Agency/Partnership Flashcards
Agency
Agent is authorized to represent principal with third parties
Agency Creation Elements
(1) Consensual by both parties -No consideration required -No writing required (except SOF) (2) Principal must have contractual capacity (3) Agent only needs minimum capacity
Agent’s Duties
(1) Loyalty (2) Obedience (3) Reasonable care
Principals Legal Actions against Agent
(1) Breach of contract (2) Tort (3) Equity (4) Withhold compensation
Subagents versus Coagents
Subagent - appointed by agent to perform agent’s functions Coagnet - appointed by agent to perform on behalf of principal (no sharing)
Subagent’s Duties
If authorized - owes principal same duties as agent If unauthorized - owes no duties to principal, owes duties to agent
Principal’s Duties
Reasonable compensation and reimbursement for expenses.
Agent’s Legal Actions against Principals
(1) Contract remedies (2) Lien
Actual Authority
Agent reasonably believes she possesses based on Principal’s dealings with her (express or implied).
Apparent Authority
Third party reasonably believes agent has authority based on third party’s dealings with the principal.
Will Principal be bound: Agent has actual authority
Yes
Will Principal be bound: Agent has apparent authority
Yes
Will Principal be bound: Agent does not have actual or apparent authority
Ask if principal ratified the contract after agent entered into it - if yes then bound if no then not bound.
How do you terminate actual authority
(1) Lapse of time (2) Specific event (3) Change in circumstance (4) Agent’s breach of duty (5) Unilateral termination (6) Operation of Law
Does death terminate P/A relationship?
Yes - unless it was coupled with a valid contract
Does apparent authority linger?
Yes - and P can still be bound by A’s actions even if the P/A terminated but third parties didn’t know it terminated and P makes it seem A is still an agent to third parties.
P bound if A exceeds actual authority?
No - unless P permitted the agent to exceed it or A committing acts that come within customary responsibilities.
Ratification
A had no authority to act but P validates and becomes bound. (1) P must know all material facts (2) P must accept entire transaction (express/implied) (3) P must have capacity
Cannot Ratify When..
(1) Performance was illegal (2) Third party withdrew (3) Material change to circumstances
Liability: Principal
Bound if authority existed (actual, apparent, ratification)
Liability: Agent
Bound unless P’s existence and identity disclosed
Liability: Third Party
Bound to P if valid authority existed; Bound to A if P unidentified or undisclosed and agent enforces contract, but P entitled to contract benefits.
Vicarious Liability
Joint and several liability for agent’s tort imputed to P.
Respondeat Superior - employee
(1) Employer/Employee relationship existed (control means employee no control mean IC) (2) Was within employee’s scope of employment
Respondeat Superior - Independent contractor
(1) If activity was inherently dangerous or knowingly incompetent, then P liable.
Detour or Frolic?
Detour - small deviation and authorized in scope of employment Frolic - major deviation and not authorized - P not liable until back within scope of employment
Partnership
Association of two or more persons to carry on as co-owners of a business
Act that governs partnerships
Revised Uniform Partnership Act - or a separate agreement
Partnership formation
All you need is intent capacity consent - doesn’t have to be in writing
If no agreement in writing what will a court look at to determine whether it existed?
Intent, or Sharing profits - presumption of partnership
Titled Property (RUPA) - Property Deemed Part of Partnership
(1) titled in the partnership name, or (2) Titled in name of one of the partners and instrument transferring notes title of transferee as partner
Titled Property (RUPA) - Property Presumed Part of Partnership
(1) Purchased with partnership funds
Common Law Criteria for Property of Partnership
(1) Use of partnership funds (2) Use of property by partnership (3) Relationship between property and business (4) Improvement with partnership funds (5) Mainteance with partnership funds
Partner’s right to use property
Only can use can - cannot transfer it or use outside benefit of partnership
Partner’s interest in partnership
(1) Treated as personal property (2) Transferrable without dissolving partnership (3) Attachable
Rights of Partners in general partnership
(1) Management participation (2) Fiduciary duties (3) Accounting (4) Indemnification (5) Inspect books (6) Sue his partnership
Authority of Partners
Only have apparent authority for purposes of business: (1) Act of any partner (2) binds the partnership for carrying on in the original course of business, unless (3) partner had no authority (4) person dealing with partner knew this
When is actual authority given to partners
For extraordinary acts - unanimous vote. Or if there was a vote or communication between the partners.
Liability of Partners
(1) Liable for all contracts within scope of business (2) Liable for all torts within scope of business (3) It’s joint and several (4) Individually liable (5) Not retrospective once a partner (6) Outgoing partner liable for all time he was a partner unless a release, payment or novation
Disassociation of Partner
(1) Partner expressly states (also triggers dissolution - otherwise does not) (2) Agreed event (3) Expulsion (4) Partner’s bankruptcy (5) Partner’s death/incapacity (6) appointment of receiver
Consequences of disassociation
(1) Right to participate in management ceases (2) Partnership must buy out partner (3) Indemnify (4) Partnership can hold liable for damages if disassociating against an agreement
Disassociate Partner’s Power to Bind Partnership
Can still bind (1) Within 2 years of disassociation (2) Third party didn’t know he wasn’t a partner (3) Act would have bound the partnership before disassociation
Dissolution Triggers (RUPA)
(1) Notification by any partner to withdraw (2) Expiration if definte term of partnership (3) Consent of all partners (4) Within 90 days of partner’s death - at least 1/2 of partners wish to dissolve (5) Unlawful to continue (6) Issuance of judicial decree
Powers to Bind Partnership After Dissolution
File with secretary of state to get 90 day notice and prevent further binding. Partnership can be bound by any act of partner for winding up business and whoever partner dealt with and had no notice
Does Partnership continue after dissolution?
Yes - until it is wound up
Who can wind up a partnership
All living partners except if partner wrongfully dissolved or bankrupt partners
How do you distribute partnership assets after dissolution and windup?
(1) Reduce all assets to cash (2) Pay in following order: (3) Creditors, including partner creditors (4) Partner accounts - partner who pays more entitled to contribution.
Benefits of a Limited Liability Partnership (RUPA)?
Partners not personally liable from contract, tort or otherwise. DOES NOT SHIELD FROM OWN WRONGFUL ACTS.
How do you become an LLP?
(1) Amendment partnership agreement to include it (2) File statement with secretary of state
What information must you provide secretary of state for an LLP?
(1) Agreement by two or more partners (2) Name and address of partnership (3) Statement of intent to be an LLP (4) Deferred effective date, if any. (5) Name must end with LLP
What is a Limited Partnership (RUPA)?
Consists of general and limited partners. General - personally liable Limited - not personally liable - liability limited to your contribution
How do you become an LP?
Creation of statute - just follow the LP statute for that state and then just file with secretary of state
What duties to a partner owe to the partnership?
Loyalty Care
Does general partner violate duty of loyalty if conduct futhers own interests?
Not necessarily
Duties of general partner
Loyalty and Care
Duties of limited partner
No duty unless partnership says otherwise
Liable for improper distribution?
No - unless knowingly took it or was not reasonable
Rights of All Partners in Limited Partnership
(1) Distribution (2) Assignment - but entire transfer grounds for expulsion (3) Transact business with partnership (4) Dissolve (5) Sue
Rights of General Partners in Limited Partnership
(1) Management -Must get consent from all general and limited partners to amend agreement, convert partnership, dispose of substantial amount of property, admit a new partner (2) Right to information (3) Indemnification
Rights of Limited Partners in Limited Partnership
(1) Management only if partnership agreement allows (2) Right to information
Dissolution of Limited Partnership
(1) Failure to pay fees (can be reinstated) (2) Application of partner if no longer practical to carry on (3) Specific time frame (4) Consent of all general and limited partners holding a majority (5) Disassociation of general partner and then consent of majority - or no new general partner after 90 days (6) 90 days after last limited partner
Conversion or merger of limited partnership
(1) Consent of all partners (2) Filing a certificate with secretary of state
Limited Liability Company
(1) Hybrid organization (2) Taxed like a partnership (3) Offers owners limited liability of shareholders of corporation (4) Can run either like a partnership or corporation (5) No one has to accept personal liability
Formation of LLC
(1) File certificate with secretary of state (2) Must have at least one member (3) Name of LLC (4) Address of registered office (5) Name of registered agent
Member managed LLC
Members owe each other duty of care and loyalty
Manager managed LLC
Only managers owe duty of care and loyalty Only members may authorize an act of manager that would otherwise violate duty of loyalty
Piercing corporate veil
Managers and members only personally liable if court pierces corporate veil
Distributions in an LLC
Must be equal unless operating agreement provides otherwise
Indemnification of an LLC
Members of member managed indemnified Managers of manager managed indemnified
Right to Information in an LLC
Member managed: Member has right to inspect. Manager managed: Manager has right to inspect. Member can inspect if (1) member seeks info for purpose material to member’s interest, (2) makes demand with reasonable paticularity
Who can bring action against an LLC?
Member injured personally
Transfer of interests of an LLC
Only transfer right to receive distribution
Dissociation of LLC
Member can disassociate at any time but may be liable for damages to LLC per agreement
Dissolution of LLC
(1) Event in operating agreement transpires (2) Consent of all members (3) 90 days in which there are no members (4) Judicially (5) Administratively (failure to pay fees - comes back like it never went away once fee repaid)
When can partner bind partnership
Within ordinary course of business: majority vote for actual authority, or apparent authority with no knowledge by seller that he did not.
Outside ordinary course of business: unanimous vote for actual authority, no apparent authority.
How does a corporation share profits and losses
Profits shared equally, and losses are split in the same ratio as profits
