It’s important to know if you’re acting as an agent, principal, or third party in many situations, and where your responsibilities in any of these three roles begins and ends. Let’s take a look at an example of a bar bouncer working for a local pub to clarify the roles of principal, agent and third party:
Bar Bouncer Agency Example
There is a bar called Owen’s Pub. The owner, Owen, hires a bouncer, Ben, to keep order in the pub. Owen gives Ben authority to throw visitors out of Owen’s Pub if they cause any violence. Owen is therefore the principal and Ben is his agent.
Ryan, a local town drunk, enters the bar one night and starts a fight with another customer for no good reason. Ben, the bouncer, sees Ryan throw the first punch and Ben immediately grabs Ryan and throws him outside on the curb. Ben injured Ryan by tossing him out the door and Ryan now wants to sue. Who can Ryan sue?
Ryan sues Ben, because Ben injured him. However, can Ryan sue Owen? This depends on the nature of the relationship between Owen and Ben. As mentioned earlier, Owen is the principal of Ben. As long as Ben acted within the scope of his employment on behalf of Owen, Ryan could sue Owen as the principal of Ben. In other words, Ryan would sue Owen because Owen authorized Ben to throw Ryan out of the bar. In the eyes of the law, Owen is liable for the actions of Ben.
However, Owen and Ben would both argue that they’re innocent because Ryan deserved to get thrown out. And Owen and Ben are likely right, and if so, neither would be liable. However, if a jury or judge determined that Ben acted unreasonably and was liable to Ryan, then Owen would be liable too.
Now, assume that Ben walked up to Ryan and beat him up for no legitimate reason whatsoever. In this case, Owen would not be liable for Ben’s actions because Ben would be acting outside the scope of his employment. So, keep in mind that a principal is only liable for the actions of his or her agent if the agent acts within the scope of his or her employment! This is a concept that often confuses many people.
Finally, we’ll wrap up this article by showing how an agency relationship is terminated and offer some additional thoughts to keep in mind.