Agency and Partnerships

Question 1

What are three components of an agency relationship?

Answer 1

Assent, benefit, and control

No evidence in writing is necessary
No consideration is necessary

Question 2

Who cannot be a principal?

Answer 2

Minors and unincorporated associations

Question 3

What is actual express authority?

Answer 3

The principal creates authority by using words to convey authority to the agent
The agent must believe that he is doing what the principal wants him to do. The belief must be reasonable. Actual express authority terminate immediately upon the death of the agent, and when the agent has actual knowledge of the principal’s death

Question 4

What is actual implied authority?

Answer 4

A principal creates authority by using words to convey to the agent to take whatever steps are necessary for to achieve the principal’s objectives
The agent has actual implied authority to act within general business customer or trade usage

Question 5

What is apparent authority?

Answer 5

The principal creates apparent authority by words that cause the third-party to reasonably believe that the principal consents to have tasks done on the principal’s behalf by the agent

Question 6

What is ratification?

Answer 6

Ratification requires that the principal has knowledge of the material facts of the contract, and the principal then accepts the contract’s benefits

Question 7

What is true of a principal who is disclosed?

Answer 7

The third-party knows the agent is acting for the principal and the identity of the principal. In these scenarios, the parties to the contract are the third-party and the principal.

Question 8

What is true of a principal who is partially disclosed?

Answer 8

The third-party knows the agent is acting for a principal, but doesn’t know who the principal is. In these scenarios, the parties to the contract other third-party, the principal, and the agent.

Question 9

What is true of a principal who is undisclosed?

Answer 9

The third-party knows neither that the agency is working for a principal nor the identity of the principal. In the scenario, the parties to the contract are the third-party and the agent.
Once the third-party discovers the existence of the principal, the election of remedies doctrine requires the third-party to choose to hold liable either the principle or the agent

Question 10

What are the exceptions to the fact that the principal does not have vicarious liability for torts committed by an independent contractor?

Answer 10

The task is inherently dangerous, the principal was negligent in hiring the independent contractor, the principal retains control over certain tasks and the tort occurs within those tasks.

Question 11

What are considerations for scope of employment?

Answer 11

Did the agent intend to benefit the principal? Was the agent’s conduct of the kind that the agent was hired to perform? Did the tort occur on the job?

Question 12

What are exceptions to the fact that the principal is not vicariously liable for intentional torts?

Answer 12

The conduct occurred within the general space and time limits of employment.
The agent was motivated in some part to benefit the principal.
The act is of a kind that the agent was hired to perform.

Question 13

What are three duties that all agents owe to principals?

Answer 13

Duty to exercise reasonable care.
Duty to obey reasonable instructions.
Duty of loyalty.

Question 14

What is the duty of loyalty?

Answer 14

The agent cannot usurp business opportunities.
The agent cannot take in secrets profits.
The agent cannot compete directly with the principal.

Question 15

What is a partnership?

Answer 15

It is an association of two or more persons to carry on a for-profit business as co-owners.

Question 16

What are the duties that partners have to the partnership?

Answer 16

Duty of loyalty, to not compete with the partnership business or advance of interest that is adverse to the partnership.
Duty of care, tonight engage in grossly negligent or knowing violations of the law.

Question 17

What is an exception to the duty of loyalty?

Answer 17

Safe harbor, if a partner makes full disclosure of all material facts and certain percentage of other partners agree or ratify

Question 18

Who does the duty of loyalty and care apply to?

Answer 18

Partners, not former partners or prospective partners

Question 19

What is the allocation of profits and losses if there is no partnership agreement in place?

Answer 19

Profits are divided equally and losses will follow profits

Question 20

Do partners have a right to demand a distribution?

Answer 20

No unless there’s agreement in a partnership agreement

Question 21

What is the default rule regarding the right to transfer partnership interests?

Answer 21

A partner does have the right to transfer partnership interest to third-party, this right maybe restricted to require a majority rule of the partners

Question 22

What is the default rule regarding the introduction of a new partner?

Answer 22

All existing partners need to consent

Question 23

What is the default rule regarding rights to management of the partnership?

Answer 23

Every partner has equal rights to the management

Question 24

What is the number of votes required for extraordinary business?

Answer 24

A vote of all of the partners

Question 25

What is the level of liabilities that partners have in a partnership?

Answer 25

A partner is personally jointly and severally liable for all partnership obligations

Question 26

What is an L. L. P.?

Answer 26

A partnership in which a partner’s personal liability is eliminated

Question 27

What is the level of liability that limited partners have?

Answer 27

Limited partners are not personally liable for the obligations of the LLP. Limited partners are personally responsible for own personal misconduct

Question 28

What is an LP?

Answer 28

A partnership formed by two or more persons that has a least one general partner and limited partners

Question 29

What is the liability of a limited partner in an LP?

Answer 29

A limited partner is not personally liable for the obligations of the partnership unless he serves as a general partner or participate in the control of the partnership

Question 30

What is the liability of a general partner in at LP?

Answer 30

They are personally liable to third parties for obligations of the partnership. Many general partners are corporations.

Question 31

When does an agent have the power to bind the principal to a contract?

Answer 31

There the agent has actual authority, express or implied
The agent has apparent authority
The principal is estopped from denying the agent’s authority (ratification)