Agency & Partnerships Flashcards
What is agency?
A fiduciary relationship between an agent and a principal where the agents acts on the principal’s behalf and is subject to the principals control.
When is an agency relationship created?
When one person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement.
A principal is contractually bound to the acts of the agent if the agent acted with actual or apparent authority.
When may an agent bind a principal to a contract?
When the agent is acting within his actual or apparent, or inherent agency power.
What is actual authority?
The authority that the agent reasonably thinks he possess based on the principal’s dealings with him.
An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes him (the agent) to act.
What are the two types of actual authority?
Express - exists when the principal directs the agent to engage in the precise task in question (e.g., contained within the agreement between the parties)
Implied - exists when the agent believes, based on a reasonable interpretation of the principal’s words or conduct, that the principal wishes him (the agent) to act on the principal’s behalf.
What is incidental authority?
Subset of implied authority: the agent’s authority to conduct a transaction includes the authority to engage in actions that are incidental to it, usually accompany it, or are reasonably necessary to accomplish it.
What is apparent authority?
Arises when the principal “holds out” the agent as having certain authority, causing third parties to reasonably believe the agent has such authority.
When is a partnership formed?
A partnership is formed when two or more people associate to carry on as co-owners a business for profit.
A person who receives a share of profits is presumed to be a partner.
Are partners agents of the partnership?
Yes, each partner is an agent of the partnership for the purpose of its business. A partnership can be bound on a contract entered into by a partners with actual or apparent authority.
Actual authority (partnership context)
Authority that a partner reasonably believes he has based on his communications with the partnership. Can take the form of express authority or implied authority through custom, necessity, or prior acquiescence.
Actual authority to enter into transactions regarding matters within: 1) the ordinary course of business requires a MAJOIRTY vote of the partners; 2) outside the ordinary course of business requires UNANIMOUS vote of the partners
Apparent authority (partnership context)
The act of any partner apparently carrying on in the ordinary course of partnership business or business of the kind carried out by the partnership will bind the partnership unless the partner had no authority to act for the partnership and the third party with whom the partner dealt knew that the partner lacked authority.
Liability of partners on contracts entered into on behalf of the partnership
All partners are jointly and severally liable for all obligations of the partnership; thus, each partner is personally liable for the entire amount of such obligations.
Dissociation
Caused by a partner ceasing to be associated with the carrying on of the business. A partner is dissociated from the partnership upon notice of his express will to withdraw as a partner.
Dissolution
A partnership at will is dissolved and its business must be wound up when a partner notifies the partnership of his intent to withdraw.
