Company Liability

Question 1

What is vicarious liability?

Answer 1

• The law of torts makes an employer whether it is a company or not liable vicariously for the acts and omissions of its employees – provided that the employees are acting within the scope of their employment.

Question 2

What is the indoor management rule?

Answer 2

• The indoor management rule assists outsiders to show that a company has given authority, whether implied actual authority or apparent authority. The rule is that persons contracting with a company and dealing in good faith may assume that acts within its constitution and powers have been properly and duly performed and are not bound to inquire whether acts of internal management have been regular.

Question 3

Under the indoor management rule what can the outsider assume?

Answer 3

• There have been no procedural defects in the appointment of directors
• A meeting of the board of directors has been properly called and held; and
• Any board or general meeting approval required under the company’s constitution or under the act has been obtained.

Question 4

Where will the common law not assist an outsider?

Answer 4

• An outsider is prevented from relying on the indoor management rule, and from arguing that a company is bound by a contract on the basis of a purported agent’s apparent authority or implied actual authority if
• The actual knowledge exemption applies
• They put inquiry exception applies.