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Canadian Business and the Law 5th Edition Solution Manual

Master complex topics with Canadian Business and the Law 5th Edition Solution Manual, a comprehensive textbook guide designed for easy learning.

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    Table of Contents Chapter 1: Knowledge of Law as a Business Asset ............................................................ 1 Chapter 2: The Canadian Legal System............................................................................ 34 Chapter 3: Managing Legal Risks..................................................................................... 65 Chapter 4: Dispute Resolution .......................................................................................... 97 Chapter 5: An Introduction to Contracts ......................................................................... 132 Chapter 6: Forming Contractual Relationships............................................................... 154 Chapter 7: The Terms of a Contract ............................................................................... 196 Chapter 8: Non-Enforcement of Contracts ..................................................................... 234 Chapter 9: Termination and Enforcement of Contracts .................................................. 282 Chapter 10: Introduction to Tort Law ............................................................................. 316 Chapter 11: The Tort of Negligence ............................................................................... 346 Chapter 12: Other Torts .................................................................................................. 393 Chapter 13: The Agency Relationship ............................................................................ 434 Chapter 14: Business Forms and Arrangements ............................................................. 472 Chapter 15: The Corporate Form: Organizational Matters ............................................. 523 Chapter 16: The Corporate Form: Operational Matters .................................................. 565 Chapter 17: Personal Property ........................................................................................ 614 Chapter 18: Intellectual Property .................................................................................... 641 Chapter 19: Real Property ............................................................................................... 689 Chapter 20: The Employment Relationship .................................................................... 723 Chapter 21: Terminating the Employment Relationship ................................................ 778 Chapter 22: Professional Services .................................................................................. 825

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    Chapter 23: Sales and Marketing: The Contract, Product, and Promotion .................... 858 Chapter 24: Sales and Marketing: Price, Distribution, and Risk Management .............. 889 Chapter 25: Business and Banking ................................................................................. 918 Chapter 26: The Legal Aspects of Credit ....................................................................... 948 Chapter 27: Bankruptcy and Insolvency ......................................................................... 978 Chapter 28: Insurance ................................................................................................... 1009

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    Chapter 1 Knowledge of Law as a Business Asset by Shannon O’Byrne DETAILED TABLE OF CONTENTS Business Law in Practice ............................................................................ 2 Law in the Business Environment .............................................................. 3 Rules and Principles .............................................................................. 5 How and Why the Law Works.................................................................. 13 Knowledge of the Law as a Business Asset ........................................ 14 Law and Business Ethics .......................................................................... 15 Business Law in Practice Revisited .......................................................... 16 Chapter Summary ......................................................................................18 Key Terms and Concepts .................................................................... 19 Questions for Review .......................................................................... 19 Questions for Critical Thinking .......................................................... 19 Situations for Discussion .....................................................................20

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    I. TEACHING OBJECTIVES After studying this chapter, students should have an understanding of the role of law in guiding conduct the importance of legal knowledge in the business environment the challenges posed by business ethics and their relationship to legal requirements This chapter provides an introduction to the role and purpose of the Canadian legal system within a business context. It endeavours to put forth a corrective or alternative to the view that the legal system is obstructionist in the sense of “getting in the way” of commercial activity. Instead, the chapter advances the perspective that the law facilitates business planning, offers protection mechanisms, provides general rules of commerce, and allows businesspeople to manage their exposure to risk. In this way, the chapter defends the central proposition that informs the whole text: knowledge of the law is a business asset. The teaching objective of this chapter is to establish why it is important to study law in a business program. It is helpful to convey to students that the whole course is centred on the practical application of legal ideas and principles, and will therefore likely resonate throughout their careers. To provide a foundation for the subsequent discussion of specific legal subject areas, Chapter 1 is an account of the basic ideas that inform the Canadian legal system. By relying on the exaggerated persona of the incompetent and oblivious Louella (whose business suffers from a series of tribulations), the chapter also illustrates the pitfalls of legal ignorance. Beyond this, it demonstrates the wide range of laws that affect Louella’s operations and how Louella should proactively endeavour to understand and use the law to her advantage.

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    Through class discussion, the instructor can try to tap into whatever legal knowledge students may have and then gently advance it. For example, a student may think that the law is simply a set of rules — which it is, from a certain perspective — but it is also a process by which disputes are resolved. Furthermore, the law does not concern a process that resolves disputes in any old way; it embodies important principles, such as the idea that the laws and how they are applied should be fair and free from bias. Though no justice system can achieve such a standard of perfection, the Canadian legal system is dedicated to trying to reach it.

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    II. TEACHING STRATEGIES Although some students may have a general sense of the legal system, it can be difficult to elicit class discussion on such a broad topic. In short, students may be too intimidated to share their thoughts on the subject. Since the tone of the class is established early in the term, it is important to find ways of securing student participation at the outset. Students (at least some) will have read Chapter 1 and already be familiar with the Business Law in Practice scenario involving Louella and her disastrous business venture. During class, it may therefore be preferable to present a new, but parallel, example to facilitate discussion. The following example has been classroom tested, with success. A businessperson has come up with a new product — say, a computer that translates English into other languages. This entrepreneur believes that her product has numerous applications, in both the public and private sectors. She needs to work up a business plan. What business decisions must she make to bring the product to market? This example encourages discussion because it is straightforward. Students will quickly identify a number of areas requiring attention — the entrepreneur needs to choose a business name, hire employees, get financing in place, and so on. After general discussion subsides, the instructor can then zero in on two or three of the business decisions identified and illustrate how the law affects those decisions and provides mandatory parameters. For example, when choosing a name, the entrepreneur must be sure not to commit the tort of passing off, nor violate someone else’s trademark. In hiring employees, the entrepreneur must abide by the dictates of human rights legislation prohibiting discrimination, as well as comply with occupational health and safety legislation during operations. Before beginning production, the entrepreneur must be sure that his idea does not involve someone else ’s patent, and so on.

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    From there, the instructor can ask the class to consider what the purpose of these laws might be whether they are positive or negative forces for this entrepreneur specifically whether they are positive or negative forces for business generally After discussing these points, the instructor can then steer debate to the text’s account of the general purposes of law. An alternative approach — which has also proven successful in the classroom — is to follow through with the Business Law in Practice scenario. By highlighting the legal difficulties experie nced by Louella, an instructor can focus on this chapter’s themes, namely: the three purposes of the law (i.e., protecting persons and their property, facilitating interactions, providing mechanisms for dispute resolution) how and why the law works how knowledge of the law is a business asset, including the importance of legal risk management the relationship between law and business ethics

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    III. STUDENT ACTIVITIES Task 1: One way to help students prepare for class discussion about the role of the law in the business world is to ask them to find a news story, in a local or national paper, involving business and the law. Ask students to come to class having summarized the story and identified the main legal question or legal issue to be resolved. Task 2: Chapter 1 of the DVD supplement (supporting the Instructor’s Manual) includes a CBC Marketplace update (called “Faking It”) about San Francisco Gifts Ltd. and its owner, B arry Slawsky. This video builds on the Business Application of the Law: Fraud on the Public (page 4 of the text), which kicks off the story of San Francisco Gifts placing fake UL (Underwriters Laboratories) labels on table lamps being sold in its retail outlets. The lamps had not been UL inspected and, in fact, were a potential fire hazard. The video discusses the fire hazard created by another San Francisco Gifts product — specifically, a dolphin lamp — which also bore a fake UL label. In this latter case, the product in question began to catch on fire but the family was home and the appliance was quickly unplugged, thereby averting a potential tragedy. See too: CBC News, “Fake labels give consumers false sense of safety: CBC report” (7 April 2007) at http://www.cbc.ca/canada/story/2006/04/07/labels060407.html. After showing the CBC Marketplace video to the class, the instructor might pose the question in Task 1 above (“What is the main legal question or legal issue to be resolved?”) and the following questions as well: What is the purpose of the law that requires UL inspection and prohibits counterfeit UL labels? How does such a law fit within the definition of law set out on page 5 of the text?

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    Is the law failing in the San Francisco Gifts case? Is enforcement failing in the San Francisco Gifts case? What do you think should happen next? On a related front, students could be asked to consider the video in light of Questions for Review 1, 2, 3, 10, and 12. Task 3: The DVD (supporting the In structor’s Manual) also includes several short news clips reporting on an emerging legal issue or problem. “Sled Dog Repo” concerns the killing of sled dogs in British Columbia (which is also the focus of Ethical Considerations: Inhumane Killing of Sled Dogs in British Columbia, page 7). “Facebook Privacy” concerns privacy issues on Facebook (which is also the focus of Technology and the Law: University of Ottawa Law Students Help Challenge Facebook, page 6). “Victoria Tanning” concerns underage tannin g (which is also the focus of Business and Legislation: Regulating the Tanning Industry, page 10). The instructor could show these clips in succession and ask the class to discuss the role of law in modern Canadian society. To what extent should the law mandate protection (for animals, for underage tanners, for those who use Facebook) and to what extent should people (including those in the sled dog industry, corporations like Facebook, and those who choose to tan) be left free from government constraint or control. One common theme that unites the clips is that those whom the law seeks to protect are vulnerable in that they cannot choose their own course (such as sled dogs) or might be too immature to do so rationally (underage tanners) or do not know that their rights may be being violated to begin with (such as when social media share information with third party vendors).

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    IV. EXPLANATION OF SELECTED FEATURES Page 4 Business Application of the Law: Fraud on the Public Critical Analysis: What are the alternatives to market regulation by government? Absent market regulation by government in relation to product safety standards, for example, consumers would presumably be left to discover for themselves what products are safe. Businesses that supply shoddy products would develop poor reputations and end up out of business. Relying on the market to drive such individuals out of business, however, is a slow process and needless injury and loss could arise in the interim. Market regulation by government is therefore generally seen as preferable. Page 5 International Perspective: US Spam Laws Critical Analysis: Should American judgments be enforceable in Canada? Why or why not? What is objectionable about spamming? How is it different from marketing? (Note: Though the question above raises the more complicated matter of when foreign judgments should be domestically recognized, there is no need to take a technical approach to the matter — especially so early in the course. It is preferable to approach the question conceptually but within the context offered by the Guerbuez narrative.) If Facebook were unable to enforce its judgment in Canada, Guerbuez would essentially be able to break US laws with impunity. That is, assuming that Guerbuez has no assets in the United States, the only way that Facebook will see a dime of its award is to seize Guerbuez’s property in Quebec. This it can do only by getting its US judgment recognized in Quebec. So long as the US

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    court’s decision has been reached on a fair and legitimate basis, there is no reason for Canadian courts not to assist Facebook. Beyond this, and as the Quebec Superior Court points out, Guerbuez would have faced simi lar sanctions under Canada’s then -proposed spam legislation. It advances justice to permit Facebook to satisfy its judgment in Quebec. As Daniel Bourque notes, these Quebec decisions demonstrate that “as a matter of international courtesy,” Canadian courts will enforce, not lightly set aside, foreign judgements absent important reasons mandating them to. See Daniel Bourque, “Quebec court enforces U.S. court’s $873 million judgement against Facebook spammer” (2011 -201) 11 I.E.C.L.C. at http://www.mcmillan.ca/Files/129163_article.pdf. Spamming is objectionable for a multitude of reasons. For example, it wastes employee time, hurts the reputation of legitimate Internet marketers, and puts a strain on Internet services providers. According to the 2005 National Task Force on Spam: [t]he new mutations of spam undermine consumer confidence in the Internet as a platform for commerce and communications. Because of this, the potential of information and communications technology to buttress productivity, and the ability of e-commerce to attract investment, create jobs and enrich our lives, is constrained not only by the torrents of spam, but by the deception, fraudulent and malicious activities that sometimes accompany it. For more analysis from this Canadian task force, see “Stopping spam: Creating a stronger, safer Internet: Report of the task force on spam” (May 2005) at http://www.ic.gc.ca/eic/site/ecic- ceac.nsf/eng/h_gv00317.html. Spamming is a form of marketing but of an inherently objectionable variety. Spammers typically purchase email lists of potential customers and then inundate those email addresses with advertisements for products and services. There has been no consent by the recipients to receiving such communication — the ads are unsolicited and therefore particularly intrusive.

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    The question concerning the difference between spam and marketing can usefully be revisited in Chapter 6, where the textbook provides a basic introduction to Canada’s new antispamming legislation (which is anticipated to be proclaimed in force in 2013). When this legislation is in place, the difference between spam and simple e-marketing will be straightforward. E-marketing communications will be legislatively compliant. Spam will not be. For more discussion, see too Chapter 6 of this Instructor’s Manual. Page 6 Technology and the Law: University of Ottawa Law Students Help Challenge Facebook Critical Analysis: In what way does PIPEDA protect people and their property? Do you think that the legislation puts too much responsibility on business? PIPEDA requires businesses to be accountable in how they gather, secure, disclose, and discard the personal information of customers, including credit card numbers, photographs, business email addresses, and computer internet protocol (IP) addresses. (For analysis, see Office of the Privacy Commissioner of Canada, “Leading by example: Key developm ents in the first seven years of the Personal Information Protection and Electronic Documents Act (PIPEDA)” (2008) at http://www.priv.gc.ca/information/pub/lbe_080523_e.asp. ) PIPEDA ’s legislative requirements seek to protect persons and their property by acknowledging the importance of privacy, regulating how business is to manage the personal information of customers, and endeavouring to prevent such crimes as identity theft. In its report entitled “Leading by example: Key developments in the first seven years of PIPEDA” (2008) at http://www.priv.gc.ca/information/pub/lbe_080523_e.asp , the Office of the Privacy Commissioner of Canada provides many illuminating examples of privacy breaches that

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    could be used by an instructor in the classroom. For example, the report recounts the inappropriate disposal of personal information by a bank, in the following terms: The Assistant Commissioner has found that disposing of sensitive personal banking information in a recycling bin is a violation of PIPEDA. In this case, the complainant learned that his personal banking information — including the complainant’s and his wife’s names, address, social insurance numbers, account number and transaction history — was found by a third party in an unattended recycling bin in a parking garage. The bank determined that two of its employees had inadvertently put the information in a recycling bin rather than in a shredding bin when cleaning out the desk of a former employee. In addition to finding that the organization had violated PIPEDA’s safeguards provision, the Assistant Commissioner was troubled by the fact that the information had been left in the desk of the former employee for a year. The Assistant Commissioner stated that such information should be shredded as part of a systematic approach to dealing with any confidential information in the custody of a departing employee. [footnotes deleted] Although privacy legislation inevitably does place burdens on business, it has a strong justification for doing so. Customers are entitled to expect that their personal data will be properly stored and protected. As then-industry minister John Manley s tated in 2000, “The protection of our personal privacy is a basic right which Canadians cherish” (quoted in “Leading by example” at http://www.priv.gc.ca/information/pub/lbe_080523_e.asp ). For a news clip concerning Facebook’s privacy issues, see the DVD supplement entitled The National : “Facebook Privacy.” Page 7 Ethical Considerations: Inhumane Killing of Sled Dogs in British Columbia. Critical Analysis: What is the role of business to ensure the ethical treatment of animals? Is it acceptable to kill sled dogs with a shotgun? What is the role of government to ensure the ethical treatment of animals?

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    Working animals must rely on the business responsible for their care to provide adequate food, water, shelter, and other forms of protection. Common humanity requires no less. Beyond this, provincial animal protection laws, as well as the Criminal Code of Canada , mandate minimum standards of treatment. More specifically for the purposes to this question, causing unnecessary distress to an animal is contrary to law; therefore, when an animal has to be “put down,” it must be done humanely. On this point, Tracy Sherlock, “Sled dog bodies exhumed,” Vancouver Sun (9 May 2011) at http://www2.canada.com/edmontonjournal/news/story.html?id=e25c4365-57a4- 419a-a71a-621fd777ea6e relies on the analysis of Marcie Moriarty of the BC SPCA when she writes, “A single, fatal gun shot does not constitute animal cruelty, but throat slashing, bludgeoning or multiple gun shot wounds when the first is not fatal do.” Since this news report, the British Columbia government approved (in January 2012) the Sled Dog Code of Practices , which, at page 40, offers the follow recommended best practices in the context of sled dog euthanasia: Work with a practicing veterinarian to develop a euthanasia plan. Ensure sled dogs are euthanized by a practicing veterinarian using a barbiturate overdose with prior sedation. In an emergency situation (i.e. critical distress) AND when a practicing veterinarian is not available, euthanasia should be performed by a competent person (see glossary), and undertaken by a single bullet of an appropriate calibre to the brain (see Appendix “G”, Guidelines for euthanasia of domestic animals by firearms , Longair et al.). Use appropriate restraint if required. Do not use euthanasia for population control. Undertake euthanasia out of the sight of other sled dogs to minimize distress. To read the Code, go to http://www.gov.bc.ca/agri/down/sled_dog_code_of_practice.pdf. For a news clip concerning this story, see the DVD supplement entitled “Sled Dog Repo.” Page 9 Ethical Considerations: The Subprime Mortgage Crisis

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    Critical Analysis: Even though the lenders may not have acted illegally at the time, do you think that they had any ethical responsibility to ensure that mortgage applicants were financially able to afford the loan in question? Do you think it is better for borrowers who overextend themselves to simply bear the consequences of their own actions? Is government to blame for not doing more to protect naïve borrowers? As this chapter notes, no set of regulations can prevent fraud; however, there seems to be reasonably wide acknowledgment that government needs a stronger presence in the subprime mortgage market to reduce the likelihood of future abuses. Though borrowers and investors are responsible, to an important degree, for their own decisions, subprime borrower looked to the lender and broker as experts. According to the Federal Reserve Board, with implicit concern about the practice, [loan] originators may sometimes encourage borrowers to be excessively optimistic about their ability to refinance should they be unable to sustain repayment. For example, they sometimes offer reassurances that interest rates will remain low and house prices will increase; borrowers may be swayed by such reassurances because they believe the sources are experts. From 44522 Federal Register/Vol. 73, No. 147/Wednesday, July 30, 2008/Rules and Regulations at http://www.federalreserve.gov/reportforms/formsreview/RegZ_20080730_ffr.pdf. As well, academics, such as Oren Bar- Gill (“The law, economics and psychology of su bprime mortgage contracts” (2009), NYU Law and Economics Research Paper No. 08 -59 at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1304744 ), have shown how the subprime mortgage industry designed their mortgage products to be unduly complex. This prevented unsophisticated mortgagors from understanding what they were getting into.

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