AGENCY & PARTNERSHIPS Flashcards
General Partnership
A GP is an association of two or more people who carry on a business for profit as co-owners. No formalities required to form a GP. Parties’ intent to associate as co-owners can be implied from conduct. Evidence indicative of GP:
- Presumption of GP if sharing profits
- Title to property, sharing of gross returns, extensive activity in the business, sharing of losses
Partner Liabilities
All partners are agents of the partnership and have equal right to manage the business and enter into agreements that will bind the partnership if the partner had authority (express/implied/apparent).
Partners are jointly and severly liable for the debts of the partnership and co-partners/employees torts within the scope of partnership business
- Criminal liability – individual partners are liable for their own crimes
Liability by Estoppel - Person that represents herself as a partner, or consents to being represented by another as a partner will be liable to 3rd parties who rely on the representation.
- When a person holds another person out as a partner, she makes the alleged person her agent
- Only other partners who made or consented to the representation is bound
New Partner Liability for existing debt – generally not personally liable for obligations incurred before he joined, but any money paid into partnership can be used to satisfy existing debts.
Dissociating Partner Liability – remains liable on all obligations incurred while he was a partner unless there has been payment, release, or novation. Partner retains liability on future debts until: 1) dissociation notice given to creditors; or 2) 90 days after filing notice of dissociation w/ secretary of state
Rights of Partners - Profits and Losses
Absent an agreement, partners share profits equally. Absent an agreement, losses are shared like profits.
Partners may transfer interest in profits, losses, distribution to 3rd parties
Rights of Partners - Management
All partners have equal rights to manage and control the business unless an agreement provides otherwise.
Decisions involving the ordinary course of business require a majority vote. Unanimous vote required for matters outside the ordinary course of business and amendments to partnership agreement.
Duties of Partners
Partners are fiduciaries of the GP and each other. They owe the following duties:
Duty of Care to act as a reasonable person would in conducting her own business.
Duty of Loyalty to act in the best interest of the GP.
- Duty to account for all profits and benefits delivered to the GP
- Duty not to compete with GP
- Duty not to engage in self-dealing, usurp GP opportunities, and make secret profits at GP’s expense
Duty of Good Faith and Fair Dealing
Duty to keep complete and accurate books
Remedies - Recover losses caused by partner’s breach and disgorge profits.
Principal’s Contractual Liability - Authority
Principal is bound by the contract if the agent had authority to enter into the contract and bind Partner. Authority may be express, implied, apparent, or ratified.
Express Authority
An agent has express authority contained within the four corners of the agency agreement and those expressly granted by principal.
Implied Authority
Implied authority is authority the agent reasonably believes she has by principal’s conduct or circumstances through custom, prior dealings or necessity.
1) custom - implied authority to do tasks that are customarily performed by people w/ agent’s title/position;
2) prior dealings - implied authority to do all tasks which the agent believes to have been authorized by P’s prior acquiescence
3) necessity - implied authority to do all tasks which are necessary to accomplish an expressly authorized task
Apparent Authority
An agent has apparent authority where a third party reasonably relies on the appearance of authority by the way the agent was held out by the business.
Ratification
Authority may be granted after the contract even if Agent had no authority to act, if principal: 1) knows or should have known the material terms of the contract and 2) subsequently accepts the entire transaction.
Agent Contractual Liability
Third Party v. Agent
Whether A is liable for authorized Ks depends on whether P was disclosed, partially disclosed, or undisclosed.
P disclosed – 3rd party knows of P’s existence and identity.
- P is always liable on the K; A not liable unless: 1) the intent of the parties shows that A was a party to K, or 2) if A breached implied warranty by acting without authority
Partially disclosed – 3rd party knows of P’s existence, but not identity.
- Both P and A are liable. 3rd party may sue both, but must elect who he wants to hold liable
P undisclosed – existence and identity of P unknown
- Both P and A are liable. 3rd party may sue both, but must elect who he wants to hold liable
Third Party Contractual Liability
Principal v. Third Party
In a disclosed P situation, P may enforce the K and hold 3rd party liable.
In a Partially/undisclosed situation, P or A may enforce the K and hold 3rd party liable. When A enforces the K, P is entitled to all of the rights and benefits of the K.
P may NOT enforce the K if: 1) P’s identity was fraudulently concealed by A’s affirmative misrepresentation (i.e. A enters into K in her own name to hide P’s identity. T may rescind K); or 2) Increase of burden to 3rd Party (i.e. A enters into a requirements K w/ A, but the requirements of P are substantially greater than 3rd party believed A’s requirements to be. T may rescind K).
Principal’s Tort Liability - Respondeat Superior
Principal is vicariously liable for the agents torts torts under respondeat superior if: 1) there is an employer-employee relationship; and 2) conduct was within scope of employment (minor deviations OK).
Independent Contractor – P is generally not vicariously liable for tors of IC unless: 1) IC was performing an ultra-hazardous activity; 2) duty was non-delegable (duty of business to keep premises safe for customers – ice skating rink liable for IC Zamboni driver); 3) negligent hiring of IC.
- Employee vs. IC dependent upon P’s right to control the manner and method by which person performs tasks (skill, tools, period of employment, wages based on time/per job)
Estoppel – even if no E-EE relationship exists, P may still be held liable if P creates the appearance that such a relationship exists and the 3rd party relies on the appearance.
Principal’s Tort Liability - Intentional Torts
Employer is usually not liable for intentional torts of EEs, unless: 1) the tort occurs as a natural part of EEs duties; or 2) EE chooses a wrongful means to promote E’s business (i.e. employs thugs to beat up picketers)
Principal’s Tort Liability - Borrowed Employee
Generally, the loaning principal remains liable, unless the borrowing principal directs the actions of the employee
