Final Exam Flashcards
What is a liability?
a debt or obligation
recognized by law - enforced by a person, court process
Is a sole proprietorship its own legal entity?
No
Do sole proprietorships have limited liability?
No, since the owner cannot be separated from it
How does income work in a sole proprietorship?
Income from the business is added to the income of the sole proprietor for income tax purposes
Why would someone choose a sole proprietorship?
it is the most common and the simplest form of business entity
easy to set up and dissolve
Can a sole proprietorship have employees?
Yes
Can a sole proprietorship have multiple owners?
No
Explain unlimited liability in a sole proprietorship
the sole proprietor is directly and personally liable for all the business liabilities (contractual or otherwise)
Therefore all business and personal assets of the sole proprietor can be seized in fulfillment of the obligations and liabilities
What are the advantages of a sole proprietorship?
ability to make all business decisions (only owner)
Right to all profits
Right to deal with all assets without interference
Simple to set up, inexpensive
What are the disadvantages of a sole proprietorship?
Unlimited liability
What are the three best protections for sole proprietorships?
- Insurance
- Put investments in creditor-proof assets (some cannot be touched by creditors)
- Before starting a business make a business plan and estate plan to redistribute property and if desirable transfer assets to other individuals
What is the caveat with redistributing assets before you go into a sole proprietorship?
it must be done well in advance of starting the business
If you go bankrupt, the trustee can review transactions of up to 5 years
Should you transfer your assets to your spouse in a sole proprietorship?
No because in the case of separation the spouse can take it (you might be able to get 50% of all property after a lengthy lawsuit)
Should you transfer your assets to your parents in a sole proprietorship?
No because if they pass away and their will is wrong then other beneficiaries can get your property
How can a prenuptial agreement be useful in a sole proprietorship?
you can get some protection using a prenuptial agreement
it determines the allocation of property and support payments in the event of a divorce
What are examples of cooperatives?
Co-op, all credit unions, Red River Co-op
What is the model of cooperatives?
designed to provide their members with services at a cost lower than the cost of similar goods and services in the marketplace.
It can also be organized for the purpose of selling goods in a way that will maximize returns to the members.
Essentially about eliminating the middle men in the economy
How do cooperatives offer products at a cheaper price?
they try to sell their product as directly to the consumer as possible and try to buy as directly from the producers as possible
How many votes does each member have in a cooperative?
Every member has one vote
Can all members vote? (Cooperative)
As long as they are at the meeting, you cannot vote if you arent at the meeting
How are profits for cooperatives determined?
They are paid in accordance with the quantity of goods purchased through the ogranization by the member
Purchasing $100 of product will give you a bigger share of the profits than purchasing $10 of product
What are partnerships?
the relation between persons carrying on a business with the view of profit
Is sharing the profits of a business sufficient evidence of a partnership?
No, it’s not sufficient, but it is highly indicative
What is other evidence besides sharing profits that can indicate a partnership occurs?
Contribution of capital (property or money)
active role in the business
the existence of ongoing business as opposed to an isolated transaction
& sharing profits
What happens if you dont deny that you are a partner in a partnership?
You are held to be a partner if you dont protest it
What is the liability of a partnership?
Unlimited liability, all of the partners are liable for the debt of the business.
Who can create the liabilities in a partnership?
All partners can create liabilities in which all of the partners are responsible for
Can you have limited liability in a partnership?
No, all liability is unlimited in a partnership since there is no separate entity.
In a partnership, are the partners liable for all liabilities of the firm?
Yes, with the exception that a partner is only liable for the liabilities that the firm made during the time they were a partner
A partner is not liable for the liabilities incurred before their partnership and after their partnership
How do you terminate a partnership?
Publish notice that the partnership is dissolved and provide actual notice to people who have recently delt with your firm
Can a partner also be an employee of the partnership?
No
Is a real estate agent an agent?
No, they are just representatives
What are examples of agents?
stock broker, lawyers, a person can get the power of attorney
What are examples of non-agents?
real estate agent, sports agent, fashion agency… they are all just representatives
What is agency law?
the relationship between the principal and agent according to which the principal has authorized the agent to enter into a contract with third parties in the principal’s behalf
What are common law implied laws in terms of agency law?
courts over time have completed/created implied terms
Ex: wrongful dismissal cases
What is section 27 of the partnership? (statutorily implied terms)
all partners may take part in the management of the partnership
Need the consent of all existing partners before bringing in a new partner
all partners are liable to share equally in contributions to capital, in losses and in profits of the partnership
no partner is entitled to remuneration in acting in partnership bisiness
What is fiduciary duty? (Partnership Act)
there is a legal obligation to act in the best interest of the partnership and its members
Must exercise good faith, loyalty, and care in their dealings on behalf of the partnership
What does section 32 of the statutorily implied terms of the partnership act?
Established fiduciary responsibilities of partners within the partnership
emphasizes their joint liability for partnership debts
help maintain trust and fairness among partners
What is section 33 of the statutorily implied terms of the partnership act?
it has rules regarding non-competition among partners
their fiduciary duty to act in the partnership’s best interests
providing a remedy in case of breaches
What is section 29 of the statutorily implied terms of the partnership act?
It specifies that any partner may terminate the partnership at any time given notice to the other partners
What is section 30 of the statutorily implied terms of the partnership act?
if the partnership ends but still continues business, notice is required
What is section 36 of the statutorily implied terms of the partnership act?
there will be dissolution of the partnership by a death or mental incapacity of one of the partners
What is the definition of implied terms in the partnership act?
terms that do not exist in a contract but nevertheless the courts will insert it into the contract even though the parties never agreed to it
What is agency law?
the relationship between the principal and agent according to which the principal has authorized the agent to enter into contract with third parties in the principals behalf
What is the power of attorney and when does it happen?
when someone is chosen to do the bidding of a person incapable of carrying out day-to-day legal tasks
The appointed person (the agent) receives the authority to act, which can be either broad or restricted
Often used for the elderly or individuals who are away from home
the agent is obligated to act in the best interests of the person granting the power of attorney while managing their affairs responsibly
What is ratification?
a principal approves a contract made by an agent who exceeds their authority. If the principal ratifies (approves) the contract they become bound by its terms… if the person does not ratify (approve) the contract, the agent remains liable for it.
What is prophylactic?
preventative actions to protect yourself
What are three ways to protect yourself in a sole proprietorship?
insurance
Put investments in creditor proof assets - RRSP individual pension plans
redistribute your property, transfer assets to other individuals
What is the agency principle?
an arrangement where one entity legally appoints another to act on its behalf
What are “implied terms” of the partnership act?
a term that does not exist in a contract but the courts insert it into the contract even though the parties never agreed to it
What is agency law?
the relationship between the principal and agent according to which the principal has authorized the agent to enter into contract with third parties in the principal’s behalf
What is the power of attorney?
this happens when someone is chosen to do the bidding of a person incapable to carry out day to day legal tasks.
The power is either general or limited
the agent should be acting in the best interest of the donor while taking care of issues
What is agent by estoppels?
A barrier which prevents a person from denying the truth of certain facts when this person by words or conduct has lead another person to believe that certain facts are true and to act and rely upon these facts
Essentially no formal agency agreement was made, but a person was complicit in giving the appearance of an agency relationship
What is agent by necessity?
when the agent enters into contracts with a third party for the benefit of the principal without the consent of the principal, and to limit losses that the principal could experience
What are the duties of the agent to the principal?
Agent must comply with the contact establishing the agency or he is liable
Agent must be diligent in reprising
Duty of care implied
Duty of personal performance (cannot sub-delegate the tasks)
Duty of good faith (the agent is a fiduciary)
What is a fiduciary?
people / organizations that act on behalf of others and are required to put the clients interests ahead of their own
They are legally and ethically bound to act in the others best interest
What are the fiduciary duties?
personal performance
dont find yourself in conflict of interest
cannot take secret commissions
complete in good faith
agent cannot act on behalf of third party and principal at the same time
agent cannot intercept opportunities of the principal unless the principal grants permission to the agent
What are the duties of the principal to the agent?
Remuneration: agent has the right to be paid by the principal, can be in the contract, if not then paid by quantum meruit (a reasonable amount for the services)
Is a limited partnership different from a partnership?
Yes a limited partnership is different from a partnership because of its structure
What is the structure of a limited partnership?
Certain partners can be limited partners in which they have limited liability
There must be one general partner
What is the worrying aspect of a limited partnership?
If a limited partner participates in a manager function can convert himself into a general partner with limited liability
Why is the limited partnership not used much?
Because its tax advantages were eliminated in the early 90s
What is a general partner in a limited partnership?
There must be at least one general partner, and they have unlimited liability of any debts in the partnership
What is the biggest difference between a limited partner and a general partner in a limited partnership?
General partners have unlimited liabilities while limited partners have limited liabilities
What is the definition of a limited liability partnership?
provides protection for the personal assets of an innocent partner from professional liability claim arising from the negligence or misconduct of another partner, associate, or employees in whose work the innocent partner was not involved
What three professionals can practice under a limited liability partnership? (LLP)
lawyers, chartered accountants, certified general accountants
What is a partner in a limited liability partnership NOT liable for?
debts
obligations / liabilities of the partnership
another partner
that arise from negligence, wrongful, malpractice, or misconduct, of another partner or an employee, agent, or representative of a partnership occurring in the ordinary course of professional practice
What are the limitations of a limited liability partnership? (LLP)
if partners know of negligence and failed to take reasonable steps
negligence was committed by an employee, agent, representative of the partnership for whom the partner was directly responsible in a supervisory role
Why is this form of limited liability partnership called a partial shield?
because it protects innocent partners from the negligence, wrongful acts of others in the firm, BUT does not provide any protection for contractual or trade debts
What is the limited liability partnership “full shield”?
it extends the protection to contractual or trade debts (in addition to the protecting innocent partners from negligence of others in the firm)
Is the full shield limited liability partnership available everywhere?
No it is just available in saskatchewan, everywhere else in canada has only partial shield LLP
Out of all of the companies in North America, do corporations consist of the most?
No
Out of all companies in North America, what form of business is most dominant?
Corporations
What is the most important factor about corporations?
That they offer a separate legal entity where the corporation is treated as a separate person from the investors.
What are the benefits of having a separate legal entity in a corporation?
This means that the investors are not responsible for the actions of the corporation, gives limited liability to the shareholders. The investors cannot be sued for the entity of the corporation
What does limited liability mean?
each particular shareholder is only liable to his or her own investment and the amount of the share she has not paid.
What are the tax advantages in corporations?
Payments of salary to spouse and children is easily facilitated through the corporation.
Dividends sprinkling
Small business tax deduction
Preferential tax breaks for dividends
Capital gains exemption for the sale of shares for the first $750,000
Estate freeze: can pass shares to your heirs without tax consequences
Independent pension plan: increase retirement income
What is the transfer of ownership benefit in corporations?
it can sometimes be difficult to transfer ownership in a partnership, whereas a shareholder in the corporation business model has no difficulty
What is the continuous existence benefit of corporations?
because corporations are artificial entities they can live forever. if someone dies, the corporation does not have to dissolve
what is the loyalty aspect of corporations?
Shareholders do not have to be loyal to just one company, they may hold shares of competing corporations.
whereas partners cannot compete with their partnership because of fiduciaries duties
What are the two types of companies?
large and small companies
what is a problem/conflict in large companies?
there is competition between the employees/managers and shareholders as the money goes towards compensation or the shareholders
Are small companies publically traded?
Typically no
What is the big problem referred to in small businesses?
oppression of the minority shareholder
What is the problem of the oppression of the minority shareholder in small business?
a minority shareholder is locked in and frozen out - they cant sell their shares except at a very discounted price becuase no one wants to buy such small percentage, but are frozen out becasuse they have no influence on management with their minority position
What is the way to solve the oppression of the minority shareholder in small businesses?
provisions in a shareholder agreement
shot gun clause - make an offer to the other party at a price per share and its their choice whether they want to buy or sell
Why isn’t the shot gun clause fair to everyone?
if one party is undercapitalized (no money) you cant realistically buy them out
in those cases the price per share will be determined by someone else so that the undercapitalized will be considered
What is the royal charter corporation?
A method of incorporation
Used by the royal monarch’s to create companies for fees (one of the ways they raised money)
What is the special act corporation (statutes)?
Special statues create corporations
This method of incorporating is still employed in creating crown corporations
What is the general act of incorporation?
these are acts that businesses/people can resort to create a corporation according to the procedure laid out
What are the three types of general acts for methods of incorporation?
English system of registration
Letter paten system
Certificate of incorporation - you can have federal companies (canadian corporation act) and provincial companies (corporation act). Federal companies are more expensive and protected with your name across Canada
What are the ways you can organize a company in Manitoba?
Do a corporate name search
Create and submit to the corporation brand the articles of incorporation (name of company, corporate head office, nature of business, types of shares and their characteristics, the first directors, and the incorporators)
Pay a fee of $300 (or $400 for overnight service)
What do you need to change the type of company?
Articles of incorporation
Bylaws
What is the articles of incorporation method of changing the type of company?
if you want to change it you need a 2/3 majority of every class of shares - including the above and any restriction on the type of business that can be carried out
What is the bylaw method of changing the type of company?
can be changed by a simple majority of shareholders - initally the first directors create bylaws, but must be ratified by the shareholders at the first meeting.
What are the three types of participants in a business according to the constitution?
Shareholders
Directors
Officers
Who are shareholders?
they are the investors
they purchase shares with money / capital and they have very few rights in the corporation
What are some of the rights shareholders have within corporations?
annually vote for directors
Ability to participate in the approval of changes made to the corporation
What are the different types of shareholders?
voting rights
dividend rights
redemption value rights (by back shares at a certain price)
What are the different types of shares?
voting / non-voting
prescribed dividend rate
redemptions gives corporation the opportunity to buy back the shares from shareholders
retraction the shareholder can force the corporation to buy the shares from them
In general what are the two types of shares?
Common shares
Preferred shares
What are common shares?
generally have the right to vote and no predetermined dividend right or rate and rank late
What are preferred shares?
don’t vote, entitled to dividends to a % of return and rank ahead of common shareholders if there is a surplus on dissolution
What are directors in a corporation?
they are charged with management of the corporation, they are the agents through which the corporation acts
What are some details of what the directors in corporations must do?
they must adopt the initial bylaws
directors need not be shareholders
the directors annually elect the officers of the corporation
What do the officers in a corporation do?
run the corporation on a daily basis
need not be directors
elected annually
What is the definition of a public company?
There is no definition in the Corporation act
one can say that they are public if there is a distribution to the public of their shares and they are involved in sales in the stock market
What are public companies required to do under the securities act?
required to do a filing
to prevent fraud on potential investors in public trading or distribution of shares
What are private companies required to do under the Securities Act?
private companies are exempt from many of the costly actions as required in the Securities Act
What is a private company defined as?
a company in whose instrument of incorporation or articles the:
right to transfer its shares is restricted
the number of its shareholders is limited to no more than 50
any invitation to the public to subscribe for its securities is prohibited (no advertising)
Otherwise, you have to prescribe to the Securities Act which is expensive
How is agency law agreed upon?
Over a written or oral contract
Where does agency law play a role?
In corporations and business organizations
What is one of the consequences of those on the board of directors?
they have a fiduciary duty because they are an agent
What are the two types of agency by estoppel?
apparent authority
holding out
What is apparent authority in agency law?
an agent may acquire apparent authority from a past manner of transacting business, business by the principal or trade custom
this would make it appear to third parties that the agent has authority for the contract at hand, however they do not have any real or expressed authority
An example of trade custom is a stock broker or lawyer having apparent authority to enter in all sorts of contracts on your behalf
What is holding out in agency law?
You are representing yourself or allowing someone to represent you
1) if someone is representing to the world that they are someones agent and the person knows and doesnt say anything OR
2) you represent someone to be your agent
What are the three ways apparent authority is manifested?
The effect of publicly filed documents
Indoor management rule
Pre-Incorporation contract
What is the effect of publicly filed documents? (how apparent authority is manifested)
at one time the public was deemed to have notice of the contents of filed documents whether they had read them or not
if the documents prohibited either the corporation or one of its officers from carrying out certain acts, a third party could not rely upon what otherwise might be the officers apparent authority to perform those acts
If an aspect of apparent authority is defined under these documents, the public is expected to know what is on the documents
What is the indoor management rule (how apparent authority is manifested)?
there are requirements in a corporations constitution and governing act that require certain acts to be performed in a specific manner if they are to be valid,
if inbalid - there is a punishment for the people who enter into contracts with the corporation
What is the pre-incorporation contract (how apparent authority is manifested)?
a corporation cannot ratify a pre-incorporation contract
the individual who purported to contract on behalf of the corporation could not be held to the contract either, since the intention was to contract with the corporation
What are the directors in charge of?
management of the corporation and do not have to be shareholders
Who are the duties of the directors owed to?
The company itself, NOT the shareholders
What restrictions do directors’ authority span?
They have authority but no restrictions on authority. So long as the directors were acting appropriately to the corporation then they are protected
What do the common law duties of directors revolve around?
Care & skill
good faith
How is “care & skill” involved in director responsibilities?
directors are bound to exercise reasonable care (they cannot be negligent in carrying out duties)
no greater diligence is required of a director then is required of the average person
What are the two exceptions to the “average person” expectation rule for directors due diligence?
Accountants or lawyers are subject to a higher standard
How is “good faith” involved in director responsibilities?
If you are in a conflict of interest you must act properly
What are the two types of good faith (bona fides) for how a director should act?
Disclose an interest in contracts with the company
Interception of corporate opportunity
What is an interception of corporate opportunity?
If a director hears about a financial scheme or opportunity and goes out to steal the deal (not allowed)
directors must act in the best interest of the corporation
What is the gatekeeper liabilities in regards to directors?
it is an attempt to control wrong doing of companies by making the directors liable through duties
The liabilities consist of financial and penal nature for directors
What has typically been minority shareholder protection?
derivative action
What is derivative action (minority shareholder protection)?
a shareholder can sue the board of directors in the name of the company for wrong done to the company
What is oppression remedy in the corporation act? (minority shareholder protection)
appeal to the court saying that they have been oppressed / unfairly treated and are entitled to a remedy
The judge can choose the remedy, there are no limitations
What are some possible remedys for the oppression remedy in the minority shareholders protection?
Dissolve the company and disperse the capital on their own mean
order the forced purchase of shares
What changes were made in the 1970s that gave shareholders extra rights?
- Shareholders were now entitled to financial statements
- document of record
- if you have 5% of shareholder you can apply to the court for an inspector
shareholders could attend - min 5% to demand a shareholders meeting
- shareholders the right to vote to make changes (2/3 need to be in agreement)
- proxy votes allowed for shareholders to have others vote for them
What things should you consider when choosing the form of business entities?
limited liability / nature of the business
desirability of perprtual exstence
estate planning
number of business owners
relationship of the owners
borrowing requirement available and relationship with lenders
Available government grants
employee ownership?
cots
flexibility of structure
income tax consideration
applicable government requirements
What is the purpose of tort law?
to compensate the injured party for the loss suffered by the tortuous act, rather than punish the wrong doer
It is not punishment
Think about how much money is needed to put the defended back into the place they were before the tort occurred?
What is tort law?
Act that causes injury / harm (financial, personal, damage) to someone or their property where the person performing the act has no lawful excuse to do so
What are examples of tort law?
Trespassing, assult and battery, defamation
What are the two types/categories of tort law?
Intentional tort (various types)
Unintentional tort (negligence)
What is the applicable standard of proof in tort law?
the balance of probability
What is legal risk?
Business activities, conduct, events, or scenarios that could expose a business to some type of legal liability
What are the three elements of an intentional tort you must prove on the balance of probability to successfully sue?
Intent - intentional/purposeful
Causation - what the action caused
Proscribed/prohibited harm - inappropriate action caused harm
Does tort law attempt to punish?
No, it does not try to do anything more than provide compensation for injury
In tort law, is insanity or intoxication a defence?
No, insanity or intoxication isnt a defence
All that is required is intent
Are children exempt from being responsible for tort law?
No, children can be liable for tort
What level do you need to prove for criminal matters vs civil matters (tort law)
Criminal matters - each element must be proven up to a reasonable doubt (95%+)
Civil matters - standard is much lower (50% + 1)
Is a reflex valid for intention in intentional tort?
No reflex is not a valid reason, it is excused
What is the difference between intention and motive? (intentional tort)
intention is the desire to bring about certain immediate consequences
Motive is described as the underlying objective. Defendants mind must prompt the bodily movement to create the harm
What is the caution element in intentional tort?
means it must be the operative cause (close in time with no intervening acts), nothing to do with motive
What are examples of various proscribed harms?
Battery (touching)
Assault (putting someone in apprehension of a touching)
Deceit (fraud, the false assertion of fact without knowledge ofits falsity o at any rate not an honest belief in its truth)
False imprisonment
What happens if all three elements are proven in intentional tort?
then the plainiff is entitled to compensation to place victim in the position they were in had the tort not occurred.
Damages will not be rewarded if the defendant is successful in proving that a defence exists.
What are some of the excuses that would absolve a defendant from intentional torts?
Self-defence with extreme limits (no other reasonable way of escaping)
Consent (agree to enter into an activity)
Defence of legal authority (some individuals like police have authority to perform acts that would otherwise be torts)
What are two things that occur in intentional tort that never occur in negligence?
Defences - a legal excuse for someone to commit a tort
Punitive damages - damages compensate and additionally to punish
What are the three types of damages that exist in tort?
special damages
general damages
punitive (exemplary) damages
What are special damages in tort?
losses that can be calculated with accounting accuracy up until a particular date
example: loss of wage, loss of profit from business, medical expenses
What are general damages in tort?
losses that cannot be calculated with accounting certainty, there is a level of conjecture (estimation)
Example: future medical costs, future income loss, pain and suffering
What are punitive (exemplary) damages in tort?
are ordered, are discretionary, and given when the defendant is guilty of conduct that can be described as vindictive, aggravated or penal.
What are negligence torts?
if a person carelessly, by commission or omission, causes harm or injury to someone they should compensate the victim for that hurt or injury
What is commission (negligence tort)?
careless when doing something
Example: operating machinery
What is omission (negligence tort)?
Careless by not doing something
Example: not salting the driveway
What is the tort of negligence about?
standard of conduct
What are the 6 elements required to establishing tort of negligence?
The defendants conduct must be negligent
The claimant must suffer some damage
The damage suffered must be cause by the negligent conduct to the defendant
There must be a duty-recognized by law to avoid this damage
the conduct of the defendant must be proximate cause of the loss, the damage should not be too remote a result of the defendants conduct
The plaintiff must not be guilty of contributory negligence
is intention required for tort of negligence?
No, no intention is REQUIRED in the tort of negligence
If an individual contributed to their own injury in a tort of negligence, is the case thrown out?
Before, if the plaintiff contributed to their own injury they couldn’t succeed (even if 1% responsible)
Now through the contributory negligence statue, judges can allocate responsibility and liability
What is a professional?
an occupation that is regulated by a delegate body
the delegate body sets the standards
What is contractual liability?
implied promise that they will receive care
each party needs to promise each other a certain equal economic value
What is fiduciary liability?
someone in a position of trust is attributed to:
perform duties with care and skill
perform those duties in good faith (bona fides)
What is tort liability?
duty of care, you made a mistake
how often are contracts used?
Often, they are everywhere
What are contracts?
Agreements between 2 or more parties that the court system can enforce
Agreement to do something or refrain from doing something
What is the “offers” job in contracts?
makes a tentative promise that is subject to the condition or that contains a request to the offeree
It is the contract in draft
Are advertisements an invitation to do business?
No, advertisements fall short of an offer
What is the distinction between an offer and an invitation to do business?
through advertisements, stores are making invitations to do business at a set price they will accept
What can cause an offer to not be accepted?
The offeree fails to accept within the time frame
if the offeree fails to accept the offer in a REASONABLE time frame (if a time frame wasn’t specified)
if any of the parties dies or becomes insane prior to acceptance
What are revocation principles of offers (revoke)?
offeror can revoke offer anytime (even with a time frame) before acceptance
What are the two ways to keep an offer open (un-revokable)
when the offer is made under a seal (red tape, witness see signature)
if an option contract is created (someone promises to keep the option open)
What are the forms a offer can be?
writing, oral, or by gestures (waving down a cab). but they must be unequivocal (leaving no doubt)
What are the common different types of contracts?
Take it or leave it offers: terms and conditions (there is no negotiation)
What is the exception of liability clauses in contracts?
if the person does not know of the terms of the contract they cannot be bounded by it unless reasonable steps were taken to bring the contractual terms to their attention
How can a contract be accepted?
by words or positive unequivocal conduct
When and where is the acceptance of a contract complete?
General rule: when acceptance is received by the offeror (and location)
Postal rule: acceptance is accepted when offeree puts offer in the mailbox. Completed where mailbox is or where offeror is (sometimes unacceptable)
Who has control over the method of acceptance?
Generally, the offeror has full control over the mode and method of the acceptance
Therefore they can state the required method or prohibit certain ones
What is the carlyle vs. the smoke ball case say?
If you do the act, you have essentially accepted the contract
What are the ways you can terminate an offer?
- Rejection of the offer by the offeree
- Lapse (fail to accept in timeline, fail to accept in reasonable time if there is no time line, or one of the parties dies / goes insane)
- counter offer (terminates the original offer)
- revocation (withdraws offer before its accepted)
Can a contract be vague?
No it should be certain.
What is a consideration in contracts?
It is the essence of the contract because contracts are ultimately an exchange / bargin
Each party in a contract must provide consideration - must provide something of economic value
Is a promise or an act considered as “consideration” in contracts?
Yes as long as it is something that they otherwise would not do
What is a gratuitous promise?
A promise without a returning consideration is gratuitous and not enforceable by law of contracts
there needs to be an exchange made of somesort
What are the various signs of the gratuitous promise?
Past consideration
Existing legal duties and consideration
The rule in foakes and beer
What is the “past consideration” sign of gratuitous promise?
a reward for an act that was previously free is not binding
there has to be an exchange because a contract is based on an exchange
What is the “existing legal duties and considerations” sign of gratuitous promise?
Where there is an already existing legal duty (new portion of contract must be backed with new economic value)
Do courts investigate “consideration” in contracts?
No, they just look for the fact that it exists
What is “the rules in foakes and beer” sign of gratuitous promise?
a creditors gratuitous reduction of debt for a payment is not enforceable
if you are loaned $1,000 but the person needs the money badly so they say make one more payment then they will forgive the final two payments. The lender can sue the person for the money. The person who was lent the money must use some form of nominal consideration to over their butt, seal the contract, make the payment 1 day early
In order for there to be a contract, what must both parties intend?
Intention to be a legally enforceable agreement
What is “capacity” in a contract?
it is the ability of the parties to bind themselves in a contract
Do they have the ability to enter into a contract
What must both parties have in order to satisfy the “capacity” in a contract?
They must both have mental competency and know the nature and consequence of the act
What happens if there ist capacity in contracts?
Then the contract is void
What are the two types of incapacity for contracts?
No capacity
Limited capacity
What is “no capacity” for contracts?
no ability to assess contract, being in a negative state
What is “limited capacity” for contracts?
Minors (in manitoba this is under 18)
A contract is unenforceable against the minor, but it is enforceable against the other side (voidable by the minor)
Mentally incompetent, incapacitated by drugs or alcohol
What happens if the object of th contract is illegal?
Then it is not enforceable
Will the court help parties get back to original position if they acted illegally?
No
What happens if the contract presumption is wrong?
Then it is void - meaning it was never formed at all
What is tied selling?
Under competition act
When seller is dominant in the marketplace, it is illegal for the seller to say the consumer can only buy the highly desirable product if they also buy the not so great product
Ex: microsoft
What is it to impugn a contract?
Attacking a contract as false or lacking integrity
What are four reasons for impugning a contract?
Legal mistake
Misrepresentation
Undue influence
Duress
What happens if there was a legal mistake (impugning a contract)?
Parties assume contract with each other when the contract does not exist
What happens under misrepresentation (impugning a contract)?
Tort - false statement
Innocent (has no idea): receives recession (gets everything back)
Negligent (no due diligence): receives rescission and compensation
Fraudulent (lies and knows it): Rescission and compensation
What happens under undue influence (impugning a contract)?
domination of ones partys mind to such a degree as to deprive the other party of the will to make an independent decision (need to know other person Ex: parent)
What happens under duress (impugning a contract)?
Threatens/harms to accept contract
What are the three steps of undue influence?
Prove there is a special relationship between the victim and the dominator
Prove that the circumstances were such that the domination was probable
Burden then shifts to the dominant party to prove that undue influence was not exerted
What are examples of duress in contract law?
threatening physical force, exertion of physical force / economic duress
Do contracts have to be in writing to be enforceable?
Not all the time, but some jurisdictions do require it to be in writing to be enforcable
Why do some provinces in Canada have the Statute of Frauds law?
It is implemented to try to decrease lying and fraud
What is the statute of the Frauds law?
It is a law that requires certain types of contracts to be enforceable in writing. If they are not in writing the law cannot enforce the contracts
What types of contracts must be written in order to be enforced (Statute of the frauds law)
Promise from executor to answer for damages
Guarantee of the debt of another doesn’t include an indemnification
Prenuptial agreement
Interest in land
Agreement to not be performed
Ratification of a infants contract
What does writing mean?
If a contract falls within the scope of the statute of fraud there must be a written document that contains critical terms, or essential terms of the contract:
Signatures of both parties, subject of the consideration, dates
What is the sales of goods act?
only applicable to sales of property in Manitoba over $50
Principles to regulate contracts, ensure fairness, provide remedies for breaches or disputes
What are the two ways to interpret a contract?
The literal meaning approach
The liberal approach
What is the literal meaning approach method for interpreting a contract?
restricts interpreting to the dictionary meaning
However, there is often more than one definition…
What is the liberal approach method for interpreting a contract?
Looks at intent in the agreement, looks at the circumstances, negotiations, knowledge of the parties
How do the courts pick a method to interpret a contract?
Generally they use both methods (literal meaning approach and the liberal approach)
They take the approach that will render the contract effective
What is the parol evidence rule?
Promotes clarity and finality in contractual agreements by regulating the admission of evidence outside of written contracts
What are the exceptions to the parol evidence rule?
If its shown that the written contract didn’t intend to include certain terms
Evidence of updated contracts amending the contract
collateral agreements that can be included
Evidence of precedent - conditions that must be fulfilled before a contract becomes effective
What are some reasonable notice provisions that has been implied into non collective bargaining?
Employers must give employees reasonable notice
Employees must give reasonable notice to employers
Reasonable notice is calculated by: length of service, occupation, state of economy, age of employees)
Usually between 2-4 weeks, max 2 years
What is the doctrine of privity in a contract?
Principle that says a contract cannot confer rights or impose obligations upon anyone who is not a party to the contract
Only parties directly involved in a contract can benefit from it or be bound by its obligations
What is the exception to the doctrine of privity?
Insurance contract - life insurance
Someone can sue for dead person
What does discharge of a contract mean?
This means to cancel the obligation
What are the ways you can discharge a contract?
Discharge by performance
Discharge by agreement
Discharge by frustration
What is the discharge by agreement?
This is when you mutually agree to void the contract
Includes condition subsequent: a term that says if this ever happens we discharge the contract
What is discharge by frustration?
becomes impossible to complete by no fault of either party
How does a breach of contract happen?
A breach happens when one party fails to live up to provisions of the contract
Can every breach discharge a contract?
No not every breach can discharge a contract
No breach automatically discharges the contract
What are the three basic types of contract breaches?
Warranties
Conditions
Fundamental terms
What are warranty breaches?
Minor / non-essential term in a contract
If breached you still have to go through, but you can sue for damages
What are condition breaches?
essential term in a contract
if breached you can walk away from the contract (or sue for money lost)
What is the doctrine of substantial performacne?
It insures that a breach of a condition in a minor respect is not fatal, it makes the condition equivalent to a warranty
If a plaintiff wins remedies due to a breach, what are the two kinds of remedy they may receive?
Common law remedies
Equity remedies
What are common law remedies?
They are damages
“How much do I pay you to get back to the place you were?”
Mitigation: You need to help yourself before suing, you must try to minimize your damages
What are types of equity remedies?
Specific performance
Injunctions
Rescission
What is the “specific performance” equity remedy?
Ask court to tell someone to complete their contractual obligation (ONLY IF UNIQUE like art, land)
What is the “Injunctions” equity remedy?
Opposite to specific performance, they say stop doing that
Restrains a party from committing a breach
What is the “rescission” equity remedy?
The contract is set aside and the court puts the parties back in the original position (pre-contract position)
Sometimes it is impossible to get them back to their original position
What is the sales of goods act?
It is a principle of law that states that the buyer assumes the risk for the condition of purchases
It is the buyers responsibility to check the quality of goods before a purchase is made
What is a huge part of the Sales of Goods Act?
Caveat emptor
Are there exceptions to the sales of goods act (caveat emptor)?
there are exceptions to prevent abuse, especially if there is a reliance on the seller or if there is an inability for the buyer to inspect the goods
What is a requirement in the sales of goods act if a purchase is above a certain value?
If a good is in excess of $50, a contract is required to be in writing
An invoice is also sufficient
What is the section 13 (sellers title) implied conditions in the sales of good act?
it highlights the caveat emptor doesnt apply to determining ownership
Sellers are assumed to have the right to sell what they offer
What is the section 14 (description) implied conditions in the sales of good act?
The goods are sold based on a description provided by the seller, it is understood that the goods will match the description
What is the section 15 (suitability and quality/fitness) implied conditions in the sales of good act?
Implied condition: It is implied that the goods are suitable for the purpose they are bought for. It only applies if
1) the buyer explicitly or implicitly informs the seller of the purpose
2) the buyer indicates reliance on the sellers expertise / judgement
3) if the seller typically sells goods as a part of their business
Examination of goods
If the buyer examines the goods before the purchase, there is no implied condition regarding defects that should have been revealed through physical examination
What is the section 16 (Sale by sample) implied conditions in the sales of good act?
if goods are sold based on sample, the actual goods mst correspond to that sample in type and quality.
What is the relationship between the title and risk? (sales of goods act)
The risk of damage follows the title
Possession of item does not imply ownership
Does possession of an item mean you own it?
No
What is lien? (sales of goods act)
A person who has possession of property is allowed to retain that property until the debt has been paid
What are situations where the seller maintains the right to put a lien on the goods purchased by an individual?
if the item was bought on credit and a payment was missed
The buyer becomes insolvent (broke) before getting the goods
What is “a stoppage in transit” (remedies for the seller - sales of goods act)
If you sell goods and the buyer is unable to pay, you as the seller have every right to pause the shipment before the item gets to the buyer
This right goes away once the item has been delivered
What is the resale remedy (sales of goods act)?
Utilize the right of lien and stoppage in transit before resale
The seller can take the goods and sell them to a third party. If the seller gets less money than the original deal (that fell through), the seller can go to the original buyer and ask for the difference
Like when you default on you house, eventually the bank will sell your house in hopes of getting payment, and come to you if there is a difference.
What are “specific goods”?
goods that exist and are identified at the time a contract is made
The buyer and seller agrees on the goods as the subject of their contract
What are “ascertained goods”?
These arent specific items, but instead they meet the description in the contract.
Any goods that match what is described in the contract can be provided
What is a title? (in regards to property)
Legal ownership of the property
If something is attached to your property, is it a part of the property?
Yes, even if the owner doesnt agree to it
What are the five criteria that makes something part of the property
What the thing is
How is it attached
Why it was attached
What it’s being used for
What everyone involved thinks about it
What is bailment?
When one person borrows an item (temporarily holding it). Even though they have it… the owner technically owns it. The agreement is usually for the person to give it back to the owner
In bailment, does the title / ownership change?
No, the ownership stays with the same person throughout
Who is liable if something happens to an item when out in bailment?
The person who borrowed the item (bailee) is responsible for all damages while in their possession
What are the categories of intellectual property?
Copyright
Patents
Trademarks
Industrial design
trade secrets
Confidential information
What is copyright?
right to protect and control copies of work
protected by law, usually lasting 50 years
only covers original expression of ideas, not the ideas themselves
can sell, lease, or waive copyrights
What are examples of copyrightable things?
Stories, songs
What are patents?
government approved monopolies that let investors profit from inventions
Must be new and has not been introduced to Canada or anywhere else in the last year
Last for 20 years
How long do patents last for?
20 years
How long do copyrights last for?
50 years
What are trademarks?
Signature for a business / product- makes it stand out from the rest
Protected by law
Lasts for 15 years, can renew
Especially important for franchise businesses
What are confidential secrets?
Arent covered by specific laws - provincial courts protect them
Recipes, industry secrets, client lists
Use of NDA (non disclosure agreements)
What are NDA’s made to protect?
confidential secrets
What does real property refer to?
land and everything permanently attached to it
What is included in “real property”?
buildings, minerals underground, airspace above
What are the three types of ownership for real property?
Fee simple estate
Life estate
Leasehold estate
What is fee simple estate?
highest level of ownership
owner to possess the land for an indefinite period of time
can transfer through will, sale or inheritance
the land rarely reverts to the government (except in cases of death without heirs)
What is life estate?
grants ownership of the land for the duration of someones life
once someone dies the land reverts to the grantor or a third party
Can be complex regarding maintenance and marketing
What is leasehold estate?
Ownership for a specific, agreed-upon time, typically through a lease agreement
Land reverts back to the owner
Short-term, long-term, periodic, continual
What are the two methods to own land concurrently? (at the same time)
Tenants in common
Joint tenancy
What is “tenants in common” method to own land concurrently?
each party owns a equal share and splits income equally
cannot fence each other off without agreement
One tenant can transfer ownership without consent
What is the “joint tenancy” method to own land concurrently?
ownership automatically transfers to the other co-tenants if one dies
Avoids probate fees based on property value
What are condominiums help solve?
Housing shortages in cities
What is the condiminium act?
governs ownership in buildings with multiple units (residential and commercial)
Each unit owner has their own title for inside
Outside areas is collectively owned by all owners
What is an easement?
Special rights granted to one land owner over another persons land (contract).
There is a dominant tenement and servient tenement
Most common use is the right of way allowing passage over someones land
What is a prescriptive easement?
acquired over time without a contract
If a individual habitually exercises a right over the land for a long time, and that right could have been granted an easement, it is presumed that he has that grant AFTER 20 years
How long does it take to get a prescriptive easement?
20 years
Do we have mineral rights in manitoba?
In manitoba they belong to the government (province)
What is statutory easement?
granted for utilities like hydro, phone lines
Specific easements defined by law
What are restrictive covenants?
clauses that prevent, prohibit, restrict, or limit the actions of a person or entity named in a contract.
Typically apply conditions on land use, such as building restrictions or property size
