Independent contractor vs principal agent relationship definition

When Independent Contractors Are Seen As Agents | Abel Law Firm

independent contractor vs principal agent relationship definition

including those defined by contract between principal and agent . parties “' intend to create an independent contractor relationship and nothing contained in . There are two categories of people you will hire as a business owner: independent contractors and agents. For you, it may simply be a matter of. The terms “agent” and “independent contractor” are not necessarily mutually exclusive. In fact, by definition, “ an independent contractor is an agent in the.

An agent, as a general rule, is only entitled to indemnity from the principal if he or she has acted within the scope of her actual authority, and may be in breach of contract, and liable to a third party for breach of the implied warranty of authority. In tort, a claimant may not recover from the principal unless the agent is acting within the scope of employment.

Express actual authority[ edit ] Express actual authority means an agent has been expressly told he or she may act on behalf of a principal. Implied actual authority[ edit ] Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably necessary to carry out his express authority.

As such, it can be inferred by virtue of a position held by an agent. For example, partners have authority to bind the other partners in the firm, their liability being joint and several, and in a corporation, all executives and senior employees with decision-making authority by virtue of their position have authority to bind the corporation. Other forms of implied actual authority include customary authority.

This is where customs of a trade imply the agent to have certain powers. In wool buying industries it is customary for traders to purchase in their own names.

This must be no more than necessary [4] Main articles: Apparent authority and Estoppel Apparent authority also called "ostensible authority" exists where the principal's words or conduct would lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if the principal and the purported agent had never discussed such a relationship.

For example, where one person appoints a person to a position which carries with it agency-like powers, those who know of the appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to one occupying such a position.

If a principal creates the impression that an agent is authorized but there is no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes termed "agency by estoppel " or the "doctrine of holding out", where the principal will be estopped from denying the grant of authority if third parties have changed their positions to their detriment in reliance on the representations made. Wills J held that "the principal is liable for all the acts of the agent which are within the authority usually confided to an agent of that character, notwithstanding limitations, as between the principal and the agent, put upon that authority.

The Difference Between an Agent and an Independent Contractor | Bizfluent

It is sometimes referred to as "usual authority" though not in the sense used by Lord Denning MR in Hely-Hutchinson, where it is synonymous with "implied actual authority". It has been explained as a form of apparent authority, or "inherent agency power". Authority by virtue of a position held to deter fraud and other harms that may befall individuals dealing with agents, there is a concept of Inherent Agency power, which is power derived solely by virtue of the agency relation.

Even if the agent does act without authority, the principal may ratify the transaction and accept liability on the transactions as negotiated. This may be express or implied from the principal's behavior, e.

Liability[ edit ] Liability of agent to third party[ edit ] If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope of such authority, as long as the relationship of the agency and the identity of the principal have been disclosed.

When the agency is undisclosed or partially disclosed, however, both the agent and the principal are liable. Where the principal is not bound because the agent has no actual or apparent authority, the purported agent is liable to the third party for breach of the implied warranty of.

Liability of agent to principal[ edit ] If the agent has acted without actual authority, but the principal is nevertheless bound because the agent had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage.

Liability of principal to agent[ edit ] If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent for payments made during the course of the relationship whether the expenditure was expressly authorized or merely necessary in promoting the principal's business.

An agent owes the principal a number of duties. An agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after full disclosure and consent of the principal. An agent must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party.

The Difference Between an Agent and an Independent Contractor

In return, the principal must make a full disclosure of all information relevant to the transactions that the agent is authorized to negotiate. Termination[ edit ] Mutual agreement also through the principal responding his authority. Through renouncing when agent hm self stop being an agent.

The internal agency relationship may be dissolved by agreement. Under sections to of the Indian Contract Actan agency may come to an end in a variety of ways: Withdrawal by the agent — however, the principal cannot revoke an agency coupled with interest to the prejudice of such interest. An agency is coupled with interest when the agent himself has an interest in the subject-matter of the agency, e.

Cashiers, salespeople, maintenance workers, and managers are a few of the agents that we see regularly, working for or with the property of their principal, who is most often their employer. Corporations especially must act through agents as the corporation is a legal entity only, and not a living person who can do his or her own work.

Corporate agents, therefore, include all the directors, president, vice-president as well as all of the corporate employees. What then is agency?

Agency (Part 1)

Agency is the legal relationship that exists where one person an agent is authorized to act or conduct business for another party a principal. Except in the very smallest of businesses, a business owner must rely, to some extent, on others to conduct portions of his business. Because of this, an understanding of the operation of the laws of agency will be important to the business. The agency relationship can be created by either the acts of the parties, or by operation of law.

When Independent Contractors Are Seen As Agents

The usual method of creating the relationship is for the principal to appoint the agent to act on his or her behalf by communicating with the agent either verbally or in writing.

This is considered actual authority. The relationship might also be established by an act in which the principal, through a third person, authorizes the agent to act on his or her behalf. The relationship is also established through apparent authority. In this situation, the agent has the authority to act on the behalf of the principal because of his or her position in relation to the principal. For example, your business manager or supervisor has the inherent authority to act in your name because of their position of authority.

The agency relationship in this situation is created by operation of law to prevent fraud or injustice. All employees are, to some degree, agents of their employers. Similarly independent contractors will also be agents of whomever they have contracted with. The extent of their authority will depend on the circumstances. To have actual authority, both the agent and the principal must consent to the relationship. No consideration or payments to the agent are necessary.

If the agency relationship involves buying or selling land, the agreement usually must be in writing. In most other cases, no written agreement is necessary to establish the relationship.

independent contractor vs principal agent relationship definition

For example, an agent with actual authority to purchase goods on the principal's behalf will have the implied authority to pay for the goods either out of any of the principal's funds she has in her control, or on credit. There is also the implied authority to accept the delivery of any goods that she has the authority to purchase.

Similarly, an agent who has the authority to sell her principal's property has the implied authority to give general warranties regarding the property. If the agent possesses the property, then she has the implied authority to collect payment. Under this concept, a principal is liable for the wrongdoing committed by his or her employees if the acts were within the scope of the employee's duties. For example, if a salesman is instructed by his employer not to warrant the fitness of any of the vacuums being offered for sale and the salesperson warrants a vacuum, the employer will be held to the warranty.

In this context, scope of employment means that the employee is engaged in the furtherance of his or her employer's business. An exception is the doctrine of "apparent authority" sometimes used by the courts to prevent injustice to third persons. The mere statement by a person that he or she is an agent of a certain person is insufficient to establish the agency.

The third person has a duty to ascertain whether or not an agent has the authority to act in a particular situation. If the principal has led others to believe that the agency relationship exists, he will be bound by the acts that an agent in that situation would customarily have the authority to do. The agency relationship would be used by the courts when the principal has a duty to deny the relationship but fails to do so.

For example, if May in Cathy's presence tells others that she is Cathy's agent, Cathy has a duty to deny the relationship. If she fails to, then any third persons present might consider that May is, in fact, an agent of Cathy's. An agency relationship may also be found when the principal negligently allows another person to act as his agent.

independent contractor vs principal agent relationship definition

For example, a stranger comes into a store when no one is present, waits on a customer, sells a product, and pockets the money.

Because it was reasonable for the customer to assume that the stranger was a clerk, the owner cannot force the customer to pay for the merchandise a second time.

If the owner does this, he or she is bound by the act of the unauthorized agent. To ratify the act, the principal must know of the material facts involved in the transaction and accept the entire transaction.