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Legal and business aspect of agency relationships

What are the various ways that an agency relationship can be created?

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One of the most common legal relationships in business is that of agency. With many high-tech companies marketing, selling and licensing their products through third party channels of distribution, such as distributors, resellers, VAR's, OEM's, and company and independent sales representatives, the contractual arrangement between these various entities becomes very critical and the agreement between the parties must be very clear, detailed and unambiguous. This 'White' paper examines this relationship, how an agency relationship is created, and the legal authority, obligations, responsibilities and rights of an 'Agent' and the company ['Principal'].

The Agency Relationship:

The two common agency relationships in business are: (1) employer/employee [also legally referred to as 'Master and Servant'], and (2) company and its third party channels for distributing product [the 'Agent']. When a third party deals with a company employee or a company third party [non-employee] agent, he is in fact dealing with the company itself as the principal. Agents have the legal power to commit the company to definite acts with respect to third parties and the company then is legally bound by these acts. An agency relationship encompasses two (2) contracts; the contract of agency between the company and the agent and the contract which the agent makes with the third party for, and on behalf of, the company.

Classification of Agents; Creation:

Agents are generally classified in terms of the extent of the business to be transacted by them as follows: ...

Solution Summary

This solution outlines the various ways that an agency relationship can be created