Agency and Partnership

Question 1

Rule: Liability of Principal for Tort of the Agent

Answer 1

The Principal will be liable for torts committed by the agent if (1) the principal-agent relationship exists and
(2) the tort was committed by the agent within the scope of the relationship

Question 2

principal/agent relationship: (ABC)
-A

Answer 2

Assent: voluntary, informal agreement; the principal must have capacity

Question 3

-B

Answer 3

Benefit: the agent’s conduct must be for the principal’s benefit

Question 4

-C
-subagents
-borrowed agent
-independent contractor

Answer 4

Control: the Principal has the right to control the agent by having supervisory power
-subagents: no vicarious liability unless ABC
-borrowed agent: no vicarious liability unless ABC
-independent contractor: no vicarious liability bc no power to supervise performance, except great ultra-hazardous activity and estoppel (hold out the independent contract as an agent)

Question 5

scope
-frolic v. detour

Answer 5

scope: was the conduct of the kind the agent was hired to perform? Did the tort occur on the job? Did the agent intend to benefit the principal?
-frolic v. detour: whether the tort occured on the job
–frolic: new and independent journey -> outside the scope
–detour: mere departure from the assigned task -> within the scope

Question 6

Intentional tort

Answer 6

generally outside the scope of vicarious liability, except:
(i) specifically authorized by principal;
(ii) natural from type of employment;
(iii) motivated by a desire to serve the principal

Question 7

Rule: Liability of Principal for Contracts Entered into by Agent

Answer 7

principal liable for contracts entered into by agent if the principal authorized the agent to enter into the contract

Question 8

authority: actual express
-definition; equal dignity doctrine; revocation

Answer 8

-the principal used words (including oral or private) to express authority to agent
-equal dignity doctrine: if the contract must be in writing, then express author must be in writing
—revocation: revoked by unilateral act OR death or incapacity of principal, unless principal gives the agent a durable power of attny (a written expression of authority with conspicuous survival language)

Question 9

actual implied authority

Answer 9

authority which agent resonably believes principal has given bc of necessity in order to accomplish the assigned task; custom; or prior dealings

Question 10

apparent authority: definition

Answer 10

the principal “cloaked” the agent with the appearance of authority AND 3rd party reasonably relies on the appearance of authority.

Question 11

secret limiting instruction

Answer 11

the agent has actual authority, but the principal secretly limited the authority, and agent goes beyond the scope. The principal is still liable.

Question 12

lingering authority

Answer 12

actual authority has terminated, but the agent continues to act on the principal’s behalf. The principal is still liable until the customer receives notice of termination.

Question 13

ratification

Answer 13

authority granted after contract entered if: principal has knowledge of all material facts re: the contract and principal has accepted benefits.
-Ratification must be complete as is, no alterations to terms

Question 14

extent of liability

Answer 14

-no authority: the principal is not liable, agent is liable
-authority: the principal is liable, the agent is not. BUT if the principal is partially disclosed OR undisclosed, the authorized agent may be liable at the election of a 3rd party

Question 15

duties the agent owes to the principal:

Answer 15

-reasonable care; obey reasonable instructions; loyalty
-loyalty: no self-dealing (benefit to the detriment of the principal); no usurpation of principal’s opportunities; no secret profits
-remedy: losses caused by breach & disgorge profits

Question 16

general partnership formation

Answer 16

-NO formalities: can arise from conduct
-definition: GP is an association of 2 or more people carrying on as co-owners of business for profit
-sharing profit creates the presumption of GP. But not lending agreements, wages, or commissions.

Question 17

liabilities of partners to 3rd parites
-general partnership: agency

Answer 17

agency: principles apply with regard to torts and contracts

Question 18

general partnership: personal liability for debts of the Partnership

Answer 18

incoming partners are not liable for pre-existing debt. But, funds from incoming payments can be used to satisfy prior debt.
-disassociating Partner does retain liability for future debts until actual notice given to creditors OR 90 days acter filing notice of disassociation to state.

Question 19

general partnership: liability by estoppel

Answer 19

person who represents to 3rd party that a Gen Partnership exists is liable as if one does exist

Question 20

Other Forms: Limited Partnership

Answer 20

Limited Partnership: one General Partner and one Limited Partner: requires limited partnership certificate with the names of all general partners
-general partner: liable personally for all limited partnership obligations, including torts and contracts. Right to manage limited Partnership.

Question 21

registered limited liability partnership

Answer 21

required to register Statement of Qualification and annual reports
-no liability for underlying obligations of Partnership, but liability for own wrongdoing

Question 22

LLC

Answer 22

the members are owners with limited liability for debts and obligations of the business + benefits of personal taxation.
-requirements: Articles of Organization and Operating Agreement
-the members control, but Art can delegate to managers
-limited liquidity (the members can’t freely transfer interests)
-limited life

Question 23

rights and libailities between partners: fiduciaries

Answer 23

fiduciaries: Duty of Loyalty (no self-dealing; usurping opportunities; secret profits)

Question 24

between partners: remedies

Answer 24

action for accounting: recover losses caused by breach AND disgorge profits

Question 25

partnership property

Answer 25

no transfer of specific Partnership assets without Partner authority, eg. land, leases or equipment
-personal property: can transfer profits/surplus owned by individual partners to a 3rd party.
-share in Management: general partners have the right to share management but may not transfer

Question 26

management

Answer 26

each Partner is entitled to equal control and vote, absent an agreement

Question 27

salary

Answer 27

absent an agreement, Partners don’t get salary unless winding up

Question 28

profits/losses

Answer 28

absent an agreement, profits are shared equally; losses are shared like profit

Question 29

Partnership Dissolution:
-Dissolution

Answer 29

Dissolution: begins the end of the Partnership
-at will: dissolution is automatic upon notice of express will of any 1 GP to dissociate.
-not at will: dissolution occurs upon the happening of an event specified in the agreement OR *majority vote of Partners to dissolve within 90 days of dissociation of a single Partner

Question 30

termination

Answer 30

the actual end

Question 31

winding up

Answer 31

the time between

Question 32

compensation

Answer 32

-Partners can get compensated during the winding up
-General Partners retain liability on transactions entered into to wind up the old business with creditors
-General Partners still retain liability on new transactions until actual notice of dissolution is given to creditors or 90 days after the filing of Statement of Dissolution

Question 33

priority

Answer 33

-creditors 1st: outside non-partner trade creditors AND inside Partners who loaned $ to Partnership
-capital contributions by Partners 2nd
-remainder: profits shared equally absent an agreement; losses are shared like profits