Note: While this document was prepared as a guide to select legal issues facing independent meeting planners, it should be useful to association executives. The issues discussed highlight key legal issues and protections that should be addressed any time an association enters into a contract with an independent meeting planner or other independent agents for meeting-related services.
Agents v. Principals
Under our legal system, the law says you can only sign contracts in one of two capacities: either as a principal or as an agent. If your organization signs a contract as a principal, it is telling all other parties to the contract that it is committing itself to be the principal obligator for all the promises of performance in the contract. If the contract is breached by your organization, it alone will be subject to the legal consequences. On the other hand, if your organization signs the contract as an agent, it is telling the other party that someone else (another person or entity) is the principal and is primarily responsible for performance of the promises in the contract.
Most well-written meeting contracts will have an "authorized signature" provision before the signature lines, to the effect of: "The individuals whose signatures appear below represent and warrant that they have authority to enter into this agreement on behalf of the company/organization represented and hereby agree to the terms and conditions set forth in this agreement."
A provision similar to the above is designed to put each party to the contract on notice that the individual who signs the contract is holding himself/herself out as a legally competent person with the authority to act as agent and commit their respective organizations to the terms of the contract. A person with the proper authority welcomes this language because it tells all other parties to the agreement that the company or organization is standing behind the promises in the contract - not just the person whose signature appears. Any person who signs such a provision but does not have proper authority can later be held personally liable as a principal obligator.
Moreover, if it is reasonable for a third party to assume that the signor has authority on behalf of the organization, even though no such authority was conferred, then the organization may be held responsible as well. This is known as "apparent authority." The doctrine and sometimes harsh consequences of apparent authority in the association context were reinforced by the Supreme Court in the 1982 Hydrolevel decision. In that case, the Supreme Court held that even if someone does not in fact have authority to act in a particular manner on behalf of an association, the association will nevertheless be held liable for the actions of that individual, provided that a third party reasonably believes that he or she has such authority. Furthermore, apparent authority can turn into actual authority if the association explicitly or implicitly "ratifies" the actions of the individual at some later date. The Supreme Court has stated that the dangers of the apparent authority doctrine require associations and other "principals" to vigilantly protect their organizations from the unauthorized acts of would-be "agents."
Contracts between Meeting Sponsors and Independent Meeting Planners
The issue of authority is of paramount importance to the meeting sponsor (e.g., association), the independent planner, and the supplier. The relationship between the meeting sponsor and independent planner should be detailed in writing. This will make clear to all parties the powers and authority of each party to the negotiations and transaction. This is not only good common sense, but may be legally required. Under the "Statute of Frauds" doctrine, a contract that will not be performed within one year must be in writing in order to be enforceable. Hence, a contract negotiated today for a meeting that takes place 13 months from today must be in writing. Also, if an agent is hired to negotiate a contract that is required to be in writing under the Statute of Frauds (as many meetings contracts will be), then the agent's authority must also be in writing. This is called the "Equal Dignity Rule." Consequently, it is mandatory, in many cases, to memorialize the relationship between the meeting sponsor and the independent meeting planner in a written contract.
Meeting Planners' Scope of Authority
One of the key provisions that should be in every agent's contract is the provision defining - as specifically as possible - the scope of the agent's authority to represent and bind the organization, as well as any limitations on such authority (e.g., required approvals by the association's vice president for education, the convention committee, or the board of directors). Under agency law, an agent can only perform the acts he/she is authorized to perform by his/her principal. If an agent makes an authorized or apparently authorized commitment on behalf of a disclosed principal, then the acts and commitments of the agent are binding on the principal.
On the other hand, if an agent exceeds the authority given it by the principal, then the principal can hold the agent responsible for the unauthorized act(s). In this circumstance, the principal may still be responsible to the third party to which the commitments were made. The principal can then seek contribution/indemnification from the meeting planner. While the ability to file a claim against an agent who acted beyond his/her authority may provide some comfort to the principal, ultimately the principal and the meeting planner are better served by ensuring that the relationships and authorities are clear at the outset of the negotiations. Moreover, by engaging in full disclosure, agents can reduce their liability exposure by making it clear that they are not acting on their own behalf, but on behalf of a principal.
A prudent supplier will document the answers to several key questions during negotiations with independent meeting planners: (i) is the planner across the table the person who will sign the contract?; (ii) is the planner, who will sign the contract, acting as an agent or as a principal?; and (iii) if the contract will be signed by an independent planner in an agency capacity, does he/she have written authorization from the organization giving him/her the proper authority?
As the above questions imply, the agent who purports to have the authority to negotiate and contract for another entity should be prepared to furnish written documentation that they have the authority to do so. This written documentation should be in the form of a letter of authorization on the principal organization's letterhead signed by an officer or the chief staff officer (e.g., executive director) of the organization. A copy of this letter should be kept on file with the supplier and the agent to protect both parties.
The proper way for an agent to sign a contract on behalf of a principal organization is to: (i) use their title if they are an employee of the principal organization; or (ii) if they are a third-party independent planner, use the words "as agent for" ABC Organization after their name and signature.
By taking heed of these legal concepts and utilizing the protective measures discussed above, it is relatively simple for meeting planners to minimize, if not eliminate, personal liability exposure while effectively doing their jobs and representing the interests of their clients.
Agents v. Principals
Under our legal system, the law says you can only sign contracts in one of two capacities: either as a principal or as an agent. If your organization signs a contract as a principal, it is telling all other parties to the contract that it is committing itself to be the principal obligator for all the promises of performance in the contract. If the contract is breached by your organization, it alone will be subject to the legal consequences. On the other hand, if your organization signs the contract as an agent, it is telling the other party that someone else (another person or entity) is the principal and is primarily responsible for performance of the promises in the contract.
Most well-written meeting contracts will have an "authorized signature" provision before the signature lines, to the effect of: "The individuals whose signatures appear below represent and warrant that they have authority to enter into this agreement on behalf of the company/organization represented and hereby agree to the terms and conditions set forth in this agreement."
A provision similar to the above is designed to put each party to the contract on notice that the individual who signs the contract is holding himself/herself out as a legally competent person with the authority to act as agent and commit their respective organizations to the terms of the contract. A person with the proper authority welcomes this language because it tells all other parties to the agreement that the company or organization is standing behind the promises in the contract - not just the person whose signature appears. Any person who signs such a provision but does not have proper authority can later be held personally liable as a principal obligator.
Moreover, if it is reasonable for a third party to assume that the signor has authority on behalf of the organization, even though no such authority was conferred, then the organization may be held responsible as well. This is known as "apparent authority." The doctrine and sometimes harsh consequences of apparent authority in the association context were reinforced by the Supreme Court in the 1982 Hydrolevel decision. In that case, the Supreme Court held that even if someone does not in fact have authority to act in a particular manner on behalf of an association, the association will nevertheless be held liable for the actions of that individual, provided that a third party reasonably believes that he or she has such authority. Furthermore, apparent authority can turn into actual authority if the association explicitly or implicitly "ratifies" the actions of the individual at some later date. The Supreme Court has stated that the dangers of the apparent authority doctrine require associations and other "principals" to vigilantly protect their organizations from the unauthorized acts of would-be "agents."
Contracts between Meeting Sponsors and Independent Meeting Planners
The issue of authority is of paramount importance to the meeting sponsor (e.g., association), the independent planner, and the supplier. The relationship between the meeting sponsor and independent planner should be detailed in writing. This will make clear to all parties the powers and authority of each party to the negotiations and transaction. This is not only good common sense, but may be legally required. Under the "Statute of Frauds" doctrine, a contract that will not be performed within one year must be in writing in order to be enforceable. Hence, a contract negotiated today for a meeting that takes place 13 months from today must be in writing. Also, if an agent is hired to negotiate a contract that is required to be in writing under the Statute of Frauds (as many meetings contracts will be), then the agent's authority must also be in writing. This is called the "Equal Dignity Rule." Consequently, it is mandatory, in many cases, to memorialize the relationship between the meeting sponsor and the independent meeting planner in a written contract.
Meeting Planners' Scope of Authority
One of the key provisions that should be in every agent's contract is the provision defining - as specifically as possible - the scope of the agent's authority to represent and bind the organization, as well as any limitations on such authority (e.g., required approvals by the association's vice president for education, the convention committee, or the board of directors). Under agency law, an agent can only perform the acts he/she is authorized to perform by his/her principal. If an agent makes an authorized or apparently authorized commitment on behalf of a disclosed principal, then the acts and commitments of the agent are binding on the principal.
On the other hand, if an agent exceeds the authority given it by the principal, then the principal can hold the agent responsible for the unauthorized act(s). In this circumstance, the principal may still be responsible to the third party to which the commitments were made. The principal can then seek contribution/indemnification from the meeting planner. While the ability to file a claim against an agent who acted beyond his/her authority may provide some comfort to the principal, ultimately the principal and the meeting planner are better served by ensuring that the relationships and authorities are clear at the outset of the negotiations. Moreover, by engaging in full disclosure, agents can reduce their liability exposure by making it clear that they are not acting on their own behalf, but on behalf of a principal.
A prudent supplier will document the answers to several key questions during negotiations with independent meeting planners: (i) is the planner across the table the person who will sign the contract?; (ii) is the planner, who will sign the contract, acting as an agent or as a principal?; and (iii) if the contract will be signed by an independent planner in an agency capacity, does he/she have written authorization from the organization giving him/her the proper authority?
As the above questions imply, the agent who purports to have the authority to negotiate and contract for another entity should be prepared to furnish written documentation that they have the authority to do so. This written documentation should be in the form of a letter of authorization on the principal organization's letterhead signed by an officer or the chief staff officer (e.g., executive director) of the organization. A copy of this letter should be kept on file with the supplier and the agent to protect both parties.
The proper way for an agent to sign a contract on behalf of a principal organization is to: (i) use their title if they are an employee of the principal organization; or (ii) if they are a third-party independent planner, use the words "as agent for" ABC Organization after their name and signature.
By taking heed of these legal concepts and utilizing the protective measures discussed above, it is relatively simple for meeting planners to minimize, if not eliminate, personal liability exposure while effectively doing their jobs and representing the interests of their clients.