7: Special contracts: Insurance, employment, and leases

Question	Answer
Insurance is	a contract that transfers the risk of loss from the victim to the insurer. An insurance policy allows one party, the insured, to be indemnified by a second party, the insurer, for a loss or a liability on the occurrence of an uncertain future event
insurance premium, which is calculated based on	the risk involved. Insurance shifts the loss to the total number of people insured and spreads the risk among them
In order for insurance contracts to be legal, they must not be	wagers or bets
Wagering contracts not covered by statute are unenforceable at common law because	they are illegal
an important distinction between a wager and an insurance contract	In a wager, it is hoped that the event that will allow for payment will occur. In an insurance contract, it is hoped that the event will not occur.
Insurance policies are strictly construed against an insurer if clauses in a policy are considered ambiguous. If the literal and liberal method of interpretation does not resolve the ambiguity, the courts will use	the contra proferentem rule, which favours an interpretation against the party who drafted the clause and is now denying that it covers the insured
An insurable interest exists where	the insured will suffer a loss if the insured property is lost or damaged
There can be no windfall gain. In other words	no matter what the value of the insurance policy, the insurance company will only pay for the loss suffered
The insured has a duty of	utmost good faith toward the insurer when it makes its application for insurance
utmost good faith This complete disclosure allows the insurer to	fix the premium as a function of the risk
The insured is also under a duty to communicate promptly to the insurer any change in the	insured’s risk that comes to his or her attention
Once the insurer has compensated the insured by paying a claim for a loss, the insurer has all the rights that the insured had to recover the loss against third parties. This is called the right of	subrogation.
There are three main types of working relationships	• an employer and employee relationship (also referred to as a master-servant relationship) • an agency-principal relationship • a relationship between an independent contractor and a client
control test, which looks at	the degree of control exercised by the person paying for the service. Does he or she direct, control, and supervise the work being done? Other factors that assist in determining whether a worker is an employee include whether a salary is paid, and if the person doing the hiring receives a finder’s fee.
organization test	, an employer-employee relationship exists if a person is an integral part of the organization, usually works only for that organization, and is subject to its control. For example, if someone was hired by an insurance company to handle claims, was told to conform to the dress code of the company, had to be at work during set hours, and had to attend all social events, then it is likely the person would be considered an employee rather than an independent contractor.
An employer has certain obligations imposed by statute, such as	payment of employment insurance premiums, workers’ compensation premiums, and income tax
An agency relationship exists where a principal authorizes an agent to	enter into contracts with third parties in his or her name
An independent contractor is a	self-employed worker who is contracted to perform a specific function to achieve a specific result
The person hiring an independent contractor is not vicariously liable for the actions of the independent contractor, so an independent contractor should carry his or her own	insurance coverage
“On a frolic of this own”	When the employee goes to the bank for personal matters and injure someone in work hours.
At common law, there are two ways for an employment contract to end:	• at the expiry of a time period specified in the contract (lapse) • upon termination with reasonable notice, by either the employee or the employer
What is reasonable notice	, according to case law, may depend on how long the employee has been at the job, the job description, the person’s age and education or training, and the job market for similar employment
Reasonable notice is not required when an employee is	dismissed for cause
Any major breach of the employment contract by the employee may constitut	just cause for dismissal. Misconduct, disobedience, harassment, chronic tardiness, conduct that is illegal or immoral during or outside of the employment, and incompetence are all causes for dismissal.
Employees may leave without notice where	the working conditions are unsafe or if they are asked to perform illegal acts.
Wrongful or constructive dismissal occurs when	an employee is not dismissed for cause and is not given a reasonable period of notice or salary in lieu of notice
The usual remedy for wrongful or constructive dismissal is	damages, although reinstatement is awarded in some circumstances.
Reinstatement, a form of	specific performance, may be set out as a remedy in a collective agreement. Some professions, such as university professors, have also been allowed reinstatement as a remedy, but the courts are still reluctant to order the employee to be allowed back to work.
Damages are awarded based on	the failure to have received the required notice of termination. Damages are therefore awarded to put the employee in the position they would have been in if the required notice had been given.
If a person has been unjustly terminated and treated very poorly to the extent that his or her reputation and health has suffered, the courts may award	punitive, or punishing, damages. Punitive damages are not commonly awarded unless the conduct of the employer is considered vexatious or tormenting.
retroactive justification, where an employee has been dismissed initially without cause, but then later	wrongdoings justifying the dismissal are discovered
All provinces have a provincial employee welfare act, titled	the Employee Standards Act in many provinces
The Canada Labour Code covers employment that is	under federal jurisdiction, such as Canada’s postal service and airlines.
These acts set out the minimum standards required for employment, including working conditions, wages and hours of work, notice of termination, employment equity, and health and safety.	Employee Standards Act Canada Labour Code
Workers’ compensation is contained in provincial legislation designed to	to provide a fund that compensates injured workers, thus replacing actions for damages against individual employers.
The Employment Insurance Act, a federal statute, allows	terminated employees to receive benefits based on the number of weeks worked and the level of wages earned
Certification is the formal acknowledgment that	a union has sufficient membership to become the exclusive bargaining agent for the employees
Certification is the formal acknowledgment that	a union has sufficient membership to become the exclusive bargaining agent for the employees
The process of establishing conditions of employment through negotiations between a business and the bargaining agent for its employees is known as	collective bargaining
Mediation or conciliation is used to assist in negotiations, usually between an employer and the union, and must occur before either	a strike or lockout. If the process of conciliation and, often, the observance of a “cooling-off period” are not followed, a strike or lockout may be ruled illegal
Mediation or conciliation is used to assist in negotiations, usually between an employer and the union, and must occur before either	a strike or lockout. If the process of conciliation and, often, the observance of a “cooling-off period” are not followed, a strike or lockout may be ruled illegal
Grievances are usually referred to	arbitration, and the arbitrator’s interpretation of the collective agreement or of the grievance at hand will be considered as binding.
Grievances are usually referred to	arbitration, and the arbitrator’s interpretation of the collective agreement or of the grievance at hand will be considered as binding.
There are four main types of labour disputes:	• A jurisdictional dispute is a disagreement as to which union should represent a group of employees. • A recognition dispute occurs where the employer will not recognize the union as the employees’ bargaining unit. • An interest dispute occurs where the terms that are to be included in the agreement cannot be agreed upon. • A rights dispute settles differences in the interpretation of terms in an existing agreement.
There are two main types of leases:	operating leases and purchase leases, . The type of lease is determined by what happens to the goods at the end of the lease.
An operating lease is also known as	a “true” lease, since the owner of the goods, the lessor, retakes possession of the goods at the end of the lease period. An operating lease therefore does not transfer ownership of the goods to the lessee. Operating leases tend to be of short duration, such as the short-term rental of snow-blowing equipment, in circumstances where the lessee has no interest in obtaining ownership of the goods.
Purchase leases (called capital leases in accounting) are	entered into with the intent that the lessee will eventually gain ownership to the goods at the end of the lease term. In order for a lease to qualify as a purchase lease, one of the following three criteria must be present: • The lessee must gain title to the goods at the end of the lease. • The lessee may not, for at least 75% of the economic life of the asset, cancel the lease. • At the commencement of the lease, the present value of the payments to be made under the lease is greater than 90% of the market value of the goods at the time the lease is to begin.
There are two types of purchase leases:	security leases and finance leases
Businesses wishing to sell assets to obtain funds to run the business may enter into another type of lease:	a sale-and-leaseback. This type of lease is more commonly seen in real estate transactions, but is becoming popular with personal goods. Goods are sold in exchange for cash, and then the very same goods are leased back to the vendor, often over a long term
Lease – is an	agreement where the owner of property allows another person to have possession and use of the property for a stipulated period in return for the payment of rent.
Most leases contain terms setting out	the length of the lease, the payments or rent due, whether there is an option to purchase the goods, any renewal terms, terms regarding breach of the lease and early termination, and any requirements for insurance and maintenance.
“residual guarantee,”	where the lessor is guaranteed that the goods leased will be worth a minimum amount at the end of the lease, or the lessee will be responsible for the difference.

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7: Special contracts: Insurance, employment, and leases

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