Agency and Partnership

Question 1

Creation. An agent is a

Answer 1

person or entity that acts on behalf of a prinicipal.

Question 2

Creation. Cont

An agency exists if there is

Answer 2

assent (agreement between principal and agent)

benefit (agent’s conduct primarily benefits the principal)

and

Control (prinincipal has control of the agent)

Question 3

Actual authority

Answer 3

agent can bind a principal to contracts if the agent has actual authority. It can be expressed or implied

Question 4

Expressed authroity

Answer 4

occurs when the principal has explicitly told the agent that they are entitled to act on the principal’s behalf

Question 5

Implied authority

Answer 5

exists when the agent believes the action taken is required by their duties, they have acted the same previously or if it would be customary for agents to take such action

Question 6

apparent authroity

Answer 6

exists when the prinicpal holds another as having their authority and a 3rd party reasonably relies upon that authority

Question 7

ratification

Answer 7

Principal is liable for K entered into by an agent without authority when they have knowledge of all material facts/terms; and manifests assent to the agent’s action through words or conduct.

Question 8

= diginity rule

Answer 8

if an agent signs a K that requires a writing, the agency agreement must be in writing

look for a agent transfering a deed without written authority

Question 9

Formation of a partnership

Answer 9

Created when 2 or more persons as co-owners carry on a business for profit. No formal agreement or formalities is required and it is presumed formed if there is an agreement to share profits =

Question 10

Partners liability

Answer 10

General partners are personally liable (joint and severally) for all obligations of the partnership unless agreed otherwise. Usually judgements are not rendered against personal assets unless rendered against the partner and partnership assets have been exhausted

Question 11

Limited Liability partnership (LLP)

Answer 11

An LLP is a partnership where all partners have limited personal liability. Formation requires filing with the Secretary of State. A limited partner can actively manage the partnership, which is different from a Limited Partnership, where one partner has all of the power and the others simply have a financial stake.

Question 12

Authority to bind

Answer 12

Each partner is an agent with authority to bind for the purpose of business, including entering contracts. Each partner has express authority upon receipt of authority from the other partners. Acts within the ordinary course of the partnership business need only be approved by a majority of partners. Acts outside the ordinary course of business must be approved unanimously. A partner has implied actual authority (same as incidental authority) to take actions reasonably incidental or necessary in the performance of duties.

Question 13

What are partners always liable for

Answer 13

Their own misconduct or when they sign a personal guarantee, even if not personally liable for debts, they may be at risk of losing their capital contributions

Question 14

Transfer of ownership

Answer 14

A partner can only transfer their interest in the share of profits and losses and their right to receive distributions. All other incidents of partnership ownership (right to access partnership property, inspect books, participate in management) cannot be transferred unless all partners consent to transfer.

Question 15

Duty of care (partnership) - A partner is in breach of the duty of care when they engage in

Answer 15

a) grossly negligent or reckless conduct; b) intentional misconduct; or c) a knowing violation of law.

Question 16

Duty of loyalty (partnership)

Answer 16

A partner cannot: a) engage in self-dealing, b) usurp business opportunities, or c) compete against the partnership. Where a partner breaches the duty of loyalty, profits may be disgorged, and any contracts may be revoked or rescinded.

Question 17

Dissoultion - Upon dissolution, the firm continues until the winding up, where assets are converted to cash and distributed to

Answer 17

1) outside creditors; 2) inside creditors (partners who made loans to partnership); 3) partners’ capital contributions; and 4) profits for distribution. If partnership assets are insufficient to pay the liabilities of the partnership, the loss will be divided among the partners.