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Chapter 1 - Knowledge of Law as a Business Asset

1. Which of the following best defines business law?

a. legal responsibility for the occurrence of an event causing loss
b. rules governing commercial relationships and the enforcement of rights
c. rules governing procedures involved when one person sues another
d. rules providing members of a society with established rights

2. Kamal is a computer technician who is about to enter into a one-year

contract to provide IT services to a real estate agency. From Kamal’s
perspective, what is the most important function of this contract?
a. to establish penalties for non-compliance
b. to deal fairly with unexpected events
c. to resolve conflicts
d. to plan for the future and enforce expectations

3. Which of the following is NOT an objective of business law?

a. protection of business ideas and tangible property
b. ensuring losses are borne by those who cause them
c. imposition of fines on those who breach contracts
d. facilitating planning by ensuring compliance with commitments

4. A small group of entrepreneurs undertaking a business venture have agreed

on the roles each will assume in the business, but they must now determine the
form of business structure for the enterprise. What does the law facilitate by
offering entrepreneurs different business structure options?
a. choice of degree of exposure to liability for business risks
b. rules that make written agreements between parties binding
c. opportunities to maximize the protections that the law extends
d. legal certainty for activities conducted in the commercial arena

5. I’mNottaSoSmart Inc. overlooked the proper registration of its patent for a

unique relay component used in its new software before release for public
sale. A year later it discovered a competitor had used the component in its just-
released patented software. Which of the following best describes the
consequences to the competitor for its actions?
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a. Unprotected intellectual property can be used with impunity.

b. Theft of business property is a criminal offence.
c. Patent law infringements are punishable offences.
d. Losses due to theft of business property are recoverable.

6. Globe Investment Inc. has discovered that one of its employees has been
overcharging clients for the company’s services. The employee has been
terminated. What type of law determined the employee’s punishment?
a. employment law
b. business law
c. criminal law
d. contract law

7. Novel Swings Inc. has a contract to begin construction of a school’s swing

set on June 15th, and work is to be completed by August 1st. After weeks of
wet weather, the ground was unsuitable for work to begin in June and Novel
will not meet the completion deadline. Which of the following best describes
the legal statutes of the contractual relationship between Novel Swings and the
school?
a. The contract is void due to wet weather.
b. The contract requires renegotiation.
c. The contract is in good standing.
d. The contract has been breached.
8. How does Canadian law require businesses to protect their customer’s
private information?
a. Businesses are prohibited by federal legislation from collecting
information about their customers.
b. Federal legislation prohibits all disclosure of any information about
customers.
c. Businesses are required by provincial legislation to destroy all
information about customers.
d. Federal and provincial legislation govern the collection, use, and
disclosure of personal information.

9. What is the role of business ethics?

a. to provide a comprehensive plan for dealing with legal risk
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b. to establish principles and values for determining right and wrong in the
business world
c. to resolve disputes between conflicting parties
d. to impose legal responsibility for an event or loss that has occurred

10. What is the purpose of contract law?

a. to ensure litigation of parties committing contractual breach
b. to prescribe principles and values for use in society
c. to determine right and wrong in the business world
d. to enforce expectations and facilitate planning

11. What law regulates the use of tanning beds in Nova Scotia?
a. the Tanning Beds Act
b. the Consumer Protection Act
c. the Criminal Code of Canada
d. the Constitution of the World Health Organization

12. Champion Well Drilling Inc. is being sued for rupturing a gas line while
drilling a well on a customer’s property. How might Champion best avoid
similar risks in the future?
a. by developing and implementing a legal risk management plan
b. by limiting itself to zero-risk projects
c. by ensuring it has sufficient resources set aside to pay out future
judgments
d. by hiring a mediator to assist in resolving future legal disputes

13. Organic Veggies’4’U Inc. has entered into a one-year, extendable supplier
contract with EcoWise Fertilizers Ltd. for the delivery of 1.5-ton pallets of
worm castings fertilizer at a price of $2,000 per ton in March and June. What
type of role do contract law and its contributions to the establishment of this
business relationship have?
a. a facilitating role, providing definition, context, and certainty
b. an ethical role, facilitating better environmental practices
c. a litigation role, defining clear areas of liability for breach
d. a governing role, providing a comprehensive action plan
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14. How does a legal contract contribute to a business relationship?

a. It contributes uncertainty of liability in the relationship.
b. It defines the moral principles and values of the relationship.
c. It provides principles of paramount to govern the relationship.
d. It gives structure, predictability, and security to the relationship.

15. In what way is SPAM different from marketing?

a. SPAM is solicited by the recipient.
b. SPAM is electronic messaging that is unsolicited by the recipient.
c. SPAM is customized to the recipient for maximum effectiveness.
d. SPAM is expensive because it is directed to a large number of recipients.

16. What legal consequence might a business face were it to advertise an untrue
statement of fact about its competitor?
a. mandatory arbitration
b. a lawsuit for defamation
c. a lawsuit for passing off
d. prosecution under the Criminal Code

17. Which of the following best describes how law protects members of
society?
a. setting rules with penalties and making those who break the law
accountable
b. establishing ethical rules and minimizing risks before they materialize
c. constraining business activity and regulating commercial relationships
d. minimizing unknown contingencies to avoid irreconcilable disputes
between businesses

18. Jim has retained a lawyer to file a lawsuit claiming economic loss due to
theft of business revenues by his partner. What form of dispute resolution has
Jim undertaken?
a. arbitration
b. mediation
c. litigation
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d. reconciliation

19. Groot
Industries Inc. requires more space in order to expand its business.
Which of the following is a legal decision that Groot Industries Inc. must now
undertake?
a. who should be hired to construct a new building
b. whether its new premises will be regulated by health and fire regulations
c. whether to buy, build, or lease additional premises
d. whether to obtain insurance for its new premises

20. What are the commonly used alternative dispute resolution methods for
avoiding litigation?
a. intervention, negotiation, and reconciliation
b. intervention, arbitration, and mediation
c. negotiation, mediation, and adjudication
d. direct negotiation, mediation, and arbitration

21. What type of law is the vehicle for ensuring that those affected by a failed
business are treated fairly, reasonably, and in accordance with agreed rules?
a. bankruptcy law b. contract law c. criminal law d. corporate law

22. Olivia is suing a supplier for breach of contract. Assuming she is successful,
what remedy might she expect to receive from the court?
a. restitution
b. punitive damages based on the seriousness of the contract breach
c. aggravated damages
d. a sum of money that will put her in the position that she would have
been had the contract been fulfilled

23. Which of the following best describes the nature of the mediation process?
a. submission to litigation of the dispute before a judge in court
b. negotiated resolution with the assistance of a neutral person
c. submission to an arbitrator’s binding decision to resolve a dispute
d. renegotiation of the contract with the assistance of a judge

24. What is the main goal of the Canadian legal system?

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a. to facilitate commerce and mediation of disputes

b. to facilitate arbitration and free trade
c. to facilitate free trade and planning for the future
d. to facilitate planning, protection, dispute resolution, and justice

25. What are the standard forms of business structure available to entrepreneurs
to facilitate creation of a for-profit business enterprise?
a. sole owner, proprietor, and partnership
b. sole proprietor, partnership, and corporation
c. sole partnership, proprietor, and corporation
d. sole owner, proprietor, and corporation

26. Which of the following best exemplifies a protective element of Canadian

law?
a. It seeks to make those who break the law accountable.
b. It sets rules in order to encourage complexity.
c. It sets rules in order to encourage complacence.
d. It provides rules that prohibit making commitments.

27. Which of the following is an example of how business law guides business
conduct?
a. The law sets rules and penalties to encourage compliance.
b. The law sets specific codes of ethics to guide conduct.
c. The law seeks levels of compensation exceeding losses.
d. The law limits executive compensation to guide conduct.

28. In what way is mediation different from arbitration and litigation?

a. Mediation is free and does not require the assistance of a lawyer.
b. Mediation is time-consuming and tends to be ineffective.
c. Mediation results in an informal, non-binding decision.
d. Mediation involves the use of a neutral party to assist with resolution of
the dispute.

29. AlphaTextile Ltd. has developed a line of clothing and is considering using
the brand name Kalvin Clein in order to take advantage of the familiarity of its
target market with a well-known designer named Calvin Klein. What legal
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consequences might Alpha Textile Ltd. face if it proceeds with its plan?
a. being sued for negligence by its customers
b. criminal proceedings for breach of trademark legislation
c. being sued for damages by Calvin Klein
d. There are no legal consequences because it is not actually using the name
Calvin Klein.

30. Evergreen Solutions Inc. intends to sell its database of customer contact
information to a telemarketing firm. What infraction might Evergreen
Solutions Inc. be committing if it proceeds with this plan?
a. privacy breach
b. Criminal Code conflict
c. conflict of interest
d. financially profitable

31. Canadianbusiness law consists of a set of established bilingual rules

governing commercial relationships that exclude enforcement of rights.
FALSE

32. Canada offers an attractive commercial environment for entrepreneurs

because it has an established set of laws comprised of rules and principles
intended to guide conduct in business relationships and protect the property of
persons and business. TRUE

33. A
tanning salon that permits underage tanning may face prosecution under
provincial legislation. TRUE

34. Contractlaw refers to a collection of rules used to establish contracts as

binding agreements between contracting parties and to ensure their obligations
can be legally enforced. TRUE

35. Litigationis an expensive and lengthy process that involves one business
entity attempting to find a resolution for a conflict caused by the other party to
the contract by actively engaging in negotiations aided by a neutral party.
FALSE
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36. Litigationis usually the most cost-effective method for resolving legal
disputes. FALSE

37. The
creation of complexity in business relationships is one of the most
important contributions the law can make to the commercial arena. FALSE

38. One of the goals of Canadian law is to ensure that losses are paid for by the
parties responsible for creating them. TRUE

39. Abusiness that neglects to protect its intellectual property may have its
ideas taken with impunity by a competitor. TRUE

40. Inevery type of business dispute resolution, Canadian law requires that a
judge must decide the amount of the loss to prevent hard feelings between the
parties and allow the business relationship to be maintained. FALSE

41. A contract provides the legal backdrop to commercial relationships by

defining the rights and obligations of the parties, but it is the business
relationship itself that will determine whether, in a conflict, the parties will
insist upon strict enforcement of their legal rights. TRUE

42. Themediation process is only available in limited circumstances and is

usually more time-consuming and costly than litigation. FALSE

43. Partiesthat agree to submit disputes to a neutral party who will ultimately
make a binding decision to resolve the dispute are agreeing to participate in
the arbitration process. TRUE

44. Businesses that have been unable to resolve complex contractual disputes
may have to turn to litigation as the last resort to, among other things, establish
the liability of one business to another. TRUE

45. A
business that fails to explore different modes of carrying out business
may suffer unnecessary losses.TRUE

46. Liability between parties engaged in a contractual business relationship

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refers specifically to the legal responsibility of one party to the other for any
event or loss that may occur due to breach of the contract. TRUE

47. It
is a rule of law that a party who suffers a breach of contract is entitled to
be put in the position it would have been in had the contract been fulfilled.
TRUE

48. In
the litigation process, the party initiating a claim for breach of contract is
obligated to prove its case, and the judge is obligated to be as objective as
possible in determining whether the case of breach has been proven. TRUE

49. Asupplier who commits to a contract is free of any legal obligations for
direct and foreseeable financial consequences that the other party to the
contract may experience should the supplier breach the contract. FALSE

50. Alegal risk management plan involves a business strategy that may require
legal supervision to reduce the probability and severity of loss. TRUE

51. Briefly describe the main reasons one party to a contract might decide
to overlook a breach of contract by the other party.
ANSWER A party to a contract might decide to overlook a breach of the
contract if it is a minor breach and maintaining the business relationship is
important and desirable. A minor breach is more likely to be quickly resolved
directly between the parties, while litigation is a slow and expensive process
for resolving a dispute.

52. Describehow the law protects members of society, and provide two
examples of how a business or client might be protected by laws.
ANSWER The law protects members of society in two ways: (1) it sets
rules with penalties in
: order to encourage compliance, and (2) it seeks to make those who
break the law accountable for their misconduct.
The law also protects businesses by setting penalties and ensuring
accountability. For example, if one business misappropriates another
business’s legally protected commercial idea, the law can censure that
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conduct. As well, the law ensures that, for example, if a law firm gives
negligent advice to a client, that client can sue the firm for associated
losses.

53. Briefly
describe the steps that parties must go through to achieve the
consensus reflected in a contract. What role does a lawyer play in this
process?
ANSWER Usually one party has identified a need and will make a proposal to
another party for an
: exchange that will satisfy that need. If the other party sees benefit in
making the exchange, the parties will negotiate until they arrive at
mutually acceptable terms. Typically, each party will have a lawyer
whose role is to provide legal advice throughout the negotiation
process and, once consensus is reached, to then accurately document
the terms of the agreement in a contract.

54. Lawsuits come to court for either of two reasons: there is a dispute
about the facts that actually occurred or there is a dispute about the way
the law treats the parties. Describe the role and obligations of the judge,
including what details must be considered and what must be proven to
the court to allow it to reach a decision resolving the dispute.
ANSWER The role of the judge is to review the claim and consider the
contract and other
: evidence, as well as legal arguments presented by both sides to
determine what the agreement between the parties actually was and
what laws apply. The judge is obligated to then impartially apply the
law in an objective manner to determine whether the initiating party’s
claim has been proven, and, if so, what legal consequences would
provide a remedy to make up for the loss.

55. Briefly
describe how the law of contract facilitates commercial activity.
ANSWER The law of contract provides a way for parties to enter into binding
agreements,
: thereby creating a measure of security and certainty in their business
operations.
Contract law also allows business enterprises to plan for the future and
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to enforce their expectations.

56. Brieflydescribe the main reasons that some business disputes must be
resolved in court.
ANSWER The main reasons a court must decide some business disputes
involve instances where
: the parties are unwilling or unable to negotiate a settlement themselves,
or where there is no agreement between the parties to accept arbitration
of disputes or to refer disputes to mediation.

57. Why might an employer prefer to pay a severance package to an

employee rather than fire the employee outright?
ANSWER The time and money saved in avoiding a court battle may more than
offset the cost of
: the severance package. It may also be difficult to fire an employee
without clear evidence of misconduct or incompetence.
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Chapter 2 - The Canadian Legal System

1. Why is it important for businesses to monitor government policy?

a. Rules and regulations are periodically revised.
b. It is the machinery that regulates government.
c. It provides rulings that resolve existing disputes.
d. It can be overwhelming and very technical.

2. Which statement best reflects the high value Canadians place on the
political philosophy of liberalism?
a. Canada regulates privacy with laws restricting government access to
persons and property.
b. Canadians have elected more majority Liberal governments than NDP or
Conservative.
c. Public outcry forced the Green Party leader’s acceptance in federal
election debates.
d. Governments willingly and promptly comply with access to information
requests.

3. Why is constitutional law described as the ‘supreme law’ of Canada?

a. It protects individual freedom.
b. It contains laws that impact all legal disputes.
c. It cannot be overridden by the executive or legislative branch.
d. It places limits on the exercise of power by the branches of government.

4. What is the legal status of the office of prime minister in Canada?

a. The office of prime minister is an example of a constitutional
convention.
b. The office of prime minister does not really exist.
c. The office of prime minister is set out in the Constitution Act, 1867.
d. The office of prime minister is set out in the Canadian Charter of
Rights and Freedoms.

5. Whichlegislative body (or bodies) in Canada is (are) generally the most

involved with creating laws that regulate business activity?
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a. the judiciary b. provincial legislatures and municipalities

c. the House of Commons and Senate d. the Parliament of Canada

6. Which of the following is an example of a function typically performed by

cabinet?
a. enacting regulations
b. providing independent overview of commercial disputes
c. approval of statutes
d. regulating property rights

7. Why are provincial governments unable to pass criminal laws?

a. Criminal laws are part of the Constitution and cannot be modified by
the legislative branch.
b. The doctrine of paramountcy dictates that the federal government law
making power overrides provincially enacted laws.
c. Criminal laws can only be enacted jointly by the federal and provincial
legislative branches of government.
d. Criminal law falls under federal jurisdiction.

8. Which outcome is dictated by the doctrine of paramountcy in

circumstances where conflicting federal and provincial laws cannot be
reconciled?
a. The federal law prevails, except in Quebec.
b. The superior law prevails.
c. Concurrent provincial law prevails.
d. The provincial law prevails.
9. Which of the following is a key feature of the judicial branch of
government?
a. The judiciary is to be independent from the legislative and executive
branches of government.
b. The judiciary is composed of judges who are elected.
c. The judiciary has jurisdiction over criminal law, including the power to
define new crimes.
d. The judiciary executes government policy and reforms statutory law.
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10. Which of the following is a required element in the procedure for passing
federal legislation through Parliament?
a. a majority vote by Commons committee and approval by Senate
b. a quorum vote in the House of Commons and by the Senate
c. a majority vote of the members in the House of Commons and in the
Senate
d. an approval by the House of Commons and by the Senate committee

11. Which of the following is a feature of the superior courts?

a. The judges are appointed by provincial governments.
b. Their processes are designed to be simpler, quicker, and less expensive,
and parties often appear in this court without a lawyer.
c. They are available only after permission or “leave” to appeal is granted.
d.They have the jurisdiction to handle claims involving an unlimited
monetary amount and are the entry level for the more serious criminal
matters.

12. In which areas is the federal government given exclusive jurisdiction to

make law by the Canadian Constitution?
a. currency, trade, national defence
b. administration of justice, trade, national defence
c. interprovincial trade and commerce, highway regulation, licensing
d. criminal law, administration of justice, hospitals

13. Vape Industries Inc. plans to take legal action if the government attempts
to pass legislation restricting the advertising of water tobacco products. On
what basis might Vape Industries Inc. take legal action should such
legislation be enacted?
a.The legislation interferes with its equality rights contained in section 15
of the
Canadian Charter of Rights and Freedoms.
b.The legislation interferes with the fundamental freedom of expression
contained in section 2 (b) of the Canadian Charter of Rights and
Freedoms.
c.The legislation is beyond the jurisdiction of the legislative branch of
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government.
d.The sale of water tobacco products is an area of private law not public
law.

14. To which level of government would a business make an application for a

property zoning variance, and why?
a. municipal government; direct constitutional jurisdiction
b. municipal government; concurrent constitutional jurisdiction
c. municipal government; provincial constitutional delegation of authority
d. federal government; exclusive jurisdiction to regulate zoning

15. What is a distinguishing characteristic of a treaty?

a. A treaty is the sole law governing relations between nations.
b. A treaty is a set of coded laws to regulate relations.
c. A treaty governs relationships between Canada’s provinces.
d. A treaty can exist between nations governed by international law.

16. Which level of government should Nantucket Sleigh Rides, Inc. lobby for
regulated roadway access to sell horse- drawn sleigh rides to patrons of
downtown business establishments from December through February?
a. provincial government b. federal government c. municipal government
d. federal and provincial governments
17. The government has failed to enact new legislation requiring appropriate
warnings on water tobacco. Which statement best describes the legal
obligation of the Canadian government to enact such legislation?
a. The government has a constitutional obligation to enact legislation to
protect the health of Canadians.
b. A new law would help fulfill Canada’s international treaty obligations.
c. A new law cannot be enacted because it would interfere with freedom
of expression, which is protected under section 2 (b) of the Canadian
Charter of Rights and Freedoms.
d. The government has no legal right to control how businesses choose to
display a legal product, because such matters are private law, not public
law.
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18. The city of Riverside is considering enacting a bylaw to criminalize

solicitation for the purposes of prostitution. What legal challenge might the
city face if it proceeds with this course of action?
a.The law is unconstitutional as it interferes with the Charter right to
freedom from arbitrary detention.
b.The law is invalid as it interferes with a provincial power.
c.The law is unconstitutional because it interferes with the federal
government’s exclusive jurisdiction over criminal law.
d.The law is unconstitutional as it violates the right to equality.

19. Which statement best describes the executive branch of government?

a. The executive branch of government consists of the prime minister and
the premiers of the provinces and territories.
b.The executive branch of government provides rulings to resolve
existing legal conflicts.
c. The executive branch of government passes laws that impact business
operations.
d.The executive branch of government includes the formal executive and
the political executive.

20. Which statement best describes the common law system of private law?
a. It is used in all provinces, including Quebec.
b. It includes constitutional and administrative law.
c. It is based on the interpretation and application of statutes which must
be applied in all cases.
d. It bases its private law on judicial decisions that, if relevant and binding,
must be applied to the case at issue.

21. What is the judicial branch of government in Canada composed of?

a. the system of various levels of courts in Canada
b. the judiciary and the system of various levels of courts
c. a judiciary appointed by the governor general
d. the judiciary and federal and provincial prosecutors

22. How are the decisions of the Supreme Court of Canada best described?
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a. as binding on all other courts in all Canadian jurisdictions

b. as limited to constitutional matters
c. as binding only on the government
d. as appeals from the Federal Court of Canada

23. In what way does a civil law system differ from a common law system?
a.In a civil law system, provinces have jurisdiction to appoint judges to
superior courts.
b.Judges in a civil law system must apply a relevant provision of the Civil
Code, even if doing so would produce an unjust outcome.
c.Judges in a civil law system are not bound by how other judges have
interpreted the Civil Code.
d.In a civil law system, tort and contract laws are established by
precedent.

24. What are the basic levels of courts that make up the Canadian court
system?
a. trial, informal appeal, and final appeal courts
b. trial, intermediate appeal, and final court of appeal
c. informal trial, formal trial, and final appeal courts
d. pretrial, trial, and appeal courts

25. Which of the following functions is most likely to be carried out by an

administrative body?
a. hearing licensing and zoning applications
b. collection of revenue for government operation
c. enforcement of traffic laws
d. reviewing applications for leave to appeal

26. What is a possible legal justification for upholding a provincial law that
prohibits the display of tobacco products in retail outlets?
a.If the government can show that the law reduces the incidence of
smoking, the law may constitute a reasonable limit on freedom of
expression.
b.The provincial government has sole jurisdiction over business activity.
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c.The provincial governments have delegated jurisdiction.

d.The new tobacco law is constitutional because it protects health, and
health concerns always override business concerns.

27. Who determines whether legislation is permissible?

a. the Parliament of Canada
b. the judicial branch
c. the prime minister
d. the federal government

28. A province wants to challenge an appeal court’s decision regarding the

prevention of continued ground water contamination now posing a
significant health risk to people, wildlife, and plants living in the ecosystem
to the Supreme Court. Which of the following would immediately signify the
Supreme Court’s agreement to hear the challenge, and why it would consider
this appeal?
a. leave to appeal; significant or national concern
b. consent to appeal; provincial challenges
c. consent to appeal; jurisdiction
d. permission to appeal; national public concern

29. What is a distinguishing characteristic of the principle of precedent law?

a. A It is based on a Civil Code.
b. It applies only in Quebec courts.
c. Individual freedoms are valued.
d. Like cases should be treated alike.

30. Arecent decision of the Supreme Court of Canada established that the
equality provision contained in section 15(1) of the Charter of Rights and
Freedoms applies to unequal treatment on the basis of sexual orientation.
Which statement best describes the effect the decision will have on
provincial governments?
a.Provincial governments will not be bound because the Charter of Rights
and Freedoms is only binding on the federal government.
b.The decision applies only to cases outside of the province of Quebec.
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c.Provincial governments will be bound because the Charter of Rights

and Freedoms is binding on all levels of government.
d.The decision will be binding on provincial governments because they
are required to follow decisions of the Supreme Court of Canada under
the division of powers.
31. Judges are bound to apply relevant legislation enacted by the three levels
of government. Which of the following represents an exception to this rule?
a. laws that violate the Constitution do not have to be followed and may be
declared of no legal effect
b. common law always prevails over statutory law
c. the Supreme Court of Canada may ignore legislation, even if it has been
validly enacted
d. equity law always prevails over legislation

32. What classification of law would a provincial statute restricting the display
of tobacco products in retail outlets fall under?
a. private law b. public and domestic law
c. common law and private law d. procedural law

33. What attribute distinguishes substantive law from other forms of law?
a. It defines rights, duties, and liabilities.
b. It defines international legal status.
c. It defines the relationship between governments.
d. It defines procedures under the Charter. ANSWER: a

34. What is the defining characteristic of procedural law?

a. It is a set of laws defining individual rights, duties, and liabilities.
b. It regulates the relationship between persons and governments.
c. It governs procedure for the enforcement of rights, duties, and liabilities.
d. It governs procedure for the enforcement of the Civil Code. ANSWER: c

35. Which statement best describes the defining characteristics of public law?
a. It regulates relationships between governments and individuals.
b. It provides rules concerning rights and obligations of business.
c. It focuses on fairness according to strict rules of common law.
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d. It contains the rules of law in the Civil Code of Quebec. ANSWER: a

36. QuestElectrical Engineers Inc. contractually committed to provide

specialized services to a construction project with specified deadlines for
completion. Quest has to meet deadlines or face penalties. What type of law
governs the relationship and conduct of the parties to this contract?
a. common law b. corporate law
c. public law d. private law ANSWER: d

37. Which of the following is an example of the law of equity?

a. the “clean hands” principle
c. the “stare decisis” doctrine
b. the “decidendi” principle
d. the “judicial discretion” principle ANSWER: a

38. A hospital board of directors granted absolute authority to physicians to

arbitrarily withdraw life support from patients. The board’s authority to grant
such power was quickly challenged and overturned in the courts. What type
of law had to be applied to constrain the hospital board’s authority?
a. criminal law b. constitutional law
c administrative law d. equity law
39. Which of the following is an example of a federal administrative body that
plays a role in regulating activity?
a. the Securities Commission
b. the Board of Health
c. the Canadian Radio-television and Telecommunications
Commission (CRTC)
d. the Liquor Control Board

40. Which statement best describes the status of Aboriginal or Indigenous

rights within Canada?
a. They were created by treaties entered into after Europeans settled
across Canada.
b.They have survived British and French assertions of sovereignty and
continue to exist
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in a free-standing way today.

c. European settlement terminated the pre-Confederation interests of
Aboriginal peoples.
d.They were affirmed by the Constitution Act, 1867.

41. Whichstatement best characterizes Aboriginal rights where treaties have

not been negotiated?
a. They were ceded upon Confederation.
b. They continue to exist.
c. They have been reinstated by the federal government.
d. They are limited to fishing and hunting rights.
ANSWER: b

42. Which statement best describes the effect of section 35 of the Constitution
Act, 1982?
a. It confirms Indigenous peoples the right to self-government
b. It affirms existing aboriginal and treaty rights of the Indigenous
peoples of Canada
c. It confirms the surrender and capitulation of Indigenous rights to
sovereignty
d. It recognizes legislative powers of the federal government with
respect to Indigenous peoples
ANSWER: b

43. Which statement best describes the Indian Act?

a. It empowers band councils to pass bylaws governing the reserve
community in such areas as, for example, health, law and order, and
the residence of band members.
b. It confirms the right to hunt and fish on lands subject to aboriginal
title.
c. It has been struck down as unconstitutional.
d. It affirms existing treaty rights.
ANSWER: a

44. According to section 35 of the Constitution Act, 1867, which group is

 lOMoARcPSD|16545764

included in the term ‘Aboriginal peoples’?

a. Métis and Indian peoples b. members of First Nations’ bands
c. the d. all individuals of Indigenous heritage
Indian,
Inuit, and
Métis
ANSWER: c
 lOMoARcPSD|16545764

45. Whichof the following is NOT a source of law in Canada?

a. common law b. public opinion
c. Civil Code d. royal prerogative
ANSWER: b

46. The rights and authority of municipal governments are protected by the
Constitution Act. FALSE
47. The Constitution Act makes the provincial governments subordinate to the
federal government in cases of overlapping jurisdiction. TRUE
48. Canada’s federal Parliament is composed of the House of Commons and
the Senate. TRUE

49. Inferior
courts are presided over by judges appointed by the provincial
government. TRUE

50. Thenew Criminal Code of Newfoundland would be enforced by the courts

because it would not be contrary to the Canadian Constitution to do so.
FALSE

51. Public health and the environment are constitutionally undefined as areas
of concurrent jurisdiction shared between the federal and provincial
governments. FALSE
52. Section 1 of the Charter requires the government to justify why it is
infringing a right, as well as to demonstrate that, in doing so, it is restricting
the right in question in a reasonably measured, controlled, and appropriate
way. TRUE

53. Section
33 of the Charter permits the governments to override some of
our Charter rights, such as the freedom of expression. TRUE

54. Thejudges in Canada’s higher courts are appointed, and those in the lower
courts are elected. FALSE

55. There are no limits on the guarantees of rights and freedoms established
 lOMoARcPSD|16545764

by the Charter of Rights and Freedoms. FALSE

56. Federaland provincial legislatures are constitutionally provided with the

authority to appoint judges within specified judicial jurisdictions. TRUE

57. TheCharter is a powerful constitutional document because it provides

protection from improper or oppressive government conduct. TRUE

58. A billput before a legislative body represents a proposed piece of

legislation that a political party wants to make into law. TRUE

59. The law of equity consists of rules that focus on what is fair. TRUE

60. The
principle of precedent holds that all precedents are not of equal value,
meaning the higher the level of court that created the precedent, the less
weight it brings to bear on the common law system. FALSE

61. According to the doctrine of precedent, the Supreme Court of Canada—

the highest court in Canada—is entitled to decide a case in any way it sees
fit. TRUE

62. Private
law deals with the regulation of relationships between individuals
and government. FALSE

63. One of the defining features of the law of equity is that “anything goes, as
long as it’s fair.” FALSE

64. The
Canadian Radio-television and Telecommunications Commission
(CRTC) is an example of an administrative tribunal. TRUE

65. Eleventreaties between the federal government and Indigenous peoples

have been enacted since Canadian Confederation in 1867. FALSE

66. Briefly
describe the benefits to be derived by businesses being aware of
government policy and the status of regulations affecting their operations,
 lOMoARcPSD|16545764

as well as the consequences of being unaware of the same.

ANSWER Businesses need to actively monitor government policy and
regulations that affect how
: businesses are permitted to operate because either may be changed
periodically.
Awareness allows business to comply with laws and to attempt to
influence development of policies and regulations to favour and
further business interests. Being unaware of changes would result in
noncompliance with regulations, levy of fines, or even closure of a
business. Lack of awareness of government policy may also result in
a missed opportunity to lobby government to change law or to take
advantage of favourable change in law.

67. Brieflydescribe the role of administrative bodies in the Canadian legal

system and provide examples of particular bodies that impact businesses
and their functions.
ANSWER It is often difficult to summarize how businesses are subject to
administrative
: regulation because the nature and function of these bodies often vary.
In some instances, the body or individual carries out purely
administrative functions, as when the Canada Employment Insurance
Commission processes a claim for benefits; sometimes the body also
has judicial functions, such as when the Labour Relations Board
settles a dispute between an employer and employee; sometimes the
body exercises legislative functions, as when the Canadian Radio-
television and Telecommunications Commission (CRTC) passes
regulations concerning the amount of Canadian content on radio and
TV; and sometimes the body has some combination of these
functions.
Examples of particular bodies that might impact businesses include
municipal licensing tribunals, which issue business permits;
development zoning boards, which grant development permits; and
labour relations boards, which regulate relationships between
unionized workers and their employers.
 lOMoARcPSD|16545764

68. Briefly
describe the circumstances under which the guarantee of
Canadians’ rights and freedoms provided under the
Canadian Charter of Rights and Freedoms is permitted to be limited.
ANSWER Limitation of the guarantee of Canada’s Charter rights and
freedoms is allowed when
: the limitation is demonstrated to be justified under section 1 and by
the use of the notwithstanding clause contained in section 33 of the
Charter.

69. Briefly describe the system of courts in Canada.

ANSWER
: Each provincial and territorial system of courts has three basic levels:
trial, intermediate appeal, and final appeal. Trial courts are of two
types: inferior and
superior. An inferior court is presided over by a judge appointed by
the provincial government. These courts are organized by type of
case, such as criminal, family, and civil. The civil court, sometimes
called small claims court, handles disputes involving smaller amounts
of money. Superior courts, whose judges are appointed by the federal
government, have the jurisdiction to handle claims involving an
unlimited monetary amount. In addition, they are the entry level for
the more serious criminal matters.
Provincial courts of appeal hear appeals from these lower courts, and
from there cases go to the Supreme Court of Canada. In most
commercial cases, litigation tends to end in provincial courts of
appeal because appeal to the Supreme Court of Canada is available
only after permission or “leave” to appeal is granted by the Supreme
Court itself. Ordinarily, the Supreme Court of Canada will hear only
appeals that involve questions of national concern or significance.

70. Theapplication of precedent in a common law system is subject to a

number of rules. Outline the rules judges must apply when considering how
much weight to give a precedent case.
ANSWER The rules governing the application of precedent to a particular
case include the
 lOMoARcPSD|16545764

: following:
• A lower court must follow a relevant precedent created by a higher
court within the same jurisdiction.
• Not all precedents are of equal value—the higher the court that
created the precedent, the more valued the decision is.
• The Supreme Court of Canada—the highest court in Canada—is
entitled to decide a case in any way it sees fit.

71. Briefly
describe the origins of the common law system and the civil law
system as they exist in Canada and the comparable and contrasting
characteristics of each system of law.
ANSWER The Quebec civil law system originated from the French legal
system and was brought
: to Quebec by the French when they colonized the region. The
Canadian common law system is rooted in England’s legal system,
which was established in all provinces excluding Quebec by the
British when they conquered and colonized the Canadian regions of
North America.
The key principle of common law is that laws are interpreted and
applied in decisions of the court known as judgments. Judgments
become precedents, which form the body of case law that must be
referred to and applied by every judge hearing a similar matter when
making a legal determination in a similar dispute involving the same
laws.
The key principle of the civil law system is that the Quebec
legislature makes civil law, and those laws are codified or compiled in
one source known as the Civil Code. The judges’ task in the civil
code system is to find the specific provision in the code that applies to
the case at hand, and to apply it to resolve the dispute. Civil code
judges do not refer to past decisions at all.
Both systems are designed to deliver constant, consistent justice.

72. Briefly describe the history of treaty rights of Indigenous peoples in

Canada.
ANSWER Treaty rights derive from treaties dating back to the early 18th
 lOMoARcPSD|16545764

century as well as eleven

: numbered Treaties following Canadian Confederation in 1867. The
Nisga’a Treaty which came into force in 2000 is described as British
Columbia’s first modern treaty. As of 2016, there were 26 modern
day treaties, dealing with such matters as land title, self-government
rights, fishing and trapping, financial compensation, and other social
and economic benefits. Section 35 of the Canada Act, 1867 expressly
protects the treaty rights of Indigenous peoples.

Chapter 3 - Managing Legal Risks

1. What is the most critical step in the development of a legal risk management
program?
a. risk avoidance
b. preventing and reacting
c. identifying risk
d. assessing the organization’s functional areas
ANSWER: c

2. Risk management is best viewed as a task that should be carried out by

whom?
a. stakeholders within and outside the organization
 lOMoARcPSD|16545764

b. senior managers
c. a single person within the organization
d. managers and employees at every level of the organization
ANSWER: d

3. Which legal risk management process is most appropriate when the risk is
simply too great or when the undesirable result of the activity, product or
service is greater than the advantages?
a. prevention of loss b. reduction of risk
c. transfer of risk d. risk avoidance
ANSWER: d

4. What approach to managing interaction with the law and legal issues has the
following distinguishing characteristics: compliance with legal requirements
and anticipation of changes in the legal environment?
a. preventative b. anticipatory
c. precautionary d. reactionary
ANSWER: a

5. A food producer inadvertently labelled a batch of a food product incorrectly,

indicating it was sulphate-free when sulphate was a standard ingredient. A
number of incidents involving severe allergic reactions resulted in the
product’s removal from shelves and fines levied. What business function did
this legal risk rise from?
a. labelling b. production
c. marketing d. advertising
ANSWER: c

6. A cost-benefit analysis is conducted to assess the benefits of substituting a

key compound in a herbal health specialty product formula. The substitution
would involve the use of an untested inexpensive compound. What business
function should be analyzed for legal risk?
a. costing b. production
c. marketing d. analyzing
ANSWER: b
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7. A staff member employed in the purchasing department has been

experiencing a number of sexually harassing telephone calls from a sales
representative of a new supplier. The matter is referred to the legal risk
management department for analysis. Which function of the business must be
analyzed?
a. business relations b. human resources
c. employee relations d. supplier relations
ANSWER: b

8. A private investment firm that deals exclusively in derivative investment

products is concerned its market activities may become regulated. What
measures should the institution take to begin to address its concerns?
a. establish an adequately funded cash reserve
b. manage legal risk with a plan to prevent loss
c. appoint a junior trader to monitor and assess possibility of loss
d. prepare a risk aversion policy manual
ANSWER: b

9. A company operating a dating website for married individuals has identified

that technology-related risks, including the possibility of infiltration of its
customer database by hackers, could pose a hazard to the company and its
customers. What legal risk management step is the company engaged in?
a. evaluating potential risk; first step
b. reducing risk; second step
c. implementing, monitoring and revising; final step
d. devising a risk management plan; third step
ANSWER: a

10. A newly opened hotel has purchased a liability insurance policy in order to
address occupier’s liability due to slips and falls on the hotel premises. What
legal risk management step is the hotel engaged in?
a. risk avoidance b. risk reduction
c. risk transference d. risk retention
ANSWER: c
 lOMoARcPSD|16545764

11. Prior to completing the financing arrangements needed to fund the purchase
of an IT consulting firm, Albert Brinkman met several times with his bank
and his accountant to review the terms of the bank’s financing offer against
the business’s financial statements. What activity and corresponding step in
the legal risk management process is this?
a. avoiding the possibility of loss; first step
b. transferring legal risk; fourth step
c. evaluating severity of potential loss; third step
d. identifying risk in business decisions; first step
ANSWER: d

12. What set of methods is used when forming a risk management plan to limit
exposure to legal risks?
a. avoid, reduce, transfer, and absorb b. divert, decrease, and align risk
c. avert, tolerate, and lessen risk d. reduce, shift, diversify risk
ANSWER: a

13. Barrick Homecare Ltd. plans to introduce a health and safety system that will
require reporting of workplace accidents and which will promote a culture of
safety in their workplace. What type of risk management plan is Barrick
using?
a. risk avoidance b. risk reduction
c. risk transference d. risk retention
ANSWER: b

14. Benta recently purchased an office cleaning business with established long-
term contracts to provide cleaning services to a number of large office
building operators. Which of the following actions would immediately allow
Benta to be aware of the potential legal risks with the building operators?
a. consult with a law firm to devise a legal strategy
b. consult and arrange insurance to cover legal risks
c. schedule introductory meetings with customers
d. review contracts and customer payment history
ANSWER: d
 lOMoARcPSD|16545764

15. Why does one assess the severity of potential losses when creating a legal risk
management plan?
a. to establish insurance policies for employees exposed to greater risk
b. to delegate responsibility for devising the risk management plan
c. to prioritize identified risks and guide a given risk through the process
d. to identify mechanisms to adopt, avoid, or eliminate existing risks
ANSWER: c

16. In which of the following circumstances would an organization consider self-

insurance to be an option?
a. where it is possible to minimize risk by diversion to another
b. where the organization has determined that risk retention is appropriate
c. where it is possible to create contract terms that achieve its objectives
d. where the undesirable result of an activity is less than its advantages
ANSWER: b

17. Big City Taxi plans purchased an insurance policy for its fleet of vehicle that
includes a $1000 deductible for each claim made against the policy. Which
legal risk management strategies is Big City Taxi engaging?
a. transference and retention b. self-insurance
c. retention and avoidance d. reacting and preventing
ANSWER: a

18. Which of the following are usually classified as functional areas of a business?
a. production, human resources, finance b. finance, accounting, training
c. marketing, education systems, finance d. accounting, marketing, training
ANSWER: a

19. What is the defining feature of an ‘all-risks’ insurance policy?

a. no deductible
b. co-insurance
c. any risk not specifically excluded is covered
d. only risks related to property loss are covered
ANSWER: c
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20. Why is the inclusion of a limitation of liability clause in a commercial contract

considered to be an effective solution for business legal risk management?
a. It triggers avoidance of liability in standard form commercial contracts.
b. It creates equity because it imposes the same terms on every customer.
c. It limits financial responsibility for damages if there is a breach of contract.
d. It transfers risk from the business owners to the business and its customers.
ANSWER: c

21. Against which of the following possibilities should a high probability that a
particular loss-causing event will occur be weighed during the risk evaluation
process?
a. that the event will definitely occur and the loss is unavoidable
b. whether the likely occurrence may be offset by a low level of associated
loss
c. whether a low probability will be offset by a high level of associated loss
d. that the event will likely never occur and should be ignored
ANSWER: b

22. Amicus Investing Services requires clients to sign a contract that states that the
client understands that investing in the stock market is inherently risky and
that Amicus is not responsible in any way for any financial losses incurred by
the client as a result of following advice provided by Amicus. What legal risk
management strategy is Amicus utilizing?
a. risk elimination b. risk reduction
c. risk transference d. risk retention
ANSWER: c

23. Flow Pump Manufacturing wants to reduce costs and legal risk associated with
its product warranty program which provides purchasers of its pumps with a
two-year comprehensive warranty against pump failure. Which action should
the company take to begin development of its legal risk management plan?
a. review the loss history data for its pumps
b. review its marketing practices
c. ensure that its pumps are manufactured in accordance with current
 lOMoARcPSD|16545764

engineering practices
d. schedule an inspection of its facilities
ANSWER: a

24. Dontally Imports Inc. has an expiring contract that the overseas supplier is
anxious to renew. However, supplier shortages caused difficulties for
Dontally. Recently, it was able to secure a reliable, alternate source to meet
its obligations to its large merchant customers. Which of the following actions
should the legal risk department recommend regarding expiring contracts?
a. reduce the risk b. eliminate the risk
c. transfer the risk d. retain the risk
ANSWER: b

25. Pharmaco Ltd. plans to lobby the federal government to delay introducing new
guidelines for drug testing that will increase Pharmaco’s costs to develop new
products. Which risk management strategy is Pharmaco using?
a. risk retention b. risk transference
c. risk avoidance d. risk reduction
ANSWER: d

26. Which of the following risk management objectives would be strongly

supported by the use of a limitation of liability clause in a contract?
a. It reduces the liability for the risk and is legally enforceable.
b. It transfers the risk, is legally enforceable, and is acceptable to the other
party.
c. It eliminates the risk, limits the liability, and is acceptable the other party.
d. It retains a standard form of contractual of limited liability.
ANSWER: b

27. Which of the following correctly identifies elements that would be contained in
a legal risk management plan?
a. Transfer the risk and recommend contracts to address changes.
b. Identify the risk and hire insurance professionals to develop policies.
c. Identify the risk and monitor changes in legislation.
d. Track new manufacturing processes and implement new technology.
 lOMoARcPSD|16545764

ANSWER: c

28. Which of the following methods should be used to manage the risk of non-
payment by customers?
a. Perform credit checks on customers seeking credit.
b. Monitor the financial environment.
c. Charge outstanding accounts as expenses.
d. Reduce legal costs by finding more affordable legal counsel.
ANSWER: a

29. Which of the following would strongly support a business strategy for
managing risks uniquely associated with commitments made by employees to
suppliers or customers?
a. Identify a knowledgeable individual to be risk department manager.
b. Retain legal counsel to act as in-house counsel to the business.
c. Establish policies and financial limits for commitments to customers.
d. Deal with each risk and assign responsibility for each action.
ANSWER: c

30. Duble Mining Ltd. began gold mining operations in Brazil a year ago. Recent
changes in government policy cause the risk management department to
transfer some uninsured risk to satisfy their commercial lenders. Which of the
following actions by Duble Mining would immediately confirm to the
commercial lenders that their requirements have been met?
a. hiring private security to guard the mine
b. selling shares to the public to raise capital
c. arranging a political risk insurance policy
d. engaging in political lobbying efforts
ANSWER: c

31. After several interviews and calls to follow up on references, Fashion By

Design Inc. chooses a seasoned lawyer from a well-known commercial law
firm to provide legal services to the company. Why does the company’s
management expend substantial effort during the lawyer selection?
a. to reduce stress level put on in-house counsel
 lOMoARcPSD|16545764

b. to establish a productive, long-term relationship

c. to allow the risk to remain outside the business
d. to delegate risk management to outside source
ANSWER: b

32. Toyota Motor Corp. recalled 8.8 million cars after some of
its vehicles were
found to have unintended acceleration problems. Which goal of a legal risk
management plan were Toyota’s actions meant to achieve?
a. elimination of risk
b. facilitating self-insurance
c. evaluating risk
d. reduction of impact by implementation of plan
ANSWER: d

33. What position, if any, would a lawyer have on the risk management team?
a. professional risk management supervisor
b. part of the executive management team
c. excluded from team; acts as legal consultant
d. part of the team or a consultant to the team
ANSWER: d

34. Which of the following is the term “in-house lawyer” used to describe?
a. a lawyer working from home b. a lawyer specializing in home sales
c. a lawyer working inside the business d. a lawyer working in a law firm
ANSWER: c

35. Which statement best describes the role of lawyers in a successful risk
management plan?
a. Lawyers should always be retained to develop the risk management plan.
b. Lawyers may be part of the risk management team or may be consulted at
various states of the process.
c. Lawyers should only be consulted after legal problems develop.
d. Organizations should maintain internal legal departments to handle all
aspects of legal risk management.
ANSWER: b
 lOMoARcPSD|16545764

36. A food manufacturing company has determined that one of its most significant
risks is potential customer illness or death from listeriosis or other
contamination of its products. Which of the following is likely to be an
important aspect of this company’s risk management plan?
a. a limitation of liability clause in its contracts
b. self-insurance
c. risk reduction
d. Authority to contact legal counsel is restricted.
ANSWER: d

37. Rollie’s Electric Ltd. notes itslawyer’s account for annual corporate fees has
been paid twice. No refund was received; instead, a second account has been
sent, marked “paid in full.” Why are Rollie and his business associates now
contacting other lawyers?
a. to devise a plan to recover the overpayment
b. to determine what action would be best
c. because lawyers’ billing practices may vary
d. because circumstances warrant a change of lawyer
ANSWER: d

38. How does the management of a legal crisis differ from managing legal risks?
a. Crisis management should focus on transferring risk.
b. Crisis management requires a quick and positive reaction.
c. Crisis management requires an organization to assess its functional areas.
d. Crisis management should be handled by public relations experts.
ANSWER: b

39. A trucking company owns a fleet of gravel trucks, and rather than fully insure
the fleet, the company chooses an insurance policy that provides for a $5000
deductible in the event of a loss involving one of its vehicles. In choosing the
$5000 deductible, what form of risk management is the company using?
a. risk evaluation b. risk avoidance
c. risk retention d. risk acquisition
ANSWER: c
 lOMoARcPSD|16545764

40. Among its inventory of business decisions to be assessed for possible legal
implications, Bellamy Solar Panels Inc. must review its ownership of land
and the wording of its warehouse leases. Who has the ability to contribute the
most to this assessment?
a. senior managersb. a lawyer
c. in-house counsel d. a leasing agent
ANSWER: a

41. Prevention of loss is the primary goal of a risk management plan. TRUE

42. Having a legal risk management plan is unnecessary for a small business entity.
FALSE

43. Risk avoidance is appropriate when the undesirable result of the activity is
greater than the advantages. TRUE

44. Lawyers are increasingly willing to offer a variety of fee structures such as
billing at an hourly rate, standard fees for routine work, and annual retainers.
TRUE

45. Identifying legal risks may require an organization to analyze its operations
and transactions. TRUE

46. Risk avoidance is always the best policy. FALSE

47. Riskreduction involves introducing policies, practices, and procedures to

reduce the probability of an event happening. TRUE

48. Requiring employees to wear protective equipment is an example of a risk

avoidance strategy. FALSE

49. Insurance policies covering business risks will provide coverage for all losses
 lOMoARcPSD|16545764

as part of their standard terms, so there is no need for the legal risk
management team to review the policies. FALSE

50. A limitation of liability clause in a customer contract is an example of risk

transference. TRUE

51. Risk managers should have ample knowledge of the business, its activities,
and the industry it operates in. TRUE

52. Negotiating terms in a contract that limit the liability of the business is an
example of risk avoidance. FALSE

53. Employees are generally considered to be an unreliable source for identifying

risks in an organization’s functional areas. FALSE

54. A high probability that a particular event will occur can be offset by a
relatively low level of loss should the event actually occur. TRUE

55. Anders will be able to support his recommendation that the business
undertake development of a legal risk management plan by performing a
subjective evaluation involving an assessment of both the probability and the
severity of loss. TRUE

56. Rahim’s decision to increase the amount of the deductible on his business
liability insurance policy will result in the business having to absorb the loss
resulting from a future materialization of a legal risk. TRUE

57. There are two basic ways a business can manage its interaction with the law
and legal issues: identify issues and avoid. FALSE

58. Most lawyers can be

expected to have the expertise necessary to head up a
risk management department. FALSE

59. In-house legal counsel are highly trained commercial law specialists, capable
 lOMoARcPSD|16545764

of handling all of the business’s litigation matters. FALSE

60. Forecasting risk in international business transactions is often difficult. TRUE

61. Identify and describe the four steps in creating a legal risk management plan.
ANSWER: The four steps are:
1. Identifying the legal risks
2. Evaluating the potential loss associated with those risks
3. Devising a legal risk management plan to address those risks
4. Implementing the plan

62. Why is it important to evaluate both the probability and likely severity of loss
when evaluating risk? Provide an example to illustrate your answer.
ANSWER: The point in evaluating risks is to recognize that not all risks are
alike, nor should they be treated alike. A high probability that a
particular event will occur can be offset by a relatively low level of
loss should the event actually occur. Events that are unlikely to occur
also deserve close attention if the potential loss is high. Some events,
such as accidental release of harmful chemicals into the environment
may be very unlikely to occur but could result in severe
consequences and should therefore be given greater priority by an
organization when developing its risk management plan. Conversely,
some events, such as machinery breakdowns, may occur frequently
and have only minor consequences and therefore may be given less
priority.
63. What initial step would you suggest that a business should go through in
selecting a lawyer?
ANSWER: The first step is to develop a clear idea of the nature and the
volume of the legal advice that will be required, as well as the
allocated budget for legal services. This step also involves identifying
an appropriate lawyer or law firm with the appropriate expertise and
approach to the business’s needs. Those responsible for engaging
legal services will have to discuss a legal services agreement with
 lOMoARcPSD|16545764

potential legal services providers to ensure the right fit is achieved.

64. What are risk avoidance, risk reduction, risk retention, and risk transference?
When is each appropriate?
ANSWER: Risk avoidance, reduction, retention, and transference are the four
methods of limiting risk exposure prescribed in step three of
devising a risk management plan.

1. Risk avoidance involves the termination of an activity, and it is

considered appropriate in circumstances where the legal risks
associated with it are deemed to be too great.
2. Risk reduction is appropriate in circumstances where the
implementation of practices is possible to lower the likelihood and
severity of loss.
3. Risk retention is appropriate where circumstances justify absorbing
the legal risks that arise.
4. Risk transference is appropriate in circumstances where it is
possible to shift the risk to someone else (e.g., through an insurance
contract).

65. Acrisis can arise when a minor event or expected event spirals out of control
or an unexpected event occurs that an organization is not prepared to handle.
What are some general principles a car manufacturer might consider when
addressing a serious manufacturing defect affecting thousands of vehicles that
will now have to be recalled?
ANSWER:
There are many ways to manage a crisis, and a crisis management
plan will have to be tailored to address the specific situation and the
needs of the organization. However, some general lessons from past
events would suggest that some of the following strategies may form
part of an effective crisis management plan:
· React quickly and in a positive fashion;
· Use a prominent spokesperson to tell the company’s side of the
story and, as appropriate, publicly apologize for the event;
· Explain how the problem occurred and what the company is doing
to fix it; and
 lOMoARcPSD|16545764

· Use appropriate messages in different media.

66. The #MeToo movement has exposed a widespread prevalence of sexual

assault and harassment, especially in the workplace. What are some examples
of risk management strategies that a business might utilize to manage the risk
of sexual harassment in the workplace?
ANSWER: There are several approaches a business might consider when
devising a management plan to address sexual harassment in the
workplace and most of these will centre around risk reduction. For
example, a business might introduce policies, practices, and
procedures regarding behaviour in the workplace. Education and
training to reduce the probability of harassment occurring will likely
be a key feature of the legal risk management plan and training
should educate management and employees to recognize what
qualifies as harassment. Establishing appropriate procedures and
systems to report and fairly investigate harassment complaints would
also be features of a sexual harassment risk management plan.
67. Briefly describe how an organization’s legal risk management plan could
manage environmental risks associated with the business enterprise.
ANSWER:
Reduce: introduce practices to minimize impact of operations on the
environment. Avoid: decide not to expand operations into
environmentally sensitive areas.
Transfer: secure comprehensive general liability insurance that
includes coverage for damage to third parties; purchase an all risks
property insurance policy with environmental coverage.
 lOMoARcPSD|16545764

Retain: agree to a deductible on all insurance policies based on cost

of insurance, frequency of events, and ability to absorb losses.

When assessing the functional areas of a business (Human Resources,

Marketing, Accounting, Finance, Operations/production, IT systems),
an organization will begin to identify the legal risks for their risk
management plan. TRUE
The rights of Indigenous peoples under Canadian law are expressly
protected by section 35 of the constitution Act, 1982. TRUE
A component of assessing risk, in a risk management plan is to;(1)
assess the probability of the loss, and (2) assess the severity of the loss. TRUE
The legislative branch of the government passes laws that have an
impact on business operations. TRUE
The political executive consists of the Prime Minister (Chief Executive),
as well as cabinet ministers, civil servants, and the agencies,
commissions, and tribunals that perform governmental functions. The
Cabinet is comprised of all the ministers of the various government
departments, as well as the Prime Minister or Premier. TRUE
The types of law that are classified as public law are; contract law, tort
law, property law, and company law. FALSE
Section 91 of the Constitution Act 1867, assigns jurisdiction to the
provincial governments to make laws in the following areas: hospitals,
property and civil rights within the province, administration of justice,
local matters, incorporation of provincial companies, and power to
delegate law-making authority to municipal governments. FALSE
A reactive approach to legal issues requires an evaluation of legal risks
to minimize their impact. The emphasis is on compliance with existing
legal requirements and the anticipation of changes in the legal
environment. FALSE
PIPEDA is the acronym for the Personal Information Protection and
Electronic Documents Act, which is passed by the federal government.
It has a number of purposes, including the regulation of how the
private business collects, uses, and discards personal information
acquired from its customers. TRUE
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The Law protects business interests by setting penalties and ensuring

accountability. The Law ensures that losses are paid for by the parties
responsible for creating them. TRUE
Privacy breaches can occur as a result of human error/carelessness and
security system design flaws. TRUE
The function of Contract Law is to prevent disputes and to facilitate
business relationships that foster commercial activity by creating a
measure of security and certainty in business operations through
binding agreements. This, in turn, enables transactions that might
otherwise be unstructured and unpredictable. TRUE
Public Law:
Regulates our relationship with the government X
Governs the relationship between private citizens
Determines how rights and obligations are enforced
Determines what our rights and obligations are
Which governing bodies are the primary regulators of business
activities in Canada?
the federal and municipal governments
the Senates of the federal and provincial governments
the federal and provincial governments
the provincial and municipal governments X
A dispute has arisen between business entities with a lengthy
relationship, and each would suffer economically if the relationship
were to suddenly end. What procedure should first be employed to
attempt to maintain the relationship and quickly resolve the dispute?
Consult with accountants to determine whether the company can afford
litigation.
Refuse to compromise and look for alternate business relationships.
Attempt to negotiate a direct resolution with the goal of achieving a
formalized settlement agreement if necessary. X
Ask the company lawyer to commence litigation.
Which law regulates privacy standards in most Canadian provinces?
the Consumer Protection Act
the Personal Information Protection and Electronic Documents Act X
the Criminal Code of Canada
the Privacy and Marketing Act
When resolving contractual conflicts, what laws do the courts usually apply?
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the Contracts Act

the Sale of Goods Act
all decisions based on principles of fairness and equity
common law and occasionally statutory law X
What level of government possesses the required constitutional
jurisdiction to change laws that affect property?
Federal; paramount jurisdiction
Provincial; exclusive jurisdiction X
Municipal; concurrent jurisdiction
Provincial; delegated jurisdiction
Statute Law:
Is law established by the rules set out in decided case decisions
Can be passed by either the Parliament of Canada or by a Provincial
Legislature X
Follows the principle of stare decisis
Can also be referred to as Procedural Law
A mediator attempting to negotiate a resolution to a commercial
dispute has conceded that he is unable to move the dispute through
the mediation process. What would the mediator most likely say is the
main factor contributing to the failed mediation?
The unwillingness of one party to compromise and quickly resolve the
issues X
The parties' mutual failure to include an arbitration clause in their contract
The parties' inability to choose effective teams of negotiators
The mediator's lack of familiarity with the industry and the
businesses