Agency and Partnership

Question 1

Equal Dignities Rule

Answer 1

Agency agreement must be in writing when agent is to enter into contracts under the statute of frauds, or the agency agreement itself would fall under SOF.

Question 2

Detour

Answer 2

Minor deviation from employer’s directions. It falls within scope of employment so employer/master/principal is liable.

Question 3

Frolic

Answer 3

Substantial deviation from employer’s directions. Principal is not liable.

Question 4

Default Profit & Loss Sharing

Answer 4

Absent a written agreement, profits and losses are shared equally among partners. it doesn’t have anything to do with the amount of capital contributed. if there is an agreement to profits but not losses, loss sharing will mirror profit sharing, but not vice versa.

Question 5

Apparent Authority

Answer 5

Acts of a partner for the purpose of carrying on in ordinary course of partnership business or business of the kind, binds partnership unless partner had no authority to act in particular manner and person with whom partner was dealing had notice partner lacked authority.

Question 6

Actual Authority

Answer 6

The authority a partner reasonably believes he has based on the communications between the partnership and the partner.

A partnership will be bound by any act of a partner if they have actual authority.

Question 7

Admitting New Partners

Answer 7

Default rule: requires unanimous approval of partners.

Question 8

Dissociation by Express Will

Answer 8

Partner voluntarily leaves and can force partnership to dissolve.

Question 9

Distribution of Partnership Assets

Answer 9

Order: creditors, reimburse partners for capital contributions, . . . profits??

Question 10

Limited Partnership

Answer 10

Must file certificate with Secretary of State. General partners, not limited partners, have managements rights. Limited partners’ profits are a share of their capital contributions. Limited partners have no fiduciary duty to the partnership solely by being a partner, but general partners do.

Question 11

Limited Liability Partnership

Answer 11

General partnership where all members have limited liability

Question 12

Agency

Answer 12

Fiduciary relationship with mutual agreement between two parties. An agent consents to act on behalf of a principal.

Principal must have contractual capacity, but agent does not.

Question 13

Agent’s Duties to Principal

Answer 13

Fiduciary duties of (1) care (carry out with reasonable skill), (2) loyalty (give profits, no self-dealing, no adversity, non-compete, and don’t use their property), and (3) obedience.

Question 14

Principal’s Duties to Agent

Answer 14

Reasonable compensation and indemnification if losses occur while carrying out duties.

Question 15

Undisclosed Principal

Answer 15

When principal is undisclosed (third party doesn’t know agent is acting on behalf of someone else), or partially disclosed (unknown identity), the agent is also liable on the contract, along with the principal.

Question 16

Employee v. Independant Contractor Factors

Answer 16

Overriding factor is the right to control the manner and method of performing the task. Remember: "STEPP"
Skills (greater skill=independent contractor)
Tools required (if principal's=employee)
Employment period (longer=employee)
Purpose (if to further principal's business=employee)
Payment (by job=contractor; by time=employee)

Question 17

Partnership Liability

Answer 17

Partners are jointly and severally liable for partnership obligations, but plaintiff first must exhaust all partnership assets.

Question 18

Partner’s Fiduciary Duties

Answer 18

The following duties are owed by partners to each other and the partnership: The duty of: (1) loyalty (remember “BAN” benefit to partnership, adversity, and non-compete), (2) care (don’t act grossly negligent or recklessly), and (3) disclosure.

Partnership agreements cannot contract out of the duties of loyalty and care, but can eliminate duty of disclosure.

Question 19

Apparent Authority of Dissociated Partner

Answer 19

Dissociated partner has apparent authority to bind partnership (no more than 2 years) after dissociation. Partnership can eliminate it immediately by notifying creditors or by filing statement of dissociation which becomes effective 90 days after filing.

Question 20

Partnership Indemnification

Answer 20

When one partner pays a partnership obligation, he’s entitled to indemnification by the partnership. He may also require partners to contribute their pro rata shares of the payment if partnership is unable to indemnify.