Midterm Review

What’s On It
• Partnerships / Corporations
– Chapters 24, 25, 26, 27
– Review corporations in particular
• Torts
– Chapter 4
– Basic concepts and in particular negligence
• The exam is for 1.5 hours and there will be two
questions
– Prior midterms with grading notes will be on
Blackboard for review
Important Note
• This review is not exhaustive and will cover only
the major themes and topics
• It is not a substitute for reading the text or
previous lectures
• I do not for an instant promise that the midterm
will cover only what I directly review today – in
fact it will almost certainly include other issues
Review: Partnerships
• General partnerships and personal liability
• Criteria to establish a partnership, whether
intended or otherwise
• Lightly scan other forms of partnerships
• Apparent partnerships and implications of
same
• Fiduciary duties and responsibilities of
partners to one another and to partnership
Review: Corporations
• Natural person analogy
– A corporation has all the same powers as a
natural person
• Limited liability
– One of the defining features of a corporation is
limited liability
– There are a few exceptions relating to
improper director or shareholder conduct
Review: Corporations
• Indoor management rule
– When dealing with a corporation, you know it
has all the powers of a natural person to form
contacts, but who can sign a contract on
behalf of the corporation?
– The indoor management rule dictates that
anyone reasonably acting on behalf of the
corporation can bind it in contract
– This is for certainty of dealings
Review: Corporations
• Corporations may be either public or private
– A public corporation is openly traded, and
management is significantly removed from ownership
– A private corporation is more tightly held, and
management is often more closely integrated with
ownership
• Remember, though the same person may a
times occupy a number of roles (shareholder,
director, manager) the rights and responsibilities
go with each role and must be kept distinct
Review: Corporations
• The board of directors is collectively the highest
authority in any corporation
• Directors owe a fiduciary duty to the corporation
as a whole
– They must always act in the best interests of the
corporation (generally understood to be “make profit”)
– No particular standards of skill or diligence are
required, however, beyond ordinary prudence
– Directors are personally liable (under statute) for:
• Six months unpaid wages
• Unpaid tax withholdings
• Improper share redemption or dividend payments
• There is a defense of due diligence
Review: Corporations
• A director’s fiduciary duty is by definition
incompatible with competing interests such as
personal business, other contracts, etc.
• A director should disclose any such conflicts, and
refrain from voting on any matter that touches on
them
• Corporate opportunities belong to the
corporation, and if a director should appropriate
an opportunity he will be liable for any proceeds
– Damage in the amount of the loss
– Rescission if possible, without affecting third parties
– Accounting and delivery of all profits
Review: Corporations
• Shareholders hold equity in the corporation
• Have the right to elect directors and vote at
general meetings
– One share one vote
• May be paid dividends, subject to
profitability
• Receive, on wind up, any value left over
after all debts are satisfied (owners take
money last)
Review: Corporations
• Shareholders have few individual powers or
rights, outside of voting, but they do have some
• May sue for oppression, if their interests are
being sacrificed
– The remedy is to be bought out
• May commence a derivative action, if the
situation is desperate
• May apply to court to have the corporation
dissolved, if deadlocked with no prospect of
successful operation
Review: Corporations
• With unanimous agreement, and notice,
almost any of these basic assumptions
may be changed in practice
– Special rules on buying and selling shares
– Arrangements regarding the board
– Payment of dividends, property, etc.
• This is often done in private corporations,
intended for few owners
Review: Torts
• The basic principle of tort law is that it governs
the general duty that every person in society
owes to every other person
• It does not, therefore, rely on any pre-existing
relationship
• Where one person has committed a tort against
another, the essential rule of damages is that the
injured party must be made whole
• Damages, therefore, are intended to be
equivalent to the injury, no more or less
– Punitive damages are unusual in Canada
• Recall the thin skull rule
Review: Torts
• A negligence analysis will consist of:
– Duty of care
• Neighbour principle
• Anns-Cooper test (unlimited liability, public policy)
– Standard of care
• Reasonable person
• Competent professional
– Causation
• “But for” test
• Proximity
Review: Torts
• Liability for injury may be split among multiple
parties, including the injured party
• Therefore, if multiple parties are negligent there
is no need to figure out who’s “but for” action
came last
• Contributory negligence is a special term that
only means the injured party was guilty of some
negligence along with others
• Volenti is a special case, where the risk was
voluntarily assumed, and this eliminates liability
for anyone else
Some Basic Tips
• When you get the midterm, take a deep
breath, and accept that you probably won’t
be writing for some time yet
• Glance at the end of the fact situation and
see what you are actually being asked – it
will help you as you read
• Keep in mind what you’ll have to do as you
read the midterm – make notes as needed
but don’t go so far that it costs you too
much time
What You Want To Do
• A case study exam has basically four
elements to it
– Spot the significant issue
– Prove you know the law in this area
– Apply the law to the specific situation
– Reach an intelligent conclusion
• Then you move on to the next issue
Spotting the Significant Issues
• This can be a problem for some people,
especially when you aren’t sure what to write
• Any issue that raises a genuine question of law
is worth mentioning at least briefly
– But don’t create issues out of nowhere – for example
in the first assignment, there’s no point in raising the
question of whether there might be other partners
– Also, some issues are meatier than others, so use
your time to write about the major issues and don’t
waste it all writing on minor stuff
• Judgment is involved here and there’s no way
around it – you need to have a sense of what’s
most important to do this properly
Prove You Know the Law
• When you are starting in on an issue, it’s good to
start by demonstrating that you know the law in
this area
• It may feel artificial, but it’s a good way to both
be sure your approach stays on track and also to
be sure you get some marks on the topic, even if
you go wrong in application
– Ex. (when dealing with a negligence situation) “The
relevant tests to determine if negligence has occurred
include duty of care, standard of care, and causation.”
– Drop that in first, then apply it to the question
Applying the Law to the Issue
• When you apply the law to the issue at hand you
can pull out more than you mentioned at first
– “The relevant tests to determine if negligence has
occurred include duty of care, standard of care, and
causation. As this is a case of vicarious liability,
however, it will also be especially important to
determine in the worker was acting in the course of
employment …”
• Knowing how far to write out the law before you
start applying it can be tricky – give it a line or
two but no more than that
• Also, once you’ve said it one place, you don’t
need to do it again
Reaching a Conclusion
• This is actually the easiest part of the exercise
– You conclusion doesn’t need to be the “right” one, it
just needs to be reasonable
– Remember to weigh the facts as you’ve presented
them neutrally – even though you are advising one
person your ideas of how the law works shouldn’t
change
– Degrees of certainty are important – don’t imply you
are sure if you aren’t, and don’t hedge on a clear issue
– In any case, however, you can do very well on a
subject if you do everything else well, and don’t
conclude very well