The partnership primer – is partnering the right business move?

Partnership is a foundational element of the law of business organization. To understand a partnership, you have to consider four simple and foundational questions:

When does the partnership exist?

In Ontario the Partnerships Act establishes the basic rules of partnerships. Other provinces and territories have their own partnership regulations, but the principles are usually much the same as Ontario’s. The Partnerships Act defines partnerships as “the relation that subsists between persons carrying on a business in common with a view to profit”. So a few elements must be present for a partnership to exist:

  1. More than one person must be…
  2. In a relationship with each other that involves…
  3. Carrying on a business together…
  4. With a view to making profit.

This definition is based on the intention of parties, as disclosed by the circumstances. Did two people intend to carry on a business together with a view to making profit? If they did, a partnership will have been created.

The extent of each person’s investment in or, control of the partnership business will not define whether or not the partnership exists.

What is the legal status of the partnership?

A pig carries a bird on its head.

Partnerships can provide an opportunity for people with diverse skillsets to work together… but they are not without risk.

A partnership is not recognized as a separate legal entity. It is not legally distinct from the partners that form it. This means…

  1. Each partner is liable to the full extent of their personal assets for the debts and liabilities of the partnership. This means that if the partnership owes money to a creditor, the creditor can enforce that debt against the personal assets of any partner, not just the assets of the partnership.
  2. A partner cannot be recognized as an employee of the partnership business. This because no person can enter into a contract with themselves. Because a partnership has no legal existence distinct from the individual partners, it is not possible to be an employee and partner at one firm at the same time because it would involve employing yourself.
  3. Except in very particular circumstances provided for in the Partnerships Act, a partner can’t be a creditor of their partnership. Again, this is because it isn’t legally possible to contract with yourself, and this includes contracts to lend money.

What are the rights and responsibilities of the partners?

Under the Partnerships Act, there are eight key rights and responsibilities of partners. These rights and responsibilities emanate from the basic assumption that the partners are equal with respect to their capital contributions, rights to participate in the management of the business and rights to share in the profits of the business.

  1. All partners are entitled to share equally in the capital and profits of the business. They therefore have the responsibility to contribute equally to the losses sustained by the partnership.
  2. Every partner is entitled to take part in the management of the partnership business.
  3. New partners may not be added to the partnership without the consent of all the existing partners.
  4. Changes to the nature of the partnership may not be made without the consent of all the existing partners.
  5. A partner cannot be removed from the partnership without their consent.
  6. A partner is jointly liable with other partners for all debts and obligations of the firm as long as they are a partner.
  7. A partner is an agent of the partnership. This means that they can bind the firm and the other partners when acting in the course of their duties.
  8. As an extension of their agency, each partner owes a “fiduciary duty” – and duty of good faith – to all other partners.

What are the terms of the partnership?

The rights and responsibilities of a partner as set out above are the baseline rule established by the Partnerships Act. However, one of the most important elements of the law of partnership is that a partnership is a contractual relationship. Partnerships can be as varied as the people who are partners – partners can contract their particular rights and responsibilities, which can be different from the baseline rights and responsibilities established in the Partnerships Act. However, where a partnership contract is silent on a particular issue, the Partnerships Act’s terms for that issue will be implied.

– Isabelle Crew (3L, Faculty of Law, Queen’s University)

Presumed Innocent: Fundamentals of Canadian Law Podcast 005

We’re joined once again by Queen’s Law professor, and developer of the Law 201/701 Criminal Law module, Lisa Kerr. The topic: presumption of innocence. Why is it the bedrock of our criminal justice system? How does it level the playing field of one person versus all of society? And… is it really as venerable and ancient a principle as we think it is? Lisa joins us via Skype from New York to talk about all of this, and more!

The Brains and Brawn of Criminal Law: Mens Rea and Actus Reus

Robber is thinking of profit from robbery. Word balloon from Freepix.At the most fundamental level, criminal law is based around a single Latin phrase: “Actus non facit reum nisi mens sit rea”, which translates to “an act does not make a person guilty unless the mind is also guilty”. This means that a crime consists of two elements: the commission of a guilty act, known as actus reus, and the presence of a guilty mind, known as mens rea.

For example, section 322 of the Criminal Code defines theft as follows:

322 (1) Every one commits theft who fraudulently and without colour of right takes, or fraudulently and without colour of right converts to his use or to the use of another person, anything, whether animate or inanimate, with intent (a) to deprive, temporarily or absolutely, the owner of it, or a person who has a special property or interest in it, of the thing or of his property or interest in it…

We can see there are both actus reus and mens rea elements of this offence. The actus reus of theft is taking something without colour of right (something that isn’t yours), the mens rea is intending to deprive the owner of the thing taken.

Actus Reus

For actus reus to be made out there must be a voluntary commission of an unlawful act.  All actions are presumed to be voluntary, but the defence can argue that there was no actus reus because the defendant had no voluntary control of his or her actions. This was the case in R v Parks, where the accused presented evidence that he was sleepwalking at the time he killed his mother and father in law. The Supreme Court of Canada upheld Mr. Park’s acquittal on the basis that he was not acting voluntarily.

Additionally, where the offence charged includes the occurrence of specific result, the fact that those consequences occurred is another element of actus reus. For example, section 222(1) of the Criminal Code provides that “A person commits homicide when, directly or indirectly, by any means, he causes the death of a human being.” Causing death is therefore a necessary requirement for the actus reus of homicide. In determining causation the question we ask is, whether, but for the actions of the accused, would the result have happened?

Mens Rea

Courts presume that criminal offences require some form of subjective mens rea—intent, knowledge, recklessness, or willful blindness—in relation to all aspects of the actus reus unless Parliament clearly indicates otherwise.

For some offences, Parliament has indicated that mens rea is not required. These are known as strict liability offences. For a strict liability offence it is not necessary for the Crown to prove the existence of mens rea—the act itself is the entire offence. If charged with a strict liability offence, the accused may advance the offence that they took all reasonable steps to avoid the act. An absolutely liability offence is similar, but the accused is not able to advance a defence of this nature.

So when you’re wondering if something is a crime, start with “brains and brawn,” and ask yourself if criminal intent and criminal action were both present. As we’ve seen, there are exceptions, but it’s a reasonable place to start.

– Isabelle Crew (3L, Faculty of Law, Queen’s University)

Thought balloon in illustration courtesy Freepik.

Marijuana Legalization and the Federal-Provincial Relationship: Fundamentals of Canadian Law Podcast 004

We all know that the Canadian federal government is decriminalizing marijuana, but what does that mean? Queen’s Associate Dean Academic, Cherie Metcalf, is here to explain how the federal government and provincial governments are legally linked, and how that intricate relationship is key to understanding how pot decriminalization will happen. Cherie is also the creator of the Constitutional Law module for Law 201/701 in the Queen’s Certificate in Law — to find out more about the only online certificate in law offered in Canada by a law faculty, visit http://takelaw.ca.

Whose law is it anyway? A guide to Canadian criminal law

Almost everyone in Canada has dealt with criminal law at some point – a criminal penalty can include a simple fine like a parking ticket on through more serious punishment for serious crimes. Even if you’ve never committed a single infraction, criminal law is an active force in all our lives.

But where does criminal law come from, and who has the power to say what is criminal? Let’s take a quick look at the fundamental sources of criminal law in Canada, starting with the basic principles and structure of our criminal justice system.

Sources of Canadian Criminal Law

To get to the origins of criminal law in Canada, we have to go all the way back to 1867 and the Constitution Act. This document, issued by the British Crown, determined the exclusive jurisdiction of the Parliament of Canada over the matters of criminal law – that Canada, as a new nation, was responsible for defining and punishing its own crime.

Parliament enacted the Criminal Code in 1892. It codifies criminal offenses in Canada, though much of its content was imported from Britain. The Code is not the only source of criminal law in Canada: it has been expanded on since its creation by other federal statutes like the Canada Evidence Act and the Controlled Drugs and Substances Act.

In 1982, a new Constitution Act was passed, along with the Canadian Charter of Rights and Freedoms. The Charter establishes the fundamental rights of Canadians, including the right to a trial within a reasonable delay, and to be presumed innocent until proven guilty.

All Criminal Law is Federal

But the provinces can still get you in trouble…

Federal and Provincial Law in CanadaUltimately, this means that all crime is federal, in the sense that the Parliament of Canada has exclusive jurisdiction over criminal law, and is the source of the Criminal Code.

But wait! The provinces also have their own powers, and can set regulations to create quasi-criminal offenses, also known as regulatory offences. The provinces also have a number of important powers associated with the administration of criminal law – they hire prosecutors, appoint provincial court judges, and are responsible for the majority of criminal law prosecutions.

Let’s expand on that by going back to the Constitution Act of 1867. Among the many things defined in the Constitution Act are how power is split between the federal and provincial governments.

The section, 92.15, of the Constitution Act specifies that provinces are in charge of “[t]he Imposition of Punishment by Fine, Penalty, or Imprisonment for enforcing any Law of the Province made in relation to any Matter coming within any of the Classes of Subjects enumerated in this Section”.

So what does that mean? It means that the provinces can create the quasi—criminal offences only in relation to the matters within their jurisdiction. One example is Ontario’s Liquor Control Act. It defines, among other things, who can sell alcohol and under what conditions, which is entirely in the province’s jurisdiction as laid out in our Constitution.

Provinces can, in turn, delegate power to municipalities to create and enforce their own bylaws. Things like pet control, parking, garbage dumping, etc. are traditionally municipal, and a different set of regulatory offenses.

…and most criminal cases are tried in provincial courts!

The provinces also participate in criminal matters by upholding the administration of justice within the province including the constitution and organization of provincial courts. The section 92.14  grants provinces jurisdiction over “[t]he Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and of Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts”.

This seems complicated!

It is! Criminal law is not for the faint-hearted. But there are basically two things to remember:

One, there are two levels of crime. Crime as defined by the Criminal Code and other statutes, like murder, assault, theft, fraud, property crimes like arson… are all federal-level crimes. Infractions of regulations, like speeding on the highway, not licensing your pet, or serving liquor without a license, are usually provincial or municipal regulatory offenses. Provinces and municipalities can have their own courts and enforcement mechanisms for these.

And second, provinces and municipalities support the federal system by helping enforce the law. That’s why the Ontario Provincial Police or the Winnipeg police force can investigate, arrest, and prosecute people for murder (a federal crime), as well as provincial and municipal infractions. All levels support the investigation and prosecution of federal crime, but only Parliament can decide what is a crime by amending the Criminal Code.

The difference between “Aboriginal” and “Indigenous” Law with Hugo Choquette: Fundamentals of Canadian Law Podcast 003

Totem Pole in Vancouver BCAboriginal Law? Indigenous Law? What’s the difference? There is one — and it’s huge! We unpack what the terminology means (and how we arrived at “Indigenous” as the preferred* term for pre-colonial North American peoples) in an in-depth discussion with Hugo Choquette, Queen’s Law professor and the developer of Law 202/702, Aboriginal Law, in the Certificate in Law program.

*kind of. It’s complicated! Listen to the episode.

The “Convict Code,” Prison Law and Duress: Fundamentals of Canadian Law 002

Crowd of small symbolic 3d figures, isolatedThis week on Fundamentals of Canadian Law, the “Convict Code,” duress as a defense, and prison discipline — we’re joined by professor Lisa Kerr, a faculty member at Queen’s Law and the creator of the Criminal Law module of Law 201/701: Introduction to Canadian Law for the Queen’s Certificate in Law. We talk about a recent court case and how the “prison code” and the principle of duress as a defense factor into disciplinary decisions in prisons.

Call it a Contract: Myths and Misconceptions

Contract.

It’s a word that is both ubiquitous (sports fans hear nightly about athletes’ multi-million dollar contracts) and for some, scary or intimidating (he needs me to sign a contract about that!).  It may be one of the most misunderstood words in the legal lexicon.  Let’s consider some myths and misconceptions about contracts.

employment contract form with glasses and filler
If it’s not written down, it’s not a contract.  False!  A contract arises when two people, or two companies (or combinations of both) promise to do something for the other.  Like the cable company promising to provide you with Internet service, and you in return promising to pay for such services.  Thing is, it is the pair of promises that are generally the only requirement for there to be a contract – and those promises can be written, oral, or even implied by the context!  So the writing doesn’t make the contract, the promises do.

OK, but it’s MORE of a contract if it’s written down, right?  If the contract is written down, it doesn’t necessarily have more legal weight, but it is a whole lot easier to enforce.  Furthermore, it’s a lot easier to determine if you – or the other party – are living up to your obligations if there is a written record to reference.

So do those promises then have to be of equal value; does the contract does have to be fair?  Nope.  I said earlier that all we needed for a contract was a pair of promises; I didn’t say that exchange had to be a good deal for both people.  Fairness, like beauty, can be in the eye of the beholder.  Courts don’t examine what is, or is not, a good or fair deal (absent something nasty, say, like fraud).  So beware of one-sided contracts – they are still enforceable.

You mean like my cell phone contract, or those annoying “pop ups” whenever I download a new app or operating system?  Yes, those.  They are called “standard form contracts” and generally they are written to protect the provider of a service (the cell phone provider) from liability.  While they may seem a bit one-sided, they do help keep the costs of those services lower for consumers.

Does anybody actually read those agreements?  I just click “I accept” so I can get on with life.  They aren’t really enforceable against me, are they?  Well, why did you click “I accept” if you weren’t accepting the terms of the contract?  It’s really no different than signing a contract you didn’t read.  Think of that mouse click as being the same as an autograph.  You might want to read some of those terms that you’re agreeing to…

So contracts are nothing more than tools big companies use to intimidate consumers?  We have been talking about one type of common contract – the standard form contract – but contracts are incredibly useful tools to enhance and protect relationships, especially for small and start-up businesses.  They clarify relations, protect expectations and keep people from fighting.  And you can learn more about the uses of contracts in LAW 204, Corporate Law!

 Peter Kissick is the course developer for the Certificate in Law’s LAW 204/704: Corporate Law course. 

Fundamentals of Canadian Law Podcast, Episode 001: Morgan Jarvis and Trademark Law

Certificate in Law Podcast Logo

Welcome to the new podcast Fundamentals of Canadian Law, a podcast covering any and all aspects of the law in Canada. For our first episode, we’re joined by Morgan Jarvis, Director of the Queen’s Business Law Clinic and the designer of an upcoming course on intellectual property for the Queen’s Certificate in Law. Trademark and intellectual property the strange case of B Rich, and a great opportunity to look at trademark law and a unique way of delivering a Cease and Desist.

Fundamentals of Canadian Law is brought to you by the Queen’s Certificate in Law; find out more at takelaw.ca.

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Law 201/701 prof Lisa Kerr talks prison law with the CBC

Students who have taken Law 201/701 are familiar with Professor Lisa Kerr through her Criminal Law module in the course. The CBC’s Sunday Edition recently gave her an opportunity to explore some of the issues that are covered in passing in her criminal law overview. Michael Enright interviews Dr. Kerr in a 30-plus minute exploration of prison law, sentencing, and issues with how sentencing is currently managed in Canada. You can listen to the full audio of this interview here: