Business Law Assignment
Part 1: Outline Questions
- Distinguish among an employee, an independent contractor and an agent.
The distinction between the employee and an independent contractor is based on the application of four principles which include control, ownership of tools, risk of loss and profit loss. While the employee exerts a limited level of control on the business operations and on his or her actions, the independent contractor does not experience the immense control of the business principal but is free to make his or her own decision depending on the nature of the actions to be carried out. Secondly, the independent contractor owns most of the tools used in the business such as vehicles and machineries, shares the risk of loss with the business owner and loses profits in case of business failure, factors which are not attributed to the employee. The agent on the other hand is mandated to transact business on behalf of the principal.
- What factors will a court take into consideration when determining compensation in a wrongful dismissal action? Indicate the various types of remedies that may be available to the plaintiff.
An employee is said to have been wrongfully terminated after the complete consideration of statutory and judicial limitations as well as limitations set through Union Contracts and the employment contract. If in any case the termination violates any of these limitations, the employer is held liable for wrongful termination of employment and the employee can be remedied through means such as reinstatement, compensation for punitive and mental distress, and payment continuation. The continuation of payment is usually carried out for 6 months to 2 years depending on the termination agreement in the contract letter. The plaintiff may also claim that he/ she suffered mental distress following the termination because the employment was the only source of income known to the plaintiff.
- Distinguish between an agent’s actual, implied, and apparent authority. Explain why this distinction can be important from the agent’s point of view.
From the Agent’s point of view, the actual authority refers to the entire scope of authority/ mandate as described to the agent by the principal and as included in the contract form. The implied authority would mean the mandate intended by the words or conduct shown by the principal to the agent while the apparent authority is the level of authority that a third party would link to the agent with regards to any business transactions carried out on behalf of the principal based on the principal’s actions and words. It is important for the agent to understand these definitions due to the potential of overstepping boundaries/ going beyond the mandates given by the principal in order to please the customer as well as in case there is need to seek redress for a wrong.
- Set out the nature of the duties owed by a director of a corporation. To whom are these duties owed? Who else in the corporate organization owes similar duties?
The director of any corporation performs management duties such as determination of the corporation’s structure, initiation of essential changes, selection and removal of officers, dividend declaration and setting the compensation rates for the management. The board of directors is answerable and owes its duties to the corporations’ share-holders. The board of directors can delegate their duties to committees to be heard and deliberated. The committees are appointed by the board of directors and must have at least of the directors therein. This implies that the committee selected is mandated to perform all the roles of the directors except in cases where the corporation’s constitution prohibits this.
- Distinguish among a derivative action, dissent and oppression. Explain when it would be appropriate to use each of them.
Derivative action refers to a court suit filed by a corporation’s shareholder in complaint against the management and/ or board of directors for a failure by the corporation’s management. On the other hand dissent is involved when two or more judges explicitly disagree with the majority ruling on the same case before them while oppression is when one group such as an official inflicts physical harm to another person due to unequal distribution of power. The oppressed can seek redress through claiming for compensation on damages caused, which may amount to physical harm and psychological torture caused.
- What is meant by a restrictive covenant? Under what circumstances will such a covenant be binding on subsequent landowners? How does this relate to a building scheme?
Restrictive covenants are clauses included in property ownership documents which provide limits to what the owners can do with their properties. The clauses in the ownership documents are enforceable in a court of law. Restrictive covenants run with the land hence in case any buyer purchases land with restrictive covenants, they have to adhere to the limitations of the covenants. For instance in a building scheme, the land owner may decide that only single dwelling units should be built on each plot and formulate a restrictive covenant explaining the same to leasers and buyers. Each person who purchases the land as part of the settlement scheme has to follow the demands of the restrictive covenant in construction.
- Contrast a tenancy in common with a joint tenancy, and indicate how one can be changed to another. Why is the distinction important?
Tenancy in common refers to situations where the tenants have fixed shares in property and the shares are undivided. In case of a tenancy in common, the passing on of one of the tenants implies that the shares held by the tenant are passed on to the beneficiaries in case there is a will. On the other hand, joint tenancy which is common in marriages works through co-ownership of property where there are no shares and the remaining partner takes control of the property in case one of the partners dies. However, a joint tenancy can be changes into a tenancy in common in cases such as when a marriage breaks.
- List the concerns for employers arising from computer misuse by employees in the workplace. What steps can employers take to minimize the risk of vicarious liability?
The major concern for employers regarding the misuse of computers by employees is the possibility of revealing confidential information about the company. For shared computers, the vulnerability to information insecurity is even much higher due to access by many potential sources of errors in information handling. To address this issue and reduce the fear associated with it, employers should maintain the use of access codes such as passwords to restrict access to all information in the computer systems. Only authorized personnel may gain access to the information and be informed of the consequences of revealing sensitive information to unauthorized parties.
- The Sale of Goods Act imposes terms relating to goods matching samples or descriptions, and meeting standards of fitness, quality and title. Explain the nature of these implied terms and their effect on the parties. Indicate which terms are conditions and which are warranties. Explain the significance of the distinction.
The key conditions outlined by the sale of Goods Act is that any products that are to be sold must be of satisfactory quality and fit for the intended purpose. While the satisfactory quality aspect can be linked to product warranties, the fit for purpose is just a condition for purchase. Product satisfaction directly links to warranties as it is essential for the product to work according to the promise made by the manufacturer and/ or seller which implies that failure to this, the customer has the choice to seek redress through compensation but cannot return the product.
- How does the Bulk Sales Act protect creditors when a business is selling all, or almost all, of its assets?
According to the Bulk Sales Act, creditors are protected since the Act explicitly explains that any transfer of goods which is contrary to the unusual movement of goods should not take into consideration the creditors properties. According to the Act, the goods belonging to the creditors cannot be transferred unless certain conditions are met. The transfer of products occurs involving the sales of all goods, inventories and various types of products depending on the season and availability.
Part 2: Edition 10 Case and Discussion Questions:
Chapter 10, Case 2, p 342: Evans v Teamsters Local Union No 31;
In the case of wrongful dismissal of an employee, there are various remedies that can be applied to the case. One of them includes reinstatement while another is continued payment. Through either of these, an employer can effectively compensate the dismissed employee for the period of notice accepted. In the case of Evans, the remedy provided was for continued payment but was later changed to reinstatement. The refusal by Evans to be reinstated may amount to failure to mitigate the dismissal warranting the discontinuity of the remedy involving continued payment. However, it is the responsibility of the court to decide the case based on the available facts. While deciding the case, the court has to compare the terms of the original employment contract with the terms of the reinstatement contract. In case there is an evidence of substantial changes which may include the presence of demotion clauses and/ or reduction of benefits, the dismissed employee is at will to reject the reinstatement and demand that the contract terms be similar to or better than the terms provided in the original contract agreement. For the case of Evans, failure to confirm the presence of such changes makes it inevitable to end the payments.
Chapter 11, Case 2, p 384: Ocean City Realty v A&M Holdings;
From the perspective of A & M Holdings, it could be argued that the actions of Forbes on behalf of Ocean City Reality amounted to fraud based on misrepresentation of facts. However, it would be difficult to successfully argue using this as the case involves two different contracts i.e. that between realtor and the property owner signed by the agent on behalf of the realtor; and the contract between the agent and the property buyer. In the first contract, the buyer is a third party and has no say in the terms of the contract unless the contract has the potential to cause harm to him. Similarly, A & M Holdings have no say in the contract between the realtor and the buyer. The mandate of the seller does not include deciding what the agent does with her commission. Moreover, there is no law prohibiting the refund of part of the commission to a buyer by the agent based on their contract terms. As long as a signed contract exists that confirms the presence of an agreement between the realtor and the developer, Ocean City Reality can sue the developer for breach of contract. The initial acceptance of the contract terms by the developer indicates that the terms are not harmful to the developer. A consideration of these facts may yield a favorable outcome for Ocean City reality, resulting in remedies such as the compulsion of the developer to commit to their part of the contract.
Chapter 12, Case 5, p 420: Salesco Limited v Lee Paige;
Consideration of the laws regarding business partnership leads to the recommendation that the derivative action should succeed. The plaintiffs have two main complaints which include the unjustified winding up of a business partnership and unfair treatment of partners. For the derivative action to succeed, the plaintiffs will however have to prove that the ending of Spray Pak was unjustified as it was not based on the conditions described in the dissolution law which include: the dissociation of one member through death, withdrawal or expulsion; completion of the mandates of the partnership and agreement of all members. The actions of M and P with regards to Spray-Pak and Salesco constitute both oppression and unfair prejudicial action. It is the right of all partners in a business to be involved in all business transactions, having the right to information (both general and financial records), equal rights in the management of the partnership and distribution of business assets in case of dissolution. The failure of P and M to adhere to these basic rules corresponds to oppression of other partners and to unfair prejudicial actions. Through unfair actions, P and M paid disregard to the rights and interests of the other partners in both Salesco and Spray-Pak. This implies a breach of fiduciary duties.
Chapter 15, Case 1, p 535: Resch v Canadian Tire Corporation;
The case of Resch v Canadian Tire Corporation relates to negligent liability. Negligent liability results where there is proof of duty of care such as the duty of the manufacturer, Canadian Tire Corporation to manufacture safe and non-defective bikes. The defendant must have breached this duty as by assembling a defective fork into the bike. Since the outcome of having a defective fork on a bike i.e. an accident and subsequent harm are foreseeable, the manufacturer may be held liable for negligence. It is this breach that resulted in the harm caused to the son. Without any intervening action such as the interference of Mr. Resch during the ride or comparative negligence, the manufacturer is held completely liable for negligence in this case. On the other hand, the dealership may be indemnified from the liability due to the fact that it acted on behalf of the manufacturer in the sale of the bike and may not have been aware of the defect or its potential impacts until after the suit by the buyer. Confirming the dealership’s liability is thus subject to the consideration of various facts. The fact that the stepson contributed to the bike’s purchase makes the case even more proximate hence increasing the liability. The case is likely to be ruled in favor of compensation of the victim.
Chapter 16, Case 4, p 568: Bank of Montreal v Canada (Attorney General).
Considering the case at hand, the notices to pay cannot take priority over the bank’s secured claim. This is because the debts are considered individually and hence have to be analyzed individually. The due process for considering priority will have to be followed. This implies that for all the creditors, the payment of those with secured claims is prioritized over those without. This gives the debts into two categories, those with security and those without. For the secured claims, the prioritization is carried out based on the level of perfection. The creditors with perfected securities are granted higher priority compared to those without perfection. This gives a hierarchy that is to be followed in the payment of debts which implies that despite the notice to pay the debtors, the actual payment will be carried out only based on the prioritization of the debts (Mann & Roberts, 2011). Due to the ‘super priority’ accorded to government institutions in certain conditions, creditors have to completely perfect their securities to be considered for payment. While this may not bring them past the government entities, it may increase their chances of payment due to prioritization over the unsecured and unperfected securities’ debts. While this may be beneficial to the creditors, it may also pose a challenge to small businesses seeking financial assistance due to the potential of increased interest, greater demands for securities during financing and increased pressure for payment.
Mann, R. and Roberts, B. (2011). Business Law 15th Ed. South Western Cengage Learning.