Startup Law Road Map and Business Law 

Goodlawyer has this comprehensive guide on Startup Law Road Map that is very helpful to understand Business law.

Canadian Civil Procedure 

What is a contract?

A contract is a legally binding agreement between at least two parties for a specific purpose. There are many types of business contracts, from those that involve money, such as sales contracts, to contracts that define a relationship, such as a confidentiality or non-compete agreement. While a verbal contract is still legal (except for in specific situations), most contracts are documented in written form.

What are your obligations?

At a fundamental level, your obligations depend on the terms of your contractual agreement.  A legally enforceable contract is called a valid contract. Being legally enforceable means that can be used in court to support a decision on a disputed item. If a contract does not have certain essential ingredients, it is not legally enforceable.  If a party fails to meet its obligation, that party risks breaching the contract. So, as obvious as it seems, you must be sure that you can meet all of your obligations before signing a contract as there may be no way to back out at a later date.

How do you make business contracts valid and enforceable?

In order for a business contract to be considered valid, there must be:

• Offer, acceptance, and consideration: First an offer is made that contains all of the important and relevant terms of the contract in a clear and precise manner.  Once the offer is accepted, something of value, either an object or service, is exchanged between the parties as consideration.
• Capacity: In every valid business contract, both parties must have the ability or capacity to understand the terms and nature of the contract. Therefore, anyone with a developmental disability, impaired judgement, or who is not the age of majority in Canada (18 or 19 years of age) does not have the capacity to enter into a valid and enforceable contract. A minor may enter into a valid business contract if it is considered necessary to ensure his or her health and welfare such as in an employment contract. If it is not in the minor’s best interests, the contract is declared void.
• Consent: Each party involved in the business contract must freely consent or agree to the terms of the contract.
• Lawful Purpose: Canadian law requires that business contracts are lawful in their intent. In other words, no contract can be negotiated for a service or exchange that violates the law. For example, a contract where one party hires another party to perform an illegal activity is not valid, therefore unforeseeable.

What do you have to include in a contract?

Contracts vary widely depending on the nature of the goods or services you are buying or selling. A good contract is detailed and provides a clear description of the exact goods or services to be provided.

To protect yourself, there are a few things you should be sure to include in every contract. Parties to the contract. Include the legal names and addresses of all parties.

• Scope: A clear, detailed description of the goods or services to be provided. Due dates are normally included here. Be as clear as possible; as we explain below, this is the one most commonly disputed part of a contract.
• Price and payment terms: Be sure to include not only the amount, but also when payment is due, the length of time the purchaser has to pay, and any interest charges that will be applied to late payments.
• Responsibilities: Try to anticipate what could go wrong. For example, missing a deadline can have consequences.
• Terms and conditions: This is where lawyers have a lot of fun. Typical things to include here are limitations of liability, terms for amending or terminating the contract, warranties and disclaimers.
• Signatures: You will want to include the signature, typed name, and title of each signatory as well as the date signed for each signatory.

Remember, the more precise the wording of a contract is, the less open it will be to interpretation and dispute.

When do you terminate the contract?
Most contracts come to an end when the parties involved have met the contracts’ obligations. But occasionally they must be terminated sooner. A contract may include a simple termination condition of 30-days’ written notice and/or the following provisions:

• Impossibility of performance: This occurs when the party(ies) is/are no longer able to meet the obligations of the contract. For instance, an entrepreneur hires a professional photographer to take photographs of his premises but the photographer passes away before she has taken the pictures.
• Rescission: The contract is rescinded or deemed void due to specific circumstances. For example, a young man initially signed a contract but was later determined to be a minor which nullified the agreement.
• Material breach of contract: This serious violation may result in one party suing the other for damages or to perform the obligations of the contract.
• Anticipatory breach: This occurs when one party cancels the contract early in anticipation of the other party being unable to fulfil its obligations. In essence, the party anticipates that the other party will breach the contract and preempts the process, ending the contract on this basis. Be very careful before you try to use the anticipatory breach as a basis for termination as the degree of negligence must be very high.

Commercial Contracts

Contracts are a great tool for establishing expectations and mitigating potential conflict with your business relationships. Here are five of the most common contracts you might need as a small business.

1. Non-Disclosure Agreement 

A non-disclosure agreement (NDA) is a legally binding contract between two parties outlining confidential information or material that is not to be shared with a third party. Essentially, if you’re asked to sign an NDA, you’re agreeing to keep the information you have learned through working with that person or business confidential.  The purpose of an NDA is to prevent confidential business information from becoming public knowledge or to prevent the person receiving the information from using it for their own benefit. 

2. Commercial Lease

If your business takes place at a physical location, whether it be a shop, office or production space, then you’ll be required to sign a commercial lease for this property.  A commercial lease is a legally binding agreement between the landlord (property owner) and the business tenant which outlines the obligations of both parties. Sometimes a real estate broker will negotiate these agreements on behalf of the respective clients. 

A commercial lease typically outlines the following terms: 

• The names of the parties signing the agreement
• A legal description of the property, including the address
• The type of property being leased (retail shop, office space or warehouse, etc)
• The square footage of the leased space
• The length of the tenancy and whether the tenant has an option to renew the lease. If so, how frequently and under what terms.
• Rental payments
• Security deposit requirements
• A description of how tenants can use property (for instance, only for business purposes).
• Whether the building owner or tenant will make any improvements to the property. If so, on what timeline. Industry professionals refer to this term as the “tenant improvements”. The owner gives this in the form of an allowance if the owner expects the tenant to perform the work. Or it may specify if the landlord should perform the work on behalf of the tenant prior to occupancy.
• What fixtures, if any, the lease includes (sinks, lighting, shelving systems and furniture etc).

3. Employee Contract

Hiring employees is instrumental to the growth and success of your business! To continue that success, we highly recommend having written contracts in place with every employee you hire. A typical employee contact will establish the following:

• Job description
• Compensation and benefits
• Time off, sick days and vacation policy 
• Employment period (the contract should clearly state if the employment is ongoing or for a set period of time).
• Hours and schedule (full-time or part-time/days expected to work)
• Confidentiality terms
• Termination details 

By having a well-constructed employee contract in place, you are clearly outlining duties, establishing expectations and mitigating the risk of future lawsuits from employees. 

4. Contractor Agreement 

If hiring employees isn’t the right fit for your business, you might hire a freelancer or contractor to perform duties instead. A contractor agreement defines the business relationship between client and contractor. Your business could land itself in legal and financial hot water if you mislabel an employee as a contractor. So, avoid confusion and ensure you have a contractor agreement in place. A contractor agreement summarizes the following: 

• Project/task details 
• Deliverable dates
• Payment and billing terms
• Confidentiality clause 
• Contract termination details

Once the agreement is signed by both parties involved, you have a clear understanding of the business relationship and can collaborate with ease knowing you have protected yourself and your business. 

5. Supplier Contract

A supplier contract is a legal agreement between a business and an external supplier to establish the delivery of a set of goods, products or services. If you’re using external suppliers as part of your business, we recommend that you have a contract in place with each of them to protect your business from costly delays and disputes. Conflicts can arise if a contract doesn’t clearly define the roles and responsibilities of both parties. So ensure that you have one in place and it includes the following: 

• Define responsibilities
• Payment schedule and invoicing process
• Deliverable due dates
• Termination terms
• Confidentiality clause

Tort Law and Contract Law 

Canadian Custom Laws

Canada’s Customs Act imposes a general duty to report the importation of all goods into Canada. It also regulates the valuation of goods for duty purposes on importation to Canada, the basis for many tariff preferences from free trade agreements, exemptions from the payment of duty, and the authority of the Canada Border Services Agency (CBSA). 

The Customs Tariff implements the Harmonized System for the tariff classification of goods and specific rates of duty that apply on the importation of goods into Canada. It is also the legal basis for duty drawbacks, duty deferrals, duty remission and several types of import taxes, like some excise taxes and surtaxes. Canada’s customs laws are administered by the CBSA. The Customs Act establishes the procedures for contesting CBSA’s decisions regarding classification, origin, valuation and other customs issues relating to the importation of goods. 

The Canadian International Trade Tribunal (CITT) hears appeals from CBSA decisions in customs matters.

Shareholder agreements

A shareholders agreement regulates:

• Management of the corporation
• Procedural matters
• Covenants of the corporation
• Dealing with shares
• Provisions for the resolution of any future disputes between shareholders

A basic shareholder agreement typically contains the following components:

• Capitalization table: Your cap table defines who owns the company and how much. It lives with your minute book and gives context for the Agreement.
• Custom clauses: Claim First Refusal, Piggyback or Drag-along Rights, Shotgun Clauses, and more. A lawyer can help you figure out what you need.
• Protection against the unknown: Prevent catastrophe by clearly identifying what happens when a shareholder dies, gets divorced, becomes disabled, or disappears.
• Evaluate your shares: Outline the formula that calculates the value of the company. This is important for when you raise money and issue options.

Angel Investors Ontario provides a helpful template in case you would like more help in drafting up a shareholder agreement. Additionally, Goodlawyer provides more information on how to create a shareholder agreement.  

Intellectual Property 

Trademarks and Copyrights

When you hear the word “trademark,” some company’s logo probably pops into your mind. But there are many types of trademarks in Canada. Logos are an example of the “ordinary marks” kind of trademark. You can trademark words, symbols, or combinations of the two that make your company’s wares and services distinctive. 

A trademark allows a consumer to link a good or service with its source. It also can be a badge of quality based on the goodwill and reputation a source has acquired. A trademark, particularly a registered trademark, can add value to a business and help leverage goodwill for new product lines or services.

Trademark rights

Under Canadian law, simply by using a trademark the owners are generally considered to acquire certain rights in the trademark. These are often referred to as “common law” trademark rights. These rights are often geographically limited in scope and can be difficult to enforce. Registering a trademark gives you more robust rights and protections, meaning it is easier to enforce. If you obtain a trademark registration in Canada, you have the right to exclusive use of the trademark throughout Canada for a period of 15 years.This means you can stop other people anywhere in Canada from using a trademark that is the same as or that is confusingly similar to your trademark, even if you have not established a local reputation for your trademark in the specific area of Canada where the other party is using its mark.

Want to know more about trademarks and how to apply? Read up on the Government of Canada website for more details.

Intellectual Property, Industrial Design, and Patents

Often a startup company’s most valuable asset is its intellectual property (“IP“) portfolio. The forms of IP that make up its portfolio will depend on the space a company inhabits, the stage of its growth, and its ideas, processes, and products. To preserve and grow a company’s value, it is crucial for founders to understand the forms of IP their companies have created, and will continue to generate and to ensure these forms of IP are protected.

Types of IP that might form your IP Portfolio:

• Copyright: If your company has created an original and creative ‘work’, it may be protected under Canadian law. Works may include literary, artistic, dramatic, visual, and musical productions, performances, sound recordings, and some forms of telecommunication and computer programming. Copyright is the exclusive right to produce, reproduce, perform or deliver these ‘works’, or a substantial part of them, in any form. For example, your company may hold a right to its logo as an artistic creation, and with it, the exclusive right to produce and copy it. Anyone else attempting to create and distribute a copy of your company’s logo would be infringing it’s copyright

• Trademarks: The law of trademarks governs the use of ‘marks’, including the sounds, designs, logos, slogans and brand names associated with a company’s specific goods or services. Marks are used to distinguish the goods and services of one company from those of competitors, and will ultimately form the basis of a company’s reputation and good will. Some forms of copyright may also be registered as a trademark (a logo, for example). Registering a trademark in Canada allows the registrant to protect the trademark under law with exclusive rights to use of the mark in Canada for 15 years, with the possibility of renewal.

• Industrial Design: Industrial designs are a product’s visual features or appearance, including their shape, pattern, ornamentation, and configuration, or a combination of these factors. The shape of Apple’s iPhone, a chair by Charles Eames, or the particular silhouette of a Mercedes-Benz are each examples of an industrial design. Much like trademarks, industrial design registration grants the registrant exclusive rights to the design for up to 10 years in Canada. The design must be original for the application to be eligible for registration (i.e., it cannot closely resemble another design). Registration only protects the appearance of the industrial design, and does not protect its function or process of construction.

• Patents: Patents protect new, non-obvious, and useful inventions, such as processes or methods (e.g., investment strategies or a process for mobile commerce), machines (e.g., a 3D printer), products, compositions of matter (e.g., pharmaceutical drugs), or novel and useful improvements to an existing invention. With a patent, the inventor and patent holder is granted the right to a monopoly in the market for a designated period of time in exchange for sharing the invention. To gain patent rights, the inventor must apply to the Canadian Intellectual Property Office.
• Trade Secrets: A trade secret involves confidential business information, the knowledge of which is inherently valuable. Unlike a patent, if this secret information is released, there is no protection because once the information becomes revealed, it will never become a secret again. For this reason, some companies prefer not to share their confidential information by filing a patent, instead opting to keep the information a secret. 

The Government of Canada website has detailed information on IP and how to apply for one in Canada.

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Privacy Compliance: Free eBook

Skills4Good AI has a Free eBook: “Top 10 Privacy Compliance Tips for SMBs”Learn what you can do to make privacy compliance a top priority on your to-do list!

Link: https://www.skills4good.com/skills4good-top-10-privacy-compliance-tips

Working as an entrepreneur of a small & medium business (SMB) is challenging.  You’re responsible for marketing your business, managing your employees, and closing  sales. 

Privacy accountability is an often-overlooked task for many entrepreneurs. And with  so much on our plates, that’s understandable.  

However, you may want privacy accountability at the top of your to-do list. Starting in  2023, Canadian, US states, and international privacy & AI laws are coming into effect.  

To ensure the long-term success of your company, you must start complying with  your privacy obligations. That includes protecting the privacy of your customers and  employees in all the key markets where you do business. 

Operationalizing privacy accountability can seem daunting. So let’s start by  addressing the five FAQs of data privacy. 

What is data privacy?  

Data privacy refers to individuals’ right to control their data. The term “personal data”  means any information relating to a person, such as a name, email address, mobile  number, identification number, and location data. It also includes gender, race, sexual  identity, health, and financial information.  

What is privacy compliance?  

Privacy compliance refers to an organization’s strict observance of the requirements  of privacy laws. These laws govern how an organization should collect personal data,  use, and disclosure. These laws can vary from state to state and country to country.  Thus, knowing and understanding which specific laws apply to your company is  essential to your company’s success.

Which privacy laws do you need to comply with?  

A common misconception among entrepreneurs is that they only need to comply  with the privacy law of the country, province, or state where their company is  incorporated. That’s wrong!  

The legal requirement is that even if your company is incorporated in Canada, for  example, you must comply with all the privacy laws in key markets where you have  customers. So if you also have customers in California, Virginia, Colorado, the UK, and  the EU, you must comply with their privacy laws.  

Why is privacy compliance important for your company? 

If your company fails to comply with privacy laws, you face high risks of  noncompliance, including payment of legal fines, damaged corporate brand, and loss of  revenues.  

Privacy compliance is also crucial for building consumer trust. When your company  complies with privacy laws, it shows that you take customer privacy seriously and are  committed to protecting their information.  

Privacy compliance is also essential for employee engagement. Employees who feel  their employer respects their privacy tend to increase productivity and loyalty.  

How can you get started with privacy compliance? 

Surveys report that 90.7% of SMBs struggle to comply with privacy laws because  they lack awareness of what they need to do to comply. However, ignorance of the law  excuses no one. Thus, it is crucial to make privacy compliance a top priority on your to do list.  

SMBs like yours may not have the time or staff to devote to privacy compliance.  However, to minimize your legal risk, you must take steps toward privacy compliance as  soon as possible.

For more privacy compliance FAQs, visit this link: https://www.skills4good.com/faqs

References

• Best practices and types of contracts – Ontario website
• Tips on Intellectual Property – McMillan
• Licensing and permits information – BDC