Agency & Partnership Flashcards
What does FAR For Partners To Drive mean?
- Formation
- Authority (actual, apparent & ratification)
- Rights & liabilities
- Fiduciary Duties
- Property
- Termination (agency)
- Dissociation and dissolution (partnership)
What is the rule re: formation of general partnerships?
Rule: A general partnership (GP) is formed when two or more persons (whether natural persons or entities) are carrying on a business as co-owners for profit.
Contribution of money / services for share of profits (if any) creates a presumption of a GP.
No specific formalities are required to form a GP - there need not be formal filings or written agreements. It does not matter that the word “partnership” was not used, or that specific intent to form a GP was not present.
What is the Tort Liability Rule?
For GP, agency principles apply since partners are agents of the GP for carrying on usual partnership business. Each partner is personally liable for the debts and obligations of the partnership.
Torts Liability Rule: Under the “respondeat superior” theory, a P will be vicariously liable for torts committed by an A if (1) there is a P/A relationship & (2) the tort occurs in the scope of that relationship.
Personal Liability of Partners: Partners are personally liable for torts committed by fellow partners in the scope of usual partnership business.
When is a Tort Within the “Scope” of the Agent’s Agency?
Whether the tort is within the “scope” of agency may be satisfied if (1) the task was within the job-description; (2) the tort occurred on the job (this includes detours or mere departures from assigned tasks, but does not include a “frolic” or new and independent journey) or (3) the conduct was intended for the principals benefit (even partial benefit).
Intentional torts, however, are generally outside the “scope” of agency, unless (i) specifically authorized by P; (ii) part of the nature of employment; or (iii) motivated by desire to serve the principal.
What is the Principal/Agent Relationship Rule?
A principal-agent relationship is a consensual legal relationship in which a person/principal grants authority for another/agent to act on behalf of and under control of the principal to deal with 3rd parties. Both must have capacity. It does not require consideration or writing.
What is the Rule re: “Formation” of a Principal/Agent Relationship?
A principal-agent relationship may be formed by agreement or by estoppel (apparent authority). It is formed by agreement when (i) a P manifests assent that the agent will act on their behalf and subject to their control, (ii) the agent agrees to work for the P’s benefit, and (iii) P has a right to control the agent or supervise the manner or their performance. If P holds out a person to be their agent, and induces a 3rd party’s actual reliance on that representation, the relationship forms by estoppel as an operation of law (and apparent authority is conferred).
What is the Authority Rule / Forms of “Authority”
Once a principal/agency relationship is formed, the P is bound by actions of A within the authority conferred. Authority may be actual authority (be it actual express or actual implied authority), apparent authority, or evidenced by ratification. Actual authority may be express, by use of words (that are narrowly construed) or implied, by necessity, custom or prior dealings. Apparent authority is conferred when the P cloaks the A with the appearance of authority and there is 3rd party reliance. Ratification may confer authority after the fact, if P has knowledge of all facts and accepts the benefits of the.
What is Rule re: Agency Application to General Partnerships?
Agency rules apply to partners, as they are considered agents of the partnership for purposes of carrying on usual partnership business. Thus, within the authority conferred, the GP can be bound by actions of its general partners (as agents) and must answer for their contracts/torts that are within the authority conferred. [Repeat authority rules].
What is the Contracts Liability Rule?
Contracts Liability Rule: A principal (not an agent) is liable for contracts entered into by an agent to the extent of their authority. [Repeat “authority rules” above]. An agent will, however, be liable for (1) unauthorized contracts or (2) contracts where the principal was undisclosed or partially disclosed, at a 3rd party’s election.
Personal Liability of Partners: In GP, partners are personally liable for the authorized contracts entered into by partners with partnership authority.
