Midterm Flashcards
What is the State of Nature &; Social Contract?
State of nature: We all hop political power but there is no infrastructure
Social Contract: People will give up some of their power in return for infrastructure, order and safety.
Democracy vs. Republic
Democracy: Everyone has an equal vote
Republic: People give power to a group of representatives who should represent their options/beliefs
Separation of Powers and Checks and Balances
Prevents on part of government from being too strong.
Executive: power to enforce laws
Legislative: Power to create laws
Judicial: power to review/interpret laws.
Article Three of the Constitution
Establishes the judicial power of the federal government, supreme court & lower courts
Federalism & Reserve Powers
Federalism is the division of the governing power between the federal government and states.
Reserve Powers: those powers not enumerated to the federal government are reserved for the states
Way to interpret the constitution
Textualist: Those that read it as a “dead document.” Only what is written is what makes sense.
Interpretist: Those that see the constitution as “Living and breathing” believe that things can be implied and inferred.
Due Process
Process=intervention of the courts
Due=appropriate amount of intervention for a case of controversy
Applies whenever the govt. infringes on one’s right to life, liberty or property.
Requirements: Entitled to notice & entitled to a hearing on the matter
Kinds of Due Process
Substantive Due Process: determination of whether a particular govt. is compatible with individual liberties
Procedural Due Process: requires the govt. deception making process to be fair and impartial if it deprives a person of life/liberty/property.
Powers of legislature
Federal commerce power allows congress to regulate commerce with foreign countries and between states.
Fiscal Pwrs: tax, spend, coin money
Tax Pwrs: lay & collect taxes for public welfare. Good: revenue generating, bad: behavior regulation.
Judicial Review
-Examination of govt. actions to determine whether they conform to the US Constitution
-It is the legal threshold the govt. must meet to ensure their side prevails.
-varying levels of judicial review (scrutiny) depending on nature of case or right
Strict: Substantially related and compelling objective
Mid-Teir: Substantially further a important govt. objective
Rational: rationally related and address a legitimate interest
Freedom of Speech
- Supreme Court will recognize and defend the individual’s right to freedom of speech to the highest degree.
- If govt. is to make a law that will restrict speech–it must be done in a manner that is least restrictive.
Corporate Political Speech
First amendment protects a corporation’s right to speak out on political issues.
-Where individual’s have protected speech rights, so do corporations.
Commercial speech
expression related to the economic interest of the speaker and its audiences; such expression receives a lesser degree of protection than corporate political speech
14th amendment
It is equal protection. Supreme court building reads “Equal Protection Under Law.”
Administrative Agencies
Governing bodies created by congress via an enabling statue.
They have 3 primary duties:
1) Make rules
2) Enforce rules
3) Adjudicate (judge) disputes concerning rules
Administrative Agencies Powers
Legislative rule: carry same weight as a statue and are subject to rule making process
Interpretive rules rules: Not binding, but used as a compelling factors for adjudication
Procedural rules: Descrive an agency’s operation standards and methods
Administrative Procedures Act Informal Rule Making
- proposed rul is published in federal registrar (serves proper notice)
- interested parties have opportunity to participate (comment period)
- Publication of final draft concerning rules purpose and basis
Administrative Procedure Act Formal Rule Making
- Essentially a mini trial-type hearing for making rule
- agency must include a statement of findings and conclusions which details all material issue of fact for the record
Claims against administrative agengies
- First need to be hear by ALJ (Administrative Law Judge)
- Courts will intervene to address:
- Questions of law: whether the agency applied the law correctly in making the rule
- Questions of fact: whether the agency made correct determinations as to the facts of the case or controversy when making rules
American Airlines vs DOT
Take Home Points:
1) APA does not expressly require notice in informal rule making, but courts have inferred requirement
2) Agencies can close between adjudication and rule making to set policy
3) Courts will extend great drench to an agency’s characterization of its actions
Reasonable Person
Defined as a person who has the ABILITY to reason/analyze
Contract
A binding agreement that is enforceable by courts.
- It is a promise to do something.
- Failure to complete contractual duties is a BREACH.
The Common Law
The governing body of laws that regulate contracts for services
The Uniform Commercial Code (UCC)
The governing body of laws that regulate contracts for goods.
Goods are defined as anything moveable at time of contract.
Requirements of an enforceable contract
1) mutual assent: offer and acceptance
2) Consideration: something extra that is exchanged between two parties that will create a mutual stake in the agreement being fulfilled.
3) Legality of object: Subject of contract must be within the law
4) Capacity: Must have legal ability to enter into a contract
Express Contracts
All parties have expressed the agreement either verbally or in writing
Implied Contracts
All parties have “implied” agreement by their actions and behavior
Unilateral Contracts
Only one party of a contract makes a promise to do or not to do something
Bilateral Contracts
Both parties make a promise and incur a duty
Void Contracts
A contract that is not enforceable for lack of meeting legal requirements
Voidable Contracts
Technically a legal contract but the law will allow one or more of the partners out if
- Contract was formed in an unusual manner
- Lack of capacity of one of the parties
Promissory Estoppel
- All contracts are promises, but all promises aren’t contracts
- For a promise to be enforceable, it must meet the requirements of an enforceable contract
- There are certain types of promises the court will enforce even though they don’t meet the requirements. Typically when the other promisee took definite and substantial action in reliance on the promise
Elements of an offer
1) Communicated by the offeree
2) Manifest an intent to enter into a contract (determined by words/actions and a reasonable person could assume it meant intent
3) Must be definite and certain: all terms relating to a contract must be defined. (ex. time, quantity, price, etc.). This allows courts to determine if there was a BREACH.
Osperry v Kelly Moore
Take Homes:
- An acceptance of an offer can be sent and received by any reasonable manner
- Contracts are judged on their face value of the words
- When words are not exclusionary, they will allow any
Invalidating Mutual Assent
Invalidation of mutual assent happens when:
1) undue influence
2) duress
3) fraud
4) non-fraudulant misrepresentation
5) Mistake
Undue Influence
• Unfair persuasion by a party in a position of power/authority/influence over another
Fraud
• Any misrepresentation that causes a party to enter into a contract under false pretenses or lack of full-disclosure
• Fraud in the Inducement
• Intentionally misrepresenting a material fact about the subject matter
of the contract
• The other party relies on the misrepresentation to their detriment
Elements of Fraud
- False Representation (misrepresentation)
- Material Fact
- Misrepresenting party had knowledge of the falsity and acted with intent
- Other party relies on the falsity to their detriment
Mistakes
- What is a mistake?
- An understanding, by one or more parties to a contract, that is not aligned with the facts, laws, or terms of the contract.
Types of Mistakes
- Mutual Mistake: both parties are mistaken (Makes contract voidable)
- Unilateral Mistake: Only one party is mistaken and the other has knowledge that it is a mistake
- Assumption of Risk Mistake: When a party agrees to assume all liability for mistake; they can’t escape obligations of a contract that would normally be voidable
Illegal bargains
- To be a legal and enforceable, all aspects of a bargain must also be legal (terms, subject matter & parties; similar to contracts)
- Courts will not enforce contracts that violate statue or public policy
Contracts that violate statues
- courts won’t enforce contracts that further criminal behavior
- Courts will not grant damages for breach of contract if plaintiff is an unlicensed individual providing services where license is required
Public Policy in Contracts
Any agreement that could injure the public or public good is considered in violation of public policy
Exculpatory clases
- Contracts that absolve a tort-feasor from liability as a result of intentional torts are not enforceable
- Example: Gyms require them, but depending on individual’s actions cannot be enforced
Anderson v Mcoskar
- Will construe release of liability against benefited party (weight rests with plaintiff, not company)
- releases of liability for enforceable torts are not enforceable
- release of liability for negligence is subject to public policy
Unconscionable Contracts
No official definition but are essentially the courts resolving contracts that have a basis of unfairness.
1) Procedural unconscionability: relating to the bargaining process. (ex: unnecessary legalese, unfair negotiation tactics)
2) Substantive Unconscionability: relating to the terms of the contract itself. Oprresive or grossly unfair terms.
Sanchez V Western Pizza
- To avoid contract unconcionability-moving party must establish both substantive & procedural unconcionabilty. If one is stronger, need less of the other.
- Court found procedural unconcionability
- When procedural unconsiabiluty courts can remove this part, restrict this part or refuse to enforce entire agreement
Contracts relating to tortious Conduct
Tort is a civil wrong
- Intentional torts: Assault(bring about fear of immanent danger), batter (intentionally bringing about harm), emotional distress, slander/liable
- negligence torts
Contractual Capacity
- To be enforceable parties to a contract must be legally capable of entering into a contract
- People with limited or no capacity:
1) minors
2) incompetent persons
3) individuals intoxicated at moment of contract
Minors in Contracts
Contracts involving minors are voidable
- minor has option to disaffirm contract or enforce it
- Minor may ratify the agreement after reaching 18 years
Contracts binding on minors
- agreements to pay for necessities (clothing, food, etc.)
- Recovery for other party is limited to fair market value
Berg v Taylor
- Merchants who provide services to minor do so at own risk
- Parental consent is required
- Minor may disaffirm obligations if done so with in a reasonable time before reaching age of majority
- Factors for consideration: necessities
1) contract is to pay for reasonable value of necessary for support of minot
2) the Necessities have actually been provided
3) the Contract is enter by the minor when not under care of parent
4) Minor need not affirm declaration or give notice of disaffirmation
Incompetent Individuals
- Those who are under court appointed guardianship and sign a contract without guardian make contract VOID
- Those who have cognitive impairments/disabilities enter into contracts with inability to understand subject matter, make contracts VOIDABLE
Intoxicated Individuals
One may avoid contract if he/she was intoxicated at time of contract according to the threshold test:
1) She was at the time of contract unable to understand the nature and consequences of their actions or act in a reasonable matter
2) Once capacity is regained, the person must act promptly to disaffirm the contract
3) Slight intoxication is insufficient for avoiding a contract
First State Bank v. Hyland
Take Homes:
- Contract entered into by intoxicated people are voidable
- disaffirmance must be made promptly after gaining reasonability
Statue of Frauds
Explains what contracts must be in writing to be enforceable.
Marriage:
Year: Contract that will be completely impossible to complete in a year
Land/Sale Agreements
Executor of an Estate-agreement to personally cover debts
Goods-Sale of goods contracted for more than 500(fed) or 1000(state of michigan)
Suretyship-cosigner
Duties
What a party to a contract is obligated to fulfill
Rights
What a party of a contract is entitled to enjoy or reap
Terms of Art
Obligor: the party who owes a duty to another
Obligee: the party for whom a duty is owed
Assignment of Rights
The act of transferring contractual rights to a third party
-Assignor: the party who is transferring rights away
Assignee: third party who is receiving the rights
Designation of Duties
The voluntary transfer of duties to a third party
- Delegator-the party who is transferring duties away
- Delegatee-the party who is incurring the duties to a contract
Rights that are assignable
- right to receive money
- right to enjoyment of goods or land
Rights that are not assignable
- rights that materially change the obligor’s duty
- rights that materially increase the obligor’s risk of burden
- rights of a highly personal contract
- rights that are prohibited by statue or public policy
Duties that are non-delegable
- The duties are personal-the obligee has a substantial interest in the original obligor complete them
- The contract contains a non-delegation clause
- The delegation is prohibited by law or public policy
Third Party beneficiary contract
Contracts that involve two parties agreeing to do something, but benefit is conferred to another party
Intended Beneficiary
The promisor and promisee intend to confer a benefit to the third party (entitled to enforce rights of the benefit)
Incidental beneficiary
The promisor and promisee do not intend to confer a benefit to this third party (not entitled to enforce rights of the benefit)
Breach of Contract
When one party fails to abide by the contractual agreement . Allows other party to seek relief through monetary damages or equitable relief
Compensatory Damages
- money damages designed to make the injured party whole again
- put them in the same position as if the contract were never breached
Components of compensatory damages
- Loss of value: value of promised performs minus value of actual performance
- incidental damages: damages arising as a direct result of the breach
- Consequential damages: lost profits and injuries related to defective performance
- Cost avoided by injured party: mitigated costs as a result of the breach
Compensatory Damages Formula
Loss of value (promised val-actual val) \+incidental damages \+consequential damages -loss/cost avoided =compensatory damages
Nominal Damages
- damages that are awarded as a symbolic gesture
- given when the injured party suffers no real harm other than the breach in and of itself
Reliance Damages
Time travel solution
-puts the injured party in the same position had the contract never been made
Punitive Damages
- additional damages award to punish the defendant
- arise if defendants conduct was willful, wanton or malicious
Liquidated Damages
provision in the contract which parties agree in advance the damage amount to be paid in event of a breach
Equitable Relief
Non-monetary relief provided by the courts when money is insufficient to make the party whole again
-injunctive relief: the court order the breaching party to fulfill their contractual duties
Restitution
Court orders the breaching party to return the consideration to the injured party
What is an Agency?
A relationship with a representative
- the representative is the agent
- the person represented is the principal
The Agent
- Has authority granted by the principal to act on their behalf
- Whatever the agent does within the scope of the agency, the principal is bound to
The Principal
- Grants power to the agent to act on/in their place
- May only gran powers to the agent that the principal has
- May be liable for the actions of the agent
How to create a Principal/Agency Relationship
3 elements to a P/A relationship
- Assent to the representation
- Control by the principal
- Agent acting on behalf of the principal
How do courts determine the p/a relationship?
- Objective test
- principal requests another to act on their behalf
- indicates the other is to act without further communication
- agent consents to the act and carries it out per instructions from principal
Agencies in employment
Employees are generally agents of their employer
-Employers are vicariously liable for the actions of their employees
Requirements:
- The employee was actually employed by the employer
- The employee was acting within the scope of their employment
How to determine if agent was employee
- EXTENT OF CONTROL over the agent was mutually agreed upon
- Whether the agent is engaged in a DISTINCT OCCUPATION or business
- Whether the type of work done is customarily done under the SUPERVISION OF A PRINCIPAL
- The skill required of the agent’s occupation (distinct from company business)
- Whether the agent or principal SUPPLIED the TOOLS required
- The DURATION of the relationship
- The COMPENSATION ARRANGEMENT agreed upon (task v time)
- Whether the agent’s work is part of the PRINCIPAL’S NORMAL COURSE of business
- Whether the principal and agent BELIVE they are creating an EMPLOYER/EMPLOYEE RELATIONSHIP
- Whether the principal is or is not IN THE BUSINESS the agent is
Miller v McDonald
Take Home:
- Court found the defendant had the right to control 3K’s Performance
- A franchise does have significant control over its individual owners
Duty of Obedience (Agent)
Act only as authorized and must obey all lawful instructions
Duty of Good Conduct (Agent)
Act within the scope of agency and refrain from acting in a manner that could damage the principal
Duty of Diligence (Agent)
Act with reasonable care, competence and diligence in performance
Duty to Inform (agent)
Use all reasonable efforts to keep the principal informed of any events occurring
Duty to Account (Agent)
Agent must provide the principal with accurate financial records of expenditures in the course of an agency
Duties of an agent
- Duty of Obedience
- Duty of good conduct
- duty of diligence
- duty to inform
- duty to account
- Duty of Fiduciary
Fiduciary duties
Imposed by law requiring the agent to act with good faith and loyalty:
- Not to deal with principal on behalf of opposing party
- not to deal with principal as an an adverse party
- Not to compete with principal or assist principal’s comp.
- Not to use principal’s property or assists for the benefit of others
- not to use confidential information against the principal
- not to reap any personal financial gain in connection with the P/A relationship
Detroit Lions v Argovitz
Take Home:
P/A relationship is fiduciary
-Formal: relationship
-informal: trust and confidence
If agent is alleged to breach fiduciary duty, agent is not liable for agents actions
-burden of proof that principal had no knowledge
-Full disclosure by agent is required
Terminating Agencies by Parties
- Lapse of time- agreed upon time or reasonable time period
- Mutual Agreement
- Revocation of authority: principal notifies the agent that representation is ending
- Renunciation by the agent: agent communicates to the principal that they are denunciating their given power to represent
Terminating Agencies by law
Death-agent’s death/principal’s death
Incapacity-principal/agency’s incapacity
Change in circumstances: ends when the agent should reasonably conclude the principal no longer assents
Disclosed Principal
- Third party knows there is a principal/agent relationship
- Knows identity of principal
Unidentified Principal
- Third party knows there is a principal relationship
- Unaware of the principal’s identity
Undisclosed Principal
Third party is unaware there is a principal agent relationship
Agency Actual Authority
Determination is made by POV of agent
- consent given by principal
- implied by principal
- binds agent & principal together for shared liability
Apparent Authority
Determination is made by POV of third party
- Reliance on this perception is key
- Principal or agents actions that lead third party to believe agent has power
Arises when a third party reasonably believe that the agent has the authority to act on behalf of the principal
Actual Express Authority
Written or spoken words the principal communicates to the agent
Actual Implied Authority
- Inferred by words or conduct that the principal manifests consent to the agent
- Agent has the implied authority to do what they reasonably believe the principal wishes
Effect of Apparent Authority
Dependent on the principal manifest ions
-binds the principal in contracts and other agreements with third parties
BUT if an agent “Goes rogue” then it constitutes a violation of duties and therefore the agent would be liable for damages to the principal
Tort Liability for a Principal
Liability for the tortious acts of an agent on a principal occurs:
- the agent causes another person harm
- the principal fails to exercise reasonable care and hires incompetent/dangerous agents
Elements of Negligence
Duty of reasonable care:duties imposed on others by law-duty to exercise reasonable care in their actions
Breach of Duty: The tort-feasor/defendant failed to exercise reasonable care and deviated from that duty
Factual causation or Proximate cause: A person or object was injured/damaged/destroyed as a result of the breach
Damages or Harm: The type of harm sustained is the type protected under a negligence statue
(Due by Christmas Day)
Duty of Reasonable care
- The level of reasonable care a person must exercise in a given situation
- Definition of reasonable care is dependent on circumstances
Defined of that of a reasonable person of the same age, intelligence and experience in a given circumstance
Duty to Act
Generally speaking, individuals have NO obligation to act in order to assist another.
Exception: Your conduct or recklessness was the result of someone being put in peril
Exceptions in Special Relationships:
The law will impose a duty of reasonable care where one wouldn’t normally exist depending on the relationship between the parties like carriers and passengers, schools and students, landlords and tenants
Proximate Case
The law limits the legal liability for negligence to those harms which are sufficiently related to the negligent act
- Limitation 1: Foreseeability (how foreseeable was the harm)
- Limitation 2: Superseding cause
- More Narrow Scope of liability than factual
Factual cause
Tested by the But-For test
- the harms would not have occurred but-for the defendants negligent actions
- Very BORAD scope of liability
Klein v Pyrodyne
Take home
- Defendant is liable for injuries of others by a thing/activity that is unduly dangerous or inappropriate to the setting
- Any party carrying on an abnormally dangerous activity is strictly liable for damages
Analysis to determine unduly abnormally dangerous activity
1) is there a HIGH DEGREE OF RISK to others
2) How likely is it that others will be harmed and is that harm great?
3) Will the risk be minimized/eliminated by the use of reasonable care?
4) How common or uncommon is the activity?
5) Does the value to the community of the activity outweigh its dangerous attributes
Defenses to Negligence
- Contributory negligence
- Comparative negligence
- assumption of risk
Contributory negligence
- The plaintiff fails to exercise reasonable care for his/her own protection
- minority of jurisdictions practice
- no recovery allowed if even 1% responsible
Comparative negligence
- Damges are divided between the plaintiff and defendant
- based on the amount of fault
- majority of jurisdictions practice
Assumption of Risk
- Plaintiff expressly assumes risk to a known danger
- Similar to contract waiver/release of liability
Strict Liability
Where a defendant is liable for injuries and harms they have caused even when they did not act intentionally or negligently
Restricted to:
- abnormally dangerous activities
- keeping of animals
Abnormally Dangerous Activity
An activity that creates a foreseeable and highly significant risk of harm
and is not of common practice and usage
Keeping of Animals
- Damage to property or injuries to persons
- Wild Animals
- Domestic animals that trespass
Warranty
- A legal duty that a seller incurs
- Requires the seller to sell goods that will conform to a certain quality or characteristic
Plaintiff’s Burden in bringing a warranty cause of action
- Prove a warranty actually existed
- proved the warranty was breached
- establish the breach was the proximate cause of the harm
- notice of the breach was given to the seller
Express Warranties
- Affirmation of a fact/promise regarding the goods
- can be a description of the goods
- becomes the “basis of the bargain”
Implied Warranties
- An obligation that arises out of the circumstances of the sale
- not found in the sales contract
Implied Warranties of Merchantability
- Warrants the goods are fit for the purpose it was created
- Applies automatically to the goods unless the seller disclaims
- Typically only applies to goods sold by Merchant sellers
Implied Warranties of Fitness for a Particular Purpose
- Applies to any seller
- Arises if the seller had reason to know the buyer’s unique need or purpose for the product at the time of sale
- The buyer was using the sellers skill and judgement to select goods
Disclaiming warranties
- Sellers may limit their liability by disclaiming or modifying warranties for the products they sell
- Express warranties: cannot be disclaimed
Disclaiming implied warranties
- Language usage such as “As Is / “With all faults”
- In case of discoverable defects:
1) Buyer has the chance to inspect and refuses to do so
2) Buyer inspects and sees the defect, purchases anyways
3) Mere failure to examine the goods do not count as refusal to examine
4) Seller has the burden of demanding the buyer to examine goods prior to purchase
Strict Liability & Product Defect
Basic Principle: Merchant sellers are strictly liable for any products they sell that are defective or unreasonably dangerous condition
Manufacturing Defect
Product does not live up to the manufacturer’s standard–not property made
Design Defect
As designed, the products has inherent dangers
Failure to Warn
Product lacks adequate warning of possible danger and/or adequate instruction for proper use
Kelso V Bayer
Take Homes
- Products liability-Prima Facie Case Elements
1) Injury was result of a condition of the product
2) The condition was unreasonably dangerous
3) The condition existed at the time the product left the manufacturer
Partnerships
An ASSOCIATION of 2 OR MORE persons carrying on as CO-OWNERS of a business with the INTENT to create a profit
Laws that govern partnerships:
- Uniform partnership act
- Revised uniformed partnership act
Forming a Partnership
RUPA Guidelines
- Oral or written agreement between parties
- Informal arrangement
- Conduct of the parties who become partners by association
Partnership Agreement
Document or instrument designed to evidence the intent to create a partnership (not required but highly recommended)
Standard components:
- Firm name and identity
- Nature & scope of the partnership agreement
- The duration of the partnership
- Capital contributions of each partner
- Division of profit and sharing losses
- managerial duties of each partner
- provision for salaries
- restrictions upon the authority of partners to bin the firm
- special instructions regarding dissolving the partnership
- A formula for determining the value of each partner’s interest
Partnership Capital
Cash and cash equivalents contributed by the partner to the partnership
Partnership Property
any property (real or personal) that is acquired by the partnership. (must be legally transferred by name) -should outline ownership at termination of partnership
Duties of Partners
- Duty of Fiduciary (Duty of Loyalty)
- The Duty of Obedience
- The Duty of Care
- The Duty to Account
Fiduciary Duty aka Loyalty Duty
RUPA defines the duty to 3 contexts
1) Act as a trustee to the partnership regarding the partnership property
2) Refraining from any action that would harm the partnership
3) Refrain from competing with the partnership
Duty of Obedience
- Partners must obey the decision made by the partnership
- Partners in violation are personally lisle for any losses as a result of disobedience
Duty of Care
-Partners must exercise every good faith effort to ensure they act with good faith in partnership matters
Examples when they don’t
A) Grossly negligent conduct: Very careless
B) Extremely Reckless Conduct: Extremely Dangerous
C) Intentional Misconduct: malice component
The Rights of Partners
- Rights in specific partnership property
- Transferable interest in partnership
- Right to share in distributions
- Right to participate in management
- Right to choose associates
Rights in Specific Partnership Property
- Partners may enjoy and possess partnership property for partnership purposes
- Upon death of a partner, the surviving partners inherit the deceased partner’s share in the property
Right to Share in Distributions
Distribution: Money or property transferred to a partner (ex. profit sharing, repayment loans, etc)
Also includes the obligation in losses
Right to Participate in Management
- Normal course of business decision = majority vote
- outside normal course of business decision = unanimous vote
Partners can have vote with varying depending on hierarchy
The Right to Choose Associates
Partners cannot be forced to welcome new members if they do not agree. (unanimous vote)
Partnership Contracts with Third Parties
-partner that engage in contracts with third parties on behalf of the partnership, bind the entire partnership
Joint and several liability: Partners may be sued collectively as a partnership (joint) and individually (several)
Partnership binding authority
Actual Express Authority
Actual Implied Authority
Apparent authority
-a partner (without actual authority) who engages in a transaction
-must be in normal course of operation for apparent authority to exist
-third party has no knowledge of the lack of authority
Partnership Liability
Torts committed by partners: partnership is liable for any torts by partners as long as they are done while acting in the normal course of business and with the authority of the other partners
Crimes committed by partners: Generally, partners aren’t responsible for crimes committed unless they authorized, participated or had knowledge of it.
Disassociation of a partner
An existing partner chooses to leave (or forcibly removed) from the partnership
Partner may be disassociated
- expiration of set term
- wrongful disassociation
- rightful disassociation
Wrongful Disassociation
Departure of a partner on bad terms
- partner voluntarily leaves before agreed upon time
- The court orders a partner to be disassociated for bad acts
- Partner becomes a debtor in a bankruptcy action
- The partner is an entity shoe disassociation was willful
Stages of Terminating a Partnership
Dissolution
Liquidation (winding up)
Termination (legally)
Dissolution
Partners are no longer carrying on the business together
-at dissolution, partners lose authority to bind the partnership (unless apparent authority exists)
Why would a partnership dissolve?
- partners agree to end the arrangement
- By operation of law
- By court order
Wrongful Dissolution
Partner is liable for any damages the partners if the dissolution breached the partnership agreement
Rightful Dissolution
The dissolution was done in conformance with the partnership agreement
Dissolution By Operation of Law
- Death of a partner
- Bankruptcy of a partner or the entire partnership
- Ilegal action taken by the partnership
Liquidation Process
Process of tying up all lose ends
- fulfilling business obligations
- Take inventory of assets and liabilities
- Liquidate all non-cash assets to cash
- Auditing the partnership accounting books
- Pay off creditors
- Distribute remaining assets amongst the partners
Order of Distribution of Assets
1) non partner creditors
2) any loans or cash advanced made by partners
3) returns of capital contributions back to the partners
4) Profits owed to partners
Insolvent Partnership in Dissoloution
Partners are individually liable for the remaining liabilities(debts) owed to creditors
-If one partner is bankrupt or uncollectable, other partners are liable for his portion
Limited Partnerships
Similar to a general partnership but some major differences
- There must be an effective law that enables the creation of an LP
- The LP must be in substantial compliance with the law
- BIG ONE: the limited partners liability is limited to their own capital contribution
Formation of Limited Partnerships
Filing of an LP Certificate
- Name of LP
- Address of the office
- Name and business address of each partner
- Date of dissolution
- Other matters to be included at the discretion of the partners
Limited Liability Company (LLC)
- Hybrid between a partnership (limited liability) and a incorporated entity (tax benefit)
- Provides limited liability to all owners
- all members may participate in management
LLC Tax Implications
Private LLCS
- members may elect only to be taxed (rather than LLC itself)
- Potential tax advantage by eliminating double taxation
LLC Advantages/Disadvantages
Advantages:
- Pass through taxes-business is not taxed itself only on individual members (avoids double taxation)
- tax deductions to employees
- potentially endless
Disadvantages:
-States differ on the treatment of taxes on LLC
-States like Texas will tax an LLC like a corporation
If an LLC member dies, the LLC dies
LP Advantages/Disadvantages
Advantages:
- One person LP can take tax deductions
- Potentially limitless life
Disadvantages
-If a limited partner dies-LP dissolves
Rights of LLC members
Financial Interests
- Profit and loss sharing
- Distributions of assets upon dissolution
- Withdrawal of ownership stake and return of contribution
Management Interests
- Voting rights equal to partnership
- Access to financial records
- Right to bring a Derivative Action
- Assignment of rights to a non-owner/member
LIability Interest of LLC Members
All managers and members enjoy limited liability (up to contribution made to join partnership)
General trends:
-Non manager or member is personally liable for any debts, obligations or liabilities of the LLC
EXCEPTION
-Manager/member engages in wrongful acts or misconduct
-Personal liability will exist for that manager/members for LLC that are personally guaranteed by the manager/member
Types of Property
Law recognizes and classifies property into four distinct groups:
- Tangible Property
- Intangible property
- Real property
- Personal Property
-Not mutually exclusive–can be transferred from one to another
Fixtures
-Personal property that becomes real property…
Any personal property that becomes attached to real-property effectively merges with the home. (merger theory)
Factors for determining whether something is a fixture
- The PHYSICAL RELATIONSHIP between the item and the land/building
- The INTENT of the person who attached the item
- The PURPOSE the item serves in relation to the land
- The INTEREST of said person in the land or building at the time of attatchment
Freeman v Barrs
Fixtures are things which have been so fixed to the land that they effectively become part of the land
3-part test
a. The annexation to the reality
b. The adaptation to the use to which the reality is devoted
c. The intent that the object become a permanent part of the land
Adaptation and intent are most critical in determining fixture status
Title v Possesion
Title: Legally own it (my textbook)
Possession: Have control of it but not legally own it (someone hiding textbook)
Methods of transfer and Acquisition
Sale: pay or earn money Gift: Receive it with no condition Inheritance: legal transfer by way of succession Accession: Confusion: Possession:
Sale of personal property
Legal title of the property transfers from one to another
- dependent on the parties’ intent to pass title
- Physical transfer of possession is not required
- In exchange for $
What is a gift?
- Transfer of title to property from one person to another
- No consideration required
Requisite components
- delivery
- intent
Delivery requirements of a gift
Can be actual physical transfer of the property
Constructive delivery
-When item’s nature makes physical delivery difficult/impossible (focused on the notice)
Symbolic delivery
-When delivery is symbolized by the physical delivery of something else (ex. keys to a car)
Requirement of Intent of a gift
Intent to give
-The gift giver must actually intend to make a gift
Gifts cannot be confidential
- any conditions to receiving a gift serve as consideration
- Exception: gifts in consideration of marriage
- -engagement ring or dowry
- -may be revoked/returned if the condition is not fulfilled
Types of gifts
Inter vivos: those gifts made during the gift giver’s lifetime
Gift Causa Morta: gifts made in contemplation of one’s imminent death
When personal property “begets” additional property
-The begotten property becomes owned by owner of the adult.
Ex. mother dog has puppies, puppies are the owners of the mother
Confusion to require personal property
Situation involving numerous pieces of identical property owned by numerous owners
- The pieces of property become “commingled” or mixed with others
- Situation where owners are unable to differentiate whose property belongs to whom
The Law’s Solution
- If the goods can be divided, they will divided to each owner who can prove their share of the whole
- Risk of loss for the lack of proof
Acquiring personal property for possession
Abandoned property
-Finders of abandoned property (intentionally disposed of) get title
Lost Property
- The finder of lost property has superior right in title against all-but for true owner
- Finder has a duty to give possession of the property to the police
a. If no owner comes forth within a reasonable time-finder acquires title
b. exception-mineral rights
Mislaid Property
- Property that has been unintentionally abandoned
- Rule: The owner of the land on which the property was mislaid has superior rights to the finder
Lost property
can be abandoned (intentional) or mislaid (accidentally left)
Treasure Trove
(acquiring property through possession)
- Any items of currency that are intentionally concealed by the true owner
- Property must have been in hiding
- Reasonable presumption that the true owner is likely dead (time length)
- Finders of treasure troves are true owners
Do not confuse with shipwrecks:
- Finders of shipwrecks are afforded a finder’s fee
- Treasure is the property of the country who’s flag the ship was flying
