Table Of ContentKEY WEBLINKS
Throughout this book, references will frequently be made to the statutes enacted by the federal, provincial, and territorial
governments. These statutes are now almost all available electronically. Listed below are the websites for the statutes of
each jurisdiction:
Canada Nova Scotia
http://lois.justice.gc.ca http://nslegislature.ca/legc/index.htm
Alberta Nunavut
www.qp.gov.ab.ca www.nucj.ca/library/index.htm
British Columbia Ontario
www.qp.gov.bc.ca/statreg www.e-laws.gov.on.ca
Manitoba Prince Edward Island
web2.gov.mb.ca/laws/index.php www.gov.pe.ca/law/statutes
Quebec
New Brunswick
www.publicationsduquebec.gouv.qc.ca/
www.gnb.ca/0062/acts/index-e.asp
accueil.en.html
Newfoundland and Labrador
Saskatchewan
www.gov.nf.ca/hoa/sr
www.qp.gov.sk.ca
Northwest Territories
Yukon
www.justice.gov.nt.ca
www.gov.yk.ca/legislation
In addition to the statutory bases, the following websites contain a wealth of material of general legal interest,
which is relevant to most of the chapters in this book:
Canadian Legal Information Institute
www.canlii.org
Provides links to federal and provincial legislation, court decisions, etc.
Department of Justice
http://canada.justice.gc.ca
Includes details of the Canadian legal system, the courts, the legislative process, etc.
Uniform Law Conference of Canada
www.ulcc.ca
Includes proposals for law reform and harmonization
Legal Line
www.legalline.ca
Provides current information about Canadian law and the legal system
Bora Laskin Law Library
www.law-lib.utoronto.ca/resources
Includes links to various sites on Canadian law
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Fourteenth Edition
LAW BUSINESS
The and
ADMINISTRATION
CANADA
in
J . E. S MYTH
LATE PROFESSOR OF COMMERCE,
FACULTY OF MANAGEMENT STUDIES,
UNIVERSITY OF TORONTO
D . A. S OBERMAN
LATE PROFESSOR OF LAW,
FACULTY OF LAW,
QUEEN’S UNIVERSITY
A. J. EASSON
LATE PROFESSOR OF LAW,
FACULTY OF LAW,
QUEEN’S UNIVERSITY
S. A. M CGILL
SCHOOL OF BUSINESS & ECONOMICS,
WILFRID LAURIER UNIVERSITY
Toronto
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Cover Image: © Iurii Sokolov / Fotolia
Credits and acknowledgments for material borrowed from other sources and reproduced, with permission, in this textbook appear
on the appropriate page within the text.
Original edition published by Pearson Education, Inc., Upper Saddle River, New Jersey, USA. Copyright © [2016] Pearson Educa-
tion, Inc. This edition is authorized for sale only in Canada.
If you purchased this book outside the United States or Canada, you should be aware that it has been imported without the
approval of the publisher or the author.
This book offers a general discussion of legal principles relevant to business students. It is not intended to provide legal advice nor
address specifi c situations. The law discussed in this book was compiled between January and June of 2014. Subsequent changes in
the law will not be refl ected in the text.
Copyright © [2016] Pearson Canada Inc. All rights reserved. Manufactured in [the United States of America]. This publication
is protected by copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a
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Requests at www.pearsoncanada.ca .
10 9 8 7 6 5 4 3 2 1 [EB]
Library and Archives Canada Cataloguing in Publication
Smyth, J. E. (James Everil), 1920-, author
The law and business administration in Canada / J.E. Smyth
(Late Professor of Commerce, Faculty of Management Studies,
University of Toronto), D.A. Soberman (Late Professor of Law, Faculty
of Law, Queen’s University), A.J. Easson (Late Professor of Law, Faculty
of Law, Queen’s University), S.A. McGill (School of Business & Economics,
Wilfrid Laurier University).—Fourteenth edition.
Includes bibliographical references and index.
ISBN 978-0-13-325167-8 (bound)
1. Commercial law—Canada—Textbooks. 2. Commercial law—Canada —
Cases. I. Easson, A. J., author II. Soberman, D. A., 1929-, author III. McGill,
S. A. (Shelley A.), author IV. Title.
KE919.S69 2015 346.7107 C2014-907370-4
ISBN 978-0-13325167-8
Brief Table of Contents
Part I The Law in Its Social and Business Chapter 16 Insurance and Guarantee 3 42
Context 1
Chapter 17 Agency and Franchising 3 61
Chapter 1 Law, Society, and Business 1 Chapter 18 The Contract of Employment 3 85
Chapter 2 T he Machinery of Justice 2 1 C hapter 19 Negotiable Instruments 4 15
C hapter 3 Government Regulation of Business 4 7
Part V P roperty 440
Part II Torts 74 Chapter 20 Intellectual Property 440
Chapter 4 T he Law of Torts 7 4 Chapter 21 Interests in Land and Their Transfer 4 75
Chapter 5 P rofessional Liability: The Legal Chapter 22 Landlord and Tenant 4 99
Challenges 101 Chapter 23 Mortgages of Land and Real Estate
Transactions 5 27
Part III Contracts 1 23
Part VI Business Organizations:
Chapter 6 F ormation of a Contract: Offer and
Their Forms, Operation, and
Acceptance 123
Management 5 52
Chapter 7 F ormation of a Contract:
Chapter 24 Sole Proprietorships and
Consideration and Intention 1 43
Partnerships 5 52
Chapter 8 F ormation of a Contract: Capacity to
Chapter 25 The Nature of a Corporation and Its
Contract and Legality of Object 1 60
Formation 577
Chapter 9 G rounds Upon Which a Contract
Chapter 26 Corporate Governance: The Internal
May Be Set Aside: Mistake and
Affairs of Corporations 5 99
Misrepresentation 185
Chapter 27 Corporate Governance:
Chapter 10 Writing and Interpretation 2 04
External Responsibilities 6 32
Chapter 11 Privity of Contract and the Assignment
of Contractual Rights 2 28 Part VII Creditors and Debtors 6 57
Chapter 12 The Discharge of Contracts 2 50
Chapter 28 Secured Transactions 6 57
Chapter 13 Breach of Contract and Its
Chapter 29 Creditors’ Rights 6 79
Remedies 270
Part VIII The Modern Legal Environment
Part IV Special Types of Contracts 2 94 for Business 7 05
Chapter 14 S ale of Goods and Consumer Chapter 30 International Business Transactions 7 05
Contracts 294
Chapter 31 Electronic Commerce 7 35
Chapter 15 Bailment and Leasing 3 22
Chapter 32 Privacy 762
iii
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Detailed Table of Contents
About the Authors xvii Merger of Law and Equity 26
Preface xviii The System of Courts 2 6
The Courts of First Instance—Trial Courts 26
Authors’ acknowledgements xxiv
The Court of Appeal 27
Table of Statutes xxv
Final Court of Appeal—The Supreme Court 27
Table of Cases xxx The System of Courts in Canada 2 7
The Provincial Court System 28
Part I The Law in Its Social and The Federal Courts—Supreme Court of Canada 29
Business Context 1 The Federal Courts—Courts of First Instance 29
Intermediate Level Appeal 30
Procedural Law: Using the Courts 3 1
1 Law, Society, and Business 1
Who May Sue? 31
The Role of Law 2
Standing to Sue 31
How Is Law Defined? 2
Class Actions 31
How Is Law Linked to Morals and Ethics? 2
Procedure Before Trial 32
Is It Ever Right to Break the Law? 3
The Trial 33
How Does Law Influence Behaviour? 3
Appeals 34
Law and Business 4
Costs 34
The Significance of Law for the Business Environment 4
The Economics of Civil Litigation 36
Law and International Business 5
Contingent Fees 36
Legal Risk Management 5
Settlement Out of Court 38
Developing a Legal Risk Management Plan 5
Alternative Dispute Resolution 3 9
Strategies to Manage Legal Risks 6
Legislation: Government Made Law 4 2
The Legal Profession 7
Statutes 42
Business and the Legal Profession 8
Legislation Framework 43
Law and Business Ethics 9
“Active” Legislation: Administrative Law and
Business Ethics 9
Government 43
Codes of Conduct 10
Strategies to Manage the Legal Risks 4 4
Who Makes Law? 1 0
The Courts and Legislation 1 1 Questions for Review 45
Cases and Problems 45
Federalism and the Constitution 11
Companion Website 46
The Charter of Rights and Freedoms 1 3
The Rights and Freedoms Protected by the Charter 14 3 Government Regulation of Business 4 7
The Significance of the Charter for Business 16 T he Legal Framework for Doing Business in
Challenging the Validity of a Statute 1 6
Canada 48
Questions for Review 19 Challenging Government Regulation of
Companion Website 20 Business 48
Jurisdiction over “Business Activities” under the
2 The Machinery of Justice 2 1 Constitution 48
C lassifying Law 2 2 Government Regulation of Business and the Impact of the
Who Makes Law? 2 2 Charter 50
Legal Systems: Civil Law and Common Law 2 2 Administrative Law 52
Regions of the World under Each System 22 Judicial Review of Government Regulation 5 3
The Need for Consistency and Predictability 23 Competition 54
Common Law: The Theory of Precedent 2 4 The Competition Act 54
Certainty versus Flexibility 24 Conspiracies 55
Accommodating Change 24 Monopolizing 57
The Sources of Law 2 4 Mergers 59
The Variety of Sources 24 Consumer Protection 6 1
Case Law: Judge-Made Law 25 Why Is Consumer Protection Legislation Necessary? 61
v
Principal Types of Consumer Legislation 62 The Duty of Care—Special Relationship 109
Environmental Protection 6 7 Accuracy of the Statement 111
The Legislative Framework 67 The Standard of Care for Professionals 112
Environmental Impact Assessment Review 69 Reliance and Detriment 113
Enforcement and Liability 69 The Role of Professional Organizations 1 14
Strategies to Manage the Legal Risks 7 0 Responsibilities and Powers 114
Codes of Conduct 116
Questions for Review 71
Discipline 116
Cases and Problems 71
Conflict of Duty toward Clients, the Profession, and the
Companion Website 73
Courts 116
Multi-Disciplinary Partnerships 1 17
Part II Torts 7 4
Strategies to Manage the Legal Risks 1 18
4 The Law of Torts 7 4 Questions for Review 119
The Scope of Tort Law 7 5 Cases and Problems 119
Development of the Tort Concept 7 5 Companion Website 122
The Basis for Liability 7 5 Part III Contracts 1 23
Fault 75
Strict Liability 76
6 Formation of a Contract: Offer and
Public Policy 76
Acceptance 123
Vicarious Liability 77
T he Role of Contract Law 124
Intentional Torts 7 8
The Nature of a Contract 1 24
Assault and Battery 78
The Nature of an Offer 1 24
Nuisance 78
The Communication of an Offer 1 25
False Imprisonment and Malicious Prosecution 79
Defamation 80 Written Offers 1 26
Other Intentional Torts Related to Business 81 Standard Form Contracts: Their Risks and
Unintentional Torts 8 3 Benefits 126
Negligence 83 Required Notice of Terms 126
Elements of Proof 83 Unusual or Unexpected Terms 128
Defences to Negligence: The Plaintiff’s Own Conduct 87 The Lapse and Revocation of an Offer 1 28
The Relevance of Insurance 88 Lapse 128
Product Liability 8 9 Revocation 129
Proving Breach of the Standard of Care 91 Options 129
Inherently Dangerous Products 91 Rejection and Counter-offer by the Offeree 1 30
Occupier’s Liability 9 3 The Elements of Acceptance 1 30
Remedies 9 5 Positive and Unconditional 130
Strategies to Manage the Legal Risks 9 7 Communication to the Offeror 131
The Moment of Acceptance 132
Questions for Review 97
Transactions between Parties at a Distance from
Cases and Problems 98
Each Other 1 34
Companion Website 100
Method of Acceptance 134
5 Professional Liability: The Legal Methods of Revocation 135
Challenges 1 01 Determining the Jurisdiction Where a Contract Is
Made 135
Professional Liability: The Legal Challenges 1 02
Unilateral and Bilateral Contracts 1 35
Liability of Professionals 1 02
The Offer of a Promise for a Promise 1 35
Contractual Obligations 103
The Offer of a Promise for an Act 136
Fiduciary Duty 103
Formation of Internet Contracts 1 37
Tort Liability 105
Uncertainty in the Wording of an Offer 1 38
Choosing a Cause of Action 106
Strategies to Manage the Legal Risks 1 39
Tort Liability for Inaccurate Statements 1 07
Misrepresentation 107 Questions for Review 139
The Hedley Byrne Case 108 Cases and Problems 140
Proving Negligent Misrepresentation 1 08 Companion Website 142
vi Contents
7 Formation of a Contract: Consideration Questions for Review 180
and Intention 1 43 Cases and Problems 181
Companion Website 184
The Meaning of Consideration 1 44
Gratuitous Promises 1 44
9 Grounds Upon Which a Contract
Adequacy of Consideration 1 45
May Be Set Aside: Mistake and
Motive Contrasted with Consideration: Past
Misrepresentation 1 85
Consideration 146
Setting Aside a Contract 1 86
Relation between Existing Legal Duty and
The Narrow Meaning of Mistake 1 86
Consideration 146
Void and Voidable Contracts 1 86
Gratuitous Reduction of a Debt 1 48
Mistakes about the Terms 1 88
Equitable Estoppel 1 49
Words Used Inadvertently 188
Estoppel Based on Fact 149
Errors in Recording an Agreement 188
Injurious Reliance 151
Misunderstandings about the Meanings of Words 189
The Effect of a Request for Goods or Services 152
Mistakes about the Subject Matter 1 90
The Use of a Seal 1 53
Mistake about the Existence of the Subject Matter of a
Intention to Create Legal Relations 1 54
Contract 190
Strategies to Manage the Legal Risks 1 56
Mistake about the Value of the Subject Matter 190
Questions for Review 156 Mistakes about the Identity of a Party to a Contract 1 91
Cases and Problems 157 Mistakes about the Nature of a Signed Document 1 93
Companion Website 159 Non Est Factum 193
8 Formation of a Contract: Capacity to Misrepresentation 1 93
Contract and Legality of Object 1 60 Contract Versus Tort 193
Consequences of Misrepresentation in Contracts 1 94
The Burden of Proving Essential Elements of a
Misrepresentation by Silence or Omission 195
Contract 161
Undue Influence 1 96
The Meaning of Capacity to Contract 1 61
Burden of Proof 197
Minors (or Infants) 1 61
Arrangements Involving Spouses 197
Contractual Liability of Minors 161
Importance of Independent Legal Advice 198
Other Persons of Diminished Contractual
Consumer Protection 1 98
Capacity 164
Duress 199
Corporations 1 65
Strategies to Manage the Legal Risks 2 00
Labour Unions, Associations, and Other
Questions for Review 200
Organizations 165
Cases and Problems 201
Enemy Aliens 166
Companion Website 203
Aboriginal Peoples 1 66
Bankrupt Debtors 1 67 10 Writing and Interpretation 2 04
The Role of Legality in the Formation of a The Distinction between Substance and Form 2 05
Contract 167 The Benefits of a Written Record 205
The Difference between Void and Illegal Legislation Dealing with Writing 205
Contracts 167 The Statute of Frauds 2 06
Contracts Affected by Statute 1 68 The Types of Contracts Covered by the Statute of Frauds 206
Significance of the Wording of a Statute 168 Requirements for a Written Memorandum 208
Examples of Contracts Void by Statute 168 Consequences for Contracts within Its Scope 210
Examples of Statutes Affecting Public Policy 169 Requirements of the Sale of Goods Act 2 12
Examples of Agreements Illegal by Statute 171 What Constitutes a Sale of Goods for the Purposes of the
Examples of Agreements Made Legal by Statute 172 Writing Requirement? 212
Contracts Illegal by the Common Law and Public Evidence That Satisfies the Act 213
Policy 173 When Both Acts Apply 213
The Common Law 173 Consumer Protection Legislation 2 13
Public Policy 174 The Interpretation of Express Terms 2 15
Agreements in Restraint of Trade 175 The Goal of the Courts: To Give Validity to Contracts 215
Strategies to Manage the Legal Risks 1 80 Two Approaches to Interpretation 216
Contents vii
