What is Law?

Law is the body of rules which can be enforced by the courts or other government agencies

The Rule of Law in Canada:

-all persons are treated equally under the law and the

-government is bound by the laws it has created

3 Levels of Codes of Conduct:

1. Binding Codes: where the governing body or trade association sets the rules – ex. Law Society

2. Voluntary Codes: Industry codes with strong persuasive effect – eg real estate advertising
regulations

3. Self-imposed Codes: adopted to affect employment relationships within the work place, such as
no peanut products, no perfumed items

Differences in Criminal & Civil Law:

• the parties are different:

Regina vs Accused (by name) ex. R. v Jones

Plaintiff vs Defendant (by name) ex. Jones v Smith

The Supreme Court of Canada

The intermediate Provincial Courts of Appeal

The Courts of first instance

Divided into:
1. Inferior trial courts &
2. Superior trial courts

The provincial inferior courts are limited geographically and by subject matter, for ex. Small Claims
Court has a financial limit of $35,000 in BC

Legal Fees:

1. Hourly

2. By Task

3. Contingency Fees
 HUMAN RIGHTS CODES
Human Rights Codes apply to private relations, whereas the Charter only applies to government

The Charter of Rights and Freedoms applies only to Government and Government action or decision
making. It prevents the government from creating laws or taking action that would be contrary to the
rights guaranteed in the Charter.

She would have to base her arguments on the appropriate section(s) of the Human Rights Code.

ALTERNATE DISPUTE RESOLUTION

-Negotiation

-Mediation

-Arbitration

Contract Law

I ntention?” (Carlille vs Carbolic Smoke Ball Company)

• The law PRESUMES that parties in arms-length transactions intend to be legally bound,
especially when they are strangers in commerce

Writing

 For certain land transactions

 For a guarantee or indemnity
 For a contract not to be enforced by either party within a year
 Wills and Powers of Attorney must also be in writing

Offer
 The offer is a description of the promise of the offeror, a proposal of some sort with the intent
to be bound should the offer be accepted
 Must contain all terms clearly & unambiguously or not an enforceable agreement
 An offer can be communicated orally, in writing or by conduct
 Courts presume that an unqualified acceptance of an offer is an acceptance of every term of
that offer
Lapse

• The effect of a lapsed offer is that it no longer exists- it is a nullity

 An offer can lapse:

 When the offeree fails to accept within a time specified in the offer

 When the offeree fails to accept within a reasonable time

 When a counter-offer is made

 When either party dies or becomes insane prior to acceptance

 The offer is rejected

 The offer is revoked

Invitations to do Business

 Advertisements are generally presumed to be mere invitations to the public to visit the
advertiser’s place of business to make an offer

However, there are exceptions, including in

this case where:
(1) the wording objectively shows sufficient intention to create legally binding
 obligations

Where the wording is sufficiently specific to evidence intention to create legally binding
 obligations, (e.g. Carlill v Carbolic Smoke Ball) it
 (2) with respect to unilateral contracts 单边合同
 - so, a display of goods for sale does not constitute an offer – when you take the goods to
the cashier you are offering to purchase the goods and the cashier is free to accept or reject
your offer

What is a counter-offer?

• Until a specific offer is made by one party is accepted without change by the other party, there
is no contract

• A counter-offer is any change of terms, including any alteration or modification of the offer

• A counter-offer has the effect of terminating the original offer

• If the counter-offer is rejected negotiations are over- the original offer is not revived

• When an offeree is merely requesting information, the offer remains

- for example, “are drapes included in that price?”

Revocation （Rudder v Microsoft Corp.）(Douez v Facebook Inc.)

 • An offer may be revoked any time prior to acceptance

• Effective even where the offeror has promised to keep the offer open, unless there is an
option contract (right of first refusal) or the offer is stated as irrevocable

• To be effective, revocation must be communicated directly to the offeree, or through a reliable

source

• Time & notice of revocation by mail is only effective when the letter is actually received and
not when dropped in the mailbox

• Actually, received means delivery at the offeree’s usual address

• Non-postal communication = when capable of being received – see Electronics Transaction Act,
RSBC for details on electronic communication of Information & Records

Acceptance
• Acceptance of an offer must be unconditional

• An offer must contain all the terms of the agreement & the acceptance when made must be a
mirror image of the offer

• The offeror controls the contract. The offeror sets out:

• Terms of the contract

• How long the offer is open for

• How acceptance should be made

• Acceptance must be made in the manner requested or implied by the offeror

• If the offer is silent, must accept in the same mode the offer was made or by faster method

• Acceptance must be made in a positive form, whether in words or conduct – an offeree cannot
stipulate silence as a mode of acceptance as the offeree would be forced to act in order to reject
the offer

• Silence is acceptable only if the parties have habitually used this method to communicate
agreement or where they have agreed in advance that silence will be sufficient

• Offers can be accepted by performing an act – Carlille vs Carbolic Smoke Ball Company

• Acceptance is effective when communicated to the offeror

• General rule is that a contract is formed when and where acceptance becomes effective

The Postal Acceptance Rule

Acceptance by Mail: CLARK v. BARRICK

1) where the offer stipulates acceptance by mail or

 2) the offer has been made by mail & there is no stipulation how acceptance should
be made

acceptance is complete when a properly stamped & addressed envelope is placed in the
mailbox and not when the offeror receives the letter

If the offeror invites acceptance by the mail the contract is formed at the time acceptance is
dropped in the mailbox and the contract is formed at the place where the mailbox is located

The offeror can alter this rule by saying that acceptance will only be effective when received.

Consideration
In order for a contract to be binding it must have consideration. Consideration is the mutual
exchange of promises. A promise that lacks consideration is gratuitous and is unenforceable
(Caliguiri).

• The benefit, essential to the existence of a contract, is called consideration = something of

“value” that is exchanged for the promise of the other party

• All parties must receive some benefit

• Consideration is not restricted to the payment of money – it is the mutual gains and losses, what
the parties want to get out of the contract, but must have some material value – love and
affection are not sufficient consideration

• The exchange does not need to be an exchange of equivalents

• The courts will not unwind bad bargains

• Adequacy of consideration is not an issue for the courts unless there is evidence of:

• Fraud
• Undue influence
• Duress
• Unconscionability

Gratuitous Promise: Foakes v Beer

• A promise made without consideration being given in exchange for the other party’s promise

= a promise made without bargaining for, or accepting, anything in return

• Not enforceable in law

• Donations only binding if:

1- made under seal or

2- charity does something in response to the donor’s promise

Now overridden by Law & Equity Act RSBC s.40:

- A creditor who accepts a lesser sum in full satisfaction of a debt will not be permitted
to later claim the balance due once the lesser sum has been paid

= where a creditor agrees to accept part payment and the debtor pays the full

part payment, the debt is extinguished

Past Consideration

Consideration must be agreed upon before a contract can be formed = Consideration given after the
product/service is received is not consideration

A Promise to reward for an at done previously done gratuitously or given something of value is not
binding

A sense of gratitude or moral duty is not binding in law – past consideration is no consideration since
there is no benefit being performed in return for the promise

Existing Legal Duty

Promise to pay something extra for what is already required under an existing contract is not binding

= a new bargain requires new consideration

In order to get an increased price, there has to be either new consideration or the promise to pay this
amount would have to be under seal

The consideration that the promise agrees to provide must not be something that he/she is already
bound to do by the contract

If the promisor is getting nothing new in return for the promise there is no good consideration

Even though the promise made by Bev is unenforceable at Common Law, equity may enforce the
gratuitous promise if certain conditions are met: (Dukes Cookies, Tulsa Heaters)

Equitable or Promissory Estoppel

 • The court’s exercise of its equitable jurisdiction to estop a promisor from claiming that she was
not bound by her gratuitous promise where reliance on that promise caused injury to the
promise

Rule: When a person makes a gratuitous promise and another relies on that promise in good faith to his
detriment (incurred expenses or altered conduct in a way that would cause hardship) the maker of the
promise will be estopped (prevented) from later denying that he made the promise

For equitable estoppel to apply:

1. There must be a current legal relationship between the parties

2. A promise to relax strict legal obligations is made, even by implication. The existing contract is
modified/varied by the promise made
3. Promise relied upon causes some detriment or hardship if promise not lived up to
4. Equitable estoppel can only be used as a shield (defence) not as a sword (cause of action)

-Gilbert Steel case- argued university bound by agreement to pay more (see text)

The Use of a Seal

a seal replaces only consideration

An alternative way to make a promise binding

Must be affixed at the time the party signs the contract and the party signing must be aware of its legal
significance = “I intend to be bound”

The lack of consideration means that a valid contract incorporating the change has not been formed.

Capacity
 Capacity = competence ( the ability) to bind oneself legally to a contract
 Parties must be capable of understanding what the effect of the contract is
 Contract may be set aside if a party did not have the capacity to contract
 Categories of persons who lack capacity to enter into contracts:
o Minors (anyone below the age of majority)
o Mental incompetents - temporarily
 - permanently
  Contracts with Minors:

-age of majority determined by provincial legislation (Infants Act)

 Rule: A contract with a minor is “voidable” at his/her option but is enforceable by the
minor against the adult

s. 19 of the Infants Act (RSBC):

(1)…a contract made by a person who was an infant at the time the contract was made is
unenforceable against him or her unless it is

a) A contract specified under another enactment to be enforceable against an infant,

b) Affirmed by the infant on his or her reaching the age of majority,

c) Performed or partially performed by the infant within one year after his or her attaining the
age of majority, or

d) Not repudiated by the infant within one year after his or her reaching the age of majority

The Infants Act is clear that while a contract made by an infant is unenforceable against the infant, it is
enforceable by the infant against the adult

Waivers Signed by Parents

Have no effect on the rights of a minor - parents cannot waive an infant’s right to sue

The Infants Act does not permit a parent or guardian to bind an infant to an agreement waiving the
infant’s right to bring an action for damages in tort.

Parents can be asked to sign an indemnity agreement – so parents must indemnify an establishment
for any money paid to the infant for damages or loss suffered

Eg. Cliffhangers Rock Climbing policy

Intoxication/Insane:

• Except for necessaries, contracts are voidable at his/her option but enforceable against the
other contracting party

• Only liable for a reasonable price for necessary goods

Legality
• Object or purpose of a contract must be legal for contract to be enforceable

• The law is that restrictive covenants in employment contracts are prima facie void and illegal
unless the employer can prove the terms are reasonable. (Phoenix v. Brownlee)
•

• Must not be:

1. Illegal by statute – contrary to CCC, ITA, Competition Act

2. Void by statute- offends WCB, Bankruptcy & Insolvency Act

3. Contrary to public policy –immoral or contrary to public interest

• Void contract = contract never formed in law

• Contracts Void by Statute:

Agreements contrary to the purpose of legislation: = contracts that offend statutes

- eg. WCB – agreement to avoid paying benefits

Bankruptcy & Insolvency – agreement which transfers property to avoid it being included in
bankrupt’s estate

 Where the object of a contract is illegal by statute, the contract itself is illegal
o -licenses required by professions or for certain tasks
 - if the purpose is to protect the public from unqualified or unethical work, a
contract will not be enforced if a party lacks proper licensing

o Unlicensed person being sued cannot claim own misconduct as a defence to an action
o -courts have flexible attitude when violations occur, due to the variation in degree of
acceptability of violations, rationale for licensing – is the license required for public
safety or is it an administrative issue?

 An injunction is an equitable remedy that allows the petitioner to ask the court to restrain a
person from doing, or continuing to do, a particular act. (There is the threat of imprisonment for
contempt of court if the person disregards the order)


Insurance Contracts:

 Considered valid if party making the contract has an insurable interest in the property or life
insured
 Insurable interest: a financial benefit from the continued existence of the property or life insured
or suffer some financial detriment from its loss or destruction
 Every person has an insurable interest in their own life, certain family members and persons in
whom they have a financial interest
 The Insurance Act waives the requirement of an insurable interest when the person whose life is
insured consents in writing to placing the insurance

Agreements in Restraint of Trade

 Against public policy so illegal unless party seeking to rely on the clause can prove it is
reasonable
o The clause is reasonable with respect to the public interest (Does the enforcement of
the clause restrict competition having regard to the nature and location of the business?
Does the enforcement of the clause deprive the public of some special service having
regard to the nature and location of the business?)
o The clause is reasonable and necessary to protect the interests of the parties. (Is there a
proprietary interest being protected? Is the length of time the restriction is in place
reasonable? Is the geographical area reasonable? (Phoenix Restorations)

• The Phoenix case says that the courts are more likely to enforce a non-solicitation clause than a
non-competition clause.

• More difficult to convince courts to enforce agreements between employer and employee
based on being reasonable

• Undesirable as competition is desirable

• 3 categories:

• Between 2 or more businesses that are contrary to Competition Act

• Between vendor and purchaser of a business

• Between employer & employee which restricts rights of employee to compete

Contrary to Competition Act:

=agreements that affect competition in the industry = restrict output or

fix the selling price of a commodity or service

• s. 45 of the Act: may not “conspire, combine, agree or arrange with another person to lessen
competition unduly”

• Mergers forbidden if they prevent or lessen competition

Between Vendor & Purchaser of a Business:

• Agreements which contain restriction on the right of the vendor to carry on business in
competition with the purchaser for a certain period of time in a particular location- area & time
vary with business

• Protects Goodwill

• Prima facie void

• Enforceable if party seeking to rely on it can prove it is reasonable in view of the nature of the
business being sold = a mutual advantage

• Term severed if unreasonable – will not be rewritten or reduced

• Demand no more than reasonable so clause will be upheld

Restrictive covenants in Employment Relationships:

1. In present relationships:

=promises not to compete with present employer

2. Restrictions on revealing valuable trade secrets, confidential information to competitors during

& after leaving employment

3. Agreements binding future employment

- non-compete vs non-solicit clauses (Phoenix case)

Criteria considered for restrictive covenants regarding future employment:

A: Is restrictive covenant reasonable with respect to the PUBLIC INTEREST?

• Is it a restraint on competition looking at the nature of the business & the location?

• Would enforcement of covenant deprive the pubic of the employee’s special services?

B: Is the restrictive covenant reasonable & necessary to protect the parties to the contract?

• Is there a PROPRIETARY INTEREST to protect? (goodwill, client base, secrets)

• Is the size of the restricted geographical area reasonable?

• Is the length of time reasonable given the nature & location of the business?

• Is the scope of the restriction reasonable?

The contract would be set aside as unconscionable – an unconscionable contract is one where there
is 1- unequal bargaining power between the parties and 2- the powerful party gets an extremely
advantageous deal.

Misrepresentation
 • a false statement of a material fact made prior to the execution of a contract that induces a
party to enter into a contract and is not made a term of the final contract.

• Misrepresentation may be :

• Innocent

• Negligent

• Fraudulent

Innocent Misrepresentation:

• A false statement which the person who made it honestly believes to be true

• The maker of the statement is unaware that it is not in fact true

• If a maker of an innocent misrepresentation later becomes aware of it being a

misrepresentation, failure to inform/correct the misrepresentation causes it to become a
fraudulent misrepresentation

Negligent misrepresentation

 where there was careless disregard for the truth of the statement

Fraudulent misrepresentation

 where there is knowledge of the falsehood of the statement and the statement is
made with an intention to mislead
 For fraudulent misrepresentation the remedy is either rescission or damages.

The claimant must rely on the representation as a basis for entering into the contract and the
claimant must have suffered a loss as a result. (Weinman v Brinkman)

UNDUE INFLUENCE, DURESS AND UNCONSCIONABILIT

To determine whether a contract is unconscionable, it must be shown that the bargaining positions
of the parties were unequal, that one party dominated and took advantage of the other, and that
the consideration involved was grossly unfair.

I nterpretation
 Order of Application:
When interpreting words or terms, courts will:
1. Apply the literal or strict meaning.
2. If unresolved, look to liberal or
purposive approach, including circumstances
surrounding negotiations, knowledge
of the parties and other relevant facts.
3. Contra Proferentem

And in the cases of insurance:

1. Follow the rule of Contra Proferentem =
against the offeror
2. Construe the coverage broadly
3. Interpret the exclusion narrowly

PAROL EVIDENCE RUL

The Parol Evidence Rule says that the court will not admit evidence of a prior oral term that adds to,
varies, alters or contradicts a final written agreement.

DISCHARGE OF CONTRACT
 JEDFRO INVESTMENT LTD. V. JACYK

 SATURLEY V. LUND

Ex

1. 是不是 frustration
Frustration is a supervening event beyond the control of either party
that renders performance impossible or radically different which
cannot be self-induced.
Hardship is not frustration.
2. 如果是 frustration 的话 - can claim frustration of contract to
discharge its obligations and the loss would be apportioned
equitably.

In order to claim frustration, 3 criteria are required:

1 – the event must have occurred after the contract was entered into

2- it must make the contract impossible to perform

3- it must not be self induced

BREACH OF CONTRACT
 BREALTA ENERGY INC V. FIRST CAPITAL MANAGEMENT

 WESTCOAST TRANSMISSION V. CULLEN

 BLACKCOMB SKIING ENTERPRISES V. SCHNEIDEROccurs

1. 是 Breach of Condition 还是 Breach of Warranty

2. The issue here is whether the court would consider […] be
enforceable under the situation of an anticipatory breach of
condition.
3. Because it is a serious breach, the Orcas can choose to treat the contract as discharged
immediately – before the completion date.
 discharged immediately, before the completion date.
liquidated damages 违约金

In order for a liquidated damages clause to be enforceable it must be a genuine pre-estimate of

the loss capable of pre-estimate at the time of the contract. If it is considered to be an

unconscionable penalty the clause will not be enforced.

The courts consider several factors to determine whether the deposit is a genuine pre-estimate

of the loss. According to the Blackcomb case the courts will look at

The wording of the contract and whether it refers the amount as

liquidated damages; the relative sophistication of the parties; the
industry standards; and the fact whether the plaintiff suffers no loss is
irrelevant if other conditions are met (Blackcomb).
In this case the wording of the contract is clear, the Orcas and Bear appear to be equally

sophisticated. This deposit is within the industry standards.

when one of the parties wrongfully fails to perform its obligations under the contract

Breach does not automatically lead to termination of the contract:

• the breach must be sufficiently serious (must be of the whole contract or of an essential
term, a condition)

• the injured party must choose to terminate 受害方必须选择终止

The terms condition & warranty distinguish essential from non-essential terms in a contract

Condition:  -a fundamental, essential term

-leads to the option to discharge the contract & claim damages unless the doctrine of
substantial performance applies

-injured party must choose to treat the contract as discharged & communicate this to the
other party

Warranty:

-breach of a non-essential term

-does not discharge the contract

 -can only claim damages

HOW A BREACH MAY OCCUR:

• By expressly repudiating the contract 通过明确废除合同

- Anticipatory Breach:
• notifies the other party in advance that it will not be able to perform its
obligations = “a breach occurring in advance of the time agreed on for
performance of the contract

• by acting in a way that makes performance impossible 通过采取行动以致无法表现

• by either party failing to perform or to substantially perform 任何一方均未履行或实质上未履

行

EXCLUSION CLAUSES
 DAWE V. CYPRESS BOWL

 GREEVEN V. BLACKCOMB

 MALONEY V. DOCKSIDE

An exclusion clause is a clause used frequently in standard form

contracts to transfer risk to the purchaser.
In unsigned contracts, the defendant must do what is reasonably
sufficient to give the plaintiff notice of the condition.
The exclusion clause is clearly worded and Charlie did what was reasonable to bring the terms to Cathy’s
attention. (Dawe v. Cypress) (Dawe v. Cypress Bowl).
The general rule from Dawe and Greeven is that unsigned and unread exclusionary terms are binding
on the buyer if the seller has done what is reasonable to bring the terms to the buyer’s attention. This
would include clear language, bold print (perhaps in colour), capitalization and signage in conspicuous
places.

Whether or not the exclusion clause is enforceable will depend on the following test from
Maloney v Dockside Marine Centre Ltd. (Students might also use Weinman v. Brinkman)
 (1) does the exclusion clause apply to the circumstances at hand?
(2) If yes, was the exclusion clause unconscionable at the time the contract was made?
(3) and/ or was there evidence of a fraudulent misrepresentation? Evidence of a fraudulent
misrepresentation will nullify an exclusion clause.
in the case of unsigned, unread contracts, if the seller does what is reasonable to bring the terms to the
buyers attention, the seller may effectively exclude liability to the purchase

Sales of Good act

The SGA applies where there is a sale of new or used goods from a
dealer to a buyer for money consideration.
• S.16 Implied Condition as to title
• S. 17 Implied Condition that goods will correspond to the
description
• S. 19 Implied Condition that goods will correspond with the
sample
• S. 18 Implied Condition as to quality:
• Fitness for purpose
• merchantability

There also seems to be a breach of Section 17 – the goods must correspond with their description in
quality.

Section 18 of the SGA states that goods must be fit for their purpose if
• the buyer communicates the purpose for the goods to the seller
• so as to show that the buyer is relying on the seller’s skill and
judgment
• and it is in the usual course of the seller’s business to supply those
goods (Kobelt case)
 • the goods were not purchased using a trade or patent name
• Section 18 also says that goods must be merchantable and durable they must be fit for
at least one of the normal range of purposes goods of that description could be used
for.
• he relied on the seller’s skill and judgment and the seller normally deals in goods of this
description. (Kobelt)

The remedy for breach of this section is either rescission or damages.

Section 20 allows the dealer to exclude liability under certain sections

of the SGA for new and used goods, however there is no such exclusion
clause here
s.20 SGA:
Exclusion of Implied Terms:
• With the exception of retail sales (new goods sold by a dealer to
an ordinary individual for personal use), parties can expressly
exclude implied terms (ss.17-19 of SGA).
• For example, CAN exclude for:
• Sales to a business
• Used goods
• Someone who does NOT ordinarily sell those goods
(craigslist)
• Must be CLEARLY WORDED and SPECIFICALLY name the type of
liability (e.g. warranties v conditions)
• Cannot contract out of liability for the ENTIRE bargain (render
contract void of meaning)
Under the SGA, risk of loss follows title，Rule 5 of the SGA will apply which states that in the case of
unascertained goods title passes to the buyer upon delivery to the buyer or where the seller delivers
the goods to an independent carrier for transmission to the buyer.

PRIVITY OF CONTRACT
According to the rule of Privity, to succeed in an action in contract to
enforce contractual rights, the plaintiff must be a party to the contract.
Otherwise, the plaintiff can only directly sue the manufacturer in tort
for negligence. Donoghue v. Stevenson

NEGLIGENCE, CONTRIBUTORY NEGLIGENCE AND VICARIOUS LIABILITY

Negligence
To sue in negligence, a plaintiff must show that
 the defendant owed her a duty of care,
 there was a breach of that a reasonable standard
 the breach of this duty caused harm and damages are reasonably
foreseeable.
 If there was causation, was the loss reasonably foreseeable Is it reasonably foreseeable that
her conduct could cause harm to David

Occupier’s Liability Act to ensure the premises are reasonably safe for
her guests (WALDICK V. MALCOLM).

Defences:
Contributory negligence – courts will apportion damages according to percentages of contributory
negligence of defendant and others

Mitigation – must act reasonably and quickly to minimize the extent of the damage suffered

Volenti non fit injuria or Voluntary assumption of the risk -

1. did the plaintiff understand the risk?

2. did the plaintiff consent to the risk

(often liability is apportioned as being contributorily negligent, however this defence is used for sporting
events or things like bungee jumping)

The Volenti defence is a complete defence to a negligence action

CONTRIBUTORY NEGLIGENCE
 If both Natalie and Todd are found liable the court will apportion
liability between them according to contributory negligence and
damages will be apportioned accordingly.
Under the Negligence Act, courts can apportion losses based on the
degree of liability.
The Negligence Act allows the courts to apportion liability where there is evidence of contributory
negligence by the plaintiff

Contributory Negligence is considered a partial defence for 被告 in that the courts can shift some of the
blame back to 受害人、原告 if his own conduct was negligent

VICARIOUS LIABILITY
Vicarious liability is where an employer is held jointly liable with the employee for the
employee’s tortious conduct. To be vicariously liable, the employer either has to provide
instruction for the employee to perform the tortious conduct or the employee must be acting
within the scope of their employment.

An employer is jointly liable with the employee for torts committed in the scope of
employment.

Negligent misstatement
The law is based on the negligence framework
• owe a duty of care based on a special relationship (Rangen ? and the materials presented
were being used for the purpose prepared for (Hercules).A duty is owed to those in a special
relationship ( you knew or ought to have known would be using the information) and using the
information for the purpose prepared for. Rangen, Hercules cases
o The special relationship arises in a professional/client relationship. A professional is
anyone with skill and expertise in a particular area and it is reasonable for the client to
rely on the professional’s advice. The standard of care for professionals is high – the
conduct of the professional is compared to the reasonable behavior of others in that
same profession when providing the same advice.

• What standard of care was owed? putting in the time and skill appropriate to the task.
o The representation must be untrue, inaccurate or misleading.
o The standard of care also includes not omitting essential information. Providing partial
or incomplete information can be negligence where the professional has a duty to the
plaintiff to make the disclosure.

• breach that duty?

o The professional must have acted negligently – he/she must have fallen below the
requisite standard of care required of a professional making such a representation
• Did that breach cause economic losses?
o The client must have relied, in a reasonable manner, on the negligent misrepresentation
or omission.
o The reliance must be detrimental to the client – damages resulted.

the Rangen and Hercules cases show that the only foreseeable purpose of audited financial statements
prepared by an accountant under the Company Act is to guide the shareholders in assessing the
performance of the board No duty of care is owed by D&T to anyone who uses the audited financial
statements for a purpose for which it was not prepared.

Fiduciary Duty
A fiduciary duty is created where one party places trust and confidence in another; there is an
expectation that this person act in the former’s best interest.
. The party holding the fiduciary power must act with absolute honesty and undivided loyalty
(no conflict of interest).
Relationships in which a fiduciary obligation has been imposed seem to possess three general
characteristics:

1) The fiduciary (often a professional) has undertaken to act in the best interests of the beneficiary
(often the client)
 2) The beneficiary is vulnerable to or at the mercy of the fiduciary’s control or discretion, and
3) The legal or practical interest of the beneficiary could be harmed by the fiduciary’s exercise of
discretion or control.
Vulnerability is common to breach of fiduciary duty but need not be present for a breach of fiduciary
duty to exist. A fiduciary duty is marked by vulnerability in that the fiduciary can abuse the power to the
detriment of the other party

The key question to ask to determine whether a fiduciary duty exists- has the fiduciary undertaken to
act in the best interests of the client, is the beneficiary vulnerable due to the discretion/control of the
fiduciary, and could the beneficiary be harmed by the fiduciary’s exercise of their discretion.
(Hodkinson) The fiduciary relationship is based on trust, honesty and loyalty. (Hodkinson, Strother)

Where there has been a breach of fiduciary duty, the party in breach must disgorge the profit to the
principal. In other words, the fiduciary must account to the principal for the profit gained as a result of
the breach, and also, the fiduciary may be liable for losses on an investment as well as consequential
losses such as legal and accounting fees (Strother, Hodgkinson cases).

The remedy for breach of fiduciary duty is that the fiduciary is liable for the beneficiary’s
economic losses, consequential damages, and must disgorge any profit he/she earned from the
transaction.
The fiduciary must also keep all information of the principle confidential.
(Hodgkinson v. Simms/ Strother case/Canadian Sports Specialists Inc. v Philippon)
will also be liable for any legal and accounting fees and costs of
the legal action
The fiduciary relationship is based on trust, honesty and loyalty. (Hodkinson, Strother)

that the relationship between an accountant and client is a fiduciary relationship. Hodgkinson v. Simms

Agency
An agent acting within either actual or apparent authority binds a principal and third party in contract.

To prove apparent authority Luis must prove each of these elements:

. Apparent authority is created where:

 The principal (Scubie) creates makes a representation or creates an impression through words
or conduct (or even acquiescence) to the third party (Daphne) that the agent (Shaggy) has
some authority.
 The third party relies on that representation
 And is induced to enter into the contract
 And the third party is unaware of any restrictions on the authority of the agent.
If these are proved by the third party then the court will find that the principal is estopped from
denying liability on the contract. (Pemberton Benchlands)
  That Yuirko made some sort of representation or created an impression through words or
conduct to Luis that Roya had some authority
 Luis relied on that representation and was induced into the contract with Yuriko
 And that Luis was unaware of any restrictions on Roya’s authority. (Pemberton Benchlands)

breach of warranty of authority.

Sole proprietorship
unlimited liability which means his personal fortunes are at risk. (Data Business Forms)

Partnership
A partnership is the relationship between two or more persons carrying on a business in common with a
view to profit.
Courts can imply or deem a partnership to exist if there are two or more persons who:

 Contribute money, property, skill expertise to a joint enterprise

 Share in management
 Jointly purchase assets for the business
 Have an expectation of profit
 Share in the net profits of the business (this element is prima facie evidence of a partnership)
(Lanz v. Scragg cases)

If they are partners then they are agents of each other and the acts of one bind the firm in the ordinary
course of business. Partners are jointly liable for debts
A partnership is not a separate legal entity. The partners in a general partnership face personal
unlimited liability.
The Partnership Act is also clear that if the parties have not expressly agreed on how the profits and
losses of the partnership should be split, then they are to be split equally – not based on capital
contributions.

Partners are jointly liable for debts of the firm. (Strother case)

Corporation
The Data Business Forms case says that a corporation is a separate legal entity and can make a contract
in its own name and is liable for its own debts. The shareholders of the corporation have limited liability
– the most they would be liable for is their capital contributions (what they paid for their shares).
the sole shareholder, will have limited liability; the most he can lose financially
to creditors is his capital contribution.
. Shareholders of a corporation enjoy limited liability – the most a shareholder risks are his/her capital
contribution to the corporation. This is true unless there is fraud by the shareholder in control of the
corporation in which case the corporate veil is pierced and the shareholders in control are personally
liable for the debts of the corporation.

withdrew money from the corporation into his personal account in anticipation of a lawsuit.
This is fraud. (Universal case or Challenor)

However, we learned from the Data Business Forms case that the name of the corporation

must be properly displayed otherwise Larry gives the impression that he is carrying on business
as a sole proprietorship. However, there is an obligation upon the party who intends to rely on the
fact of incorporation to claim limited liability protection to give ample notice to suppliers of the status of
the corporation.