Q's Flashcards
Define the term “Gatekeeper” liability as used in the course and give an example:
Gatekeeper liability refers to the legal responsibility that is placed on individuals or entities that are in position to prevent wrongful doing but fail to do so. An example: A bank that fails to prevent fraud activity on a customers account can be held liable for the losses.
What is a limited liability partnership?
A limited liability partnership is one that allows limited liability protection to partners. Personal assets are protected and shielded from the partnerships obligations and debt. Each partner has an equal stake in the company and say.
What is a Limited Partnership
A limited partnership has general partners and limited partners. General partners manage the business and have unlimited personal liability for the partnerships and obligations. The limited partners tend to be more of the passive investor in the company, they have limited personal liability for the partnership’s debts and obligations.
What is an “implied term” In law? Give 2 examples.
A term that is not specifically stated in the contract but is considered to be apart of the agreement by the courts.
A common implied term: You can be fired for insubordination.
Term for sale of goods is the guarantee that a good sold fits their intended purpose and are reasonably quality.
What is a Trustee in Bankruptcy and what does it do?
Court-appointed professional who administers the assets of a debtor who has filed for bankruptcy. Their duties include liquidation of assets, distributing funds to creditors. Opposing improper claims.
What is a secured transaction and when is it relevant in a commercial transaction? Give examples.
A type of security where the borrower grants a security interest in collateral to a lender as a form of security for a loan or other obligation. It is relevant in a commercial transaction when a business needs to borrow money or obtain credit to finance its operations. One example could be a business getting a loan from a bank and offering up its inventory as collateral. Another example could be when someone buys a car with a loan, the car becomes the collateral in some cases.
Special usage of words rule:
A principle in contract law that pertains to the interpretation of contract terms. According to this rule, if the parties to a contract have consistently used a certain term or phrase in a particular way that is unique to their relationship or industry, that special meaning will be applied when interpreting the contract.
Call upon expert witnesses to explain the special usages of the words.
What is the “principal of remoteness” in the Law of Contract and Why is it important?
A key concept in the Law of Contacts that governs the recovery of damages for breaches of contracts. Damages are only recoverable if there was a foreseeable consequence of the breach, not if they were too remote. It is important because it limits the liability of the breaching party and ensures damages are only rewarded for losses that were caused by the breach.
What does the term “Escheat” mean?
It means “that which falls to one”. Ownership of a property is transferred to the Crown when a person dies without leaving a valid heir.
What is a “fee simple” as opposed to a “leasehold estate”?
Fee simple is a type of property ownership that gives the owner the unrestricted right to use sell or transfer the property as they see fit. Owner hold title in perpetuity.
Leasehold estate is a type of property ownership where the owners holds a limited interest in the property for a fixed term of years. They can use property for the term lease but the do not own it and they generally pay rent to the owner of the fee simple.
Life-Estate: You get the estate only for the life of one person
What does “estoppel” mean and discuss where it is relevant in this course
The word means “stopper.” Legal principle that prevents a party from asserting a claim or right that is inconsistent with their previous actions or statements. It is relevant in this course in Contract law, negotiations and disputes. For example, if a party makes a promise or representation to induce another party to enter into contract, and that party relies on the promise in entering the contract, the first party may be estopped from denying the truth or validity of the promise of representation.
A legal principal that states if you allow someone to believe something you cannot deny it.
What are “liquidated damages” and what are their limits?
They are pre-determined amount of money agreed upon by the parties to a contract as compensation for a specific type of breach. They are meant to provide certainty and predictability in a commercial transactions. They are limited in the way that the amount of liquidated damages must be reasonable estimate of the actual damages that would be suffered by the non-breaching party in the event of a breach.
What is “prescriptive easement”? Give an example.
A type of easement that is created by continuous use of another person’s property for a certain period, without the owner’s permission. An example could be a neighbour crossing over a portion of a person’s driveway for years without permission.
What are “moral rights” in respect of “copyrights”?
A set of rights associated with the creator of a copyrighted work. They include the right of attribution and the right of integrity. Attribution ensures the creator is recognized as the author and integrity protects their reputation and artistic vison.
What does the “parole evidence rule” mean and in what context in this course is it used? Why is it important?
A legal principal that limits the type of evidence that can be used to interpret a written contract. If a contract is reduced to writing and is intended to be the final expression of the party’s agreement, then any prior oral or written negotiations or agreements are generally not admissible to contradict or add to the terms of the written contract. In commercial law, the parole evidence rule is used to determine the scope and extent of the party’s agreement based on the terms of the written contract. It is important because it promotes stability and predictability of contract by giving effect to the terms that the parties have agreed upon writing.
Define the term “negotiability” and why it is important.
A legal concept that refers to the ability of certain types of commercial instruments, such as checks, promissory notes, and bills of exchange, to be transferred from one party to another in a way that confers ownership and a legal right to payment on the new holder of the instrument. Negotiability is important because it allows for the efficient and secure transfer of commercial instruments from one party to another, without the need for cumbersome and time-consuming procedures such as assignment or novation.
Why is “certainty” in Contract Law important and to what “element” does it relate? Discuss how the Common Law promotes it both as a system and through principles or doctrines of law. Discuss any statutes that seek to promote “certainty” in Contract Law. (10)
Certainty is a fundamental element of contract law that relates to the ability of the parties to a contract to be able to understand and enforce their legal rights and obligations. The concept of certainty is important because it promotes the stability and predictability of contractual relationships, which is essential for the efficient functioning of the commercial marketplace.
In the common law system, certainty is promoted through a number of principles and doctrines that establish clear rules and standards for the formation, interpretation, and enforcement of contracts. For example, the principal of offer and acceptance requires that both the parties to a contract make clear and unambiguous offers and acceptances, in order to establish a mutual agreement. The doctrine of consideration requires that each party to a contract provide something of value in change for the other parties promise or performance.
Other doctrines that promote certainty in contract law include the parole evidence rule, which limits the types of evidence that can be interpreted or supplemented in a written contract, and the doctrine of frustration, which allows a contract to be discharged in a certain circumstance where performance has become impossible or impracticable.
Statutes that promote certainty in contract law included for example is the Uniform Commercial Code (UCC) in the US establishes clear rules and standards for the formation and enforcement of contracts for the same of goods. The UCC provides guidance on issues such as offer and acceptance, the obligation to perform, warranties and disclaimers, and remedies for breach of contract, helping to promote certainty and predictability in commercial transactions.
To conclude, certainty is fundamental in contract law to relates to the ability of the parties to contract to understand and enforce their legal rights and obligations. Common law system promotes certainty through principles and doctrines that establish clear rules and standards for contracts.
Discuss the relationship of the Law of Agency to the business organizations reviewed in this course. (10)
The Law of agency is a fundamental aspect of commercial law that governs the relationship between principals and agents in business transactions. The law of agency is relevant to many of the business organisations from this class such as partnerships, corporations, and limited liability companies.
In partnerships. Each partner is an agent of the partnership and can enter into contracts and make decisions for the partnership. The law of agency makes it, so the rights and responsibilities of each partner are interconnected and liable for the other actions of the partners.
In corporations. The officers and directors of the corporations are agents of the corporation and can make decisions to enter contracts on behalf of the corporation. The law of agency establishes the rights and responsibilities of these agents and ensures they are held accountable.
In an LLC, some members may act as agents of the company, depending on their agreement put in place. The law of agency governs the relationship between the members and the company and establishes the rights and responsibilities of each party.
As reviewed in your textbook and lectures, discuss the various forms of protection that minority shareholder in a corporation has at their disposal if its in their interest are being adversely affected. (10)
Minority share holders have a variety of protection available to them if their interest are being adversely affected. Some of these protections are:
Statutory rights: minority share holders have the right to inspect corporate records and the right to vote on certain matters.
Fiduciary duties: Directors/ officers owe a fiduciary to the shareholders and minority shareholders meaning they have to act in the best interest of them. Minority shareholders can seek legal actions when directors or officers breach this duty.
Derivative actions: Minority shareholders may be in this action when they believe the corporation has suffered due to the actions of directors and officers. This when holds them accountable for their actions.
Appraisal rights: In some cases, minority shareholders have the right to seek appraisal of their shares if the corporation undergoes a merger. They can receive fair value for their shares if they disagree with this change.
Shareholder agreements. Protection of their interests through agreements. Establish certain rights and protections for minority shareholders (veto rights etc.…)
What is a Secured Transaction? Why are secured transactions important? When are they important?
A secured transaction is a transaction in which the borrower pledges collateral to a lender as a security for a loan or other obligations. The collateral can take place as being personal property, inventory/ equipment or real property such as a mortgage on a house.
They are important because they provide a means for borrowers to obtain a financing by using their assets as collateral, while also providing the lender with reduced risks of the default. The lender then has legal rights to that collateral if a default on the loan or obligation occurs.
They are also important in commercial transactions, where businesses may need to obtain financing to purchase inventory or equipment. In estate transactions, mortgages are used to finance the purchase of real property.
Discuss some of the appropriate Conditions Precedent that should be included for a purchaser in a Contract of Purchase of a Business that has real property, buildings, employees and complex legal, tax and environmental issues. Does it make a difference if it is an asset purchaser or a share purchase? (5)
Some examples include:
Due diligence review: The purchaser may want to conduct a thorough due diligence review of the business, including financial statements, tax record, contracts, environmental reports in order to determine potential liabilities.
Environmental assessments: If the business has environmental issues or liabilities, the purchaser may want to require that an environmental assessment take place to reveal any potential environmental risks/ liabilities.
Title searches: Make sure the seller actually has the title and ownership of the real property and buildings.
Employee transfers: if you want to know about employees, there may be a written agreement in place to obtain all necessary information about the transfers of employees.
Tax clearances: Make sure the seller is paying taxes through evidence so there are no outstanding payments or debts to be made after the purchase.
The inclusion of these conditions’ precedent may differ depending on whether the purchaser is acquiring the assets or the shares of the business. In an asset purchase, the purchaser may want to include additional conditions related to the transfer of specific assets, such as the real property or equipment, whereas in a share purchase, the purchaser may want to focus more on the liabilities and risks associated with the business as a whole.
Define and discuss the impact of the concept of “Freedom of Contract” in respect of the Laws of Contract as reviewed in this course. (5)
Freedom of contract is a legal principal that allows parties to a contract to negotiate and agree on the terms and conditions of the contract without undue interference from the government or external parties.
It has an impact on the formation, interpretation and enforcement of contracts. It allows each party to negotiate their personal needs and circumstances and promotes efficiency/ flexibility.
It is not an absolute principal and is subject to certain limits and restrictions. Example: contracts that violate public policy are unenforceable .
Discuss the situations when a court must interpret a contractual term. Is it the Plaintiff or Defendant who is usually most interested in requiring the construction of a contract? What do courts attempt to fulfil through contract interpretation and what approaches do they use? (5)
Courts must interpret contractual terms when there is a dispute between the parties regarding the meaning or application of a particular term or provision in the contract. In such situations, the court must identify the intent of the parties and apply relevant legal principles to interpret the contract.
A plaintiff who is most interested in requiring the construction of a contract as they are seeking to enforce their rights under the contract. However the defendant may also seek to require the construction of a contract if they believe that the plaintiff’s interpretation is incorrect.
As discussed in this course, define the term “insurance”, what it accomplishes and in what role is it useful or worthwhile in property and business transactions and ownership. Also, what does the term “insurable interest” mean and why is it important? (10)
Insurance is a legal contract between an insurer and a policyholder, in which the insurer agrees to pay out a certain amount of money in the event that the policyholder experiences a covered loss. This can help with lowering risk as if you know in case something were to happen, you will get some sort of coverage for it.
In property and business transactions. Insurance can be helpful if it means protecting against risks associated with property ownership and business operations. Insurance for property damage or theft is available for real property owners. And Business owners may purchase insurance to protect against employee injuries, liability claims and more.
Insurable Interest is a legal or financial interest that an individual or business shares in the subject matter of an insurance policy. To get insurance, the policyholder must have an insurable interest In the property or subject matter being insured. This ensures that the policyholder has a legitimate interest in protecting against potential loss.
Its important because it ensures that insurance policies are only to those who have a legitimate interest in protecting against loss, helps prevent fraudulent claims.
As reviewed in this course, discuss the reasons for the expansion of Professional Liability Claims. (5)
Claims have been expended in recent years due to several reasons. One reason is the increasing complexity of professional services resulting in harder to provide accurate and effective services to their clients. Another reason is due to the increase of lawsuits and claims filed against professionals.
The role “professional” has changed from someone as a trusted advisor to a service provider, clients are more demanding and less forgiving of mistakes.
Because of technology, professionals are more at risk for data breaches and other technologically advanced attacks to gather information on them and their clients.
What are the types of director duties that exist in the Canadian Legal System? How do they place directors in legal liability jeopardy and also impair the effectiveness of corporation as a business organization in society? How should a director protect herself/himself? (5)
The duties include:
Fiduciary duty: Directors must act honestly and in good faith and in the best interests of the shareholders.
Duty of care: they must exercise care, diligence and the skill of a reasonable person
Duty to disclose conflicts of interests
Duty to act in good faith: Must act in good faith and with honesty in the face of the company.
If a director breaches any of these duties, they can be held accountable and liable for damages sustained under their care and authority when it affects the company. Could result in criminal charges, lose of employment etc…
Because of the legal liability, it can cause the directors to not be qualified or limiting poor talent to the pool available for the company.
To protect your self, they should understand their duties, seek advice when needed, get insurance reviewing and updating corporations policies.
Sales of good act.
Caveat Emptor “let the buyer beware” This term is a legal principal that means any absent conditions or terms in a contract, the buyer assumes the risk of the purchased item.
Under the sales of good act, this limits Caveat Emptor
Section 13 (sellers title) The implied condition of which the seller is implied to be the owner or title holder of the object at play.
Section 14 (description) Implied condition that goods sold by description will conform to the description.
Section 15 (suitability and quality/ fitness) Implied that the conditions of the time can be used for the purpose of it,
Section 16 (sale by sample)
Non est factum
“Not my doing”
a way to void a contract by stating you cant take advantage of someone if they are illiterate.
As reviewed in your text book and lectures, discuss the importance of a Legal Risk Management Plan for businesses. In your answer, include the five (5) distinct steps for creation of said Plan and the strategies for managing legal risks that may be involved in the Legal Risk Management Plan.
- Legal Risk Management Plan: anticipates possible legal liability, and provides preventative and remedial strategies
5 Steps to Legal Risk Management Plans:
1. Audit of potential liabilities: interaction that business has with outside organizations or persons
2. Prioritize the risks identified in terms of likelihood and potential result
3. Develop strategies to deal with each risk: prevent legal liabilities from crystalizing and minimize consequences if it does crystalize
a. Avoid the risk
b. Reduce the risk – quality control issues
c. Transfer the risk – have someone else do the work or have insurance
d. Absorb the risk – do this through minimization of risk
4. Implement plan
5. Revise Plan
Explain how fraudulent, negligent and innocent misrepresentation differ. Identify the remedies that are available for each type of misrepresentation.
- Innocent misrepresentation occurs when the individual doesn’t know that what he or she has said is false.
- Negligent misrepresentation is when the person honestly thought that what he or she was saying was true, but should have known it was false.
- Fraudulent misrepresentation is when someone knowingly makes a false statement that induces another to enter into a contract.
- The importance of the distinction is in the remedies available. If the misrepresentation is innocent, only rescission is available. If the statement becomes a term of the contract, normal breach of contract remedies apply. If the representation was either negligent or fraudulent rescission and damages are available to the victim.
Name the four basic duties an agent owes to his principal.
Agent must comply with the contract establishing the agency or he is liable
Agent must be diligent in reprising
Duty of care implied: whether paid or not, must be careful
Duty of personal performance: cannot sub delegate the tasks
What is apparent authority in agency law?
the agent has no real authority but appears to have authority to act on behalf of the principal on account of the past matter of transacting business or on account of certain practices in the trade.
What is the Parol Evidence Rule?
A term previously agreed upon by the parties but not included in the final written form of the contract will not later be permitted to add to or contradict the contract.
What is the standard of proof necessary in civil cases, and what is the standard of proof reported in a criminal case?
In civil cases, certainty of 51% is needed for standard of proof. In criminal cases, standard of proof is “beyond reasonable doubt” at over 95% certainty.
What is a condition subsequent?
Is an uncertain event in which the occurrence brings the promisor’s contractual liability to an end. One, both or all of the parties have reserved an out in certain circumstances. Example. In employment contracts, there is a misconduct clause.
Briefly describe consideration in the law of contract.
Consideration is the price for which the act or other party is bought. So long as the promisor bargains for the other party to do something – or to promise to do something – that they otherwise would not do, the promisor will have received consideration.
What is “non es factum” in contract law?
Not fact. allows a signing party to escape performance of an agreement “which is fundamentally different from what he or she intended to execute or sign.” A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning. Is grounds to impugn a contract, making the contract void.
State the purposes of damage awards in Tort Law and Contract Law.
In Tort Law, damages are rewarded to compensate the individual, to place the victim in the same position had the tort not occurred. Damages in Torts are monetary remedies. Contract Law is concerned with lost profit, so general damages include expected damages (cost of performance or Economic Loss).
What are the 4 basic categories for discharging a contract?
Discharging a contract means to cancel the obligation, make the contract null and inoperative. Discharge by performance (when both the parties perform all the primary obligations both express and implied which are set out under the contract), discharge by agreement (both parties agree between themselves that the contract does not need to be performed and is therefore discharged), discharge by frustration (courts excuse persons for failure to perform their contracts in a wide variety of circumstance where the inability to perform is not their fault, typically thought of an “an act of God”. Performance by literally be impossible or if performance is physically impossible) and discharge by breach (a failure or refusal by one or both of the parties to perform one or all of the obligations imposed upon them under the contract).
What are the four basic limitations on the separate entity principle in corporate law?
A corporation is a separate person from the investors (shareholders). The investors are not responsible for the actions of the corporation, gives limited liability to the shareholders.
To ignore separate entity principle means to pierce the corporate veil:
Four limitations to the separate entity principle are taxation situations, for the residence of the corporation and the controlling shareholders, for agency principles (was the parent in constant control of the corporation) and in certain situations of fraud (if the corporation is found to be a sham).
Name 2 equitable remedies that exist for breach of contract.
Specific Performance (court order which requires the party in breach to completely perform their part of the bargain according to the contract) and Recission (old contract which was breached is rescinded or cancelled. A new contract may be written which more clearly addresses the different needs of each party.)
Briefly define a guarantee. Indicate when a guarantee might be employed and for whose benefit.
A legal commitment where one party (the guarantor) agrees to assume responsibility for fulfilling the debt or obligation of another party (the principal debtor) in case that party fails to do so. Often used in the context of loans, leases, or other agreements where there is risk that the principal might not meet their obligations.
Commonly employed in situations where the primary party seeking a loan or entering into a contract does not have sufficient creditworthiness on their own
Why is the case Donoahue vs. Stevenson significant?
The Donoghue v. Stevenson case from 1932 is pivotal because it established the “neighbor principle,” which expanded the scope of who could legally be owed a duty of care. Simply put, it means that we should consider the potential impact of our actions on those who might be directly affected by them. The lawsuit involved a woman who became ill after consuming ginger beer that contained a decomposed snail, although she had no direct purchase contract with the manufacturer. The ruling by the House of Lords in favor of the woman set a precedent that manufacturers owe a duty of care to consumers, allowing individuals to seek redress for negligence even when there is no contractual relationship. This case fundamentally shaped the responsibility producers have towards consumers and is a cornerstone of modern tort law.
Describe and discuss the elements of the tort of negligence and the elements of intentional torts. Give examples of each. How are these two types of torts different yet the same? Also discuss why professional liability is expanding.
Tort of Negligence is about a standard of care. When someone is liable in negligence, they are liable in having failed to live up to the required standard of conduct which is applicable to all activities in society. No intention is required in the tort of negligence. Six elements required for Tort of Negligence:
Defendants conduct must be negligent
The plaintiff must suffer some damage
The damage suffered must be caused by the negligent conduct of 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 as a result of the defendant’s conduct
The conduct of the plaintiff should not be such as to bar their own
recovery; they must not be guilty of contributory negligence and they must
not voluntarily assume the risk.
Intentional Torts are an intentional act proscribing intentional harm; harm cannot
be reflective or defensive. For intentional, there must be three elements proven:
Intention: Must be a voluntary act committed by the defendant
Causation: it must be the operative cause (close in time with no intervening acts), nothing to do with motive.
Various Proscribed harms: such as battery, assault, deceit, etc.
If all three are proven, the plaintiff is entitled to compensation to place the
victim in the position they were in had the tort not occurred.
Professional liability is expanding because
The practicing of the professions is becoming more complex, meaning there is a greater chance of making an error
There is a tendency now due to economic pressure for professional to take more clients and files leading to a greater chance error and a greater chance the client will sue.
Clients are more sophisticated and not willing to accept the word of professionals; they also tend to be more litigious and more demanding and aggressive toward professionals.
Various forms of invalid consideration in contract law were reviewed. Define and discuss each of them, and also discuss how each form of invalid consideration is a manifestation of gratuitous promise.
- Past considerations - an action done before the promise was made, not valid because there is no exchange or bargain at the time of the promise. This aligns with principle of gratuitous promises
- Pre-existing legal duty - party is already under legal obligation to perform a duty, any promise to perform that same duty is not considered valid. This type of promise does not provide anything additional or new to the contract, making it effectively a gratuitous promise
- Seal (Nominal Consideration) - historically, the presence of a seal was considered sufficient to bind a party to a contract; however, for a contract to be enforceable under equity, substantial consideration is required beyond normal forms such as a dollar or peppercorn. This also ties back to a gratuitous promise
What is duty to mitigate?
Is a restriction to common law damages. Is the duty of someone who was wronged to make reasonable efforts to limit the resulting harm. The damages the plaintiff can recover will not include what may have been reasonably avoided, preventing economic waste.
What does locked-in a frozen out mean and how can such a situation be remedied?
A minority shareholder cannot sell their shares except at a very discounted price because no one wants to pay to be a minority shareholder but are frozen out because they have no influence on management with a minority. Locked-in and frozen out can be remedied through provisions in a shareholders agreement. The most important clause is the shot gun clause which states that the minority shareholder can make an offer to the other party the ability to buy their shares at price per share (buying out the minority shareholder) or the ability for the other party to sell their own shares to the minority shareholder.
What are the elements necessary for the imposition of an equitable remedy in contract law?
The elements necessary for equitable remedies are:
the plaintiff must have clean hands (they cannot be guilty of unethical conduct)
the plaintiff cannot have acquiescence (no long delays, must act promptly upon becoming aware of the misconduct)
refuse to intervene if there is a third party for value
requires substantial consideration
