Catanese & Wells, a Law Corporation provides a quarterly newsletter to the equine industry of and concerning legal, tax and business issues for participants in the horse business or sport. www.cataneselaw.com
In this edition of the Equine Legal Summary the topic discussed is "agency" and how this legal concept arises in almost all equine transactions and activities whether for profit or non-profit.
General Rules Regarding Creation and Existence of Agency
An agent represents another who is called the "principal" in relationship to third persons. Agents can be special wherein they act only for a particular reason or general wherein they act in broad respects when they represent the principal. The rules of agency are generally found in the Restatement of Agency (first published in 1933).
In the equine industry, agency can arise even though the parties and the purported agent or agents do not purposely act to create an agency. For example, a buyer of a horse may instruct a trainer or a manager to arrange for and supervise a pre-purchase examination of the horse. And, should the purported "agent" fail to properly conduct or supervise the pre-purchase examination, should the buyer (principal) later claim the veterinarian or seller-conducted pre-purchase examination was faulty, the defense likely would claim that the purported agent's negligence was imputed to the buyer as a defense.
Liability of the Principal for Acts and Omissions of the Agent
A principal may be directly responsible and liable for damages to a third party where the principal directs or authorizes wrongful conduct of the agent. (Cal. Civ. C. §2339). Moreover, a principal may be liable where the principal accepts the benefits of the wrongful acts of the agent (ratification of the tort). Even where the principal is innocent, the principal may still have liability to a third party for the wrongful acts of the agent if the agent committed the acts within the scope of the employment or agency. Liability may exist even where the employee or agent acts in excess of the authority given by the principal or contrary to the principal's instructions. (Cal. Civ. C. §2338). California has specific jury instructions which confirm this doctrine (CACI 3700, 3701). More importantly, California also has a jury instruction that allows a jury to find liability against a principal under ostensible agency where the principal intentionally or carelessly created the impression that a purported agent could act on behalf of the principal. (CACI 3709).
The Use of Insurance to Mitigate Risk in Equine Lease Transactions
Based upon the above, if you are a horse owner or breeder, trainer, land owner, transportation provider, or even a veterinarian or service provider, you must keep these rules in mind when you are dealing with any party whether it is an employee or independent individual wherein you give specific instructions or you allow third parties to believe that the employee or independent individual is authorized to act for you in a particular manner. Generally, agency will typically arise in purchase and sale transactions, transportation agreements, training agreements, breeding situations, and on-premises (farm and ranch activity). Failure to abide by the agency concepts may create unintended liability or cutoff the ability to proceed with a lawsuit against a third party because of the agent's acts or omissions.
For further questions regarding agency or any other equine legal issue feel free to contact our offices.