BUS 393 Lecture Notes - Lecture 6: Unemployment Benefits, Workplace Violence, Independent Contractor
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BUS393 Chapter 6
An independent contractor performs a specic service described in a contact.
Normally, this is not an ongoing obligation
Example: consultants and auditors are example of independent contractors who
provide a contracted service to a business.
Employee, commits to an employer in an ongoing relationship.
A dependent contactor operates a separate business, but is more like an
employee operating in an ongoing dependent relationship with one employer.
A consulting rm o'ering services exclusively to another rm over a period of years
would qualify as a dependent contractor, and when those services involve arranging
contracts with other, they are acting as agents.
An agent is someone who represents another person (principal) in dealings with a
Employees and dependent and independent contractors can nd themselves acting
as agents depending on the nature of their duties.
Travel and insurance agents are examples of independent contractors acting as
agents, whereas a store clerk or a restaurant server is examples of employees
acting as agents.
The agency relationship is usually created by contract, but in rare case it can be
created gratuitously where the agent acts as a volunteer.
*important thing is to nd that there has been a granting authority to act on behalf
of the principal
Circumstances the third party will be able to hold the principal responsible
for the conduct of the agent in contract law and/or in tort law.
a. When the principal has directly granted the authority to act, it is called
expressed authority and will support the contract.
b. The authority to act can also be implied from the surrounding
i. A gas station attendant would have the implied authority to sell
gas whether the employer has specically stated he has such
authority or not
c. Such expressed or implied authority is referred as an agent’s actual
d. Apparent authority- the principal has done something to lead a third
party to believe the agent has authority, even when he or she does
not, the third party can rely on that representation and so the agent is
said to act within his or her apparent authority.
e. READ: for example to denying the agent has authority from page 158-
f. Estopped 不不不不不
i. Prevents employer from denying someone has authority
ii. Where principal does something to lead a third party to
reasonably believe that the “agent” has authority to act, the
principal cannot later deny such authority
iii. Based on apparent authority
2. Ratication 不不
a. Where agent exceeds both actual and apparent authority, principal is
not bound but may still ratify (creating a binding contract)
b. Agent can be given authority by ratication intentionally or it can be
done inadvertently 不不不不不 by the principal taking some benet under
c. Restrictions on ratication;
i. It must have been possible to enter into the contract at the time
1. You cannot ratify a contract of insurance after the house
has been burned
ii. It must have been possible for the principal to enter into the
contract at the time agent purported to act
1. You cannot ratify a contact when you were insane
iii. It must take place within a reasonable time of the agent
3. Vicarious Liability
a. Liability where agent is a dependent contractor is similar to
b. For independent contractor, the principal will only be liable if the tort
causing injury took place during the actual exercise of the authority
that the principal gave the agent. The agent has to be in the process of
actually transacting the business he or she was authorized to do.
c. Example: my real estate agent negligently runs over someone on the
way to show my house, I would not be held vicariously liable for her
tort, but if she fraudulently or negligently misrepresented some aspect
of the house to a customer, I could be held vicariously liable for that
i. If the principal gave false information to the agent, who then
innocently passed it on, the agent would be completely innocent
and it would be the principal alone who would be directly liable
for the fraud statement.
d. May be imposed by statute
i. Statute may impose liability on owner of a vehicle when another
has been given permission to use motor vehicle (either
expressly or implied)
Normally, the agent cannot be sued under the contract, the third party must look to
the principal for a remedy.
Exception: when agents have exceeded the authority to act , then the third party
can sue the agent for claiming authority not possessed. This is a tort action for
“breach of warranty of authority” and gives the third party the right to obtain
compensation from the agent for what was lost because of the unauthorized
Or agents maybe be sued where acting for undisclosed principal (agent doesn’t
disclose to third party that he or she is acting as an agent or refuses to disclose)
*there are some situation where a contract entered into by an agent for an
undisclosed principal will not binding (where identity is important)
Although the principal has some obligation to the agent, such as salaries, payment
of expenses, agents has a duciary 不不不 duty to the principal.
Fiduciary duty is basically an obligation to act in this best interest of the principal.
As a duciary, the agent cannot take advantage of a business opportunity that
comes to him or her because of her position.
An agent must act for only one principal and cannot take a benet from both sides.
These are called kickbacks 不不; 不不 and for an agent to take even a small gratuity
such as liquor, or some other benets from a supplier would be a violation of
Look at table 6.1 at page 162.
Where such a duciary duty is breached, the principal can demand an accounting.
He can require the agent to disclose any prots made personally from the
transaction and then to pay those prots to the principal.
It is a criminal o'ence for an agent to accept secret benets
Actual authority normally ends when:
job is nished
agent receives di'erent instructions
employment or agency relationship is changed or ended
Death, bankruptcy or insanity terminates authority. Apparent authority may
continue and this is one reason the principal should avoid the creation of such
apparent authority in the rst place.
An independent contractor performs a specific service described in a contact. Example: consultants and auditors are example of independent contractors who provide a contracted service to a business. Employee, commits to an employer in an ongoing relationship. A dependent contactor operates a separate business, but is more like an employee operating in an ongoing dependent relationship with one employer. A consulting firm offering services exclusively to another firm over a period of years would qualify as a dependent contractor, and when those services involve arranging contracts with other, they are acting as agents. An agent is someone who represents another person (principal) in dealings with a third party. Employees and dependent and independent contractors can find themselves acting as agents depending on the nature of their duties. Travel and insurance agents are examples of independent contractors acting as agents, whereas a store clerk or a restaurant server is examples of employees acting as agents.