MEE Flashcards
Creation of Agency Relationship
Agency arises when one person (P) manifests ASSENT to a 3P (A) that the A shall act on the P’s behalf + S2 the P’s control, and A must manifest assent or otherwise so consent to act.
P/A must have capacity (P = cap to etner into relationship and transaction; P = minimal capacity to do what appointed to do)
need not be compensated
need not believe/intend to enter into Agency relationship
Actual Authority
A principal will be bound to a K entered into by the A when the agent has actual authority.
An agent has acutal authority when the Ps manifestations cause the A to reasonably believe that the P wishes the A to so act.
Actual authority may be either express or implied.
- (A) Express – Ps explicit directions to agent (orally or in writing)
- (B) Implied – allows A to take whatever acts necessary to achieve Ps objectives, based on As reasonable understanding of his duties
- any act necessary to carry out agent express auth duties
- agent acted similarly in prior dealing before / P acquiesced or remained silent
- it is customary for agent in that position
Apparent Authority
A P is bound to a K entered into by an A with apparent authorty.
ApA exists when:
- (1) a 3P reasonably believes that the agent has the authority to act on behalf of the P AND
- (2) that belief is traceable from the Ps manifestations (principal holds agent out as having authority)
- P holds A out as having auth when he:
- a) gives position or title indicating auth
- b) previously held the A out and did not publish a revocation
- c) cloaked the agent with the appearance of authority
- P holds A out as having auth when he:
ApA continues until the P communicates termination to 3P
ApA not applicable if: (1) 3P had knowledge of lack of auth or (2) txn not in OCB
Estoppel
A person who has not represented that an individual is authorized to act as an agent may be estopped from denying the existence of an agency relationship or an agent’s authority with respect to a transaction entered into by the agent if:
- (1) the 3P justifiably induced to make a detrimental change in position bc he believed that the txn entered into was on belaf of the P
- (2) P failed to take reasonable steps and to use ordinary care (i.e. knew A acting w.o auth and not giving notice to 3P
Ratification
A P can ratify an act that was done on the principal’s behalf. If a P ratifies the A’s action, then the P is bound just as if the action had been authorized, even if the agent acted without authority.
There are four requirements for ratification:
- (1) principal must ratify the entire K
- (2) P and 3P must have legal capacity to enter into the K
- (3) ratify in a timely manner (the ratification must occur before the 3P w/draws from the K) and
- (4) the principal must know the material facts of the transaction involved in the original act.
Agent also remains liable if P was not disclosed
Agent K Liab
~~~ONLY DISCUSS IF CALL ASKS FOR IF AGENT BOUND~~~~
When an A enters into a K on Ps behalf and binds the P to a K, the agent might also become liable on the K.
In order to avoid becoming liable on the K, the agent needs to
- enter into the K on behalf of a disclosed principal,
- disclose that P to the 3P, and
- not agree to become a party to the K.
Generally, if the A lacks authority to bind the P, then breach of implied warranty has occurred, and A is liable to 3P for breach. However, in cases when P bound to 3P after A acts with apparent authority in binding them, the A is not liable on the K.
The liability of the A depends on the TERMS of the K and the DEGREE to which the P is disclosed:
- [Disclosed] – A purport to act for P, 3P knows P exists and its identity.
- Follows the general rule above.
- [Partially Disclosed] if 3P has notice of Ps existence, but not ID
- Unless 3P and A agree otw, A becomes party to K
- [Undisclosed] no notice of existence or ID of P
- A becomes party to K
- Whether or not P party depends:
- if A had authority or P ratifies –> P is party [P-A-3P]
- If A did not have auth –> only A and 3P parties
Once a third party discovers the existence of a P, the election of remedies doctrine requires the 3P to choose to hold liable either P or A.
EE v. IC
Primary focus is whether the P had the right to control the manner and method for which the job was performed
- EE – someone who is S2 Ps control with respect to the physical conduct of the Agents performance
- IC – non EE agent, not S2 Ps control about physical conduct or method of As performance
Courts analyze the following to see if person EE or IC:
- whether maintain high level indep
- free to work with others
- fixed fee/no salary/gets paid on results
- liable for work done and accept resp to remedy defects
owns own tools
VL for A’s Torts
Vicarious liability asserts that a P is liable for the acts of an A, even though the P is not directly responsible.
(1) A P can be liable under the doctrine of respondeat superior when the A commits a tort while a_cting within the scope of employment._
- Acts w/in scope of emp when (1) performing work assigned by ER or (2) engaging in course of conduct S2 ER control
- To determine scope of employment, cts analyze whether:
- (a) the conduct is of the kind the EE was employed to perform
- (b) occurs on the job (i.e. substantially within the authorized time and space limits)
- (c) whether the act was motivated in whole or in part by a desire to benefit the ER/P
- Not w/in ScEMP if unrelated to AND not intended to serve any purpose of the ER
- To determine scope of employment, cts analyze whether:
(2) A P can also be VL when an A acts with apparent authority and commits a tort and their appearance of authority allowed them to do so.
* The 3P must reasonably believe that the A was acting with actual authority and the belief must be reasonable and traceable to a manifestation by the P. [if a 3p reasonably believes IC has apparent auth can hold liable].
Intentional Torts generally outside the scope of emp, UNLESS, occur within space and time limits of employment, acting for the ER benefit, and was the kind of work that the person was hired to do OR the act was specifically authorized by the ER
A’s liab – will be liab for acts of neg or intent torts, not liable for P torts
PL P for A Torts + IC Torts
A P/ER will be directly liable for A’s acts, even if outside scope of emp if:
- (a) P intended the conduct/consequences (i.e. had actual auth or ratified)
- (b) P was negligent or reckless in selecting, training, supervising, or controlling the agent
- (c) it is a non-delegable duty
Generally, a ER/P has not liability for IC torts except:
- inherently dangerous activity
- non-delegable duty owed by P
- negligent hiring, supervision
- P retains control over certain tasks and the tort occurs within those tasks
- Estoppel - P holds out C as agent, 3P reasonably relied on IC skill, and 3P suffered harm
Duties Owed by Agent to P
A owes several mandatory duties to the P including:
- Duty of Care – duty act w/ the care that a RP in a like position would exercise under similar circumstances, measured by local standard, if special skills hold to that
- Duty of Loyalty – duty to act solely and loyally for Ps benefit in matters connected to the Agency
- encompasses duty not to:
- usurp biz op
- not use P confidential info
- not deal with P as adverse party w/o Ps knowledge
- not take a financial gain/skim off top from P
- encompasses duty not to:
- Duty of Obedience – duty to obey all reasonable directions of the P and act within scope of authority
Also owes duties to
- (4) Provide Relevant Info and Accounting
- (5) to Keep and render accounts
- (6) implied duty to act in accd with K term, if there is one
General Partnership
A GP is formed whenever two or more persons associate (whether or not in writing) for the purposes of carrying on a business for profit.
It is not necessary that such persons have the SI to form a p’ship.
The only agreement necessary to create a p’ship is the agreement to conduct a for profit business as co-owners.
- This agreement may even be implied by the conduct of the parties when they have not entered into a written or oral agreement.
If carrying on as co-owners for profit or if someone receives share of profits, assumed P’ner UNLESS payment is for: a debt; wages as EE or IC; rent; of an annuity or retirement benefit; of interest/loan charges; OR for sale of goodwill of biz
Incoming P’ner must secure consent of all existing partners
LP
Is a p’ship composed of LPs and at least one general partner.
- LP’s liability for p’ship debts is limited to her capital contribution to the P
- General partner has PL for p’ship debts like in GP
LP not formed unless Certificate of LP filed w SoS which must include:
- name of p’ship
- address of p’ship principal office
- name and address of registered agent + each GP
- whether p’ship is LLLP and
- signed by all GPs
New P’ners can only be admitted by written consent of all parties after creation unless PA says otw
LLP
A LLP is a p’ship in which p’ner PL for obligations of the p’ship is eliminated. However, a p’ner is still is PL for his own personal misconduct.
To become LLP
- (1) must be approved by all p’ners of GP (same # as to amend), unless PA provides otherwise
- (2) must have LLP at end of name
- (3) To enjoy LLP status, the p’ship must file a Statement of Qualification with the SoS (does not create new p’ship) includes:
- (i) Name and address of P’ship
- (ii) statement that the P’ship elects to become an LLP and
- (iii) deferred effective date (if any)
Amending PA
Unless PA provides otw, P’ship agreement may be amended at any time with a unanimous vote
Authority to Bind the P’ship
The scope of a p’ner authority is governed by agency law principles. Each p’ner has equal rights in the management and conduct of the p’ship business
- P’ner is agent of P’ship for the purpose of its business and can contractually bind the partnership when the partner acts with either actual or apparent authority.
Actual Authority
- express- can arise from PA itself, authorization from other partners or statement of authority filed with the state
- implied actual authority – p’ner may take actions reasonably incidental or necessary to achieve p’ner duties
- If PA is silent as to scope of agent-p’ner authority, a P has actual authority to commit a p’ship to usual customary matters, unless the p’ner has reason to know that (1) other p’ners might disagree or (2) for some reason consultation with fellow p’ners is appropriate.
- Under general agency law principles, a p’ner does not have authority to take unusual or non-customary actions that will have a substantial effect on the p’ship (or to amend the PA); for such actions unanimous consent of the p’ners is required.
- But if there is a difference in opinion about acts within the OCB, only a majority of p’ner approval is necessary.
Apparent Authority – A p’ners act that was not authorized by the p’ship may nevertheless bind it under the principle of ApA. For ApA to apply, the p’ner must perform the unauthorized act in the ordinary course of apparently carrying on either the p’ship business or business of a kind carried on by the p’ship. (OCB = normal and necessary for managing the business)
- However, the third party with whom the partner was dealing cannot hold the partnership liable when that party knew or had received notification that the partner lacked authority. For the partnership to escape liability, the third party generally must possess actual knowledge of the partner’s lack of actual authority.
- **for acts outside scope of biz –> need manifestation by p’ship that p’ner had authority to be binding
Liability of P’ners
A p’ner is J/S personally liable for all p’ship obligations.
- Because a p’ner is an agent of the p’ship, the p’ship is liable for a p’ners tortious acts, including fraud, committed in OCB or with the p’ship’s authority (actual or apparent). However, not liable for criminal acts of other p’ners just by virtue of being in the p’ship
-
Incoming P’ner
- A person admitted as a p’ner into an existing p’ship is not PL for any prior P’ship obligations. However, any capital contributions made by an incoming partner to the p’ship is at risk for satisfaction of such p’ship obligations.
-
Dissociating P’ner
- P’ship is not terminated until the p’ship biz is wound up. After dissolution, the p’ship is bound by a p’ner’s act that is appropriate for winding up the p’ship. Each p’ner is liable to the other p’ners for his share of p’ship liab incurred by such post-dissolution acts. Further, although a dissociated p’ner loses any right to participate in the biz, his apparent authority to bind the p’ship lingers after dissociation for up to 2 years.
Judgement Enforcement Against P’ner Personal Assets
- Judgement against the p’ship is not a judgement against the individual p’ner
- Unless there is also a judgement/suit against the p’ner, a judgement against the p’ship cannot be satisfied from the p’ner assets, only from p’ship assets.
- Even though a p’ner is PL for the p’ship obligation, a p’ship creditor generally must exhaust the p’ship assets before levying on the p’ners personal assets.
Liability of LP’ners
- not PL for obligations of LP
- liable for own misconduct
- at risk of lsoing capital contribution to p’ship OR
- may become PL if p’ner participates in management
P’ner Duties to EO and P’shp
A p’ner is an A of the P’ship and owes the p’ship and the other p’ners two fiduciary duties:
- (1) DoL – requiers the P’ner to act in the best int of the P’ship
- Under DoL P’ner must refrain from:
- (i) competing with P’ship biz, unless agreed otw
- (ii) advancing an interest adverse to P (having a COI)
- (iii) usurping P opp or otw using P’ship prop or biz to dervie personal benefit, without notifying the p’ship
- pship opp is one that: a) is closely related to the p’ship existing or prospective line of biz; b) would competitively advantage the p’ship and c) the pship has financial ability, knowledge, and experience to pursue
-
Exceptions
- However, the PA can designate certain activities as not violating DoL as long as not manifestly unreasonable, but cannot do away with DoL all together
- P’ner not liable if:
- (i) fully discloses material facts AND
- (ii) either PA is amended OR all partners consent
- Under DoL P’ner must refrain from:
- (2) DoC – Under the DoC, a p’ner is prohibited from engaging in
- (a) grossly negligent or reckless conduct,
- (b) intentional misconduct,
- (c) or a knowing violation of law.
- ~(3) GF and Fair Dealing
- ~(4) Duty to Provide Full Info
- UPA – render on demand true and full info about things fx p’ship
- RUPA – shall disclose w/o demand full info about p’ship biz and affairs
If P’ner breach –> may be PL to P’ship for losses; or other partner may maintain direct action to enforce the p’ner right (incl violation fid duty), but P’ner cant maintain deriv action
Who Do they Apply to?
- Generally only apply to P’ners (dealing b/t prospective p’ner not subject to these duties)
- Upon P’ner dissociation or p’ship dissolution duties dont apply unless p’ner engaged in winding up
- If participating in winding up, applicable besides noncompete aspect of DOL
Rights of P’ners Among Themselves
Profits and Losses – PA controls right to share in P/L, division need not be the same, if silent entitled to even share of P/L (even if only silent losses, losses shared in same manner as profits)
Right to Mgmt and Control – Each p’ner has equal rights in the management and conduct of the p’ship business (incl actual auth to conduct usual and customary P’ship matters)
- A difference arising as to a matter in the OCB of the p’ship may be decided by a maj of the p’ners [MAJORIT]
- An act outside the OCB of p’ship and an amendment to p’ship agreement may be undertaken only with affirmative vote or consent of all p’ners [UNANIMOUS]
Distributions – P’ner cannot demand profit distribution but is entitled to have her account creditited with her share of prifits
Transfer of P’ship O‘Ship – A partner has a transferable partnership interest, i.e. a partner may transfer the right to share in the profits and losses of the partnership and/or to receive distributions. Any other rights cannot be transfered, unless PA provides otw
- The transfer or assignment may include his entire interest or only part of it
- Such a transfer does not trigger dissolution or dissasociation of that P’ner from the partnership (A transferor will remain a partner with all the associated rights and duties apart from an interest in the distributions transferred)
- Rights of Transferee
- A transferee is not entitled to participate in the management or conduct of the partnership business or access partnership records.
- A transfer of a partner’s partnership interest does not make the transferee a partner unless the other partner or partners consent to making the transferee a partner
- Right to receive distributions, seek judicial order of dissolution (and to get accounting upon dissolution)
- A transferee is not entitled to participate in the management or conduct of the partnership business or access partnership records.
Right to P’ship Property – any property acquired by p’ship (or with p’ship assets) is owned by p’ship, not p’ner individually.
- P’ners have equal right to use prop for P’ship purposes
- But personal use of p’ship property requires consent of other partners
- Cannot transfer o’ship interest in p’ship property
- Separate v. P’ship Prop
- Prop acquired in name of p’ner is rebuttably presumed separate property as long as:
- (i) no p’ship assets or P credit used to acquire
- (ii) Title to prop does NOT reference p’ship
- If that does not solve look at use, tax treatement, source funds to maintain prop
- Prop acquired in name of p’ner is rebuttably presumed separate property as long as:
Renumeration (payment for P’ner Servs) – P’ner not entitled to remuneration for services performed for p’ship UNLESS (A) PA to contrary or (B) reasonable compensation for services while winding up
Advance Funds + Reimbursement,– P’ship must reimburse p’ner for advance to p’ship beyond thier capital contribution amount
- (1) Payment must be in proper course of p’ship biz and (2) p’ner must comply with DOC and DOL
Indemnification – p’ship required to indemnify p’ner for PL incurred in OCB
Access to Records – (mandatory) PA cant restrict this right unreasonably; P’ship must permit its p’ner and thier agents to access or copy all p’ship records in biz hours; gotta give any info on demand concerning p’ship biz unless unreasonable or improper, not on demand must give info relevant to p’ner to excercise rights and duties under PA
Dissociation P’ship [this card is crazy]
P’ner can w.draw at any time and without notice
Events triggering Dissociation
- Voluntary Dissociation – p’ner gives notice of w/drawl to p’ship
- cant prevent withdrawl all together in PA
- can provide that it be in writing (which is not generally required)
- Involuntary
- Occurence in PA
- Expulsion event in PA
- expulsion by unanimous consent of p’ners if
- (a) unlawful to continue to carry on with the p’ner or
- (b) person transferrred all interest to assignee (not for security purposes)
- Judicial Expulsion (PA cant prevent this) if:
- (a) p’ner engaged in misconduct that adversely and materially affected the business
- (b) willfully and persistently caused a material breach of PA
- (c) breached duty to P’ship or P’ners
- BR (or assign interest to creditors)
- Incapacity/Death
- Appoint PR/Reciever
- Termination of Entity P’ner
Wrongful Dissociation
- Dissociation deemed wrongful if:
- If at will p’ship –> A p’ners dissociation is wrongful only if it is in express breach of an express provision in the P
- If P’ship for definite term/undertaking –> dissociation wrongful if it occurs before the completion of an agreed upon term or undertaking
- Effect on P’ner
- A p’ner who wrongfully dissociates is liable to the p’ship and other p’ners for damages caused by the dissociation.
- In addition, a dissociated p’ner generally does not have the right to participate in the mgmt or conduct of the p’ship biz AND cannot participate in the winding up.
- Payout
- If decide to wind up
- the dissociated p’ner is not entitled to any payout until the end of the original term unless the p’ner can prove to the court that earlier payment would not cause undue hardship to the business
- If other p’ners decide to continue
- entitled to have interest bought out, but since liable for damages they may not be entitled to anything if damages > buyout value
- generally if WD person serves demand for payout, other p’ners must pay + interest w/in 120 days, otherwise can use judicial action to determine buyout price and compel payment
- If decide to wind up
- Effect on P’ship
- Wrongful dissociation may, but does not necessarily, result in dissolution of the p’ship.
- Wrongful dissociation or death of p’ner creates a possibility of dissolution, if within 90 days of dissociation, a maj of remaining p’ners express a will to wind up the biz.
- If remaining p’ners decide to continue the business, they could buy out the dissociating p’ner interest (value = greater of liquidation or going concern value + interest), less any damages caused by his wrongful dissociation, and continue the business as is.
- if P’ship purchases interest, must indemnify against p’shp liabs, whether incurred before or after dissociation, unless due to that p’ners actions
- If remaining p’ners decide to continue the business, they could buy out the dissociating p’ner interest (value = greater of liquidation or going concern value + interest), less any damages caused by his wrongful dissociation, and continue the business as is.
- Wrongful dissociation or death of p’ner creates a possibility of dissolution, if within 90 days of dissociation, a maj of remaining p’ners express a will to wind up the biz.
- Wrongful dissociation may, but does not necessarily, result in dissolution of the p’ship.
Rightful Dissociation – The dissociation is rightful—that is, dissociating partner has no obligations to the other p’ners—when the p’ship is at will and the dissociation breaches no express provision in the p’ship agreement, or the PA so provides.
- Effect on P’ner
- If the dissociating p’ner is not wrongful, the p’ner is not liable for damages and would retain the right to participate in the dissolution and winding up the p’ship (and actions during that time can bind p’ship)
- Effect on P’ship
- Once a P’ship has been dissolved, but before winding up of biz is complete, the p’ship may choose to resume carrying on its business as if dissociation never occurred.
- To do so, the p’ners (including any rightfully dissociated p’ners) must agree to waive the right to terminate the p’ship within 90 days of dissociation.
- A person winding up the p’ship biz may preserve the biz or property as a going concern for reasonable time to max value.
- Once a P’ship has been dissolved, but before winding up of biz is complete, the p’ship may choose to resume carrying on its business as if dissociation never occurred.
Dissolution P’ship
To terminate a p’ship there needs to be (1) an event causing dissolutoin and (2) winding up – not terminated until wound up
(1) Events Causing Dissolution – Unless OTW agreed:
- (a) occurence of event agreed upon in PA
- (b) event that makes it unlawful for all or substantially all p’ship biz to continue unless it can be cured w/in 90 days
- (c) judicial determination
- (i) sought by P’ner
- econ purpose of p’ship frustraetd unreasonably
- another p’ner conduct makes it not reasonably practicable to carry on with that p’ner
- not otherwise practicable to carry on p’ship biz in accd with PA
- (ii) sought by transferee of p’ship interest
- after term expires if fixed OR at any time if at will or after charging order issued
- (i) sought by P’ner
- (d) [if p’ship at will] notice of p’ner express will to w/draw (dissociation)
- majority express will to wind up
- (e) [if for fixed term]
- expir term or undertaking complete
- if keep going, presume agreed to continue as p’ship at will
- all p’ner agree to dissolve wind up
- w/in 90 days p’ner associating (death/BR/WD) + majority express will to wind up
- expir term or undertaking complete
(2) Winding Up
- Who
- any p’ner not WD can participate
- legal rep/last surviving p’ner
- any p’[ner/transferee/legal representative who seeks judicial wind up
- What do they do?
- dispose of p’ship assets + distribute to:
- (1) outside creditors
- (2) inside creditors
- (3) p’ner captial contributions
- (4) any surplus distributes evenly or accd to PA (if insufficient share in losses)
- dispose of p’ship assets + distribute to:
- Waiver
- Once a P’ship has been dissolved, but before winding up of biz is complete, the p’ship may choose to resume carrying on its business as if dissociation never occurred.
- To do so, the p’ners (including any rightfully dissociated p’ners) must agree to waive the right to terminate the p’ship within 90 days of dissociation.
- Once a P’ship has been dissolved, but before winding up of biz is complete, the p’ship may choose to resume carrying on its business as if dissociation never occurred.
Actions for Misconduct P’ship
A p’ship may pursue legal action against a p’ner for breach of the P’ship agreement or for violating a duty owed to the p’ship that caused the p’ship harm. A p’ner may pursue legal action against the p’ship or another p’ner to enforce the p’ner rights under PA or RUPA. In addition can seek an accounting as to the p’ship business.
Reqs for Valid Marriage
- consent from both parties
- need capacity to give consent
- marriage license
- reqs
- meet min agre req
- fulfil waiting period
- complete premar med testing if reqd in state
- marry before expir
- will not give license if:
- bigamy
- too closely related
- marraige sham
- parties cant understand nature of act
- reqs
- ceremony
Common Law Marraige
(1) have legal acapacity to marry
(2) cohabitate
(3) present intent to be marreid
(4) hold EO out as spouses
Annulment (Void Marraige
(i) Bigamy
(ii) incest
(iii) mental incapacity
only defense - remove impediment, but that makes it voidable