You are the owner of a chocolate factory. One of your workers takes the initiati

Question

You are the owner of a chocolate factory. One of your workers takes the initiative and decides to place an order for more sugar from one of your suppliers while you are out of town. Since the sugar was necessary for keeping operations going while you were gone, you happily pay the supplier for the order when you get back in town. This same employee starts to place new orders for sugar anytime supplies are low, and even though you never gave him formal permission to do this you keep paying the supplier. However, one day you decide that the price the supplier is paying is too high and you refuse to pay on the grounds that your employee was not authorized to place the order. Do you think you would be liable for this payment or not based on the concepts of agency law?

Explanation / Answer

Agency law has the contract liability associated to it. As per the contract liability, the principal (the owner) is liable for any tort committed by the agent (the employee in this case) while the agent is acting within the scope of his authority. Also the principal is indirectly responsible for the agent’s actions as long as the agent is acting within express, implied or apparent terms of contract. The employee was placing the order on the behalf of the organization, hence the owner of the organization is liable for the employee’s actions as per Agency Law.

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