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What is the Difference Between Actual Agency and Ostensible Agency? Part 1

February 3, 2023 Blog,California Laws

By Eric Ganci

If a business harms you, then the business may be liable for your injuries. However, this gets deeper if the business is a franchised business from another name.

This discussion comes by way of the November 23, 2022 decision Pereda v. Atos Jui Jitsu, cited right now as 2022 WL 17174558. This case gives a nice discussion to understand what the differences between actual and ostensible, and how it may apply to your personal injury lawsuit in California.

I’ll break down this case into a few sections, to discuss the general principle of actual versus ostensible agency, then next go’round, I’ll discuss the holdings of the case.

So what were the brief facts of Pereda? Plaintiff was a Jui-Jitsu student at a studio that was a franchisee of a larger-named franchisor. Plaintiff sparred with someone at the Franchisee Location and Plaintiff was injured.

In the lawsuit for negligence, Plaintiff named both the Franchisee and Franchisor as Defendants. Franchisor then filed a motion for summary judgment, arguing Plaintiff’s claim against Franchisor had no “triable issue of material fact.”

Actually, the Court gives a nice nugget for what a motion for summary judgment means, legally:

“Summary judgment is appropriate, and the moving party (typically, the defendant) is entitled to judgment as a matter of law, where (1) the defendant carries its initial burden of showing either the nonexistence of one or more elements of the plaintiff’s claim or the existence of an affirmative defense, and (2) the plaintiff thereafter fails to show the ‘existence of a triable issue of material fact’ as to those elements or affirmative defense.”

Ok, so lets’ jump into agency principles, per California Law.

Quoting this case: “There are two types of agency—actual and ostensible.

  • Actual agency is based on consent, and turns on whether the principal has the right to control the agent’s conduct.
  • Ostensible agency is based on appearances, and turns on whether the “the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent” even though the third person is not actually an agent.”

“A defendant may be held liable as a ‘principal’ for the acts of the defendant’s ostensible agent (that is, the third party who is not actually his agent) only if (1) the plaintiff, when dealing with the agent, did so ‘with [a reasonable] belief in the agent’s authority,’ (2) that ‘belief [was] generated by some act or neglect by the principal,’ and (3) the plaintiff was not negligent in relying on the agent’s apparent authority.”