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Principal & Agent Liability in California

This article defines and explains the legal concept of Principal and Agent Liability in California. In certain circumstances, a person can be held liable for the actions of another. One of the most common of such situations is called “principal-agent liability.” This situation can come into play when an agency relationship is created.

Creation of an Agency Relationship

Principal and Agent Liability in California

Business & Trial Attorney Gregory G. Brown

There can be no principal-agent liability without an agency relationship. Agency relationships can be created in two different ways, authorization and ratification. When a principal authorizes an agent to perform on its behalf, then an agency relationship has been created. Additionally, where an agent acts on the principal’s behalf without authority, but the principal accepts the benefit of the agent’s conduct, an agency relationship is also created.

Principal-Agent Liability

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When an agent acts within the authority given to it by its principal, the principal is liable for the agent’s actions. The principal will be held liable even if the specific act was not authorized by or known to the principal. For example, if a long haul truck driver is employed by a shipping company who authorizes him to drive a shipment across the country, the shipping company will be liable for an accident negligently caused by the truck driver. This is true even though the shipping company did not specifically authorize the truck driver to drive negligently or to get into an accident.

A principal will not, however, be held liable for an agent’s actions if the agent was acting outside the scope of their authority. So while the shipping company may be liable for their truck driver injuring someone else in a traffic collision while driving a shipment, they would not be liable if the truck driver got into an accident while driving their own car during their time off work.

Scope of Agent’s Authority

An agent can have actual or ostensible authority. Actual authority is created by an agreement between the principal and the agent. One example of this is a home seller and her real estate agent. When a home seller hires a real estate agent, she grants the agent the authority work on her behalf for the purpose of selling the seller’s home.

A principal can also be held liable for the conduct of its agent while the agent is acting under “ostensible authority.” For a principal to be held liable for acts of an agent acting under ostensible authority, three requirements must be met (1) the third party dealing with the agent must have a reasonable belief that the agent has authority from the principal, (2) the third party’s belief must be the result of some act or neglect of the principal, and (3) the third person cannot be negligent them self.

Getting Legal Help

In addition to being legal experts in the areas of Principal and Agent Liability in California, Brown & Charbonneau, LLP represents individuals as well as large and small companies in cases involving all forms of business disputes. If you are involved in a business dispute, or would like to learn about your rights and how to protect them, we can provide you with the information you need. Contact us or call today at 714-505-3000 to schedule a consultation and learn more about how we can help you.

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