Independent Contractor Agreement – the additional 6 common law duties

Independent Contractor Agreement – the additional 6 common law duties

The duties of a contractor are set out in the Independent Contractor Agreement you are building. In addition to this, a number of general duties arise under the common law. We protect the Principal. We preserve these common law duties. The Contractor:

  1. performs what it promises

The Contractor’s primary duty is to get on with the job that the Principal is paying it to do.

  1. acts honestly

Where no definite instructions is given, or where the contractor’s authority allows discretion, the contractor is guided by the honest exercise of judgement and the principal’s interests: Re M (a debtor); Dalgety & Co Ltd (1910) 10 SR (NSW) 175.

  1. follows usual business practice

Your contractor follows the ordinary course of its business. This includes the ordinary course of any previous business between the principal and the contractor: World Transport v Royte Ltd [1957] 1 Lloyd's Rep 381.

  1. uses information obtained for the Principal’s benefit

Your contractor employs any materials and confidential information obtained by reason of the independent contractor agreement solely for the purpose of the contract, and not in any manner inconsistent with good faith. The contractor may not divulge them to third parties, or use them in unfair competition with the principal: Consul Development v DPC Estates Pty Ltd (1975) 132 CLR 373; Warman Ltd v Dwyer (1995) 182 CLR 544. A contractor breaching this duty is liable to make an account of profits to the principal.

  1. does not put itself in a position of conflict of duties

A contractor should not act for a second principal in a manner which may result in a conflict of duties: BLB Corp of Australia v Jacobsen (1974) 48 ALJR 372; Lintrose Nominees Pty Ltd v King [1995] 1 VR 574; Moore ‘Estate Agents in Conflict of Interest’ (1994) 2 APLJ 282.

Where a contractor, in breach of duty to the principal, acts for a second principal, and acquires information, which is confidential to the second principal, the contractor must not disclose that information to the first principal. However, the contractor is liable to compensate the first principal for any loss caused by the resultant conflict: North and South Trust Co v Berkeley [1971] 1 All ER 980.

A contractor is permitted to place duty in conflict with personal interests if the contractor has first made to the principal full disclosure of the exact nature of the interests, and the principal has so assented. It is insufficient merely to disclose that the contractor has an interest: Haywood v Roadknight [1927] VLR 512.

  1. use proper care, skill and diligence

Your contractor is responsible to the principal for losses occasioned by want of proper care, skill or diligence in the carrying out its duties. This includes where the principal may have been negligent in not discovering the agent's breach of duty: Claude R Ogden Pty Ltd v Reliance Fire Sprinkler [1973] 2 NSWLR 7; Provincial Insurance Australia Pty Ltd v Consolidated Wood Products Pty Ltd (1991) 25 NSWLR 541.

Because you are paying your contractor it exercises a higher standard of care, skill, or diligence than a gratuitous contractor. The standard required is not merely that which the contractor in fact possesses, but that which is reasonably necessary for the due performance of the contractor’s undertaking. The contractor may be liable even if it acts to the best of its abilities: How v Carman [1931] SASR 413; Lunghi v Sinclair [1966] WAR 172 and as to negligent misrepresentations: Sanders v Leonardi (1976) 1 BPR 9409.

You can build commercial contracts such as an Independent Contractor Agreement here.

For more legal advice telephone us. We are a law firm and can help you answer the questions to build the documents on our website.

Adjunct Professor Brett Davies,  CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
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