Agency and Partnership Flashcards
requirements for an agency relationship- ie how to determine if an agency relationship exists
1) CONSENT by both the principal and the agent that the agent will act for the principal’s behalf
2) that the agent is subject to the principal’s CONTROL
An agency relationship is created when:
i) A principal manifests assent to an agent;
ii) The agent acts on the principal’s behalf;
iii) The agent’s actions are subject to the principal’s control; and
iv) The agent manifests assent or otherwise consents
When is the principal bound on a contract entered into by an agent
A principal is bound on a contract entered into by an agent if the agent had AUTHORITY to enter the contract.
Actual Authority can be express or implied. Authority can also be apparent
What is express actual authority
Agent is expressly given authority to act for the principal
What is implied actual authority
Implied actual authority is present when the principal’s CONDUCT leads the AGENT to believe it has authority. This can be implied by custom, past course of conduct, necessity, or emergency circumstance
- what the agent reasonably believes they can do.
What is apparent authority
1) the person dealing with the agent must do so with a reasonable belief int he agent’s authority
2) the belief must be generated by some act or neglect on the part of the principal
based on PRINCIPAL’S CONDUCT OR COMMENTS WITH A THIRD PARTY
=if the third party reasonably believes the agent has authority to act based on P’s conduct then the agent will have power to bind the principal.
What is ratification
Even if the agent did not have authority to enter a transaction, the principal can ratify the acts by expressly or impliedly affirming or accepting the benefit of the acts so long as the principal knew the material facts and had capacity.
Do partners in a general partnership or member in an LLC have actual and apparent authority to bind the other partners in contracts
YES
if the principal is undisclosed (unknown to third party) can there be apparent authority
NO. b/c apparent authority requires communication between principal and third party
When is the AGENT liable to a third party on a contract?
if the agent had no apparent or actual authority to enter the contract OR if the principal is undisclosed or if the agent acts beyond his authority
Can a principal be vicariously or directly liable for the torts committed by his agent
Yes- under vicarious liability of employer- employer is liable for torts of agent or employee if
- acting in scope of employment
-made a minor deviation (detour) from employment not a frolic
-committed an intentional tort only for P’s benefit or b/c P authorized it.
Is agent liable for own torts committed in course of employment
Yes
what is indemnification
The principal can recover against the Agent if the the agent acts beyond his authority
How can a principal terminate the agency relationship
-for actual authority- can just tell agent authority is revoked
-for apparent authority- use tell 3rd p that authority is revoked
Key duties an agent owes to principal or partners owe to the partnership
- duty of care- act as reasonable partner, no negligent conduct, no intentional misconduct
- duty of loyalty- no self-dealing, usurping, no competing with principal or partnership
How do you form a partnership
A partnership is the association of two or more persons to carry on as CO-OWNERS in a FOR PROFIT business WHETHER OR NOT THE PERSONS INTENDED TO FORM THE PARTNERSHIP.
- no writing or certificate necessary. General partnership is default form. No need for Intent to form a partnership
Profit sharing–> presumption of partnership
If two people are sharing profit from a business they own together what is it
A partnership
In a partnership, what is the liability of the partners
Each partner is jointly and severally liable for the partnership debts.
What duties do partners have
Partners have fiduciary duties-
duty of care
duty of loyalty- usurping partnership opportunity
and duty to account for any profits
How to end a partnership
step 1) dissolution. changes relationship of partners, gives notice to creditors
Step 2) winding up- assets liquidated, creditors paid. Partners still liable for any liabilities incurred during this phase
Step 3) termination