agency and partnership

Question 1

What does RUPA stand for?

Answer 1

Revised Uniform Partnership Act (RUPA) provides a default set of rules that provide guidance on the governing of a partnership.

Question 2

Partners are generally considered agents and can bind a partnership. However, a partner with apparent authority will not bind the partnership when:

Answer 2

1) the partner lacked authority; and 2) the third party knew or had notice that the partner lacked authority.

Question 3

Can an undisclosed principal ratify the act of an agent?

Answer 3

It depends. Under the Second Restatement, an undisclosed principal cannot ratify the act of an agent. Under the Third Restatement, an undisclosed principal may ratify the unauthorized act of an agent.

Question 4

In a sentence (or two), what is a basic definition for a limited partnership?

Answer 4

A limited partnership is composed of one or more general partners and one or more limited partners. The rights, duties and liability between general partners and limited partners differs.

Question 5

When may a principal be liable for the acts of an independent contractor?

Answer 5

Principal may be liable where:

1. Acts performed by independent contractor are inherently dangerous;
2. Principal selected an incompetent contractor, or
3. Where there is a nondelegable duty to act.

Question 6

All general partners have the right to manage and control the general partnership. This includes voting on decisions. What is the difference between the voting requirements for decisions made in versus outside the ordinary course of business?

Answer 6

Decisions made in ordinary course of business are controlled by a majority vote; whereas matters outside the ordinary course of business require a unanimous vote.

Question 7

When does dissolution of a partnership for a definite term occur?

Answer 7

1) within 90 days of a partner’s dissociation by death or wrongful dissociation;
2) upon the express will of all the partners to wind up the business; or
3) upon the expiration of the term or completion of purpose.

Question 8

What does UPA stand for?

Answer 8

The Uniform Partnership Act (UPA), which includes revisions called RUPA, is a uniform act for the governance of business partnerships by U.S. States. There are several versions of the UPA, the earliest were promulagated in 1914, and the most recent in 1997.

Question 9

It’s a Trick: Apparent Authority and the MEE

Answer 9

With regard to establishing apparent authority, the principal must, in some manner, indicate to the third party that the agent has authority. This may be done expressly through an announcement or impliedly be providing a uniform or company van (Think a UPS delivery person. These individuals are clearly agents of the company.). However, if a fact pattern ONLY indicates that the agent held themselves out to the third party as having such authority, without an indication that the principal indicated this, apparent authority will not be established to bind the principal.

Question 10

Even after dissolution, a partner has apparent authority to bind the partnership if:

Answer 10

1) the partner’s acts would normally bind the partnership; and 2) the third party did not have notice of the dissolution.

Question 11

May a partner transfer his share of profits or losses to a third person?

Answer 11

Yes, while a partner may not transfer his interest in management and other rights, he may transfer his interest in profits, losses, and distribution to a third party. Such a conveyance does not dissolve the partnership. Nor does the transferee automatically become a partner.

Question 12

What is the doctrine of respondaet superior?

Answer 12

Under the doctrine of respondaet superior, an employer (principal) may be vicariously liable for the torts committed by the employee (agent) if: 1) An employer-employee relationship exists; and 2) The employee committed tortious action during the scope of employment.

Question 13

How is a limited partnership formed?

Answer 13

A limited partnership is formed when: 1) Written certificate of limited partnership is executed in substantial compliance with state law; 2) Must file certificate with the secretary of state; 3) Must maintain an office with records (e.g., certificate of limited partnership) in its state of organization; and 4) Must maintain an agent in the state for service of process.

Question 14

What does ULPA stand for?

Answer 14

Uniform Limited Partnership Act (ULPA) governs limited partnerships.

Question 15

The relationship between an agent and a principal is a fiduciary one. What duties does an agent owe the principal?

Answer 15

An agent owes the principal the following fiduciary duties: 1. Duty of Loyalty 2. Duty of Obedience 3. Duty of Reasonable Care

Question 16

When can a creditor recover from the one of the partners personally, and what procedural steps must be taken to satisfy debt?

Answer 16

1) Where there is an obligation, a claimant should obtain a judgment against all partners personally and against the partnership. 2) Prior to levying a judgment against the individual partner’s personal assets, claimant should first attempt to satisfy the obligation through the partnership’s assets.

Question 17

A tip for Actual Authority and the MEE

Answer 17

In discussing actual authority on the MEE, analyze the relationship and communication beteeen the principal and the agent. Determine whether actual authority exists. If this does not exist, then discuss apparent authority.

Question 18

What does RULLCA stand for?

Answer 18

Revised Uniform Limited Liability Act of 2006 (RULLCA) is a uniform act for the governance of limited liability companies.

Question 19

Partners owe the partnership and other partners a number of fiduciary duties including the duty of care. What does the duty of care require?

Answer 19

The duty of care requires a partner to refrain from engaging in: 1) Grossly negligent or reckless conduct; 2) Intentional misconduct; or 3) A knowing violation of law. A partner must discharge duties with good faith and fair dealing.

Question 20

To form a limited partnership, a certificate of limited partnership must be filed. What does this require?

Answer 20

The Certificate of Limited Partnership must include: 1) the name of the partnership; 2) the address of the partnership; 3) name and address of each partner; 4) whether the partnership is a Limited Liability Partnership; and 5) it must be signed by a general partner.

Question 21

What fiduciary duties does the principal owe an agent?

Answer 21

A principal owes the agent the following fiduciary duties: 1. Duties Imposed by Operation of Law: Compensation and Reimbursement 2. Duties Imposed by Contract 3. Duty to Cooperate

Question 22

Under respondaet superior, when is an employee acting within the scope of this authority?

Answer 22

An employee may be acting within the scope of his employment when: 1) performing work assigned by the employer; or 2) is engaging in conduct that is subject to the employer’s control.

Question 23

There are three types of partnerships. Name them.

Answer 23

1) General Partnership 2) Limited Liability Partnership 3) Limited Partnership

Question 24

Can a partner bring a direct or derivative action against another partner or the partnership?

Answer 24

Direct Action: A partner can maintain a direct action against another partner (with or without an accounting) to enforce the partner’s rights, including an action for violation of a fiduciary duty. Derivative Action: A partner cannot maintain a derivative action on behalf of the partnership because they are not permitted under RUPA.

Question 25

In a sentence, what is the basic definition for a limited liability partnership.

Answer 25

A limited liability partnership is one where all partners have limited liability.

Question 26

Another fiduciary duty required by all partners is the duty of loyalty. What does the duty of loyalty require?

Answer 26

The duty of loyalty requires a partner to: 1. Account for property, profits, opportunities, or benefit derived by the partner in conjunction with the partnership business; 2. Refrain from acting adverse to the partnership; and 3. Refrain competing with the partnership. A partner must discharge duties in good faith and with fair dealing.

Question 27

An agency relationship exists if there is:

Answer 27

1) Consent; 2) Benefit; and 3) Control

Question 28

An agency relationship can be terminated (i.e., the agent no longer has authority to act) by:

Answer 28

act or agreement of the parties or by operation of law.

Question 29

Describe how an agency relationship may be terminated by the parties?

Answer 29

An agency relationship may be terminated by the parties when: 1) The principal and/or agent manifests to the other that the relationship is terminated; 2) A specific term of the agent's authority expired; or 3) The purpose of the agency relationship has been fulfilled.

Question 30

Describe how an agency relationship may be terminated by operation of law?

Answer 30

An agency relationship may be terminated by operation of law upon: 1) The death of the principal or agent; 2) Incapacity of the principal or agent; or 3) The agent materially breaches a fiduciary duty owed to the principal.

Question 31

There universal, general, and special agents. What are the differences between the three?

Answer 31

1) A universal agent has broad authority, and is authorized to transact all the business of his/ her principal of every kind. 2) A general agent is authorized to conduct a series of transactions. 3) A special agent has limited authority for a specific act, transaction or a specific period of time.

Question 32

Define the characteristics of a principal in a sentence.

Answer 32

A principal is a person or entity that manifest an intent that an agent acts on his behalf and under his control.

Question 33

Define the characteristics of an agent in a sentence.

Answer 33

An agent is a person or entity that acts on behalf of the principal.

Question 34

Actual authority is authority that the agent reasonably thinks she possesses based on the principal’s dealings with her. Actual authority may be express or implied. When does actual express authority exist?"

Answer 34

Actual express authority exists when the agent acts in accordance with the agency agreement (i.e., the explicit communication (written or oral) from the principal to the agent).

Question 35

When does actual implied authority exist?

Answer 35

Actual Implied Authority is authority arises when: 1) the agent believes he is entitled to act because the action is necessary to carry out expressly authorized duties; 2) the agent has acted similarly in prior dealing and through the principal's actions the agent reasonably believes he has such authority in the future; 3) it is customary for agents in that position to act that way.

Question 36

When does apparent authority arise?

Answer 36

Apparent authority arises where a third party reasonably believes the agent had authority to act on behalf of the principal.

Question 37

In a sentence, define the general agency relationship between an agent and principal.

Answer 37

Agency is a fiduciary relationship that exists between an agent and principal where the agent acts on the principal’s behalf and is subject to the principal’s control.

Question 38

Can a partner be reimbursed for funds advanced to the partnership?

Answer 38

Yes, a partnership shall reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contribute. If the partnership has insufficient funds to reimburse the partner, the partner has the right to be reimbursed for a portion of the contribution from the other general partners based on each’s percentage of ownership.

Question 39

How can a partnership become a limited liability partnership?

Answer 39

Any partnership can become a limited liability partnership if there is: 1) Approval of the partners by a vote; and 2) By filing a Statement of Qualification with the state.

Question 40

What is the duty of obedience?

Answer 40

All partners are agents of the partnership. This requires that partners must obey all reasonable directions from the partnership.

Question 41

An employee disreguards the employer's instructions. Is the employee's conduct automatically outside the scope of employment?

Answer 41

No. If the employee disregarded the employer's instructions but did so in an attempt to serve the employer, the employee's actions are not considered outside the scope of employment.

Question 42

If the agent had authority, the principal is liable to the third party. Generally, an agent does not have contractual liability for third party contracts entered into with that party. This is true as long as the agent:

Answer 42

1) Fully disclosed the principal he is acting on behalf of; and 2) Acts within the scope of his authority. An agent will be liable under the implied warranty of authority, if the act was unauthorized or when the principal is undisclosed, partially disclosed, or unidentified.

Question 43

What must a Statement of Qualification include?

Answer 43

A Statement of Qualification must include: 1) the name and address of the partnership; 2) a statement that the partnership elects to become an LLP; and 3) an effective date.

Question 44

May a partner access the partnership books, records and information?

Answer 44

Yes, every partner has the right to inspect and copy the partnership books. Each partner, upon reasonable demand of another partner, must provide complete, accurate and true information concerning the partnership.

Question 45

There are no formalities like a written agreement is required to form a general partnership. In determining whether a general partnership exists, what will the court consider?

Answer 45

The court will consider whether the parties: 1) Intent: Where parties intended to carry on a business as co-owners, a partnership is formed regardless of whether that was intended. 2) Shared Profits: This raises a presumption of partnership (does not apply where profits received as repayment of a debt or loan); 3) Joint Ownership: This does not establish a partnership in and of itself, but may tend to show the parties associated as co-owners; 4) Shared Control: Again, this does not establish a partnership in and of itself but may tend to show the parties associated as co-owners.

Question 46

In a sentence, briefly define dissociation.

Answer 46

Dissociation occurs when any partner withdraws from partnership business.

Question 47

Discuss an agent's authority to bind the principal.

Answer 47

An agent may bind a principal to a contract if the agent is acting within the scope of actual or apparent authority. Once the principal is bound to a contract by the agent, the principal is liable under the terms of the contract unless the third party had notice that the agent was exceeding his authority.

Question 48

In a limited partnership, how does the liability between the general and limited partners differ?

Answer 48

General partners are personally and jointly and severally liable for partnership obligations; whereas limited partners generally do not have any liability beyond the liability to make agreed-upon contributions.

Question 49

What is a partnership by estoppel?

Answer 49

Where no partnership exists, a partnership by estoppel allows parties may be held liable to third parties as a partnership if they actively held themselves out as partners or consented to being held out as partners.

Question 50

How does a partner become dissociated from a partnership?

Answer 50

A partner can dissociate by: 1) notice of the partner's “express will” to withdraw; 2) the occurence of an agreed-upon event; 3) a partner's expulsion, death, incapacity, or bankruptcy; 4) appointment of a personal representative; or 5) termination of an entity partner.

Question 51

What is the liability of a general partner on partnership contracts?

Question 52

To bind the principal, an agent must have authority to enter into the contract. The principal's liability occassionally depends on whether the principal was disclosed, unidentified, or disclosed. Describe the liability of the agent and principal in these scenarios.

Answer 52

1) When the principal is disclosed, the principal is liable for contracts entered by authorized agent. The agent is not liable. 2) When the principal is unidentified or partially disclosed (existence, but not identity, known to third party) and undisclosed (existence and identity are unknown to third party), both the agent and the principal are liable.

Question 53

In a limited partnership, how do the fiduciary duties differ between general and limited partners?

Answer 53

Unlike general partners who owe fiduciary duties, limited partners owe no fiduciary duty. While the principles of good faith and fair dealing are still applicable, limited partners may compete with and have interests adverse to the limited partnership.

Question 54

In a sentence, what is a basic definition for a general partnership?

Question 55

When is dissociation considered wrongful?

Answer 55

Wrongful dissociation arises if dissociation is a breach of an express term in the partnership agreement. A wrongful dissociation bars a partner from management and the winding up process.

Question 56

All general partners are personally and jointly liable for all partnership debts. Is this true for liability that pre-date their participation as a partner?

Answer 56

No, general partners are not personally liable for partnership obligations that pre-date their participation as a partner.

Question 57

An employer will not be vicariously liable for employee's conduct where:

Answer 57

1) There is a frolic (major deviation). Contrast this with a detour (minor deviation). In the case of a detour, employer is liable. 2) Unless expressly authorized by employer, passengers and trespassers are outside of scope of employment. Employer is not liable. 3) Unauthorized Instrumentalities: employer is not liable.

Question 58

Inherent authority allows the principal to be bound in certain situations absent the agent’s actual or apparent authority. Describe when courts apply inherent authority.

Answer 58

Inherent authority is a principle based in equity. Courts balance the totality of the circumstances against forcing the third party to absorb all damages. Some courts apply inherent authority when: 1) An agency relationship exists; and 2) the agent's acts are generally of a kind that would fall within his actual authority.

Question 59

Where a party receives profits of the partnership for repayment of a debt, wages, rent, of an annuity or retirement benefit, of a loan or interest or for the sale of the goodwill of the business, this party is

Answer 59

not considered a partner.

Question 60

In a limited partnership, how do the management roles differ between general and limited partners?

Question 61

Even when an agent lacks actual authority, a principal may be bound by an agent's acts if the agent acted with apparant authority. Apparent authority arises when the principal "holds out" the agent as having authority to act which gives a third party a reasonable belief that the agent has such authority. How does a principal "hold out" an agent as having authority?

Answer 61

## Footnote _The principal "holds out" an agent when he: 1) Cloaked the agent with the appearance of authority; 2) Gives the agent a position or title indicating such authority; or 3) Has previously held the agent out as having authority and has not revoked such authority._

Question 62

What is the effect of a dissociation on the partnership?

Answer 62

Dissociation terminates the dissociating partner's legal relationship with the partnership. This includes the rights to partnership profits, management and control. Additionally, fiduciary duties are terminated after the partner's dissociation, except regarding matter occurring prior to the dissociation.

Question 63

Can general partners be criminally liable for a crime of another partner within the scope of the partnership business?

Question 64

What is considered partnership property?

Question 65

Does a limited partner have the right to inspect the limited partnership records?

Question 66

A tip for Apparent Authority and the MEE

Question 67

Apparent authority will not apply in certain circumstances including when:

Question 68

Can a partnership "buy out" a dissociating partner's interest?

Question 69

What is the difference between an employee and independent contractor?

Question 70

What does jointly and severally liable mean?

Answer 70

General partners are jointly and severally liable for partnership obligations, which means that a claimant can collect the full amount of the debt from any one of the partners. A partner may be entitled to seek contribution from the other partners if he pays more than his proportionate share of the partnership obligation.

Question 71

What interest do partners have in partnership property?

Question 72

Partners in a limited liability partnership enjoy limited liability. When may a limited liable partner be liable?

Question 73

A non-judicial dissolution of a limited partnership occurs upon: 1) the occurrence of an event specified in the agreement; 2) the consent of all general partners and of all limited partners owning a majority of rights to distributions; 3) after dissociation of a general partner; d) 90 days after dissociation of the last limited partner; or e) the filing of a declaration of administrative dissolution by the Secretary of State.

Answer 73

1) the occurrence of an event specified in the agreement; 2) the consent of all general partners and of all limited partners owning a majority of rights to distributions; 3) after dissociation of a general partner; d) 90 days after dissociation of the last limited partner; or e) the filing of a declaration of administrative dissolution by the Secretary of State.

Question 74

A key distinguising factor between actual and apparent authority is

Question 75

What is the liability of a general partner for tort liability?

Question 76

Any personal use of partnership property requires

Answer 76

the consent of other partners.

Question 77

In a sentence (or two), briefly define dissolution.

Answer 77

Dissolution is the termination of a partnership. A partnership continues after dissolution until the winding up of the business is completed. At that point, the partnership is considered terminated.

Question 78

Does changing from a general or limited partnership to a limited liability partnership extinguish debts and obligations that pre-date the change?

Answer 78

No, obligations incurred before a partnership becomes an LLP are treated as obligations of the prior partnership entity (i.e. general partnership or limited partnership).

Question 79

A principal is generally not liable for the torts committed as an agent functioning as an independent contractor. What factors are considered when determining is an agent is an independent contractor?

Answer 79

The principal’s amount of control over the agent is key to determining whether agent is an independent contractor. Other factors include, but are not limited to: 1) Characterization by the parties; 2) Nature of the work; 3) Skill required; 4) Who supplies the tools, equipment and facilities; 5) Length of employment; 6) Basis of compensation.

Question 80

In a sentence, what is a basic definition for a limited partnership?

Answer 80

A limited partnership is composed of one or more general partners and one or more limited partners. The rights, duties and liability between general partners and limited partners differs.

Question 81

A partner may only use general partnership property:

Answer 81

1) On behalf of the partnership; or 2) To carry on the business of the partnership.

Question 82

Dissolution of a general partnership occurs upon:

Answer 82

1) notice of the partner's “express will” to withdraw; 2) the occurence of an agreed-upon event; 3) by operation of law (e.g., it is unlawful to continue); 4) judicial dissolution (e.g., Court orders a decree that partnership is no longer reasonably practical)

Question 83

A partnership is entitled to the patent that is the result of a partner's invention if:

Answer 83

1) the partnership facilitates or business time is used for its creation; or 2) the partner is employed to do the inventive work.

Question 84

If an agent acts without authority, a transaction that was ratified will be treated as if it was entered with authority. When does ratification of an agent's act occur?

Answer 84

Ratification occurs when the principal: 1) has knowledge of all material facts or contract terms; and 2) manifests express or implied affirmance of the agent's act through words or conduct.

Question 85

Agency and Torts crossovers on the MEE

Answer 85

Concepts that frequenly crossover between Agency and Torts involve respondaet superior and determining whether a party will be considered an employee or an independent contractor. Most often when you encounter an employer/employee relationship, and the question poses whether the employer will be liable, this is a tip to discuss respondaet superior.

Question 86

How are partnership profits and losses distributed between partners?

Answer 86

Absent an agreement to the contrary, each partner is entitled to an equal share of the partnership profits and must contribute toward the partnership losses in proportion to his share of the profits.

Question 87

Generally describe the partner's right to manage.

Answer 87

Absent an agreement to the contrary, all general partners have equal rights to manage the general partnership business.

Question 88

During the winding up process, parnership assets are converted to cash. What order are these assets distributed?

Answer 88

1) Liabilities are paid to creditors; 2) Partners' capital contributions; and 3) Profits are distributed to partners.