Agency and Partnership Flashcards
Creation of agency relationship
Assent (Mutual) + Benefit + ControlWriting not required
Can a minor/incompetent be an agent?
Yes, but have limitations to form contracts
When is P liable for A’s action’s
When A acts with express actual authority, implied actual authority, or apparent authority.
Express: A reasonably believes, based on P’s oral or written words or conduct, that A is doing what P wants. P must give clear notice if P disagrees.
Implied: Not expressly authorized, but A reasonably believes, based on manifestations of P, that A’s actions are necessary to achieve P’s objectives. Can be based on business custom or P acquiescence.
Apparent: Reasonable reliance of a third party on A’s authority to act, based on… A’s title, past dealings btwn P and A, trade customs, relevant industry standards, P’s written statements of authority, benefit to P.
When does A’s authority terminate?
Upon notice to other party of renunciation;
A’s breach of fiduciary duty;
Consistent with terms of agreement;
Change of circumstances that should reasonably lead A to believe authority terminated;
Passage of reasonable period of time; or
After P’s death or loss of capacity, but only upon notice
P is estopped from denying P-A relationship when….
3d party was justifiably induced to make a detrimental change of position in reliance of belief in authority, and P did not take reasonable steps to avoid such change of position….
How does P ratify A’s action?
P may ratify an ultra vires transaction if P has legal capacity, has knowledge of material terms of the transaction, and accepts the benefit or timely assumes the burden of the transaction.
When is P vicariously liable for A’s acts in tort?
P is liable for A’s acts if such acts were w/in scope of employment.
- Intentional Torts are w/in S/E when w/in space and time limits of employment, done for employer’s benefit, and of the kind the employee was hired to perform
- Frolic v. Detour: Significant deviation from performing duty = frolic. Personal errand may be either frolic or detour.
- Apparent authority theory can support tort liability if 3d party reasonably believed A acted w/ actual authority bc of P’s manifestation
Can A delegate authority?
Default rule is no, not without express authorization
When is A liable in K?
Disclosed P: A not a party to K if 3d party knows of P’s existence and identityPartially Disclosed or Undisclosed P: A becomes party to K when 3d party only has notice of P’s existence, or has no notice at all.
Is 3d party liable to undisclosed P?
Yes, unless K expressly disclaimed such liability, or P’s existence fraudulently concealed
P’s Rights
Right to control A’s acts on P’s behalf
A’s Duties to P
Duty of care - A must follow P’s instructions and perform duties with reasonable care, diligence, and judgment;
Duty of loyalty: Avoid acts in A’s self-interest, do not usurp business opportunities or compete, do not take secret profits from transactions on P’s behalf;
Duty of accounting
P’s Duties to A
Duty of good faith and fair dealing:
Deal fairly in good faith per contract terms, warn A of risks to physical or financial harm, not harm A’s business reputation
Duty not to interfere:
P cannot interfere with A’s performance of dutiesDuty to indemnify:
P must indemnify A against pecuniary loss for matters w/in scope of A’s actual authority, but not for A’s negligence or otherwise wrongful conduct.
P remedies for A breach
Injunction, breach of K, tort, rescission, restitution, accounting, termination of relationship, forfeiture of compensation, disgorgement.
Partnership formation - requirements
A partnership is formed when
(1) Two or more persons or entities
(2) intend to carry on a for-profit business
(3) as co-owners.
Profit-sharing creates a presumption of partnership.
No writing required, unless can’t be completed w/in a year (Statute of Frauds)
Partner by Estoppel
A person may be treated as a partner if
(1) Purported P does not object to representation that he or she is a partner,
(2) 3d party reasonably relies on that representation, and
(3) 3d party suffers damages as a result.
Are partners personally liable for partnership obligations?
Yes, unless limited partners
Can partner bind partnership as an agent?
Yes
What are partner’s duties?
Duty of loyalty: Partner cannot advance an interest adverse to partnership, usurp partnership opportunities, or compete with partnership. Partnership Agreement can limit this duty, but not eliminate it. Ratification possible.
Duty of care: Partner must act with reasonable care, diligence, and skill. No grossly negligent or reckless conduct. Partnership Agreement CANNOT limit this duty.
Duty of good faith and fair dealing: Partnership Agreement can prescribe reasonable standards.
When do partner’s duties to partnership end?
Dissociation or dissolution
How are profits and losses shared?
Profits: Absent contrary agreement, each partner is entitled to an equal share of profits.
Losses: Absent contrary agreement, losses follow profits.
Partner’s account
Contains partner’s contributions plus partner’s share of profits, less distributions, losses, and liabilities
Can partner demand a distribution?
No, but partner can demand placement of profit share in partner’s account
Can partner transfer all or part of a partnership’s distribution interest to third party?
Absent agreement to the contrary, a partner can transfer all or part of P interest.
