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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
True/False Questions
1) The law can affect a business both positively and negatively. It often prohibits actions
that otherwise would be possible. However, it sometimes permits parties to do something
that they could not otherwise do.
a. True
b. False
2) Beta Inc has recently discovered that a defect in one of its products poses a risk of
injury to consumers. Its only option, from a legal risk management perspective, is to
eliminate the risk of liability by removing the product from the market.
a. True
b. False
3) As described in the text, the four forms of risk management are risk avoidance, risk
elimination, risk transfer, and risk acceptance.
a. True
b. False
4) Sabeka Inc has discovered that one of its products may cause consumers to suffer a
certain form of property damage. In response to that risk, the company has written an
exclusion clause into its sales contracts. In doing so, it has adopted a form of risk
management known as risk shifting.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
5) Jahume Ltd operates as an Internet service provider. It has retained Alison to work as
in-house counsel. Following an increasingly common trend, this means that she will work
for the company from her own home, rather than from a traditional law firm office.
a. True
b. False
6) Quebec is said to be a “civil law system” because it is derived from the legal system
that governed the citizens of ancient Greece.
a. True
b. False
7) “Administrative law” derives its name from the fact that it is concerned with the
administration of the trial courts and appellate courts.
a. True
b. False
8) Bianca punched Mick. She now finds herself in court. The person who has brought the
claim for damages against her is Mick himself. It is safe to assume that the court is
concerned with a private law issue, rather than a criminal law issue.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
9) Glimmer Co recently received a tax assessment with which it disagrees. It does not
believe that it should be required to pay the full amount of the demand. If it challenges
the assessment, the case will fall into the category of “public law” even though the
company is a private corporation.
a. True
b. False
10) Paul has committed a legal wrong against Buckmaster Strings Inc. Depending upon
the circumstances, it may be possible for legal proceedings to be taken against Paul in
both criminal law and tort law.
a. True
b. False
11) Because of the need to ensure that the fundamental rules for governing the country
are kept up to date, the Constitution (unlike most statutes) is quite easily amended.
a. True
b. False
12) Athlone Inc wants to start a new television channel. To do so, it requires a
government licence. It should apply to the federal government, rather than the provincial
government, because the issue of telecommunications is not mentioned in the
Constitution. It therefore falls under federal jurisdiction because of the residual clause.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
a. True
b. False
13) Kane Media Inc wants to start a new radio station. The government has refused to
grant a licence. Kane Media Inc believes that the government’s position is blatantly
discriminatory. Nevertheless, it cannot rely on the Charter of Rights and Freedoms,
which was intended to protect the fundamental rights and freedoms of people, and which
does not apply in favour of companies.
a. True
b. False
14) A bill to amend a business corporations statute was introduced in the House of
Commons. The statute in question must be a piece of federal legislation, as opposed to
provincial legislation.
a. True
b. False
15) Quiet Corner Bookstore is something of a landmark. It was opened in 1908 and it has
long served the needs of the community. The store’s popularity is based not only on its
reputation for excellent service, but also on the fact that it has always been run by
members of the same family: the Meyers clan. In an age of increasingly anonymous chain
stores, customers appreciate the personal touch that they receive at the Quiet Corner.
Recently, however, the government has announced that it intends to expropriate the land
upon which the store is located in order to build a highway through the neighbourhood.
The Meyers family may, however, be able to defeat that plan, and save their store, by
relying on a provision of the Charter that protects cherished property.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
Multiple Choice Questions
1) The three steps in risk management are
a. realization, response, and reaction.
b. recognition, evaluation, and insurance.
c. identification, evaluation, and response.
d. evaluation, qualification, and litigation.
e. assessment, formulation, and implementation.
2) Alpha Corp has discovered that one of its products is potentially dangerous. It
therefore has purchased liability insurance. It has employed a form of risk management
known as
a. risk capitalization.
b. risk elimination.
c. risk shifting.
d. risk acceptance.
e. risk avoidance.
3) Beta Inc has discovered that one of its products is potentially dangerous. It therefore
pulled that product from the store shelves before any were sold. It has employed a form
of risk management known as
a. risk destruction.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
b. risk avoidance.
c. risk reduction.
d. risk acceptance.
e. risk denial.
4) Gamma Co has discovered that one of its products is potentially dangerous. That
danger, however, is not great. There is only a small chance that someone will be hurt, and
even if someone is hurt, the injury will not be life threatening. Gamma Co therefore has
decided to do nothing about the danger. It has employed a form of risk management
known as
a. risk ignorance.
b. risk aversion.
c. risk displacement.
d. risk harmonization.
e. risk acceptance.
5) In an effort to increase sales, Delta Ltd hired Chandra, a marketing expert. Because
Delta was concerned about being held responsible for any torts that Chandra might
commit, it arranged to hire her as an independent contractor, rather than an employee. It
has employed a form of risk management known as
a. vicarious liability.
b. independent responsibility.
c. risk allowance.
d. risk shifting.
e. incorporation.
6) Epsilon Inc has recently retained the services of Noriko as in-house counsel. Which of
the following statements is most likely TRUE?
a. Although Noriko is not an employee of Epsilon Inc, she can be called in from her law
firm whenever the company has a legal problem.
b. Noriko can both help to resolve legal problems and help to prevent legal problems
from arising in the first place.
c. Epsilon Inc has probably made a mistake because, like most in-house counsel, Noriko
is probably available because she cannot find work in a law firm.
d. Epsilon Inc has hired Noriko for the purpose of resolving a single legal problem that it
expects will drag on for several years.
e. Noriko may provide advice to Epsilon, but she cannot represent the company in court.
7) Which of the following statements is TRUE with respect to risk management and
incorporation?
a. Incorporation is irrelevant to risk management because corporations cannot be held
liable.
b. Incorporation increases the risk of liability because a shareholder of a corporation is
personally liable for all of the corporation’s torts.
c. Incorporation completely eliminates the risk of liability because the government is
responsible for a corporation’s debts.
d. Incorporation reduces the risk of liability because the doctrine of limited liability
usually means that a corporation’s debts must be paid by the corporation and not by the
people who run the corporation.
e. Incorporation spreads the risk of liability because if one corporation becomes liable,
every other corporation in the same province may be required to pay the debt.
8) Which of the following statements is TRUE with respect to exclusion clauses and risk
management?
a. An exclusion clause can be inserted into a contract for the sale of goods.
b. An exclusion clause can affect liability for property damage but not for personal injury.
c. An exclusion clause can be used by a person but not by a corporation.
d. An exclusion clause represents a type of risk acceptance.
e. An exclusion clause always shifts the risk of liability onto an insurance company.
9) Techniques for managing risks include
a. insurance and incorporation but not exclusion clauses.
b. exclusion clauses, negligence, and contract.
c. incorporation, insurance, and exclusion clauses.
d. vicarious liability, employment, and the Charter.
e. independent contractors, exclusion clauses, and residual powers.
10) Red River Inc, which is based in Winnipeg, Manitoba, has sued a company called
Eiffel Tours, which is based in Paris, France. That dispute will be decided by the
“common law.” That most likely means that the case will be decided by
a. the provision of a statute.
b. a legal system that can be traced to England.
c. a legal system that can be traced to France.
d. a government official, other than a judge.
e. a law that is frequently applied in both France and Manitoba.
11) Which of the following statements is TRUE with respect to the law of Quebec?
a. Because Quebec inherited its laws from France, its criminal laws are different from
those that apply in other parts of Canada.
b. Because Quebec inherited its laws from France, its constitutional laws are different
from those that apply in other parts of Canada.
c. Even though Quebec inherited much of its law from France, it uses some of the same
laws that apply in other parts of Canada, but it also has a civil law system for much of the
law that is within provincial jurisdiction, including property and civil rights.
d. Quebec is considered a common law jurisdiction because it inherited most of its laws
from England.
e. Quebec is considered a common law jurisdiction because it inherited laws that were
once common to all parts of the Roman Empire.
12) Eric, who is a resident of Saskatchewan, has sued Trois Étoiles Ltd, which is a
company based in Quebec, for breach of contract. Which of the following statements is
TRUE?
a. The case can be classified as a “public matter” because it involves a person suing a
company for breach of contract.
b. The case will be heard in a “civilian jurisdiction” if the claim is heard by a
Saskatchewan court applying the laws of Saskatchewan.
c. The case can be classified as an “international law” matter if the claim is heard by a
Quebec court applying the laws of Quebec.
d. The case would be classified as a “criminal matter” if Eric sued the government of
Quebec rather than the Quebec company.
e. The case can be classified as a “civil matter” under the “common law” if it is decided
on the basis of the laws of Saskatchewan.
13) Which of the following statements is TRUE with respect to administrative law?
a. Administrative law is concerned with the behaviour of public officials and therefore is
not particularly important to business people.
b. Because of the Constitution, administrative law applies at the federal and provincial
levels but not at the municipal level
c. Administrative law affects the government but not private individuals or corporations.
d. Administrative law is the law by which the decisions of government appointed
decision makers and government appointed tribunals are reviewed by the courts.
e. Administrative law is usually classified as a branch of criminal law.
14) Attila works for Epsilon Inc. The police recently became aware of illegal activities in
connection with that organization. Which of the following statements is TRUE?
a. Epsilon Inc. may be charged with a “white collar crime,” which is any crime that was
committed by a corporate organization rather than an individual.
b. Neither Attila nor Epsilon Inc. can be charged with a “corporate crime” unless they
broke a law that was intended to protect another corporation.
c. A “white collar crime” is the same thing as a “corporate crime.”
d. Attila may be charged with a crime, but Epsilon Inc cannot, because only a human
being can be convicted of a criminal offence.
e. Even if Attila and Epsilon Inc are convicted of crimes, they may also be sued privately
if they have committed torts or by statute there is a private cause of action against them.
15) The category of public law contains
a. constitutional law and administrative law but not tax law.
b. constitutional law and tax law, among other things.
c. criminal law, employment law, and constitutional law.
d. administrative law and tax law but not criminal law.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
e. any case in which a government sues or is being sued.
16) The category of private law contains
a. contract law and tort law but not if a government has sued or is being sued.
b. real estate transactions, lawsuits based on deceit, and the violation of copyrights,
among other things.
c. contract law and property law but not tort law, which is closely related to criminal law.
d. only those cases that the parties resolve themselves, or with the assistance of a neutral
third party other than a judge.
e. rules that govern personal matters, such as the right to privacy but not rules that govern
public matters, such as the contracts of a public company.
17) The Canadian legal system contains various types of laws. It occasionally is
necessary to consider the relationship between two or more areas of law. Which of the
following statements is TRUE?
a. Because they deal with different types of rules, it is impossible for criminal law and
tort law to ever apply to the same set of facts.
b. Because they involve obligations that arise from different sources, it is impossible for
tort law and contract law to ever apply to the same set of facts.
c. “White collar crime” is a misleading phrase because the relevant concepts arise in tort
law rather than criminal law.
d. The relationship between an employer and an employee is governed entirely by the law
of contract.
e. A lawyer who provides careless services usually is sued in both tort and contract as the
lawyer owes the client a duty of care to not be careless and is also bound by the terms of
the contract with the client not to be careless.
18) Suppose that there is a general feeling in certain parts of the country that judges
should be elected rather than appointed. A system of electing judges can be introduced
only through a constitutional amendment. This means that
a. there must be unanimous agreement by all of the provincial legislatures.
b. the federal Parliament can adopt the new system as long as there is majority support in
both the House of Commons and the Senate.
c. the prime minister must call an election.
d. the new system must be supported by at least half the provinces, and those provinces
must contain at least two-thirds of the country’s population.
e. the new system must be supported by Parliament, plus two-thirds of the provinces,
where those consenting provinces represent at least half of the Canadian population.
19) The Citizen’s Coalition for Property Rights (the CCPR) believes that the Charter
should protect the right to own property. Which of the following statements is TRUE?
a. The CCPR has no need to worry because property rights are already expressly
protected by the Charter.
b. The Charter cannot be amended unless, among other things, the federal Parliament
agrees.
c. Because property rights are listed under section 91 of the Constitution, the CCPR will
not have to persuade the federal government to amend the Charter.
d. The Charter can be amended as long as at least half of the Canadian population
supports the protection of property rights.
e. The Charter cannot be amended unless the government holds a referendum and allows
individual Canadians to vote on the issue.
20) During a trial, a lawyer raised an argument based on the concept of the “residual
power.” The lawyer’s argument must
a. involve an issue of private law.
b. be concerned with the amending formula.
c. be based on either section 98 or section 99 of the Constitution.
d. have something to do with the municipal governments.
e. be concerned with the federal government and constitutional law.
21) A province created a statute. A court ruled that the statute was ultra vires. That means
that
a. the statute has full force (ultra means “most” and vires means “strength,” as in
“virility”).
b. the province acted contrary to the division of powers in that it enacted legislation that it
did not have the constitutional jurisdiction to enact.
c. the statute must violate the Charter.
d. the statute applies both inside and outside of the province.
e. the statute must deal with public law rather than private law.
22) In an effort to protect its dairy industry, a provincial government passed a law that
prohibits the importation or manufacture of soy milk. If a soy milk company challenges
that statute on constitutional grounds, what would a court likely say?
a. Because property rights are protected by the Charter, the statute is constitutionally
invalid.
b. Inter-provincial trade is an issue that provinces are entitled to decide for themselves.
c. The federal government has jurisdiction over international trade but not over inter-
provincial trade.
d. The statute is entirely ultra vires because federal jurisdiction over international and
inter-provincial trade extends to every issue that is related to trade, including the
manufacture or production of soy milk.
e. The statute is at least partially intra vires because provinces have the authority to
regulate the production or manufacture of things like soy milk within the province but the
law may be constitutionally ultra vires as interfering with the federal jurisdiction over
inter-provincial trade, or mobility rights pursuant to the Charter.
23) Which of the following statements is TRUE with respect to the Charter?
a. It was introduced in 1982.
b. It is a federal statute.
c. Because it is intended to protect people’s rights and freedoms, it severely limits the
grounds upon which courts can strike down laws.
d. It only applies in favour of a government or a government actor.
e. It applies to federal laws but not provincial laws.
24) The federal, provincial, and territorial governments have decided to re-consider the
contents of the Charter. They are particularly interested in the possibility of protecting
economic and property rights. Which of the following statements is TRUE?
a. Although the Charter does not currently contain a section devoted exclusively to the
protection of economic and property rights, the right to “liberty” in section 7 of the
Charter has been judicially interpreted in a way that broadly provides such protection.
b. The introduction of a new Charter right for the protection of economic and property
rights would be desirable primarily because it would increase the federal government’s
ability to regulate natural resources.
c. The Supreme Court of Canada has said that because the Charter does not limit
economic and property rights, every Canadian enjoys the unconstrained right to transact
business whenever one wishes.
d. The introduction of a new Charter right for the protection of economic and property
rights might allow for the courts to compel governments to ensure that every Canadian
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
enjoys adequate housing however this would be an unlikely scenario. The U.S.
constitution has a clear right to property and no such judicial result has occurred in the
United States. Moreover, the concept of an “economic right” is not a historically defined
right in Canadian law or in similar common law systems.
e. Since the Charter applies to the relationship between private citizens, it should protect
economic and property rights.
25) The Charter includes (among other things) rights regarding
a. mobility, housing, and equality.
b. contracts, sexual orientation, and religion.
c. ownership, expression, and association.
d. equality based on religion, age, and ethnic origin.
e. Aboriginals, multiculturalism, and accommodation.
26) A provincial government recently enacted a statute that established a scholarship for
“Aboriginal students who are enrolled at Canadian universities.” Melissa, a university
student whose ancestors were all born in England, believes that the scholarship is
unconstitutional because it unfairly discriminates against her on the basis of her race. If
Melissa brought that complaint to court, a judge would likely say that
a. the scholarship presumably is unconstitutional because it discriminates on the basis of
race, and that it can be saved, if at all, only under section 1 of the Charter.
b. the scholarship is unconstitutional because the federal government has exclusive
jurisdiction over education as a result of section 92 of the Constitution.
c. the scholarship is valid under section 15(2) of the Charter because it is aimed at
improving the conditions of a disadvantaged group.
d. because Canadian universities are private institutions, the facts do not reveal any
government action that could possibly trigger the Charter‘s provisions.
e. Melissa is entitled to participate in the scholarship scheme because she is a woman and
because the Charter prefers rights based on sex to rights based on race.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
27) The rights and freedoms contained in the Charter are limited
a. to cases involving interactions between different governments.
b. to human beings, with the result that the Charter cannot work in favour of a company.
c. by the ability of a federal or provincial government to invoke the notwithstanding
clause only in relation to the rights and freedoms in section 2 or sections 7 to 15 of the
Charter, and the general limitation of those limits demonstrably justified in a free and
democratic society pursuant to section 1.
d. to situations in which the government created a law in bad faith.
e. to cases involving substantial amounts of money.
28) Lamda Corp is based in Vancouver but sells products across Canada. Which of the
following statements is TRUE with respect to Lamda Corp and the Charter?
a. Although the people who work for Lamda Corp enjoy Charter protection, the company
itself is not a person and therefore is not protected by the Charter.
b. Although Lamda Corp enjoys freedom of religion, it does not enjoy freedom of
expression.
c. Although Lamda Corp enjoys freedom of expression, it does not enjoy freedom of
religion.
d. Although Lamda Corp enjoys freedom of religion and freedom of expression, it is not
a person and therefore it does not enjoy equality rights.
e. Although Lamda Corp does not enjoy any Charter rights, it may be sued if it violates
the Charter rights of one of its employees.
29) The premier of your province wants to invoke the notwithstanding clause in order to
avoid the consequences of a recent decision by the Supreme Court of Canada. Before she
tries to do so, however, she wants to know as much as possible about the notwithstanding
clause. Which of the following statements is TRUE?
a. The notwithstanding clause cannot be invoked unless the relevant people are willing to
amend the Constitution.
b. If the notwithstanding clause is invoked, it will have effect for 10 years, after which it
will lapse unless it is reapplied.
c. The notwithstanding clause can be invoked by the federal government but not by a
provincial government.
d. The notwithstanding clause can be used against equality rights but not against mobility
rights.
e. The notwithstanding clause has been invoked frequently in the western provinces but
not in Ontario.
30) The Dark Room Bookstore was recently charged under the Criminal Code with
selling magazines that contain photographs of people involved in violent and degrading
sexual acts. The owner of the bookstore believes, however, that the government should
not interfere in the private lives of its citizens and that he has a right to express his
sexuality through the sale of such magazines. Which of the following statements is TRUE
with respect to the Charter in this situation?
a. Because freedom of expression is one of the fundamental rights that is contained in
section 2 of the Charter, it cannot be subject to the notwithstanding clause.
b. Once a court decides that the relevant provision of the Criminal Code does violate the
right to freedom of expression, it becomes impossible to save that provision under section
1 of the Charter.
c. The Charter is irrelevant in this case because the corporation that owns the store is not
a person and therefore cannot claim the right to freedom of expression.
d. Because the Charter applies only to government actions, it will not apply to this case
unless the court is satisfied that at least one of the magazines was sold to a government
official.
e. The owner would have a good legal defence that his Charter rights of freedom of
expression are infringed by the law. However, it is likely that the law will be upheld as a
reasonable infringement of the right of expression, which restriction is demonstrably
justified in a free and democratic society.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 1: Risk Management and Sources of Law
31) A provincial statute says that a monthly allowance of $250 is available to “any parent
or set of parents that cares for an adopted child who is under the age of 12.” That
provision was challenged under the Charter by a parent who cares for a young child to
whom she gave birth. The court agrees that the statute discriminates against “birth
parents.” As a remedy, the court could
a. declare that the relevant provision is valid under the Charter and is therefore
unconstitutional.
b. allow the federal government to amend the provincial statute.
c. grant an injunction that allows the parents to re-draft the statute in a way that extends
the allowance to birth parents.
d. read in a broader definition of “parent” that excludes both adoptive parents and birth
parents.
e. strike down the statute, but suspend the effect of that remedy in order to give the
government time to re-draft the legislation.
32) Sigma Inc sued Tau Ltd for breach of contract and asked for the remedy of specific
performance. The case will be heard in Alberta. Which of the following statements is
TRUE?
a. Specific performance is an equitable remedy because it historically was awarded by the
court of legislators.
b. Because of the fusion of courts, there no longer is any need to draw a distinction
between law and equity.
c. Sigma Inc’s claim against Tau Ltd is an example of legislative litigation because it
involves a claim by one private party against another private party.
d. Sigma Inc’s claim against Tau Ltd is a common law claim because it will be decided
on the basis of laws that historically were developed in French courts.
e. Specific performance is an equitable remedy which is now granted by the courts as the
courts of common law have been fused with the courts of equity.
