MEE Essentials: Agency + Partnership Flashcards
When does agency relationship exist (rule statement)
CONSENT by both principal and agent
to BENEFIT principal
CONTROL over agent by principal
How can agency relationship terminate?
Principal manifests desire to discontinue agent relationship, or other ways
Do partners in general partnership/LLC have 1) actual or 2) apparent authority to bind partnership into Ks?
BOTH, so long as in normal course of business
Actual authority rule statement
Actual authority can be EXPRESS where agent is given authority to act for principal, or can be IMPLIED when principal’s conduct leads agent to believe it has authority
How can implied authority be establsiehd?
Custom, past course of conduct, industry norms, emergency, necessity
When does actual authority terminate?
Reasonable time passes
change of circumstances
death/incapacity of principal
Apparent authority rule statement
1) person dealing with agent must have REASONABLE BELIEF in AGENT’S AUTHORITY and 2) belief must be CAUSED by some act or neglect of PRINCIPAL
Ratification rule statement
Even if agent acts without authority, principal can ratify acts (and thus become liable) by
1) expressly or impliedly ACCEPTING benefit and
2) Principal KNOWS of material facts of acts and had CAPACITY (even if didn’t know until after K formed)
Principal can choose NOT to ratify
When is agent bound in K with third party?
-when he had no ACTUAL or APPARENT authority to enter
-when principal UNDISCLOSED or PARTIALLY DISCLOSED
When is agent liable to principal for breach of K
when he acts BEYOND HIS AUTHORITY
vicarious liability rule statement
employer is liable for tort of employee acting 1) in SCOPE of employment and 2) was DETOUR
Intentional tort only if 1) AUTHORIZED by principal 2) to BENEFIT principal 3) arose NATURALLY due to employment
liability for agent and principal?
J&S
indemnification rule statement
A principal can recover against agent for indemnification if agent acts beyond his authority
Direct liability of principal rule statement
A principal is directly liable for negligent hiring/supervision/failure to fire agent
What duties are owed by agent?
CARE and LOYALTY (no self-dealing, no profit w/o disclosure, duty to follow instructions)
May principal recover profits/losses from agent?
Yes, only when agent in BREACH
Partnership formation rule statement
A partnership is the association of two or more persons to carry on as co-owners, as business for profit, whether or not the persons intended to form a partnership
Profit sharing presumption
Where profit sharing exists, PRESUMPTION of partnership UNLESS payment of debt/rent/wages
Other financial indicia/control of partnership?
capital contributions, mutual agency
must 1) writing or 2) certificate be filed to form GENERAL partnership or SPECIFIC
General: NO, neither required
Specific (LLP/LP) : certificate IS required
If limited partnership tries to form but fails to formality, what happens?
Courts will consider it a GENERAL PARTNERSHIP (default form)
Is partner entitled to separate payment for services?
NO, bc compensated by profits (unless agreed upon)
Ordinary v. extraordinary matters
Partners are agents and comanagers with equal rights. In settling disputes, a majority vote is required to settle ordinary affairs. A unanimous vote is required for extraordinary matters
Partnership liability: incoming/outgoing partners
Partners are J&S liable for partnership debts
Incoming partners are NOT liable for debts prior to joining partnership (though capital contributions may be drawn upon)
Outgoing partners ARE liable for debts incurred during time in partnership
Partner fiduciary duties: 3 types of duties
Partners have FIDUCIARY DUTIES to one another and must act IN GOOD FAITH
Duties include duty of LOYALTY (no usurp, self-dealing, or competing), duty of CARE, and duty to ACCOUNT
Dissociation definition + notice requirements
Dissociation is the change in relation of partners.
PERSONAL notice required to prior CREDITORS
GENERAL notice to others who knew of partnership (newspaper)
Three steps to end partnership
1) dissociation
2) winding up
3) dissolution
can partner withdraw from partnership at any time? What is consequence?
YES, subject to restrictions
If at-will partnership, this will DISSOLVE
Winding up
when assets are liquidated and creditors are paid
partners STILL liable for activity during this period
name of true end of partnership?
TERMINATION
Can creditor claim against individuals or partnership?
For claim against PARTNER: creditor may claim interest in partnership (profits, but NOT management or voting)
For claim against PARTNERSHIP: can collect from INDIVIDUAL partners
How can creditor exercise claims against partners?
Must obtain JUDGMENT against them PERSONALLY to go after their assets
Must creditor go after partnership before personal partner assets?
Generally, yes
Partnership certification rule statement
Partnerships other than general partnerships must file a certificate with the state to be properly formed. Liability is limited.
Limited liability partnership
NO partner personally liable for obligations of partnership (APART from personal TORTS)
Limited partnership
At least one general partner filed with state who has personal liability, limited partners have liability LIMITED to CAPITAL contributions.
General partners liable for obligations and manage control
What happens when general partnership converts to LLP?
Partners remain J&S liable for acts occurring BEFORE conversion
Election of remedies
third party can ONLY recover from principal or agent for damages, NOT both (but neither can escape liability and can still indemnify)
If ratification occurs, are 1) agent 2) principal or 3) both parties to contract
BOTH
When a partner engages in lending misconduct in partnership, to whom have they breached a duty?
PARTNERSHIP and OTHER PARTNERS
NOT to lender
What is required for partner to withdraw from at-will partnership?
oral is acceptable, EVEN IF dissociation is wrongful, unless partnership has agreed to written dissociation
