An agent is a person hired by another person called principal to represent him in contractual dealings with third parties pursuant to section 182 of the Indian Contract Act 1872. Vicarious liability is the holding of the principal liable for any negligent or faulty act done by his agent during the latter’s course of employment to the former. The purpose of this article is to examine the rules governing the concept of vicarious liability then to show that its application between agent and principal has at times been problematic.
State Of Rajasthan vs Smt. Shekhu And Ors. 2004 defined vicarious liability as the attribution of liability to a party A when another related party B committed a tortuous act during the course of his work for A. Shekhu described the concept of vicarious liability within the context of a master/servant relationship where the party held responsible for the other party’s tortuous act is related to the latter as the master whereas the other is the servant. The concept of vicarious liability was held to include actions done in the service of a master even where those actions were not authorised by him. It is simply the fact that the tortuous act was done in the course of employment to the master that is sufficient to give rise to such liability. Vicarious liability is not to be misunderstood as some sort of partial liability but rather as the court stipulated, the master is to be considered as equally liable to the servant who committed the tortuous act and in the court’s terms the master is responsible of such an act “as if he had done the act himself”.
A master is akin to the employer in that he employs another person to do some work for him under his command and directions . The main reasons why the employer is held vicariously liable for his employee’s actions is because he is considered to be wealthier which should enable him to pay damages and court proceedings. Another reason is that the employer’s use of his employee to generate profits makes it more appropriate for the employer to incur the losses his employee causes.
It is the employment relationship that matters when holding a party vicariously liable for another party. For example in the case of a bus driver having committed a negligent act resulting in an accident, it is not the actual registered owner of the bus that is to be regarded as the employer of the bus driver but it is rather the corporate body that directs and commands the bus driver’s operation of his work that was found vicariously liable in Rajasthan State Road Transport vs Kailash Nath Kothari & Ors. 1997. It did not matter who the registered owner was as long as the defendant company was the hirer of the vehicle and was thus under actual possession of it. It is not the purpose of the law of vicarious liability to hold the original owner of a driver’s bus liable for any accident the driver commits but rather it is the actual employer of the driver that is concerned by such liability. The question to be asked for the requirement of an employment relationship to be found when determining vicarious liability in this case was who the bus driver was working for when driving the bus and not who owned the bus. This was not a case of transfer of services between the registered bus owner to the company but rather services were run and provided by the company in addition to the company being in full control of its instructions to the driver in which the bus registered owner played no part. It is therefore the employer of an employee that is concerned by vicarious liability.
In the case of an agency relationship where a principal employs an agent to act on his behalf to conduct contractual dealings for him, there is a type of employer-employee relationship and thus as per Mumthas C v Tahsildar 2021 vicarious liability is applicable to a principal-agent relationship. The court expressed the view that the principal bears responsibility for any risk the agent creates because it is he the principal who selected his agent to whom he delegated certain powers and thus even for fraudulent acts committed by the agent, the principal must be held liable because the choice of such an agent goes back to him. The principal should also bear responsibility because as he uses his agent for his own benefit, he should also incur any loss that occurs during the course of employment.
The question of the existence of a principal-agent relationship was at the core of determining vicarious liability in the case Ramu Tolaram, Gulam Hussain… v Amichand Hansraj Gupta and Ors 1987 for the consequences of an accident. The case was of strange facts in that the person who caused the accident was not proved to be known but the car that was driven and that has caused the accident was owned by a person who put it in a garage for repair. It was when the car was in the garage that it was taken out by a stranger when the garage was left by the garage owner to his attendants, one of whom was in custody of the car keys. It has, peculiarly, not been proved whether the garage workers were involved in the unknown person’s taking the car out. The Tribunal has found that with such facts and the vehicle owner not having been in control of the car at that time, he couldn’t be held vicariously liable nor could the garage partners be liable due to lack of evidence of their contribution to the accident. However, on appeal, the court held that the clearing of the liability of all respondents could not be sustained and thus the issue to be answered for finding of vicarious liability was who the agent and who the principal were if they of course existed in this situation. The question was then whether the owner of the car could be held vicariously liable. By leaving his car in the garage for the owner of the garage to repair and buy the necessary elements to his car, the owner of the garage was acting as an agent to the car’s owner. The owner of the garage was the agent to the owner of the car. The agent, the garage owner, was found liable, without much explanation from the court, for the negligence of the person who drove the car causing the accident, and this despite lack of proof of his attendants’ involvement. By application of vicarious liability rule, the principal, which means the owner of the car, was found vicariously liable.
The case of Ramu Tolaram raises certain objections. The main problem is that the garage owner was not proved in fact to be responsible for what his attendants may or may not have done in his absence since their alleged involvement remained a mystery due to lack of evidence, yet he was held liable for their negligence and through vicarious liability his principal was also found liable. The concept of vicarious liability is founded on the principle that the principal or master will be held liable for what their agent or servant does with fault or negligence during their course of employment as held in State Bank of India v Shyama Devi 1978. It is the fact that the act in question happened in the course of employment that will give rise to the liability of the principal. It is arguable whether the garage owner in Ramu Tolarum was acting within the scope or course of employment to his principal, the car owner, when the negligence or faulty action of his attendants happened after he left. However, what the court has perhaps not mentioned or clearly explained is that there was a servant-master relationship between the garage owner and the attendants. The attendants acted, with or without fault, in the course of their employment. Therefore, their master/the garage owner was vicariously liable for his servants/attendants’ negligence and it is this liability of the garage owner that seems to have constituted sufficient basis for the vicarious liability of the car owner, the principal of the garage owner. It is true that the court in Ramu Tolarum has proved that there was an agent-principal relationship between the garage owner and the car owner, yet the purpose of allocating liability to a principal is to alleviate the legal costs and damages to the agent who is usually of limited resources and this principle was based on the typical reality of principals being big corporations and because their agents will become insolvent if they were to bear the cost of risks whereas principals usually have more resources. Yet, this was not the case in Ramu Tolarum. The car owner was not a big corporation or an institution and even though technically there was some kind of an agency relationship, it was not the kind to which vicarious liability between agent and principal was meant for, that of well-resourced employer vs limited income employee.
It is therefore to be questioned whether a technical application of the definition of an agency relationship is sufficient to the application of vicarious liability and whether it is always just to do so. This article would conclude by suggesting that the law should be more specific as to whether vicarious liability should apply to all relationships akin to that of principal-agent even where the relationship does not fulfil the purpose of vicarious liability to attribute liability to the more resourced party.
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Journal, vol. 1, no. 2, December 2020, pp. 93-98. HeinOnline.
2. Idem.
3. Gibson, Evan, et al. "Regulating Digital Financial Services Agents in Developing
Countries to Promoted Financial Inclusion." Singapore Journal of Legal Studies, vol.
2015, no. 1, 2015, pp. 26-45. HeinOnline.
This article is written by Zina Balkis Abdelkarim, of University of London Worldwide.
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