Agency & Partnership Flashcards
How is an agency relationship created?
Agency is the fiducuriary relationship that exists between an agent and a principal where the agent acts on the principal’s behalf and subject to their control.
Created when (1) parties voluntarily consent to enter into an agency relatinship and (2) The agent is subject to the principals control. (amount of control may be limited).
How is an agency relationship termintated?
By either the parties or operation of law.
By the parties if (1) agent manifests to the other the desire to cease the agency relationship(effective on notice (2)Express terms expire (3) or Purpose of relatinship is fulfilled.
By law - (1) One dies (2) Loses capacity (3) agent materially breaches a fiducuary duty owed to the principal.
How may an agent bind the principal?
If acting with either (1) actual or (2) apparent authority.
Actual authority - An agent acts with actual autority when, at the time of taking action that has legal consequenses for the principal, the agent reasonably believes, in accordance with the principals manifestations to the agent, that the principal wishes him to act. Actual autority can be express or implied.
Actual implied - The agent believes, based on a reasonable interpretation of P’s words and conduct, that the principal wishes him to act on his behalf. (a) incidental authority
Apparent authority - An agent acts with apparent authority when - (1) the principal holds the agent out as having authority to act on P’s behalf AND (2) the principals conduct, when reasonably interpteted, causes a third party to rely on the agent’s apperance of authority when dealing with the agent.
However, even if the above are lacking, the inherent agency power allows court to hold P liable whn (1) agency relationship exists (2) totality of the circumstances wiegh against forcing third party to absorb damages. - Usually occurs in undisclosed principal situation.
When may a prinicpal have tort liablity premised on the actions of his agent?
(1) Employer - employee relatiunoship exists AND (2) Act occurs within the scope of employment.
(1) a - What is the extent of control exercised by P?
(2) a - Was the conduct a function for which the empoloyee was hired to perform, within the employers authorized time and space limit, conducted to serve the employer and foreseeable?
Moreover, employer liable for detour not frolic - when looking at this, look at the time and georpgraphic distance. Even if personal to agent, still liable if incidental.
Not liable for intentional torts unless - authorized, force is within scope of employees work.
How do you determine whether a individual is an employee or IC for Respondent superior purposes?
Principal’s amount of control is the key factor. (1) Nature of work (2) who supplies the tools (3) method of payment (4) length of employment (5) how do they classify relationship?
P not liable unless - abnormally dangerous activity, acts with apparent authority, makes misreprepsenations to benefit P.
When an agent acts without authority, how can P still be liable on a contract?
Ratification by P. (1) knowledge of material facts (2) Agent purported to act on P’s behalf and (3) P affirmed agents conduct.
What are an agent’s fiduciary duties?
(1) Duty of care
(2) Duty of loyalty - The agent must act loyally for the principals sole benefit
(3) Duty of obedience - Act within the agent’s actual authority and to follow the principal’s instructions.
How is a general partnership formed?
(1) Two or more persons (2) Associate as co - owners (3) to carry on business for profit. - Intent is irrelevant.
Courts will look at - Sharing of profits, shared control of property, Sharing of control, capex, and labor.
What is a limited partnership and how is it created?
Conists of one or more general parnters and one or more limited partners, General partners remain personally, jointly and severally liable for all debts of the limited parntership, while limited partners are only liable for debts ONLY to the extent of their investment.
Written certificated of LP is executed and filed with SOS. The certificate must substantially comply with the following requirements. (1) SIgnature of each general partner (2) name of the limited parntership AND (3) Name, street and mailing address of each general partner, designated office, intital agent for SOP. NOTE - if they fail here, they will likely be treated as a general parterhip.
What is an LLP?
Limits a partners liabliity for professional malpractice that is commited by another partner. Remains liable for if (1) commited the malpractice himself or was directly involved in the activity that resulted in the malpractice OR (2) Supervices or directed the person who commited the malpractice.
Any partnership may become an LLP upon - (1) vote AND (2) filing of a statement of qualification with SOS. SOQ must have - name and address of partnership and agent for SOP, Statement that partnership elects to be LLP AND - deffered effecitve date.
Must file annual report or risk revoking statement of qualification.
WHen may a partnership be subjected to tort liabliity?
What is the tort liability for different type of partners?
Wrongful acts or omissions of ANY partner acting (1) within ordinary course of business or (2) with authority of all partners.
General partners - same as above.
Limited partners - not personally liable for obligations of the LP arising from the wrongful acts or omissions of other partners.
When may the partnership be contractually liable?
What is the contractal liabliity for partners themselves?
Each partner is agent of the partnership. Thus, actions of every partner that are made within the ordinary course of business bind the partnership UNLESS (1) has no authority to act AND (2) the other side has knowledge or notice that the partners lacks authority.
Actions taken by a partner that are outside the OCOB do not bind UNLESS the other partners unanimously authorize the action with actual or apparent authority.
General partners - JOintly and severally liable for ALL debts and obligations
Limited - only to the extent of their investment.
May a partner transfer his interest in profits and losses to a third party?
Yes, but the transfaree does not automatically become a parnter nor does the partnership terminate or dissolve. However, a transfaree may become a partner if the other parnters unanimoulsy consent, then he will be liable for obligations of the partnership inccured after his admittance.
What is partnersip liabliity during dissolution?
Dissolution does not imeediately terminate the partnership - rather it enters a winding up phase. DUring this phase, actual authority is limited to actions necesary to wind up the partnerships affairs. However, a partner may still have apparent authority to bind so long as the other side does not have notice of the parnterhsips dissolution.
What are the rights of partners amongst themselves?
Absent an agreement to the contrary, general partners are agents and have equal rights to manage and control the partnership business, while limited partners have no say. Disagreements are decided by majority of the partners. Outisde ordinary course of business, requires unanimous vote.
