Agency & Partnership Flashcards
Master agency and partnership law for the California bar.
Liability of principal for contracts entered into by agent - bases of liability
Actual authority: reasonable A would believe authority based on P’s words/conduct
Apparent authority: reasonable 3P would believe authority based on P’s words/conduct
Ratification: P has knowledge of all material facts of K
Liability of principal for contracts entered into by agent - bases of liability - actual authority
Actual authority: reasonable A would believe authority based on P’s words/conduct
- Express
- Implied (including implied from acquiescence)
Termination
- After specified time or event, or after a reasonable time if neither specified
- By a change of circumstances (e.g., subject matter of agency destroyed)
- By breach of A’s fiduciary duty
- By unilateral act of either P or A
- By death or incapacity of P or A
Liability of principal for contracts entered into by agent - bases of liability - apparent authority
Apparent authority: reasonable 3P would believe authority based on P’s words/conduct; unilateral A representations do NOT create
- From power of position
- Lingering apparent authority
Termination
- Difficult; may have to tell 3Ps no authority
Liability of principal for contracts entered into by agent - bases of liability - ratification
Ratification: P has knowledge of all material facts of K; accepts entire transaction; does not alter rights of 3Ps
- Express: oral or written affirmation of K (e.g., company resolution)
- Implied: P accepts benefits of K
Liability of principal for contracts entered into by agent - rules
Actual authority, apparent authority, or ratification:
P liable, A not
P undisclosed (at time of A's transaction, 3P has no notice that A is acting for a P): P and A both liable
P partially disclosed (at time of A’s transaction, 3P has notice that A is acting for a P, but not P’s ID):
P and A both liable
Principal and agent - duties
Agent’s duties to principal:
Fiduciary duties of loyalty, care, obedience
Principal’s duties to agent:
Not fiduciary; indemnity and compensation
Liability of principal for torts of agent - general rule
Master liable for torts committed by servant w/in scope of employment; master and servant jointly and severally liable
Also look for assent by and benefit to master
Principal generally not liable for torts committed by independent contractor in connection w/ work
Liability of principal for torts of agent - employee/servant vs. independent contractor
Control over means: employee/servant
Control over results: independent contractor
Detailed factors:
- Skill required; ownership of tools and facilities; indefinite vs. short-term employment; time-based vs. task-based compensation; act in furtherance of P’s business vs. other reason; distinct business vs. employment
Liability of principal for torts of agent - scope of employment
- Was conduct “of the kind” that A hired to perform?
- Did the tort occur “on the job” (i.e., within the time and space limits of the employment)?
- A minor deviation: detour
- Substantial deviation: frolic - Was the conduct actuated at least in part to benefit the principal?
Partnership - definition
Two or more persons associate to carry on as co-owners a business for profit, regardless of whether the parties subjectively intend to form a partnership. No state filing or other formalities are required.
Partnership - formation - analysis
Most important factor: sharing of profits
Person who shares profits is presumptively partner unless received in payment: (1) of a debt; (2) as wages or other compensation; (3) as rent; or (4) as interest on a loan.
Partnership - voting
Unless otherwise agreed, all Ps have equal rights in management of 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.
Partnership - profits and compensation
Unless otherwise agreed, profits are shared equally, and losses are shared in the same manner as profits
Unless otherwise agreed, Ps get no compensation (w/ exception of reasonable comp for services rendered in winding up partnership)
Partnership - liability of the partnership
Tort: liable for loss or injury as a result of tortious conduct of P or EE acting in the ordinary course of business of the partnership or with authority of the partnership
Contract: liable for Ks entered into on its behalf by Ps with actual or apparent authority
Partnership - actual and apparent authority
Actual: by vote or by filing statement with SoS
- Grants and restrictions in the statement on Ps’ authority to transfer partnership real property are binding on 3Ps if recorded in county where property located; for all other transactions only grants effective as to 3Ps
Apparent: P has apparent authority to bind partnership to transactions w/in ordinary course of partnership’s business (and for two years after dissociation unless creditors notified or stmt filed, which goes into effect after 90 days)
Partnership - liability of partners
Joint and several, but must exhaust p’ship resources before seeking to collect from individual P; P who pays p’ship obligation entitled to indemnity from p’ship or pro rata contribution from other Ps
Newly admitted P not personally liable for p’ship obligations that arose before his admission
Disassociated P personally liable for pre-dissociation p’ship obligations; may also be liable for post-dissociation liabilities incurred w/in two years (can protect himself by notifying creditors of his dissociation or by filing a public statement, which becomes effective 90 days after filing)
Partnership - duties of partners
Fiduciary: loyalty, care
Statutory: disclosure
- W/o demand: info concerning p’ship’s business and affairs reasonably required for proper exercise of P’s rights and duties
- On demand: other info concerning p’ship’s business and affairs, unless unreasonable/improper
Partnership - property
Partnership property if:
- Acquired in p’ship’s name
- Apparent from document that P is acting for a p’ship (e.g., mentions p’ship or says he is a P)
Presumed partnership property if:
- Partnership funds are used.
Presumed partner’s property if:
- Acquired in P’s name w/o p’ship funds and no sign that he is acting for a p’ship
Partnership - ownership interest in partnership
- Management rights
- Cannot unilaterally transfer; default rule for admission of a new P is unanimous vote - Financial rights
- Can unilaterally transfer
Partnership - disassociation
Dissociation means withdrawal
P liable to p’ship for any damages caused by wrongful dissociation:
- Dissociation breaches express term in p’ship agreement
- P withdraws, is expelled, or becomes bankrupt before the end of term in term p’ship
Partnership - dissolution vs. buyout
Dissolution and winding up
- In at-will p’ship, P who dissociates by express will can compel.
- In term p’ship, if one P dissociates wrongfully, dies, or goes bankrupt, required only if, w/in 90 days 1/2 of remaining Ps vote to do so
Buyout
If P’s dissociation does not result in dissolution and winding up, P is entitled to receive buyout of his p’ship interest; if dissociation wrongful, buyout reduced by damages
Partnership - dissolution - winding up
Each level must be totally satisfied before beginning next level:
- Pay all creditors, outside and inside
- Repay all capital contributions paid by Ps
- Third, profits or losses, if any.
If assets insufficient, individual Ps required to contribute (“pay in”) based on loss shares
Partnership - dissolution - apparent authority
Ps retain apparent authority to bind p’ship to 3P on new business even after event requiring winding up
P’ship can protect itself by notifying creditors, and any P who has not wrongfully dissociated may file a public statement of dissolution (becomes effective 90 days after filing)
Partnership - other forms - LPs
- Must file certificate of limited p’ship with SoS
- LP is managed by general partner(s). Each GP has equal management rights, and majority vote required for ordinary business activities.
- Limited partners usually have no management rights unless granted, but can vote on extraordinary activities
Partnership - other forms - LPs - profits, liabilities, duties
- Distributions made in proportion to value of each P’s contribution
- GPs liable for p’ships obligations; LPs liable only up to value of investment
- GPs have fiduciary duties of regular Ps; LPs have no duties
Partnership - other forms - LLPs
- Must file stmt of qualification with SoS
- Partner in LLP not personally liable
- Other rules of general partnership apply
Partnership - other forms - LLCs
- Must file articles of organization with SoS
- Default is mgmt by all members, with profits distributed based on contributions
- Owe fiduciary duties of loyalty of care
