Agency/Partnership Flashcards
Agency relationship
An agency relationship is created when one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement. A principal is contractually bound to the acts of the agent if the agent acted with actual or apparent authority.
Actual authority
authority that the agent reasonably thinks he possesses based on the principal’s dealings with him. Actual authority can be express (contained within the agreement between the parties) or implied from the actions of the principal.
Apparent authority
arises when the principal holds out to the agent as having certain authority, causing third parties to reasonably believe the agent has such authority.
Partnership
A partnership is formed when two or more people associate to carry on as co-owners a business for profit. A person who receives a share of the profits from a business is presumed to be a partner.
Partnership agency
Each partner is an agent of the partnership for the purpose of its business. A partnership can be bound on a contract entered into by a partner with actual or apparent authority.
Actual authority is authority that a partner reasonably believes he has based on his communications with the partnership. Actual authority can take the form of express authority or implied authority through custom, necessity, or prior acquiescence.
The act of any partner apparently carrying on in the ordinary course of the partnership business or business of the kind carried out by the partnership will bind the partnership unless the partner had no authority to act for the partnership and the third party with whom the partner dealt knew that the partner lacked authority.
Actual authority to enter into transactions regarding matters within the ordinary course of business requires a majority vote of the partners, and actual authority to enter into matters outside the ordinary course of business requires unanimous consent of all partners.
Partnership liability
All partners are jointly and severally liable for all obligations of the partnership, which means that each partner is personally liable for the entire amount of such obligations. [Editor’s note: In jurisdictions that follow the Uniform Partnership Act (“U.P.A.”), partners
are only jointly liable for debts of the partnership.]
When a partner enters a contract he had no authority to enter on behalf of the partnership, the partnership is not bound by the contract.
Dissociation
a change in the relationship of the partners caused by any partner ceasing to be associated with the carrying on of the business. A partner is dissociated from the partnership upon notice of his express will to withdraw as a partner.
Dissolution
A partnership is dissolved and its business must be wound up when a partner in a partnership at will notifies the partnership of his intent to withdraw.
A partnership will be bound by a partner’s act after dissolution if the act is appropriate for winding up the partnership business. A partnership also will be bound by a partner’s postdissolution act—even an act that is not appropriate for winding up the partnership, such as entering into a contract to carry out new business— where the party with whom the partner dealt did not have notice of the dissolution.
at-will partnership
default when the partners did not agree that the partnership was to continue for any specific amount of time
whether a partner who pays the entire amount of a partnership debt may collect contribution from another partner
Each partner is jointly and severally liable for obligations of the partnership. [Editor’s note: In jurisdictions that follow the U.P.A., partners are only jointly liable for contract obligations.] Where one partner pays the whole of a partnership debt, she may require the other partner to contribute his pro rata share of the payment. In the absence of an agreement otherwise, partners share profits equally, and losses are split in the same ratio as profits.
“Peg, as agent for Acme, Inc., a corporation to be formed,”
While under Agency law such a signature would release an agent from liability on a contract that the agent entered into on behalf of a principal, BUT one may not be an agent of a nonexistent principal.
