CHAPTER 1
RISK MANAGEMENT AND SOURCES OF LAW
CONTENTS
TEACHING APPROACH
1. An Interactive Approach
2. Law as a Process
3. The Canadian Charter of Rights and Freedoms
ADDITIONAL TEACHING SUGGESTIONS
1. Natural Law and Positivism
2. Corporate Crime: Section 217.1 of the Criminal Code
3. Division of Powers
4. Concurrent Jurisdiction
5. Patriation of the Constitution
6. Constitutional Amendments — Regional Veto Act
7. Charter of Rights and Freedoms
8. Before the Charter — The Bill of Rights
9. The Scope of the Charter
10. The Charter and Its Critics
11. Statutory Interpretation
Business Law in Action: Statutory Interpretation
12. Law and Equity
Not Parallel Systems
Not Broad Discretion
DISCUSSION BOXES
1. Business Decision 1.1—Risk Management
2. Ethical Perspective 1.1—Rules and Laws
3. You Be the Judge 1.1—Charter Remedies
4. Business Decision 1.2—Law, Equity and The Trust
REVIEW QUESTIONS
CASES & PROBLEMS
CASE BRIEFS
TEACHING APPROACH
An Interactive Approach
The teaching philosophy adopted for this introductory chapter is critically important
because it will set the tone for the entire course. While it is perhaps inevitable that
students may not be fully prepared during the initial session, they nevertheless must be
drawn into the material. This chapter was designed with that need in mind.
Some topics almost inevitably must be approached in a lecture format. It is, for instance,
rather difficult to generate animated discussion regarding the legislative process through
which a bill is transformed into a statute. Those materials should be treated accordingly.
Copyright © 2011 Pearson Canada Inc. 1
, Chapter 1 – Risk Management and Sources of Law
Students should appreciate the means by which laws come into existence, as well as the
opportunities that business people have to influence that process. Little would be gained,
however, from excessive detail or extended debate.
The great bulk of the chapter, in contrast, has been structured to foster discussion and to
allow students to develop skills that they will require throughout the course (and into
their professions). That is true from the opening pages of the text. Rather than tell
students why, as business students, they should study law, let them discover the reasons
for themselves. Ask them to imagine themselves in business. Take suggestions until a
simple model emerges. Then continue on with the exercise using that simple model. Ask
why some businesses succeed, while others fail. Push the students toward the realization
that the answer depends a great deal on risk management, both negatively and positively.
A successful business person is able to make decisions that avoid harmful events and that
exploit profitable opportunities. That proposition will logically lead to the next series of
questions. How do business people effectively manage risks? What do they need to
know? For present purposes, the important answer is “law.” Allow the students to explore
some of the various ways in which a knowledge of the law can help a business. Once
again, make sure that they consider negative and positive possibilities. It is important to
highlight both sides of that coin. Risk management most obviously includes the
avoidance of liability, but it also includes, for instance, the ability to use a contract to
hold another party to a promise. Students must realize early on that, from a business
perspective, the law is not simply a series of prohibitions, but rather a rich and varied
collection of resources that can be used for the effective management of risk. That is why
they must be familiar with it.
Although the chapter goes on to examine a number of other introductory topics, it is
important to maintain the momentum generated by the opening exercise. The natural
temptation to rely exclusively on straight lectures must be resisted. There is,
understandably, an inclination among most students to remain passive during the initial
sessions. There is also a tendency among students to regard opening lectures as somehow
relatively unimportant. Both of those factors must be overcome. With that in mind,
Chapter 1 includes a number of Discussion Boxes that are inherently interesting and
immediately accessible.
Business Decision 1.1 centres upon the issue of reference letters, a subject of
great significance for every young professional.
Ethical Perspective 1.1 deals with a failure to rescue a drowning person. If
desired, it can be made more poignant by changing the facts to include a
drowning child. Absent a special relationship (eg parent or teacher), I am legally
free to watch an infant drown, just as I am legally free to watch an adult die.
Law as a Process
The various discussion boxes are valuable from a purely pedagogic perspective: they help
to keep students engaged and interested. At least implicitly, however, they also serve two
other useful functions. First, by working through the exercises, students will begin to
develop essential skills. Risk management requires action. Students therefore should
become accustomed to actively discovering information and formulating solutions, rather
Copyright © 2011 Pearson Canada Inc. 2
, Chapter 1 – Risk Management and Sources of Law
than merely passively receiving lecture notes. Second, the process of working through
business law issues should make students realize that law is a malleable process, rather
than a static list of dos and don’ts.
Although that proposition may initially seem trite, it underlies a significant challenge in
teaching business law. Students very often arrive in class with an assumption that the law
consists of a long list of rules, and that legal education consists of memorizing as many of
them as possible. Somewhere out there, it is thought, there is a really big book with all of
the answers. That, of course, is not true. Law is constantly evolving to reflect changes in
society. (In the business context, for example, a rule of contract that was developed in the
nineteenth century may no longer be appropriate. Chapter 18, which deals with Electronic
Commerce, contains a number of illustrations.) Furthermore, those changes are
introduced by human agents, typically judges and legislators, who struggle to strike a
delicate balance between competing interests. (The text’s discussion of the Charter
clearly points in that direction. A statute that prohibits the sale of violent pornography
violates freedom of choice, but it is nevertheless justifiable given the current state of
Canadian society.) The material should be presented in a way that highlights the
malleability of rules and that stresses the human face of the law. Students should realize
that a rule that they learn today may be discarded tomorrow if judges or legislators adopt
a new position on a particular issue. Consequently, quite often, what is important is not
the memorization of rules, but rather an understanding of the process.
The Discussion Boxes can also be used to debunk another common misperception. Many
students tend to equate law and “justice” (usually with the assumption that “justice”
coincides with their intuitive notions of right and wrong). The discussion engendered by
Ethical Perspective 1.1 can be used to dispel that myth. Students should realize that while
there is considerable overlap between law and morality, those two categories are not
always consistent. Indeed, in an increasingly multicultural society, moral consensus is
becoming even more difficult to obtain. Consequently, the law very often must be content
to strike a balance between competing interests in a way that will inevitably offend some
moral perspectives.
The Canadian Charter of Rights and Freedoms
A substantial portion of the chapter is devoted to the Charter. As many of the examples
illustrate, business people are often directly affected by Charter decisions. Beyond that,
however, students must be made to appreciate that Canadian law — indeed Canadian
society — simply cannot be understood apart from the Charter. Every Canadian,
including every business person, is deeply affected by its provisions. The Charter
provides the backdrop against which everything else plays out.
ADDITIONAL TEACHING SUGGESTIONS
Natural Law and Positivism
While it would be inappropriate to embark on an extended philosophical debate, the
issues surrounding Ethical Perspective 1.1 inevitably will lead students to question that
nature of law. Historically, the issue tended to divide thinkers into two camps: those who
subscribed to natural law theory and those who subscribed to positivism. To some extent,
Copyright © 2011 Pearson Canada Inc. 3
, Chapter 1 – Risk Management and Sources of Law
that remains true today, notwithstanding the growth of more modern perspectives (eg law
and economics, feminism, critical legal studies).
Classical natural law theory was based on the belief that there exists a natural order
within the universe, and that humans have a natural role within that universe. Morality
and immorality consequently were defined in terms of activities that tended either toward
or against the fulfillment of that role. To take a common example, it was thought that
humans exist to fulfill certain ends: survival, perpetuation of the family, and so on.
Sexual intercourse intended for the purpose of procreation was considered moral because
it tended toward the fulfillment of those ends. In contrast, sexual activity that was not
intended for procreative purposes (eg sodomy) was considered immoral. Laws were
formulated accordingly. Vaginal intercourse between man and wife was permitted, while
homosexuality was prohibited.
Because of the need to identify a set of purposes, natural law theory tends to be closely
tied to religious beliefs. There is, however, no necessary connection between the two. So
long as there is some touchstone that sets the standard for assessment, it is possible to
have a secular conception of natural law. An atheistic environmentalist, for instance,
might believe that the validity of human laws can be adjudged by their tendency to either
promote or frustrate conservation of the planet in its natural state.
Students could be asked to critique natural law theory. They might be expected to suggest
arguments along the following lines.
Natural law cannot account for the whole of the legal system. There are many
laws that, in themselves, are morally neutral. It is, for instance, hard to see how a
legal requirement to fill out a form in triplicate either advances or inhibits any
particular view of the universe. In response, it might be suggested that natural law
merely requires a law to be morally permissible, not morally mandated.
Natural law also cannot account for the undeniable existence of morally
repugnant laws. That is inevitable given the extent to which Canadian law must
mediate between the increasingly divergent views of a multicultural society. No
perspective can command the invariable support of the courts and legislatures.
Classroom examples, however, should be chosen with great care. A suggestion
that abortion is immoral, for instance, should be clearly ascribed to a particular
point of view, rather than presented as a “correct” position. Likewise the
suggestion that the government’s failure to implement effective pay equity
provisions is morally offensive.
Perhaps the most damning criticism of natural law lies in the great difficulty of
identifying and articulating natural ends, and in the even greater difficulty of
applying those standards in specific ways. The standards may tend to be so
abstract as to be practically useless. What does it really mean, for example, to say
“do good and avoid evil”? Furthermore, in a pluralistic society, the mere act of
identifying the relevant ends will tend to smack of subjectivity. Given the
Constitution’s entrenchment of multiculturalism, why should one group, however
large in number, be entitled to force its views upon others?
Copyright © 2011 Pearson Canada Inc. 4
RISK MANAGEMENT AND SOURCES OF LAW
CONTENTS
TEACHING APPROACH
1. An Interactive Approach
2. Law as a Process
3. The Canadian Charter of Rights and Freedoms
ADDITIONAL TEACHING SUGGESTIONS
1. Natural Law and Positivism
2. Corporate Crime: Section 217.1 of the Criminal Code
3. Division of Powers
4. Concurrent Jurisdiction
5. Patriation of the Constitution
6. Constitutional Amendments — Regional Veto Act
7. Charter of Rights and Freedoms
8. Before the Charter — The Bill of Rights
9. The Scope of the Charter
10. The Charter and Its Critics
11. Statutory Interpretation
Business Law in Action: Statutory Interpretation
12. Law and Equity
Not Parallel Systems
Not Broad Discretion
DISCUSSION BOXES
1. Business Decision 1.1—Risk Management
2. Ethical Perspective 1.1—Rules and Laws
3. You Be the Judge 1.1—Charter Remedies
4. Business Decision 1.2—Law, Equity and The Trust
REVIEW QUESTIONS
CASES & PROBLEMS
CASE BRIEFS
TEACHING APPROACH
An Interactive Approach
The teaching philosophy adopted for this introductory chapter is critically important
because it will set the tone for the entire course. While it is perhaps inevitable that
students may not be fully prepared during the initial session, they nevertheless must be
drawn into the material. This chapter was designed with that need in mind.
Some topics almost inevitably must be approached in a lecture format. It is, for instance,
rather difficult to generate animated discussion regarding the legislative process through
which a bill is transformed into a statute. Those materials should be treated accordingly.
Copyright © 2011 Pearson Canada Inc. 1
, Chapter 1 – Risk Management and Sources of Law
Students should appreciate the means by which laws come into existence, as well as the
opportunities that business people have to influence that process. Little would be gained,
however, from excessive detail or extended debate.
The great bulk of the chapter, in contrast, has been structured to foster discussion and to
allow students to develop skills that they will require throughout the course (and into
their professions). That is true from the opening pages of the text. Rather than tell
students why, as business students, they should study law, let them discover the reasons
for themselves. Ask them to imagine themselves in business. Take suggestions until a
simple model emerges. Then continue on with the exercise using that simple model. Ask
why some businesses succeed, while others fail. Push the students toward the realization
that the answer depends a great deal on risk management, both negatively and positively.
A successful business person is able to make decisions that avoid harmful events and that
exploit profitable opportunities. That proposition will logically lead to the next series of
questions. How do business people effectively manage risks? What do they need to
know? For present purposes, the important answer is “law.” Allow the students to explore
some of the various ways in which a knowledge of the law can help a business. Once
again, make sure that they consider negative and positive possibilities. It is important to
highlight both sides of that coin. Risk management most obviously includes the
avoidance of liability, but it also includes, for instance, the ability to use a contract to
hold another party to a promise. Students must realize early on that, from a business
perspective, the law is not simply a series of prohibitions, but rather a rich and varied
collection of resources that can be used for the effective management of risk. That is why
they must be familiar with it.
Although the chapter goes on to examine a number of other introductory topics, it is
important to maintain the momentum generated by the opening exercise. The natural
temptation to rely exclusively on straight lectures must be resisted. There is,
understandably, an inclination among most students to remain passive during the initial
sessions. There is also a tendency among students to regard opening lectures as somehow
relatively unimportant. Both of those factors must be overcome. With that in mind,
Chapter 1 includes a number of Discussion Boxes that are inherently interesting and
immediately accessible.
Business Decision 1.1 centres upon the issue of reference letters, a subject of
great significance for every young professional.
Ethical Perspective 1.1 deals with a failure to rescue a drowning person. If
desired, it can be made more poignant by changing the facts to include a
drowning child. Absent a special relationship (eg parent or teacher), I am legally
free to watch an infant drown, just as I am legally free to watch an adult die.
Law as a Process
The various discussion boxes are valuable from a purely pedagogic perspective: they help
to keep students engaged and interested. At least implicitly, however, they also serve two
other useful functions. First, by working through the exercises, students will begin to
develop essential skills. Risk management requires action. Students therefore should
become accustomed to actively discovering information and formulating solutions, rather
Copyright © 2011 Pearson Canada Inc. 2
, Chapter 1 – Risk Management and Sources of Law
than merely passively receiving lecture notes. Second, the process of working through
business law issues should make students realize that law is a malleable process, rather
than a static list of dos and don’ts.
Although that proposition may initially seem trite, it underlies a significant challenge in
teaching business law. Students very often arrive in class with an assumption that the law
consists of a long list of rules, and that legal education consists of memorizing as many of
them as possible. Somewhere out there, it is thought, there is a really big book with all of
the answers. That, of course, is not true. Law is constantly evolving to reflect changes in
society. (In the business context, for example, a rule of contract that was developed in the
nineteenth century may no longer be appropriate. Chapter 18, which deals with Electronic
Commerce, contains a number of illustrations.) Furthermore, those changes are
introduced by human agents, typically judges and legislators, who struggle to strike a
delicate balance between competing interests. (The text’s discussion of the Charter
clearly points in that direction. A statute that prohibits the sale of violent pornography
violates freedom of choice, but it is nevertheless justifiable given the current state of
Canadian society.) The material should be presented in a way that highlights the
malleability of rules and that stresses the human face of the law. Students should realize
that a rule that they learn today may be discarded tomorrow if judges or legislators adopt
a new position on a particular issue. Consequently, quite often, what is important is not
the memorization of rules, but rather an understanding of the process.
The Discussion Boxes can also be used to debunk another common misperception. Many
students tend to equate law and “justice” (usually with the assumption that “justice”
coincides with their intuitive notions of right and wrong). The discussion engendered by
Ethical Perspective 1.1 can be used to dispel that myth. Students should realize that while
there is considerable overlap between law and morality, those two categories are not
always consistent. Indeed, in an increasingly multicultural society, moral consensus is
becoming even more difficult to obtain. Consequently, the law very often must be content
to strike a balance between competing interests in a way that will inevitably offend some
moral perspectives.
The Canadian Charter of Rights and Freedoms
A substantial portion of the chapter is devoted to the Charter. As many of the examples
illustrate, business people are often directly affected by Charter decisions. Beyond that,
however, students must be made to appreciate that Canadian law — indeed Canadian
society — simply cannot be understood apart from the Charter. Every Canadian,
including every business person, is deeply affected by its provisions. The Charter
provides the backdrop against which everything else plays out.
ADDITIONAL TEACHING SUGGESTIONS
Natural Law and Positivism
While it would be inappropriate to embark on an extended philosophical debate, the
issues surrounding Ethical Perspective 1.1 inevitably will lead students to question that
nature of law. Historically, the issue tended to divide thinkers into two camps: those who
subscribed to natural law theory and those who subscribed to positivism. To some extent,
Copyright © 2011 Pearson Canada Inc. 3
, Chapter 1 – Risk Management and Sources of Law
that remains true today, notwithstanding the growth of more modern perspectives (eg law
and economics, feminism, critical legal studies).
Classical natural law theory was based on the belief that there exists a natural order
within the universe, and that humans have a natural role within that universe. Morality
and immorality consequently were defined in terms of activities that tended either toward
or against the fulfillment of that role. To take a common example, it was thought that
humans exist to fulfill certain ends: survival, perpetuation of the family, and so on.
Sexual intercourse intended for the purpose of procreation was considered moral because
it tended toward the fulfillment of those ends. In contrast, sexual activity that was not
intended for procreative purposes (eg sodomy) was considered immoral. Laws were
formulated accordingly. Vaginal intercourse between man and wife was permitted, while
homosexuality was prohibited.
Because of the need to identify a set of purposes, natural law theory tends to be closely
tied to religious beliefs. There is, however, no necessary connection between the two. So
long as there is some touchstone that sets the standard for assessment, it is possible to
have a secular conception of natural law. An atheistic environmentalist, for instance,
might believe that the validity of human laws can be adjudged by their tendency to either
promote or frustrate conservation of the planet in its natural state.
Students could be asked to critique natural law theory. They might be expected to suggest
arguments along the following lines.
Natural law cannot account for the whole of the legal system. There are many
laws that, in themselves, are morally neutral. It is, for instance, hard to see how a
legal requirement to fill out a form in triplicate either advances or inhibits any
particular view of the universe. In response, it might be suggested that natural law
merely requires a law to be morally permissible, not morally mandated.
Natural law also cannot account for the undeniable existence of morally
repugnant laws. That is inevitable given the extent to which Canadian law must
mediate between the increasingly divergent views of a multicultural society. No
perspective can command the invariable support of the courts and legislatures.
Classroom examples, however, should be chosen with great care. A suggestion
that abortion is immoral, for instance, should be clearly ascribed to a particular
point of view, rather than presented as a “correct” position. Likewise the
suggestion that the government’s failure to implement effective pay equity
provisions is morally offensive.
Perhaps the most damning criticism of natural law lies in the great difficulty of
identifying and articulating natural ends, and in the even greater difficulty of
applying those standards in specific ways. The standards may tend to be so
abstract as to be practically useless. What does it really mean, for example, to say
“do good and avoid evil”? Furthermore, in a pluralistic society, the mere act of
identifying the relevant ends will tend to smack of subjectivity. Given the
Constitution’s entrenchment of multiculturalism, why should one group, however
large in number, be entitled to force its views upon others?
Copyright © 2011 Pearson Canada Inc. 4
