. .. 626 Chapter 1: The Sale of Goods ........................................................ . Chap ter 2 : Consumer Protection and Competi tion Law

18

Fin ancing th e Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Chap t er 3 : Bu siness and Banking

50

Chap ter 4: Th e Legal Aspects of Cr edit

73

Chapter 5 : Bankruptcy and Insolvency ................................................. 97 Transference of Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................... 120 Chapter 6 : Insurance ................................................................. 121 Glossary

............................................................................ 147

How to Read a Ci tati on CaseIaw Reporters

.. 160

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......................... 161

.. 162

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PREFACE In Canadian Business and the Law, Seventh Edition, legal knowledge is regarded as a business asset that builds competitive advantage for the inruvidual and the orgaruzation allke. This text demonstrates how the law can protect persons and their property as well as resolve disputes. The text also shows that the law facilitates personal and commercial interactions. In short, the law provides both opportunities to be capitalized on and r isks to be managed. Canadian Business and the Law is written from the perspective that the law plays an integral role in all business decisions. Furthermore, it systematically advocates a r isk management approach as the optimum way of dealing with legal considerations in the business world. A risk management model is introduced in Part One and apphed in every subsequent part of the book. Topical coverage is o rgamze d as follows: Part One establishes the rationale for students' study of business law. It accounts for what the law is, where it comes from, and how the law regulates business. It also establishes risk management as the recurring theme of the book and the study of business law. Parts Two and T hree recognize that the legal issues a businessperson is most llkely to face are in the areas of contract law and tort law. Part Two, Contracts, and Part Three, Business Torts, provide a practical and contextualized analysis of these important areas. Here students acquire not only an essential legal grounding in contract and tort principles, but also the basic background for the specialized topics ruscussed later in the book. These two essential parts of the book are carefully written so that contracts and torts can be read and taught in whichever sequence is preferable to the user. The fundamentals of contract law are examined in depth in Part Two to allow for application in context in later parts, which deal with topics such as agency, partnership, employment, and insurance. By applying the law to particular relationships, students gain insight into d1e kinds of contracts that will figure prominently in their professional lives. In our experience, students best understand the law when it is related to core subject areas in the business curriculum, including finance, human resources, sales, and marketing. For this reason, the remairung parts of the book look at the functional areas of business and consider legal issues in relation to those activities. Part Four concerns the selection and use of the form of business. Part Five examines the creation, acquisition, use, and protection of property. Part Six analyzes the acquisition and use of human resources. Part Seven focuses on the selling and marketing of goods and ser vices. Part Eight addresses financing the business activity. Part Nine explores the transference of r isk through the use of insurance. Our work in Canadian Business and the Law focuses on meeting a number of objectives: Our most important aim is to explain the basic legal principles and concepts in a business context that is engaging and relevant for all readers.

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The second objective is to reinforce that all aspects of the legal environment necessitate active management. We offer a model for identifying, evaluating, and managing legal risk in Chapter 3. Examples of the model's application to business enterprises and a risk management orientation are reflected in the treatment of legal subjects throughout the text. The third objective is to convey legal information in contexts geared to the practical application of knowledge. A Business Law in Practice scenario opens each chapter with a business situation containing both legal and managerial implications. Questions posed by the opening scenario give students rurection and purpose and encourage critical thinking as they read the chapter. As a means of testing the students' comprehension and analytical skills, the scenario is revisited later in the chapter with suggested responses to the opening questions. The practical application of legal knowledge is reinforced through boxes provided throughout the text entitled Business Application of the Law. These provide examples of the impact of the law on business enterprises. By illustrating how legal issues arise in the business environment and how these issues are managed, this feature helps students develop a concrete understanrung of why the law matters in a business context. The fourth goal of the text is to recognize the importance of legal considerations inherent in the emergence of new technologies, internationalization and globalization of the economy, as well as ethical and environmental concerns, all of which cut across traditional legal subjects. Based on our contextualized approach to teaching and learning, these topics or unifying themes are integrated throughout the body of the text and through features entitled Technology and the Law, International Perspective, Ethic.al Considerations, Business and Legislation, and Environmental Perspective. The fifth goal is to provide a pedagogically effective framework for the presentation of jurucial decisions. Our special Case format begins with a description of the business context surrounrung the legal dispute in question, followed by a concise statement of the relevant facts that led to the legal conflict. Next, a statement of the legal issues is provided as a summary of how the court resolved the conflict. The feature concludes with several questions that students are asked to consider in order to deepen their understanding of the case under study. This feature focuses on context and relevance. Jurucial rulings are summarized and supplemented with brief excerpts of judicial language. The Landmark Case and Business and Legislation features provide an account of pivotal case law and historical legislative initiatives, which can be essential to grasping contemporary law. Finally, an Ethical Considerations feature assists the student in assessing the sometimes uncomfortable compromises that the law forges between competing interests. As demonstrated in the chart on the inside front cover, the textbook organizes coverage of the international, environmental, ethics, and technology themes because of their importance to the modern business world . We have increased both the depth and the breadth of these four themes according to strands, or markers, to illustrate the range of topics tllat tlle text covers. The

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comprehensive chart is also designed to assist instructors in creating their lectures. At a glance, instructors can access the textbook's many themed boxes and locate material according to the subject they wish to address, such as ethics in consumer relations or ethics in relation to employees.

What's New in This Edition In this edition, we continue to build on the strengths of the textbook. The content is Canadian, current, business oriented, and focused on risk management. In addition to enhancing t11e thematic approach as noted above, we present students with new, real-world examples of the application of the law as well as the latest Canadian cases and legislation. This new edition introduces aboriginal law as a sustained topic as well as, in Chapter 2, aspects of Indigenous laws. There are many reasons for these additions, including the Final Report of the Truth and Reconciliation Commission of Canada (2015); the impor tance of reconciliation through inclusivity and curr iculum reform; the relevance of Indigenous and aboriginal legal matters to education in business schools at large; and the significance of Indigenous laws and aboriginal law to business on a variety of fronts. Some of the other key additions and changes to this edition are: New ca ses. Many new cases have been added . Examples include: Churchill Falls (Labrador) Corporation Ltd v Hydro-Quebec, 2016QCCA 1229, leave to appeal to the SCC granted, 2017 Can LU 21420 (SCC) (Chapter 5); Rosas v Toca, 2018 BCCA 191 (Chapter6); Downerv Pitcher, 2017 NLCA 13 (Chapter 8); Deloitte & Touche v Livent Inc (Receiver of), 2017 SCC 63 (Chapters 11 and 22); Tondat v Hudson's Bay Company, 2017 ONSC 3236, aff'd 2018 ONCA 302 (Chapter 12); Fairview Donut Inc v TDL Group Corp, 2012 ONSC 1252, (2012] OJ No 834, aff'd 2012 ONCA 867, (2012] OJ No 5775 leave to appeal refused, (2013] 2 SCR viii (note) (2013] SCCA No 47 (Chapter 14); Finkelstein v Ontario (Securities Commission), (2018) ONCA 61, (2018] OJ No 489 (Chapter 15); Midwest Properties Ltdv Thordarson, 2015 ONCA 819, 128 OR (3d) 81, leave to appeal dismissed 2016 CanLII 30455 (SCC) (Chapter 16); Menni/lo v Intramodal inc, 2016 SCC 51, (2016] 2 SCR 428 (Chapter 16); Tsilhqot'in Nation v British Columbia, 2014 SCC 44, (2014] 2 SCR 257 (Chapter 17); Diageo Canada Inc v Heaven Hill Distilleries et al, 2017 FC 571, (2017] FCJ No 598 (Chapter 18); Keenan (cob Keenan Cabinetry) v Canac Kitchens, 2016 ONCA 79, (2016] OJ No 455 (Chapter 20); Howard v Benson Group Inc, 2016 ONCA 256, 129 OR (3d) 677, leave to appeal refused, (2016] SCCA No 240 (Chapter 21); Canada (Commissioner of Competition) v Thane Canada Inc (2018), CT-2018-001 (Chapter 24); Re Redwater Energy Corporation, 2016 ABQB 278 (CanLI!) (Chapter 27); and Ledcor Construction Limited v Northbridge Indemnity Insurance Company, 2016 SCC 37, (2016] 2 SCR 23 (Chapter 28). New legislation. We have highlighted new, amended, and proposed legislation relevant to business, including the regulation of dron es (Chapter 1); the regulation of r ide-sharing and ride-booking enterprises such as Uber (Chapter 1); the regulation of the sale and marketing of vaping products (Chapter 2); the proposed introduction of regulations mandating plain and standardized packaging for tobacco products (Chapter 2); franchises in British Columbia (Chapter 1 4); crowdfunding

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regulations (Chapter 15); national securities regulation (Chapter 16); the t ransition of accountants in Canada to the new chartered professional accountant (CPA) designation (Chapter 22); reducing email spam (Chapter 24), and new and revised legislation governing payday loans (Chapter 26). New real-world examples. This new edition discusses, for example, how a local craft brewery resolved a trademark ruspute with one of the largest craft breweries in the United States (Chapter 1); Volkswagen's diesel emissions scandal (Chapter 3); third party funding of litigation (Chapter 4); the effect on business by Canada's Anti-Spam Legislation (Chapter 6); how a Telus customer responded after r eceiving a $24 000 cell phone bill (Chapter 7); how a business was adversely affected by online defamation (Chapter 12); an agent's authority to enter an agreement to share a prize (Chapter 13); responsibility for a partner's debts (Chapter 14); Bombardier and dual-class shares (Chapter 15); a hospital's claim of ownersh ip over its patient's excised tissue (Chapter 1 7); ownership and regulation of water r ights (Chapter 1 7); cybercrime and cyber insurance (Chapter 1 8); offensive names in sports (Chapter 1 8); the global reach of Canadian injunctions (Chapter 18); director, corporate, and taxpayer liability for environmentally contaminated land (Chapter 1 9); Tim Hortons and Ontario's minimum wage (Chapter 20); sexual harassment in the workplace (Chapter 20); bad behaviour outside of the workplace (Chapter 21); social media and just cause for dismissal (Chapter 21); aggravated and punitive damages in the employment context (Chapter 21); the liability of aurutors to m isled creditors (Chapter 22); convictions for price fixing and other anti-competitive behaviour (Chapter 24); and the abandonment of contaminated oil wells in Western Canada (Chapter 27). Updated and revised real-world examples from previous editions. Examples include the liability faced by business for privacy violations (Chapter 1); data breaches at Yahoo, Ashley Madison, and Equifax (Chapter 3); legal rufficulties encountered by Cana.man mining companies (Chapter 3); class action lawsuits in the area of privacy, inclurung Facebook and Ashley Madison (Chapter 4); securities class actions (Chapter 15); death in the workplace and criminal sentencing (Chapter 16); corporate social responsibility (Chapter 16); class actions for unpaid overtime (Chapter 20); cryptocurrency such as Bitcoin and other new methods of electronic payment (Chapter 25); genetic testing and insurance legislation (Chapter 28); and pollution exclusion in commercial general liability policies (Chapter 28). New content concerning Indigenous laws and aboriginal law. Examples include an account of Indigenous peoples and constitutional law (Chapter 2); the Crown's duty to consult and accommodate aboriginal peoples (Chapter 4); an explanation of aboriginal title and important developments with respect to the use of lands that are subject to unresolved land claims (Chapter 17); and an examination of section 89 of the Indian Act (Chapter 26). New material on negotiable instruments. The ruscussion of negotiable instruments has been significantly enhanced and expanded, especially on the topics of bills of exchange, pro1nissory notes, and defences.

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New and updated d1apter openers (Business Law in Practice) for Chapters 4, 11, 17, 20, 21, 23, and 24. New and revised end-of-chapter material. We have added or replaced questions in the Questions for Review, Questions for Critical Thinking, and Situations for Discussion features.

Canadian Business and the Law, Seventh Edition, is offered as a modern resource for learning the fundamentals of business law from a business and risk management perspective. Rather than simply providing a summary of the law, it presents traditional business law topics in a manner that resonates with commercial reality. If you have any suggestions for improvements, additions, or clarifications, please let us know: Dorothy Du Plessis Shannon O'Byrne Philip King Lorrie Adams

[email protected] [email protected] [email protected] [email protected]

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INTEGRATED PEDAGOGICAL SYSTEM Basic legal principles and concepts are explained and reinforced through extensive pedagogy designed to help students proceed and learn the material. Chapter Objectives outline the learning goals of each chapte\

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A Business Law in Practice scenario opens each cha pt er with a business situation containing both legal and managerial im plications. A special section before the Chapter Summary called Business Law in Practice Revisited reviews the questions posed in the scenario with suggested responses.

KNOWLEDGE or LAW AS ABUSINESS ASSH iUSIHESSLAW IN PRACllCE

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