Agency & Partnerships

Question 1

Agency Checklist

Answer 1

(1) Formation
(2) Principal’s Liability to 3rd Parties
(3) Authority
(4) IC/Employee

Question 2

Agency Formation

Answer 2

A relationship that arises when one person (principal) manifests an intention that another person (the agent) act on the principal’s behalf.

Requires three elements: (1) capacity, (2) consent, and (3) control.

Question 3

Capacity, Consent, and Control

Answer 3

Capacity - age of majority & mental capacity. For A, ONLY minimum mental capacity is required.

Consent - oral or written agreement

Control - consider control of manner of completing work, supply of tools, direction etc.

Question 4

Liability of P on Negligence Claim

Answer 4

Employee - YES VL in within course and scope of agency, unless frolic.

Independent Contractor - YES VL if inherently dangerous activity or nondelegable

Question 5

Liability of P on Intentional Tort Claim

Answer 5

P is generally not vicariously liable for A’s intentional tort, whether employee or IC unless
(1) force is authorized in the agency;
(2) friction is generated by the agency; or
(3) the agent is furthering the business of the employer.

EACH OPTION REQUIRES AUTHORITY.

Question 6

Liability of P on Contract Claim

Answer 6

DEPENDS ON AUTHORITY. Talk about at least 3

Question 7

Express Authority

Answer 7

Agent expressly has the authority from Principal to act in the manner the Agent ACTUALLY acted in.

Question 8

Implied Authority

Answer 8

The nature of A’s position implies authority to act in a particular matter – either from custom or usage, or by acquiescence (including failure to enquire), or because of emergency or necessity.

Question 9

Apparent Authority

Answer 9

P communicates by some statement or act to a third party the apparent authority of the agent to act on behalf of the principal with respect to that third party.

Question 10

Ratification

Answer 10

P knowingly agrees to be bound by the unauthorized acts of A, OR series of occasions of acquiescence.

ONLY discuss when there is actual knowledge of unauthorized acts.

Question 11

Agent Duties Checklist

Answer 11

(1) Undivided Loyalty
(2) Licensed Person
(3) Strict Obedience
(4) Reasonable Care

Question 12

Remedies for Breach by Agent

Answer 12

(1) damages,
(2) accounting for agent’s secret profits,
(3) withholding of compensation.

Question 13

Principal’s Duties to Agent

Answer 13

(1) Compensation - duty to reasonably compensate and reimburse for losses reasonably incurred
(2) Contract
(3) Cooperate

Question 14

Remedies for Breach by Principal

Answer 14

(1) damages for breach of contract (subject to duty to mitigate),
(2) an agent’s lien in any property the agent holds

Question 15

Termination of Agency Relationship

Answer 15

(1) lapse of time,
(2) happening of an event,
(3) change of circumstances,
(4) breach of fiduciary duty,
(5) unilateral acts, or
(6) operation of law.

Question 16

Termination of (Express/Implied) Authority

Answer 16

Actual (express or implied) authority terminates when the agent knows or should have known of the termination.

Question 17

Termination of Apparent Authority

Answer 17

Where there’s a writing by principal given to agent manifesting their authority and that is meant to be shown to third parties, the apparent authority will not be terminated with respect to the third parties who see and rely on such writing until principal communicates termination to third parties.

(P must communicate termination to third parties.)

Question 18

Irrevocable Agency

Answer 18

(1) Agency coupled with interest
(2) Power given as security

Question 19

Disclosed Principal

Answer 19

When 3rd party knows who the P is

Agent - Not liable on contract to third party
Principal - Liable on contract when A acts for improper purpose or for someone else’s purpose, unless that person KNOWS A is going rogue

Question 20

Partially Disclosed Principal

Answer 20

A P exists, but identity unknown.

Agent AND Principal are liable on contract entered into by an authorized agent on behalf of a partially disclosed principal, unless the third party has notice that the agent is not acting for the principal’s benefit

Question 21

Undisclosed Principal

Answer 21

The third party believes A is the contracting party and has no knowledge of the existence of a principal.

A and P are both liable to third party on contract entered into by an authorized agent on behalf of an undisclosed principal.

BUT P is not liable when Agent goes rogue. Otherwise liable - still getting benefit.

Question 22

Secret Limiting Instructions

Answer 22

Where P gives secret limiting instructions to A, P is bound even if A acts beyond the scope of the limiting instructions.

BUT P can sue agent for breach of duty of obedience and recover difference.

Question 23

Agency and Partner Liability

Answer 23

Partnership is liable for acts and omissions of any partner acting
(1) in the ordinary course of the partnership business or
(2) with authority of the other partners.

Question 24

Apparent Authority of Partner

Answer 24

If third party reasonably believes a partner is acting for the partnership, that partner will have the apparent authority to bind to partnership.

Question 25

General Partnership - JSL

Answer 25

In a general partnership, all partners are jointly and severally liable for all obligations of the partnership.

Question 26

LLPs

Answer 26

Limited partners’ liability is limited to their capital accounts in the partnership.

Question 27

Agency and Corporate Liability

Answer 27

Express - Board of Directors passing resolution

Implied - Corporate officer has implied authority intrinsic to his position to bind the corporation to minor day-to-day obligations (depends on office)

Apparent - Officer has apparent authority with third persons if acting in ordinary course of business.

Question 28

Partnership Formation

Answer 28

A partnership is an agreement among two or more persons
(1) to carry on a business as co-owners (sharing control)
(2) for profit (shared).

Question 29

Management & Operation of Partnership

Answer 29

(1) Equal Rights in management
(2) Disagreements related to ordinary matters may be decided by majority
(3) No act in contravention of the partnership agreement may be done without consent of all partners.

Profits and losses are divided evenly.
Any partner can bind the partnership.
Still bound for contractual or tortious acts after dissolution if the 3rd party does not have notice of dissolution.

Question 30

Partner Duty of Loyalty

Answer 30

Requires Good Faith & Fairness:
(1) refrain from dealing with the partnership as, or on behalf of, a party ADVERSE to the partnership;
(2) refrain from COMPETING with the partnership; and
(3) account for profits, property, opportunities, or other benefits derived by the partner in conjunction with the partnership business.

Question 31

Partnership Essay Structure

Answer 31

(1) Start with formation and IRAC each
(2) AFTER deciding entity is a partnership, discuss type (GP, LP, or LLLP)
(3) NO formalities -> General Partnership

Question 32

Partnership Dissociation

Answer 32

Change in relationship among partners caused by any partner ceasing to be associated with carrying on of the business.

Can occur voluntarily or involuntarily.

Question 33

Partnership Dissolution

Answer 33

An at-will partnership can be dissolved by any partner by that partner’s express will. - “I quit”

If 3rd parties don’t know, the entire partnership still liable.

Question 34

Acts That Will Cause Dissolution

Answer 34

(1) some acts of dissociation, including: within 90 days after a partner’s death, bankruptcy or wrongful dissociation;
(2) the express will of at least half of the remaining partners to wind up the business;
(3) the express consent of all partners to wind up the business; or
(4) the expiration of the partnership term.

Question 35

General Provisions of LLCs

Answer 35

Taxed like a partnership (profits and losses not taxed at corporate level but flow through to members) but enjoy limited liability like shareholders and directors of a corporation.

Controlled by operating agreement

Distinct entity from members

Question 36

Forming an LLC

Answer 36

Formed by filing articles of organization with the state.

Must include:
(1) statement that the entity is an LLC;
(2) entity’s name, which must include “LLC” (or spelled out);
(3) street address of
(a) the office and
(b) the registered agent for service of process; and
(4) the names of all members.

Defective -> General Partnership