Agency and Partnership Flashcards
When and how is a partnership formed?
When 2 or more co-owners carry-on a business for profit.
What are the two types of partnerships?
(1) At-Will: There is no agreement to continue. A partner may dissociate rightfully at any time.
(2) Term: Lasts for a specified duration or the term necessary to complete a specified project, task, or goal.
When does a dissociation from a partnership occur?
Dissociation occurs when a partner no longer associates with the partnership and is no longer involved with the carrying on of business.
When does dissociation from a partnership occur?
Dissociation occurs when a partner expressly communicates their intent to withdraw as a partner.
What is wrongful dissociation?
Wrongful Dissociation occurs: When partner either
(1) withdraws before the term or the specific time set for the duration of the partnership or before the project that is the object of the partnership has been completed OR
(2) breaches a partnership agreement.
What happens because of a partner disassociating?
When a partner of an at-will partnership disassociates, upon such notice, the at-will partnership must be dissolved and wound up.
In what event does actual authority to enter into contracts relating to matters outside the course of ordinary business exist?
For actual authority to exist to enter into contracts outside the normal course of business, there must unanimously consent from all the partners.
What is an agency agreement?
Agency agreement occurs when both the principal and the agent agree (manifest intent) that the agent may act on behalf of the principle.
What is actual authority?
Actual authority is the authority an agent reasonably believes they have based on communications and dealings with the principal. Actual authority can be express or implied.
What is implied authority?
Implied actual authority can occur when, for example, the principal gives the agent a title of “buyer.” It would be implied that the agent is allowed to buy items for the principal.
What is apparent authority?
Apparent authority is the authority a 3rd party reasonably believes is vested in the agent based on the “holding out” of the agent by the principal.
What procedure must a creditor take to go after the individual partners personally?
(1) The creditor must first assert a claim against the partnership.
(2) If the creditor cannot recover from the partnership, they may then pursue the partners individually. Then, the creditor must secure a judgment against the partnership AND the partners.
What is the assumption when someone receives profits from the partnership?
The assumption is that the person receiving profits is a partner, but this assumption can be rebutted.
For example, if someone is only receiving profits to repay a loan from the partnership, the assumption is rebutted.
Is each partner an agent of the partnership?
Yes, each partner is an agent of the partnership unless the partnership agreement specifies otherwise.
When will a partnership be bound by a post dissolution contract? What is the exception?
Post dissolution contracts entered into by a partnership, or a member of a partnership are binding only when the contract is appropriate for the purposes of winding up the business.
Exception: The partnership may still be bound by a post dissolution contract, even when not appropriate for winding up, if and only if, the contract is (1) with another party who has no notice of the dissolution, and (2) the partnership would have been bound by the same contract prior to dissolution.