Sample Law Essay on Company’s Liability in Criminal or in Law of Tort

Company’s Liability in Criminal or in Law of Tort

A company is a legal person as regarded in Company law, and different from people acting in their capacity in the same organization. Companies are legal entities and their legal responsibilities are separated from stakeholders’. The company acts in it capacity through different bodies or individuals as stipulated in the memorandum of association. The persons who act in place of the company could either be directors, shareholders, managers, employees, or agents in a principal-agent relationship[1]. It is difficult to determine who is liable in case the company is found guilty of committing a criminal or tortious act in a court of law. To establish the person liable, it is essential to differentiate the natural individual from the legal entity. This company law separates the natural liabilities from the companies in case of acting within the power given and without negligence. The company’s liability is also minimized if it had carried the act of due diligence when the act of or omission was carried out by a natural person[2].

The Approaches of Lord Reid and Lord Diplock

The case study for Tesco Supermarkets Ltd v Nattrass elaborates the liability of a company, which is different from that of a person acting for the company. The ideas applied by Lord Reid and Lord Diplock in the Tesco case to interpret company legal responsibility for violation of the Trade Descriptions Act 1968 differed, though they both came up with a common conclusion. The subject that was before them was to give a clear direction and an explanation to which of the company’s representatives or servants’ actions could be considered as acted for the organization[3]. This was so to differentiate an individual’s liability as a result of actions taken, from that of the company resulting from the same act carried out on its behalf. They were hence to make it clear when the natural person’s actions turn to be the act of the company, which is a separate legal entity[4]. Both Judges Lord Diplock and Lord Reid seemed to be essentially equal with regards to Lord Reid’s statement. The statement affirmed that it ought to be legally interpreted whether a person is to be considered as acting in the capacity of a company or just a servant or a company’s agent. According to Lord Reid, if a person is simply a servant or an agent, any legal responsibility of the company could only be a legal or vicarious liability[5].

Though they were into a consensus, the two Lords applied different approaches to reach that point. The procedure followed by Lord Diplock in deciding the direct mind and will of a company was quite ordinary though realistic. He argued out that, the apparent and the only grounds to rely on in determining who should act as the company itself and hence imposing accountability on part of the company are the businesses’ Memorandum and Articles of Association. These documents specify that directors should run the business, implement, and be conferred trust upon the powers of the company[6]. In addition, these documents might grant the executives the right to give powers to managing directors of a company. In his opinion, Diplock’s supposed that for a person to be considered as the power of company this must be established in Articles and Memorandum, an action of directors or the decision of members of the company during a general meeting in accordance with the Articles[7].

Lord Diplock’s statement differed from Reid’s in his suggestion that the due diligence act and the whole defense could be fulfilled by just proving the absence of negligence on the part of the defendant. On the contrary, Lord Reid briefly and precisely emphasized due diligence defense from the perspective that the defendant could provide evidence of being innocent. He explained that since the company lacks the mind and hands to execute its obligations, it has to use the mind of a natural person[8]. This could either be the company’s directors, managing directors, or any senior officer. The company would be vicariously liable if any individual acting in such capacity acts on behalf of the company[9].

Issue of Agency and Authority

Agency relation occurs as a result of an agent acting on part of the principal subject to power and control. In case of law Tesco v Nattrass, the manager did not have the authority to act in the capacity as the mind of the company. The company store manager was found individually liable since as a company’s agent, he could have consulted the managing directors of the company before taking the initiative. The principal has to observe due diligence, on the other hand, a person acting as an agent must avoid all liability as a result of negligence through consulting or else may be found personally guilty for the action taken on behalf of the principal[10].

Bibliography

Campbell, Neil, and John Armour. “Demystifying the Civil Liability of Corporate Agents.” The Cambridge Law Journal 62, no. 2 (2003): 290-304.

Cohen, David L. “Theories of the Corporation and the Limited Liability Company: How Should Courts and Legislatures Articulate Rules for Piercing the Veil, Fiduciary Responsibility and Securities Regulation for the Limited Liability Company.” Okla. L. Rev. 51 (1998): 427.

Davies, Paul Lyndon. Introduction to company law. New York: Oxford University Press, 2010.

Gibbs, David. “David Kershaw, Company Law in Context: Text and Materials.” The Law Teacher 47, no. 3 (2013): 433-436.

Hicks, Andrew. Cases and materials on company law. New York: Oxford university press, 2008.

Jacobides, Michael G., and David C. Croson. “Information policy: Shaping the value of agency relationships.” Academy of Management Review 26, no. 2 (2001): 202-223.

Laufer, William S., and Alan Strudler. “Corporate Intentionality, Desert, and Variants of Vicarious Liability.” Am. Crim. L. Rev. 37 (2000): 1285.

Len S. Sealy, and Sarah Worthington. Cases and Materials in Company Law. New York: Oxford University Press, 2008.

Rubin, Dale. “Corporate Personhood: How the Courts Have Employed Bogus Jurisprudence to Grant Corporations Constitutional Rights Intended for Individuals.” QLR 28 (2009): 523.

Wen, Shuangge. Shareholder Primacy and Corporate Governance: Legal Aspects, Practices and Future Directions.New York: Routledge, 2013.

[1] Dale, Rubin. “Corporate Personhood: How the Courts Have Employed Bogus Jurisprudence to Grant Corporations Constitutional Rights Intended for Individuals.” QLR 28 (2009): 523.

[2] Sealy, Len, and Worthington Sarah. Cases and Materials in Company Law. (New York: Oxford University Press, 2008.) 180

[3] Shuangge, Wen. Shareholder Primacy and Corporate Governance: Legal Aspects, Practices and Future Directions. (New York: Routledge, 2013.) 90

[4] David, Cohen, “Theories of the Corporation and the Limited Liability Company: How Should Courts and Legislatures Articulate Rules for Piercing the Veil, Fiduciary Responsibility and Securities Regulation for the Limited Liability Company.” Okla. L. Rev. 51 (1998): 427.

[5] Lyndo, Davies. Introduction to company law. (New York: Oxford University Press, 2010) 83.

[6] David, Gibbs. “David Kershaw, Company Law in Context: Text and Materials.” The Law Teacher 47, no. 3 (2013): 433-436

[7] William, Laufer, and Strudler, Alan. “Corporate Intentionality, Desert, and Variants of Vicarious Liability.” Am. Crim. L. Rev. 37 (2000): 1285.

[8] Michael, Jacobides, and Croson, David. “Information policy: Shaping the value of agency relationships.” Academy of Management Review 26, no. 2 (2001): 202-223.

[9] Campbell, Neil, and John Armour. “Demystifying the Civil Liability of Corporate Agents.” The Cambridge Law Journal 62, no. 2 (2003): 290-304.

[10] Hicks, Andrew. Cases and materials on company law. New York: Oxford university press, 2008.