Agency & PS Flashcards
3 components of Agency
ABC
Assent by both
Benefit of P
Control by P
Entitles that can be Principals
Employer
LLC
LLP
Unincorproated cannot be P bc no legal capacity
Characteristics of IC
Maintain high level of independence
Free to work for other ppl
Fixed fee
Owns own tools
Termination of Agency
Either party can terminate it unilaterally
Common Agency fact pattern
- Arguable formation of agency
- Agent will do work on behalf of P
- P will get sued by TP
Agency - 4 types of legal authority to K
- Actual express authority
- Actual implied authority
- Apparent authority
- Ratification
Diff btw actual and apparent
Actual : P —> Agent
Apparent: P —> TP re agency
Actual express authority
Communication btw A + P—written or oral
Intent: A believed he is doing with P wants. Belief needs to be objectively reasonable
Termination by death— actual express authority
P dies—termination when A has actual knowledge of P’s death
A does — immediately terminates
Actual Implied Authority
Communication btw P+ A
P creates authority by using words or conduct to convey authority to A to do whatever is necessary to achieve goal
A can act within accepted business custom or trade usage
Apparent Authority
Communication btw P + TP
P communicated with TP that caused TP to reasonably believe P consents to acts done on his behalf
Reasonable? Look to their prior business dealings
Revocation of Apparent Authority
P needs to tell TP no more authority
Until revoked, apparent authority exists
Ratification by P
After the fact action
- P has knowledge of material terms of K
- P accepts the K’s benefit
Upon ratification —> P is L for the K
Can Ratify to either A or TP after the fact
NOTE: both A and P can be L
3 types of principles
Disclosed
Partially disclosed
Undisclosed
Disclosed P
Parties to K — P + TP
TP knows:
1. A is acting on behalf of the P
2. P’s identity
Partially Disclosed P
Parties to K — P + TP + A
TP knows A is working for P, but doesn’t know P’s identity
Undisclosed P
Parties to K — TP + A
TP does NOT know:
1. A is working on behalf of P
2. P’s identity
A will be L
Whether undisclosed P is also a party depends if A had authority to bind P to K
Agency Torts v K
Torts - vicarious L
K — actual, apparent, ratification
Vicarious L of P
Only for employees. Not IC
More control, more L
When is a P L for IC ?
Nondelegable duties
- Inherently dangerous tasks
- P neg in hiring IC
- P retains control over certain tasks, and tort occurs during that task
Determine scope of employment for VL
Did A intent to benefit P?
Was A’s conduct the kind that A was hired to perform?
Did the tort occur on the job?
Frolic
Significant deviation — outside scope of employment
Detour
Minor deviation — tort w/in scope of employment
Is P VL for intentional torts of A?
Generally No
Unless:
- conduct occurred w/in general space and time of employment
- A was motivated in some part to benefit P
- act was kind that A was hired to perform
Fiduciary Duties of Agency
Agents owe all Ps 3 duties:
Duty to exercise reasonable care
Duty to obey reasonable instructions
Duty of loyalty
Duty of Loyalty — Agency
- Cannot usurp business opp
- A cannot take secret profit
- A cannot compete in competing business
PS — Definitok
Two or more ppl
Carry on a for profit business
As co owners
Share profit
Share control
Do you need SI to form PS?
No, just need to meet elements: co owners and share profit
Presumption of Sharing Profits
Presumption that there is a PS
DOES NOT APPLY:
- paying debt
- rent
- wages
PS Liability
Each partner is personally L for the debts and obligations of the PS
PS Taxation
No entry level taxation — passes through
PS AGREEMENT
PS K is law of PA
Don’t need one, but if you have one, then it will govern + trump state law (unless state law is mandatory)
Mandatory state law:
- liabliy to TP
- cannot deny right to access books
- fiduciary duties
Fiduciary Duties - PS
Every partner is a fiduciary of PS + owes the below duties
Duty of loyalty
Duty of care
Duty of Loyalty — PS
- cannot compete w PS business
- advance an interest adverse to PS
- usurp PS opp
Cannot eliminate it; but PS can limit it, as long as not unreasonable
Safe harbor - duty of loyalty
Worried something might be disloyal?
Partner makes full disclosure of all material facts —> partners can vote to ratify
Duty of Care — PS
Partners must not engage in:
1. Grossly negligent or reckless conduct
2. Intentional misconduct
3. Knowing violation of law
PS CANNOT REDUCE DOC
Can duties of a PS be modified?
DOL yes
DOC no
Who owed duties to a PS
Duties apply to current partners only
Not prospective or former
Division of profits and losses
Can have a K for division; Division of both doesn’t have to be the same
Capital doesn’t have affect on division
When no PS K, divide profits evenly, losses follow
Distributions
GR: partner do not have right to demand distribution
They can agree in advance to allow distributions to be made according to PS agreement
Transfer of PS Interest
GR: partner has right to transfer their PS interest
This will not dissolve the PS, but partners may require to change default rule to require majority vote
New Partner in PS
when new partner is introduced –> all existing partners need to consent
can have a PS committee to vote instead of all
Managing PS
GR: every partner has equal rights in the management and control of the PS
this can be changed in the PS K
Common division is to reflect the partners’ capital contributions instead of an even share
Ordinary Business – PS
ordinary business –> majority vote
ie, declaring contribution
Extraordinary Business – PS
extraordinary business –> Unanimous vote
ie, amending PS agreement
Quroum
No GR for quorum for PS
Access to Records
All partners (and their agents) must be provided with access to records/books
This is MANDATORY –– cannot be modified in PS K
Dissociation –PS
Partner leaves PS
Voluntary Dissociation –partner can give notice to PS that they want to withdraw
Involuntary Dissociaiton – can happen if:
- event triggered in PS k
- expelled
- unlawful for PS to do business w/ that partner
- court order
- partner goes bankrupt
- partner becomes incapacitated or dies
Can a PS prevent a partner from withdrawing?
No, but can provide restirctiosn
ie, written notice, L for wrongful dissociation
Consequences of Dissociation
Dissociation ≠ Dissolved
Former partner has no right to manage + no more duties to PS
If PS continues, it must buyout former partn’s interests
Agency of PS
all partners are an agent to the PS
Express Authoity – PS K, statement of authoirt filing, or ad hoc authorization
Implied Authority – exists based on reasonable belief action is necessary
Apparent Authority – PS may be bound due to parnet acting in ordinary course of business –– Based on PS interactions with TP
Tort L – PS
PS is L for tort committed by partners acting w/in scope of PS
Incoming Partner L for PS obligation?
No
Former parner L for PS obligations?
Possible to be personally L that occured post dissociation
2 steps to terminating PS
- dissolution
- winding up
Dissolution – Types of triggers
- PS at Will
- PS for a Term or Undertaking
- Any dissolving event set in PS K
- Any event that makes it unlawful to continue if not cured w/in 90 days
- Judicial determination
Who winds up PS?
any partner not wrongfully dissociated;
legal rep of the last surviving partner;
any partner, legal rep, or transferee may seek judicial supervision of wining up
Power of Person Winding Up PS
- dispose and transfer of PS property
- discharge PS liabliites
- preserve PS business to maximize value
Statement of Dissloution
filing that gives notice to TP that the PS has been dissolved after 90 days
why file? limits apparent authority and liability
Prioroity of distributions
- creditors
- partnes
LLP
PS, in which each partners’ personal L is eliminated
Name must always end with RLLP or LLP
**MUST file with state
LLP – Formation
- must file with state
- to transform from GP to LLP, need vote authorizing transformation
- if PS K is silent, then need unanimous vote
LLP – termination
partners can volunatrily cancel LLP status
State can revoke LLP status
LP
Have GP who deals with managing and LP who is passive
GP – personally L
LP – limited L
LP – formation
file certificate of LP, must contain:
- name of LP + LP in the title
- in state address
- name of agent in state
- name and addresses of all GP
- statement of duration
- signed by the GP
Comes into existence when filed––effective if there is substantial compliance with the requirements
Limited Partner – LP
- can join at inception of LP or w/ unanimous consent of partners
- GR: LP does not vote––can modify in LP K
- has right to records
- L to TP: limited, unless starts having more active role in PS
- LP can (without considered “managing”):
- be an officer/director/SH of the GP
- consult GP on PS affairs
- act as a surety of PS
- request to attend meetings
- wind up PS
- propeose/approve PS matters - Withdrawl – <6 month written notice
General P – LP
- join at inception or unanimous consent
- Same rights/powers as GPS
- Personall L to TP –> to go around this, GP can be a corporations
- can voluntarily withdraw
- might be removed if transfer interest
- if becomes bankrupt or insolvent can be removed
Duty to Account –PS
duty to account for any progir and hold any profits as a trustee for PS
