Agency and Partnership Flashcards
Agency: Agency Defined
Agency is a fiduciary relationship that arise when one person appoint another to act on the principal’s behalf and the agent consent to the act. The agency must act subject to the principal’s control.
Agency: Equal Dignity Rule
An agency agreement must be in writing if the agent will enter into certain contract within the Statute of Frauds.
Agency: Agent’s Duty of Care
Agent owes its principal a duty to carry out their agency with reasonable care.
Agency: Agent’s Duty of Loyalty
Agent owes a principal a duty of undivided loyalty.
Agency: Agent’s Duty of Obedience
Agent owes a principal a duty to obey all reasonable directions of their principal and may be liable for loss resulting from disobedience.
Agency: Subagents
A subagent is a person appointed an agent to perform function the the agent has consented to perform on behalf of the agent’s principal. Agent has absolute liability to principal and subagent owes the principal the same duties.
Agency: Principal’s Duties to Agent
A principal does not owe an agent any fiduciary duties but may owe the agent contractual duties.
Agency: Agent’s Authority to Bind
An agent has the power to bind a principal to a contract the agent enters into only if the agent acted with authority (actual, apparent).
Agency: Actual Implied Authority
Implied actual authority is authority that an agent reasonably believes she has a result of the actions of the princpal.
Agency: Apparent Authority
An agent has apparent if. the principal holds out another as possession authority that leads a reasonable third party to believe that authority existed.
Agency: Ratification
A contractual agreement will be enforced if the agent act on behalf of the principal without any authority but the principal subsequently validates the act.
The principal must have knowledge of all material facts regarding the contract, accepts the entire transaction, and the have capacity.
Agency: Contractual Liabilities
Third Party v. Principal (principal liable if agent had authority)
Third Party v. Agent (no liability unless the existence and identity of the principal was not disclosed or the parties intended the agent to be liable)
Agency: Liability for Agent’s Torts
First, determine whether the agent is an employee or independent contractor. Whether an agent is an independent contractor or employee depends on the principal’s control over the manner and method of the agent’s performance.
Consider:
- skills required
- required tools
- facilities used
- period of employment
- basis of compensation
Agency: Independent Contractor
Generally, a principal will not be liable for an independent contractor’s tort unless the activity involved is inherently dangerous, the duty in non-delegable, or the principal knowingly selected an incompetent contractor.
Agency: Vicarious Liability
A principal is vicariously liable for the tortious act of his employee that are within the scope of employment. A detour is still within the scope of employment.
Agency: Vicarious Liability for Intentional Torts
Generally, an employ is not vicariously liable for the intentional torts of an employee unless
- natural incident of employee’s duties
- where employee is promoting or is motivated to. serve employer business
- if specifically authorized or ratified by employer
Agency: Tort Liability by Apparent Authority
A principal may be held vicariously liable if agent appears to eat or communicate on behalf of the principal and the agent’s apparent authority enables the agent to
1) commit a tort or
2) cancel its commission
P’ship: GP Partnership
An association of two or more person to carry on as co-owners a business for profit. Profit sharing raises presumption of p’ship. Lack of right to control the business rebuts presumption.
Each partner is jointly and severally liable for the obligations of the partnership, whether the obligation arise in contract or torts, but the partnership’s resources must first be exhausted.
P’ship: Limited Partnership
A limited partnership is composed of one or more general partners and one or more limited partners. In order to validly for an Lp, a certificate of limited partnership must be filed with the Secretary of State.
In a LP, the general partnership are personally liable for the partnership obligations, meanwhile limited partners generally do not have any liability beyond their agreed-upon contributions.
P’ship: Limited Liability Partnership
To become a limited liability partnership, a partnership must file a statement of qualification with the Secretary of State. A partnership becomes an LLP at the time of filing the statement or on a date specific in the statement.
In an LLP, the partners are not personally liable fro the partnership obligations. However, a partner remains personally liable for his own wrongful acts.
P’ship: Partnership by Estoppel
If a person makes a reasonable person believe that they are partners with words or conduct they will be estopped from denying they are partners.
P’ship: Partnership Management Rights
Unless otherwise agreed all partners have equal management and vote.
Voting- matter within course of business (majority vote) outside of course of business (unanimity)
No Right to Salary- Partner has not right to compensation for services tended to the partnership.
Cannot be unilaterally transferred (requires unanimous consent)
P’ship: Financial Rights
Partners share profits equally by number and losses share in the same manner as profits.
May be unilaterally transferred.
P’ship: Actual Express Authority
Express authority is that authority contained within the four corner of the partnership agreement and any authority express granted by the vote of the partnership.
P’ship: Actual Implied Authority
Implied authority is authority that the partner reasonably she has a result of the action of the partnership. Absent an agreement to the contrary, all partners have equal rights in the management of the partnership.
Here, since ____ did not have a partnership agreement or any management agreement, ____ can argue that she/he had implied authority to enter into the contracts that are within the scope of the partnership business.
P’ship: Apparent Authority
Apparent authority exists if the partnership holds a partner out as possessing certain authority, thereby inducing other reasonably to believe that authority exist. A partner is an agent of the the partnership, therefore a partner has apparent authority to bind the partnership to transaction within the partnership’s ordinary course of business or of the kind carried out by the partnership. However, the partnership will not be bound if the third party knew that the partner lacked authority to act.
P’ship: Ratification
A partnership will be bound by ratification if a partner purports to act without any authority, but the partnership subsequently validates the act and becomes bound. For ratification to occur the partnership must know or have reason to know all material facts, accept the entire transaction, and have capacity.
P’ship: P’ship Liability for Torts
The p’ship is liable for loss or injury caused by the tortious conduct of a partner acting in the p’ships ordinary course of business.
P’ship: Liability of Dissociating Partner
A dissociating partner remain liable for obligations arising while they were partners unless there have been payment, release, or novation.
Dissociated may be held liable for post-dissociation p’ship obligations incurred within 2 years if 1) 3p reasonably believed dissociated partner was still a partner 2) did not have notice.
Dissociating partner may bind for period not exceeding two years by apparent authority.
P’ship: Partners Fiduciary Duties
A partner owes the partnership and other partners the following duties
Duty of Loyalty
Duty of Care (refrain from engaging in gross negligent conduct or reckless conduct)
Duty of Disclosure (of information concerning the partnership)
P’ship: Partnership Property
Property purchased with partnership funds is presumed to be the partnerships. Also partnership property if acquired in p’ships name or in partner’s name when apparent that acting for p’ship.
Partners have no interest in the partnership property and may only use it for partnership purposes.
P’ship: Wrongful Dissociation
A partner will be deemed to have wrongfully dissociated if dissolution is in breach of express term or if partner withdraws, expelled, or becomes bankrupt before end of a term, in a term partnership.
P’ship: Required Dissolution
A dissolution and windup are required if
1) at will p’ship and partner dissociates by express will
2) in term partnership if one partner wrongfully dissociates or dies and 1/2 of remaining partners agree to windup the business within 90 days of dissociation/death.
P’ship: Windup Priority
Pay outside creditor
Pay inside creditor
pay back capital contribution
Allocated profits and losses amongst partners
Any living partner may participate in windup.
