CHAPTER 1

Foundations of Business Law in Canada

BLAW 2910
Commercial Law
• Chapter Objectives:
• Describe how law affects and relates to business
• Describe the process for developing a legal risk plan
• Explain the concept of “precedent”
• Explain the significance of Canada’s constitution
• Describe how business is regulated by government
• Describe how Administrative Law affects business people
• Distinguish between Public and Private Laws
• Describe selected branches of law that affect business practices
• Understand why you are being required to study business law.
Managing Legal
Risk
Every business has some element of risk. The purpose of this
course is to equip you with the necessary skills to:

 Identify legal risks associated with a business activity

 Apply legal knowledge and develop strategies to
minimize risk
 Recognize when you should seek legal guidance
 Use legal services effectively
Legal Risk Management Plan
Every organization needs a
legal risk management plan
that:
 Identifies the legal risk
 Evaluates the likelihood
and severity of the risk
 Manages (mitigates) the
risk through various
strategies
 Revisits and updates
itself to adapt to
changing business
environments.
Main Strategies for Legal Risk Management
Your main choices in
addressing a legal risk are to:
 Avoid: Stop the activity
creating the risk
 Transfer: Place the risk
on another party (perhaps
through insurance)
 Reduce/Mitigate: Put
practices in place to
reduce and manage the
risk.
 Accept: Recognize some
things as a cost of doing
business and budget for
them.
Risk Management
Components of a Risk Management Plan

• Policy Statement: What are your objectives?

• Documentation: Policy Manuals, Safety Manuals, Accident Forms
• Training: Ensuring your workers are made aware of common risks and how to
avoid or mitigate them.
• Monitoring and Evaluating: This is not a static thing, laws and rules change
and policies may have to be updated. Accidents and incidents should be
tracked with a view to learning from them and reducing future damage claims.
• Review and Revise: Your experience will tell you what is being done poorly and
what is being done well. This should be done at least annually.
• Insurance:
• Insurance to deal with the risks your business faces:
• Occupiers Liability Insurance;
• Professional Liability Insurance
• Structural/Machinery Insurance
• Business Interruption Insurance
• Emergency Procedures: What to do in the event of a fire or natural disaster.
 NATURE AND ORIGINS OF THE LAW

A law is a rule which governs or regulates the conduct of persons

and businesses

In general, the law is a jurisdiction-based collection of rules

which impose penalties when the rule is ignored or disobeyed.
Different jurisdictions will have different rules.
The functions of law include:

1. The protection of rights and

privileges

2. The restriction of rights and

privileges

3. The control and enforcement

of rights and privileges
THE COMMON LAW
The common law originated in
Britain and is used in all of the
provinces and territories
except for Quebec

It is judge-made law based on

the doctrine of precedent,
meaning the use of previous
judgments as an aid to later
decisions

When cases have very similar

facts, the decisions of higher
courts are binding.
Doctrine of Precedent
• A rule established in one case by a judge will generally be
applied in similar cases before other judges. The latin term is
“stare decisis” meaning courts should follow that which has
already been decided. This is especially true when “lower”
courts are considering decisions of “higher” courts.
 EQUITY
The law of equity originated in Britain in the
Court of Chancery

It was developed when the common law did not

provide a suitable remedy through the
provision of money damages
Specific performance and an injunction
are two examples of an equitable
remedy from the Court of Chancery

Specific performance makes you do

something like complete a real estate
purchase

Injunction makes you stop doing

something like occupy a public place
or prevent somebody from accessing
their place of work
DIVISION OF LAW MAKING AUTHORITY

The British North America Act was

enacted in 1867

It formally divided the authority to

make law between the federal
(section 91) and
provincial
(section 92) governments

The subject matter of the law

determines which government has
jurisdiction
 THE CANADIAN CONSTITUTION
The Constitution of 1982 consists of
two parts: the British North America
Act and the Charter of Rights and
Freedoms

The Constitution gives to the courts

the authority to strike down
government action that exceeds
jurisdiction or contravenes the
principles of “The Charter”
THE CHARTER OF RIGHTS AND FREEDOMS

The Charter entrenches the fundamental and

basic rights of Canadians

The Charter cannot be changed or repealed

except by an Act of Parliament approved by
two-thirds of the provinces which contain at
least 50 percent of the population

Rights are subject to “such reasonable limits

prescribed by law as can be demonstrably
justified in a free and democratic society”
(section 1)
.
 The Charter
The “notwithstanding clause” (section 33)
permits a government to enact legislation
that overrides some parts of The Charter if
its purpose is to achieve an important
government goal

After five years, such laws expire, although

they may be formally re-enacted by a
government

.
R. v. Big M. Drug Mart (1985)

Some municipalities and provinces used to prohibit the opening

of retail stores on Sundays. This law was often called “The
Lord’s Day Act” or something similar.

This religion-based law was challenged successfully in court and

ultimately the Supreme Court of Canada ruled that governments
could not impose religious beliefs on individuals or businesses.

Big M Drug Mart Decision Video

 STATUTE LAW
A statute is a law that arises from a legislative
process

It is initiated by elected representatives, debated,

and if approved, brought into force

If there is a conflict between a statute and the

common law, the statute law prevails

There are three levels of statute law: federal,

provincial and municipal
Public and Private Laws
• Public Laws are generally concerned about the public interest in a given
activity. Examples include:

• Environmental Law : Sets standards for environmental accountability

• Criminal Law: Sets standards for acceptable public behaviour
• Tax Law: Spells out how governments collect revenue.

• Private Laws Govern the relationship among individuals and/or companies.

Examples include:
• Contract laws that regulate transactions between individuals (Sale of Goods Act,
Employment Standards Act, Residential Tenancy Act)
• Tort laws that set standards or provide compensation for persons injured
(Occupier’s Liability Act).
• Private laws also govern things like the ownership of property and how title to
property can be pledged as security for a loan or transferred to others.
Criminal Versus Civil Law
• Criminal Law relates to rules established by the federal government that
establishes the standard of acceptable behavior in Canada. Breaching
criminal law involves fines and/or imprisonment as well as other penalties.

• Civil Law relates to disputes between individuals or entities (such as

companies). One party is generally seeking financial damages and/or specific
performance or injunctions due to a claim. Typically, an injured party is seeking
monetary compensation for a tort or breach of contract.
Standard of Proof
• Criminal Law: A person charged with a crime
has to be shown as having committed the
criminal act beyond a reasonable doubt. The
“onus” is on the government to establish this
proof. In other words, an accused person does
not have to prove innocence, the prosecutor has
to prove guilt.

• Civil Law: A claimant seeking compensation for

a civil wrong only has to establish that another
party is the cause of their damages on the
balance of probabilities. The onus is on the
person making the claimant to show (on the
balance of probabilities) that the other party
(defendant) is responsible for the damage they
have suffered.
Some Statutes that affect business include:

Business Corporations Act: Regulates the rules around what

companies can do

Sale of Goods Act: Rules implying terms and conditions in

contracts

Employment Standards Act: Rules around minimum wages, hours

of work and other employment related matters

Bankruptcy and Insolvency Act : Rules around going bankrupt

Competition Act: Rules around fair competition

Occupiers Liability Act : Rules related to people at your business

or residence.
 ADMINISTRATIVE LAW
 Boards or commissions may perform a function similar to that of a
court, but only within the jurisdiction of a specialized statute

 Procedural fairness on the part of the tribunal is required in the

conduct of a hearing

 A court may quash the decision of a tribunal if the procedural

fairness requirement is not met, if its decision is patently
unreasonable, or if the tribunal has exceed its jurisdiction

Examples Include:
 Human Rights Tribunals
 Competition Tribunal
 Agricultural Land Commission
 Workers Compensation Board Appeals Tribunal
Business Law and Ethics
Legal Principals and ethical values
often agree, but not always.
 Complying with the law is not the
equivalent of being ethical
 Not complying with the law can be
different from being unethical

 For example, contracting with an

off-shore company to supply you
with goods made by exploiting
child labour may be legal but not
ethical.

 Forgetting to renew your car

insurance and driving your car
without insurance is illegal, but
not unethical.
 SUMMARY
• Law will affect nearly every aspect of a business operation.
• The Canadian Charter of Rights and Freedoms is relevant to business
as all activities will be subject to constitutional rights and protections.
• Failure to address legal risk management can result in costly lawsuits
that can put the viability of any business in question.
• Common law deals primarily with disputes between individuals and
statute law focusses more on the public interest in protecting,
restricting or controlling a certain matter.
• All levels of government regulate business activities in some way.
• Virtually all businesses are also regulated in some way through
Administrative Law
• Public laws relate more to standards set by society generally and
Private Laws tend to regulate individual transactions.
• If you don’t understand the fundamentals of business law you will
have difficulty succeeding in the business world.
Your checklist of things to do
Check out the Course Textbook: Canadian
Business Law, A British Columbia Perspective,
Emond Montgomery Publications (The Business
Law Group) * All sections taught by all instructors
use the same text.
Go to www.mondaq.com and sign up for free news
alerts.
Go to www.canlii.org and explore how to look up a
case
Go to Moodle and log on with the password to get
copies of everything
Review the Course Outline and Schedule so that
you are prepared for exams and the assignment.