5

Suppose a car was damaged by a body shop (or similar shop) and the shop refused to cover the cost of repair. (Assume the damage done is not related to work performed. For example, engine is damaged from moving the car, but the service requested was a paint job.)

The body shop is a franchise, so there are potentially three entities in the shop: the manager, the franchisee (owner), and the franchiser. When taking the matter to small claims court, which entity should be held liable?

  • In this scenario is the car not insured? If it is then the answer is, "Claim with your insurer and let them figure it out." Also unclear: Are you asking who should be sued as a matter of legal strategy, or are you asking who is liable under the law? I believe the first answer is always, "Everybody." And there isn't enough information to answer the second: You would have to know things about the relationship between the three entities that are a matter of private contract. – feetwet Jun 24 '15 at 20:04
  • Which jurisdiction are you interested in? – Mark Jun 24 '15 at 22:37
  • @Mark - common-law, state of Nevada – Bobazonski Jun 25 '15 at 23:03
  • Does anyone know if there is joint and severable liability among these three? And what about liabilities for executives? I understand CA pierces the corporate veil for franchises. Perhaps name the executives of the franchisor? – jqning Sep 12 '15 at 15:56
2

If the manager of the shop is an employee of the franchisee, then they would not be likely to be personally liable if the damage occurred in the course of performing their duties, even if it was not related to the specific work being performed on the vehicle.

For instance, consider the situation where engine work is requested, but as a result of some object falling from a height, some panel damage occurs. As long as the manager did not maliciously drop the object, the employer would be vicariously liable for the employee's actions.

Let's turn to the franchisee-franchisor relationship - while it is legally more like an independent contractor relationship, it is both symbiotic and interdependent, and legally independent.1

What would be considered is the actual franchising contract, as well as the substance of the relationship. In unusual cases, a franchisor may be liable for franchisees who act as the agent for them.2

Where a franchisor is considered an employer of the franchisee, then the franchisor can be held vicariously liable.3

Additionally, US case law shows a number of instances where the franchisors have been held liable for negligence in selecting franchisees, maintaining standards, franchise unit design, food safety, and security.4

In the US, the Restatement (Second) of Agency extent of control test imposes vicarious liability on a franchisor that controls (or has the right to control) the day-to-day operations of the franchisee.5

Therefore, a court would request a lot more information pertaining to the particulars of a situation, in order to arrive at a judgement on such a matter.

This information was synthesised from Franchisor Liability for Franchisee Conduct, (2013) Andrew Terry and Joseph Huan, Monash Law Review pp.388-410, page references below. You probably don't need to read all of it, as most of the important information is introduced in the first dozen pages.


1. p. 390
2. p. 390
3. p. 390
4. p. 392
5. p. 394

-3

The person who was negligent is liable.

  • This is not, in general, true. For example, it it well-established in the United States that if an employee of a company is negligent while performing his job duties, the company is liable. – Mark Jun 25 '15 at 0:10
  • @Mark, it is completely true. In the case you describe the company is the person who was negligent - companies are people too, at least in the law. Actions by an employee in the course of their employment are actions by the employer - company or otherwise. As a philosophical rather than a legal question, how can a company (an entity that exists on a piece of paper) do anything? – Dale M Jun 25 '15 at 0:15
  • 1
    Is it possible for an entity to be liable for damage even if it wasn't negligent? (Hint: Yes.) – feetwet Jun 25 '15 at 1:09
  • @DaleM Except when that employee is a cop, then they aren't liable in most cases, their dept is. – unknownprotocol Jul 12 '15 at 8:08

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