3. Agency and Partnership Flashcards
What is required to form an agency relationship?
- Intent manifested by principal
- That agent act on his behalf
- Consent by both parties (express or implied)
- Control
- Capacity (principal only!)
What duties does an agent owe his principal?
Agent is a FIDUCIARY of a principal. 3 Duties
- Duty of loyalty - agent must put the principal’s interests before his needs or a third party’s needs
- Duty of care - agent must carry out duties with reasonable care and prudence
- Duty of obedience
what duties doe a principal owe an agent?
Principal is NOT a fiduciary of agent
- Duty to compensate for services
- Duty to indemnify and reimburse for costs incurred in scope
What are the three forms of agent authority for binding the principal?
- Actual authority
- Apparent authority
- Ratification
Actual Authority of an agent
Principal’s words and conduct would lead a reasonable person in the AGENT’s position to believe they have the authority.
Usually expressly granted in employment agreement but can be implied by conduct
Apparent Authority of an agent
Principal’s words and conduct lead a reasonable person in a THIRD PARTY’s position to believe the agent has authority.
Special considerations
- Position of Power - if agent holds position of power, more likely to have AA
- lingering authority - even if principal has expressly forbidden authority, if still appears to have authority, he has AA
What are the requirements for binding ratification of a contract made without authority?
Can be express or implied ratification. Implied = accepts benefits of deal
Three requirements:
- Principal had knowledge of material facts;
- The principal accepted the WHOLE transaction;
- Principal did not alter rights of intervening parties (i.e., cut off a valid contract that had been formed)
When is an agent liable for a contract entered into?
Usually agents do not have contractual liability (their principals do) BUT liable if:
- Principal undisclosed; or
- Principal partially disclosed
What is the key test to distinguish a master-servant relationship (respondeat superior) vs. an independent contractor?
The degree of control which the principal exercises over the agent. “Does the principal have the right to control the manner and method of the employee?”
When is an employer responsible for intentional torts committed by employee?
General rule - not responsible for intentional torts
Exceptions:
- Intentional torts are part of the job; or
- Done for the benefit of the principal; or
- Specifically authorized by the principal
What are the requirements for formation of a general partnership?
NO FORMAL FILING REQUIREMENTS (very informal and easy to form - intent does not matter)
- two or more persons;
- carrying on as co-owners;
- a business for profit;
- in writing if contract is subject to statute of frauds
What are the two presumptions of a partnership?
- A party entitled to a share of profits is presumed to be a partner (unless gross revenue, or profits were instead wages, debt payment, or interest on loan)
- A partner has a right to control as a co-owner
Voting rules for general partnerships
- Ordinary business decisions = majority vote
- Extraordinary business decisions = unanimous
Financial splits for general partnerships
General rule = equal share of losses and profits
But
- If profits designated, losses will follow
- But if losses designated, profits will be default
General partnership’s liability
Tort - liable for torts committed by partners or employees in ordinary scope of business OR with actual or apparent authority
Contracts - Partnership bound by contracts entered into with actual or apparent authority
