Legal Aspects of Business: Fiduciary Duty and Vicarious Liability

This report delves into the legal intricacies of business operations, focusing on the concepts of fiduciary duty, agency, and vicarious liability. It begins by defining fiduciary duty within the context of English law, emphasizing the high standard of care, loyalty, and trust required of agents. The report ...Read More

Legal Aspects of Business

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1 ...........................................................................................................................................1
TASK 2 ...........................................................................................................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In the present world, there are different types of laws which implied on the business
organizations. For maintained business operation, it's important that to follow each and every
legislation imposed on the firm (Akintoye, Renukappa and Lal, 2012). The present report make
analysis on the fiduciary duty and their impact on the contract of agency. Agency can be describe
as the actions which taken by an individual as per the order of another person. In addition, it
also makes analysis on the Vicarious liability and its different aspects.
TASK 1
Fiduciary duties owed by an agent to the principal.
Fiduciary duty
As according to the English law, fiduciary duty is legal relationship in between two of
more than two parties. It is considered as the highest standard of care. The person who has
fiduciary duty is called the fiduciary and the person who owns the duty is called as the principal
or beneficiary. It is the highest standard of care imposed at either equity or law (Bowyer, 2016).
A fiduciary is expected to be extremely loyal to the person they own the duty. The person who
is performing duty, must not put their personal interest before the duty and must not involved
unethical profit practices by using their position. Basic elements of this relationship are good
faith, loyalty and trust.
When the fiduciary duty is imposed, it is requires to maintained level of equity and duty
of care. In the case of equitable cause of action for the fiduciary obligation required proof of the
two element i.e. there was relationship in between fiduciary and beneficiary , and another one is
obligations are part of that contract.
Nature of Agency relationship
As per the English law “ Consensual relationship authorizing on party to act on the behalf
of another party”. As per this law employment it is duty which is given by one person to
another person and bringsboth of them into legal relation (Dimatteo, 2016). This relation may be
created by the express appointment or by implication of law or by subsequent ratification by the
principal. As per the fiduciary aspects of the agency, equity must be derived from equity, quasi
contract or tort. In the case of agency fiduciary duties are specific type of the contractual term,
namely duty of unselfishness, which applies in the absence of contrary agreement.
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In the case of the Agent and Principal relationship, it is duty of the agent to follow each
and every rules. (Gillies, 2014). This relationship is based upon trust and loyalty. It is the duty
of the agent to avoid personal interest and maintained duty of delegation of authority.
Following are the basic duty of the fiduciary contract are as follows.
Conflict between duty and interest
The nature of the agency relationship is based on trust, that agent must be maintained. It
is duty of the agent to avoid of interest which appears during performing his duty. Agent must
have known that no personal interest should come under this relationship, otherwise it can
consider as part of the breach of contract agency (Oladokun and Aluko, 2014). This situation is
clearly defied in the case of Consul development Pvt Ltd V DPS Estates Pvt Ltd. As according to
the case law, Grey as managing director of Walton’s company . The another company DPS has
give him task to make investigation and find the suitable properties for development of their
business. Under this contract Grey Owed fiduciary duty of DPC (Oladokun and Aluko, 2014).
As per this law Grey, worked as agent and need to maintained that his personal interest would
not come under this contract. Later, Grey break this contract and purchased some properties for
himself which DPS might have wished to purchase which is considered as conflict of interest.
Duty not to accept any kind of commission or bribe
If at the time of performing the Job, any type of commission or bribe consume by the
agent then it is considered as the breach of duty and agent has to get punishment. It is the duty of
the agent if any kind of illegal commission which is derived during the performing of the duty,
and exceed amount of remuneration then exceeding amount will be seized by principal (Koutsias
and Willett, 2012). Along with this some legal actions may be taken against him/her. Similar
condition was also appeared in the case of Reading v R. In this case R was sergeant of the
British army, in the year of 1943 and 1944, he was on the active service in the Egypt. During his
services he was involved with many types of smugglers. He got money from the smugglers to
ride in their lorries of illegal spirit, he got more than £20000 each time, but was caught. The state
seized money and give him punishment to live in prison (McInnes, Kerr and VanDuzer, 2013).
In this case Mr Reading hold fiduciary duty. So he was liable to maintained nature of agency in
this case.
Make own profit without consent to the principal
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Another aspect which includes in the fiduciary duties on the agent, is that not to derived
any type of profit from principals business It also includes that if any type of profit or
remuneration which derided from the regular business without consent of the Principal then it is
considered as the breach of duty (Sprague, 2016). The similar situation were also found in the
case of the Chan v Zacharia. Under this case, both the person Chan and Zacharia were doctors.
They rented the premises as joint tenants under the three year of contract. At the end of three
year terms, both doctors decided to break their partnership (Winfield, 2016). Chan was invited
to join the option for renewal their rented house and he entered into a new lease of premises on
his name. As per the case law it was duty to Chan, asked before entering into contract to his
partner Zacharia. In this case he exploited his fiduciary position (outsias and Willett, 2012). So
as per the case study it is concluded that in the relation of the Agent and principal it is essential
that for the agent to make consent to the principal before making its own profit or any type of
decision
The duty to account
The duty of account is generally appears in case of fiduciary duties. As according to this
law, there are many non government company which are not authorized to filled any types of
record with government agency (Sprague, 2016.). As per this it has been, established that heirs
and beneficiaries get their legal rights and assets. The person who is authorized to take care
assets of the individual have also right to find his legal hires and give him property. If the legal
hire is minor then they have to take care of their property upto attains his majority In the case of
relationship of Agent and principal, agent needs to take care of properties or assets which
belongs to principal. Along with this each information which are important to reach to the
principal should be inform. It is important so if any type of risk occurred while performing duty,
they can make rectifications and no loss can be appeared. The similar case appears in case of
Freeman v Fairlie, 3. Mer 43.
In the fiduciary duties, it is considered that Agent has duty to inform about the all
important aspects on the contract (Chamallas, 2014). It is basic element of the Agent and
Principal dealings to maintained trust in their relationship.
Duty not to delegate authority
In the aspect of the agent and principal relation, fiduciary duty is considered appropriate
when agent receive open- ended power. In the such type of contract it is essential to maintain
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effectiveness of contract (Tadros, 2014). Fiduciary duties, in the relation of agent and principle,
are designed to perform the owner's tasks. It is also advised as the power of fiduciary duty, to
perform tasks on the behalf another person. Apart from this, it is duty of Agent to not delegated
his/ her duty to anyone else. In such case if any type of problems occurred that loss shall be bear
by the agent only and it is considered as the breach of contract (Akintoye, Renukappa and Lal,
2012). In the case of agency, agent need to perform each task by himself and not to delegated his
power to anyone else because to maintained trust in agency is important element.
TASK 2
Concept of vicarious liability in the area of tort law
Vicarious liability
It refers to that conditions, in which one person is liable for the tort of another. As
according to the common Law of act, it is considered that if any type of relationship which is
stated in the English Law falls under Vicarious liability then principal will be liable for the act
which done by his agent (Lawson and Seidman 2016). The common relationship of such
liability is based on employees and employers relationship. Where the employer held liable for
the every act which is done by the employee.
As according to this law, employees are agent of the company. Each action which is
committ by workers make employers liable as well. . The issue of the vicarious liability is that
it can be present injustices for the other people (Weidner, 2016). For ensuring that mistake has
been taken on the employees part, different types of requirement should be meet. Leaders need
to provide proper guidelines and instruction to their workers so no such mistake can take place at
the workplace.
At the first place in such type of cases, court try to make identify that someone else
should be liable for wrongdoings of another person (Policy Area, Business and enterprise. 2017).
In the many times it is argued that how can employers is become liable for the wrong actions of
his employee.
` In the case of the “Catholic Child Welfare Society v Institute of the Brothers of the
Christian School” considering two points which includes that nature of relationship which rise
vicarious liabilities and second the connection which linked with wrongful act. Under this case
Institute of the Brothers of the Christian School has mission to teach children in their schools. It's
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members are Lay brothers (Bowyer, 2016). They were involved in making illegal activities
sexual and physical abuse of children of the institutions. Now the question had been raised that
how institution become liable to act of their members. At the first stage it is important to
established that their was relationship of employee and employers. In the above case all the
activities which are taken by the lay brothers in their school were directed by the institutions.
Along with this, brothers were also obliged to follow each rule which made by the institution
(Dimatteo, 2016). At the first stage it is considered that vicarious liability was satisfied (About
Us 2017). At the second stage they it is required to check that whether employers were aware
about the act present by the employees. In the above case Lay brothers were appointed as the
headmaster of the schools. So it was the duty of the institution to give authority in the safe hand.
 As per the Justification of the above case, which made in the different area it is found in t
that employers have large number of assets so they have to pay the compensation to
injured people (Gillies, 2014).
 Another justification which given by the committee is that if any type of act which is
done by the employees then employer gets benefited so he should also need to bear the
losses of the employees as well. The last justification it was considered that the way to reduce risk in the employment it is
important that to ensure that adequate precaution needs to conduct. So no such situation
can be raised
Development in establishing liability
As per the vicariously liability it is found that employer is strictly liable for the torts
which conduct by his employees (Oladokun and Aluko, 2014). To find the guilty of the
employees it is important for the court to make established of the employer and employee
relationship. For the establishing vicarious liabilities it is important to note that adequate evident
should be present that wrongdoings were done by the command of the employer if they want to
give punishment to employer as well.. For this there are three types of test which established by
the court that is control test, organization test and multiple test.
Control test
it is primary test which established to measure employer and employee relations
(Koutsias and Willett, 2012). This is one of the most effective test which is need to be considers
by the court. This test was established in the case of the Yewens v Noakes. As per this case, the
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person who case taker of house and earn only 150 GBP was not fall under the category of the
servant but later it is found that every person who follow his/ her master command falls under
the category of the servant.
Organization test
This test make focus on the different type of factors of contractual and external factors. It
makes difference in between contract of services, and contract for services (McInnes, Kerr and
VanDuzer, 2013). As per this it is, considered that the case of contract of services, employees
are integral part of organization and in the case of the services for contract workers are not
integrated to business. Which helps to established the relations in between employees and
employers.
The Multiple test
As per this test, for establishing employees and employer relations it is important to full-
fill three conditions. First, All the action skills and tasks which performed by the employees
should be paid (Sprague, 2016). At workplace all the element should be control by employer and
there should be contract of services. If all these three conditions meets then employees and
employers relationship is considers as the established.
The connection of torts to employment
After establishing the relationship in between employer and employees, it is important to
noticed that any type of committed which is done by employee is part of their employment
(Winfield, 2016). If such type of things appears, then employers is also guilty As per the many
arguments, are present in the court that no test can established the adequate relationship in
between employees and employers in the case of Vicarious liabilities.
In the case of tort liabilities it is found that there are certain cases in which employer is
not found guilty where an employee is going what his business in a standard -way (Koutsias and
Willett, 2012). Along with this there are certain cases as well in where employees provide
proper guidelines to their workers to performing their jobs and if there is any type of the
wrongdoings appears then it is employer is not held liable for their act.
In the vicariously Liabilities it is important that to measure the intention of the employees.
Following are the cases in which employers can measure to what extent they are liable for the
actions which taken by their employees
Fraud
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Employers are liable if, any type of misrepresentation of their employees. The Vicarious
liability is found that if any type of mistake done by employees in his ordinary course than
employers is liable for their act. As according to the case of “Dubai Aluminium Co Ltd v
Salaam”. As per the fact of this case, a senior partner of the company was involved in the
making fraud with the solicitor's firm (Sprague, 2016). In the present case it is found that
employers does not make any type of representation but he was still found guilty in the course of
action, because at the time of inquiry it is found that there was close relationship has been
established in between partner's fraud and employer's liability.
Sexual Assault
As per the definition of the vicarious Liability, all the act which is done by the employee,
employer is also liable for such actions, but in the case of sexual assault it is found that, it is not
essential that employer is liable for worker's action. As according to the case Law, Lister v
Hesley Hall Ltd. The fact of this case is related to that warden of the home care was involved
in making sexual activities with the children of the home care. According to the judgement of the
court, vicarious Liability applied and employer is also liable (Chamallas, 2014). The justification
was given on this case that in the child care, it was the duty of employer to appoint right person
for the job.
Theft
As per the argument of, the Vicariously Liability it is found that employer is not merely
liable of the act of employer in the case of theft. But it is the duty of the employer to keep their
customers goods safe and secure. Similar status was also appeared in the case of Nahhas v Pier
House Management. Here management of the Luxury hotel appointed the employee who was
the ex-professional thief (Tadros, 2014). Person who lived in that building handed over key to
employee and he robbed expensive jewellery. The management of the company found guilty
and they have to make compensation. Although there were, not involved in making any kind of
robbery but it is found that it was their duty to check background of employee before hiring.
CONCLUSION
Summing the above report it concluded that there are different types of aspect of
business which need to be considered. For the running a successful business operation, it is
important that to followed all type of laws and regulations. In the case of the Fiduciary duty
agent and principal relationship is considered. For maintained Fiduciary duty in the agency,
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agent need to followed certain condition so the nature of the agency can be maintained. A
fiduciary is expected to be extremely loyal to the person they own the duty. For performing
such type of duty it is important that for the agent, remain loyal towards his work. The existing
report concluded about the Vicarious Liability. It refers to that situation, in which one person is
liable for the action of another person. As according to this law, it is liability of the employer
that each type of activities which done by employees, should be bear by him.
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REFERENCES
Books and Journals
Akintoye, A., Renukappa, S. and Lal, H., 2012. The abolition of the “contracts in writing” rule
in the 2009 Construction Act: Potential implications for UK adjudication. International
Journal of Law in the Built Environment. 4(2). pp.140–156.
Bowyer, M. L., 2016. Insurance contract law and regulation and competition in the UK
insurance industry: The missing link. Journal of Financial Regulation and Compliance.
8(2). pp.140 – 150.
Chamallas, M., 2014. Two Very Different Stories: Vicarious Liability Under Tort and Title VII
Law. Ohio St. LJ. 75. p.1315.
Dimatteo, L. A., 2016. International Business Law and the Legal Environment. Routledge
Gillies, P., 2014. Business Law. Federation Press.
Koutsias, M. and Willett, C., 2012. The Unfair Commercial Practices Directive in the UK.
Koutsias, M. and Willett, C., 2012. The Unfair Commercial Practices Directive in the UK.
Erasmus L. Rev. 5. p. 237.
Lawson, G. and Seidman, G. I., 2016. By Any Other Name: Rational Basis Inquiry and the
Federal Government's Fiduciary Duty of Care.
McInnes, M., Kerr, I .R. and VanDuzer, J. A., 2013. Managing the Law: The Legal Aspects of
Doing Business. Pearson Education Canada.
Oladokun, T. T. and Aluko, T. B., 2014. Dispute resolution in corporate multi-tenanted property
management: a case study. Journal of Corporate Real Estate. 16(1). pp. 22 – 32.
Sprague, R., 2016. Editor's Corner: Publishing Impactful Scholarship.American Business Law
Journal. 53(1). pp.5-8.
Sprague, R., 2016. Editor's Corner: Publishing Impactful Scholarship.American Business Law
Journal. 53(1). pp.5-8. Erasmus L. Rev. 5. p. 237.
Tadros, V., 2014. Orwell's battle with Brittain: vicarious liability for unjust aggression.
Philosophy & Public Affairs. 42(1). pp.42-77.
Weidner, D. J., 2016. Cadwalader, RUPA and Fiduciary Duty.
Winfield, P. H., 2016. History of Negligence in the Law of Torts, The. LQ Rev. 42. p.184.
Online
Policy Area, Business and enterprise. 2017 [Online]. Available
Through:<https://www.gov.uk/government/topics/business-and-enterprise>. [Accessed
on 10th June , 2017].
About Us 2017. [Online]. Available
Through:http://www.legislation.gov.uk/ukpga/2002/40/contents>. [Accessed on 10th June
, 2017].
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