Agency & Partnership

Question 1

Liability for Partners in a Partnership

% out of exams tested: 66.6%

Answer 1

Rule: Partners are jointly and severally liable for obligations of the partnership, meaning that each partner can be held liable to a third party for the entire obligation of the partnership. However, a partner cannot be held liable for a partnership obligation unless the partner was personally served in the lawsuit in addition to the partnership and the judgment against the partnership was not fully satisfied out of the partnership’s assets.

Question 2

Actual or Apparent Authority:

Basic Rule

% out of exams tested: 100%

Answer 2

To determine if the principal is bound by the contract, whether the agent had the authority to enter into the contract must first be determined.

Question 3

Actual Authority

% out of exams tested: 100%

Answer 3

Actual Express Authority: Express authority is that authority contained within the four corners of the agency agreement and those expressly granted by the principal.

Actual Implied Authority: Implied authority is the authority that the agent reasonably believes she has as a result of the principal’s actions.

Termination of Actual Authority: Termination of actual authority occurs by either party’s unilateral termination.

Question 4

Apparent Authority

% out of exams tested: 100%

Answer 4

Apparent authority arises from reasonable belief of third parties. It exists if the principal holds the agent out as having certain authority, thereby inducing reasonable reliance by others on that authority. The third-party must reasonably rely on the holding out.