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I am managing member of a sole-proprietor LLC incorporated

in New York City. I...
I am managing member of a sole-proprietor LLC incorporated in New York City. I am contemplating entering into a revenue sharing agreement with an independent professional to distribute a product owned by the company. Would it be acceptable for the company to provide the individual (who will not be an employee) with an e-mail address on the domain name of the company while he is marketing the product ?
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Answered in 5 minutes by:
3/28/2013
BartEsq
BartEsq, Researcher
Category: Legal
Satisfied Customers: 1,506
Experience: Juris Doctor
Verified

BartEsq :

Welcome! Thank you for using JustAnswer.

BartEsq :

My name isXXXXX going to try and help.

BartEsq :

It is acceptable. But you need to be concerned with the law of agency.

BartEsq :

By giving an independant contractor an email address with your LLC, you might be setting yourself up for a claim based on the contracting party percieving the independant contractor as your agent.

BartEsq :

The different scenarios are many and complex. But I can try to find a good resource for you to better understand agancy law if you like.

BartEsq :

agency*

BartEsq :

http://www.rotlaw.com/legal-library/what-is-the-law-of-agency/ Actually, here is a very good summary of the agency law and the different ways an agency relationship can be created.

Customer:

I think I get the sense of it - so basically having the contractor using company e-mail gives ground to the argument that he is acting on behalf of the company ?

BartEsq :

Correct.

BartEsq :

Because many times the claim is based on the other party's perception that the contractor is your agent.

BartEsq :

And the email could further that belief.

Customer:

In this case, I think there are other elements that position him as my co's agent

BartEsq :

Indeed. The contractor can always get his own domain name and set up a unique email.

Customer:

Our initial thought is to be quite open about the fact that he will be actively looking for commercial opportunity linked to the co's product

BartEsq :

Disclaimers also work well.

Customer:

Is the point to protect the company if he were to make any errors ?

BartEsq :

Errors, breach of contract, ect. You just dont want someone to sue you also for something that would otherwise be the contractor's problem.

Customer:

Does the fact that the company have a revenue-sharing agreement with the contractor in itself not position it by default as an agency relationship ?

BartEsq :

No, that is between you and the contractor. Agency invloves three parties. You, the agent, and the principle, ie, cusotmer, ect.

BartEsq :

Well, you are actually the principle, the contractor would be your agent, and then the third party.

BartEsq :

To limited your liability, you want to make sure there is no appearance the contractor is your agent. Otherwise, the contractor can bind your company to agreements and contracts.

BartEsq :

Kind of defeats the purpose of using an independant contractor.

BartEsq :

But you are free to use the contractor as an agent if you want.

Customer:

I hear you, but nonetheless a status that is lawful and accepted. If I understand correctly, the agent is very similar to an employee.

BartEsq :

Correct.

BartEsq :

But even an employee can not be an agent. Like a cahier at wal mart cant bind the compnay in contracts.

BartEsq :

So agency law stands alone but independant contractor versus employee is a factor.

BartEsq :

That is why many claims are based on the complaining party's perception.

BartEsq :

And by using your company email, it ads to the perception that the contractor is an agent or employee. Not decisive but a factor.

Customer:

Perfectly clear, thank you. Now in case the company gets dragged down into contention with a client due to the contractor error, is the only recourse of the company to turn back to the contractor - effectively facing the client in potential litigation ?

Customer:

Not an ideal scenario, since errors can sometimes be costly and individuals can easily argue they don't have the financial means to face the liability

BartEsq :

You dont have to turn your back on the contractor, just deny liability to the customer.

BartEsq :

The client would have to establish agency.

Customer:

right understood, that is the first line of defense. But if they did.

BartEsq :

Well, you could avaluate your relationship with the contractor to see if any changes need to be made in operating procedures but no need to turn your back completely unles the contractor did something egregious.

BartEsq :

evaluate*

Customer:

understood, as always though before getting into a venture I would like to understand my liability in the event of a disaster scenario.

Customer:

so indeed if he did something reckless. Will I/the company pretty much be left on the hook ?

BartEsq :

No. You have a pretty good line of defense. But I cant see what claims could caome your way.

BartEsq :

come*

Customer:

I think you lost me there. You mentioned it was a clear possibility, if the contractor was perceived as an agent, and made an egregious mistake, the client may turn against the company. Are you now saying they can't ?

BartEsq :

He is an idependant contractor. That is good for you. Would be better to have him get his own domain name email. But it is still ok using yours. But he should make it clear he is an independant contractor to avoid perceptions of agency.

BartEsq :

Yes, they can, there is a difference between someone trying to sue you and winning.

Customer:

I think you lost me there. You mentioned it was a clear possibility, if the contractor was perceived as an agent, and made an egregious mistake, the client may turn against the company. Are you now saying they can't ?

BartEsq :

Anyone can try to sue you for just about anything. That doesnt mean they will win.

Customer:

I hear you - you recommend using disclaimers though ?

Customer:

Are they pretty much standard disclaimers ?

BartEsq :

Sure, cant hurt. Just want to make sure whoever the contractor is doing business with understands he is not an employee or agent.

Customer:

Understand - thanks. Should I get an attorney to draft a disclaimer or are they so standardized that I could source it online ?

BartEsq :

Im sure you can find something online but you are always free to hire an attorney. You just want to make sure that clients have some type of notice that the contractor is not an employee or agent.

BartEsq :

Avoids the whole percieved agent scenario.

BartEsq :

Without anything else, I would personally think your contractor was an agenct or emplyee using your email domain.

BartEsq :

That is what you dont want.

Customer:

Yes. The caveat is that in the disaster scenario, I would have had no ways of enforcing the disclaimer to be sent.

Customer:

So typically a protection might work best when I don't need it

BartEsq :

Have your contractor make clear to clients he is not an agent or employee. Especially if he is using your domain. Otherwise, have him get his own domain email.

Customer:

Understood. Thank you very much for your help.

BartEsq :

No problem. Any other concerns?

Customer:

No we are all set. Many thanks for your help today.

BartEsq :

My goal is to provide you with excellent service. Let me know if you have any questions. If I can provide you with any additional service, please don't hesitate to ask. Please remember to rate my service so I can get credit for my work. Bonus is not mandatory but much appreciated. Thank You.



You can request me directly by putting “To Bart” at the beginning of your question or clicking on my profile link here: http://www.justanswer.com/law/expert-bartesq/

BartEsq
BartEsq, Researcher
Category: Legal
Satisfied Customers: 1,506
Experience: Juris Doctor
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The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

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