BUS216-125 Chapter 4
TheLegal Concept of Liability
Thelegal concept of liability involves judging whether or not a party islegallyresponsiblefor any loss or damage caused by its action or inaction. Some of thecases where the concept is applied include defamation, nuisance,conversion, and negligence. Suppose that an agent has been handlinghis/her customer’s insurance needs for several years. Every timethe policy was due to expire, the client would arrange a meetingbetween him/her and the agent to negotiate for a new one. There is nosingle instance that the agent had informed the customer that his/her policy was about to expire. Unexpectedly, the inevitable occursand fire destroys the client`s building immediately after the policyhad expired. The client argues that the agent had the duty to remindhim or her of the policy`s expiry date. Feeling that the agent wasnegligent, the client sues the agency. However, the court appliesthe doctrine of "Course of Conduct and Custom" to the case. This principle evaluates how two parties have always conductedbusiness between them to assess whether any one of them owed theother a legal duty. It was a tradition for the agent not to notifythe client when the policy was due to expire. As such, the courtcould not hold that the former had a legal duty to inform the latterthat he/she had to arrange for a new policy. The other example thatclarifies the legal concept of liability is a case scenario where abusiness owner has relied on an accounting firm to file his annualreturns for many years. Every year, the accounting firm visited thebusiness owner’s premises for the purposes of helping him file hisreturns. However, at one time, the consultancy firm suffered a highemployee turnover and decided to send an email informing the businessowner that he had to visit them in their offices. However, the clientwas not used to checking his mails and therefore did not receive themessage from the accounting firm. Several months later, the businessowner received a notification from the State’s revenue collectionoffice that he was penalized for failing to file his tax. Under theCourse of Conduct and Custom Doctrine, the accounting firm failed tohonor its legal duty to the business owner by deviating from the waythe two had conducted business between them for many years.
Onthe other hand, others may argue that there are instances in which aperson is liable even though no negligence is proved. Let us go backto the unhappy uninsured client whose building had caught fire andchange the facts slightly. For example, let us imagine that thecustomer had informed his/her agent that a notification informinghim/her that the policy was nearing its expiry dates was notnecessary. Because of the client`s wishes, the agent informed his/herstaff not to send any policy status notices over to the customersince the latter had chosen to relinquish his/her right to get theinformation. As such, the client had waived his/her right to get anotification of the cancellation of his/her policy. Another exampleinvolves a contractor who enters into a contract with the State inwhich he/she agrees to provide drainage services to certainhomeowners. However, it starts to rain heavily, and this makes thebasements of the houses to sink. If the contractor in question failsto take responsibility for the damages caused by the floods, thehomeowners can sue him/her for not honoring his/her legal duty.However, it is the duty of the court to establish whether or not thecontractor is liable for the damages caused by the floods.