Having an agent is one way of managing a fast growing business enterprise with several branches. When you hire an agent to carry out business transactions on your behalf, you establish an agent-principal relationship. Here, the actions of your agent are legally binding to you. Not only do you enjoy the benefits of the services they render you but also have to deal with the liabilities that come along. If you are hiring an agent for the first time, the following things will help you understand where you stand when it comes to liability:
Your agent is presumed to act under the specific instructions you issue and terms of the agency agreement. Therefore, direct liability occurs when you issue instructions that prompt the agent to commit an infringement. Moreover, it also occurs in cases where you were aware that the instructions you issued to the agent would lead to an infringement of the law or the rights of another person in the transaction. Often, direct liability results from negligence on your part. Ideally, you should be careful regardless of handling transactions through your agent.
Intentional Infringements by the Agent
In a case where you did not instruct the agent to do something that amounts to an infringement, you will not be held liable. However, the liability can be traced to you in some cases especially where the agent committed the wrong act for the benefit of your business. Here, legal application might vary, and the case examined according to its unique facts.
Vicarious liability is the based on the principle of the master-servant relationship that you have with your agent. As the principal (master), the scope of liability is broader and it might extend to things that you had no knowledge of or didn't intend to commit. However, the liability is traced back to you because the agent commits it in the scope of work that you have hired them for. This is because vicarious liability is perceived in the context of the "deep pocket." Presumably, you are in a better position to pay for the damages to another party in case of an infringement, unlike your agent.
Agents Using Your Business' Automobiles
In the agency agreement, you should state explicitly the scope of the agent's work. For instance, state categorically that an agent driving your car for business purposes should not take detours to run their personal errands. Should an infringement arise, such clarification will help you address the ambiguity of the term "scope of employment".
For more help preventing liability and preempting any issues, work with a professional in commercial law to draft an agency agreement that will protect you and your business.