Agency Partnerships Flashcards
How is an agency formed?
Formation of Principal-Agent Relationship
- BY AGREEMENT
(1) assent - an informal agreement b/w a principal who has capacity and the agent
(2) benefit - the agent must work for the principal’s benefit
(3) right to control agent - by having the power to supervise the manner of the agent’s performance - BY ESTOPPEL (Apparent Authority) - requires 3d party reliance on principal’s actions
How is a general partnership formed?
General Partnerships - Revised Uniform Partnership Act (RUPA) def = an ass'n of 2+ persons who are carrying on as co-owners of a business for profits
- sharing of profits = contribution of money or services in return for a share of profits in any creates a presumption of a general partnership
Formation = there are NO FORMATION FORMALITIES for general partnerships
What types of authority are there?
Actual Authority
Apparent Authority
Inherent Authority
What is actual authority?
Actual Authority = express agreement b/w principal and agent
What is apparent authority?
- Principal cloaks agent w/ appearance authority, AND
2. Reliance by 3d party
What is inherent authority?
Can be implied to the extent that an agent’s express authority requires it to do certain other acts as a matter of course in order to perform its functions as an agent
What is a principal’s liability for agent’s torts?
(Respondeat Superior)
• Tort occurred in the scope of the principal-agent relationship = 3 part term
(1) within the agent’s job description
(2) tort occurred on the job
- frolic = new and independent journey outside of scope
- detour = mere departure w/in scope of agency
(3) conduct INTENDED for PRINCIPAL’S BENEFIT
Intentional torts = outside the scope of agency EXCEPTIONS: - specifically authorized by principal - nature of employment - motivated by desire to serve principal
What is a principal’s liability for IC torts?
No vicarious liability UNLESS
- ultra-hazardous activities
- estoppel = hold out IC as agent
- non-delegable duties
- principal knowingly selected incompetent IC
What is a principal’s liability for agent’s contracts (Ks)?
Principal liable for AUTHORIZED CONTRACTS ONLY
ACTUAL EXPRESS authority
ACTUAL IMPLIED authority = inferred from conduct/circumstance
• necessity
• custom
• prior dealings
APPARENT AUTHORITY
- principal cloaks agent w/ appearance authority
- reliance by 3d party
RATIFICATION
- knowledge and
- accepted benefits of contract
What is an agent’s liability for contracts?
Not liable for authorized contracts (gen) when agent entered into them on behalf of principal
Exception: UNDISCLOSED PRINCIPAL
- 3d party can sue either the agent
- or the principal once he/she is disclosed
General Partnerships: Powers of Partners to Bind the Partnership
Actual authority = yes
(actual authority = authority a partner reasonably believes he/she possesses based on communications w/ the other partners)
Apparent authority = yes, UNLESS
- no authority and
- 3d party knew / had received notification of no authority
General Partnership Rights and Obligations
Rights and obligs. under TERMS of partnership agreement - partners may alter default rights and obligs. of a partnership by agreement
Rights and obligs. in ABSENCE of terms in a partnership agreement
- equal control - one partner = one vote
- no salaries (exception: winding-up partnership business)
profits and losses
- profit sharing = equally w/o contrary agreement
- loss sharing = just like profits w/o contrary agreement
What are the personal liabilities of partners for partnership obligations?
liable for debts and obligations of the partnership
liable for co-partners’ torts in scope of usual partnership business
liable for authorized contracts
What are the incoming and outgoing partner liabilities?
INCOMING partner ≠ liable for PRIOR debts
- exception: money paid in by incoming partner CAN BE USED BY PARTNERSHIP TO SATISFY PRIOR DEBTS
OUTGOING partner = liable for FUTURE debts UNTIL
- notice of dissociation given to creditors; or
- 90 days after notice of dissociation to the state
The outgoing partner is liable for future debts until?
- notice of dissociation given to creditors; or
- 90 days after notice of dissociation to the state
What is the exception to what the money paid in by the incoming partner can be used on?
Can be used by the partnership to satisfy prior debts
What are the formalities of a Limited Partnership (LP)?
- at least one general partner
- at least one limited partner
- must file limited partnership certificate and includes names of general partners
What are the general partners rights and liabilities?
Right to Manage
General Partners’ personal liability
- debt and obligations of limited partnership
- co-partners’ torts in scope of usual partnership business
- authorized contracts
What are the limited partners rights and liabilities?
NO right to manage
NO personal liability for debts and obligations of limited partnership
What are the formalities of a Limited Liability Companies (LLC)?
- must file articles of organization
- may adopt operating agreement
What are the financial rights and obligations of LLC members?
- Internal allocation of financial interests = on basis of member’s contributions
- No personal liability for debts and obligations of the LLC
What are the characteristics of a LLC?
Formalities
- must file articles of organization
- may adopt operating agreement
Financial Rights and Obligations of LLC Members
• Internal allocation of financial interests = on basis of member’s contributions
• No personal liability for debts and obligations of the LLC
Management by all members - but the articles may provide otherwise
Limited Life
Limited Tax
Who manages a LLC?
Management by all members - unless the articles provide otherwise
What are the formalities of Registered Limited Liability Partnerships?
must file statement of qualification
- executed by at least 2 partners
- name and address
- statement that entity is LLP
effective on date of filing or deferred effective date
What is the liability of general and limited partners for debts and obligations of LLP?
None, no liability
What are the fiduciary duties of agents?
Duty of Care
Duty of Obedience
Duty of Loyalty
Principal Remedies for Breach
- may recover losses caused by breach
- disgorge profits made by the breaching agent
What are the duties of principals?
- Duties imposed by Contract
- Reasonable compensation
- Reimbursement for Expenses
- Duty to cooperate w/ agent and no unreasonably interfere
What are the remedies for a principal when the agent breaches a duty?
Principal
- may recover losses caused by breach
- disgorge profits made by the breaching agent
What are the fiduciary duties of partners?
• Duty of care - no negligent, reckless, or unlawful conduct
• Duty of loyalty
- account for all profits and benefits derived in connection w/ partnership business
- refrain from dealing w/ partnership as an adverse interest
- not compete w/ partnership
Partnership Remedies for breach - ACTION FOR ACCOUNTING
- may recover losses caused by breach
- disgorge profits made by breaching partner
What remedies does a partnership have for breach of fiduciary duties of partners?
ACTION FOR ACCOUNTING
- may recover losses caused by breach
- disgorge profits made by breaching partner
How do Partners’ Share Profits?
What about Losses?
Profit Sharing = EQUALLY w/o contrary agreement
- w/o an agreement to the contrary, partners share profits equally
LOSS SHARING = EQUALLY (just like profits w/o contrary agreement)
How is an agency terminated?
- lapse of time (specified time or reasonable time if not specified)
- occurrence of specified event
- change in circumstances
• destruction of subject matter
• principal or agent insolvent
• change in law - agent’s breach of fiduciary duty
- unilateral termination by either party
- death or incapacity of principal or agent (exception: durable power of att’y)
How can partnerships end?
dissociation
dissolution
winding-up
What are the events of dissociation (partnerships)?
- Withdrawal of partner
- Expulsion of Partner
- Partner’s bankruptcy
- Partner’s death or incapacity
- Appt of a receiver
- Termination of a business entity that was a partner
What are the effects of dissociation (for a partnership)?
Partnership MUST
- buy out dissociated partner’s interest - liquidation or going-concern value
- indemnity the partner against
• all known pre-dissociation liabilities
• post dissociation liabilities not result of dissociating partner’s actions
Dissociated partner’s power to BIND W/IN 2 YEARS if
(1) act would have bound partnership prior to dissociation
(2) 3d party reasonably believed dissociated partner still partner AND
(3) no notice of dissociation
Dissociated partner’s liability POST DISSOCIATION W/IN 2 YEARS if
(1) 3d party reasonably believed dissociated partner still partner AND
(2) no notice of dissociation
What is the effect of dissolution (partnership)?
Requires partnership business to be wound up
What are the events for dissolution?
- Withdrawal if partnership may be dissolved at will
- Lapse of time
- Occurrence of specified event
- Change in law
- Court Order
• economic purpose frustrated
• no longer reasonably practicable to continue business
• business cannot be continued in conformity w/ partnership agreement
Winding-up the partnership business
- LIABILITY after dissolution
- OLD business transactions = partnership and indiv gen partners retain liability on all transactions entered into to wind-up old business w/ existing creditors
- NEW business transactions = partnership and indiv gen partners retain liability until the notice of dissolution is given to creditors or until 90 days after filing a statement of dissolution w/ the state - COMPENSATION for helping wind-up partnership = yes
- Order of Distribution
(1) Creditors
- outside 3d party trade creditors
- all loans by partners to partnership
(2) Capital contributions of partners
(3) Profits or Surpluses = equally w/o contrary agreement
What is the order of distribution for winding-up the partnership business?
(1) Creditors
- outside 3d party trade creditors
- all loans by partners to partnership
(2) Capital contributions of partners
(3) Profits or Surpluses = equally w/o contrary agreement
