The legal use of the term "agent" could be nearing obsolescence. Some master agents report that, in recent months, their updated agreements have gotten rid of "agent" in contracts, instead defining third-party salespeople in terms such as "partner representative" and "selling partner." There seem to be two reasons for the shift: fear of lawsuits and the indirect channel's changing business model.
More service providers are using the indirect sales channel and relying on them to a greater extent after years of considering the strategy as a bit of an afterthought. As a result, these companies are realizing that unclear phrasing could give partners the right to act on their behalf. The danger arises when a provider "could be held liable for the representation or bound by the promise if the agent had what’s called 'apparent authority'," explained Telecom Lawyer's Ben Bronston.
Apparent authority applies to a situation where a reasonable person would understand that an agent had authority to act on behalf of the principal (i.e., the provider), he explained. This means the principal is bound by the agent's actions, even though the agent had no "actual" authority, whether express or implied. "Typically, there must be some act or omission on the part of the principal — if the agent alone acts to give the third party this false impression, then the principal is not bound," said Bronston.
The bottom line is that eliminating "agent" as a legal term gives providers a little more breathing room, but it does not solve the liability problem altogether. It's not a matter of how an agent is referred to in a provider contract, but whether the scope of the agent’s authority to bind the provider is clearly defined, said Bronston. "As long as the scope of the agent’s authority is clearly defined in the contract, it doesn’t really matter what they’re called," he said.
Indeed, substituting terminology, such as "partner representative," "selling partner" and the like also can prove problematic if the partner-provider relationship remains unclear, said Neil Ende, managing partner of Technology Law Group LLC. "So I'll get agent agreements that are really reseller agreements, and vice versa, all the time," he said. "It's a mess and a jumble all the time."