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Bar Prep > Agency & Partnership > Flashcards

Agency & Partnership Flashcards

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1
Q

What are the 6 ways in which Actual Termination may occur?

A
  1. After a specified time/event or a reasonable time.
  2. By change of circumstances
  3. If agent acquires adverse interest
  4. When Agent Says so
  5. When Principal Says So
  6. By death/incapacity/Bankruptcy
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2
Q

When may a Principal revoke?

A

Anytime there is no coupled interest.

Examples: borrow money, or fee/commission agreement.

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3
Q

Why is it harder to destroy Apparent Authority?

A

Because it is intended to protect third parties who don’t know the status of the Pship. There may still be one in the minds of many creditors.

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4
Q

What is required to ratify a contract or decision made through apparent authority?

A
  1. Knowledge—of all material facts
  2. All or nothing—must accept the entire contract or decision
  3. Capacity–Must have capacity at the time the contract was made or decision was made.
    *Ratification is RETROACTIVE.
    Hint: Companies not formed at the time the contract was made or agreement was made, DID NOT HAVE THE CAPACITY!!!
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5
Q

What is unique about the Adoption of a contract or agreement made with apparent authority?

A
  1. NOT Retroactive

2. Does NOT relieve the initial “Agent” who acted with apparent authority.

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6
Q

What duties are owed by an Agent?

A

Agent is a fiduciary Owes duty of:

  1. Loyalty
  2. Obedience
  3. Care
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7
Q

Implied actual authority is the authority

A

An agent believes she has based on her communications and relationship with the principal.

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8
Q

What is Inherent Authority?

A

A few courts recognize the concept of inherent authority, which is derived solely from the agency relationship. It results in a principal being bound by his agent’s acts in certain situations even though the agent has no actual or apparent authority.

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9
Q

Who is responsible for the breaches of the subagent?

A

Agent.

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10
Q

When will employer be liable for intentional torts committed by their employee?

A

An employer will be liable for torts that result from friction naturally engendered by the employer’s business.

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11
Q

What does the Duty of Compensation say?

A

A principal owes an agent a duty to reasonably compensate her for services rendered.

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12
Q

What are the two types of Deviation from the Scope of Employment?

A
  1. Detour–minor deviation, usually within the scope of employment.
  2. Frolic–A substantial deviation that is usually outside the scope of employment
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13
Q

Who is liable if tort was committed within the scope of employment?

A

Master and Servant are jointly and severally liable.

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14
Q

What is required to distinguish a joint venture from a partnership?

A

An express agreement as to how losses will be shared.

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15
Q

What are the property interests of partners?

A

Totally unrestricted rights in property owned BY the partnership. Rebuttable presumption that the partnership owns the property if paid for with partnership funds. If the partnership’s name is used in the transaction then it is the partnerships property. But if acquired with personal funds with no reference of the partnership then it is partner’s property.

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16
Q

How are partnership profit’s and losses split?

A

UOA, Equally in proportion to the contribution.

17
Q

When is a partner entitled to compensation from the partnership?

A

UOA, there is no right to receive compensation unless partner is winding up the partnership affairs because the company will not receive any more profits.

18
Q

What is the one duty that cannot be eliminated or modified?

A

The Duty of Loyalty

19
Q

What can a new investor lose based on debt occurred prior to investing?

A

The most he can lose is his interest in the company, but he will not be personally liable for any preexisting debts

20
Q

What is the only thing a limited partner can use?

A

Their capital contributions

21
Q

What are the rights and obligations of a Limited Partner?

A
  1. Promise to contribute—must be in a signed writing to be enforceable
  2. May withdraw ONLY if the agreement permits
22
Q

What does a series LLC do?

A

Partitions assets/liabilities among separate (independent) series. Designed for asset protection.

23
Q

What are the elements of Agency?

A

1) Manifestation by the principal that the agent will act for him—failing to protest counts as a manifestation
2. Acceptance by the agent of the undertaking
3. An understanding between the parties that the principal will be in control of the undertaking

24
Q

What is the definition of Authority?

A

The power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him.

25
Q

What are the exceptions to Agency?

A
  1. Marital status cannot in and of itself prove the agency relationship
  2. Joint land ownership does not make one an agent for the other
  3. If agent does not disclose principal then agent is personally liable.
26
Q

What are some factors a court would consider when deciding if there is a partnership?

A

1) Language of the agreement
2) Right to share in profits
3) Obligation to share in losses
4) Ownership and Control of the Property
5) Conduct toward third parties
6) Community of power to manage
7) Rights upon dissolution
8) Intent of the other parties

27
Q

What are the three keys of a partnership?

A
  1. Joint Control
  2. Joint Liability
  3. Joint Agency
28
Q

What is the buyout formula for a partnership dissolution?

A

The Partner’s Capital Acct. plus the average of 3 previous years’ profits actually paid to the general partner or as is agreed prior to dissolution in Partnership agreement

29
Q

What is the Business Judgment Rule and what are the elements?

A

Business managers and directors are given broad discretion for failures and bad business deals that occur within the company and shield them from liability so long as three elements are satisfied and absent ANY finding of abuse.

  1. The decision was made in Good Faith
  2. with the care that an ordinarily prudent person in a like position would exercise under similar circumstances
  3. AND in a manner the directors reasonably believe to be in the best interest of the company
30
Q

What are the factors considered in determining whether the corporate veil has been pierced?

A
  1. Is the unity of the interest and ownership such that the separate personalities of the corporation and the individual shareholder no longer exist.
  2. Several Factors are Considered:
    a) Commingling of funds and other assets
    b) Diversion of the corp.’s funds to noncorporate uses
    c) Failure to maintain the corporate formalities necessary for the issuance of or subscription to the corporation’s stock such as formal approval of the stock issue by the board of directors
    d) representations of personal liability
    e) Failure to maintain corporate minutes or adequate corporate records
    f) Identical equitable ownership in two entities
    g) Concealment or misrepresentation
    h) Sole ownership of all the stock by a single person or single family
    I) disregard of legal formalities and failure to maintain proper arm’s length relationships among related entities
31
Q

What are the events of withdrawal?

A
  1. The receipt by the partnership of notice of partner’s desire to withdraw
  2. The occurence of an event specified in the partnership agreement as an event of withdrawal
  3. The expulsion of a partner per the agreement
  4. Partner’s bankruptcy, death, or incapacity
  5. The redemption of all of a partner’s interest in the partnership by a transferee holding that interest
32
Q

What events require Winding Up?

A
  1. Expiration of a period of duration. Provided for in the partnership agreement.
  2. Consent of the partners
    Occurrence of an event that makes it illegal to carry on the partnership’s business unless the illegality is cured in 90 days of notice to the partnership
  3. A judicial decree
  4. The sale of all or substantially all of the partnership’s assets
  5. The receipt of a request to wind up from a partner in a partnership at will unless denied by the majority in interested partners
33
Q

What is the unique restriction on a limited partner?

A

CANNOT run the day to day operations. Too much control strips partner of her limited status and she may be personally liable for her actions in the partnership

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