Professional Documents
Culture Documents
Business Law Chapter 4 and 5
Business Law Chapter 4 and 5
The purpose of tort law is to compensate victims for harm caused by the activities of others
- generally not to punish
As a general statement, a tort identifies a set of circumstances that creates a right to claim
compensation
Tort law is one way of apportioning loss, along with other approaches such as insurance and
government compensation schemes
Initially anyone who caused direct injury to another had to pay compensation
No inquiry was made into the reasons for the injury or whether the conduct of the injurer was
intentional or unintentional
Strict liability: liability that is imposed based upon causation regardless of fault
Over time, the idea developed that a person should not be responsible for harm caused to
another if he acted without fault
Today’s tort law involves 2 principles:
- the fault of the defendant (that is, whether the behaviour was improper)
- the causation of harm (that is, whether the plaintiff’s injury was the result of the defendant’s
conduct)
The Basis for Liability
Fault
Fault: unjustifiable injurious conduct that intentionally or carelessly disregards the interests of
others
Refers to the blameworthy or culpable conduct – conduct that in the eyes of the law is
unjustifiable because it intentionally or carelessly disregards the interests of others
One reason for basing liability upon fault is a belief in its deterrent effect: people will be more
inclined to be careful if they must pay for the consequences of their carelessness
Accident victims who cannot establish fault on the part of some other person go
uncompensated, and the costs and delays of litigation deter many other claims
Strict Liability
Some activities are inherently dangerous regardless of the amount of care taken – for example,
transporting high explosives
- it seems logical that a person knowingly undertaking an inherently dangerous activity should
be strictly liable for resulting damage, regardless of fault
- why? Because that person could charge for his services according to the degree of risk, and
could carry adequate insurance to compensate for possible harm done to others
In the absence of legislation, Canadian courts typically consider fault to be the primary basis of
liability
However, the expected level of care rises as the danger increases
Public Policy
The most radical policy proposal would eliminate lawsuits for all personal injuries and
compensate victims through government run compensation schemes
No Fault Insurance: a system of compulsory insurance that eliminates fault as a basis for claims
Another example of an alternative to the tort approach is found in the scheme governing
workers’ compensation in Canada
Workers’ Compensation: a scheme in which employers contribute to a fund used to compensate
workers injured in industrial accidents regardless of how the accident was caused
Employers must contribute to a fund that is used to compensate workers injured in industrial
accidents, even when the employer is blameless and the injury is the result of the employee’s
own carelessness
Vicarious Liability
Refer to page 388-389
Employers without fault may also be liable for harm caused by the acts of an employee when
those acts arose in the course of employment
An employer may even be found liable when he has given strict instructions to take proper care
or not to do the particular act that causes the damage, and he may be held liable for criminal –
as well as intentional and unintentional – tortious acts of an employee
Vicarious liability: the liability of an employer to compensate for torts committed by an
employee during the course of his or her employment
Figure 4.1
2 public policy reasons for taking this approach:
1. Although an employee is personally liable for the torts he commits while acting for himself or
his employer, employees often have limited assets available to pay compensation for the
potential harm they can cause
2. It seems only fair that the person who makes the profit from an activity should also be liable
for any loss
Intentional Torts
Unintentional Torts
Purpose of the law of torts is to compensate an injured party, the usual remedy for a tort
(intentional or unintentional) is an award of a sum of money, known as damages, to compensate
for physical and economic losses
- rule of tort
Damages: a sum of money awarded as compensation for loss or injury
Courts were initially reluctant to award damages for only economic loss without some
corresponding physical damage, but now often do
Punitive or exemplary damages: damages awarded with the intention of punishing a wrongdoer
Restitution: an order to restore property wrongfully taken
Injunction: a court order restraining a person from doing, or continuing to do, a particular act
Mandatory injunction: an order requiring a person to do a particular act
CHAPTER 5
Professional Liability: The Legal Challenges
“professionals” here to apply to people who have specialized knowledge and skills that are
relied upon by clients and others
Professionals increase a good result, but results are not guaranteed
If the courts go too far and award damages to compensate everyone who relies on bad advice,
the increased costs will likely discourage people from entering the profession and increase the
price of advice beyond reach
A proper balance must be found
Inhibiting useful activities
Liability of Professionals
Obligations may arise from 3 relationships, generating three different causes of action:
- the contractual relationship generates a breach of contract cause of action
- the fiduciary relationship generates a breach of fiduciary duty
- the tort of negligent misrepresentation is available when a tort duty of carer is owed
Contractual Obligations
An agreement to provide professional services to a client contains a promise, whether stated
expressly or not, to perform those services competently
Fiduciary Duty
Fiduciary duty: a duty imposed on a person who stands in a special relation of trust and loyalty
to another
3 characteristics of fiduciary relationships:
- the fiduciary (often a professional) has undertaken to act in the best interests of the
beneficiary (often the client)
- the beneficiary is vulnerable to or at the mercy of the fiduciary’s control or discretion
- a legal or practical interest of the beneficiary could be harmed by the fiduciary’s exercise of
discretion or control
But not every professional relationship is automatically a fiduciary one, and these must be
evaluated using the above criteria
For example, the broker and client relationship depends on the particular facts of the case
If a fiduciary duty is found to exist, the law imposes a wider range of obligations on the
professional than is expressly stated in the contract or required under tort law
The professional must act honestly, in good faith, and only in the best interests of the client
Liability for breach of fiduciary duty may arise without any negligence
Case 5.1 & 5.2 & 5.3
Conflict of interest: a situation where a duty is owed to a client whose interests conflict with the
interests of the professional, another client, or another person to whom a duty is owed
A fiduciary obligation requires complete loyalty to the other party to the relationship
Consequently, a professional who acts on behalf of two or more clients who have competing
interests
Tort Liability
Tort liability extends the range of possible plaintiffs beyond clients who have paid for the advice
Sometimes “other” people may rely on a professional opinion given to a single client or to the
public at large
Examples on pg 106 (top)
These “others” are known as third parties and any liability to them is referred to as third party
liability
Third-party liability: liability to some other person who stands outside a contractual relationship
Choosing a Cause of Action
In the case of breach of fiduciary duty, a defendant may be under a duty to account for any
profit derived from the breach in addition to or as an alternative to damages
Duty to account: the duty of a person who commits a breach of trust to hand over any profits
derived from the breach
Misrepresentation
A misrepresentation is an untrue statement
If it is made knowing it to be untrue or without an honest belief in its truth, and with the
intention to mislead some other person, the misrepresentation is fraudulent and amounts to
the intentional tort of deceit
Deceit: an intentional tort imposing liability when damage is caused by a false statement made
with the intention of misleading another person
Deceit also known as fraudulent misrepresentation requires at least some knowledge or willful
disregard for the falseness of the information
The unintentional tort of negligent misrepresentation does not require knowledge of the
falseness of the information, only carelessness in its creation
Negligent misrepresentation: an unintentional tort imposing liability when an incorrect
statement is made without due care for its accuracy, and injury is caused
- reliance
- duty of care owed to whom? You owe a duty to people who will rely on their statement
The Hedley Byrne Case
Case 5.6
Heller should have foreseen that its information would be used by a customer of the other bank
It therefore owed that customer a duty of care
Disclaimer: an express statement to the effect that the person making it takes no responsibility
for its accuracy