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Agency/Partnerships Flashcards

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1
Q

Agency/ Partnership: Partnership Property When can creditors execute on partnership property?

A

Creditors can only execute on partnership property for partnership debts. Partnership property is not subject to attachment by personal creditor.

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1
Q

Agency/Partnership: Partnership Profits Payment of creditors

A

Personal creditors of a partner can execute on a partner’s right to profits. The Circuit Ct. has power to issue a charging order to force a partner to use profits to pay her personal creditor.

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2
Q

Agency/Partnerships: Agency and Contracts Implied authority

A

A’s reasonable interpretation of what P told A to do

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2
Q

Agency/Partnership: Partnership Property What factors into whether property is partnership property?

A

CONSIDER: 1. If property is acquired with p’ship funds, it is presumed to be p’ship property. 2. If titled in individual names, it is presumed not to be p’ship property. 3. Other considerations: Used in p’ship’s ordinary business? Who pays property tax? Who pays for improvements?

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2
Q

Agency/ Partnership: Dissolution of Partnerships When can a court order dissolution of a partnership?

A

A court can order dissolution of a partnership if: - The economic purpose of the partnership is likely to be unreasonably frustrated. - Another partner has engaged in conduct which makes it not reasonably practicable to carry on the business with that partner. - It is not reasonably practicable to carry on the partnership business in conformity with the partnership agreement.

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2
Q

Agency/Partnership: Limited Partnerships How is an LP formed?

A
  1. File a certificate of limited partnership w/ SDAT 2. Certificate must include name including “limited partnership” or “LP,” name and address of resident agent and general partners, and latest date of dissolution.
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3
Q

Agency/Partnership: Partnership Basics What is a purported partner?

A

Someone not a partner who is held liable as if s/he were a partner. REQUIREMENTS: 1. Purported partner represented self as partner or consented to be held out as such, AND 2. T extends credit to business in reasonable reliance on belief that purported partner is actual partner

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3
Q

Agency/ Partnership: Partnership Property How can partnership property be used?

A

Partnership property can only be used for partnership purposes, not any personal purpose of a partner unless unanimous consent.

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3
Q

Agency/Partnership: Limited Partnerships How is an LP dissolved?

A

-Withdrawal or death of limited partner does not cause dissolution. - Withdrawal or death of general partner will cause dissolution unless agreement provides otherwise.

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4
Q

Agency/Partnership: Partnership Property Can partnerships own property?

A

Yes. P’ship property is owned by the p’ship as an entity, NOT by the individual partners.

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5
Q

Agency/Partnerships: Agency and Torts Borrowed Servants?

A

Test: Who controlled servant at time of tort? In Maryland, employee can be servant of two employers at same time, so both employers can be vicariously liable

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6
Q

Agency/Partnerships: Agency and Contracts Disclosed Principal

A

T knows A is working for P, and T knows P’s name Liability: 1. A cannot enforce or be held liable on an authorized contract —-Only P and T have K rights 2. A can be sued on an unauthorized K for breach of warranty of authority

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7
Q

Agency/Partnerships: Agency and Contracts Undisclosed Principal

A

T thinks A is making a K for A Liability: 1. A can enforce and be held liable on the K 2. P can be held liable on the K 3. P can enforce the K against T unless: —-T contracted based on trust or confidence in A —-T would have refused to deal with P —-K language expressly denies an undisclosed P any rights

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8
Q

Agency/Partnerships: Agency and Torts 2 Types of agents, Magic words and factors to consider

A

IC and servant If “Right to Control” then person is a servant Salary v. paid by job Low skill v. high skill Not in own business v. has own business Long term worker v. short term worker Has no tools v. owns tools Business location same as P v. not

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9
Q

Agency/Partnership: Limited Liability Partnership What is an LLP and how is it created?

A

In an LLP, no partner can be held personally liable for the business’ debts, either tort or contract. To create an LLP- file a certificate w/ SDAT

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10
Q

Agency/Partnerships: Agency and Contracts Express Authority

A

Exactly what P told A to do

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11
Q

Agency/Partnership: Dissolution of Partnerships Partnership for term

A

If there is a set term, partner’s quitting before term has expired is breach of agreement, and partner could be liable for damages.

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13
Q

Agency/Partnership: Dissolution of Partnerships Winding up

A

Partnership continues after dissolution for purpose of winding up the business, no new business can be conducted. Partnership terminates after all winding up is completed.

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14
Q

Agency/Partnerships: Agency and Contracts Apparent Authority

A

T’s reasonable belief that A is authorized based on a past manifestation from P to T Manifestation is usually: -past dealings -custom of the trade

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14
Q

Agency/Partnerships: Agency and Contracts Partially Disclosed Principal

A

T knows A is working for a P, but does not know P’s name 1. Disclosure of corporation’s name or partnership’s name is considered full disclosure 2. Disclosure of trade name is only partial disclosure Liability: P, A, and T all have rights and liability under the K

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14
Q

Agency/Partnerships: Competition When may an A legitimately compete against a P?

A
  1. A CANNOT compete while working for P. 2. A CAN prepare to compete while working for P. 3. A CAN compete after quitting, but cannot use confidential info learned from P.
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16
Q

Agency/Partnership: Limited Partnerships What is an LP?

A

An LP involves at least one general partner and at least one limited partner. General partners have unlimited personal liability for the business’ debts. Limited partners are not personally liable for the business’ debts.

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18
Q

Agency/Partnership: Partnership Basics What are the limitations on the liability of a purported partner?

A
  1. If rep made in PRIVATE: Only the person to whom it was made can rely 2. If rep made in PUBLIC: Anyone can rely
18
Q

Agency/Partnership: Limited Partnerships How are new partners admitted to an LP?

A

To admit a new general partner requires unanimous consent of the general partners, plus the majority vote of the limited partners who vote based on capital contribution. Agreement can change this.

20
Q

Agency/Partnerships: Other Agency Issues What is imputed knowledge/notice?

A

If A learns of information within scope of employment, P is deemed to have notice of it as well (use 4W’s to assess scope of employment). EXCEPTION: P not deemed to have imputed knowledge if A is acting fraudulently against P.

21
Q

Agency/Partnerships: At-Will Employees What are the exceptions to the abusive discharge rule?

A
  1. Abusive discharge. A can collect damages if discharge violates “clear mandate of public policy,” such as being fired for refusal to take a lie detector test or refusal to have sex with clients. 2. If policy arises from a statute and a statutory remedy is available (environmental whistleblower is bound by the terms of the environmental whistleblower statute)
22
Q

Agency/Partnership: Fidcuiary Duties What fiduciary duties are owed by partners (3)?

A
  1. Duty of Care (gross negligence standard) 2. Duty of Good Faith and Fair Dealing 3. Duty of Loyalty MAY BE SUED FOR BREACHES
23
Q

Agency/Partnership: Limited Partnership What happens if an LP certificate isn’t filed w/ SDAT?

A

Failure to file will lead to personal liability of supposed limited partner unless supposed limited partner had good faith belief that filing had been completed, and within 30 days of knowing or should have know of failure to file, person files certificate or withdraws.

25
Q

Agency/Partnership: Partnership Compensation Are partners entitled to a salary?

A

No, not entitled to compensation for working for p’ship, unless written into p’ship agreement or compensation is related to the winding up of the business.

26
Q

Agency/Partnerships: Agency and Torts Commuting rules

A

General rule: not within scope of employment while commuting to and from work MD exception: If employer requires employee to use own car for business purposes then it is within scope of employment as soon as he leaves his house

26
Q

Agency/Partnerships: Termination of Agency What serves to terminate an agency relationship?

A

The death, bankruptcy or insanity of P, even with no notice to A.

27
Q

Agency/Partnerships: Agency and Contracts Doctrine of Election

A

T cannot take judgment against both P and A if was undisclosed Not followed in MD

29
Q

Agency/Partnership: Joint Ventures What is a Joint Venture?

A

A joint venture is a partnership for a limited time and limited purpose.

30
Q

Agency/Partnership: Dissolution of Partnerships Partnership at will

A

If there is no set term, any partner can quit w/o any liability, unless quitting constitutes breach of fiduciary duty

32
Q

Agency/Partnership: Partnership Profits How are partnership profits shared?

A

Partners share profits equally even if capital contributions are unequal, unless agreement provides otherwise.

33
Q

Agency/Partnership: Limited Liability Company What is an LLC?

A

Requires only one person, but can have many more. - Investors are called members - Members not liable for LLC’s debts - Members can manage the LLC and still can’t be sued - Members share profits based on capital contribution Must file w/ SDAT to be a valid LLC Failure to file personal property report for the tax year results in LLC forfeiting its right to do business and to bring ct. action (including derivative action), but LLC still exists as an entity.

34
Q

Agency/Partnerships: Agency and Torts Apparent Agency Theory of Vicarious Liability

A

Only liable if victim reasonably relied upon ads that the local gas station repair persons are servants of national oil company —Reasonable reliance required

35
Q

Agency/Partnership: Partnership Basics What is required to form a partnership (4 things)?

A
  1. Two or more persons. 2. No filing with the state. 3. No written agreement (RUPA is default unless p’ship agreement trumps this). 4. Intent to form a p’ship (can be implied).
36
Q

Agency/Partnership: Partnership Voting Discuss voting requirements/rights for partnerships.

A
  1. For ordinary business matters: Majority rules 2. For matters outside the scope of ordinary business: Unanimous consent (consider specifically: Selling p’ship’s goodwill and admitting new partners) 3. Absent an agreement, all partners have equal voting rights regardless of the amount of their capital contributions.
38
Q

Agency/Partnerships: Agency and Torts Vicarious Liability even if IC?

A

2 theories: 1. Inherently dangerous activity, or 2. Non-delegable duty

39
Q

Agency/Partnership: Partnership Compensation Are private agreements among partners as to who will pay a partnership debt binding on 3rd parties?

A

No. P’ship and partners can still be sued despite this private agreement.

40
Q

Agency/Partnerships: Restrictive Covenants When are restrictive covenants not to compete considered valid?

A

If reasonable with regard to (a) time; (b) geography; (c) subject matter; (d) public interest (consider the importance of more competition for the public- the more unique the business is the more likely more competition would be in the public’s interest)

42
Q

Agency/Partnership: Partnership Basics What does NOT result in the presumption of a partnership?

A
  1. Agreement to share losses (but may be additional evidence of intent) 2. Agreement to share gross returns or gross receipts
43
Q

Agency/Partnership: Foreign Limited Partnership

A

A limited partnership formed in another state that wants to do business in MD. - must file with SDAT - Doing business in MD w/o filing can lead to a fine and inability to sue as a plaintiff in MD - Failure to file does not invalidate foreign limited partnership’s contracts, does not prohibit it from defending in MD ct. and does not create any liability for the limited partners.

44
Q

Agency/Partnership: Partnership Basics What is presumef if two or more people share in the profits of a business?

A

There is a p’ship. EXCEPTIONS: 1. Debt repaid from profits 2. Wage paid from profits 3. Rent paid from profits 4. Receipt of goodwill of sold business from profits 5. Receipt of retirement or health insurance benefits paid from profits

45
Q

Agency/Partnership: Dissociation How does a partner dissociate from the partnership?

A

By quitting, dying, going bankrupt, or being expelled.

46
Q

Agency/Partnership: Dissociation Discussion liability issues related to partnership dissociation and any potential solutions to this liability.

A
  1. A dissociated partner can be liable for 2 years to p’ship creditors if creditor reasonably relied on dissociated partner still being a partner. 2. Dissociated partner can bind p’ship to k’s for 2 years if T reasonably believes dissociated partner is still a partner. SOLUTION: File a Statement of Dissociation with SDAT to avoid liability.
47
Q

Agency/Partnerships: Agency and Contracts Ratification

A
  1. Retroactive authorization - A has no authority but makes the K anyway, it is valid if P authorizes it afterwards 2. Important date is date of contract 3. Ratification must be before T withdraws 4. P must ratify entire deal 5. Undisclosed P can not ratify
48
Q

Agency/Partnership: Limited Partnerships Can a limited partner be held personally liable for the LP’s debts?

A

A limited partner can be held personally liable for the LP’s debts if: - a limited partner has her name in the limited partnership name and the creditor believes that the limited partner is a general partner; or - the limited partner takes part in the control of the business and the creditor reasonably believes, based on the limited partner’s conduct, that the limited partner is a general partner.

49
Q

Agency/Partnerships: Agency and Torts 2 Theories of Liability

A
  1. Negligent hiring/supervision 2. Vicarious Liability
51
Q

Agency/Partnerships: At-Will Employees When can an at-will employee be terminated?

A

At any time and for any reason, without any liability.

52
Q

Agency/Partnership: Limited Partnerships What is a limited partner allowed to do without loosing LP protections?

A
  1. allowed to be an employee or consultant to limited partnership 2. allowed to vote on limited partnership matters 3. allowed to be director, officer, or shareholder of a corporation that is a general partner
53
Q

Agency/Partnership: Limited Partnership What are the rights of limited partners?

A
  • Profits shared based on % of capital contribution - must own at least 5% of limited partnership to inspect tax records and names of all partners - bring derivative action - petition court for dissolution
54
Q

Agency/Partnerships: Agency and Torts Test for scope of employment?

A

4 W’s: 1. What was the agent doing? 2. When did he do it? 3. Where did he do it? 4. Why was he doing it?

55
Q

Agency/Partnership: Partnership Basics Discuss partnership liability issues.

A
  1. A partnership can sue and be sued in its own name. 2. If p’ship assets are insufficient, partners are personally jointly and severally liable for p’ship debts. 3. Incoming partners are not liable for debts incurred prior to their becoming a partner (although their capital contributions can be used to pay pre-existing debts).

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