Principals, Agents, and Tort Liability

When an agent or employee of another person, business or other entity causes an accident, injury or other loss, the person injured by their conduct may be able to seek compensation from their employer or principal:

  • Agent: An agent is a person who is authorized by another person or entity to act on its behalf.

  • Principal: A principal is the person or entity that has the authority and right to control its agent.

The responsibility of an employer for certain acts of an employee, or a principal for the actions of its agent, arise under the legal doctrine of vicarious liability, pursuant to which one person or entity is legally responsible for the negligent acts of another. (An employer is the principal of its employee.)

Although the specific rules of agency, and when vicarious liability applies, will vary between states, the general approach is as outlined in this article.

Liability of the Principal

When a plaintiff alleges that an agency relationship exists between a person who caused the injury and a principal, the defendant principal may be determined to be bound by the acts of the agent based upon principles of actual authority or apparent authority.

  • Actual Authority: The employee or agent was acting within the actual scope of the authority granted to that agent or employee by the principal

  • Apparent Authority: Although actual authority may not have been granted,

    1. The principal placed the agent or employee in such a situation that an ordinary person familiar with the particular type of business or activity involved would be justified in assuming the agent had the authority to act on behalf of the principal;

    2. The plaintiff in fact assumed that the agent had the authority to act on behalf of the principal; and

    3. The plaintiff was justified in assuming that the agent had the authority to act on behalf of the principal.

Liability Based Upon Apparent Authority of an Agent

Under the doctrine of apparent authority, a principal may be liable for the acts of a person who is not actually an authorized agent. That is, the principal may be liable based upon evidence that person appeared to be an agent. Similarly, a principal may be liable for the acts of an agent who is acting in excess of the authority granted by the principal, if it reasonably appears to others that the agent has authority to act.

For example, if you are in the business of leasing computer equipment and you do 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. When you call the company, you speak to somebody at their office or call center who instructs you that you should keep the equipment in a safe place until the company can pick up the equipment from your premises.

Three months later, when the company has still not picked up the computer equipment, you receive an invoice for three months of unpaid lease payments and late fees. When you call the company they admit that you placed the call to cancel the lease, but inform you that the person to whom you spoke was not authorized to accept your notice of termination.

Should the matter end up in court, the court is unlikely to accept the company's argument that you had not properly terminated the lease. It is reasonable to assume that a person who accepts your call on behalf of the company and makes statements or gives instructions consistent with your having successfully canceled the lease, has the authority to in fact cancel the lease. That is, they had apparent authority to accept your notice, and the company should be bound by their statements even if the person violated internal company procedures by making those statements.

Liability of Employers for the Acts of Employees

When an employee is acting within the course and scope of employment and negligently causes injury to another person or to property, the employer may be held liable for the employee's negligence under principles of respondeat superior, a Latin phrase meaning "a superior must answer".

An employer acts within the scope of employment when carrying out the duties that are reasonably associated with the employee's occupation. Even if the employee is careless or violates the employer's policies when carrying out work duties, the employee's actions remain within the scope of employment.

An employee who is acting on behalf of an employer will normally be carrying out those duties within the course of employment. However, an employee might take an action that falls outside of the scope of the employment relationship, and thus relieves the employer of liability until the employee returns to his or her duties.

If an employee is performing work-related errands and stops to go to an ATM or to buy a snack, that minor deviation is not likely to be deemed to fall outside of the scope of employment.

However, if the employee takes an unauthorized break while running errands in order to hang out with friends in a bar, the employee will normally be found to have deviated so significantly from the employment relationship during that time that any injury he or she causes falls outside of the scope and course of employment.

Claims of vicarious liability often arise in an employment context when an employee is involved in a motor vehicle accident while on the job.

Copyright © 2003 Aaron Larson, All rights reserved. No portion of this article may be reproduced without the express written permission of the copyright holder. If you use a quotation, excerpt or paraphrase of this article, except as otherwise authorized in writing by the author of the article you must cite this article as a source for your work and include a link back to the original article from any online materials that incorporate or are derived from the content of this article.

This article was last reviewed or amended on May 7, 2018.