MOS2275 Study Guide
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
CHAPTER 1
KNOWLEDGE OF LAW AS A BUSINESS ASSET
Objectives
After studying this chapter, you should have an understanding of:
• the role of law in guiding conduct
• the importance of legal knowledge in the business environment
• the challenges posed by business ethics and their relationship to legal requirements
Learning Outcomes
•
•
•
•
•
Understand the role of law in the business environment (page 4)
Understand the purpose of laws (page 5)
Understand how legal disputes are resolved (page 9)
Understand the values of the Canadian legal system (page 11)
Recognize that knowledge of law is a business asset (page 12)
Chapter Summary
Law is involved in all aspects of business, whether the entrepreneur is aware of it or not. The law protects persons and their property, facilitates commercial interactions, particularly through contract law; and provides mechanisms for dispute resolution. Though not perfect, the Canadian legal system has much to recommend it. The system strives for just outcomes by demanding that both the process for determining liability and the rules or laws that are applied I that process are fair, objective, and free from bias. No justice system, of course, can consistently accomplish all these goals. Indeed, there are serious limitations to what the law can realistically achieve when a legal problem arises; thus, it is imperative that a business adopt a proactive approach in managing the legal aspects of its environment through a legal risk management plan. An emphasis is placed on the idea that knowledge of the law is an essential business asset. Informed owners and managers can protect their businesses by ensuring compliance with legal requirements. They can capitalize on the planning function of law to ensure the future of their business by entering into contracts. They also can seek enforcement of legal rules against those who do business or have other interactions with the enterprise. In this way, the property, contractual expectations, and profitability of the business are made more secure. Business ethics – while sometimes but not always coextensive with legal requirements – are also increasingly important to running a successful business. 1
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Study Outline
Use this outline to prepare a complete set of notes for this chapter.
Rules and Principles – page 5
______________________________________________________________________
______________________________________________________________________
Protecting Persons and Their Property _______________________________________
Sets rules of behaviour ________________________________________________
Enforces rules of behaviour ____________________________________________
Facilitating Interactions __________________________________________________
Creates certainty _____________________________________________________
Providing Mechanisms for Dispute Resolution ________________________________
Litigation __________________________________________________________
Mediation __________________________________________________________
Arbitration __________________________________________________________
SELF-ASSESSMENT
Key Terms
Briefly define each term in the space provided
Spam – page 3
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Business law – page 4
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Law – page 5
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Breach of contract – page 5
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
Contract law – page 8
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Litigation – page 9
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Mediation – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Arbitration – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Liability – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Legal risk management plan – page 13
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Business ethics – page 13
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
3
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Matching
Match the correct letter of each term in the space provided before each sentence.
A
B
C
D
E
F
G
H
I
J
1. ____
2. ____
3. ____
4. ____
5. ____
6. ____
7. ____
8. ____
9. ____
10. ____
Business law
Law
Breach of contract
Contract law
Litigation
Mediation
Arbitration
Liability
Spam
Business Ethics
Legal responsibility for a loss.
Failure to comply with a contractual promise.
Parties try to settle a dispute with the help of a neutral party.
Unsolicited e-mail advertising a product or service.
A set of rules and principles that guide our conduct.
Moral principles and values that seek to determine right and wrong in the _ business world.
The process whereby a neutral third party makes a binding decision to settle a dispute. Rules that govern commercial relationships.
Rules that make agreements binding.
The process involved when one person sues another.
Questions
Write a short, point-form answer for each question in the space provided. To assist you in understanding the chapter, it is recommended that you also use additional paper to write a full and complete essay answer for each question.
1. Outline five purposes of business law.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
2. How can knowledge of business law assist owners and managers in reaching their business goals?
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
3. How can lack of knowledge of business law harm a business?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
4. What is the broad definition of the law?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
5. How does law protect business interests?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
6. How does the law provide protection to members of society?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7. How does contract law facilitate commercial interactions?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
8. How does the law facilitate commercial relations?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
5
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
______________________________________________________________________
______________________________________________________________________
9. What is the function of business law?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
10. Identify the recommendations put forth that would prevent US lending institutions from compromising world markets.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
11. Outline four mechanisms to resolve disputes.
What is the problem with some traditional methods for resolving disputes?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
12. What is the problem with some traditional methods of resolving disputes?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
13. Who is obligated to prove the case when a breach of contract claim is made? What is the role of the judge with respect to this obligation?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
14. Identify the rule of law pertaining to parties who suffer a breach of contract and explain the rationale behind that rule.
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
15. How can a business person avoid negative business experiences and enhance returns?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
16. Identify the perspective that would consider mere compliance with the law as inadequate.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
17. Describe the relationship between law and business ethics, and between the business ethics and the entrepreneur.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
18. Describe an ethical issue that can arise with regard to labour practices.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
19. Describe an ethical issue that can arise with regard to employee privacy.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
20. Describe an ethical issue that can arise in relation to businesses and the environment.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
______________________________________________________________________
______________________________________________________________________
21. Identify the business consequences that can arise from skirting or violating ethical norms. ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
22. Identify the various forms that a business enterprise may take.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
23. What restrictions apply to the use of business names?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
24. Identify the legal implications associated with a business’s financing considerations.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
25. Identify the legal implications associated with a business’s financing considerations.
_____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
26. What should an entrepreneur be aware of with respect to the employment of staff?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
_____________________________________________________________________
27. Outline the legal implications that relate to a business’s marketing activities.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
28. Describe the legal implications of selling?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
29. What is considered to be an invaluable tool available to every business operation?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
30. Identify the goals of the Canadian legal system, its shortcomings, and what a business can do to manage the legal aspects of its environment.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
9
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWERS
Key Terms
Spam – page 3
Unsolicited e-mail advertising a product or service.
Business law – page 4
A set of established rules governing commercial relationships, including the enforcement of rights. Law – page 5
The set of rules and principles guiding conduct in society.
Breach of contract – page 5
Failure to comply with a contractual promise.
Contract law – page 8
Rules that make agreements binding and therefore facilitate planning and the enforcement of expectations. Litigation – page 9
The process involved when one person sues another.
Mediation – page 10
A process through which the parties to a dispute endeavour to reach a resolution with the assistance of a neutral person.
Arbitration – page 10
A process through which a neutral party makes a decision (usually binding) that resolves a dispute. Liability – page 10
Legal responsibility for the event or loss that has occurred.
Legal risk management plan – page 13
The comprehensive action plan for dealing with the legal risks involved in operating a business. Business ethics – page 13
Moral principles and values that seek to determine right and wrong in the business world.
Matching
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
H
C
F
I
B
J
G
A
D
E
– page 10
– page 5
– page 10
– page 3
– page 5
– page 13
– page 10
– page 4
– page 10
– page 9
Questions
1. Outline five purposes of business law.
Page 4: The five purposes of business law are:
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
•
•
•
•
•
to define general rules of commerce to protect business property including business ideas to provide mechanisms that let business people have input on participation and exposure to risk in business ventures to seek to ensure that losses are borne by those who are responsible for them to facilitate planning by ensuring compliance with commitments
2. How can knowledge of business law assist owners and managers in reaching their business goals?
Page 4: The law affects most business decisions. Understanding the role of law when making such decisions allows an entrepreneur to maximize the protection that the law extends while avoiding its pitfalls. Knowledge of law is a business asset that can assist owners and managers in reaching their goals and objectives.
3. How can lack of knowledge of business law harm a business?
Page 4-5: Lack of knowledge may result in failure to maximize opportunities or in losing out on them altogether. In addition, the business may be subjected to regulatory and judicial sanctions, including being fined, forced to pay penalties, or closed down altogether.
4. What is the broad definition of the law?
Page 5: The law is broadly defined as a set of rules and principles intended to guide conduct in society, primarily by protecting persons and their property, facilitating personal and commercial interactions, and providing mechanisms for dispute resolution.
5. How does law protect business interests?
Page 5: The law protects businesses by setting penalties and ensuring accountability. As well, the law ensures that losses are paid for by the parties responsible for creating them.
6. How does the law provide protection to members of society?
Page 5: The law provides protection to members of society in two primary ways. First, it sets rules with penalties in order to encourage compliance. Second, it seeks to make those who break the law accountable for their misconduct.
7. How does contract law facilitate commercial interactions?
Page 8: One of the ways commercial activity in the marketplace is governed is through contract law. The law of contract facilitates commercial activity by creating a measure of security and certainty in the business operations through binding agreements, which allow business enterprises to plan for the future and to enforce their commitments to each other.
8. How does the law facilitate commercial relations?
Page 8: The law facilitates commercial relations by providing rules governing the marketplace. The law functions to prevent disputes and to facilitate relationships. The more significant role of law is facilitative in that legal rules provide definition and context to doing business. 9. What is the function of business law?
11
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Page 8: The function of business is to prevent disputes and to facilitate business relationships by providing certainty in commercial agreements that in turn, enables transactions that might otherwise be unstructured and unpredictable.
10. Identify the recommendations put forth that would prevent US lending institutions from compromising world markets.
Page 8: Recommendations include a strengthened government presence in overseeing financial entities that originate and fund mortgages and implementation of legislation requiring originating lenders to retain at least a portion of the risk of default in any mortgages that are securitized.
11. Outline four mechanisms to resolve disputes.
Page 10: Solutions to a dispute exist at various levels of formality. The first logical step is for the parties to try to come to a resolution between themselves and produce, if necessary, a formalized settlement agreement. If this solution does not work, the legal system offers mediation and arbitration as ways of avoiding litigation. Sometimes, one business will commence legal action against another and take the matter to court. It is essential to a workable business environment that the last-resort solution provided by the litigation process be available to the disputants. In this way, the liability of one business to another can be established. 12. What is the problem with some traditional methods of resolving disputes?
Page 11: Traditional methods lack accordance with modern ideas of what is just, fair, and reasonable. Canada’s legal system is opposed to such inequitable, arbitrary and violent outcomes. 13. Who is obligated to prove the case when a breach of contract claim is made? What is the role of the judge with respect to this obligation?
Page 11: The party initiating the complaint is required to prove the case. The role of the judge is to be as objective as possible in determining whether the party initiating the law suit has proven its case. In doing so, the judge must determine what the agreement between the parties actually was, as well as the law governing the matter. The judge must then apply the law as impartially as possible to the situation. In order for the outcome of the dispute to be seen as just, the law the judge ultimately relies on must also be fair and reasonable.
14. Identify the rule of law pertaining to parties who suffer a breach of contract and explain the rationale behind that rule.
Page 11/12: It is a rule of law that a party who suffers a breach of contract is entitled to be put in the position they would have been in had the contract been fulfilled. The rationale behind the rule is simple: a party has broken its contractual promise and must therefore assume responsibility for any direct and foreseeable consequences the other party experiences as a result.
15. How can a business person avoid negative business experiences and enhance returns?
Page 13: Develop and implement a legal risk management plan that identifies legal risks and implements concrete measures for managing the legal risks before they occur.
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
16. Identify the perspective that would consider mere compliance with the law as inadequate. Page 13: It is from the perspective of a business’s reputation and profitability, and the application of business ethics, that mere compliance with the law may be considered inadequate. 17. Describe the relationship between law and business ethics, and between the business ethics and the entrepreneur.
Page 13: Business ethics concern moral principles and values that seek to determine right and wrong in the business world. Business ethics require entrepreneurs to confirm to principles of commercial morality, fairness and honesty.
18. Describe an ethical issue that can arise with regard to labour practices.
Page 13: The text identifies a few ethical issues: To what lengths should a company go to enhance shareholder return? To reduce costs, should a business employ child labour in countries where it is legal to do so? What if the child’s income is essential to family survival? 19. Describe an ethical issue that can arise with regard to employee privacy.
Page 13: Should an employer monitor employee e-mails and/or Internet use on company computers? 20. Describe an ethical issue that can arise in relation to businesses and the environment.
Page 13: Should a business improve upon the minimum environmental standards required by legislation? Should it move production to countries that have exceedingly low environmental standards?
21. Identify the business consequences that can arise from skirting or violating ethical norms. Page 15: A variety of consequences can result including lost revenue, bad publicity, public demonstrations, and condemnation for contributing to social injustice.
22. Identify the various forms that a business enterprise may take.
Page 15: The various forms that a business enterprise may take include a sole proprietorship, a partnership, or incorporation, which of which has its own set of legal rules.
23. What restrictions apply to the use of business names?
Page 15: A business is restricted from using a business name that is confusingly similar to the name of another business. A similar business name, even if inadvertently chosen, can lead to legal consequences, including being sued for damages by an individual or company that has built up goodwill in its business name.
24. Identify the legal implications associated with a business’s financing considerations.
Page 16: Borrowing operating capital for a business may involve a requirement to enter into a specialized form of contract known as a promissory note. The promissory note requires the borrower to promise to repay the principal loaned, together with interest, according to a schedule. If an entrepreneur is interested in raising capital for a business by selling shares,
13
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
the business must incorporate. If the incorporated company offers shares for sale to the public, it will have to comply with disclosure obligations under securities legislation.
25. Explain the legal implications for a business that relate to the property?
Page 16: The legal implications relating to property involve the unique set of laws that apply to the purchase of existing property, construction of new premises, or leasing existing premises. In addition, occupation of a business premises will likely be subject to regulations concerning matters such as fire and health and safety. A further legal implication for business arising from property relates to customers who may be injured on their premises.
In such instances, a business may be held liable for the injuries and be required to pay damages to its injured customer.
26. What should an entrepreneur be aware of with respect to the employment of staff?
Page 16: An entrepreneur should be aware of the law concerning unjust dismissal, employment equity legislation, and human rights legislation that prohibits specific forms of discrimination. 27. Outline the legal implications that relate to a business’s marketing activities.
Page 16: The legal implications of promoting a business to the public involve prohibitions against false and misleading advertising, as well as trademark and copyright law.
28. Describe the legal implications of selling?
Page 16: The legal implications to a business with regard to its selling activities require that a reasonable level of service be provided to customers.
29. What is considered to be an invaluable tool available to every business operation?
Page 16: A properly devised legal risk management plan is an invaluable tool for managing the legal elements of the business environment.
30. Identify the goals of the Canadian legal system, its shortcomings, and what a business can do to manage the legal aspects of its environment.
Page 16: Though not perfect, the Canadian legal system strives for just outcomes by demanding that both the process for determining liability and the rule or laws that are applied in that process are fair, objective and free from bias. There are serious limitations to what the law can realistically achieve when a legal problem arises; thus, it is imperative that a business adopt a proactive approach in managing the legal aspects of its environment through a legal risk management plan.
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1
KNOWLEDGE OF LAW AS A BUSINESS ASSET
Objectives
After studying this chapter, you should have an understanding of:
• the role of law in guiding conduct
• the importance of legal knowledge in the business environment
• the challenges posed by business ethics and their relationship to legal requirements
Learning Outcomes
•
•
•
•
•
Understand the role of law in the business environment (page 4)
Understand the purpose of laws (page 5)
Understand how legal disputes are resolved (page 9)
Understand the values of the Canadian legal system (page 11)
Recognize that knowledge of law is a business asset (page 12)
Chapter Summary
Law is involved in all aspects of business, whether the entrepreneur is aware of it or not. The law protects persons and their property, facilitates commercial interactions, particularly through contract law; and provides mechanisms for dispute resolution. Though not perfect, the Canadian legal system has much to recommend it. The system strives for just outcomes by demanding that both the process for determining liability and the rules or laws that are applied I that process are fair, objective, and free from bias. No justice system, of course, can consistently accomplish all these goals. Indeed, there are serious limitations to what the law can realistically achieve when a legal problem arises; thus, it is imperative that a business adopt a proactive approach in managing the legal aspects of its environment through a legal risk management plan. An emphasis is placed on the idea that knowledge of the law is an essential business asset. Informed owners and managers can protect their businesses by ensuring compliance with legal requirements. They can capitalize on the planning function of law to ensure the future of their business by entering into contracts. They also can seek enforcement of legal rules against those who do business or have other interactions with the enterprise. In this way, the property, contractual expectations, and profitability of the business are made more secure. Business ethics – while sometimes but not always coextensive with legal requirements – are also increasingly important to running a successful business. 1
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Study Outline
Use this outline to prepare a complete set of notes for this chapter.
Rules and Principles – page 5
______________________________________________________________________
______________________________________________________________________
Protecting Persons and Their Property _______________________________________
Sets rules of behaviour ________________________________________________
Enforces rules of behaviour ____________________________________________
Facilitating Interactions __________________________________________________
Creates certainty _____________________________________________________
Providing Mechanisms for Dispute Resolution ________________________________
Litigation __________________________________________________________
Mediation __________________________________________________________
Arbitration __________________________________________________________
SELF-ASSESSMENT
Key Terms
Briefly define each term in the space provided
Spam – page 3
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Business law – page 4
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Law – page 5
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Breach of contract – page 5
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
Contract law – page 8
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Litigation – page 9
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Mediation – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Arbitration – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Liability – page 10
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Legal risk management plan – page 13
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Business ethics – page 13
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
3
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Matching
Match the correct letter of each term in the space provided before each sentence.
A
B
C
D
E
F
G
H
I
J
1. ____
2. ____
3. ____
4. ____
5. ____
6. ____
7. ____
8. ____
9. ____
10. ____
Business law
Law
Breach of contract
Contract law
Litigation
Mediation
Arbitration
Liability
Spam
Business Ethics
Legal responsibility for a loss.
Failure to comply with a contractual promise.
Parties try to settle a dispute with the help of a neutral party.
Unsolicited e-mail advertising a product or service.
A set of rules and principles that guide our conduct.
Moral principles and values that seek to determine right and wrong in the _ business world.
The process whereby a neutral third party makes a binding decision to settle a dispute. Rules that govern commercial relationships.
Rules that make agreements binding.
The process involved when one person sues another.
Questions
Write a short, point-form answer for each question in the space provided. To assist you in understanding the chapter, it is recommended that you also use additional paper to write a full and complete essay answer for each question.
1. Outline five purposes of business law.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
2. How can knowledge of business law assist owners and managers in reaching their business goals?
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
3. How can lack of knowledge of business law harm a business?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
4. What is the broad definition of the law?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
5. How does law protect business interests?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
6. How does the law provide protection to members of society?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7. How does contract law facilitate commercial interactions?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
8. How does the law facilitate commercial relations?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
5
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
______________________________________________________________________
______________________________________________________________________
9. What is the function of business law?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
10. Identify the recommendations put forth that would prevent US lending institutions from compromising world markets.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
11. Outline four mechanisms to resolve disputes.
What is the problem with some traditional methods for resolving disputes?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
12. What is the problem with some traditional methods of resolving disputes?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
13. Who is obligated to prove the case when a breach of contract claim is made? What is the role of the judge with respect to this obligation?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
14. Identify the rule of law pertaining to parties who suffer a breach of contract and explain the rationale behind that rule.
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
15. How can a business person avoid negative business experiences and enhance returns?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
16. Identify the perspective that would consider mere compliance with the law as inadequate.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
17. Describe the relationship between law and business ethics, and between the business ethics and the entrepreneur.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
18. Describe an ethical issue that can arise with regard to labour practices.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
19. Describe an ethical issue that can arise with regard to employee privacy.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
20. Describe an ethical issue that can arise in relation to businesses and the environment.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
______________________________________________________________________
______________________________________________________________________
21. Identify the business consequences that can arise from skirting or violating ethical norms. ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
22. Identify the various forms that a business enterprise may take.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
23. What restrictions apply to the use of business names?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
24. Identify the legal implications associated with a business’s financing considerations.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
25. Identify the legal implications associated with a business’s financing considerations.
_____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
26. What should an entrepreneur be aware of with respect to the employment of staff?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
_____________________________________________________________________
27. Outline the legal implications that relate to a business’s marketing activities.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_____________________________________________________________________
28. Describe the legal implications of selling?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
29. What is considered to be an invaluable tool available to every business operation?
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30. Identify the goals of the Canadian legal system, its shortcomings, and what a business can do to manage the legal aspects of its environment.
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9
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWERS
Key Terms
Spam – page 3
Unsolicited e-mail advertising a product or service.
Business law – page 4
A set of established rules governing commercial relationships, including the enforcement of rights. Law – page 5
The set of rules and principles guiding conduct in society.
Breach of contract – page 5
Failure to comply with a contractual promise.
Contract law – page 8
Rules that make agreements binding and therefore facilitate planning and the enforcement of expectations. Litigation – page 9
The process involved when one person sues another.
Mediation – page 10
A process through which the parties to a dispute endeavour to reach a resolution with the assistance of a neutral person.
Arbitration – page 10
A process through which a neutral party makes a decision (usually binding) that resolves a dispute. Liability – page 10
Legal responsibility for the event or loss that has occurred.
Legal risk management plan – page 13
The comprehensive action plan for dealing with the legal risks involved in operating a business. Business ethics – page 13
Moral principles and values that seek to determine right and wrong in the business world.
Matching
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
H
C
F
I
B
J
G
A
D
E
– page 10
– page 5
– page 10
– page 3
– page 5
– page 13
– page 10
– page 4
– page 10
– page 9
Questions
1. Outline five purposes of business law.
Page 4: The five purposes of business law are:
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
•
•
•
•
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to define general rules of commerce to protect business property including business ideas to provide mechanisms that let business people have input on participation and exposure to risk in business ventures to seek to ensure that losses are borne by those who are responsible for them to facilitate planning by ensuring compliance with commitments
2. How can knowledge of business law assist owners and managers in reaching their business goals?
Page 4: The law affects most business decisions. Understanding the role of law when making such decisions allows an entrepreneur to maximize the protection that the law extends while avoiding its pitfalls. Knowledge of law is a business asset that can assist owners and managers in reaching their goals and objectives.
3. How can lack of knowledge of business law harm a business?
Page 4-5: Lack of knowledge may result in failure to maximize opportunities or in losing out on them altogether. In addition, the business may be subjected to regulatory and judicial sanctions, including being fined, forced to pay penalties, or closed down altogether.
4. What is the broad definition of the law?
Page 5: The law is broadly defined as a set of rules and principles intended to guide conduct in society, primarily by protecting persons and their property, facilitating personal and commercial interactions, and providing mechanisms for dispute resolution.
5. How does law protect business interests?
Page 5: The law protects businesses by setting penalties and ensuring accountability. As well, the law ensures that losses are paid for by the parties responsible for creating them.
6. How does the law provide protection to members of society?
Page 5: The law provides protection to members of society in two primary ways. First, it sets rules with penalties in order to encourage compliance. Second, it seeks to make those who break the law accountable for their misconduct.
7. How does contract law facilitate commercial interactions?
Page 8: One of the ways commercial activity in the marketplace is governed is through contract law. The law of contract facilitates commercial activity by creating a measure of security and certainty in the business operations through binding agreements, which allow business enterprises to plan for the future and to enforce their commitments to each other.
8. How does the law facilitate commercial relations?
Page 8: The law facilitates commercial relations by providing rules governing the marketplace. The law functions to prevent disputes and to facilitate relationships. The more significant role of law is facilitative in that legal rules provide definition and context to doing business. 9. What is the function of business law?
11
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
Page 8: The function of business is to prevent disputes and to facilitate business relationships by providing certainty in commercial agreements that in turn, enables transactions that might otherwise be unstructured and unpredictable.
10. Identify the recommendations put forth that would prevent US lending institutions from compromising world markets.
Page 8: Recommendations include a strengthened government presence in overseeing financial entities that originate and fund mortgages and implementation of legislation requiring originating lenders to retain at least a portion of the risk of default in any mortgages that are securitized.
11. Outline four mechanisms to resolve disputes.
Page 10: Solutions to a dispute exist at various levels of formality. The first logical step is for the parties to try to come to a resolution between themselves and produce, if necessary, a formalized settlement agreement. If this solution does not work, the legal system offers mediation and arbitration as ways of avoiding litigation. Sometimes, one business will commence legal action against another and take the matter to court. It is essential to a workable business environment that the last-resort solution provided by the litigation process be available to the disputants. In this way, the liability of one business to another can be established. 12. What is the problem with some traditional methods of resolving disputes?
Page 11: Traditional methods lack accordance with modern ideas of what is just, fair, and reasonable. Canada’s legal system is opposed to such inequitable, arbitrary and violent outcomes. 13. Who is obligated to prove the case when a breach of contract claim is made? What is the role of the judge with respect to this obligation?
Page 11: The party initiating the complaint is required to prove the case. The role of the judge is to be as objective as possible in determining whether the party initiating the law suit has proven its case. In doing so, the judge must determine what the agreement between the parties actually was, as well as the law governing the matter. The judge must then apply the law as impartially as possible to the situation. In order for the outcome of the dispute to be seen as just, the law the judge ultimately relies on must also be fair and reasonable.
14. Identify the rule of law pertaining to parties who suffer a breach of contract and explain the rationale behind that rule.
Page 11/12: It is a rule of law that a party who suffers a breach of contract is entitled to be put in the position they would have been in had the contract been fulfilled. The rationale behind the rule is simple: a party has broken its contractual promise and must therefore assume responsibility for any direct and foreseeable consequences the other party experiences as a result.
15. How can a business person avoid negative business experiences and enhance returns?
Page 13: Develop and implement a legal risk management plan that identifies legal risks and implements concrete measures for managing the legal risks before they occur.
Copyright © 2011 by Nelson Education Ltd.
CHAPTER 1: KNOWLEDGE OF LAW AS A BUSINESS ASSET
16. Identify the perspective that would consider mere compliance with the law as inadequate. Page 13: It is from the perspective of a business’s reputation and profitability, and the application of business ethics, that mere compliance with the law may be considered inadequate. 17. Describe the relationship between law and business ethics, and between the business ethics and the entrepreneur.
Page 13: Business ethics concern moral principles and values that seek to determine right and wrong in the business world. Business ethics require entrepreneurs to confirm to principles of commercial morality, fairness and honesty.
18. Describe an ethical issue that can arise with regard to labour practices.
Page 13: The text identifies a few ethical issues: To what lengths should a company go to enhance shareholder return? To reduce costs, should a business employ child labour in countries where it is legal to do so? What if the child’s income is essential to family survival? 19. Describe an ethical issue that can arise with regard to employee privacy.
Page 13: Should an employer monitor employee e-mails and/or Internet use on company computers? 20. Describe an ethical issue that can arise in relation to businesses and the environment.
Page 13: Should a business improve upon the minimum environmental standards required by legislation? Should it move production to countries that have exceedingly low environmental standards?
21. Identify the business consequences that can arise from skirting or violating ethical norms. Page 15: A variety of consequences can result including lost revenue, bad publicity, public demonstrations, and condemnation for contributing to social injustice.
22. Identify the various forms that a business enterprise may take.
Page 15: The various forms that a business enterprise may take include a sole proprietorship, a partnership, or incorporation, which of which has its own set of legal rules.
23. What restrictions apply to the use of business names?
Page 15: A business is restricted from using a business name that is confusingly similar to the name of another business. A similar business name, even if inadvertently chosen, can lead to legal consequences, including being sued for damages by an individual or company that has built up goodwill in its business name.
24. Identify the legal implications associated with a business’s financing considerations.
Page 16: Borrowing operating capital for a business may involve a requirement to enter into a specialized form of contract known as a promissory note. The promissory note requires the borrower to promise to repay the principal loaned, together with interest, according to a schedule. If an entrepreneur is interested in raising capital for a business by selling shares,
13
PART 1: THE LEGAL ENVIRONMENT OF BUSINESS
the business must incorporate. If the incorporated company offers shares for sale to the public, it will have to comply with disclosure obligations under securities legislation.
25. Explain the legal implications for a business that relate to the property?
Page 16: The legal implications relating to property involve the unique set of laws that apply to the purchase of existing property, construction of new premises, or leasing existing premises. In addition, occupation of a business premises will likely be subject to regulations concerning matters such as fire and health and safety. A further legal implication for business arising from property relates to customers who may be injured on their premises.
In such instances, a business may be held liable for the injuries and be required to pay damages to its injured customer.
26. What should an entrepreneur be aware of with respect to the employment of staff?
Page 16: An entrepreneur should be aware of the law concerning unjust dismissal, employment equity legislation, and human rights legislation that prohibits specific forms of discrimination. 27. Outline the legal implications that relate to a business’s marketing activities.
Page 16: The legal implications of promoting a business to the public involve prohibitions against false and misleading advertising, as well as trademark and copyright law.
28. Describe the legal implications of selling?
Page 16: The legal implications to a business with regard to its selling activities require that a reasonable level of service be provided to customers.
29. What is considered to be an invaluable tool available to every business operation?
Page 16: A properly devised legal risk management plan is an invaluable tool for managing the legal elements of the business environment.
30. Identify the goals of the Canadian legal system, its shortcomings, and what a business can do to manage the legal aspects of its environment.
Page 16: Though not perfect, the Canadian legal system strives for just outcomes by demanding that both the process for determining liability and the rule or laws that are applied in that process are fair, objective and free from bias. There are serious limitations to what the law can realistically achieve when a legal problem arises; thus, it is imperative that a business adopt a proactive approach in managing the legal aspects of its environment through a legal risk management plan.
Copyright © 2011 by Nelson Education Ltd.
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