12006 ABCA 44, 384 A.R. 70; 56 Alta. L.R. (4th) 207.
Ratification There is an obvious overlap between apparent authority and implied authority. The distinction is only important where there have been express instructions to the agent not to act and he or she does so anyway. Of course, where the agent exceeds both his or her actual and apparent authority the principal is not bound. Still, if the prin- cipal likes the deal he or she can ratify the agreement, making it a binding contract. This can be done intentionally by the principal expressly ratifying the transaction, or it can be done inadvertently by the principal taking some benefit under the agreement. In effect, the principal is giving the agent authority to act after the fact, and that grant of authority works retroactively as if the agent always had authority. This is confusing but it is really the only way such ratification could create a binding contract.
In fact there are some restrictions on when a contract can be ratified. First, it must have been possible to enter into the contract at the time of ratification. For example, you cannot Agent can be given authority by
ratification either intentionally or by implication
165
C h a p t e r 6 A g e n c y a n d E m p l o y m e n t
ratify a contract of insurance after the house has burned down. Second, it must have been possible for the principal to enter into the contract at the time the agent purported to act. You cannot ratify a contract if you were insane at the time the contract was entered into by the agent. The ratification must take place within a reasonable time of the agent’s unauthor- ized conduct. Also the agent must have identified the principal to the third party at the time he entered into the contract. The agent can’t enter into a contract on behalf of some uni- dentified principal and then search around for a someone to ratify the contract.
Vicarious Liability Remember that the agent or employee will be personally liable to the third party victim for any torts that they commit. This discussion is to determine any additional responsibility the principal has for the torts committed by the agent. Where the agent is also an employee, the liability of the principal for the agent’s conduct is based on the principles of vicarious liability as discussed in Chapter 2. Essentially, when the conduct of the employee is closely related to the job he or she is employed to do, the employer/principal will be liable as well as the employee (see Figure 6.2). If a company’s purchasing agent negligently struck a pedestrian on her way to a meeting with suppliers, she would be liable, but so would her employer. She was acting within the scope of her employment when she committed the tort in question. However, if she were driving home or had diverted to do some personal chore, she would be on a “frolic of her own” and the company would not be responsible for her conduct.
The question is not always clear, and the Supreme Court of Canada has determined that the answer is usually based on the application of policy considerations. Chief Justice McLachlin stated, “The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability.”2 This leaves room for those acting outside their actual job responsibilities to still impose vicarious liability on the employers. These same obligations will likely apply when the agent is a dependent contractor. The more difficult question relates to when a principal will be liable for torts committed by an agent who is independent. Liability for the acts of independent contractors such as lawyers, accountants, insurance agents, and real estate agents is much more restricted. The principal will be liable only 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 transacting the business he or she was authorized to do. Usually this is restricted to the tort of fraud and negligent misstatement associated with the negotiation or enactment of the contract itself. Where my real estate agent neg- ligently 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
Vicarious liability will be imposed where an agent is also an employee and . . .
Where employee/agent commits tort in course of employment
Liability where agent is a dependent contractor is similar to employment
Liability of principal for agent’s torts are limited where the agent is an independent contractor
2Bazley v. Curry, [1999] 2 S.C.R. 534, (1999), 174 D.L.R. (4th) 45 (SCC).
Agent/employee commits tort while performing
duties Third-party victim
sues agent/employee and employer through agent Vicarious liability
Principal/Employer Agent/Employee
Third Party
166 L e g a l F u n d a m e n t a l s f o r C a n a d i a n B u s i n e s s
house to a customer, I could be held vicariously liable for that tort. Of course, if the prin- cipal gave the 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 or negligent statement. Be careful here. The agent may be found to have a duty to the third party to make sure the information provided by the principal is correct and be found negligent where he failed in this duty.3
Note that in the statutes of many jurisdictions the owner of a motor vehicle is vicari- ously liable when she loans out her vehicle.4 Essentially, if you loan your car to someone and he gets into an accident that is his fault, you are responsible along with the driver.