Agency and Partnership Flashcards
Agency
The fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on his control and subject to his control, and consent by the other to act.
Requirements for Agency to be Established
- Consent
- on behalf of
- Control
Actual Authority
Actual authority is authority that the agent recently thinks she possesses based on the principal’s dealings with her. May be express or implied.
Express Actual Authority
Authority conveyed by the principal in words (oral or written)
Implied Authority
Authority the agent reasonably believes she has as a result of the principal’s actions.
Termination of Actual Authority
Authority will be revoked:
- after a specified time or event or after a reasonable time;
- by change of circumstances;
- by a breach of the agent’s fiduciary duty;
- by a unilateral act of either the principal or the agent; or
- by death or incapacity of the principal or the agent.
Apparent Authority
Apparent Authority exists when the principal “holds out” another as possessing authority and a third party is reasonably led to believe the authority exists.
Ratification Requirements
- the principal must have knowledge or all material facts regarding the contract;
- the principal must accept the entire transaction. The principal cannot merely ratify a portion of the transaction;
- Ratification cannot be used to alter the rights of intervening parties.
Principal liability on a Contract
If actual authority, apparent authority, or ratification is present, the principal is liable on the contract and the agent is not.
Agent’s Duties to the Principal
An agent is a fiduciary of its principal, and owes corresponding fiduciary duties to its principals.
- Duty of Care
- Duty of Loyalty
Remedies for Breach of Fiduciary Duty
The principal may sue for damages as well as disgorgement of the profits made by the agent.
Principal’s Duties to an Agent
Not Fiduciary in nature
The principal has a duty to indemnify the agent.
Master (Employer)
A principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in performance of the service.
Servant (Employee)
A servant is an agent so employed y a master.
Independent Contractor
An independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking.
Servent v. Independent Contractor
In general, if a person is subject to control of another as to the means used to achieve a particular result, he is a servant. By contrast, if a person is subject to the control of another as to his results only, he is an independent contractor.
Detour
Minor deviation from the employer’s directions- still within scope of employment
Frolic
A substantial deviation from the employer’s directions is usually outside of the scope of employment
General Partnership
A partnership is formed as soon as two or more persons associate to carry on as co-owners a business for profit, regardless of whether the parties subjectively intent to form a partnership. No state filing or other formalities are required.
Voting in a General partnership
Unless otherwise agreed, all partners have equal rights in the management of the business and equal votes. Decisions regarding matters within the ordinary course of the partnership business require a majority vote of the partners. Matters outside of the ordinary course of business require the consent of all partners.
Sharing Profits and Losses in General Partnership
Unless otherwise agreed, profits are shared equally among the partners. Unless agreed, loses are shared in the same manner as profits.
Liability of Partnership in Contract
A partnership is liable for contracts entered into on its own behalf by partners with actual or apparent authority.
Actual Authority in Partnership
Can be created by the partnership agreement, by requisite vote of the partners or by filing a statement of partnership authority with the Secretary of State.
Apparent Authority in Partnership
A partner is an agent of the partnership, and a partner has apparent authority to bind the partnership to transactions within the ordinary course of the partnership’s business.
Liability of Partners in General Partnership
Each partner is jointly and severally liable for all obligations of the partnership, but the plaintiff must first exhaust partnership resources before seeking to collect from an individual partner’s assets.
Duties of Partners in General Partnerships
Partners in general partnerships owe fiduciary duties of care and loyalty to each other and to the partnership. they also owe a statutory duty of disclosure
Duty of Disclosure
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.
Pick your Partner Rule
Unless otherwise agreed, a partner cannot unilaterally transfer his management rights and thereby make the transferee a “partner”. the default rule for the admission of a new partner is that it requires a unanimous vote of the existing partners.
Dissociation
When a partner dissociates from a partnership, the partner withdraws or “bows out” of the partnership.
Events of Dissociation
- a partner giving notice to the partnership of his desire to withdraw;
- a partner’s expulsion, death or bankruptcy;
- an agreed upon event; and
- the appointment of a receiver for a partner
At-Will Partnership
One where the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking. It is the default form of partnership.
Term Partnership
a partnership where the partners have agreed, explicitly or implicitly, to remain partners for a definite term or until the completion of a particular undertaking.
