Agency and Partnership

Question 1

Partner Withdrawal

Answer 1

A partner may withdraw from a partnership by giving notice to the other partners.

A partner has the power to dissociate from the partnership at any time, even if the dissociation is wrongful

Question 2

A partnership at will is:

Answer 2

an open-ended partnership that does not have a fixed termination based on a period of time or particular undertaking

Question 3

A partnership at will is dissolved when:

Answer 3

a partner chooses to dissociate from the partnership by giving notice of his withdrawal

Question 4

When a partner is engaged in winding up the partnership business:

Answer 4

The duties of loyalty and care are generally applicable

Question 5

Under the duty of loyalty, a partner is required to refrain from:

Answer 5

(i) competing with the partnership business,
(ii) advancing an interest adverse to the partnership, and
(iii) usurping a partnership opportunity or otherwise using partnership property or business to derive a personal benefit, without notifying the partnership.

Question 6

An agent has the power to bind the principal when:

Answer 6

the agent acts with actual or apparent authority

Question 7

Express actual authority exists when:

Answer 7

principal expressly gives agent authority to act for the prinicpal

Question 8

Apparent authority exists when:

Answer 8

a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on the principals behalf

Question 9

An agent who enters into a contract on behalf of an undisclosed principal:

Answer 9

becomes a party to the contract, thus becoming liable to the third party on the K

Question 10

Unless the agent and third party agree otherwise, an agent who enters into a K on behalf of a partially disclosed principal:

Answer 10

becomes a party to the K

Question 11

Ratification

Answer 11

Even if agent did not have authority to enter into a transaction, principal can ratify the acts by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew that material facts and had capacity

Question 12

An agency relationship exists when:

Answer 12

a principal manifests assent to an agent that the agent shall act on the principal’s behalf and the principal is subject to the agents control

Question 13

An LLP continues:

Answer 13

to be the same entity that existed prior to the filing of a statement of qualifications as an LLP

The filing partnership continues to be the same partnership entity that existed before the filing

Question 14

Partnership (including LLP) Joint and Several Liability

Answer 14

Partners in a partnership are jointly and severally liable for all obligations of the partnership unless otherwise agreed by the claimant or provided by law

Question 15

Post-LLP Partnership Obligations

Answer 15

Any obligation incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership

*Any obligation incurred before the partnership qualified as an LLP - limited liability protection does not apply

Question 16

Person who is admitted as a partner is not personally liable:

Answer 16

For any partnership obligation incurred prior to the admission of the person to the partnership

*The amount a partner contributed to the partnership could be used, however, to satisfy existing partnership debts

Question 17

When a principal is undisclosed or partially disclosed:

Answer 17

Third party may elect to hold the agent or the principal liable

Question 18

Implied actual authority

Answer 18

Principal’s conduct leads the agent to believe it has authority to act on behalf of the principal

Question 19

Vicarious Liability of Employer

Answer 19

Employer is liable in tort for the acts of the agent or employee if the agent or employee:

(1) was acting in the SCOPE of employment,
(2) made a minor deviation from employment (rather than a frolic), or
(3) committed an INTENTIONAL tort only if it was for the principal’s benefit because the principal authorized it, or one that arose naturally due to the nature of employment

Question 20

Indemnification

Answer 20

Principal can recover against the agent for indemnification if the agent acts beyond his authority

Question 21

Direct Liability of Principal

Answer 21

Principal is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent

Question 22

Does an agent owe fiduciary duties?

Answer 22

The agent owes a duty of care and duty of loyalty

*Principal my recover losses from and profits made by the breaching agent

Question 23

A partnership is:

Answer 23

the association of two more persons carry on as co-owners, a business for profit, whether or not the persons intended to form a partnership

Question 24

Profit sharing presumption

Answer 24

Profit sharing creates a presumption that a person is partner unless the profits were received in payment of a debt, rent to a LL, wages, etc.

*General partnership is the default (formed because LP was improperly formed)

Question 25

Partners are:

Answer 25

Agents and comanagers of the partnership

• Partners have equal rights to co-manage the affairs within the ordinary course of business
• Affairs outside of the ordinary course of business required a unanimous vote

Question 26

General Partnership Liability

Answer 26

In a general partnership, partners are jointly and severally liable for partnership debts

Question 27

An incoming partner:

Answer 27

Is not personally liable for prior debts of the partnership, but his capital contributions can be used to satisfy such debts

*Outgoing partners are personally liable for debts incurred during their time

Question 28

Partners owe partners:

Answer 28

fiduciary duties of loyalty, care, and to account (must account for any profits)

Question 29

End of a partnership

Answer 29

Dissolution does not end a partnership - it ends once winding up is complete

(1) Dissolution - change in the relationship of the partners (partner can withdraw at any time by giving notice at any time),
(2) Winding up - Partnership assets are liquidated and creditors are paid
(3) Termination - true end to the partnership

Question 30

If a creditor has a claim against a partner:

Answer 30

Creditor can obtain an interest in the partnership

Question 31

LPs and LLPs must file:

Answer 31

A certificate with the state to be properly formed

Question 32

LP

Answer 32

At least one general partner must listed on the certificate

• Limited partners have limited liability
• General partners are liable for all partnership obligations and manage control of the business
• If converted to an LLP, partners remain jointly and severally liable for actions that took place before conversion

Question 33

LLP

Answer 33

No one partner is liable for the obligations of the partnership (partners are liable for personal torts)