Principals, Agents, and Tort Liability
By Aaron Larson
An "agent" is a person who is authorized by another to act on its behalf. The person or entity which has given the authority and has the right to control the agent is called the "principal." This is a form of "vicarious liability" - where one person or entity is legally responsible for the negligent acts of another. This article describes the rule of agency as it has commonly been applied, although the law may vary in any specific jurisdiction.
Where a plaintiff alleges an agency relationship, the defendant principal is considered to be bound by the acts of the agent if there is apparent authority:
The defendant placed the agent in such a situation that an ordinary person familiar with the particular type of business involved in this matter would be justified in assuming the agent had the authority to act on behalf of the defendant;
The plaintiff assumed that the agent had the authority to act on behalf of the defendant; and
The plaintiff was justified in assuming that the agent had the authority to act on behalf of the defendant.
Please note that under that definition, a principal may be liable for the acts of a person who is not actually an authorized agent, where the person appears to be an agent. By way of example, if you were leasing computer equipment and you did not want to renew the lease, you would likely call the company which leased the computer to you to inform them that you wished to end the lease. Assume that the company representative you spoke with told you that you should keep the computer in a safe place until somebody from the company could come by to pick it up. If, three months later, they had still not picked up the computer equipment, and sent you a bill for rental past the end of the original lease agreement, a court would likely reject their argument that you should remain liable for rental payments as the representative you spoke with on the phone was not authorized to accept your notice of termination, as the person you spoke with had apparent authority to accept your notice.
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