The Scope of an Agent: Be Sure to Define the Limits

One of the greatest tools a company can utilize is hiring agents.  Agents often specialize in carrying out certain tasks that may be foreign to the company.  Agents allow the company that hires them to have more free time to concentrate on tasks within their knowledge, and allows them to concentrate on what they believe is most important.

However, while hiring agents may be efficient, there are some downfalls.  Chief among these is the fact that the company, as principal, may remain liable for an agent’s actions. In fact, many courts treat agents as extensions of the company, and as such will hold the principal just as liable as if the principal himself created the liability.  In those situations, it is important to understand whether the company has recourse against an agent for his or her actions.  The short answer: the company might, but it requires careful attention and process.

Regardless of what the action is that caused the liability, the third party is going to sue the principal to reach the deep pockets of the company.  When that happens, the principal will be just as liable as if he, himself, completed the liable act.  This is because courts attempt to protect third parties who are not as knowledgeable of the relationship between the agent and principal. A principal may, however, attempt to turn around and sue the agent, claiming the agent was solely responsible for the action.  In order to do so, the company must prove the agent acted outside its scope, making it crucial to define the scope of an agent’s authority.

A principal should be as explicit as possible in defining the scope of the agent’s authority.  Courts may provide some leeway to the agent in terms of its authority because there is some inherent authority involved.  However, providing explicit instructions with regards to the agent’s duties, the principal can ensure the scope of the agent’s authority is as limited as possible. If done correctly, you will have better proof that the agent acted outside of its scope when attempting to sue the agent later.  This is crucial to ensuring the company can recover from the agent.

In sum, when companies hire agents, they must be as explicit as possible in defining the scope of those agent’s authority.  This ensures that if a principal is liable later to a third party, he may be able to recover from the agent when the agent acted outside of its scope, thereby protecting a company from unwanted liability.  Consulting with the right legal team can ensure that a principal is protected in those situations. Call the Trembly Law Firm at (305) 431-5678 today to schedule a consultation.