Agency and Partnership

Question 1

Agent’s Duties

Answer 1

(1) Duty of Loyalty
(2) Duty of Obedience
(3) Duty of Care

Question 2

Principal’s Duties

Answer 2

(1) Duty to Compensate and Reimburse

(2) Duty to Cooperate

Question 3

Actual Authority

Answer 3

The authority that the agent reasonably thinks she possesses based on the principal’s dealing with her.

Express - principal expressly gives to agent

Implied - Agent reasonably believes she has as a result of the actions of the principal

Question 4

Apparent Authority

Answer 4

Even if the agent lacked actual authority at the time of the contract, the principal will be bound on the contract if: (1) the principal held out the agent as having authority; and (2) based on the holding out, the third party reasonably believed that the agent had authority to act.

Question 5

Ratification

Answer 5

A principal can be bound by a contract if the principal later ratifies the transaction.

Methods of ratification include:

• acceptance of the transaction’s benefits
• silence if there is no duty to affirm
• suing on the transaction

Question 6

Factors to Imply a Partnership

Answer 6

(1) Intent of the parties;
(2) Sharing of profits raises a presumption of partnership;
(3) Title to property is held in joint tenancy or tenancy in common;
(4) Parties designate their relationship as a partnership;
(5) Their venture requires extensive activity;
(6) Sharing of gross returns.

Question 7

Duty of Loyalty

Answer 7

Partners must account for all profits or other benefits derived by the partner in connection with partnership business. Partners may not deal with partnership as one with an adverse interest. Partners may not compete with the partnership.

Question 8

Duty of Care

Answer 8

Partners must refrain from engaging in negligent, reckless, or unlawful conduct. Partners must refrain from engaging in intentional misconduct.

Question 9

Duty of Obedience

Answer 9

Partners must obey all reasonable directions of the partnership. Partners must refrain from acting outside the scope of the partner’s actual authority.

Question 10

Duty to Provide Complete and Accurate Information

Answer 10

Partners must provide complete and accurate information concerning the partnership.

Question 11

Contract Liability in Partnerships

Answer 11

Partners are liable on contracts made by a partner in the scope of the partnership business and on any other contracts expressly authorized by the partners.

Question 12

Tort Liability in Partnerships

Answer 12

Partners are liable for any torts committed by a partner or an employee of the partnership in the ordinary course of partnership business.

Question 13

Dissociation

Answer 13

A partner is dissociated from a partnership upon:

• Notice of the partner’s express will to withdraw
• The happening of an agreed upon event
• The valid expulsion of a partner
• The partner becoming bankrupt
• The death of an individual partner, or the termination of a partner that is a business entity; or
• a court decision that a partner is incapable of performing her duties.

Question 14

Limited Partnership (LP)

Answer 14

(1) One or more general partners + at least one limited partner
(2) Need to file a certificate of limited partnership with secretary of state

Question 15

Limited Partner

Answer 15

No person liability for obligations of partnership

Question 16

General Partner

Answer 16

Jointly and severally liable for all partnership obligations.

Question 17

Duties of Partners in Limited Partnership

Answer 17

GP - Duties of Care and Loyalty to LP

LP - no fiduciary duties owed

Question 18

Limited Liability Partnership (LLP)

Answer 18

Must file statement of qualification with secretary of state which includes (1) name and address of partnership; and (2) statement of election to be an LLP.

Partners not personally liable for the obligations of the partnerships.

Question 19

Limited Liability Companies (LLC)

Answer 19

Taxed like partnerships, but members enjoy limited liability, like shareholders in a corporation, and the LLC is treated as an entity distrinct from its members.

Question 20

Member-Managed LLC

Answer 20

Members owe duties of Care and Loyalty to each other and the LLC. They must also discharge their duties consistently with the contractual obligations of good faith and fair dealing.

Members have a right to insepct and copy any record concerning the LLC’s business that is material to the member’s rights and duties.

Question 21

Manager-Managed LLC

Answer 21

Only the managers are subject to the duties of care and loyalty. Only the members may authorize or ratify an act by a manager that would otherwise violate the duty of loyalty.

Managers have same right to information as in a member-managed LLC.

Question 22

Piercing the Corporate Viel

Answer 22

Courts may PCV to reach personal assets of members in circumstances similar to those justifying piercing in a corporation.