BUSINESS LAW EXAM
Agency: A relationship that exists when one party (the agent) represents another party (the principal) in the formation of legal relations.
Agent: A person who is authorized to act on behalf of another.
Principal: A person who has permitted another to act on her or his behalf.
Law of Agency: The law governing the relationship where one party, the agent, acts on behalf of another, the principal. It is largely derived from tort and contract law.
Agent–Principal Relationship: The connection where the agent acts on behalf of the principal.
Outsider–Principal Relationship: The relationship between the principal and a third party with whom the agent conducts business.
Creation of Agency Relationship: Usually arises by contract, where the principal authorizes the agent to act, and the agent agrees for remuneration.
Conduct-Based Agency: A relationship formed through actions that lead outsiders to reasonably believe an agency exists, even without a formal agreement.
Forms of Agency Agreement: Can be express, implied, oral, in writing, or in writing under seal.
Authority of Agent: Determines whether a valid contract exists between the principal and an outsider; the principal is bound by the contract.
Actual Authority: Power of an agent from an express or implied agreement.
Express Authority: Written or oral authority directly given by a principal.
Implied Authority: Authority that is inferred from the situation or conduct, not explicitly stated.
Apparent Authority: Authority that an agent appears to have, based on the principal's conduct or statements to outsiders.
Agency by Estoppel: Created when a principal’s actions lead third parties to believe an agency relationship exists, even if it doesn’t.
Agency by Ratification: When someone acts without authority but the principal later adopts the action as if the agent had authority.
Fiduciary: A person with a duty of good faith toward another due to the nature of the relationship.
Fiduciary Duty: Duty the agent owes the principal to act in good faith, not profit personally (“profit rule”), and avoid conflicts of interest (“conflict rule”).
Termination of Agency Agreement: Can occur by law (death, insanity, bankruptcy), mutual agreement, or notice by one party. The principal should inform third parties of the termination.
Employment Law: A body of law regulating employment relationships, based in common law with additional legislation at federal and provincial levels.
Employment Relationship: A contract where an employer pays an employee in exchange for work or services.
Independent Contractor: A worker who is not considered an employee, like a doctor or lawyer.
Dependent Contractor: A contractor who works almost exclusively for one employer and is economically dependent.
Employee vs Contractor Test: Determined by control, provision of equipment, and ability to hire help.
Employee Rights: Employees are entitled to statutory benefits like holidays, overtime, and the ability to sue for wrongful dismissal.
Tort Liability: Employers are liable for employees' actions during employment but not for independent contractors.
Hiring Process: Typically includes job descriptions, advertising, applications, interviews, background checks — all under human rights legislation.
Human Rights Commission: Enforces human rights laws and investigates discrimination complaints.
Prohibited Grounds of Discrimination: Includes race, marital status, disability, religion, sex, age, and sexual orientation.
Discrimination: Treating someone unfairly based on a prohibited ground.
Adverse Effects Discrimination: When a neutral rule has a discriminatory impact.
Systemic Discrimination: Discrimination built into policies or practices over time.
Bona Fide Occupational Requirement (BFOR): A valid job requirement that may justify discrimination if done in good faith and for a legitimate reason.
Offer of Employment: Must be reasonably certain to be legally binding and include job details. It doesn’t need to be in writing.
Employment Contract: A legal agreement between employer and employee; can be fixed-term or indefinite-term.
Fixed-Term Contract: Ends automatically when the specified period expires.
Indefinite-Term Contract: Ongoing until terminated with reasonable notice.
Just Cause: A serious reason an employer can terminate an employee without notice, often implied in employment contracts.
Dismissal for Just Cause: Occurs due to serious misconduct, habitual neglect, incompetence, incompatibility, or willful disobedience.
Serious Misconduct: Intentional harmful behavior by the employee, possibly involving cumulative minor infractions.
Habitual Neglect of Duty: Repeated failure to fulfill work duties without permission, such as frequent lateness or absenteeism.
Incompetence: Lack of skill or qualifications, requiring prior warnings and opportunities to improve.
Willful Disobedience: Deliberate failure to follow lawful and reasonable instructions.
Dismissal for Other Causes: May include harassment, policy violations, or drug/alcohol use. Misconduct must seriously impact the employment relationship.
Without Just Cause: The employer must provide notice or pay instead of notice when terminating without cause.
Reasonable Notice: Time given for an employee to find new employment; cannot be reduced arbitrarily by the employer.
Dismissal with Notice: Permissible under provincial law if the job is indefinite. Fixed-term jobs need no notice at end, but early termination breaches the contract.
Character of Employment: Higher-level positions may require longer notice due to fewer available roles.
Length of Service: Longer service often leads to longer notice, but not calculated at a fixed rate per year.
Age: Older employees typically receive more notice due to challenges in finding new jobs.
Availability of Similar Employment: Fewer available jobs increases notice entitlement.
Specialization & Inducement: Highly specialized roles or those hired through inducement often require longer notice.
Constructive Dismissal: When an employer makes substantial, unilateral changes to a contract without consent, allowing the employee to sue.
Fundamental Term: A key part of the contract — changes to which can trigger constructive dismissal.
Wrongful Dismissal: A legal claim by an employee that they were dismissed without cause or proper notice.
Duty to Mitigate: The obligation of a dismissed employee to seek comparable employment. Damages may be reduced if they don’t.
Credit: A contractual relationship where a lender agrees to lend money and the borrower promises to repay with interest within a certain time. Governed by debtor and creditor law.
Secured Credit: A debt backed by an interest in the debtor’s property (collateral); the creditor can seize and sell the property if unpaid.
Unsecured Credit: A debt with no claim on specific property; creditor only has a contractual right to payment.
Security: Any interest in property (real or personal) used to secure a loan.
General Security Agreement: A loan agreement that includes all business assets as collateral.
After-Acquired Property: Collateral that includes property acquired by the debtor after the loan is made.
Personal Property Security Act (PPSA): Legislation allowing lenders to understand their position in case of debtor default. Covers: Attachment, Perfection, Registration, Priorities, Remedies.
Attachment: Occurs when (1) debtor owns the collateral, (2) value is provided, and (3) a written security agreement is signed. It makes the security interest enforceable.
Perfection: A combination of attachment and registration that gives priority over unperfected security interests.
Registration: Filing a financing statement to show evidence of a security interest.
Financing Statement: The document registered to indicate a security interest.
Priorities: PPSA rules for deciding whose interest in collateral comes first. Earlier public registration takes priority.
Purchase-Money Security Interest (PMSI): A special security interest that allows the debtor to acquire assets and gives the creditor a “super priority” over others.
Remedies:
Unsecured creditors: Can sue for payment.
Secured creditors: Can sue, seize, and sell collateral.
In bankruptcy, secured creditors still have claims on assets.
Guarantee: A contract where a guarantor promises to pay a debt if the debtor defaults.
Guarantor: A person who guarantees repayment to the creditor.
Trustee in Bankruptcy: A licensed professional responsible for administering bankruptcies and proposals under the BIA.
Estate: The assets of the insolvent or bankrupt individual or business.
Insolvent: A person or business unable to meet financial obligations as they come due.
Proposal: A formal agreement under the BIA allowing a debtor to restructure debt and avoid bankruptcy by reducing payments or extending timelines.
Arrangement: A similar restructuring under the CCAA for businesses with debts over $5 million.
Division I Proposal: Available to individuals or corporations; no debt limit.
Division II Proposal (Consumer Proposal): Available to individuals with less than $250,000 in debt (excluding home mortgage).
Companies’ Creditors Arrangement Act (CCAA): Allows insolvent businesses with over $5 million in debt to restructure rather than declare bankruptcy.
Bankruptcy: A legal process transferring assets to a trustee for liquidation and distribution. Allows a “fresh start” for individuals and equitable treatment for creditors.
Bankrupt: The status of a debtor who has made an assignment or is subject to a bankruptcy order.
Protection of Assets: The trustee secures and evaluates assets, ensures protection (e.g., insurance), and may continue operations temporarily to manage them.
Transfer at Undervalue: A transaction where assets are transferred for less than fair market value. Courts can void the transaction or require compensation.
Arm’s Length Test: A transfer is undervalued if made within 1 year before bankruptcy, the debtor was insolvent, and the intention was to defraud or delay a creditor.
Preference: A payment that unfairly favors one creditor over others when the debtor is insolvent.
Fraudulent Conveyance: Transfers made to avoid paying creditors; governed by both federal and provincial laws.
Real Property: Land or real estate, including buildings, mineral rights, leases, and associated legal rights.
Personal Property: Property that is not land, including both tangible and intangible items.
Tangible Property: Physical items, such as furniture, vehicles, or equipment.
Intangible Property: Non-physical property, such as patents, copyrights, or trademarks.
Aboriginal Title: Legal title to land held by Indigenous peoples, protected under the Constitution Act, includes rights to enjoyment, occupancy, economic benefits, and proactive use, arises from pre-sovereignty occupation, and cannot be sold.
Legal Rights Associated with Property: Include the right to exclude others, the right to possess and use, and the right to transfer or dispose of the property.
Right to Possess and Use: Ownership and possession can be separate, such as in a lease.
Right to Transfer or Dispose: Property can be sold or given away, except for life-only ownership or borrowed items.
Patent: A legal monopoly to make, use, or sell an invention, protects devices, compositions, and processes, and is common in industries like pharmaceuticals and manufacturing.
Requirements for Patentability: Must be new, useful, and non-obvious, cannot be scientific principles, abstract ideas, or covered by other protections.
Industrial Design: Protection for the visual appearance of a manufactured article, such as its shape, pattern, or ornamentation.
Duration of Industrial Design Protection: 10 years from registration, allows the owner to make, import, or sell the design.
Trademark: A word, symbol, design, or combination used to distinguish goods or services, can be registered for national protection or unregistered with common law protection.
Unregistered Trademark: Acquires rights through use, protected through the tort of passing off, and limited to the geographic area used.
Registered Trademark: Provides nationwide protection and presumption of ownership and validity.
Copyright: The right to prevent others from copying or modifying original literary, artistic, dramatic, or musical works, governed by the Copyright Act.
Requirements for Copyright: Must be original and fixed in a tangible form, such as on paper or digital media.
Rights Under Copyright: Include reproduction, public performance, publication, translation, adaptation, mechanical reproduction, and rental.
Moral Rights: Include the right to attribution, the right to object to harmful modifications, and the right to control association with other products or services.
Fair Dealing: A defense to copyright infringement, allows use for private study, research, criticism, review, parody, education, or satire.
Confidential Business Information: Private business information that gives a competitive advantage, such as customer lists, recipes, formulas, or technology.
Assignment: A transfer of ownership rights from one party to another.
Licence: Permission granted by the rights-holder to another person to use the work in specified ways.
Bailment: The temporary transfer of possession of personal property from one person to another.
Bailor: The person who owns the property.
Bailee: The person who receives and holds the property.
Bailment for Value: A bailment involving payment, often commercial, such as paid storage or repairs.
Gratuitous Bailment: A bailment with no payment, benefiting only one party.
Standard of Care in Bailment: Depends on who benefits, with mutual benefit requiring reasonable care, bailor-only benefit requiring minimal care, and bailee-only benefit requiring a high standard of care.
Fee Simple: The highest and most complete form of land ownership, includes nearly all rights to the property.
Life Estate: Ownership of land for the duration of a person’s life only.
Leasehold Estate: The right to occupy land for a specific term under a lease agreement.
Tenancy in Common: A form of co-ownership where each owner has an undivided share and can sell their interest independently.
Joint Tenancy: A form of co-ownership where the surviving owner inherits the deceased's interest automatically.
Landlord: The person who owns the property and leases it to another.
Tenant: The person who leases and occupies the property.
Lease: A legal contract granting possession of property for a specific time, creates a landlord-tenant relationship.
Exclusive Possession: The tenant's right to control and occupy the leased premises during the lease term.
Easement: A right to use another person’s land for a specific purpose, such as a shared driveway, must be respected by the landowner, and maintained by the user.
Sole Proprietorship: The oldest and simplest form of business organization, has only one owner, requires no special legislation but may need a business licence and trade name registration, easy to set up, and has no legal distinction between the business and the owner.
Pros of Sole Proprietorship: Least regulated, lower costs, faster to form, efficient decision-making.
Cons of Sole Proprietorship: Unlimited personal liability, limited access to capital and resources, limited lifespan, tax disadvantages, difficulty transferring ownership.
Partnership: A business carried on by two or more persons with the objective of making a profit, similar to a sole proprietorship in that it has no separate legal personality.
When a Partnership Exists: When two or more people carry on a business in common with a view to profit, includes those who act like partners even if they don’t intend to be, and excludes not-for-profits.
Rules Governing Partnerships: Partnership legislation, contract law, agency law.
Financial Liability in a Partnership: Partners are fully responsible for debts, with joint liability meaning each partner can be held liable for the full debt amount.
Pros of Partnership: Faster to form than a corporation, lower costs, greater access to resources, stronger management through pooled efforts.
Cons of Partnership: Unlimited personal liability, potential for disagreements, challenges in decision-making, difficulty in transferring ownership, tax disadvantages.
Partnership Act: Provides default and optional rules, governs when a partnership exists, relationships among partners, relationships to outsiders, and how partnerships end.
Relationship of Partners to One Another: Partners are each other’s agents, owe fiduciary duties, must act in each other's best interests, and should have a detailed partnership agreement.
Relationship of Partners to Outsiders: Each partner can bind the partnership through their actions, the firm is liable for actions of individual partners, and partners have joint and several liability for obligations.
Joint and Several Liability: Each partner is individually and collectively responsible for the entire debt of the partnership.
Limited Partnership: A partnership with at least one general partner with unlimited liability and one or more limited partners whose liability is limited to their capital contribution.
Corporation: A distinct legal entity, capable of owning property and assuming obligations, provides liability protection to its shareholders, and is governed by a board of directors.
Shareholder: A person who owns shares in a corporation and has an ownership interest.
Director: A person elected by shareholders to manage a corporation.
Limited Liability: Shareholders are only liable up to the amount they have invested.
Profit Sharing: Corporation profits are distributed to shareholders through dividends.
Dividend: A portion of corporate profits paid to shareholders.
Corporate Capital: Corporations can raise money by issuing shares or borrowing, shares provide equity and potential dividends but carry risk.
Pros of Corporation: Limited liability, flexible structure, greater access to capital, continuous existence, tax advantages, easy transfer of ownership.
Cons of Corporation: Higher costs, more regulation, potential loss of control, increased bureaucracy.
Joint Venture: A business arrangement where entities collaborate for a specific project, profits and losses are shared, can be structured as a partnership, an incorporated entity, or a contractual agreement.
Equity Joint Venture: A corporation created for the venture, with each party holding shares, governed by incorporation rules.
Strategic Alliance: A cooperative business arrangement for shared research, technology, or resources, not a legal form but a business strategy.