This fiction tries to negate the unfairness of someone avoiding liability for an act or omission by simply denying knowledge of the law.
To incur liability for a crime, a person must have both committed a prohibited act (the actus reus, which must be willed: see automatism) and have had an appropriate mental element (the mens rea) at the relevant time (see the technical requirement for concurrence).
When evaluating behavior, the legal process assumes the defendant was aware of their immediate physical surroundings and understood practical cause and effect.
A mens rea is imputed when a person with reasonable foresight in the same circumstances would have foreseen that the actus reus would occur.
Hence, the notion of vicarious liability for companies and other business entities exclusively depends on the ability to impute knowledge.
If they are engaged in an entirely personal activity—e.g., attacking a fellow employee out of anger or stealing from the company—the courts do not impute the relevant mens rea to the company.
In the United States, the courts use a three-pronged test to determine whether a corporation is vicariously liable for the acts of its employees: A standard example of imputation arises through the principle of joint endeavour.
If principals were allowed to hide behind their agents' ignorance, mistakes, or failures to communicate, they could achieve better results than if they acted personally.
Since the purpose of the law is to offer protection to Third Parties who act in good faith, it is reasonable to allow them to believe that, in most cases, the agents have fulfilled this duty.
In Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711, a company secretary fraudulently hired cars for his own use without the managing director knowing.