Module 6: Agencies, Partnerships, Corporations

Question 1

Agency, Principal, Agent definitions

Answer 1

Agency: anyone acting on authority of or on behalf of someone else; principal: main person; agent: person acting on behalf of the principal

Question 2

Creation of agent, principal relationship

Answer 2

Agreement, estoppel (informed but not formal agreement), ratification (agents acts on principal’s behalf), necessity

Question 3

Duties of Agents

Answer 3

Agent owes principals duty of care, loyalty, obedience

Question 4

Liability of Principal

Answer 4

Principal liable for all acts of agent as long as agent is acting with authority of principal whether acting on authority, implied authority, or apparent authority (appearing to act on behalf of the principal b/c of the job they’re hired to do)

Question 5

Liability of the Agent

Answer 5

Acts for which agent does not have authority, going beyond bounds of agreement; violating duty of obedience, care, or loyalty; If principal identity is not fully disclosed to third party

Question 6

Partnership definition

Answer 6

As association of two or more people entering business together to mark a profit - Doesn’t have to be in writing, implied by parties’ behavior, particularly profit sharing

Question 7

Partnership by Estoppel

Answer 7

If someone acts as if they’re a partner to a third party, they become a partner at least to that third party

Question 8

Partnership Liability

Answer 8

All partners are agents to each other; Every partner is liable to third parties for torts or contract violations; Every partner is liable for debts and obligations of the partnership

Question 9

Dissolution of Partnership

Answer 9

Specified period of time; Desire of any individual partner to leave - remaining partners must reform; Mutual agreement
Death; expulsion, or bankruptcy of a partner Court Order;
Terminates actual authority for all involved to act for partnership with exception of acts to finish final business; Must notify any third parties involved b/c it changes the principal agent relationship; Assets are used to pay creditors, remaining assets split between partners

Question 10

Corporation Business Judgment Rule

Answer 10

Directors and officers owe duty of care and loyalty to the company and shareholders, but even if decisions go badly, directors/officers are protected as long as they were acting in reasonable scope of ordinary decisions

Question 11

Piercing the Corporate Veil Doctrine

Answer 11

Liability exception beyond the corporation: officer/owner using the corporate form to evade their own personal liability, could be held personally liable

Question 12

Termination of Corporation

Answer 12

dissolution and liquidation by board and shareholders (or by court order); Board vote and ratify, or court order, dissolution certificate filed with the state; Liquidate and pay creditors and shareholders