AGENCY & PARTNERSHIP

Question 1

REQUIREMENTS FOR AN AGENCY RELATIONSHIP

Answer 1

Include: (1) consent by both the principal and the agent that the agent will act for the principal’s benefit and (2) that the agent is subject to the principal’s control. Authority to act for the principal can terminate in several ways, including the principal manifesting a desire to the agent to discontinue the relationship.

Question 2

ACTUAL AUTHORITY

Answer 2

Actual authority can be express, where the agent is expressly given authority to act for the principal. It can also be implied. Implied authority is present when the principal’s conduct leads the agent to believe it has authority. This authority can be implied by custom, past course of conduct by the principal, necessity, or an emergency circumstance. This authority terminates after a reasonable time or following a change in circumstances, death, or incapacity of the principal, etc.

Question 3

APPARENT AUTHOURITY

Answer 3

the elements of apparent authority are as follows: (1) the person dealing with the agent must do so with a reasonable belief in the agent’s authority and (2) the belief must be generated by some act or neglect on the part of the principal.

Question 4

RATIFICATION

Answer 4

even if the agent did not have authority to enter into a transaction, the principal can ratify the acts (and thus become liable) by expressly or impliedly affirming or accepting the benefit of the acts, so long as the principal knew the material facts and had capacity.

Question 5

VICARIOUS LIABILTY OF EMPLOYER (RESPONDEAT SUPERIOR)

Answer 5

The employer is liable in tort for the acts of an agent or employee if the agent or employee (mnemonic=SMI)
* was acting within the scope of employment;
* made a minor deviation (adetour) from employment (ratherthanafrolic); or
* committed an intentional tort only if it was (mnemonic=BAN) for the principal’s benefit,
because the principal authorized it, or one that arose naturally due to the nature of employment. The agent is liable too under a theory of joint and several liability.

Question 6

DIRECT LIABILTY OF PRINCIPAL

Answer 6

The principal is directly liable for his own negligence if he negligently hired the agent, failed to fire the agent, or failed to properly supervise the agent.

Question 7

PARTNERSHIP GENERALLY

Formation of a general partnership does not require much. When an MEE question asks if a general partnership is formed, the answer is usually yes!

Answer 7

• Start your essay by stating: “A partnership is the association of two or more persons to carry on as co- owners of a business for profit whether or not the persons intended to form the partnership.’”
• Profit sharing = presumption of a partnership: Profit sharing creates a presumption that a person is a partner unless the profits were received in payment of a debt, rent to a landlord, wages, etc. Other indicia of a partnership include capital contributions and mutual agency. Neither a writing nor a certificate needs to be filed for a general partnership to be formed.

Question 8

RIGHTS OF A PARTNER

partners are agents and comanagers of the partnership.

Answer 8

• Partners have equal rights to comanage ordinary affairs (e.g., signing a lease) (even if profits are not shared equally). A majority vote wins if there’s disagreement
• Extraordinary matters require a unanimous vote (e.g., admitting a new partner or selling land).

Question 9

FIDUCIARY DUTIES OF PARTNERS

Answer 9

Partners are in a fiduciary relationship with one another and must act in good faith. They are charged with the duty of loyalty (i.e., they may not usurp corporate opportunities for a personal advantage, engage in self-dealing, or compete with the partnership), the duty of care, and the duty to account (they must account for any profits).

Question 10

DISSOLUTION & WINDING UP

dissolution does not end a partnership—it ends once winding up is complete.

Answer 10

• Step one—dissociation: The dissolution of a partnership is the change in the relation of the partners. Prior creditors are entitled to personal notice of the dissolution of the partnership. Others who knew of the partnership are entitled to newspaper notice. Note that a partner can withdraw from a partnership by giving notice at any time. This will trigger dissolution in an at will partnership.
• Step two—winding up: This is where partnership assets are liquidated and creditors are paid. Note that partners are still liable for any liabilities that occur during the winding up phase.
• Step three—termination: this is the true end of the partnership!