Canadian Legal System & Contract Law Essentials

Canadian Charter & Legal System Foundations

Definition: Part of Canada’s Constitution that guarantees fundamental rights and freedoms. Legislation that violates a Charter right can be invalidated unless it meets the Oakes Test.

Scenario: A small business is subject to a provincial regulation restricting certain advertisements. The business argues the restriction violates freedom of expression under the Charter. A court applies the Oakes Test to see if the limit is justifiable.

Understanding Legal Tribunals

Definition: Specialized boards or agencies (e.g., labour boards, human rights tribunals) created by statute to deal with specific issues more efficiently than courts.

Scenario: An employee alleges discrimination. Instead of suing in court, they file a complaint with the provincial human rights tribunal, which holds hearings and can award remedies.

Common Law Versus Civil Law Systems

Definition:

• Common Law: Judge-made law based on precedent, used in most provinces.
• Civil Law: Codified system used in Quebec.

Scenario: An Ontario judge looks to past decisions (“precedents”) from Ontario and other common-law provinces to decide a new negligence case.

Alternative Dispute Resolution (ADR) Methods

Definition: Methods to resolve disputes outside of court.

• Mediation: A neutral facilitator helps parties negotiate; the outcome is not binding unless they agree.
• Arbitration: A neutral arbitrator hears both sides and makes a binding ruling.

Scenario: Two businesses in a contract dispute agree to mediate. The mediator helps them reach a settlement, avoiding a costly trial.

Key Steps in a Lawsuit (Action)

Definition:

• Pleadings (statement of claim/defence)
• Discovery (exchange of documents, questioning)
• Pretrial Conference
• Trial (evidence, arguments, judgment)

Scenario: A customer sues a contractor for faulty work. They file a statement of claim; the contractor files a defence. Both exchange project documents at discovery, then proceed to trial if no settlement occurs.

Legal Costs: Substantial vs. Partial Indemnity

Definition: Court-awarded legal costs.

• Partial Indemnity: Covers only part of the successful party’s legal fees.
• Substantial Indemnity: A significantly higher portion is covered (used if the losing side acted particularly badly).

Scenario: A judge finds the defendant acted in bad faith to delay the trial, so the court orders substantial indemnity costs to penalize that behavior.

Understanding Privity of Contract

Definition: Only parties to a contract can sue or be sued under it (subject to some statutory and common-law exceptions).

Scenario: Alice orders supplies from Bob. Carol, who is not a party to the contract, generally cannot sue Bob if the supplies are defective.

Contingency Fees in Legal Cases

Definition: An arrangement where a lawyer’s fee depends on winning the case—often a percentage of awarded damages.

Scenario: A personal injury plaintiff cannot afford a lawyer. The lawyer takes the case on a 30% contingency fee if they win or settle.

The Principle of Unjust Enrichment

Definition: When one party unfairly benefits at another’s expense without a legal reason. Courts may order restitution.

Scenario: Company A accidentally sends a double payment to Company B. Company B refuses to return it. Company A claims unjust enrichment to get the overpayment back.

Civil Law Versus Criminal Law Explained

Definition:

• Civil Law: Private disputes, usually about money or other remedies.
• Criminal Law: Prosecution by the government for offences against society.

Scenario: If a business defrauds a supplier, the supplier can sue in civil court for damages. Separately, the government could lay criminal charges for fraud.

Regulation, Torts, and Negligence Principles

Assault and Battery: Intentional Torts

Definition:

• Assault: The threat of harmful contact creating fear.
• Battery: Actual intentional physical contact without consent.

Scenario: A store security guard raises a fist and threatens to punch a suspected shoplifter (assault). If the guard actually hits the suspect, that is battery.

Understanding False Imprisonment

Definition: Unlawful restraint on another’s freedom of movement (no legal justification).

Scenario: A security guard locks a customer in a back room for two hours without cause or authority.

Detention Under Auspice of Authority

Definition: When someone (like a police officer) detains a person, they must do so within lawful authority. Exceeding that authority can lead to false imprisonment.

Scenario: A mall cop tries to detain a shopper for hours over a minor incident, without turning them over to real police. This may exceed the guard’s authority.

Defamation: Protecting Reputation

Definition: A false statement published to a third party that harms a person’s reputation.

Scenario: A blogger falsely accuses a restaurant of serving contaminated food. If customers read and believe it, the restaurant may sue for defamation.

Negligence and the Duty of Care

Definition: Failure to exercise reasonable care, causing harm to someone owed a duty of care.

Scenario: A contractor installs faulty wiring in a house. That wiring causes a fire, injuring occupants. The contractor may be liable for negligence.

The Duty Owed to Rescuers

Definition: If the defendant’s negligence creates a peril, they may owe a duty to rescuers who get harmed trying to help.

Scenario: A truck driver’s reckless driving causes a major crash. A passerby who is injured while rescuing crash victims can sue the reckless driver.

Vicarious Liability in Employment

Definition: An employer is liable for employee torts if done “in the course of employment.”

Scenario: A courier driver negligently hits a pedestrian while delivering packages. The courier company may be liable alongside the driver.

Tort Damages: General and Special

Definition:

• General Damages: Non-monetary losses (e.g., pain, suffering).
• Special Damages: Quantifiable losses (e.g., medical bills, lost wages).

Scenario: An injured plaintiff claims special damages (out-of-pocket medical costs) plus general damages (for emotional distress).

Common Defences to Defamation Claims

Definition:

• Truth (Justification): The statement was factually correct.
• Privilege: The statement was made in a protected context (e.g., in parliament or court).
• Fair Comment/Opinion: Honest opinion on a matter of public interest.

Scenario: A journalist prints a harsh review. If it’s their honest opinion based on true facts, they can claim fair comment.

Contract Formation and Professional Liability

Oral Contracts: Validity and Exceptions

Definition: Most contracts can be oral unless a statute (e.g., for land sales) requires writing.

Scenario: Two companies verbally agree on a supplies contract. This is generally enforceable if the basic contract elements are present.

The Principle of Informed Consent

Definition: A person must understand the nature and consequences before agreeing, especially in professional or medical contexts.

Scenario: An accountant explains the potential risks of a tax strategy to a client, ensuring the client’s consent is informed.

Presumption of Intention in Contracts

Definition: Courts presume commercial parties intend a legally binding contract unless there is clear evidence otherwise.

Scenario: A business tries to avoid a contract by saying, “It was just a friendly deal.” Courts usually find intent where money or services are exchanged in a business context.

Vicarious Liability for Professionals

Definition: A professional firm (e.g., accounting or law firm) can be liable for negligence by its employees or partners if done in the course of business.

Scenario: A junior accountant negligently prepares a client’s financial statements. The firm can be sued along with the individual accountant.

Distinguishing Offers from Invitations to Treat

Definition:

• Offer: A clear, definite proposal that only needs acceptance.
• Invitation to Treat: An invitation for others to make offers (e.g., store displays).

Scenario: A store’s flyer lists an item at $100. That’s usually an invitation, so the customer’s decision to buy is the offer. The store “accepts” at checkout.

Consideration, Intention, and Minors in Contracts

Understanding the Burden of Proof

Definition: The obligation to prove one’s claim in court (usually on the “balance of probabilities” in civil matters).

Scenario: A plaintiff sues for breach of contract. The plaintiff must prove each element of the contract (offer, acceptance, consideration, intention, breach, and loss).

Contractual Rules for Minors

Definition: Minors (under the provincial “age of majority”) usually can rescind or avoid non-necessary contracts. Contracts for necessaries (e.g., food, shelter) generally bind them.

Scenario: A 16-year-old buys an expensive smartphone contract. They can typically walk away without liability if the phone is deemed non-essential and the provider knew of the minor’s age.

Contracts and Temporary Incompetence

Definition: A person who is intoxicated or otherwise incapacitated may avoid a contract if they couldn’t understand its nature and the other party knew or should have known.

Scenario: Someone signs a contract while extremely drunk at a corporate event. Later, they claim no legal capacity to contract if they prove the other side knew they were too impaired to understand.

Gifts and Gratuitous Promises in Law

Definition: Promises given without consideration (something of value) aren’t enforceable, unless sealed or covered by a doctrine like promissory estoppel.

Scenario: A friend promises to give you a car for free; you provide nothing in return. Later, they refuse. You generally can’t enforce that promise because it’s gratuitous.

The Postal Rule for Contract Acceptance

Definition: Acceptance via mail is effective when mailed, not when received (if mail is an appropriate method).

Scenario: X mails an acceptance letter to Y. Even if Y never receives it due to a mail mix-up, the contract may be formed the moment the letter is posted.

Understanding Promissory Estoppel

Definition: Stops a party from going back on a promise that the other side relied on to their detriment, even if it lacked consideration.

Scenario: A landlord promises a business tenant reduced rent during renovations. The tenant relies on that promise, but the landlord later demands back rent. Estoppel may prevent the landlord from reneging.

Equity and the 'Clean Hands' Doctrine

Definition: Courts may grant equitable remedies (e.g., injunction, specific performance), but only if the requesting party acted fairly (no misconduct).

Scenario: A plaintiff who misled the defendant in negotiations may be denied an injunction because they do not have “clean hands.”

Contract Capacity, Legality, and Discharge

Contractual Capacity and Legality Issues

Definition:

• Capacity: Competence to form a binding contract (includes minors, mentally incapacitated persons).
• Legality: The contract’s purpose must not be illegal or against public policy.

Scenario: A 17-year-old signs a two-year gym membership contract (non-necessary). He can typically walk away. Similarly, a contract to commit an illegal act (e.g., fix prices) is void.

Caveat Emptor: 'Buyer Beware' Principle

Definition: The buyer is responsible for checking quality and suitability unless protected by legislation or a contractual warranty.

Scenario: You buy a used computer “as is.” Later you find major defects. Without a seller’s warranty or consumer protection law, you might have little recourse.

Understanding Punitive Damages in Law

Definition: Awarded to punish/deter outrageous conduct, on top of any compensatory damages.

Scenario: A contractor intentionally and maliciously damages a homeowner’s property. A court might award punitive damages to punish that extreme behavior.

Defining a Legal Cause of Action

Definition: The legal basis for bringing a lawsuit (e.g., breach of contract, negligence).

Scenario: If you want to sue for a defective product, your “cause of action” may be breach of contract (the product didn’t meet contractual terms) or negligence (unsafe design).

The Parol Evidence Rule in Contracts

Definition: A final written contract cannot be modified by outside oral (or written) statements made before or at the same time, subject to exceptions (e.g., fraud, duress).

Scenario: A buyer claims the seller verbally promised free shipping despite the written contract stating otherwise. If no exception applies, the written contract stands.

The Reasonable Bystander Test Explained

Definition: Courts interpret words/conduct objectively by asking how a “reasonable bystander” would understand them, rather than focusing on a party’s secret intention.

Scenario: A business jokes, “I’ll sell all my stock for $1,” but a customer takes it seriously. If a reasonable bystander would perceive it as a joke, no contract is formed.

Contract Frustration: Reality Limitations

Definition: When an unforeseen event makes performance impossible (or radically different from what was agreed), parties may be discharged from the contract.

Scenario: An events company rents a venue, but a sudden natural disaster destroys the building. The contract is frustrated; neither side needs to perform.

The Principle of Utmost Good Faith

Definition: Requires parties to disclose all material facts and act honestly (e.g., in insurance contracts).

Scenario: When applying for life insurance, you must disclose relevant medical history. Failure to do so can void the policy.

Understanding Bars to Contract Rescission

Definition: Factors preventing a party from cancelling (rescinding) a contract. For example, if they’ve affirmed the contract after discovering a problem, or waited too long.

Scenario: A buyer learns of the seller’s misrepresentation but continues using the goods for months before complaining. This delay can bar rescission.

Statute-Barred Claims: Limitation Periods

Definition: A claim may be out of time if not brought within a legal deadline (limitation period).

Scenario: You find a defect in your purchased machine but wait six years to sue, surpassing the two-year limitation period. The lawsuit is likely barred.

Duress and Undue Influence in Contracts

Definition:

• Duress: Threats or coercion to force consent.
• Undue Influence: Abuse of a position of trust or power to obtain an unfair advantage.

Scenario:

• Duress: A person signs a loan agreement because they’re threatened with violence.
• Undue Influence: An elderly person signs over property to a caregiver who manipulates them.

Understanding Voidable Contracts

Definition: Legally valid until the innocent party exercises their right to avoid it (e.g., a contract made by a minor or under duress).

Scenario: A minor can “void” their contract for a non-necessary item, so it’s voidable at the minor’s option. The other party, however, may be bound.

Methods for Discharge of Contracts

Definition: Ways a contract can end:

• Performance (duties fulfilled)
• Agreement (mutual release or new contract)
• Frustration (impossibility)
• Operation of Law (e.g., bankruptcy, limitation periods)
• Breach (a fundamental breach by one party allows the other to treat the contract as terminated)

Scenario: A business contract ends when both sides deliver exactly as promised (discharge by performance). Or, if an unforeseeable event destroys the subject matter, the contract may end by frustration.