TRU CLAW 122 MIDTERM NOTES-2 EXAM 2026 COMPLETE UPDATE
MODULE 1 (CHAPTER 1&2) : INTRODUCTION TO THE STUDY OF LAW
WHY STUDY LAW?
There are many factors affecting success and failure in business, and they are often a function of decision-making
abilities. For example, a business’ choice of location, choice of product and marketing efforts are all the result of
decisions and all can have a material impact on how successful the business will be.
Additionally, the decisions made in business not only can determine the fate of a business but can also have legal
consequences, both positive and negative. Examples of each are as follows:
● Negative consequences: for example, the decision for a manufacturing plant to dump pollutants into the
environment could result in liability for damage caused by these pollutants
● Positive consequences: for example, the decision to bind someone to their promise to buy the services you are
offering could ensure that that person’s promises to make such a purchase will be kept
There is therefore a very circular relationship between business and the law; business decisions can trigger legal
consequences and those legal consequences can themselves have a direct effect on profits and losses, and liability may
be imposed for poor decisions and opportunities may be exploited by good decisions.
LAW AS A FORM OF RISK MANAGEMENT
Law sets the framework for risk associated with running a business. For example, businesses regularly purchase
insurance in order to manage potential situations such as negligence committed by employees, they add exclusion and
limitation clauses into contracts with suppliers, and sometimes they incorporate a business in order to take advantage of
limited liability.
There are 4 types of risk management strategies which businesses can take:
● Risk Avoidance (Eliminate risk).
→ How? e.g. Withdrawing dangerous products from the market.
● Risk Reduction (Minimize risk)
→ How? e.g. Modify products to reduce danger.
● Risk Shifting (Make risk someone else’s problem)
→ How? e.g. Buy liability insurance for losses caused by danger/negligence
● Risk Acceptance (Live with the risk)
→ How? e.g. Do nothing
RISK MANAGEMENT PROCESS
,In managing risks, businesses should take a three step Risk Management process:
Identification: recognize legal risks
→ “Can we be held liable for this?”
Evaluation: assessment of legal risks
→ “What are the chances of something going wrong?”
Response: reaction to legal risks
→ “What are we going to do about it?”
THE NATURE OF LAW GENERALLY: LAWS VS. RULES
How is law different from other rules? All laws are rules but not all rules are laws. (For example, the rules of playing
soccer are not laws but must be followed by those playing the game.)
We may define “law” as a set of principles and rules that can be enforced by courts. The study and practice of law
is therefore a way of thinking (or reasoning) about these principles and rules.
Importantly, not all law is always enforced by courts. Think about the number of times people may cross the street at a
red light, or download movies and television shows without paying for them over the Internet. The fact that a law is not
enforced does not mean that it cannot be enforced, which is why we defined law as principles/rules that can be
enforced by courts.
As well, in the study and practice of law it is not just the result of a case (i.e., who won and who lost) that matters. The
reasons for the result are where law happens. Law is bound up in the reasoning, not just the final decision. So when
considering legal issues, it is important to ask “why” and “how,” not just “who won.”
ETHICAL REASONING: LAW VS. MORALITY PART 1
How then is law different from morality? Consider the case below.
CASE STUDY
You own a bakery. Your products range from incredibly expensive cakes using the finest ingredients to basic loaves of
bread you sell for just $1.00. One day while minding your store you notice a man grab something off a shelf and run
out of your bakery without paying. Shocked, you quickly call the police giving them a detailed description of this man.
Later that day, the police come to your bakery to tell you they caught the man and that he had stolen a single loaf of the
bread you sell for just $1.00. The police tell you that as they arrested him, the man told them, between sobs, that he
only took the bread since he was homeless and had not had anything to eat for over a week.
Assume that the Criminal Code states:
,“Any theft of goods valued at $1,000 or less is guilty of an offence and will be subject to imprisonment for a minimum
of five (5) years.”
Be sure to consider the question fully before revealing the answers.
Do you think the man should be charged with theft?
1. If we take a textual approach, we must uphold the letter of the law. A clear law has to be applied even when it
creates a result that may seem morally objectionable. In this case, there would be no choice but to charge the man with
theft.
The problem is that the textual approach operates without regard to the social context and the circumstances. There
may be a good reason to make a distinction between criminals who steal and the man in this case. But sticking to the
letter of the law does not allow any consideration of such differences.
2. If we take the more liberal, purpose approach, we have to look beyond the letter of the law and to consider the
purpose of the law against theft. There can be, however, a few purposes to such a law:
→ If the main purpose of the law against theft is punishment (“retribution”), we find that the man needs to be punished
for stealing the bread.
→ If the main purpose of the law is rehabilitation, meaning, teaching criminals how to mend their ways and become
better citizens – then there may be no point in charging the man with theft. Stealing is not something he is likely to do
again. He only acted that way because he was starving.
→ If the main purpose of the law is to deter people from committing theft in order to protect society – again, this
suggests that in this case that is not a concern.
It is likely that the law against theft aims to achieve all three purposes. The problem in this case is that each purpose
points to a different result. There is no “right” answer to this question, of course. The result will depend on what
approach will be taken by the court who hears the case. The example illustrates the point that law is not always a clear
rule that can be simply understood and applied to each given situation. There is very often a need to interpret the law
and to give it meaning.
This case also shows that law and morality do not always overlap. Here, you can see how some legal rules may seem
problematic when applying them may go against some people’s sense of moral judgment.
, ETHICAL REASONING LAW VS. MORALITY PART 2
As illustrated by the previous case study, what is ethical might not be what is legal, as law and morality are not the
same thing. Put differently:
● moral wrongs may be informally sanctioned (for example, you may not go to jail but you may lose friends over
unethical behaviour); and
● legal wrongs can be formally sanctioned (for example, if you are found guilty of a criminal offence, you could
go to jail).
Analyzing ethical issues therefore requires a focus on why something is ethically right or wrong, not just whether it is
right or wrong. In order to do so, it is best to consider the issue from one of the four following models of ethical
reasoning:
1. Consequences: we should promote good consequences and avoid bad ones, for all concerned, in the long run
(in other words, happiness is good; pain is bad!).
2. Justice and Fairness: we should make sure that good and bad consequences are distributed fairly. We should
pay our debts and treat cases alike.
3. Rights and Duties: we should protect rights and perform duties. These are often “nearly absolute.”
4. Character/Virtue: we should consider what kind of people we want to be, and what example we want to set.
Ethical issues are thus closely intertwined with legal ones but they are not the same thing. Ted Rogers School of
Management offers a variety of business ethics courses.
While this course refers to ethics, its main focus is legal reasoning and the law.
CIVIL LAW AND COMMON LAW
Now that you are getting a sense of why it is important to study legal issues, the next step for appreciating the
importance of law to business is to understand the structure of the Canadian legal system. Canada, somewhat uniquely
internationally, operates under two distinct legal regimes:
1. Common law, which is the regime in Ontario and the rest of Canada other than Quebec.
→ This is a legal regime based on dispute-based, judge-made laws.
→ Common law originated in England.
→ As well as being the legal regime used in most of Canada, it is also the legal regime used in England (where it
originated), Australia and New Zealand.
MODULE 1 (CHAPTER 1&2) : INTRODUCTION TO THE STUDY OF LAW
WHY STUDY LAW?
There are many factors affecting success and failure in business, and they are often a function of decision-making
abilities. For example, a business’ choice of location, choice of product and marketing efforts are all the result of
decisions and all can have a material impact on how successful the business will be.
Additionally, the decisions made in business not only can determine the fate of a business but can also have legal
consequences, both positive and negative. Examples of each are as follows:
● Negative consequences: for example, the decision for a manufacturing plant to dump pollutants into the
environment could result in liability for damage caused by these pollutants
● Positive consequences: for example, the decision to bind someone to their promise to buy the services you are
offering could ensure that that person’s promises to make such a purchase will be kept
There is therefore a very circular relationship between business and the law; business decisions can trigger legal
consequences and those legal consequences can themselves have a direct effect on profits and losses, and liability may
be imposed for poor decisions and opportunities may be exploited by good decisions.
LAW AS A FORM OF RISK MANAGEMENT
Law sets the framework for risk associated with running a business. For example, businesses regularly purchase
insurance in order to manage potential situations such as negligence committed by employees, they add exclusion and
limitation clauses into contracts with suppliers, and sometimes they incorporate a business in order to take advantage of
limited liability.
There are 4 types of risk management strategies which businesses can take:
● Risk Avoidance (Eliminate risk).
→ How? e.g. Withdrawing dangerous products from the market.
● Risk Reduction (Minimize risk)
→ How? e.g. Modify products to reduce danger.
● Risk Shifting (Make risk someone else’s problem)
→ How? e.g. Buy liability insurance for losses caused by danger/negligence
● Risk Acceptance (Live with the risk)
→ How? e.g. Do nothing
RISK MANAGEMENT PROCESS
,In managing risks, businesses should take a three step Risk Management process:
Identification: recognize legal risks
→ “Can we be held liable for this?”
Evaluation: assessment of legal risks
→ “What are the chances of something going wrong?”
Response: reaction to legal risks
→ “What are we going to do about it?”
THE NATURE OF LAW GENERALLY: LAWS VS. RULES
How is law different from other rules? All laws are rules but not all rules are laws. (For example, the rules of playing
soccer are not laws but must be followed by those playing the game.)
We may define “law” as a set of principles and rules that can be enforced by courts. The study and practice of law
is therefore a way of thinking (or reasoning) about these principles and rules.
Importantly, not all law is always enforced by courts. Think about the number of times people may cross the street at a
red light, or download movies and television shows without paying for them over the Internet. The fact that a law is not
enforced does not mean that it cannot be enforced, which is why we defined law as principles/rules that can be
enforced by courts.
As well, in the study and practice of law it is not just the result of a case (i.e., who won and who lost) that matters. The
reasons for the result are where law happens. Law is bound up in the reasoning, not just the final decision. So when
considering legal issues, it is important to ask “why” and “how,” not just “who won.”
ETHICAL REASONING: LAW VS. MORALITY PART 1
How then is law different from morality? Consider the case below.
CASE STUDY
You own a bakery. Your products range from incredibly expensive cakes using the finest ingredients to basic loaves of
bread you sell for just $1.00. One day while minding your store you notice a man grab something off a shelf and run
out of your bakery without paying. Shocked, you quickly call the police giving them a detailed description of this man.
Later that day, the police come to your bakery to tell you they caught the man and that he had stolen a single loaf of the
bread you sell for just $1.00. The police tell you that as they arrested him, the man told them, between sobs, that he
only took the bread since he was homeless and had not had anything to eat for over a week.
Assume that the Criminal Code states:
,“Any theft of goods valued at $1,000 or less is guilty of an offence and will be subject to imprisonment for a minimum
of five (5) years.”
Be sure to consider the question fully before revealing the answers.
Do you think the man should be charged with theft?
1. If we take a textual approach, we must uphold the letter of the law. A clear law has to be applied even when it
creates a result that may seem morally objectionable. In this case, there would be no choice but to charge the man with
theft.
The problem is that the textual approach operates without regard to the social context and the circumstances. There
may be a good reason to make a distinction between criminals who steal and the man in this case. But sticking to the
letter of the law does not allow any consideration of such differences.
2. If we take the more liberal, purpose approach, we have to look beyond the letter of the law and to consider the
purpose of the law against theft. There can be, however, a few purposes to such a law:
→ If the main purpose of the law against theft is punishment (“retribution”), we find that the man needs to be punished
for stealing the bread.
→ If the main purpose of the law is rehabilitation, meaning, teaching criminals how to mend their ways and become
better citizens – then there may be no point in charging the man with theft. Stealing is not something he is likely to do
again. He only acted that way because he was starving.
→ If the main purpose of the law is to deter people from committing theft in order to protect society – again, this
suggests that in this case that is not a concern.
It is likely that the law against theft aims to achieve all three purposes. The problem in this case is that each purpose
points to a different result. There is no “right” answer to this question, of course. The result will depend on what
approach will be taken by the court who hears the case. The example illustrates the point that law is not always a clear
rule that can be simply understood and applied to each given situation. There is very often a need to interpret the law
and to give it meaning.
This case also shows that law and morality do not always overlap. Here, you can see how some legal rules may seem
problematic when applying them may go against some people’s sense of moral judgment.
, ETHICAL REASONING LAW VS. MORALITY PART 2
As illustrated by the previous case study, what is ethical might not be what is legal, as law and morality are not the
same thing. Put differently:
● moral wrongs may be informally sanctioned (for example, you may not go to jail but you may lose friends over
unethical behaviour); and
● legal wrongs can be formally sanctioned (for example, if you are found guilty of a criminal offence, you could
go to jail).
Analyzing ethical issues therefore requires a focus on why something is ethically right or wrong, not just whether it is
right or wrong. In order to do so, it is best to consider the issue from one of the four following models of ethical
reasoning:
1. Consequences: we should promote good consequences and avoid bad ones, for all concerned, in the long run
(in other words, happiness is good; pain is bad!).
2. Justice and Fairness: we should make sure that good and bad consequences are distributed fairly. We should
pay our debts and treat cases alike.
3. Rights and Duties: we should protect rights and perform duties. These are often “nearly absolute.”
4. Character/Virtue: we should consider what kind of people we want to be, and what example we want to set.
Ethical issues are thus closely intertwined with legal ones but they are not the same thing. Ted Rogers School of
Management offers a variety of business ethics courses.
While this course refers to ethics, its main focus is legal reasoning and the law.
CIVIL LAW AND COMMON LAW
Now that you are getting a sense of why it is important to study legal issues, the next step for appreciating the
importance of law to business is to understand the structure of the Canadian legal system. Canada, somewhat uniquely
internationally, operates under two distinct legal regimes:
1. Common law, which is the regime in Ontario and the rest of Canada other than Quebec.
→ This is a legal regime based on dispute-based, judge-made laws.
→ Common law originated in England.
→ As well as being the legal regime used in most of Canada, it is also the legal regime used in England (where it
originated), Australia and New Zealand.
