BUSN 1320 Chapter 1-2 - Peter Durovic PDF

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Business 1320: Introduction to Business Law

Week 1

Why Study the Law? 

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Business decisions have legal consequences  Negative: dumping pollutants into the environment.  Positive: binding contractual party to promise. Legal consequences affect profits and losses  Some decisions create opportunities, others impose liability  Knowing the law decreases liability through risk management Purpose of Business 1320  Understand the role of law in business transactions  Recognize and manage legal risk

Risk management • • • •

Three steps of risk management: Identification: recognize legal risks - “Can we be held liable for this?” Evaluation: assessment of legal risks - “What are the chances of something going wrong?” Response: reaction to legal risks - “What are we going to do about it?”

Risk Management Strategies

Risk Management Examples •

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Exclusion and limitation clauses (chapter 9) • contractual terms that exclude liability for some acts/losses, or limit compensation available Insurance (chapter 17) • liability insurance or property insurance Incorporation (chapter 21) • “limited liability”: shareholders not usually liable for company debts

What is the law?  •

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All laws are rules but not all rules are laws Morality and law • moral wrongs are informally sanctioned - damaged relationships or reputation • legal wrongs are formally sanctioned - fines or imprisonment Laws are rules that can be enforced by courts

What is the source of law?

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Business 1320: Introduction to Business Law •

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Natural Law Framework: • Considers law to have a “real” existence. • Moral values derive from a rational examination of the world, and the rational examination reveals Principles of Justice. Positive Law Framework • Source of positive law is people with power • These man-made laws allow: giving rights to some, taking rights from others

Categories of law

Legal Traditions • •

Civil law jurisdictions: • Originated in ancient Rome - most of Europe, Louisiana, and Quebec Common law jurisdictions: Originated in England • England, Australia, New Zealand, most of Canada • To understand Canadian law, we must look at British history

Tribalism (BC) •

In ancient Britain, the law was • what the tribal leader said it was unwritten & uncertain, changed with the leadership • unpredictable, depended on leader’s mood • without due process, the right to appeal

Pax Romana (40 AD - 400 AD) • • •

Roman rule and the application of Roman Law. - civil law Breakdown of tribal allegiances Expansion of trade & commerce - common currency

Chapters 1 & 2

Business 1320: Introduction to Business Law

Week 1

Feudalism (8th -11th century): • • •

Tribal land ownership replaced by private ownership. Clan loyalty replaced by responsibility to the Lord Disputes submitted to a local court

Norman conquest (1066) •

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William I of France conquers England • Retains right to make laws • Claims all land rights, redistributes land Courts established with the monetary interests of the king • (law and order = king’s revenue) • travelling judges exercising centralized control • Their decisions produced a body of legal precedent Common Law: • the rules of settling disputes, common to all England • Ends legal variation based on local custom Judges interpret and apply law, but do not create it Because reasoning is based on precedent, the rate of change in the law is slow

Courts of Chancery (13th century) • • •

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King hears from persons suffering under Common Law Offloads responsibility on his Chancellor (advisor) Concerned with fairness (equity), not common law • Upside: innocent party finds justice • Downside: predictability of common law goes out the window Eventually Common Law and of Chancery courts merged As a result, a judge sitting in court is supposed to have two minds: • Common Law mind for procedure (form = consistency) • Chancery mind for equity (substance = justice)

Mercantile class (14th century) • • • •

Guilds give money and power to tradesmen Crown (King) and Nobility (Lords) become indebted to mercantile class Mercantile class gains influence over law Development of the Law Merchant: rules and practices of guilds, administered by own courts

Parliament (15th century) • •

Legislative power of the king (the right to make laws) transferred to Parliament Two houses in Parliament: • House of Lords: represents the interests of the (hereditary) landed class. • House of Commons: represents the interests of the commoner (the mercantile class).

Parliamentary democracy (17th century) •

Legislation becomes more important than Common Law • Elected representatives in House of Commons propose legislation to serve their constituents • House of Lords approves the legislation • Monarch consents to the legislation

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Business 1320: Introduction to Business Law •

Week 1

Legislation allows for changes in the law faster than at Common Law

Canada (1867) •

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Canada inherited Britain’s: • Common Law • Parliamentary Democracy • British Statutory Law in effect at the time Canada and the provinces came to rely on their own statutes under the Constitution Act, 1867

Sources of Canadian law •

Hierarchy of sources of law • Constitution • legislation • courts

Purpose of Constitution Act (1867) •

Constitution • Fundamental principles by which a nation is governed • promote Peace, Order and Good Government • provides rules for society, and legal and political systems • allocate power to Federal and Provincial legislatures • highest source of law -law inconsistent with Constitution: no force or effect (section 52) • difficult to amend - requires consent of both Parliament and two-thirds of all provinces with at least 50% of population

Constitution – federalism 

Constitution Act (1867) • The Dominion of Canada: a federation of provinces • Two constitutionally recognized levels of government • Federal government: represents entire country • Parliament • made up of Senate (appointed) and House of Commons (elected) • lead by Prime Minister • Provincial (territorial) government: represents province • Legislature - all elected • lead by Premier

Constitution – Division of Power        

Federal (s. 91) trade fishing and shipping penitentiaries intellectual property military and banking marriage and divorce residual power

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Provincial (s. 92) stores and commerce timber and resources reformatory prisons real property hospitals and charities old age pensions

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Business 1320: Introduction to Business Law

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Constitution – Residual Power • •

federal government holds residual power doctrine of federal paramountcy determines which law prevails when federal and provincial statutes conflict • when a government legislates outside its authority, the law is ultra vires and has no force or effect (s. 52)

Constitution – Subordinate Legislation •

Subordinate legislation (regulations, by-laws) • created under Parliament’s or legislature’s authority • example of municipality • province creates municipality • province gives municipality power to pass by-laws • Risk management • Businesses are responsible to 3 levels of government: • Federal • Provincial • Municipal

Constitution – Kinds of Power • Constitution allocates power under three headings: 1. Executive Power (the power to rule)  The power to rule  Remains vested with the Queen  Includes military power (commander in chief)  The power is exercised through her local representative, the Governor-General  In practice, the Queen is a figurehead  Real power exercised by the Prime Minister 2. Legislative power (the power to pass laws)  The power to pass laws  Federal Parliament for all the provinces passes federal laws  Federal Parliament has two houses:  House of Commons  Represents the interests of the constituency.  Members elected  Open to every citizen  Sits for a term of no more than 5 years  Senate  Equivalent in function to the House of Lords  Members appointed  Must own land ($4000)  Sits for life (age 75) unless turns bankrupt  Parliamentary procedure  Bills introduced in the House of Commons are decided by the majority through 3 readings  Proposed legislation sent to Senate for approval  Senate sends legislation to Governor-General  Governor-General approves on Queen’s behalf

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Business 1320: Introduction to Business Law

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 “royal assent” Judiciary Power (the power to pass judgment) The power to pass judgment Function of courts create and apply “common law” (judge-made law) interpret and apply Constitution review unconstitutional laws (ultra vires - outside scope of powers) interpret and apply legislation Literal approach (traditional English) Give a word its plain meaning Liberal approach (contemporary Canadian) Look at the intention of Legislature and give a fair interpretation protect civil liberties (Charter of Rights and Freedoms)

Charter of Rights and Freedoms (1982) • • •

Adds human rights to the Canadian Constitution for all matters within the authority of the government Charter rights cannot be overridden by legislation under ordinary circumstances Limitation of Charter • Charter serves to protect citizens and residents against excesses of the state, but not against excesses of other citizens and residents

Chapters 1 & 2

Business 1320: Introduction to Business Law

Week 1

Chapters 1 & 2...