Liability of Principal

Under certain circumstances the principal may be liable to the third person for the torts or crimes of the agent or employee.

Assume that an agent or an employee causes harm to a third person. Is the principal or employer liable for this conduct? If the conduct constitutes a crime, can the principle or employer be criminally prosecuted? The answer is that in many instances the principal or employer is liable civilly and may be prosecuted criminally. That is the principal or employer is liable although personally free from fault and not guilty of any wrong. This concept of imposing liability for the fault of another is known as vicarious liability. The situation arises both when an employer has an employee and the principal has an agent who commits the wrong. The rules of law governing the vicarious liability of the principal and the employer are the same. In the interest of simplicity, this section will be stated in terms of employees acting in the course of employment. It is to be remembered that these rules are equally applicable to agents acting within the scope of their authority. As a practical matter, some situations will only arise with agents. For example the vicarious liability of a seller for the misrepresentation made by a sales person will only arise when the seller appointed an agent to sell. In contrast, both the employee hired to drive a truck and the agent being sent to visit a customer could negligently run over a third person. In many situations, a person employed by another is both a employee and an agent and the tort is committed within the phase of "employee" work. The rule of law imposing vicarious liability upon an innocent employer for the wrong of an employee is also known as the doctrine of respondeat superior. In modern times, this doctrine can be justified on the ground that the business should pay for the harm caused in the doing of the business, that the employer would be more careful in the selection of employees if made responsible for their actions, and that the employer may readily obtain liability insurance against claims of third persons.

Nature Of Act

The wrongful act committed by the employee may be a negligent act, an intentional act, a fraudulent act or a violation of a governmental regulation. It may give rise only to civil liability of the employer or it may also subject the employer to prosecution for crime.

Negligent Act:

Historically the act for which liability would be imposed under the doctrine of respondeat superior was a negligent act committed within the scope of employment.

Intentional Act:

Under the common law, a master was not liable for an intentional tort committed by a servant. The modern law holds that an employer is liable for an intentional tort committed by an employee for the purpose of furthering the employer's business. Thus an employer is not liable for an intentional , unprovoked assault committed by an employee upon a third person or customer of the employer because of a personal grudge or for no reason, but the employer will be held liable by the modern view when the employee's assault was committed in the belief that the employee was thereby advancing the employer's interest.