Joint enterprise liability theory is similar to the agency theory. Both the joint enterprise liability theory and the agency theory fall under the umbrella of vicarious liability. A trial lawyer will say vicarious liability is a legal theory that allows one party, typically a superior, to be held liable for the actions of an associate or a subordinate based upon the relationship between the two parties.
An agency relationship theory requires two parties, a principal and an agent. To prove that an agency relationship existed, the principal must have had a large degree of control over the agent to such an extent that the agent acts solely for the superior’s interests.
The joint enterprise liability theory is very similar to the agency theory in that it makes each party the agent of the other and thereby holds each responsible for the negligent act of the other. The essential elements to establish a joint enterprise are: “(1) an agreement, express or implied, among the members of the group; (2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in the purpose, among the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.” Lord v. Chew, 127 Nev. 1156, 373 P.3d 937 (2011). These elements are also set forth in the Restatement Second of Torts, § 491.
Simply put, a joint enterprise is an activity joined into by two or more people with common interests, purpose, and control. The theory does include certain informal arrangements for corporations, typically for a more limited period of time and a more limited purpose – i.e., for carrying out a small number of activities or objectives. A joint enterprise theory of liability is most commonly found in the business law and criminal law contexts. For example, in the business context a joint enterprise may be found where two individuals come together to each contribute money to achieve a common purchase such as to short a stock. In the criminal context, a joint enterprise refers to a small group’s negligence or a criminal conspiracy.
For example, a joint enterprise theory may be found when three men decide to get together and rob a bank. One has prior experience, one has funds and purchases the equipment necessary, and one has a blueprint of the building. All three work together to rob the bank. Here, a criminal joint enterprise would likely be found because each party contributed something to rob the bank (i.e., a common purpose).
In the Lord case, however, after a group of individuals organized a large city-wide scavenger hunt, one participant fell into a mine and was severely injured. See id. The plaintiffs sought to hold the group organizers liable under the joint enterprise liability theory. See id. The court disagreed and reasoned that a joint enterprise was not present because the game organizers did not seek any monetary benefit from the game – i.e., they did not have a community of pecuniary interest in the purpose of forming the enterprise. See id.
Thanks to Eglet Adams for its insight on joint enterprise liability theory.