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MEE & MBE > Business Associations > Flashcards

Business Associations Flashcards

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1
Q

Agency: GENERAL

A

A fiduciary relationship that is created when one party (principal/P) EITHER EXPRESSLY OR IMPLIEDLY authorizes another party (agent/A) to act on his behalf.
· Roots in K law
· Parties may only enter into an agency relationship if they possess the requisite CAPACITY
–> DIFFERENT standard for A & P

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2
Q

Agency: Capacity: GENERAL
· R3A §3.04

A

Same as general capacity required to enter into a K.
· Relevant time in which capacity is entered is measured WHEN THE AGENT ACTS
–> NOT when the P enters into the agency agreement

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3
Q

Agency: Capacity: P

A
  1. The party MUST be EITHER an individual OR recognized legal entity. (R3A §1.04)
    –> T4: An unincorporated, noncommercial organization = NO CAPACTIY to act as P (but individuals could).
  2. Individual MUST have reached the AGE OF MAJORITY (AOM)
  3. MUST HAVE required MENTAL CAPACITY to enter a K
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4
Q

Agency: Minors: GENERAL

A

Minors are not legally capable of undertaking binding contractual obligations.
· T4: K entered into by minor is VOIDABLE
–> The other party MAY be entitled to some reasonable compensation if there was NO FRAUD OR OVERREACHING
· Minor MAY ratify the K upon reaching the AOM
· MAY NOT avoid Ks for NECESSARIES (food, shelter)

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5
Q

Agency: P CAPACITY: Minors

A

A minor MAY NOT act as a P
· If they do appoint an A, the minor MAY DISAFFIRM EITHER:
–> Appointment; OR
–> Any action taken by the A
· MAY NOT avoid an agreement for NECESSARIES undertaken by the A
· Special rules for minors in entertainment to ensure Ks cannot be disaffirmed

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6
Q

Agency: P Mental Capacity

A

MUST HAVE the mental capability to understand the NATURE AND CONSEQUENCES of entering the agreement.
· W/o mental capacity req., VOIDABLE EITHER:
–> By that person when she regains capacity; OR
–> By her personal representative.

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7
Q

Agency: P W/O Mental Capacity

A

An agency appointment and ANY ACT OF AN AGENT done on behalf of an incompetent P MAY BE DISAFFIRMED OR RATIFIED by the P when P regains competence OR by the P’s personal rep.

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8
Q

Who may act as an Agent?

A

Anyone. via R3A: Minors/individuals who are mentally incompetent to enter Ks on their own behalf MAY SERVE AS AN A
· Some states require a minimum level of competency

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9
Q

A: Lack of Capacity

A

May limit A’s obligations and liabilities to the P or 3Ps

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10
Q

A: Legal Restrictions

A

In some states:
· Dual Agency
· Licenses
· Non-delegable Duties

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11
Q

Dual Agency

A

Some states have a legal restriction on an A representing P and 3Ps.
· May sometimes WAIVE w/ INFORMED CONSENT
–> E by a signed writing

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12
Q

Licenses

A

Some states require acting in certain activities to be licensed
· Only A w/ required licenses may act in those transactions

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13
Q

Non-Delegable Duties

A

A may generally be appointed to do anything the the P could do, BUT SOME DUTIES ARE non-delegable duties
· Either as a matter of K or by OPERATION OF LAW, some duties are personal to the P AND ONLY THE P’s PERFORMANCE WILL SATISFY THEM.

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14
Q

Agency Relationship: Consent

A

R3A: An agency relationship can ONLY be created by CONSENT OF BOTH parties.
· Consent MAY BE DEMONSTRATED orally, in writing, or by the parties conduct (R3A §1.03)

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15
Q

Agency Relationship: Writing Requirement

A

In some cases, a P will NOT be bound w/o a writing.
· GENERALLY, writing not required
–> Some states, Equal Dignities Rule

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16
Q

Equal Dignities Rule

A

Any K that must be E’d by writing under the SOF MAY ONLY be entered into by an A if the agency agreement is also in writing.

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17
Q

Agency Relationship: Consideration

A

Unlike most K, an agency relationship MAY be created WITHOUT consideration

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18
Q

Gratuitous A

A

A working for free

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19
Q

Apparent Authority (AA)

A

An A MAY BE VESTED w/ AA when the P says or does something to communicate to a 3P that the A is authorized to act on his behalf. R3A ·3.03

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20
Q

Agency Relationship: Operation of Law

A

· May be created
· Many states have created limited agency relationships to serve a specific purpose.

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21
Q

De Facto Agency Relationship

A

May be created based on DOCTRINE OF ESTOPPEL.
· Prevents a P from denying the existence OR avoiding the consequences of a Agency relationship b/c the P:
–> INTENTIOALLY OR CARELESSLY cause a 3P to believe that a valid agency relationship existed; OR
–> Failed to correct a 3P’s REASONABLE belief that a agency relationship existed despite being aware that the party might detrimentally rely on that belief. R3A §2.05.

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22
Q

Agent

A

Someone who has been authorized by P to act on the P’s behalf.

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23
Q

Different Types of Agents

A
  1. Universal Agent
  2. General Agent
  3. Special Agent
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24
Q

Different Types of Agents: UNIVERSAL AGENT

A

A who is empowered to engage in ANY AND ALL activities on behalf of the P.

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25
Q

Different Types of Agents: GENERAL AGENT

A

A who is authorized to engage in a SERIES of transactions of a particular type
· Sometimes for a continuous, ongoing period

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26
Q

Different Types of Agents: SPECIAL AGENT

A

A authorized to engage in a SINGLE transaction OR a time-limited series of transactions.

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27
Q

Actual Authority: GENERAL

A

Power P SPECIFICALLY granted to A to act OR that the A REASONABLY BELIEVES was authorized by the P

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28
Q

Actual Authority: Types

A
  1. Express
  2. Implied
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29
Q

Agency: A’s Remedy: GENERAL

A
  1. General breach of K action
  2. Lien against any property belonging to the P in A’s possession
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30
Q

Agency: Remedy for Breaches: ACTION TO RECOVER SECRET PROFITS

A

Equitable action
· Allows P to recover ANY PERSONAL PROFITS the A derived by breaching A’s fiduciary duties

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31
Q

Agency: P’s Remedy: GENERAL

A
  1. Right to w/hold payment
  2. P may seek damages
    –> EITHER of breach of K OR in TORT
  3. Force A to turn over all money or property owed to the P
  4. Action to Recover Secret Profits
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32
Q

Fiduciary Duties: P to A: Obligation of Compensation

A

Obligated to compensate UNLESS A is gratuitous
· Indemnify the A for any payments or expenses properly incurred in the course

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33
Q

Fiduciary Duties: P to A: Duties of GOOD FAITH AND FAIR DEALINGS

A

Requires the P to cooperate with the A in the performance of the A’s duties and AVOID UNREASONABLY interfering w/ the relationship.

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34
Q

Fiduciary Duties: P to A: GENERAL

A
  1. Obligation of the P to comply with the terms of the K
  2. Duty of good faith and fair dealings with the A
  3. Obligation to compensate the A
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35
Q

Fiduciary Duties: A to P: DUTY OF OBEDIENCE

A

A has a duty to conduct A REASONABLY AND avoid acts that will harm the P.
A has an obligation to obey the LAWFUL AND REASONABLE instructions of the P in the carrying out of the A’s duties.
T4: A NOT obligated to follow instructions that are:
· ILLEGAL OR UNDULY burdensome; AND
· Onerous.

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36
Q

Fiduciary Duties: A to P: Duty to Act w/ Reasonable Care

A

REQUIRES A to act w/ the degree of care, skill, and diligence that would ordinarily be exercised by an A in similar circumstances
· Objective standard
· A w/ particular knowledge or skill
–> MUST use them AND will be held to a standard of care that would be observed by an A w/ those specialized skills.

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37
Q

Fiduciary Duties: A to P: DUTY OF LOYALTY

A

A may seek the P’s INFORMED CONSENT to engage in an activity that would otherwise be a breach of the duty.
· Waiver will ONLY effective if the A discloses ALL MATERIAL FACTS AND otherwise acts in good faith

38
Q

Fiduciary Duties: A to P: FIDUCIARY DUTY OF LOYALTY

A

A MUST ALWAYS be on the P’s side and act for the P’s benefit. This means:
· A must NOT engage in self-dealing OR seek to enrich herself by virtue of her position as the A;
· A may NOT represent an adverse party against the P in a transaction;
· A must also AVOID engaging in competition w/ P
–> whether in the A’s personal capacity OR by working with 3Ps whose interests are adverse to Ps
· A must AVOID usurping the P’s opportunities
· A may NOT use property OR confidential information of the P to serve the A’s own purposes OR those of anyone other than the agent.

39
Q

Fiduciary Duties: P to A: GENERAL

A
  1. General K duty: Whatever is agreed upon
  2. Duty of Good Faith and Fair Dealing
  3. Obligation to compensate the agent
40
Q

Fiduciary Duties: A to P: GENERAL

A
  1. General K duty: Whatever is agreed upon
  2. Duty of Loyalty
  3. Duty to Act with Reasonable Care
  4. Duty of Obedience
  5. Duty to share information w/ P
  6. Obligation to maintain P’s property separately from A’s property and keep separate records.
41
Q

Termination of Authority: DEATH

A

Terminates the A’s authority.
· Death or cessation of the P will terminate the A’s ACTUAL AUTHORITY
–> Only effective once the A HAS NOTICE
–> Some states: A’s authority ceases AT THE MOMENT OF DEATH

42
Q

Termination of Authority: WAYS

A

Termination of Authority can be done by the P or the A BUT agency powers that are granted as securities and certain proxies may be irrevocable.
1. Death of an A
2. Loss of Capacity
3. When agreed upon
4. When circumstances change SO MUCH that the A should recognize that the P would no longer want to continue the agency
5. A breaches fiduciary duties
6. By operation of law when statutory provision so dictate

43
Q

Termination of Authority: WAYS

A

Termination of Authority can be done by the P or the A BUT agency powers that are granted as securities and certain proxies may be irrevocable.
1. Death of an A
2. Loss of Capacity
3. When agreed upon
4. When circumstances change SO MUCH that the A should recognize that the P would no longer want to continue the agency
5. A breaches fiduciary duties
6. By operation of law when statutory provision so dictate

44
Q

Ratification of A’s Actions; Adverse and Inequitable Effects

A

Ratification will NOT be permitted if it would cause adverse and inequitable effects on the rights of 3Ps.
· P who engages in conduct that causes other to REAONSABLE BELIEVE P has ratified the A’s conduct will NOT later be permitted to deny ratification if a 3P has DETRIMENTALLY RELIED on the ratification. (R3A §4.08).

45
Q

Ratification of A’s Actions; Adverse and Inequitable Effects

A

Ratification will NOT be permitted if it would cause adverse and inequitable effects on the rights of 3Ps.
· P who engages in conduct that causes others to REAONSABLE BELIEVE P has ratified the A’s conduct will NOT later be permitted to deny ratification if a 3P has DETRIMENTALLY RELIED on the ratification.

46
Q

A Acts w/ NO AUTHORITY; P Lacked Capacity

A

P did NOT have capacity AT THE TIME the A acted BUT later REGAINED CAPACITY:
· Act will be treated as valid ONLY FROM THE TIME OF RATIFICATION (R3A §4.02-4.03).

47
Q

A Acts w/ NO AUTHORITY; Ratification

A

A acts w/o authority BUT the P elects to be bound.
· Anytime a P later affirms the UNAUTHORIZED conduct of an A, the act will be treated as if it were authorized when it was done (R3A §4.01)
–> P MUST be FULLY informed of all RELEVANT facts
–> P MAY NOT change the terms OR PARTIALLY ratify the A’s acts.

48
Q

Inherent Authority

A

Power that results when an A has been given some actual authority WHICH THE A GOES BEYOND
· BUT which justifies binding the P in order to protect 3Ps
· An extension of apparent authority
–> BUT NO REQUIREMENT for the P to have any direct dealings w/ 3P to give rise to inherent authority
· A way to hold a P liable for unauthorized acts of an A when fairness requires it

49
Q

Obligations of P to 3P: GENERAL

A

When an A w/ actual authority enters into a K w/ a 3P on behalf of the P, the P WILL BE BOUND to the 3P.

50
Q

Apparent Authority

A

P hold out to a 3P that an agent is authorized to act on the P’s behalf EVEN THOUGH the A has no such power.
· If P’s conduct lead a 3P to REASONABLY RELY on the existence of an agency relationship –> P will be liable to 3P on any Ks the 3P enters into w/ the A.

51
Q

A’s Liability: Status Types of P

A
  1. Disclosed P;
  2. Unidentified P; or
  3. Undisclosed P
52
Q

A’s Liability: DISCLOSED P

A

The A dealing with a 3P on the PO’s behalf tells the 3P both the existence and identity of the P.
· P will always be liable to 3P
· A will NOT be held liable UNLESS the parties intend otherwise.

53
Q

A’s Liability: UNIDENTIFIED P

A

A discloses the existence of a P to the 3P BUT NOT the identity.
· If A acted with APPARENT AUTHORITY
–> Unidentified P will be a party to the K AND liable to 3P
–> A is ALSO a party to the K UNLESS agreement w/ 3P that the A will not be liable

54
Q

A’s Liability: UNDISCLOSED P

A

A dealing w/ a 3P discloses NEITHER the existence nor the identity of the P.
· A and 3P are parties to the K
· BOTH A and P are liable on the K

55
Q

A/P/3P Enforcement of K

A

· Disclosed P may enforce K against 3P;
· Unidentified and undisclosed Ps
–> MAY enforce a K against a 3P UNLESS allowing the P to enforce the K would result in an injustice to the 3P.

56
Q

A Acting w/o Authority

A

UNLESS the P has done something that would justify holding her liable to 3P, a P will NOT be liable for unauthorized actions by individuals purporting to be agents.

57
Q

A’s Implied Warranty

A

A holds himself out to 3P as possessing actual authority
· T4 impliedly warrants necessary authority
· T4 ensures 3P that A is authorized OR MAY BE HELD LIABLE for the damage that results.

58
Q

A = No Authority
P = Refuses to Ratify

A

3P may see\k damages against A

59
Q

A’s Implied Warranty: DISCLAIMER

A

A MAY EXPRESSLY disclaim the warranty of authority

60
Q

Enforcement of K: Implied Warranty: 3P Knows A Lacks Authority

A

3P MAY NOT enforce a warranty of authority against an A if the 3P was aware that the agent had no power to enter the K

61
Q

Doctrine of Respondent Superior

A

An employer can AND WILL be held liability for the tortious acts of his or her employees committed w/in the SCOPE OF EMPLOYMENT

62
Q

Doctrine of Respondent Superior; TWO-PART TEST

A

(1) There must be an employer-employee relationship b/w the tortfeasor AND the party to be held liable; AND
(2) The employee MUST have committed the tort WHILE acting within the SCOPE OF EMPLOYMENT.

63
Q

Respondent Superior: INDEPENDENT CONTRACTOR

A

One who engaged to perform a certain service for another according to THEIR own methods and manner, free from control and direction of his “employer” in all matters concerned w/ the performance of the service except as to the result thereof.

64
Q

Respondent Superior: EMPLOYEE

A

An individual hired to perform work for an employer under the supervision and direction of the employer regarding ALL OR AT LEAST MOST aspects of the completion of the work.

65
Q

Respondent Superior: SCOPE OF EMPLOYMENT

A

There is no vicarious liability for the employer for torts committed by the employee while acting OUTSIDE the scope of employment.

66
Q

Respondent Superior: Scope of Employment –> FROLIC

A

A SERIOUS OR MAJOR departure from the employee’s duties.
· MUST BE SUBSTANTIAL
· T4: An employer will NOT be held vicariously liable for acts of an employee on a frolic AND vicarious liability does not resume until the employee returns to work.

67
Q

Respondent Superior: Scope of employment –> DETOUR

A

A comparatively small deviation from the employee’s duties for personal activities
· T4: Generally w/in the scope of employment

68
Q

Respondent Superior: INTENTIONAL TORTS

A

Always be deemed OUTSIDE the scope of employment.
· May still be held vicariously liable for intentional torts that the employer authorized, done for the employer’s benefit, OR that are incidental to the nature of the employer’s business

69
Q

Respondent Superior: Fraudulent Misrepresentation

A

A P may be held vicariously liable for the fraudulent misrepresentations of an A if the A was authorized to speak on the matter.

70
Q

Respondent Superior: Independent Contractors

A

An employer will be held liable for torts of independent contractors related to inherently dangerous activities OR non-delegable duties

71
Q

Respondent Superior: Independent Contractors; Doctrine of Estoppel

A

An employer who holds out an independent contractor as an employee; OR
· Intentionally OR carelessly creates the belief that the contractor is an employee MAY BE ESTOPPED from denying that the contractor is an employee in a tort action by a 3P.

72
Q

Respondent Superior: Type of Liability

A

Joint and Several
· the individual harmed may see satisfaction from either the tortfeasor OR the employer OR both BUT may only obtain one satisfaction.

73
Q

Types of Unincorporated Business Organizations

A
  1. Sole proprietorships;
  2. General partnerships;
  3. Limited partnerships; OR
  4. Limited liability partnerships.
74
Q

Starting Sole Proprietorship

A

An individual can state a sole proprietorship simply by engaging in the business.
· No formal requirements or legal filings are necessary.
· MAY still need a license or permit depending on the TYPE of business.

75
Q

Sole Proprietorship: Taxes

A

Do NOT have to file separately from business.
· Owner just includes the business’s income and expenses on his or her personal tax return.

76
Q

Partnership

A

Two or more people in a FOR-PROFIT business jointly owned by both.

77
Q

Partnership: Contributions

A

Each partner shares in the profits or losses.
· EACH make EQUAL contributions and have an equal say in controlling the business.

78
Q

Partnership: Taxes

A

Not required to file a separate tax return.
· the Business’s profits and losses pass through to the partners and they include that information on their personal taxes.

79
Q

Uniform Partnership Act of 1997

A

UPA: Assumes that all general partners share equally in management rights, profits, and liabilities, ABSENT SOME AGREEMENT OTHERWISE.
· Default type of partnership

80
Q

Limited Partnership

A

One in which at least one partner acts as general partner and at least one partner acts as a limited partner
· LIMITED partners MAY contribute capital AND are entitled to share in the profits BUT MAY be limited in their participation in management AND cannot be held personally liable for partnership debts.

81
Q

Uniform Limited Partnership Act of 1916 -OR- Revised Uniform Limited Partnership Act

A

The general partner or partners are entitled to participate in the management of the partnership AND MAY be held personally liable for the partnership’s debts and obligations.

82
Q

Limited Liability Partnership

A

LLP/Registered LLP (RLLP): Partnerships made up only of limited partners.
· NO GENERAL PARTNERS who control the business and are personally liable for partnership debts.
· ALL partners are protected from personal liability for partnership debts and obligations
· Limited partners MAY manage business
· Not all states allow: some ONLY permit for certain types of businesses

83
Q

Joint Venture

A

Just a partnership formed by two or more people to engage in a single undertaking or project.
· Generally treated like partnerships

84
Q

Partnership Agreement: GENERAL

A

= K –> T4: MUST possess K capacity
· Must have reached the AOM; AND
· Must be mentally competent.

85
Q

Partner WITHOUT Mental Capacity

A

Will likely be able to avoid personally liability for partnership obligations.

86
Q

Partnership: REQUIREMENTS FOR ALL PARTIES

A

All parties MUST consent EITHER by words OR conduct.
· A person CANNOT become a partner WITHOUT the agreement of all other partners.

87
Q

General Partnerships: LEGAL REQUIREMENTS

A

No legal requirement that the parties enter into any type of formal agreement.
· MUST be in writing if SOF

88
Q

Partnership: FORMATION

A

Partnerships MAY be formed by:
· EXPRESS agreement; OR
· IMPLIED by conduct.

89
Q

Evidence of Implied Partnership

A

Owning property jointly is NOT ENOUGH; BUT
· Receiving a share of profits is PRESUMPTIVE E that a partnership exists UNLESS profits are received as payment of a DEBT, WAGE, RENT, BENEFIT, SALE or some other type of payment.

90
Q

LP/LLP

A

Generally MUST file a certificate of limited partnership OR some other official doc w/ the proper state authority (usually Sec. of State.)

MEE & MBE (12 decks)

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