Agency and Partnership

Question 1

Agency: Agency Defined

Answer 1

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.

Question 2

Agency: Equal Dignity Rule

Answer 2

An agency agreement must be in writing if the agent will enter into certain contract within the Statute of Frauds.

Question 3

Agency: Agent’s Duty of Care

Answer 3

Agent owes its principal a duty to carry out their agency with reasonable care.

Question 4

Agency: Agent’s Duty of Loyalty

Answer 4

Agent owes a principal a duty of undivided loyalty.

Question 5

Agency: Agent’s Duty of Obedience

Answer 5

Agent owes a principal a duty to obey all reasonable directions of their principal and may be liable for loss resulting from disobedience.

Question 6

Agency: Subagents

Answer 6

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.

Question 7

Agency: Principal’s Duties to Agent

Answer 7

A principal does not owe an agent any fiduciary duties but may owe the agent contractual duties.

Question 8

Agency: Agent’s Authority to Bind

Answer 8

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).

Question 9

Agency: Actual Implied Authority

Answer 9

Implied actual authority is authority that an agent reasonably believes she has a result of the actions of the princpal.

Question 10

Agency: Apparent Authority

Answer 10

An agent has apparent if. the principal holds out another as possession authority that leads a reasonable third party to believe that authority existed.

Question 11

Agency: Ratification

Answer 11

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.

Question 12

Agency: Contractual Liabilities

Answer 12

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)

Question 13

Agency: Liability for Agent’s Torts

Answer 13

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

Question 14

Agency: Independent Contractor

Answer 14

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.

Question 15

Agency: Vicarious Liability

Answer 15

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.

Question 16

Agency: Vicarious Liability for Intentional Torts

Answer 16

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

Question 17

Agency: Tort Liability by Apparent Authority

Answer 17

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

Question 18

P’ship: GP Partnership

Answer 18

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.

Question 19

P’ship: Limited Partnership

Answer 19

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.

Question 20

P’ship: Limited Liability Partnership

Answer 20

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.

Question 21

P’ship: Partnership by Estoppel

Answer 21

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.

Question 22

P’ship: Partnership Management Rights

Answer 22

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)

Question 23

P’ship: Financial Rights

Answer 23

Partners share profits equally by number and losses share in the same manner as profits.

May be unilaterally transferred.

Question 24

P’ship: Actual Express Authority

Answer 24

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.

Question 25

P’ship: Actual Implied Authority

Answer 25

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.

Question 26

P’ship: Apparent Authority

Answer 26

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.

Question 27

P’ship: Ratification

Answer 27

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.

Question 28

P’ship: P’ship Liability for Torts

Answer 28

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.

Question 29

P’ship: Liability of Dissociating Partner

Answer 29

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.

Question 30

P’ship: Partners Fiduciary Duties

Answer 30

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)

Question 31

P’ship: Partnership Property

Answer 31

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.

Question 32

P’ship: Wrongful Dissociation

Answer 32

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.

Question 33

P’ship: Required Dissolution

Answer 33

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.

Question 34

P’ship: Windup Priority

Answer 34

Pay outside creditor
Pay inside creditor
pay back capital contribution
Allocated profits and losses amongst partners

Any living partner may participate in windup.