INTRODUCTION
The dispute between Lloyd Pauper v. Grace Smith and Corporation (1912) gives a new concept regarding vicarious liability in a master-servant orprincipal-agent relationship. A person may be found vicariously liable for an offence committed by another person, depending on the type of relationship between the two. In this scenario, the issue is whether or not the master will be held liable for the wrongdoing carried out by his servant. According to Section 238 of the Indian Contract Act of 1872, any misrepresentations or fraud committed by an agent acting for a principal in the course of their business shall be deemed to have been committed by the principal itself.
FACTS
In this case, Mrs. Lloyd, a widow who owned two cottages, went to the office of Mr. Smith, the sole member of the firm of Grace, Smith, and Co., who was a solicitor by profession, to seek advice on how to increase the income from her cottages because she was dissatisfied with her current income from her cottages.One of the employees of the firm advised her to bring property papers and sell her cottages to them. At last, the employee fraudulently convinced her to transfer the ownership of her property to himself for his profit. Mrs. Lloyd subsequently filed a lawsuit against the company, claiming that the firm shouldbe held liable for the employee’s wrongdoing.
The learned judges gave the judgement in favour of the plaintiff. According to the concept of vicarious liability, if any wrongful act is committed by the servant or agent, the master or a principal will be held liable for that act. As a result, in this case, the solicitor will be responsible for the employee’s actions.
ISSUES
• Whether the principal should be held responsible for the agent’s fraud
• Whether the employee’s fraud benefited the interests of the company or only his own interests
JUDGEMENT
It was held that the principal would be responsible if the fraud was committed by the agent while working as his employee and was done inside the boundariesof his agency. The profit of the principal or agent does not matter to the principal in this situation.
ANALYSIS
Smith claimed that he is a solicitor by profession. In this case, he showed a lack of concern for the business. Smith also claimed that his employee had the authority to manage the firm and could also make deals on behalf of the principal. Additionally, according to Mr. Smith, his employees informed him, or were supposed to inform him, of the daily operations of the business. In this case, the employee (agent) was the one who committed the fraud, but the owner of the firm was also held liable for the act committed by an agent because of the relationship that existed between the two as a principal-agent relationship or a master-savant relationship. So, we can say that if any misrepresentation or fraudis committed by an agent, the principal will be responsible because, according to the law, that act was committed by the master himself. Whether the action was taken to benefit the principal or not is irrelevant to the principal, and the principal was also unable to fulfil his role as a principal because one of hisemployees committed fraud. In his defence, the defendant claimed that it was a private transaction between the employee and the plaintiff. The only fact is that they both committed this dealing in his office; therefore, it cannot be considered a private dealing. Consequently, this case concerns the idea of vicarious liability, where the principal will be held accountable for the crime of his agent, and in this case, an agent was acting in his due course of business.
REFRENCE:
1. https://www.isurv.com/directory_record/5134/lloyd_V_grace_smith_co
2. https://www.legalserviceindia.com/legal/article-10771-lloyd-v-s-grace-smith-1912-ac-716.html
WRITTEN BY: KHUSHI AGARWAL
