A legal entity is a term used to describe organizations you are probably familiar with, including associations, corporations, partnerships, and other similar business formations. These entities are groups of people, referred to as natural persons, which act as one entity for the purpose of legal matters, such entering into contracts, incurring and paying debts, and filing or defending against lawsuits.
When it comes to civil law and matters involving legal entities, many rules are centered on the existence of certain knowledge. This means parties involved in legal disputes or litigation will need to prove certain elements of their claims in order to have a winning case. Often, this requires an illustration of what one party knew, or should have known, when they engaged in a certain act. As an example, a plaintiffs seeking damages for fraud against a business will need to prove that a defendant knew false statements were false.
When handling these types of issues against an individual, cases can be straightforward in that plaintiffs can focus on what one person knew in regard to their legal issue. With a legal entity, however, it can become exceedingly difficult to determine and highlight what the entity knew. This is because a legal entity has no brain and because many people may be involved, such as in the case of a corporation. Information can be fragmented among various parts of the organization and various officers or employees.
Attributing knowledge to a legal entity is a complex matter that raises important legal questions, including:
- Is a legal entity deemed knowledgeable if the fact at hand was not known by the employee involved, but was known by others in the organization?
- Would the relevant information have reached the employee in due time, as part of the functioning of the organization?
- Does knowledge acquired in an employee’s personal life constitute knowledge of the legal entity?
Often, these issues come down to courts determining whether a legal entity can rely of the ignorance of employees involved in an incident or legal issue, whether there was foreseeable relevance to the information, and whether applicable rules require actual knowledge in order to prove a claim.
At Reed Leeper, P.C., our Marietta business lawyers have extensive experience working with small and large businesses throughout the region, including many who run into issues, disputes, and litigation centered on proving the knowledge of a legal entity. Because these matters can be highly complex, and because they are often essential to effectively and successfully handling a case, businesses and individuals should always work with experienced lawyers who have the insight and resources to prove or defend against claims.
