This article is written by Prasam Jain, from Symbiosis Law School, Noida. This article deals with the Vicarious Liability: Principal-Agent Relationship.

Introduction

A tort is a civil wrong for which the law provides a remedy. Probably the essential thing to worry about tort is that tort only appears in civil courts, which means that there is no criminal liability from a tort.

Torts can be categorized into three types, i.e. intentional torts, negligence, and strict liability.

Intentional torts are those torts where the defendant desires to bring about a particular result is that they intend the consequences of their actions. Now negligence occurs when one’s conduct without regard to the person’s intent or state of mind imposes an unreasonable risk of harm to another. In negligence, the tortfeasor state of mind is irrelevant which means that it doesn’t matter what they are thinking. The last category of torts is strict liability. In strict liability, one doesn’t care about the state of mind or whether the person is intended armed. Here the harm that occurred is the only important thing.

This article discusses vicarious liability which is a form of secondary strict liability. Vicarious liability is when one party is held liable for the torts of another. Three conditions have to be established.

• There has to be a tort.
• There has to be something like employment or agency relationships.
• The act should be committed in the course of employment.

To establish the second condition, it is important to apply various tests to show that there is an employment relationship. These are control tests, integration or organization tests and economic or multiple reality tests. Economic or multiple reality tests are the most popular test. To establish the third test Is that the act was committed in the course of employment, it has to be shown that the employer directly or indirectly authorized the act or this was incidental to what the employee had to do or that the employer had authorized that the employee performs the unauthorized act.

Liability for a wrongful act arises from the relation existing between:

• Master and Servant;
• Owner and Independent Contractor;
• Principal and Agent;
• Company and Director;
• Firm and Partner;
• Guardian and Ward.

This article discusses the liability existing between Principle and Agent. Vicarious liability in the context of principle and agent means inflicting responsibility on the principal on the acts of the agent. Taking an example, where a vehicle owner allows another person to drive under his supervision or where that person has the authority to drive the vehicle on behalf or for the vehicle owner, the vehicle owner will be responsible.

The legal term to define the vehicle owner in this situation is ‘principal’ and driver will be termed as ‘agent’ and the principle is vicariously liable for his agent’s negligent driving.

The Extent of Vicarious Liability

Vicarious liability extends to those acts done in the course of the agency where the agent is following instructions of the master.

It does not extend to the extent:

1. Acts done outside the course of the agency.
2. Acts done after the agency is terminated provided if this information was given.

Examples:

1. Collecting Agent;
2. Partnerships;
3. Personal Relations asked to carry out a particular task.

Vicarious Liability in the Agency context

The very first research article that I read was “Vicarious liability in the agency context” by Luke McCarthy. The author aimed to analyse whether the principles for vicarious liability should apply to principal-agent relationships or not. He began by defining what the terms agency and agent meant by different authors. The next part of the research paper dealt with different kinds of relationships like master-servant, relationships arising out of owner lending his vehicle for use to someone else etcetera. Up until this point, I found the paper to be very general. All the terms and relationships that were mentioned, I already had a good understanding of them due to my research for this project. Nothing new as such was learned by me. Also, the author, in my opinion, focused more on giving definitions by various judges which I felt was not needed that much. A mere explanation of simple terms would’ve been enough. The next part of the paper focused on whether vicarious liability should be used only in the context of a master-servant relationship or not. Here, the author mentions several ideas of many distinguished commentators from the likes of Gardiner to Hambly.

I think this was an interesting part of the article since the same argument was analysed through various perspectives. And reading about these different perspectives was deeply refreshing. Next, the author discusses the rationale against the imposition of liability in master-servant relationships. This again was too generic and a little bit outside the scope of this particular paper. The author could’ve easily left this part out and his paper would’ve still made sense. The last part of the paper focused on the approach and the reasoning behind the said approach of McHugh J in two cases: Hollis v Vabu and Scott v Davis. The justification given by McHugh J in both the cases concerning vicarious liability was not up to the mark. I agree with the author on this issue. The demarcation in cases where the principal should be liable for the acts done by the agent and the ones in which he should not; is not very clear by the arguments presented by McHugh J. A more clear and concise methodology needs to be adopted and applied.

In conclusion, I found the paper to be repetitive and very general. It could’ve been made a little more specific. Having said that, I did find certain parts of the research article which were interesting to read about. It was well written in that sense. I also learned about certain new case laws that I was not aware of initially. Another thing which I liked was the frequency of case laws. The author had taken proper care in inserting important case laws almost on every page which made the reading of this paper enjoyable and at the same time knowledgeable as well. Overall, I’d say that the principal goal/ aim of the author, which was to analyse whether the principles for vicarious liability should apply to principal-agent relationships or not, was partially met by him.

The Relationship of Principal and Agent

The article “Vicarious Liability” by Modern Law Review aims to inspect the main rules and elements of English Law regarding Principal and agent relationships. The author has begun the article by criticizing those writers who have restated and analysed English Law by stating the fact that they haven’t mentioned the law governing relations between principals and their agents.

In the first part, the author talked about the relationship between principal and agent which is still supposed to be essentially contractual. It is based on the assumption that relation exists when there is a contract between the parties. He then further points out the difference and similarities between the Law of Agency and Law of Contracts. He stated that “a contract accompanies an agency, but there may be a complete agency without a contract”. Further, many propositions were presented by the author to establish an exact connection. These propositions were simple to understand the connection between the two. In the next part, he discussed the agency and the doctrine of fiduciary relations. Fiduciary relation is an extension of the law of trust. The author discussed different forms of fiduciary relation like agents and principals, attorneys and clients, guardian and awards etcetera. Later in this part of the article, the author talked about equitable maxim, that there cannot be a conflict between duty and a person’s interest.

A case has also been discussed in the article: Bentley v. Craven where the agent must disclose personal interest involved in the transaction.

Now the author discusses a circumstance where an agent becomes a trustee of a property. To explain this, he discussed a case: Lees v. Nuttal where the agent property in his name and became the Trustee of the property on behalf of the Principal. I think this was an interesting part of the article since the same argument was analysed through various perspectives. And reading about these different perspectives was deeply refreshing.

In another section in the article, he talked about the nature of agency. This section endeavours to characterize the idea of ‘agency’, especially in the extent of English and EU law. He mentioned that” three parties are needed for a legal relationship in English law: a ‘principal’, on whose behalf the agent acts; an ‘agent’, who acts on behalf of the principal; and ‘third parties’ whom the agent brings into legal relations with the principal”. Moving forward, he stipulated that how European law has applied an extensive effect on the agency in the context of English Law. The impacts were explained by the author in a way that can be easily comprehended.

The last part of the paper talks about the normal incidents of agency in various points regarding power liability relations. It made it very easy to understand the incidents since they were explained in points with examples.

Therefore, the author discussing everything in a precise manner made the concept interesting and knowledgeable. Overall, I’d say that the principal aim of the author which was to restate the agency concerning English Law was met.

Case analysis

Facts 

Facts of the case: Castillo v. Case Farms of Ohio, the defendant is an Ohio based chicken processing plant which has been operational since 1986 and it was during the years 1996 and 1997 that they were actively recruiting employees. Their package included free bus tickets to Ohio and a 20$ to bear conveyance expenses. But the labourers alleged that the terms and conditions promised to them significantly varied from what Tempcorps made when it recruited. To make their case, the recruits relied on the theory of the principal-agent relationship, arguing that an agency relationship existed between the defendant and the agent.

Issues in the Case 

1. Can ATC be called an agent of Case Farms?

2) If called an agent of Case Farms, will it be liable for ATC’s actions?

3) Will the Case Farms recompense the worker?

When a person engages another to act on his behalf it creates a relationship between the principal and the agent. Since the principal put the agent in a situation where a tort is committed, the principal is vicariously liable for the acts of the agent. A principal would be liable for the acts of an agent when it is expressly delegated to the agents by the principal. Giving express authority to do a certain task also includes implied authority to do all things in a proper and usual manner necessary to perform the job undertaken. Following are the tests to check if a principal-agent relationship exists: 

1. Express appointment and publishing the same to the outside world.
2. Implied actions and conduct which leave the impression of an agent.
3. In case of emergency, appointment by necessity.
4. A distinguishing test from the M-S relationship is that the agent has the power to enter into contracts on behalf of the principal.

Analysis of the Case Law 

Here, like the defendant in Castillo v. Case Farms of Ohio, Defendant’s HR reached out to ATC to outsource workers. This shows that the defendant appointed ATC as his agent. The facts say that it was during 1996 and 1997 that they were actively hiring workers. So, it is clearly stated by the facts that since they were actively recruiting and it was known to outsiders, they expressly appointed ATC and published the same outside the world. The activities like lodging and transportation activities like shipping to and from great distances and keeping them in apartments were implied actions of the defendant.

In the above case, since there was no such emergency, there is no case of appointment by necessity.

The distinguishing feature that the agent has the power to enter into contracts on behalf of the principal was not experienced in this case as ATC didn’t enter into any contract other than its contract with the defendants.

Besides, since the job was explicitly delegated by the defendants to ATC, as it was ATC’s responsibility to hire workers and look for them, it is therefore now defendants liability.

Since ATC kept them in bare houses or apartments, provided them with bad living conditions, etc. they didn’t perform their job in a proper and usual manner, therefore, liability rests upon defendants.

Conclusion

After analysing the case by applying rules to the issues, we can infer that ATC being an agent of Case Farms makes the defendants liable for ATC’s actions. Therefore, the damages suffered by the workers will be compensated by Case Farms.