Source: Robin Roth, Senior Contracts Editor, Conferon, Inc.
E-Specs: June 9, 2003

The parties to a contract must be clearly identified in order to meet one of the legal requirements of a contract. Words such as "you" or "we" should be defined in order to avoid confusion about which party they refer to. Also, words describing legal status, such as "independent contractor" or "agent," should be defined so that the responsibilities are understood.

In general, an agency relationship exists when two parties agree that one (agent) will act for the benefit of and under the direction of the other (principal). An agent is usually one who represents and conducts business transactions for his or her principal. The principal determines the extent of the agent’s authority, which could include signing contracts, incurring expenses, and even paying for charges associated with the meeting on behalf of the principal. Different types of agents include Conferon’s classification as "agent of record." This is a term that comes from the insurance industry and means a party that is compensated for generating business for a certain transaction.

Employees are distinguished from independent contractors, based in general upon the degree of control their principals have over their acts. An independent contractor’s acts are generally not within the control of the principal whereas an employee’s acts are subject to control by the principal to some extent. Often a supplier for a specific meeting or convention serves as an independent contractor for the principal of the event.

Understanding the broad meaning of these terms will improve your overall understanding of your contracts and their requirements.

(Note: This information is not intended to be "legal advice." A qualified attorney should be consulted to review all contract issues.)