Agency & partnerships Flashcards
3 elements to establish agency relationships
Consent (An agent acting for the benefit of the principal)
Control (agent is subject to principal’s control)
Capacity (agent doesn’t need capacity)
What fiduciaries duties does agent owe to the principal?
Duty of care
Duty of loaylty
What fiduciaries duties does principal owe to the agent?
None. But he owes CL duties:
1) indemnity
2) compensation for services
What are the types of authority?
Actual (express or implied) – based on what principal did
Apparent authority – P lead 3rd to believe A has authority
When is the P liable on contract to 3rd parties
When A had Actual or Apparent authority or ratified the contract. (Agent won’t be liable)
When is the P liable for torts to 3rd parties
When employee commited the tort within the scope of employment
what is detour and frolic?
Detour is minor diviation from scope of employment.
Frolic is major deviation from scope of employment
Does agent need to have capacity to be an agent?
No. Principal must have capacity, but agent can be a minor.
What are the requirements for ratifification
- have knowledge of all material facts
- accept the entire transcation
- Have capacity
What is a partnership?
1) two or more persons
2) co-owners of a business
3) for profit
No need of writing, intent, filing or other requirements
what are the factors in partnership formation
Shared profits
Right to participate in control of business
Is splitting and sharing revenues creates a presumption of partnmership?
No. unlike sharing profits, sharing revenue does not create a presumption of partnership
What is a partnership by estoppel?
allows to hold personns who pretend to be partners, to hold them liable as partners.
NEED RELIANCE ON THAT STATEMENT BY 3rd PARTY
can partnership agreement be oral?
Yes, if does not violate SoF. it can also provide the manner in which the business is run.
Is partnership a separate legal entity?
Yes
How many votes is needed for a extraordinary business decision?
Unlike ordinary business decisions that require a majority vote, extraordinary require unanimous vote
what are the default rules?
1) 1 vote for 1 partner
2) losses and profits shared equally (not percentage based)
3) No salary for partners
4) unanimous vote to admit new partners
Can you cut off apparent authority of partners?
Only as to real estate AND only by filling partnership agreement with secretary of state
Can plaintiff go after personal property of partners?
Yes, partners jointly and severaly liable if partnership resources have been exhausted
What are partner’s remedies if plaintiff went after its assets?
Can sue partnership to indemnify or sue other partners for their pro rata share
Are limitaitons on liability to 3rd parties effective?
Yes and No. 3rd parties can go after whoever they want, but the agreement is effective among the partners, so can sue other for indemnification
Is a newly added partner liable for existing debts?
No
To whom do partners owe fiduciary duties?
To partnership and other partners
If partner acted negligently, is he in breach of his duty?
NO. unlike agency relationships, breach of duty of care in partnerships requires GROSS negligence or Recklessness
What property belongs to partnership?
Presumption when acquired:
1) in partnership’s name; or
2) by a partner for the partnership; or
3) payed by partnership funds
What interests do partners have in partnerships?
financial rights and
management rights
What is a dissociation by express will?
Partner gives notice to partnership that he wants to leave
When does wrongful dissociation occur?
when partner is in breach of an express term or is expelled or becomes bankrupt.
Partner will be liable for any damage caused by the dissociation.
What happens when a partner dissociates?
dissolution of partnership; OR
dissociated partner is entitled to a buyout of their interest
What happens when a partner dissociates by express will?
Partnership MUST dissolve
What happens when a partner dissociates not by his will (e.g. death) (wrongful dissociation)
Parnership must dissolve only if 1/2 of partners decide to dissolve within 90 days.
Is dissociated partner liable for partnership obligations?
For pre-dissociation liabilities – YES
For post-dissociation liability – yes, for 2 years, unless you notify creditors or by filling a statement of dissociation (takes effect 90 days after)
Can a partner dissociate from term-partnership?
Yes, but it will be a wrongful dissolution.
What is LP?
limited partnership – partnership with at 1+ general and 1+ limited partner
How to form LP, LLP or LLC?
1) must file certificate with Secretary of State
2) name must include language to inform the public. I.e. LP, L.L.C. etc.
What is special about LP?
General managers have managerial rights and own fiduciary duties to the partnership and other partners, they are liable for everything.
Limited parners don’t have managerial rights and cannot be personally liable.
Profit is distributed based on CONTRIBUTION
What is special about LLP?
A general partnership where all partners have limited liability
What does limited liability means?
it limits liability as to partnership’s debts, not liability for a partner’s own wrongful acts
What is special about LLC
1) Members manage LLC , unless operating agreement provides otherwise (need unanimous vote to approve amendments)
2) Fiduciary duties attached to managment control
3) can’t unilaterally trasnfer managerial rights (same as in partnership)
4) dissociation does not happen if a member dissociates at express will
What is a business judgment rule?
Protects managment from ordinary negligence (in partnerships it is provided by statute, here it is CL)
What does LLC dissolve?
1) upon event specific in operating agreement
2) consent of all members
3) after 90 days without members
4) judicial dissolution (if unlawful conduct was or will be, frustration, conduct harmful to a member)
