NY Agency & Partnerships Flashcards
Agency questions tend to focus on three areas
- P’s liab to TP for agent’s torts
- P’s liab to TP for K’s entered into by agent
- Duties an agent owes to P
Be prepared to (1) identfy existing agency relationships, (2) demonstrate an agent’s fidcuariy obligation to P, and (3) detail when agency relationshiop terminates
Creation of Agency relationship (KNOW IT COLD!)
TWO PART TEST: (1) When P “manifests assent” to an agent that (a) agent act on P’s behalf and (b) subject to P’s control, AND (2) Agent manifest assent.
“control” - here, means overall objectives
three types: expression (appt), implication (conduct), misinterpretation (P’s fault)
Reqs to be P; to be A
Principal - must have legal capacity to possess rights and incur obligations.
NB - Unincorporated Ass'n cannot serve as Principals
Agent - any person with mininal capacity (ie, the ability to consent to act on P’s behalf) or any entity can serve as agent.
Recurring, 3
ER - EE
Corp - officers…. BUT corp not in existence cannot be a P!
Partnerhsip - partner
Agent Vocabulary, 5
Gratuitous agent - no compensation (bert/ernie)
General agent - broad authority (restaurant manager)
Trustee as agent - (agent of settlor or beneficiaries)
Special agents - limited authority over specifci acts. Many examples:
1. Broker titles: (a) buyer’s agent, (b) listing agent, (c) seller’s agent, (d) dual agent, (e) designated sales agent” i.e. designated wehn there’s a dual agent, (f) broker’s agent (NOT A SUBAGENT TO ULTIMATE P!), (g) tenant’s agent, (h) LL’s agent. REQS: brokers must (1) be licensed!, (2) disclose to P fiduciary duteis
Subagents - as it sounds
Subagent rules
Agent may only appoint if actual or apparent authority to do so
SA owes DOL to P and A
Contract liab: a is responsible to P for losses by SA; P is bound by SA to the same extent as if A acted; A can be VL for SA
Terminating Agency Relationship
Can be done by either side (P or A), ie it’s a unilateral right. [True, even if longer term in K, but there will still be breach of K]
Ways P-A terminates:
- Expiration of time (express or reasonable period), eg snow shoveling
- Revocation, renunciation - effective when other party recieves notice
- Operation of Law (automatic) in three circumstances (a) death of principal or agent , (b) P’s loss of capacity, and (c) A’s breach of fidicuary duty. EXCEPTIONS: (i) if P in military when dies, (ii) bank customer; OR (iii) if “durable power of aty given, in writing”
NB: irrevocable? agreement with security.
OJO: P liable for terminating?
Look to see if there was an act of breach by the Agent!!!!
P’s K Liability, general rule
Principal bound if Agent acted with (1) actual auth, (2) apparent auth, or (3) inherent auth.
Actual Auth (P’s K Liability)
Actual authority - Based on the manifestations of P’s intent, Agent must actually and reasonably believe that he is acting doing what the P wants. Both an objective and subjective component.
Express or implied
Implied - if necessary to other objectives etc. Consider: (1) custom and usage, (2) P’s acquiescence.
Sometimes can be implied to delegate: same basic analysis
Implied actual authority to delegate (P’s K Liability)
NOT IMPORTANT SKIP
Use common sense. But also 4 scenarios:
- delegation is ministerial
- agent required to delegate to specailist under law
- delgation is consistent with custom /usage
- impossible for agent to perform
Actual authoirty - P’s intent?
P’s K Liability
P’s subjective intent is IRRELEVANT! only A’s good faith and objectively reasonbale understanding of P’s intent
Terminating Actual Authority, 8 ways
P’s K Liability
- revocation
- agreement
- change in circumstnaces (coconut allegy)
- passage of time
- principal’s death
- agent’s death
- p’s loss of capacity
- termination req’d by statute
Test for Apparent Authority
P’s K Liability
Does a THIRD PARTY with whom an agent is dealing have a reasonable and good faith belief that the agent is acting with authority? (subjective and objective)
Based on PRINCIPAL’s actions.
Five factors, but really pretty basic: (1) past dealings between p and a, (2) trade customs re transactions, (3) relevant industry standards, (4) P’s written statemnt of authority, (5) transactions taht wouldn’t benefit P . ALL THESE FACTORS GO TO THE GOOD FAITH OF THE THIRD PARTY!
Ratification and Estoppel (P’s K Liability)
Ratification (express or implied) making action by unauthroized agent valid. FOUR factors: (1) knowledge - P must know ALL material facts; (2) comprehensiveness - have to ratify all or nothing, no selective ratification; (3) timeliness - P must ratify in timely manner, can’t prejudice TP; and (4) capacity - can only ratify if P has capactiy to do actions.
Estoppel - when P’s negligence is the reason that someone thought the A had apparent authority (NJ furniture store not policing its registers)
Respondeat Superior (P’s tort liability)
Two reqs: (1) master-servent relationship; and (2) servent was acting in the scope of employment.
Master-Servent (Respondeat Superior)
Subset of P/A. Amount of CONTROL is more stringent. Need control over DAY-TO-DAY functioning of agent.
Scope of employment, vocab and factors-5 (Respondeat Superior)
FROLIC (not in scope of employment) vs. DETOUR (in scope).
NY Courts look at 5 factors: (1) whether activitiy closely connected to the servent’s work for the master; (2) when the activity is common to servants; (3) history of relationship btw M and S; (4) if servant departs from the normal methods of pursuing his or her duties; (5) how reasonably foreseeable was it that EE would act this way!
Commute to work is NOT within scope
K liability for Agent, generally
Is P disclosed, partially disclosed, or undisclosed?
disclosed (identity, too): then agent is NOT liable
partially disclosed (no identity): then agent IS liable
undisclosed: agent IS liable
Difference btw partially disclosed and undisclosed
TP is stuck with K if partially disclosed; TP can back out of K if undisclosed.
Warranty of Authority (K liability for Agent)
if warranty is breached, then no K, but agent liable for damages.
P’s duties to A
- duty of fair treatment and good faith
- contractual obligations
- duty to reasonably compensate A
- duty to indemnify A for losses (but not for torts)
recovery in either tort (breach of fiduciary duty) or K
A’s duties to P
- Duty to notify (impute knowledge to P)
- Duty of loyalty: no competing, self-enriching, etc.
- Duty of reasonable care - perform “with reasonable diligence and skill”; notify
- Duty of obedience
Breach? sue for an accounting; can have restitution
Partnership Defined (KNOW IT)
An association fo two or more person to carry on a for-profit business as co-owners.
Intent to form biz as co-owners. BUT NO NEED for specific intent to form partnership.
Partnership Formation
Key test: sharing of profits? Sharing of profits is PRIMA FACIE evidence of a partnership. Rebuttable presumption.
Five statutory EXCEPTIONS when profit sharing will not constitute presumptive partnership:
- debt payment
- interest on loan charges
- form of compensation
- goodwill payments from sale of business
- annuity or retirement benefits for retired partner
No formal agreement is required.
Partnership by estoppel (two types)
Used:
- to impose liability on purported partner
- to impose liabilty on partnership due to actions of purproted partner
Partenrship by estoppel elements
Four elements: 1) must be representation that the person is a partner, (2) representation made by person , (3) TP reasonably relies on representation, and (4) TP suffers damage as a result.
If representations by partnership, then Partnership will be liable
Partner duties, 7
Agent of partnership! (And fiduciary duties as a result: DOL, DOC, DOC)
Unlimited liabiltiy, partners J&S liability once assets of Partnership exhausted
Profit/loss sharing; equal share
No entitlement to compensation
Each partner contributes capital contribution (no entitlement to interest)
Reimbursement for expenses
Indemnification for conduct in business
Partnership Rights (econ/voting)
Right to transfer ECONOMIC RIGHTS
BUT NOT voting/management rights
Partnership Property (rights, and test)
No unilateral right to assign Pship property
Cannot use Pship Prop for personal gain
Test: PRESUMPTION- property purchased with Pship assets is presumptive Pship property. While proprety purchased with personal assets is presumptively personal. FACTORS: 1. use of property, 2. pship made improvements, 3. property of similar character to other pship proeprty, 4. property listed as asset on pship’s books, and 5. who pays the taxes?
Pship Management:
Ordinary vs. special business decisions:
ORDINARY biz decisions (only need majority)
SPECIAL biz decisions (need UNANIMOUS vote):
- admitting NEW partner
- selling substantial portion of Pship’s assets or property
- amending the Pship agreement
Partners Bring Suit
NOT allowed to sue each other; rather, must hold an accounting.
Accounting = all the partners are joined and the court determines the liabilities between each
partner and the partnership as a whole.
When Partners can call for an accounting, 5
When you can jsut go straight against P
- P wrongfully being excluded from biz
- P wrongfully excluded from using Pship Property
- Pship agreement expressly provides
- Partner has obtained secret profits
- When ct determines would be just and reaosnbale
TWO skip gos: 1. tort claim in negligence against indivudal partner; 2. unrealted and discrete claim.
Workers comp against Pship?
NO! Partners cannot so recover.
Partnership Liability in K
Just apply agency rules, as Partners are agents (actual/apparent auth, etc. ).
ADDITIONAL CONSIDERATION: ordinary vs. special business matters: Each Partner has actual authority wrt ORDINARY biz acts. But partners do NOT have actual auth wrt SPECIAL business matters.
5 special biz matters: (1) assignement of pship property; (2) disposition of goodwill of ship; (3) action that would make it impossible for pship to continue operaitng; (4) confessing a judgment; (5) subimtting Pship claim to arbitration.
If P transfer Pship property without authority, can pship get it back?
Yes, if property was in Pships name, the Pship may freely recover from INITIAL transferee
No, if property was in partner’s name, Pship may recover ONLY if transferee KNEW proeprty was Pships
Notice to Partner
Knowledge
Imputed to Pship, unless partner was acting fraudulentely etc.
Knowledge also imputed. DISTINCTION: if knowledge acquired during course of partnership then imputed, AND true of nonparticipating partner. BUT not if trivial etc.
EXCEPTION: when one partner is commitning fraud on the Pship.
Pship TORT liability
Pship J&S liable for partner’s torts, with THREE exceptions: (1) p’s tort consists of a crime AGAINST the pship; (2) p’s wrongdoing is OUTSIDE THE SCOPE of Pship; or (3) P commits a crimianl act.
Persoanl Liab from judgment
only after Pship assets exhausted; new partner only on hook for debts after he joined
old partners not off the hook even if dissociated.
Vocab: Dissolution & Winding up
- “Dissolution:” the change in rights and obligations among the partners upon the occurrence of certain events (When an event occurs that causes dissolution, the partnership actually remains in existence until the winding up process is complete.)
- “Winding up:” the factual, practical business of finishing up the partnership
Causes of Dissolution, 8
WE ME BAD + COURT!
- in at-Will pship, decision by any partner
- pship “for term”, then Expiration of term
- unanimous p consent (Mutual consent)
- good faith Expulsion of p for breaching agreement
- p goes Banrkrupt
- Activities of pship become illegal
- any p’s Death
- COURT order (6, BIG IPO):
(a) if partner Breaches duties/agreement
(b) Incompetecn of a p
(c) a p is found Guilty
(d) p found Incompetent
(e) pship can no longer turn a Profit
(f) any Other equitbale reason
When can nonpartner petition?
if purchased economic rights to phsip: and either (1) term ends, or (2) if at will pship
Consequences of Disollution re (AAuth or ApAuth)
Deprives all ps of ACTUAL AUTHORTIY to act for pship EXCEPT FOR limited purposes of winding up.
There could still be APPARENT authority, however. But TP must not know about dissolution. TP is DEEMED to have notice if (a) advertised in newspaper, or (b) files statement of dissolution, which becomes effective 90 days thereafter.
After Dissolution P actions
Pship not bound by actions of individual p if:
- Pship dissolved bc it was illegal
- p acting was the one who went bankrupt
- p did not have auth to wind up
- p knows of windup but takes actions INCONSISTENT with windup
BUT generally dissolution does not limit liability.
Wind up (authoirty & asset distribution)
Every p has authority to wind up the pship. EXCEPTIONS: 1. p who wrongfully dissocaited (ie leaving without permission) does NOT have authority to wind up, 2. p stripped of her authoirty cannot wind up.
Distributing assets, in order. Pship must pay: (1) outside creidtors, (2) inside creditors (ps who made loans) and then (3) repaying capital contributions, and then (4) distibuting equally.
Pship continuation
Remaining ps may decide to continue the pship, duh.
LLP or RLLP
Limited Liability Partnership or Registered Limited Liability Partnership
- must file a certificate of registration with state
- open only to licensed professionals
- limited liability
- CERTIFICATE, req’d info: 1. name of LLP, 2. office in NY, 3. profession, 4. agent for process etc. , 5. effective date of registration, 6. express limit of liab.
LP
Limited Partnership: general partners and limited partners. Profits and losses allocated by pro rata based on P’s capital contribution.
GENERAL PARTNERS: like partners in pship, no limit to laibility. Can withdraw with notice or by operation fo law (1. assignment, 2. removal, 3. bankruptcy, 4. dies/incompetency)
LIMITED PARTNERS: limited liability, with exceptions (1. liab from own activities, or 2. activities of someone supervised by lp) CANNOT freely withdraw.
CERTIFICATE: usual stuff PLUS (1) name & biz address of all general partners (2) date of dissolution.
OTHER rules:
- new partners only upon unanimous consent.
- Limited partner can sell via pship agreement of unaninous consent.
- General partners can sell, but the interest then becomes a LIMITED pship interest
Joint venture
basically like a partnership. Difference: pursue particular, discrete business undertaking.
Parties to joint ventures ≈ partners
JV ≈ partnership
Model answer, can partner devise partnerhsip interest?
ISSUE ONE: MANAGEMENT VERSUS ECONOMIC RIGHTS: A partner may transfer his or her interest in the partnership to another person. This transfer, however, does not entitle the transferee to rights in the management or administration of the partnership’s business or the right to inspect partnership records, absent an agreement of all the partners. The assignee (transferee) is only entitled to the financial interest of the transferring partner, meaning the right to share in the profits of the partnership. An assignee does not become a new partner unless all existing partners agree to admit the new partner into the partnership.
ISSUE TWO: DISSOLUTION AT DEATH: Dad’s death triggered the dissolution of GP and thus Dora is entitled to Dad’s share of the profits after the winding up of the corporation is completed. Generally, the death of a partner will dissolve the partnership. The partnership, however, will continue to exist if the partners have made a written agreement to provide for what happens in the event of the death of a partner. Here, since there is no evidence to indicate an agreement for the partnership to continue after a partner’s death, Dad’s death caused the dissolution of GP. Therefore, the only interest that remains is Dad’s share of the profits following the winding up of GP.
