MEE Essentials: Agency + Partnership

Question 1

When does agency relationship exist (rule statement)

Answer 1

CONSENT by both principal and agent

to BENEFIT principal

CONTROL over agent by principal

Question 2

How can agency relationship terminate?

Answer 2

Principal manifests desire to discontinue agent relationship, or other ways

Question 3

Do partners in general partnership/LLC have 1) actual or 2) apparent authority to bind partnership into Ks?

Answer 3

BOTH, so long as in normal course of business

Question 4

Actual authority rule statement

Answer 4

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

Question 5

How can implied authority be establsiehd?

Answer 5

Custom, past course of conduct, industry norms, emergency, necessity

Question 6

When does actual authority terminate?

Answer 6

Reasonable time passes

change of circumstances

death/incapacity of principal

Question 7

Apparent authority rule statement

Answer 7

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

Question 8

Ratification rule statement

Answer 8

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

Question 9

When is agent bound in K with third party?

Answer 9

-when he had no ACTUAL or APPARENT authority to enter
-when principal UNDISCLOSED or PARTIALLY DISCLOSED

Question 10

When is agent liable to principal for breach of K

Answer 10

when he acts BEYOND HIS AUTHORITY

Question 11

vicarious liability rule statement

Answer 11

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

Question 12

liability for agent and principal?

Answer 12

J&S

Question 13

indemnification rule statement

Answer 13

A principal can recover against agent for indemnification if agent acts beyond his authority

Question 14

Direct liability of principal rule statement

Answer 14

A principal is directly liable for negligent hiring/supervision/failure to fire agent

Question 15

What duties are owed by agent?

Answer 15

CARE and LOYALTY (no self-dealing, no profit w/o disclosure, duty to follow instructions)

Question 16

May principal recover profits/losses from agent?

Answer 16

Yes, only when agent in BREACH

Question 17

Partnership formation rule statement

Answer 17

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

Question 18

Profit sharing presumption

Answer 18

Where profit sharing exists, PRESUMPTION of partnership UNLESS payment of debt/rent/wages

Question 19

Other financial indicia/control of partnership?

Answer 19

capital contributions, mutual agency

Question 20

must 1) writing or 2) certificate be filed to form GENERAL partnership or SPECIFIC

Answer 20

General: NO, neither required

Specific (LLP/LP) : certificate IS required

Question 21

If limited partnership tries to form but fails to formality, what happens?

Answer 21

Courts will consider it a GENERAL PARTNERSHIP (default form)

Question 22

Is partner entitled to separate payment for services?

Answer 22

NO, bc compensated by profits (unless agreed upon)

Question 23

Ordinary v. extraordinary matters

Answer 23

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

Question 24

Partnership liability: incoming/outgoing partners

Answer 24

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

Question 25

Partner fiduciary duties: 3 types of duties

Answer 25

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

Question 26

Dissociation definition + notice requirements

Answer 26

Dissociation is the change in relation of partners.

PERSONAL notice required to prior CREDITORS

GENERAL notice to others who knew of partnership (newspaper)

Question 27

Three steps to end partnership

Answer 27

1) dissociation
2) winding up
3) dissolution

Question 28

can partner withdraw from partnership at any time? What is consequence?

Answer 28

YES, subject to restrictions

If at-will partnership, this will DISSOLVE

Question 29

Winding up

Answer 29

when assets are liquidated and creditors are paid

partners STILL liable for activity during this period

Question 30

name of true end of partnership?

Answer 30

TERMINATION

Question 31

Can creditor claim against individuals or partnership?

Answer 31

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

Question 32

How can creditor exercise claims against partners?

Answer 32

Must obtain JUDGMENT against them PERSONALLY to go after their assets

Question 33

Must creditor go after partnership before personal partner assets?

Answer 33

Generally, yes

Question 34

Partnership certification rule statement

Answer 34

Partnerships other than general partnerships must file a certificate with the state to be properly formed. Liability is limited.

Question 35

Limited liability partnership

Answer 35

NO partner personally liable for obligations of partnership (APART from personal TORTS)

Question 36

Limited partnership

Answer 36

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

Question 37

What happens when general partnership converts to LLP?

Answer 37

Partners remain J&S liable for acts occurring BEFORE conversion

Question 38

Election of remedies

Answer 38

third party can ONLY recover from principal or agent for damages, NOT both (but neither can escape liability and can still indemnify)

Question 39

If ratification occurs, are 1) agent 2) principal or 3) both parties to contract

Answer 39

BOTH

Question 40

When a partner engages in lending misconduct in partnership, to whom have they breached a duty?

Answer 40

PARTNERSHIP and OTHER PARTNERS

NOT to lender

Question 41

What is required for partner to withdraw from at-will partnership?

Answer 41

oral is acceptable, EVEN IF dissociation is wrongful, unless partnership has agreed to written dissociation