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Agency and Partnerships > MEE hot topicsw > Flashcards

MEE hot topicsw Flashcards

1
Q

What is an agency relationship

A

a fiduciary relationship that arises when one person the principal appoint another the agent to act on the principal’s behalf and the agent consents to act

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2
Q

Capacity required for the creation

A

principals must have contractual capacity
agents must have minimal capacity

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3
Q

formalities of an agency

A
  1. consent
  2. writing is not required but the SOF may require one
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4
Q

What are an agent’s duties to the principal

A
  1. care
  2. loyalty
  3. obedience
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5
Q

Duty of Loyalty

A

agent owes a duty of treating the principal fairly which includes:
- can’t profit for themselves
- act for benefit of principal
- refrain from dealing with principal as an adverse party
- agent may not compete with principal
- may not use the principal’s property for own purpose

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6
Q

Duty of care

A

an agent owed a duty to their principal to carry out their agency with reasonable care

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7
Q

duty of obedience

A

an agent must obey all reasonable directions of their principal and if they don’t then the agent will be liable for any losses suffered

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8
Q

principal’s remedies for breach

A

include:
- contract actions
- tort actions
-actions for secret profits
- equitable actions for an accounting
- imposition of a constructive trust
-withholding of compensation

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9
Q

actual authority

A

principal’s words/conduct lead a reasonable person in the agent’s position to believe that the agent has authority to act on the principal’s behalf

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10
Q

What is the difference between implied and express actual authority

A

can be express: actually contained in the four corners of the agency agreement (oral or written)

Or implied: agent reasonably believes they have as a result of the principal’s actions or words

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11
Q

termination of actual authority

A
  1. happening of an event
  2. lapse of a reasonable time
  3. change in circumstances
  4. agent’s breach of fiduciary duty
  5. either party’s unilateral termination
  6. operation of law
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12
Q

Apparent authority

A

principal’s words or conduct lead a reasonable person in the third party’s position to believe the agent has authority to act on the principal’s behalf and would have apparent authority to bind the principal

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13
Q

When agent exceeds authority

A
  1. Prior act: principal let agent exceed express/implied authority and knows the third party is aware then the principal is bound through apparent authority
  2. power of position: established through an agent’s title or position and that position customarily carries certain responsibilities the principal is liable
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14
Q

lingering apparent authority

A

had given an agent actual authority at one point and third parties knew but then you took it away and people still believe they have that authority.

  • may need to give notice of termination
  • recover via written authority
  • death/incompetence of principal doesn’t automatically terminate agent’s apparent authority
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15
Q

Ratification effect

A

even if an agent didn’t have authority at the time of entering into a K the principal will be bound if they ratify the contract

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16
Q

Requirements for ratification

A

principal must:
1. have knowledge of (or reason to know) all material facts regarding the K
2. accept the entire transaction AND
3. have capacity

requires no consideration

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17
Q

Third party vs agent

A

Bound unless principal’s existence and identity are disclosed

Exception: existence/identity of principal isn’t disclosed - if judgment not satisfied by agent and they find ID of principal they can sue them later

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18
Q

third party v principal

A

bound if valid authority existed (actual, apparent, or ratification)

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19
Q

Employee vs independent contractor

A

Employee: the principal/employer retains the right to control the manner in which an employee perform their work

independent contractor: principal doesn’t have a right to control the manner in which work is performed

can look at: skill required, tools used, period of employment, basis of compensation, business purpose, distinct business

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20
Q

Scope of employment for torts

A

Employer liable for employees torts only if they are committed in the scope of the employee’s employment

Consider:
1. conduct of the kind they were hired to perform
2. did the tort occur on the job
3. was the conduct actuated at least in part to the benefit of the employer

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21
Q

frolic v detour

A

Frolic: major deviation requiring substantial departure from employment is beyond the scope

Detour: small deviation from employer’s direction is in the scope of employment

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22
Q

Intentional torts

A

employer is not liable unless
1. natural incident of employee’s duties
2. whether the employee is promoting the employer’s business or motivated to serve the employer
3. authorized or ratified by employer

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23
Q

Formation of general partnership

A

association of two or more people to carry on as co-owners of a business for profit and is formed as soon as that happens

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24
Q

2 main factors for deciding is a partnership exists

A
  1. sharing of profits - presumption
  2. right to participate in control
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25
Q

Partnership existence rebuttable presumption

A

show lack of co-ownership relationship like no control or not sharing losses

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26
Q

additional evidence of a partnership

A
  1. title to property held in joint tenancy or in common
  2. parties designate their relationship as a partnership
    3, venture undertaken by the parties requires extensive activity
  3. sharing of gross returns
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27
Q

voting

A

all partners have equal rights in management of business decisions unless otherwise state

ordinary course: majority vote
outside ordinary course: unanimous

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28
Q

renumeration

A

partners have no right to renumeration for their services to the partnership except for winding up the partnership bsuiness

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29
Q

distributions

A

partners have whatever right are granted in the agreement for distribution of profits. If silent the split profits and losses equally

30
Q

Partnership transactions involving real property

A

grants of and restrictions on partner authority to transfer real property in teh statement are binding on 3rd parties if the secretary of state and county filings are made, third parties are benefited by grants, and burdened by filed retrictions

31
Q

partnership actual authority

A

authority a partner reasonably believes they have based on communications between the partnership and partners

32
Q

apparent authority

A

partner is an agent and that a partner has apparent authority to bind the partnership to transactions in ordinary course of the partnership

33
Q

exceptions to apparent authortiy

A

a partnership will not be bound by a partner’s act if the partner lacked actual authority and the person with whom they were dealing knew or received notification of that fact

34
Q

Liability of partners in a general partnership

A

each partner is jointly and severally liable for all obligations of the partnership whether arising in a tort or K but the P must first exhaust partnership resources before going after a partner

Note: therefore they can be indemnified by the other partners or require contribution of pro rata share

35
Q

GP liability of admitted partners

A

newly admitted partner is not personally liable for obligations that arose before the admission

36
Q

GP liability of outgoing partner

A

remain liable for obligation when they were a partner unless there was a payment, novation, or release

37
Q

Four duties of a partnership

A
  1. duty of loyalty
  2. duty of care
  3. duty of disclosure
  4. duty of obedience
38
Q

Partnership: Duty of loyalty

A

each partner
1. account tot he partnership for any benefit derived by the partner in conducting the partnership business, using the partnership’s property, appropriating a partnership opportunity
2. refrain from dealing with the partnership in the conduct of its business as a party having an interest adverse to the partnership
3. refrain from competing with the partnership in business

39
Q

Partnership: Duty of care

A

each partner refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or knowing violation of law

40
Q

partnership: duty of disclosure

A

provide complete and accurate information concerning the partnership
1. w/o demand any info concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties and
2. on demand any other info concerning the partnerships business and affairs

NOTE: only duty that can be eliminated

41
Q

duty of obedience

A

duty of obedience requires partner to obey directions of partnership

41
Q

Property presumed to be partner’s property

A
  1. held in name of one or more partners
  2. no sign acting in partnership
  3. funds not used
42
Q

Rules for determining partnership property

A
  1. titled property is partnership property if acquired in partnership’s name or partner’s name when acting for partnership
  2. presumed: purchased with partnership funds
42
Q

untitled property

A

look at
1. use of partnership funds
2. use of property by partnership
3. entry of property in partnership books
4. close relationship between property and business
5. improvement of property with partnership funds
6. maintain of property with partnership funds

43
Q

Rights in partnership property

A

partnerships rights: totally unrestricted

Partners rights: use for partnership purpose

44
Q

partner’s ownership interest in partnership

A

“partnership interest”

partner can transfer his financial rights unilaterally

45
Q

restrictions on partner’s interest

A
  1. no unilateral transfer of management rights - require unanimous vote
46
Q

Define disociation

A

when a partner withdraws from a partnership

47
Q

events of dissociation

A
  1. oral or written notice of partner’s express will to withdraw
  2. happening of an agreed event
  3. valid expulsion
  4. partner’s bankruptcy or the appointment of a receiver for a partner
  5. the partner’s death or incapacity to perform partnership duties
  6. the decision of a court that the partner is incapable of performing a partner’s duties or
  7. termination of a business entity that is a partner
48
Q

wrongful dissociation

A

if the dissociation is in breach of a term in the agreement OR if withdraws, expelled, or bankrupt before end of term

49
Q

Consequences of dissociation

A
  1. dissolved and business is liquidated
  2. dissociating partner can be bought out
50
Q

Two circumstances of Dissolution

A

required in limited circumstances

  1. partner dissociates by express will in an at will partnership
  2. in a term partnership: one part dissociate wrongful or because of death or bankruptcy, then wind up is required only if w/in 90 days after dissociation at least one half of partners agree
51
Q

Liability of dissociate partner - pre dissociation

A

remain liable for pre dissociation obligations

52
Q

liability of dissociate partner - post dissociation

A

liable for post dissociation partnership liabilities incurred within two years after the dissociation if
1. entering the transaction the other party reasonably believed the dissociated partner was still a partner and
2. did not have notice of the dissociation

and therefore could still bind a partnership

53
Q

What events cause a dissolution

A

RUPA
1. Partnership at will: notification of an express will to withdraw
2. Definite term/undertaking: 1) expiration of the term or completion of undertaking 2) consent of all partners to dissolve 3) within 90 days after partner’s death/bankruptcy/wrongful dissociation at least half remain partners want to dissolve
3. agreed event
4. event that makes it unlawful to continue
5. issuance of judicial decree by a partner that
a) economic purpose is frustrated
b) partner has engaged in conduct making it not reasonably practicable to carry on business
c) business can’t practicably be carried on in conformity with partnership agreement
6. issuance of judicial decree on application by transferee
7. 90 days during which partnership has less than 2 partners

54
Q

priority of distribution

A
  1. partnership pays creditors
  2. partnership repays capital contributions
  3. profits/losses if any
55
Q

Define a limited partnership

A

partnership with at least one general partner and one limited partner.

GP is liable for obligations

LP no liability beyond contribution

56
Q

Formation of an LP

A
  1. File certificate of LP with secretary of state
  2. sign certificate
  3. list name of partnership - MUST include some form of LP
  4. names and addresses of agent for service of process
  5. name/ address of each general partner
57
Q

Difference between a certificate of formation and a partnership agreement in an LP

A

certificate of formation is whats filed and has limited info

partnership agreement is how the LP operates

58
Q

Management of a limited partnership

A

General partners: have equal rights in management and conduct of the LP’s activities

Limited Partners: usually no rights but participation doesn’t cause them to become liable

59
Q

LP financial rights

A

Distributions are made on the contribution of partners
- have no rights to distribution
- if a partner knows they received an improper distribution they must return the improper amount
- can transfer right to distribution

60
Q

LP Liability rights

A

GP: jointly and severally liable for all obligations of the LP
Lp: not personally liable and are limited meaning they can only lose the value of their investment

61
Q

Limited Liability Partnership benefit

A

Advantage: partners are not personally liable for the LLP’s obligations

62
Q

Formation of LLP

A

File a statement of qualification with the secretary of state
1. name and address of partnership
2. statement that partnership elects to be an LLP
4. deferred effective date if any

63
Q

Limited Liability Company

A
  1. taxed like a partnership (single pass through)
  2. offers owners partnership
  3. can run like a corporation or partnership
64
Q

Formation of LLC

A

file a certificate of organization with secretary of state as long as there is one member
1. name of LLC
2. address of LLCs office and
3. name and address of registered agent

65
Q

LLC operating agreement

A

contains the provision of the LLC and can alter duties

66
Q

LLC liability

A

not personally liable and limited to the amount invested

67
Q

LLC fiduciary duties

A

Duty of Care: act with care that a person in like position would.
Duty of Loyalty: must ) account to a hold LLC any benefit they derive 2) refrain from dealing with LLC in adverse action 3) refrain from competing

68
Q

LLC member managed vs manager managed

A

Member managed: member owe to each other and the LLC duties of care and loyalty

Manager managed: 1) only managers are subject to the duties of loyalty and care discussed above and 2) only members may authorize or ratify an act by a manager that would otherwise violate duty of loyalty

Agency and Partnerships (1 decks)

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