Agency Relationship in Hawaii

Proudly Serving Honolulu, Maui, Kauai and the Big Island

A person may be held liable for the acts of another if an agency relationship is established.  According to the Hawaii Supreme Court, “an agency relationship may be created through actual or apparent authority.”  Cho Mark Oriental Food, Ltd. v. K & K Intern., 73 Haw. 509, 515-17 (1992) (Brackets and citations omitted.).  There are two types of actual authority; express actual authority and implied actual authority.  Id.  Express actual authority is created by an express agreement.  Id.  In the alternative, implied actual authority “may arise either independent of any express grant of authority or it may arise as a necessary or reasonable implication required to effectuate some other authority expressly conferred by the principal.”  Id.  “The focus is on the agent’s understanding of his authority inasmuch as the relevant inquiry is whether the agent reasonably believes, because of the conduct of the principal (including acquiescence) communicated directly or indirectly to him, that the principal desired him so to act.” Id.

With regard to apparent authority, the Hawaii Supreme Court held in Cho also held as follows:

Apparent authority arises when “the principal does something or permits the agent to do something which reasonably leads another to believe that the agent has the authority he was purported to have.”  The critical focus is not on the principal and the agent’s intention to enter into an agency relationship, but on whether a third party relies on the principal’s conduct based on a reasonable belief in the existence of such a relationship.  Apparent authority can occur under the following circumstances:

 (1)The principal has manifested his consent to the exercise of such authority or has knowingly permitted the agent to assume the exercise of such authority; (2). . . the third person knew of [the principal’s actions]. . .and, acting in good faith, had reason to believe, and did actually believe, that the agent possessed such authority; and (3) . . . the third person, relying on such appearance of authority, has changed his position and will be injured or suffer loss if the act done or transaction executed by the agent does not bind the principal.

Cho Mark Oriental Food, Ltd. v. K & K Intern., 73 Haw. at 516-17.  (Brackets and citations omitted.)

When an agent acts with apparent authority, “the principal can be vicariously liable to wronged third parties even when the agent acts wholly out of personal motive or with the purpose of defrauding his principal and even when the principal is innocent and deprived of any benefit.”  Premium Financing Specialists, Inc. v. Hullin, 90 S.W.3d 110, 113 (Mo.App.W.D. 2002).  It is important to make sure that anyone purportedly acting as your agent is acting in your best interests since you may be liable for his or her actions.