Agency & Partnerships Flashcards
Partner’s Pwr to Bind the P
Every partner is an agent of the p for the purpose of its business. The act of a partner for apparently carrying on in the ordinary course of business of the p binds the p, unless the partner has no authority to act in the matter and the person whom he is dealing has knowledge that he has no such authority. An act of a partner that is not in the OCOB of the p doesn’t bind the p unless authorized by the other partners
Agent’s Authority to bind the P
A principal may be bound to Ks executed by an agent if it is within the agent’s authority to contract on behalf of the P. An agent’s authority can be actual or apparent. An agent has AA to take actions that are necessary or incidental to achieving the principal’s objectives. AA arises based on the principal’s rep made to a 3rd party. it arises when the behavior of the principal leads the 3rd party to believe the agent is acting w the principal’s authority. Under the doctrine of AA, a principal i accountable for the results of 3rd party beliefs about an actor’s authority to act as an agent when the belief is reasonable and traceable to a manifestation of the principal.
creation of agency relationship
An agency is a relationship that exists between an agent and principal where the agent acts on principal’s behalf and is subject to the principal’s control. An agency is created when there is consent (express or implied) to enter into the relationship and control – agent is subject to principal’s control.
The agreement does not need to be in writing and can be created through apparent authority (how P holds A to a 3rd). Ratification – liable for previous unauthorized acts of agent
types of authority
There are three types: actual, apparent and ratification.
Actual – express and implied. Express – authority expressly provided to a by p. Implied – a reasonably believes he has based on principals’s words or conduct, which includes incidental acts taken by a reasonably nec to complete a task or transaction
Apparent – present when the p holds a as having authority to act and p conduct causes a 3rd party to reasonably rely on a’s appearance of authority.
ratification – present when a purported to act on p’s behalf, p has knowledge of material facts of the act, and principal affirmed a’s conduct.
Vicarious liab: definition
Generally, Principal is vicariously liable where Principal
controls Agent and Agent’s actions are within the scope of the agency relationship.
Principal is liable for harm caused by his negligence in selecting, training, retaining, supervising, or otherwise controlling Agent
VL: relationship between principal and agent
employer-employee
employer-IC
VL: scope of employment
w/in scope of employment meanst that the conduct was the same or similar in nature to that which the employee was hired to perform AND/OR tort was committed tin sev of employer and or to further employer’s goals.
Duties partners owe to each other and p
Duties:
- Loyalty: Can’t: (1) compete with the partnership or appropriate a partnership opportunity, or (2) enter deals with the partnership that are adverse to the partnership’s interest
- Care: Can’t engage in (1) grossly negligent or reckless conduct, (2) intentional conduct that harms the partnership, or (3) a knowing violation of the law
- Obedience: obey all reasonable directors from p
- Disclose: Without demand: Any information related to the partnership and reasonably required to exercise a partner’s rights and duties under the PA
• On demand: Any other information concerning the partnership if the demand is
reasonable and made for a proper purpose
Actual Authority & Apparent (Partnership)
Actual A is created by the manifestation by the principal to the agent of the principal’s request that the agent act for the benefit of the principal in a particular way, and the principal’s agreement to be bound by the agent’s actions.
Apparent A arises from the principal’s representations to a third party. It exists where the principal’s behavior leads the third party to believe that the agent is acting with the principal’s authority. Thus, even if a partner lacks actual authority, a LLP can be bound by the acts of a partners if the partner was apparently carrying on in the ordinary course of the partnership business or business of the kind carried on by the partnership. Apparent A doesn’t exist if the third party had actual knowledge that the agent lacked authority.
LLP Personal Liability
Each p has equal rts in the mgmt and conduct of the partnership’s business. Under the RUPA, a partner in an LLP is not liable for partnership obligations solely by reason of being or acting as a partner. However, a partner can become liable for partnership obligations based on her own personal misconduct. Under some statutes, through not RUPA, partners in a LLP may also become liable for the negligence, wrongful acts or misconduct of any person under the partner’s direct supervision and control.
FD: D of Loyalty and D of Care
under RUPA, a partner owes the partnership and other partners the d of loyalty and care. The fd of loyalty includes the obligation to refrain from appropriating partnership assets for personal use. the d of care includes a d not to engage in intentional misconduct and knowing violations of the l. partners are liable for damages to the partnership and to co-p for breach of these duties. claims for breach of d by p in a LLP are not subject to the rule of LL applicable yo claims by outside parties.
The D of L and C run to both the partnership and the other partners. As a result, a partnership can maintain action against a partner for violating his fd to the partnership and thus causing harm to the partnership. A partner may also maintain an equitable or legal action against another partner or the partnership to enforce the partner’s rt’s under the PA, under the RUPA, and any other rts otherwise protectable. An accounting action is equitable in nature, and determines each partner’s investment, partnership’s profits or losses, and the share of profits to which each partner is entitled.
