Chapter: 1 the Canadian Legal System

Common Law: - Two systems – The old common law + court of equity

Private and Public Law: Deals with the rights and obligations of government on one hand and individuals and
private organizations on the other

Law of Quebec: Uses civil Law

Equity:
 Spirit of fairness
 Justness
 Right dealing
 Founded in percept of consciousness
Precedent:
 Where the court applies the legal principles used in previous court decisions which involved similar
facts
 But there is some flexibility depending on the situation (equitable relief)
 Flexibility upon the factual distinctions
Legislation:
 Statutes enacted by elected legislators. (Formal Written Enactment)
o A statute is a codification of the law
o The court can always determine the applicability of the statute
o Example: The Professional Engineers act of Ontario- which provides that an elected appointed
council may prescribe conducts and rules and may also regulate other matters
Division of Powers:

Federal Court: Provincial Court:

Criminal laws Taxes (Provincially)
Banking (Incorporation) Public land transaction in that province
Taxation Basic local works
Trade and commerce
Copy Rights

Fundamental Rights:
 Freedom of expression
 Freedom of religion
 Freedom of peaceful assembly
 Freedom of association

Litigation: Lawsuit

Plaintiff: In a lawsuit, the party who is claiming the lawsuit

Defendant: Party defending the action against whom the claim is made

Appellant: The party who usually appeal against the decision of the lower court
Respondent: The party seeking to uphold the decision of a lower court
Privity of Contract: Legal relationship of parties to the contract

Creditor: The party to whom an amount is owed

Debtor: The party who owes the amount of money

Indemnification: A promise to directly compensate or reimburse another party for the loss which has
occurred.
It is similar to a guarantee; the essential difference is that the indemnity rights can be exercised
directly
Chapter 2 Business Structures

Sole Proprietorship:

 Sole owner whoever established this business.

 Can use personal account for this business, do not need separate account.
 You are liable for all components and receive all income from this business.
 Done after the owner dies.

Partnership:

 A business owned by one or more partners.

 Percentage of ownership equals percentage of income and percentage of liability.
 If one dies the partnership must be reorganized because the old partnership is not valid.
 No tax breaks or advantages it is the same as sole proprietorship.
 Disadvantage if there are 3 members then 2 agree on most things the one partner will not make any
decisions since he is out voted every time. LLP limited liability partnership.

Corporation:

 It is an independent organization in itself. It will always exist;

 If the founder dies the corporation is not affected.
 Its assets and liabilities are the corporations. It has its own bank accounts and revenue. Tax breaks for
certain revenues.
 Disadvantage is it is very complex. You need a lawyer, accountant and check accountant. It can be
registered at either the provincial level or federal level.

Need a personal guarantor who gives consent to apply for credits or loans thus loosing his/her limited liability statues
Important Cases:
 1897 Salomon VS Salomon CO.LTD
 1972 Fern Brand Waxes LTD Vs Pearl- Director used both the company as instruments to divert funds for
his own purposes- Thus the court lifted the corporate veil and give decision against the defendant

Structure of the corporation the corporation has shareholder. They are the owners of the corporation. They will
appoint the board of directors.
 The BOD can be mostly shareholders or they can be someone from outside the corporation with expertise in
the corporations business.
 There will be a chairman of the BOD which will be responsible of the corporation and making all final
decisions based on the shareholders objective
 The Officers of the corporation is assigned their own section of the corporation. Then there are the
employees of the corporation based on seniority.
 Every corporation has a shareholders agreement that dictates selling buying of shares and all rules for
shareholders.

Basic Tax Consideration:

 Dividend income from a corporation can result in less tax payable then sole or partnership
 Timing advantage cause because the taxes paid by the shareholder will only have to pay when the
dividends are paid
Thus the main point is Incorporation may provide both limited liability and tax advantages

The partnership Agreement

 Describes the management role of each partners
 Amount of profit and losses
 What will happens if any partner is expelled
 Contribution and working capital

Limiting Partnership Liability

 Partners are only liable for the amount of money they invested and will only gain profit according to their
investment

Limited liability Partnerships

 Describes how partners are not liable for the other partners and they are only liable for their own

Incorporation
 Can be incorporated through statutes of the federal or provincial legislatures
 Done accordance to Canada Business Corporation acts or Corporation act of Ontario
 Can be done either provincially or federal depending what kind of jurisdiction is need to run the business.

Private And Public Corporation:

Private Public
 Shares are restricted to be distributed among Shares are distributed among public according to stock
public agency requirements
 Can be distributed among board of directors
upon approval
 Number of shareholders cannot exceed 50

Shareholders Agreement :
 Obligations of the shareholders
 Who is entitled to nominate members of the board of directors
 Restrictions to communicate trade secrets of the company

The directors standard of care : (Businees corporation act of Ontario)

 Act honestly and in good faith with the view of the best of the corporation
 Exercise the care, the skills that a person would usually exercise to take care of the company in any
circumstances

CASE STUDY:

Points of case:
 Smith is 25% shareholder and director of SKYLIFT inc.
 Smith became involved in a similar company where he has 50% share (SKYHOOKS LTD)
 SKYLIFT showed interest in Buyin SKYHOOKS
Outcome:
 As a director Smith had the following directors standard of care to follow:
 o He is the trustee this he should act honest and always think about the good will of the company
o Exercise his skills experience and knowledge to take of the company he is the director of
 Thus his first mistake was to participate and acquire 50% of the share of skyhooks
 Second mistake was he didn’t mention his involvement with skyhooks to the board
 He was only looking for his own interest and should be liable for all the damages which skylift went through
Chapter 3 Global Considerations

Political Risks:
 Change in the government therefore change in labour rates
 Change in policies etc

Foreign Legal Systems

 Canadian system based on the British common wealth where as some other countries uses civil law
 The British law system always seeks compensation for the hurt party due to any mistake from the company
that inflicted that hurt
 Civil law seeks to correct the mistake in order to maintain the original contract

Licensing Requirements:
Cannot conduct business without proper licenses, if you are from a different country you may not be able to apply for
these licenses therefore one would need to partner with a citizen in order to apply for these licenses.
 Usually it takes a long time due to inexperienced procedure or lack of knowledge which happens in
underdeveloped countries where there are not used to foreign investors

Financial Risks:
 Currency exchange rate can fluctuate hindering profits
 Borrowing money from foreign nations. Loan’s interest rate can change considerably depending on the
foreign countries stability.

Contract Forms:
FIDIC- international Federation of Consulting Engineers
 They set the standards for forms.
 There are set contracts such as the construction contract which you fill out and alter based on your
requirements then send to your lawyer for finalizations

Global Dispute Resolution: The New York Convection :

If something bad happens one does not always need to go to court as this is long and expensive.

Dispute Resolution: To avoid the uncertainties and risks of exposure to the courts of a foreign jurisdiction

Arbitration -is the next alternative. It can say in the contract that the arbitrators say in the matter is final.

Arbitration : a form of alternative dispute resolution (ADR), is a legal technique for the resolution
of disputes outside the courts, where the parties to a dispute refer it to one or more persons (the
"arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a
settlement technique in which a third party reviews the case and imposes a decision that is legally binding
for both sides

 It provides a speedier, more efficient and less costly means than the courts for resolving
disputes
But on major international engineering and construction projects arbitration alone has not been sufficient to
satisfy the concerns of disappointed disputants. Alternative dispute resolution is then need (ADR)

Mediation- The two parties can try to resolve:.

 It basically means to resolve a dispute through negotiations through
o Common interest
o Compromise
Dispute resolution steps:
Convection:
1st step is mediation
2nd is arbitration
3rd is bring the matter to court.

Cases can take 15 years to resolve. So Million dollar cases can cost the parties more then the actual amount they
are fighting for. Thus the need for mediation and settling is required in difficult legal battles.

Dispute Resolution Board (DRB)

Board appointed by the two parties in order to resolve the matter before going to court. It is comprised of more then
one person. Should be 1 neutral person from each party and an expert in that particular matter, thus 3 people are in it
so there can be a decision ie 2 v 1.
Alternative Dispute Resolution (ADR) – anything other then taking a case to court.

Project Neutral and the Expert:

Must be neutral in the matter debated and be an expert in the subject in order to make a proper analysis on the
matter. They must also be updated on the project process so they know what is happening.

Common Law Civil Law

 Great emphasis on the importance of
consideration
 Compensation is normally the remedy for
breach of contract
 In case of litigation lawers are in charge
 Civil law system doesnot
 Compensation is not the first option
 Judge or arbitrators are in charge
Chapter 4 Tort Liability
May 17, 2011

Tort Liability
 Wrong doing or negligence when providing a professional service or product independent of contract,
example a design
 May arise from:
o Auto accidents
o Transport of hazardous material
o Negligent performance of professionals
 Contract doesn’t matter for tort liability to exist

When something bad happens in resulting in injuring someone then that someone is accountable for this whether it
be the wholesaler, constructor or designer.
No contract is required when having tort liability. Example drinking a pop results in some health damage, you don’t
have a contract with anyone yet someone is responsible for the damage to you.

Fundamental Purpose
Two reasons
o To punish the person the person who made the mistake is not the main purpose of tort
o To compensate the injured party is the main purpose ( Engineers should obtain appropriate professional
liability insurance coverage so that if any mistakes they can compensate the tort victims)
o The British common wealth looks only to compensate the injured party whether it punishes the mistaken
party does not matter.

Principles of Tort Liability (important)

3 main principles:
1. A party (defendant) owes the other party (plaintiff) a duty of care
2. Defendant breached the duty of care
3. The mistaken party has injured/caused damages in any way to the plaintiff
If any of these three essential aspects of tort action is not present the plaintiff will not succeed

The Engineer’s Standard of Care:

Professional engineers are held at a very high standard and one should know all knowledge/skills/expertise before
decided to provide services as one.
o The Standard which the court applies to determine whether the engineers conduct was negligent
o The standard applied is based on the premise that engineers have the duty to use the reasonable care and
skill of engineers of ordinary competence which they would usually undertake
o For lack of liable skills, the engineer can be liable for the loss incurred
Case: 1974 Dominion Chain CO.LTD VS Eastern Construction CO.LTD

Development of Tort Law:

Donoghue VS Stevenson:
 Ginger Beer contained decomposed snail caused plaintiff to get sick
  Court determined the manufacturer had the legal duty to provide products with reasonable care so that the
product didn’t have any flaws which could create problems to the consumer
 (NO contract) but still the manufacturer was responsible

Hedley Byrne Case----Which is always referenced

 Plaintiff (Advertising agent) who asked their bankers to look into the financial situation of a company which
the plaintiff wanted to buy. The banker was suppose to provide them with a report
 The bank negligently provided information about the financial state about the company “but mentioned
without any responsibility” which the plaintiff was suppose to buy.
 The plaintiff went ahead to purchase that company and went into a loss
 The court held the bank to be liable

o Expanded the scope of damages that may be recovered in a tort action.

o It also focused attention on services performed by professionals who possessed special case

Strict Liability:
Concept of fault is sometimes ignored in the case of strict liability
The liability of a company or a corporation. Example employer must have worker compensation for its employees if
they are injured in the workplace. The employer has done nothing wrong but they are still liable for this. Basically
companies now days are always liable for the employee’s health hazard related to their work.

In case of product liability, though the manufactures are sometimes not negligent in manufacturing their product but
still they are strictly liable for any damages that results from the use of their product.

Vicarious Liability:

Liability of an employer for their employees. The employee may have made the mistake but the employer is the one
held liable. Usually the employer has an insurance policy to protect them. Case: employee of an insurance company
failed to put the proper insurance package for a client and missed a specific condition. That condition happened and
since it was not in the client’s package they had to pay for it themselves but then sued the insurance company and
won.
This is basically because the company is usually in a better financial state then the employee. Thus they can easily
compensate the tort victims.
But it doesn’t mean it will always be the case. Depends on judge to judge

Concurrent Tortfeasors
-Legal term given one or more people that are being held liable in a tort case.

*Architect wants a geographical report but the engineer said they could not afford it in the budget, so the architect
said just look at the foundations of the surrounding buildings to estimate the soil content and such. This is guess work
and both the architect and engineer are held liable. Engineers responsible for ethics and should be responsible no
matter what.
- Cut test pits for cheap geographical data
Case: Corporation of District Survey V Carrol Hatch

Product Liabilities
When someone buys a product from a manufacturer there is no contract involved but if the product causes harm due
to negligence from the manufacturer. Then the manufacturer is liable for it.
Case: Donoghue VS Stevenson:

Standard of Care and Duty to Warn

Warning signs must be easy to read and obvious covering all stupidity.

Case: George Ho Lem V barotto Sports

Hunter Case automated magazine reloader burns.

Case: Lambert V Lastoplex Chemicals

Newlywed purchase paint for their walls, this paint had flammable vapours and in their confined basement a fire
started and their house burned down. The can had every danger flammable sign possible but the court found in
favour of the couple. They did this because all of that paint’s competitors had much more warnings overall.

Economic Loss :
Case: Macmillan VS Foundation CO
A construction company accidentally cuts power to an office building by cutting a power line. The construction
company is responsible for repair cost of this power line but may also be held liable for any down time of the building
they cut power too. However the law prevents the office building from making money off of the construction
company’s mistake. So they can cover the economic losses of the office but not the possible lost profits in the
downtime. (Case in the book) Can they ask for salaries of the employees for the down time? Yes this makes sense
since they still have to pay the employees even though they did no work. However other issues arise because are the
employers producing the entire time they are there so how can you characterize the amount of time they were
working for the employer. All this must be mitigated by the court as to not screw over the (in this case) the
construction company.
The court dismissed the case as the economic loss was not properly accounted for
Case: Rivtow Marine LTD VS Washington Iron
water way closed due to a ship damaging the bridge in the waterway. Other ships sue for forcing a detour. (case in
book read more)
o Usually when there is no damage to property or injury compensation asked for economic loss is very limited
o This e

Other Relevant Torts:

Defamation: libel or slander

Verbal defamation is called slander
Written is libel.
Saying something to hurt the reputation of someone or company. If what you say is true then there is no problem but
if you have no proof you are held liable.

Occupier’s Liability
Someone renting a place they are liable for anything that happens in that place.
Ex warehouse.

Nuisance Liability
Someone causes damage to another person’s property. Example drainage from company contaminates water wells.
Father in law accidentally salts neighbours lawn.

Sample Case Studies

65 to 70
Chapter 5: Limitation Period

o Tort action and action of breach must always be commenced in a specified period. If not it will be statute
barred.
o Statutory limitation period can be changed by legislative amendments time to time

Discoverability:
o Tort actions and actions for breach of contract must be commenced right after the “cause of action arose”. In
other words when the damage has been first discovered by the plaintiff.
o This discoverability concept defines when a legal proceeding can be formally commenced
o The day on which the person with the claim first knew:
 That the injury, loss or damage has occurred

The limitation act of Ontario:

o 2 years at first
o There is ultimatum of 15 years
o Even if the damage is not discovered in the first 2 years it can go to the ultimatum period

Chapter 6: Proof
Proof:
Which depends on:
o Proven on The balance of probabilities
o Proven beyond a reasonable doubt

Engineers: Can only express their opinions on litigation when they know the case inside out and have
lots of experience in that field.
Must take his/her duty seriously and should provide proper testimony not getting engaged with any of
the parties

Chapter 7: Contracts

Contracts to be enforceable:
o An offer made and accepted
o Mutual intent to enter the contract
o Consideration
 o Capacity of contract
o Lawful purpose
Law:
o Enforce the provision of a valid contract
o Will not impose more favourable terms then which has been already decided between the two
parties (Example: if a bad business deal has been negotiated, the courts will not impose more
favourable terms)

Chapter 8: Offer and acceptance

Offer:
o Offeror makes offer to offeree.
o Verbal
o Written
Written should be the approach taken as it is more safer to do so.
o Until a offer is accepted it can be withdrawn unless it is an irrevocable offer
o The offer must be accepted in a limited time period
o Acceptance of the offer should be clearly communicated

Irrevocable Offer:

An offeree might want to ensure that the offer won’t be withdrawn till the offeree accepts it. Usually happens during
tender process. There is usually a note “Contract Consideration” and the contract must be sent under seal.

Option Contract:

o Another means of keeping an offer open for a certain period of time with a nominal amount of payment or
something of a value-must be made at the time of entering into option contract so that the contact is
enforceable
o The right to accept this offer is open till the offeree has exercised the option (Example: Used frequently in
the mining business)
o If the specific period of time has passed which has been mentioned in the contract the contract gets expired
o EXAMPLE: Mining business, Land development

Manner of Communication:

o Accepting an offer:
o Offer is officially accepted the time of the contract has been posted
o In case of telegraph. The offer is accepted as soon as the telegraph operator receives the
acceptance letter.
o Otherwise with any other means the offer is only accepted when the offeror receives physically
o Revoking an offer:
o No matter what means of communication, an offer is only revoked when the offeree get the notice
of revocation
o Complication may arise there the offeror should do this process promptly
 o Governing law The place where an offer is accepted then that is what laws govern the offer unless it
clearly states the laws of say Ontario will govern the offer.

o The Battle of the form getting a contract but then scratching out certain parts and reforming others this is
called a counter offer. Now the offering party becomes the offered party. Usually happens during equipment
sales
CASE STUDY: GO THROUGH:
Chapter 9 Intent:

Letter of Intent is not a contract so do not act on this on good faith as the other party can bail at any moment so do
not start working off of this as it will not hold up in court.
o It is only used to express interest in proceeding with particular transaction
o It is not an agreement
o Essential terms of the contract are usually missing in the letter of intent
o Those terms could only be agreed on by further negotiations between parties
o The letter of intent may act as an agreement if all details are in it

Chapter 10 Consideration

Consideration: (Promise)
o Essential part of a enforceable contract governed by common law principles
o It is the
o Motive
o Price
o Impelling influence that induces a contracting party to enter into a contract
o Example: A promise made by an engineer to design something in return of fees
o SEALS are used which usually mean that the promisor is bound to keep their promises
Gratuitous Promise:
A promise without consideration which don’t legally bind contract

Equitable Estoppel
o Where the court intervenes to protect the rights of a company, ex Construction Company (look up might be
wrong)
o A court will only exercise equitable estoppel to avoid an obviously inequitable result
o The equitable estoppel theory is usually used by the court to enforce a party not to use its contractual rights
o Courts are usually very strict with situation which seems to be inequitable
Thus equitable estoppel is a concept that can be applied to prevent a party to a contract from enforcing its strict
contractual terms in circumstances where doing so would produce an unfair and inequitable result.

Chapter 11 Capacity
Minors:
o In order to enter into a contract all parties must have the necessary capacity to get into the binding
o For example a contract is enforceable by a minor but not enforceable by the other party.
 o The age of majority in Ontario, Manitoba, Saskatchewan, Alberta and Prince Edward Island is 18
o Other places it 19

Mental Incompetence:
o In case of intoxicant and mentally incompetent person a contract is not enforceable
o The other party should always be aware of the situation while going into a binding.

Corporations:
o Going into a contract with a corporation should be carefully handled
o It should be always checked whether the corporation is within its power to get into a contract

Chapter 12 Legality

Contrary to Statue Law:

A contract is not enforceable if by any means it is unlawful.

Examples:
 A contract becomes void in case in situations where property is transferred between related parties
and the transferor becomes bankrupt within one year of the transfer
 A company also cannot transfer any of it properties to a preffered creditor three months before it
declares bankruptcy according to the Bankruptcy and Insolvency Act
 If a particular job need licensing then the party doing that job need the licence before going into a
contract to do that job? Without licence the contract becomes void.
 A contract between two parties which tries to destroy competition

Contrary to Common Law:

A contract that is against public policy may be illegal or void according to the common law
 Restraint of trades—but if the party can prove that the contract doesn’t contain anything which is
against public interest then the court can consider
 Example: A non-competition agreement must persuade the court that the terms are reasonable
between parties.

Chapter 13 Statute of Frauds:

Various types of contracts are referred to in the statute of frauds:
 Contracts relating to interest in land
 Guarantees of indebtedness
These kind of contracts should always be in writing

Derivation of Statute:

The statue was derived to prevent property interests being lost through fraudulent testimony about verbal
agreements to convey property interests

Unenforceable contracts not void:

Although a verbal contract may be unenforceable because of the statute of frauds, but it won’t be treated as
void; the court will recognize its existence for certain purpose

Chapter 14 Misrepresentation/Duress/And Undue Influence:

Misrepresentation:
 Misled in any way before entering into a contract. Misinterpretation of information etc
 Two types:
o Innocent misrepresentation
 Is remedied by rescission of the contract. The deceived party may not accept the
contract within a certain period of time and may also claim compensation for any
kind of damages
o Fraudulent Misrepresentation:
 Cancel the contract. Ask for compensation for damages and also can sue.
Duress:
 Party going into a contract by means of intimidation, threat or actual violence. This kind of situation
where the contract has been made might be voidable.
Undue Influence:

 Similar to duress but arises in less drastic circumstances

 In occurs when one party to a contract dominates the free will of the other party to such an extent
that it leads to an unfair agreement

Chapter 15 Mistake:

Rectification:

It is usual when a contract is written there are some discrepancy with what which has been decided. If a
common mistake occurs, one of the parties to the agreement can apply to the court for an order of
rectification

Unilateral Mistakes:

Where one party does the mistake. It is really common in the engineering work especially during tendors.
For example a company submits a bid for a tender but miscalculated which is why his bid was much lower
than other.
Imporant cases:
 Belle river case
Important note: Offeree cannot accept and offer which he knows has been made by mistake which affects a
fundamental term of a contract.
 Chapter 16 Tendering issues Contract A:
 Came from Ron engineering case
o Two type of contracts:
 Contract A-Deals with the tendering phase
 It forms when the owners offer is accepted upon the submission of the bid.
Thus if 2 bids are submitted. 2 Contract A are formed
 Give advantageous opportunities to negotiate with the owner prior to the
contract award
 Owner should be always carefull while writing the clauses in the contract.
He should keep options for some flexibility
 All bidders should be treated fairly otherwise it will be a breach of contract
A
 Contract B- Construction phase, contract that addresses the substances of the
work or service to be performed
 Forms in selection of the winning bid
o Owner’s Option to Reject all bids and start again:
 If none of the bids are in owners budget, the owner just can’t talk to any of the
bidders to ask them to reduce the price because then it would be a breach of
contract A. So what the owner can do is not reject all the bids and start a new
bidding process
o Potential Liabilites For engineering on tendering matter:
 Engineers are sometimes involved in the selection of successful bidders may incur
significant liability if they are negligent to do so.
o Bidshopping:
 Unethical where price negotiations takes place after the close of tenders. Where
such negotiations are not expressly provided for in the tender documents, it is
ofcourse inconsistent with contract A where it says all bidder should treated fairly
and equally

Chapter 17: Contract Interpretation:

Sometimes there are disputes with part of the contract. Such disputes can refer to the court. The parties to
the contract will be bound by the court’s determination of the most reasonable interpretation. To approach
can be taken in case of interpretation
 Liberal approach
o Takes into account the intent of the parties and in the extreme may lead to too much
speculation on that intent
 Strict Approach
o Focuses on the precise words in the agreement, on the extreme relies on the dictionary
meanings.
 But in the end it will be courts decision as to what constitutes the most reasonable interpretation in
the circumstances
 Thus it is really important to clear and concise on the wording while making a contract.
  In interpreting the contract, the court may also listen to the witnesses. The witnesses may testify
and discuss the subject matter.
Rule of Contra Proferentem:

Underscores the importance of clear and unambiguous language in the drafting of contracts. If the contract
has any kind of unmeaningful language it will construed or interpreted against the party that drafted the
provision

Parol Evidence Rule:

A contract should symbolize all the terms agreed by both parties. Problems arises when some conditions
are agreed verbally and are not in the contract. The verbal conditions is not a part of the contract and
cannot be enforced if a dispute occurs.

The contract law that precludes evidence of the omitted condition is call the parol evidence rule.
 Only used in exceptional circumstances in which the court wont apply this rule.
 Example Pym VS cambell. Where the court took a condition into consideration even though the
condition was not written in the contract.
Implied Terms:

Sometime there are conditions which are not written in the contract but court will imply those conditions as
that is usual.

Chapter 18: Discharge of Contracts:

 The parties can always agree to cancel or terminate a contract on mutual agreeable terms and
conditions
 It should be always mentioned in the contract that all parties may terminate the contract upon the
occurrence of certain events. Usually happens in construction business. When a contractor ususlay
fails to complete the work properly.