Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Bar Prep > Agency and Partnership > Flashcards

Agency and Partnership Flashcards

You may prefer our related Brainscape-certified flashcards:
MBE flashcards
1
Q

Agency Generally

A

Fiduciary relation
Results from the manifestation of consent
By one person to another
That the other shall act on his behalf and subject to his control
And consent by the other so to act

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Agency Elements

A

Consent
On Behalf of
Control
Capacity
No Writing Required

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Equal Dignities Rule

A

Agency agreements must be in writing when agent is to enter into certain contracts within statute of frauds or agency agreement itself would fall within statute of frauds
Ie. contract to buy land

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Agent’s Duties to the Principal

A

Care
Loyalty
Obedience

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Agent’s Duty of Care

A

Carry out agency with reasonable care

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Duty of Loyalty

A

Undivided loyalty

Includes:
May not use position to profit for themselves
Must act solely for the benefit of the principal
Refrain from dealing with principal as adverse party or with adverse party
May not compete with principal based on subject matter of the agency
May not use principal’s property or information to benefit self

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Duty of Obedience

A

An agent must obey all reasonable directions of their principal
Liable to principal for losses from failure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Principal’s Remedies for Agent’s Breach of Duties

A

When it comes to breach of fiduciary duty, note that a wide range of equitable remedies are available to a court. In general, a court can do whatever it wants to “do justice” in the situation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Principal’s Duties to the Agent

A

Not fiduciary in nature
Indemnify agent’s losses in carrying out principal’s instructions
Compensate agent for services

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Actual Authority

A

Based on agent’s reasonable belief. If reasonable person in agent’s position would believe principal gave them authority.
Requires principal’s manifestation

Express: Conveyed by principal in words
Implied: Agent reasonably believes it exists

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Termination of Actual Authority

A

Revokes after:
Specified time
Specified event
Reasonable time
Change of circumstances
Breach of fiduciary duty
Unilateral act by either party
Death
When agent has notice

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Apparent Authority

A

Based on third party’s reasonable belief
If principal’s words or conduct would lead a reasonable person in 3Ps position to believe agent has authority to act
Power of position: Based on agent’s title or position

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Ratification

A

After-the-fact authority
Express or implied
Express: oral or written
Implied: Principal accepts benefits

For ratification to occur, the “principal” must:
Have knowledge of (or have reason to know) all material facts regarding the contract
Accept the entire transaction (meaning the “principal” cannot merely ratify a portion of the transaction) AND
Have capacity (be competent and of legal age)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Who is bound on a contract? (Agency)

A

Actual authority, apparent authority, or ratification: principal bound.
Undisclosed or partially disclosed principal: agent also bound.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Vicarious Liability

A

Master liable for torts in scope of servant’s employment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Servant vs Independent Contractor

A

Not just task but how task must be accomplished = servant

Factors for Right to Control:
Skill required more likely independent contractor
Tools and facilities
Period of employment (longer = employee)
Basis of compensation
Time: employee favored
Job: IC favored
Business purpose
Distinct business

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Detour vs Frolic

A

Detour:
Minor deviation from employer’s directions still within scope

Frolic:
Substantial deviation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Intentional torts Agency and Exceptions

A

Employer generally not liable for employee’s intentional torts

Exception:
Conduct natural from nature of job
Motivated to serve employer
Authorized by employer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Direct Liability for Torts

A

Every person is liable for their own torts.
Thus, an employer is liable for their own negligence if they fail to properly train or supervise employees or independent contractors, or
fail to check an employee’s or independent contractor’s criminal record or job history
Exam: Discuss both theories of liability: Direct and vicarious

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Partnership definition

A

Two or more persons associate to carry on as co-owners a business for profit
Do not need to intend partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Partnership Formation factors

A

Profit sharing
Receive a share of profits, then legal presumption of partnership
Doesn’t include paying back debts or rent
Sharing of gross returns does not count as profit sharing, revenue is without losses cut out
Right to participate in control of business
Loss Sharing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Partnership by Estoppel

A

Partner liability imposed when a party is not a partner in fact.
Hold self out to the world as if they were partner and 3P relies on that
Exam: Rely on provisions of a partnership agreement first then fall back on statutory provisions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

General Partnership Voting Default Rules

A

Unless otherwise agreed:
One partner, one vote
Ordinary business decision = majority vote
Extraordinary business decision = unanimous vote

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

General Partnership Salary Default Rules

A

Unless otherwise agreed, no compensation
Because you get profits distributed at end of year

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

General Partnership Profit/Loss Sharing Default Rules

A

Profits shared equally
Losses shared in same manner as profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Partnership Liability

A

Partnership = principal under agency law
Partner = Agent under agency law by statute

Tort
Liable for loss or injury caused to a person by a partner in course of partnership

Contract
Liable for all contracts entered into by a partner in the scope of partnership business or with actual or apparent authority of the partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Partners entering into contracts

A

And usually have apparent authority for whole partnership
Cannot waive away 3P rights such as apparent authority

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Statement of Authority exception to partner contracts

A

Document filed publicly limiting partner’s authority to transfer real property
Gives constructive notice that partners can’t transact with real property, only real property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Liability of Partners

A

Each partner is jointly and severally liable for partnership obligations
P must exhaust partnership resources before collecting from partners, so partners are guarantors
Able to get indemnified by partnership
Cannot limit 3Ps rights

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Admitting new partners

A

Default rule: Unanimous vote
Not liable for obligations that arose before becoming partner

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Partnership Duties

A

Care
Loyalty
Duty of Disclosure

To each other AND partnership
Cannot eliminate these duties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Partners Duty of Loyalty

A

Account to partnership for any benefit
No taking adverse positions to partnership
No competing with partnership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Partners Duty of Care

A

No grossly negligent or reckless conduct

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Duty of Disclosure

A

A partner also has a duty to provide complete and accurate information concerning the partnership.
Statutory, not fiduciary duty
R.U.P.A. provides that each partner and the partnership shall furnish to a partner
(1) without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties; and
(2) on demand, any other information concerning the partnership’s business and affairs (except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances)
Can eliminate this duty

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Partnership Property

A

Belongs to partnership if bought in partnership name or by partner and it is apparent in document they’re acting for the partnership
Presumed partnership property if partnership funds used
Presumed partner property if bought in their name without partnership funds and no sign of using property for partnership

Rights in partnership property
Totally unrestricted

Partnership owns partnership property
Partner right
Not a co-owner of partnership property

36
Q

Partnership interest

A

is the partners ownership stake in the partnership
Ownership interest in partnership
Management rights
Financial rights

Rights:
No Unilateral Transfer of Management Rights
–Unless otherwise agreed, a partner cannot unilaterally transfer his management rights and thereby make the transferee a “partner.”
Unilateral Transfer of Financial Rights Permitted
–Unless otherwise agreed, a partner can unilaterally transfer his financial rights.
Ie: only able to transfer financial rights

37
Q

Dissociation

A

Partner’s withdrawal from partnership
Methods:
(1) oral or written notice of the partner’s express will to withdraw;
(2) happening of an agreed event;
(3) valid expulsion of the partner;
(4) the partner’s bankruptcy or the appointment of a receiver for a partner;
(5) the partner’s death or incapacity to perform partnership duties;
(6) the decision of a court that the partner is incapable of performing a partner’s duties; or
(7) termination of a business entity that is a partner

38
Q

Wrongful Dissociation

A

A partner will be deemed to have wrongfully dissociated if the dissociation is in breach of an express term in the partnership agreement.
A dissociation is also wrongful in a term partnership if the partner withdraws, is expelled, or becomes bankrupt before the end of the term.
A partner who wrongfully dissociates is liable to the partnership for any damages caused by the dissociation.

39
Q

At-will Partnership

A

No agreement to remain partners (default)

40
Q

Term Partnership

A

Agreement to remain partners for amount of time or until completion of project

41
Q

When a partner dissociates from a partnership:

A

one of two statutory avenues is implicated:
Dissolution: Partnership ends, business is wound up, assets are sold off
The partnership continues in existence with the dissociated partner becoming entitled to a buyout of their partnership interest

42
Q

Dissolution

A

Two circumstances are of particular importance:
In general, when a partner dissociates by express will in an at-will partnership, the partnership is dissolved and its business must be wound up.
In a term partnership, if one partner dissociates wrongfully, or if a dissociation occurs because of a partner’s death or bankruptcy, dissolution and winding up of the partnership are required only if, within 90 days after the dissociation, at least one-half of the remaining partners agree to wind up the partnership.

43
Q

Buyout

A

Dissociating partner’s right to be paid value of partnership interest by continuing partners

44
Q

Liability After Dissolution

A

Remains liable for pre dissociation partnership obligations
And post-dissociation partnership obligations for 2 years
Protect self by letting creditors know directly or
Public statement of dissociation
In 90 days, constructive notice

45
Q

Apparent Authority of Dissociated Partner

A

A partnership can be bound by an act of a dissociated partner undertaken within two years after dissociation (assuming that dissolution has not occurred) if:
(1) the act would have bound the partnership before dissociation, and
(2) the other party to the transaction
(a) reasonably believed the dissociated partner was still a partner
(b) had notice of dissociation

46
Q

Dissolution General

A

When dissolution and winding up occur, partnership assets must be applied to the discharge of partnership liabilities. If the assets are insufficient, individual partners are required to contribute (“pay in”) in accordance with their loss shares. If there are excess assets, they are distributable to the partners in cash in accordance with their profit shares.

47
Q

Distribution of Partnership Assets After Dissolution

A

First, to creditors
Second, to reimburse partners for capital contributions
Third, profits or losses if any

48
Q

Partnership Continues After Dissolution Until

A

The partnership continues to exist after dissolution until the partnership is wound up.
Exam tip: look for partnerships failing to file documents that cut off apparent authority after a partner leaves

49
Q

Apparent Authority—Partner’s Power to Bind Partnership After Dissolution

A

Apparent authority exists even after dissolution
The partnership can protect itself by notifying creditors directly of the dissolution (effective immediately).
In addition, any partner who has not wrongfully dissociated may file a statement of dissolution with the secretary of state; all persons are deemed to have notice of a dissolution 90 days after such a notice is filed.

50
Q

Partners May Waive Dissolution and Continue the Business

A

Any time before the winding up of the partnership business is complete, the partners may decide to waive the dissolution and continue the partnership by unanimous vote of the partners who have not wrongfully dissolved.

51
Q

Limited Partnership

A

Partnership with at least one limited member

Formed by:
A certificate of limited partnership must be filed with the secretary of state
Records Office
Agent for Service of Process
Name

52
Q

Certificate of limited partnership

A

must be filed with the secretary of state

Needs:
(1) the name of the partnership,
(2) the names and addresses of the agent for service of process, and
(3) the names and addresses of each general partner

53
Q

Records Office for Limited Partnership

A

A limited partnership must maintain in its state of organization an office with records of the certificate, any partnership agreements, and the partnership’s tax returns for the three most recent years.

54
Q

Agent for Service of Process for Limited Partnership

A

A limited partnership must maintain in the state an agent for the service of process.

55
Q

Name Requirement for Limited Partnership

A

Name must contain “limited partnership” or LP
Must alert public to limited liability nature of the business

56
Q

Partnership Agreement

A

The real detail on the operation and governance of a LP is typically found in a partnership agreement. It can be written, oral, or implied.

57
Q

Management by General partners

A

Each general partner has equal rights in the management and conduct of the LP’s activities.

Generally, any matter relating to the limited partnership’s ordinary business activities may be exclusively decided by the general partner or, if there is more than one general partner, by a majority of the general partners.

58
Q

Management by Limited Partners

A

Usually no management rights but financial rights
That said, unless otherwise agreed, the vote of all partners (general and limited) is necessary for certain extraordinary activities

59
Q

Financial Rights in Limited Partnership

A

The Uniform Limited Partnership Act’s (U.L.P.A.’s) provisions for distributions are very similar to the distribution provisions for corporations. Unless otherwise agreed, distributions from an LP are made on the basis of the partners’ contributions

60
Q

Liability in Limited Partnership

A

General partners liable
Limited partners have limited liability
Only lose value of investments
Always liable for own torts

61
Q

Fiduciary Duties in Limited Partnership

A

Limited partners have no fiduciary duties
No management power

62
Q

Limited Liability Partnership

A

General partnership where all partners have limited liability
Limited Liability Limited Partnership: limited partnership rules but everyone has limited liability

Formation:
File a statement of qualification with the secretary of state
Name
Liability

63
Q

Statement of qualification for LLP

A

Requires:
Name and address of partnership
Statement partnership wants to be an LLP
A deferred effective date, if any.

When filed, become LLP or day in statement

64
Q

Name for LLP

A

The name of a limited liability partnership must end with the words “Registered Limited Liability Partnership” or “Limited Liability Partnership” or one of the abbreviations “L.L.P.,” “LLP,” “R.L.L.P.,” or “RLLP.”

65
Q

Liability for LLP

A

A partner in an LLP is not personally liable (directly, indirectly, or by way of contribution) for the obligations of the LLP, whether arising in tort, contract, or otherwise

If partnership assets are insufficient to indemnify them for an obligation they incurred on behalf of the LLP, they forfeit the right to receive contributions from other partners in exchange for being relieved of the obligation to contribute to their personal liability.
Remember, no liability for co-partner torts but look to see if engaged in it

66
Q

LLCs

A

Limited liability company
Hybrid of corporation and partnership where owners have limited liability and partnership tax treatment
NOT corporation or partnership, something separate

67
Q

Members

A

Name for owners of an LLC

68
Q

Formation of an LLC

A

Certificate of LLC Filing that must be made to form

69
Q

Certificate of LLC Filing

A

Needs:
(1) the name of the LLC,
(2) address of the LLC
(3) the names and addresses of the agent for service of process

70
Q

Name for LLC

A

Needs LLC in it

71
Q

Operating agreement

A

Private doc for how business runs

72
Q

Management for LLC

A

All of the members
Or can have it “manager managed”

Member managed: members manage it themselves

Manager managed: LLC where managers, who may or may not be members, handle management

73
Q

Voting for LLC

A

Manager vote for regular decision
Unanimous for extraordinary

74
Q

Finances for LLC

A

Profits and losses split based on contribution

75
Q

Liability for LLC

A

Members not personally liable for LLC

76
Q

Fiduciary Duties for LLC

A

Always with those who have management power

77
Q

Duty of Care for LLC

A

Members (or managers if manager-managed) must act with the care that a person in a like position would exercise under similar circumstances, in a manner reasonably believed to be in the best interests of the LLC
BJR exists

78
Q

Duty of Loyalty for LLC

A

No conflicts of interest

79
Q

Transferability for LLC

A

Same as partnership: financial rights can be transferred, management cannot

80
Q

Dissociation of LLC

A

A person has the power to dissociate as a member of an LLC at any time, rightfully or wrongfully, by expressly withdrawing as a member. Generally, the events that cause dissociation of a partner in a partnership will also cause dissociation of a member of an LLC. A wrongfully dissociating member may be liable to the LLC for damages

81
Q

Dissolution of LLC

A

An LLC will be dissolved when any of the following events occurs:
(1) an event or circumstance that the operating agreement states causes dissolution;
(2) the consent of all the members; or
(3) the passage of 90 consecutive days during which the LLC has no members

82
Q

Judicial Dissolution of LLC

A

Court may grant dissolution if:
The conduct of all or substantially all of the LLC’s activities is unlawful.
It is not reasonably practicable to carry on the company’s activities in conformity with the certificate of organization and the operating agreement.
The controlling members have acted, are acting, or will act in a manner that is illegal or fraudulent.
The controlling members have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the member applying for dissolution.

83
Q

Taxation for LLC

A

Partnerships and LLCs are taxed on a “pass-through” basis.
There is no entity-level tax; instead, business income is passed-through to the owners and reported on the owners’ individual tax returns (regardless of whether that business income is actually distributed to the partners).

By contrast, a corporation is subject to “double taxation.” The corporation pays taxes on its income, and the shareholders pay taxes on that income again when and if it is distributed to them. In today’s tax climate, pass-through treatment usually results in less taxes paid.

84
Q

Pass-through taxation

A

Business entity does not pay taxes as an entity–instead, owners pay tax
Still must declare income even if not passed out through dividends

85
Q

Conclusion on LLCs

A

LLPs and LLCs are generally the best vehicles for closely held businesses. They protect all of the owners from liability for the obligations of the business; they allow the owners to contract around almost all of the statutory provisions (so that the business can be run as the owners desire); they allow all of the owners to participate in the management of the business; and they provide pass-through income tax treatment.

Bar Prep (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions