Agency and Partnerships Flashcards

1
Q

What do you need to create an Agency Relationship

A

ABC!
ASSENT! (that agent will work on principal’s behalf)
BENEFIT! (to the principal)
CONTROL! (agent agrees to work subject to principal’s control)

(no consideration or evidence in writing necessary)

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2
Q

Factors indicating employer/employee relationship:

A

i) giving the employees tools to work at the workplace,
ii) paying employees on a structured pay period, and
iii) directing the ways in which employees should finish and perform the tasks.

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3
Q

What entity can’t be a principal

A

unincorporated association - they lack sufficient legal capacity

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4
Q

Who can be an agent?

A

anyone w/ minimal legal capacity (includes minors)

To have minimal capacity, an agent must be able to:

  • Assent to the agency relationship;
  • Perform the tasks on behalf of the principal; and
  • Be subject to the principal’s control.
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5
Q

Who can be a principal?

A

anyone w/ legal capacity

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6
Q

Characteristics of an independent contractor:

A
  • Maintain a high level of independence
  • Free to work for other people
  • Paid on a fixed fee
  • Has his own tools
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7
Q

Who can terminate an agency relationship?

A

Either agent or principal can unilaterally

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8
Q

Types of legal authority for Agents

A
  1. actual express authority
  2. actual implied authority
  3. apparent authority
  4. ratification
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9
Q

How to Create Actual Express Authority

A

The principal creates actual express authority by using written or spoken words to convey authority to the agent.

  • Subjective intent: The agent must believe that he is doing what the principal wants him to do.
  • Objective intent: The belief must be reasonable.

Upon the death of the principal, actual express authority terminates when the agent has actual knowledge of the principal’s death. Actual express authority terminates immediately upon the death of the agent.

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10
Q

How to Create Actual Implied Authority

A

A principal creates actual implied authority by using words, written or spoken, or other conduct to convey authority to the agent to take whatever steps are necessary to achieve the principal’s objectives.

The agent has actual implied authority (absent express instructions to the contrary) to act within general business custom or general trade usage

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11
Q

How to Create Apparent Authority

A

The principal creates apparent authority by words, written or spoken, that cause the 3rd Party to reasonably believe that the principal consents to have acts done on the principal’s behalf by the agent.

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12
Q

How to Create Authority through Ratification

A

There’s no pre-act communication to consider.

Ratification requires that

(i) the principal has knowledge of all material facts of the K AND
(ii) the principal then accepts the K’s benefits

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13
Q

Types of Principals (w/r/t disclosure) and the resultant parties to the K

A

Disclosed: 3rd Party Knows (i) agent is acting for the principal, and (ii) the ID of the principal
–> Parties to K: 3rd party and Principal

Partially Disclosed: 3rd Party knows (i) agent is acting for a principal, but (ii) doesn’t know who the principal is
–> Parties to K: 3rd Party, Principal, and Agent

Undisclosed: 3rd Party knows neither (i) that the agent is working for a principal, nor (ii) the ID of the principal
–> Parties to K: 3rd Party and Agent

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14
Q

Reqs for Principal’s liability for Agent’s actions under Respondeat Superior

A

1) The principal has sufficient CONTROL such that the
agency relationship is employer-employee; and
2) The tort committed by the agent was committed while the agent was acting w/in the SCOPE of that relationship.

Control: A principal who controls, or has the right to control, the physical conduct (manner and means) of the agent’s performance of work is in the higher category of employer-employee status.

A principal does NOT have vicarious liability for torts committed by an independent contractor.

  • EXCEPTIONS:
    1. task in inherently dangerous
    2. principal was negligent in hiring the independent contractor.
    3. The principal retains control over certain tasks and the tort occurs within those tasks.
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15
Q

Factors determining scope of employment

A
  1. Did the agent intend to benefit the principal?
  2. Was the agent’s conduct of the kind that the agent was hired to perform?
  3. Did the tort occur “on the job?”
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16
Q

Exceptions in which a principal may be held vicariously liable for intentional torts:

A

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

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17
Q

duties that all agents owe to principals—even if the agent is unpaid:

A

1) Duty to exercise reasonable care
2) Duty to obey reasonable instructions
3) Duty of loyalty
a. cannot take in secret profits
b. cannot usurp business opportunities
c. cannot compete directly w/ the principal

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18
Q

Intent and formation of partnerships

A

No need to have specific intent to form a partnership, but must meet other requirements

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19
Q

Formation of Partnerships

A

association of 2 or more persons to carry on a for profit business as co-owners

  • Co-Ownership: When two or more persons share profits, there is a presumption of a partnership relationship
  • Sharing Control: Ask, has there been a sharing of control?

These are NOT agreements to share profits:

  • Payment of a debt
  • Interest payments
  • Rent
  • Wages
  • Goodwill
20
Q

Consequences of a Partnership

A
  1. Separate Legal Entity (separate and apart from each individual partner)
  2. Partnership Liability (all partners are personally liable for partnership obligations)
  3. No Entity-Level Taxation (unlike Corps.)
21
Q

Partnership Agreements

A

o There need not always be a written partnership agreement.
o If there is no partnership agreement, then state law will govern the partnership with default
rules.
o However, when there is a written partnership agreement, the agreement controls
o Exception: When the state law is mandatory

22
Q

What state laws are mandatory upon partnerships?

A
  1. liability to 3rd parties
  2. can’t deny partners access to books and records
  3. fiduciary duties can’t be limited
23
Q

Partners’ duties to the partnership

A
  1. Duty of Loyalty: must not…
    …compete w/ a partnership
    …advance an interest that is adverse to the partnership
    …usurp a partnership opportunity
    CAN limit extent of duty, or use ratification as safe-harbor
  2. Duty of Care: must not…
    …Engage in grossly negligent or reckless conduct
    …Engage in intentional misconduct
    …Engage in a knowing violations of the law
24
Q

Timing of partners’ duties to the partnership

A

Duties of loyalty and care apply only to partners, not to former or prospective partners

25
Q

how are profits and losses divided

A

Division of profits and losses is generally dictated or determined by the partnership agreement

When there is no partnership agreement regarding division of profits and losses, profits are divided equally and losses follow profits.

26
Q

partner’s rights w/r/t distributions

A

Default Rule: Partners do not have the right to distributions

Can agree to in advance in the partnership agreement

27
Q

partner’s rights w/r/t transfer of partnership interests

A

Default Rule: partners have the right to transfer partnership interests to 3rd parties

Partners may still agree to restrict transfer to
require a majority vote of the partners.

28
Q

default rule for accepting new partners into partnership

A

All existing partners must consent to new partner

29
Q

managing and governing partnerships

A

default rule: equal rights to management and government

Can be changed by agreement; a common division is to reflect the partners’ capital contributions

30
Q

approval of business matters in partnership

A

Ordinary business: requires a vote of majority of partners

Extraordinary Business: requires a vote of all partners

31
Q

acts that create involuntary dissociation

A

1) There may be an event triggered in the parnership agreement
2) They can be expelled pursuant to the partnership agreement.
3) It is illegal for a partnership to carry on business with that partner.
4) A court order that a partner must be dissociated.
5) A partner goes bankrupt
6) A partner dies
7) A partner has become incapacitated
8) One of the entities of the partnership dissolves.

32
Q

restrictions on partner withdrawal

A

Can’t prevent a partner from withdrawing, but can require certain restrictions on withdrawal

33
Q

what must partnership do after a partner w/draws

A

If the partnership continues, it must buy out dissociated partner’s interest

34
Q

steps in dissolution of partnership

A
  1. dissolution

2. wind up

35
Q

An open-ended partnership with
no fixed termination to time or undertaking

Generally, dissolved when any partner chooses to dissociate

A

Partnership at Will

36
Q

Means of Dissolution of Partnership

A

1) Any dissolving event set forth in the partnership agreement
2) Any event that makes it unlawful continue if not cured w/in 90 days
3) judicial determination (i.e. that purposes are frustrated

37
Q

partnership that may be dissolved by end of term or when all partners agree

A

Partnership for a Term or Undertaking

38
Q

who may wind up

A

Any partner that has not been wrongfully dissociated
Legal representative of the last surviving partner

Any partner, legal representative, or transferee may seek

39
Q

Statement of Dissolution

A

a filing that gives 3rd parties notice that the partnership has been dissolved after 90 days

40
Q

What gives 3rd parties notice that a partnership has been dissolved?

A

Statement of Dissolution

41
Q

forming LLP

A

must file w/ state

to change from normal partnership, must have same vote as any amend. to partnership (usually unanimous)

name must always end with either LLP or R(registered)LLP

42
Q

Terminating LLP status

A

partners can voluntarily cancel or state can revoke

43
Q

what must certificate filed to state to form LLP contain?

A
  • Name of limited partnership
  • In-state address
  • Name of agents
  • Names and addresses of general partners
  • Statement of duration of partnership
  • Signed by general partner
44
Q

when can a limited partner be personally liable for the obligations of the partnership

A

when participates in the control of the partnership

Can do the following w/o running the business:
-Be an officer, a director, or a shareholder of the general partner
-consult or advise general partner on partnership affairs
-Act as a surity the partnership
-Request to attend meetings the
partnership
-wind up the partnership
-propose or approve of partnership matters

45
Q

w/drawal of limited partner

A

must give 6 months’ notice