Agency and Partnership Flashcards
Partner Withdrawal
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
A partnership at will is:
an open-ended partnership that does not have a fixed termination based on a period of time or particular undertaking
A partnership at will is dissolved when:
a partner chooses to dissociate from the partnership by giving notice of his withdrawal
When a partner is engaged in winding up the partnership business:
The duties of loyalty and care are generally applicable
Under the duty of loyalty, a partner is required to refrain from:
(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.
An agent has the power to bind the principal when:
the agent acts with actual or apparent authority
Express actual authority exists when:
principal expressly gives agent authority to act for the prinicpal
Apparent authority exists when:
a third party reasonably relies on manifestations by the principal concerning the agent’s authority to act on the principals behalf
An agent who enters into a contract on behalf of an undisclosed principal:
becomes a party to the contract, thus becoming liable to the third party on the K
Unless the agent and third party agree otherwise, an agent who enters into a K on behalf of a partially disclosed principal:
becomes a party to the K
Ratification
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
An agency relationship exists when:
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
An LLP continues:
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
Partnership (including LLP) Joint and Several Liability
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
Post-LLP Partnership Obligations
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
Person who is admitted as a partner is not personally liable:
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
When a principal is undisclosed or partially disclosed:
Third party may elect to hold the agent or the principal liable
Implied actual authority
Principal’s conduct leads the agent to believe it has authority to act on behalf of the principal
Vicarious Liability of Employer
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
Indemnification
Principal can recover against the agent for indemnification if the agent acts beyond his authority
Direct Liability of Principal
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
Does an agent owe fiduciary duties?
The agent owes a duty of care and duty of loyalty
*Principal my recover losses from and profits made by the breaching agent
A partnership is:
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
Profit sharing presumption
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)
Partners are:
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
General Partnership Liability
In a general partnership, partners are jointly and severally liable for partnership debts
An incoming partner:
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
Partners owe partners:
fiduciary duties of loyalty, care, and to account (must account for any profits)
End of a partnership
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
If a creditor has a claim against a partner:
Creditor can obtain an interest in the partnership
LPs and LLPs must file:
A certificate with the state to be properly formed
LP
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
LLP
No one partner is liable for the obligations of the partnership (partners are liable for personal torts)
