Agency and Partnership

Question 1

creation of agency relationship

Answer 1

1. capacity
2. consent - must be manifested by both principal and agent
3. method of formation
   - action = actual or apparent authority or ratification (previously authorized acts)
   - operation of law = principal may be estopped from denying the existence of an agency relationship or an agency may be created by statute

Question 2

agents duties

Answer 2

1. duty of loyalty - agent must disclose interest adverse to the principal
2. duty of obedience - the agent must obey all lawful instructions of the principal
3. duty of care - agent must act with reasonable care
4. duties under contract - agent must comply with any terms of the agency contract

Question 3

principal duties

Answer 3

1. duty to compensate and reimburse - reimburse for expenses and loses
2. duty to cooperate
3. duties under contract

Question 4

remedies of principal

Answer 4

1. a compensated agent can he liable for damages based on breach
2. any agent is subject to tort liability for damages resulting from his misuse of the principal’s property, for intentional or negligent misperformance, or failure to perform
3. if an agent breaches her fiduciary duty of loyalt and secretly profits the principal may recover the profits or property
4. the principal can bring an accounting action in equity to determine the exact amount an agent owes
5. if the agent committed an intentional tort or intentionally breached duty the principal may without unpaid compensation
6. principal may terminate the agency relationship when the agent breaches one of his duties

Question 5

remedies for agent

Answer 5

1. a compensated agent can sue for breach

2. an agent has possessory lien on any money the principal owes

Question 6

actual authority

Answer 6

authority that the agent reasonably think they posses based on principals dealings

• actual express = expressly gives
• actual implied = agent reasonably believes as a result of actions of the principal
• apparent authority = if lacked actual principal ill bound if (1) principal held out agent as having authority (2) based on holding out the 3rd party reasonably believed that the agent had auth
• ratification = principal can be bound if later ratifies transaction
  1. acceptance of transaction’s benefits
  2. silence if there is a duty to affirm
  3. suing on the transaction

Question 7

contract liability - third party v. principal

Answer 7

general rule that if agent had authority the principal is liable to the third party

Question 8

contract liability - third party v. agent

Answer 8

whether an agent can be held liable on a contract he enters on behalf of the principal depends on whether the principal was disclosed, unidentified or undisclosed

1. disclose principal - agent generally not liable
2. unidentified/undisclosed principal - generally either the principal or agent can be held liable (third party chooses)

Question 9

contract liability - principal or agent v. third party

Answer 9

where the principal is disclosed, only the principal may enforce the contract and hold the third party liable. if the principal is unidentified/undisclosed either the principal or agent may hold the third party liable

Question 10

formation of partnership governing law

Answer 10

1. revised uniform partnership act RUPA provides a default set of rules for general partnership
2. contract and agency rules also apply

Question 11

partnership formation requirements

Answer 11

1. no formal agreement in writing required to form partnership; parties intent can be implied from conduct
2. anyone is capable of entering into a binding contract is capable of being a partner
3. partnership may not have an illegal purpose
4. no one may become a partner without consent of al partners

Question 12

factors to imply partnership

Answer 12

1. intent of parties
2. sharing of profits raises a presumption of partnership
3. factors that don’t raise presumption but are evidence of partnership
   - title to property is held in joint tenancy or in common
   - parties designate their relationship as partnership
   - venture requires extensive activity
   - sharing of gross returns

Question 13

rights of partners

Answer 13

1. all partners have an equal right to participate in the management and control of the partnership absent agreement otherwise
2. all partners have equal right to share in profits and losses and receive distributions
3. partners are not entitled to remuneration except for reasonable compensation for services rendered in winding up the partnership’s business
4. partnership must indemnify partners for payments reasonably made and obligation reasonably incurred by a partner in carrying on the business of the partnership
5. if a partner must pay more than his fair share of the partnership’s debt he is entitled to contribution from the other partners
6. all partners have the right to inspect the partnership books and records
7. partnership may sue or be sued in the partnership name or in the names of individual partners

Question 14

duties of partners

Answer 14

1. duty of loyalty
2. duty of care
3. duty of obedience
4. duty to provide complete and accurate information