6.2 - Principal and Agent Relationship in a Liability Lawsuit Flashcards
Describe the relationship between principal and agent in a liability lawsuit
Definition - “Agent”
a person licensed and authorized or employed to act on behalf of another
Definition - “Principal”
the individual or corporation whose performance is guaranteed in suretyship
Principal and Agent
-an agent acts on another’s behalf and the general rule is that the principal is responsible for such acts
-‘Qui facit per alium facit per se’ - one who acts through another acts himself
-the agent and principal must be aware of each other’s intentions, which are usually embodied in some form of agreement, either express or implied
-agents have been classified by the court from several point of view: the scope of authority conferred, the source of authority (principal/agent contract), and the nature of services or work provided
-in the broad sense, anyone who in any manner serves another is that person’s agent
Creation of Agency
-agency can be created by the following:
> Contract
Ratification
Estoppel
Necessity
Creation of Agency - By Contract (Express)
-the creation of the relationship of principal and agent by contract is subject to the same rules that affect other contracts
-the legal liability of the principal for the activities of an agent depends on the agency contract
-however, the principal is bound not only by the express authority stated in the contract, but also by the apparent or ostensible authority that arises from the operation of the contract
-such authority presents itself when the agent undertakes duties outlined in the contract, and coincidental duties arise for which the agent is responsible
-consider a buyer who is acting as an agent for a department store. The agency contract sets the guidelines for the types of items to be purchased. However, it does not set out how to arrange shipping, insurance, and packing - things for which the agent is responsible
Creation of Agency - By Ratification
-an agent may knowingly act for a principal without express authority to do so
-if the principal later acquiesces or by some positive act demonstrates acceptance and approval of the agent’s actions, ratification is said to have occurred and agency created between the two
-the principal will then be bound by the actions of the agent
Creation of Agency - By Estoppel
-estoppel is simply the restraint the law places on a person to prevent allegations that previous representations, either by word or action, were not truthful, when another person has relied on those representations assuming them to be true
-it applies the law of agency when a principal tacitly agrees to allow someone to act as an agent on a matter where, in fact, no authority has been given
-when a similar matter arises on a different occasion, the principal is estopped from denying liability on a contract because the agent is not authorized to act on such a contract
Creation of Agency - By Necessity
-there are cases where no actual authority has been conferred by a principal to an agent, but because of the urgency of the situation, the law allows the person to act as an agent
-thus, a carrier of perishable goods would be authorized to dispose of them at the best price if the need arose
-when the duties of the principal and agent are set down in contract, the parties must abide by the,
-among other items, the contract will specify payments to and fees and expenses of the agent, provided that the agent does not act negligently or delegate authority
-good faith dealing is also expected of the parties to a contract
-as long as the agent acts within the authority conferred, the principal will be responsible for all commitments entered into by the agent; however, the principal may sue the agent it the agent has breached their agreement in arranging a contract with a TP
-an agent will be held liable to TP on contracts in which the agent is improperly identified, when the principal does not exist, and when the agent exceeds the conferred and apparent authority of the agency contract
-the principal is liable for any tort committed by the agent while the agent acts on the principal’s behalf
-a contract between a principal and agent may end because of a time limit or the two parties involved can agree to terminate it
Mandator and Mandatary
-under the CCQ, the law of agency arises as mandator and mandatary and it is quite similar to common law rules on agency
CCQ Article 2130:
»Mandate is a contract by which a person, the mandator, confers upon another person, the mandatary, the power to represent him in the performance of a juridical act with a third person, and the mandatary, by his acceptance, binds himself to exercise the power.
That power and, where applicable, the writing evidencing it, are called the power of attorney.»
CCQ Article 2131:
»The object of the mandate may also be the performance of acts intended to ensure the personal protection of the mandator, the administration, in whole or in part, of his patrimony and, generally, his moral and physical well-being, should he become incapable of taking care of himself or administering his property»
-an example of a mandate is the contract between the lawyer and client retaining the lawyer to defend the client in the courtroom.
> The mandator is liable to TP for all obligations contracted by the mandatary within the limits of the authority or mandate and for acts exceeding such authority when they have been ratified, as set out in the CCQ Article 2160
The mandator is also responsible to TP who, in good faith, contract with a person they believe to be a mandatary but who is not, when the mandator has given reasonable cause for such belief, as set out in CCQ Article 2163
The mandator is liable for any injury caused by the fault of the mandatary in performing the mandate unless it is proven that the injury could not have been prevented, as set out in CCQ Article 2164
The mandatary cannot act beyond the authority expressed or implied in the mandate except for those acts that are incidental and necessary for execution of the mandate, as set out in CCQ Articles 2135 and 2136
The mandatary is obliged to execute the mandate and is responsible for damages arising form the failure to do so, as set out in CCQ Article 2138
-when the mandatary acts in the name of the mandator within the bounds of the mandate, there is no personal liability to third persons with whom contracts were made, as set out in CCQ Article 2157.
-however, when the mandatary acts in personal capacity, they are liable to TPs and TPs can still pursue the mandator
Master and Servant/Employer and Employee
-the relationship between owner and employee arises from the historical master and servant relationship when an employee entered into employment to be taught and directed in the skills of domestic, agriculture, or trade duties
-originally, many such employment contracts included the provision of food and shelter in the consideration
-this almost total control and direction placed on the master responsibility for the behaviour of a “servant” during the employment contract
-this has endured through to modern-day employment practices
-for example, in ‘Lockhart v. Canadian Pacific Ry. Co.’, an employee used his personal vehicle while out on company business even though her knew that this was not permitted by his employer. When he had an accident that caused injury to a third party, the court decided that the employer was responsible for the actions of his employee
-not only is the employer responsible for acts the employee is authorized to do, but they are also responsible for the way in which they are done
-even if the employee does something that is expressly forbidden, this is not necessarily a defence when the action represents a way of doing what the employee was hired to do
-if the employee was carrying out assigned duties, the employer will be held responsible
-most employee activities during business hours are clearly recognized as being required to carry out assigned duties, but the courts acknowledge that an employee may, during business hours, abandon work and do something unrelated to it and, in the process, negligently cause damage. Case law describes this as ‘a frolic of his own’. In such instances, the employer is not liable for an employee’s personal negligence
-an employer is not responsible for the negligence of an employee if it arises from the unauthorized use of the employer’s property for the employee’s own use
-liability may exist, however, under a specific statute, such as the “Highway Traffic Act’ or ‘Motor Vehicle Act”
-an employer cannot be held liable for the negligence of a person to whom an employee has delegated the employee’s authority, or a person who has assumed the duties of the employee without authority to do so
-if an employer is held liable for the torts of an employee, the employer may sue the employee
-on occasion, both the employer and the employee can be held liable
-Articles 1463 & 1464 of the CCQ state that employers are responsible for the acts of their employees
Independent Contractors
-a relationship exists with contractors who, in consideration of fees for service or work, undertake to perform for others certain duties involving the use of their special skills
-the relationship is not that of employer and employee because the contractor functions independently and without the constant supervision of the principal or owner
-the contractor must produce the specified results, but how it is done is a person choice
-in such a case, when the person doing the work is an independent contractor, liability incurred while doing the work rests with the independent contractor and not with person or entity that hires the independent contractor
-for example, a homeowner pays a plumber to repair a leaking drainpipe and leaves the details of doing the work to the plumber. The owner will not be responsible if the plumber is negligent and a TP is injured by tools left on the sidewalk
General Contractors
-independent contractors can be general contractors
-general contractors hire and coordinate other independent contractors to get the job done
-the contractor hired by a general contractor is referred to as a subcontractor
-a subcontractor provides some service or material for the performance of a principal contractor’s contract
Sub Subcontractor
-the contractor hired by a subcontractor is referred to as a sub subcontractor and so on
-in the contractual relationship between the general contractor and the client, the general contractor typically agrees to accept responsibility for all the work done including that part done by subcontractors
-in the contractual relationship between the general contractor and the subcontractor, the general contractor can agree to assume responsibility for the subcontractor’s work
-exceptions to this rule arise then the following happen:
> Dangerous work is undertaken
> Unlawful work is done
> The principal interferes with the contractor
Dangerous Work
-when a specialist firm is hired by a general contractor to complete dangerous work, that firm is responsible because of the nature of the work
-however, the general contractor also shares in responsibility if there is any cause for it
-for example, a general contractor’s project involves blasting, which is performed by a specialist firm who is responsible for any damage done by the blasting
-however, the general contractor also remains liable should damage or injury arise
Unlawful Work
-when unlawful work is done, the law does not support the party guilty of it
-and typically, liability for unlawful work is not recoverable under a liability policy
Interference
-other exceptions relate to instances when the contractor, though independent in name, ceases to really be independent because of interference in their operation by the employer or principal who knows better
-for example, when the principal gives instructions on how a job is to be done (‘Davie Shipbuilding Ltd. et al. v. Cargill Grain Co. Ltd. et al.), the principal will be held liable for the consequences
-in ‘Davie Shipbuilding’, arising from Quebec courts, the engineer’s and contractor’s responsibilities were examined when a marine tower collapsed
-the court held the following:
>the claim by the owner Cargill against the contractor Cobra for the collapse of the marine tower must be dismissed, since Cargill was a knowledgeable owner with technical expertise far superior to that of its contractor. Furthermore, the latter was worried about the overload on the structure and had brought this to the attention of the owner, who took no action to correct the serious error in the plans.
The owner’s claim against the contractors Foundation and Davie as a result of the partial collapse of the warehouse must also be dismissed. The construction design for this warehouse has been imposed by Cargill on its consulting engineers, and the collapse of the structure was attributable to the errors in the plans provided by the owner. In the context of the case, and in view of the owner’s experience in this type of construction, I must conclude that the contractor and the architect should not have to bear the consequence of faulty data provided by the experienced, informed owner
