legal liability


  • [6] An employer should also be aware on how the extent of their liability can change based on the agreements their agents make.

  • Liability in business In commercial law, limited liability is a method of protection included in some business formations that shields its owners from certain types of liability
    and that amount a given owner will be liable for.

  • There can be direct liability if the principal hired an incompetent agent, if harm resulted from nonemployee agent’s failure to perform a duty of care that the principal bestowed
    on them (a duty of care is an action whose successful performance is so important that if it is delegated to an agent and not accomplished, the principal is still liable), and a principal is liable if the nonemployee agent did not take the
    correct precautions required to complete very dangerous activities.

  • [2] This means that when a business is found liable in a case, the owners are not themselves liable; rather, the business is.

  • There is an exception to this rule, however, which allows a claimant to litigate against the owner(s) of a limited liability business, if the owner(s) have engaged in conduct
    that justifies the claimant’s recovery from the owner(s): This exception is called “piercing the corporate veil.”

  • Employers should worry about this rule when the employee commits a tort or harmful act when the employee was acting within the course and scope of employment at the time of
    the incident.

  • The reasoning behind this legal principle is because it is thought that the employer is best suited for bearing the financial burden, employers can protect themselves against
    this burden with insurance, and the cost can be passed to customers by raising prices.

  • If, for example, a limited liability business goes bankrupt, then the owner(s) will not lose unrelated assets, such as a personal residence (assuming they do not give personal

  • [6] For business owners, there are main categories of liability exposure to be aware of in order to protect their businesses from liability and financial troubles and issues.

  • The incident was motivated, at least in part, for the purpose of serving the employer If these four factors are found to be true, the employer will have to answer for the

  • To determine if an agent is liable for a contract, one must look at the type of principal.

  • This occurs when a principal’s actions lead a third party to reasonably assume that the agent can act in a certain way and create contracts with the third party on behalf
    of the principal.

  • The agent is liable here if they knew the principal had no capacity to take part in the contract even if the third party knows that the principal does not exist.

  • Finally, the last major category relates to holding directors and officers personally liable for actions taken by the company, as seen in piercing the corporate veil.

  • [citation needed] If anything, there was more of need to impose liability standards on industries because consumers had less power to freely bargain with corporations and
    other business forms.

  • An agent may also be liable to a third party if they lack the authority to contract for a principal.

  • A principal is not ordinarily liable for torts committed by nonemployee agents since the principal does not fully control the method of work done.

  • The first is employment-related issues where the larger the work force, and the more turnover there is, the larger the likelihood of liability lawsuits such as wrongful termination

  • Which theories of liability are available in a given case depends on nature of the law in question.

  • Unlimited liability means that the owner(s) of the business have the full responsibility of assuming all the business’s debts.

  • The limited liability of the business will no longer apply for these wrongdoings.

  • To avoid claims regarding negligent hiring or retention, employers should be diligent when hiring employees who will have a lot of contact with customers and the public (especially
    if they will have access to vulnerable members of the public, go to customers’ homes, and/or have access to weapons), and dismiss any employees who pose a potential danger.

  • Usually, a principal is liable for a contract made by the agent if the agent had actual or apparent authority to make the contract.

  • The employee is still participating in a non-work related activity, but the activity is not a major disregard for work duties.

  • To test whether the conduct that led to the incident is within the scope of employment, one must determine: 1.

  • A given liability may be covered by insurance.

  • [6] Additional concepts[edit] Economists use the term “legal liability” to describe the legal-bound obligation to pay debts.

  • The limited liability form essentially acts as a corporate veil that protects owners from liabilities of the business.

  • [10] It is important for employers to note whether someone working for them is an independent contractor or an employee.

  • An independent contractor, on the other hand, contracts with a principal to produce a result and in the process, gets to determine how that result will be completed.

  • Product-related liability (also called manufacturer’s liability) details poor manufacturing of products that results in injuries and/or accidents, which is discussed in more
    detail in the following section.

  • The term “scope of employment” is when an employee is doing work assigned by their employer or is completing a task that is subject to the employer’s control.

  • This happens when in the process of hiring a new employee, the employer does not check criminal pasts, backgrounds, or references to ensure the applicant did not pose a potential
    danger if hired as an employee.

  • An agent is a person who has the power to act on behalf of another party (typically the principal).


Works Cited

[‘LIABLE, Black’s Law Dictionary (10th ed. 2014)
2. ^ Siedel, George (2016). The Three Pillar Model for Business Decisions: Strategy, Law, and Ethics. United States: Van Rye Publishing, LLC. p. 61. ISBN 978-0-9970566-1-7.
3. ^ “Limited Liability”.
LII / Legal Information Institute. Retrieved 2020-12-18.
4. ^ Gevurtz, Franklin A. (1997). “Piercing Piercing: An Attempt to Lift the Veil of Confusion Surrounding the Doctrine of Piercing the Corporate Veil”. Oregon Law Review. 76: 853.
5. ^
Tarver, Evan. “With Unlimited Liability, You Are Responsible for Any Business Debts”. Investopedia. Retrieved 2020-12-05.
6. ^ Jump up to:a b c d e f Langvardt, A. James Barnes, Jamie Darin Prenkert, Martin A. McCrory, Joshua E. Perry (2018). Business
Law: The Ethical, Global, and E-Commerce Environment. McGraw-Hill Education. ISBN 978-1260091809.
7. ^ “Liability Definition – Entrepreneur Small Business Encyclopedia”. Entrepreneur. Retrieved 2020-12-05.
8. ^ Kenton, Will. “Vicarious Liability”.
Investopedia. Retrieved 2020-12-05.
9. ^ “Frolic and Detour”. LII / Legal Information Institute. Retrieved 2020-12-13.
10. ^ “Employer Liability for an Employee’s Bad Acts”. Retrieved 2020-12-14.
11. ^ O’Sullivan, Arthur; Sheffrin,
Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 187. ISBN 0-13-063085-3.
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