Agency & Partnership Flashcards
What is the definition of an agency relationship?
A fiduciary relationship where one person (principal) manifests assent for another person (agent) to act on their behalf and under their control.
What are the requirements for the formation of an agency relationship?
- Consent by both parties
- Agent acts on behalf of principal
- Principal has control over agent
Is writing or consideration required for the formation of an agency relationship?
No.
What is actual authority in the context of agency?
Authority expressly given by the principal or implied from principal’s conduct.
What is the difference between express and implied authority?
- Express: Clearly stated by the principal
- Implied: Based on custom, prior dealings, or necessity
What is apparent authority?
Principal’s words, conduct, or inaction cause a third party to reasonably believe the agent has authority.
What is ratification in agency law?
Even if no authority exists, a principal can ratify an agent’s act if:
* Principal knows all material facts
* Principal accepts the act’s benefits
* Principal had capacity at the time of the act
Under what conditions is a principal liable for an agent’s contracts?
A principal is bound by an agent’s acts if the agent acted with actual, apparent authority, or ratification.
What is the liability of agents when the principal is disclosed?
Principal is liable, agent is not.
What is the liability of agents when the principal is partially disclosed or undisclosed?
Both agent and principal are liable.
What is vicarious liability in the context of principal-agent relationships?
A principal is liable for an agent’s torts if a master-servant relationship exists and the tort was within the scope of employment.
What are the exceptions to a principal’s liability for independent contractors?
- The work is inherently dangerous
- Principal was negligent in hiring
- The contractor was acting with apparent authority
What is the duty of loyalty in agency?
Agent must act solely in principal’s interest, avoid self-dealing, and not usurp business opportunities.
What is the duty of care for agents?
Agent must act with reasonable diligence and competence.
What is the duty of obedience for agents?
Agent must follow lawful instructions of the principal.
What is the definition of a partnership?
An association of two or more persons who carry on a business for profit as co-owners.
What formalities are required for the formation of a partnership?
No formalities required; can be express, implied, or formed by conduct.
What are the default management and voting rights in a partnership?
Equal management rights, regardless of capital contribution.
How are profits and losses typically shared in a partnership?
Profits shared equally, losses follow profits.
What fiduciary duties do partners owe to each other?
- Duty of Loyalty
- Duty of Care
- Duty of Good Faith & Fair Dealing
What is the liability of a partnership for contracts entered into by partners?
Partnership is liable for contracts entered into by any partner with actual or apparent authority.
What is the personal liability of partners in a partnership?
Partners are jointly and severally liable for partnership obligations.
What is a Limited Liability Partnership (LLP)?
Partners are NOT personally liable for debts/torts of the partnership except for their own wrongdoing.
What is required for a Limited Partnership (LP)?
Requires at least one general partner (with full liability) and one limited partner (liability limited to investment).
What constitutes dissolution of a partnership?
- Mutual agreement
- Partner’s dissociation (if remaining partners vote to dissolve)
- Court order for misconduct, economic unprofitability, or other valid reasons
What is the process for winding up a partnership after dissolution?
Assets are distributed in this order:
* Creditors (including partner-creditors)
* Capital contributions repaid to partners
* Profits & losses distributed to partners
What happens to apparent authority after dissolution?
Partners retain apparent authority to bind the partnership to new business until third parties receive actual notice.
True or False: A former partner remains liable for obligations incurred before dissociation.
True.
