Outline Flashcards
Agency is…
A fiduciary relationship that arises when a principal appoints an agent to act on his behalf and the agent consents
Assent of both parties
Agent acts for benefit of principal.
Agent is within principal’s control.
Principal must have contractual capacity; Agent need not
Agent’s Fiduciary Duties
Duty of care
Duty of loyalty
Duty of obedience
Principal’s Duties to Agent
- indemnify
- compensate
Actual Authority
Express or Implied
Authority agent:
1. reasonably believes she has
2. based on principals words or action
Effect on agent
Implied Actual Authority
Can be inferred from:
1. words or conduct
2. custom, or
3. prior acquiescence
Actual Authority is terminated when:
- specified
- circumstances have changed
- duty is breached by agent
- principal or agent dies
- a party terminates it
Apparent Authority
Effect on third party
Principal holds out another as possessing authority leading third party to reasonably believe authority existed
May be established by title or position
Actual authority can become apparent authority after it ends if principal does nothing to prevent it
Ratification
principal will be bound even if agent had no authority if he ratifies the contract through acceptance of benefits
Ratification requires:
1. knowledge of all material facts
2. acceptance of entire transaction
3. capacity
It cannot be used to alter rights or intervening parties
Cannot ratify if:
- illegal performance
- other party withdrew
- material change in circumstances
Liability of agents Contract Acts
ONLY Principal will be liable if there was authority or ratification.
Agent AND principal will be liable if principal is undisclosed or partially disclosed.
Liability for Agent’s Torts
Master and servant are joint and severally liable for acts within the scope of employment
Principal generally not liable for acts of independent contract. Independent contractor depends on:
1. skill required
2. tools and facilities provided
3. period of employment
4. basis of compensation
5. business purpose in furtherance of principal or contractor
Principal may be liable for Independent Contractor’s Acts if:
- inherently dangerous activities
- Delegation of nondelegable duties
- Principal knowingly hired incompetent contractor
Detour
Minor deviation
Frolic
substantial deviation
Employer is only liable for intentional torts if they are:
- within the nature of the job
- to serve the employer
- authorized or ratified by employer
Partnership
Formed when two people come together to run a business for profit.
Sharing of profits + right to participate in control = partnership
Sharing profits is not assumed a partnership if it is to:
1. pay off a debt
2. pay wages or compensation
3. pay rent
4. pay interest on a loan
Intent to form a partnership not required.
Partner Voting
Equal rights in mgmt. and equal votes unless otherwise agreed.
Ordinary matters require majority vote.
Matter not ordinary require unanimous vote
Sharing Profits
Profits are shared equally unless otherwise agreed.
Sharing Losses
Losses are shared in the same manner as the profits are shared unless otherwise agreed.
Losses follow profits, not the other way around
Partnership liability
Partnership is liable for torts or contracts of other partners on behalf of the business.
Exception in contracts: Acting partner did not have actual or apparent authority
Partner liability
Each partner jointly and severally liable for partnership obligations AFTER all partnership resources have been exhausted
Cannot shield a single partner from 3rd partner liability
Partnership fiduciary duties
- Loyalty
- Care
- Disclosure
owed to each other and the partnership
Transfer of interest in partnership
Partner CAN transfer financial rights
CANNOT transfer mgmt. rights
Events of Dissociation of a Partner
- Notice of intent to withdraw
- Expulsion, death, bankruptcy
- Agreed upon event (goal accomplished)
- Appointment of a receiver for partnership
Upon dissociation the partnership must:
dissolve or continue with a buyout
Partnership must dissolve and wind up upon:
- notice of withdrawal of partner unless all partners agree it can continue
- Happening of an event
- wrongful dissociation, death, or bankruptcy IF 1/2 remaining partners agree within 90 days to wind up
- partnership becomes unlawful
Liability of dissociated partner
May be liable for post-dissociation liabilities for up to two years after, if he did not notify creditors or file public statement of dissociation
Apparent authority remains in the same way unless partnership notifies
Limited Partnership
Has at least one general partner and one limited partner.
Must file with the state
General partners: management rights, liability for the partnership
Limited partners: no mgmt. rights, not personally liable for obligations
Limited Liability Partnership
General partnership but all partners have limited liability
Must file with the state
Partners not personally liable for obligations
Limited Liability Company
Members (owners) have limited liability and partnership tax benefits
Must file with the state
Profits and Losses based on contribution percentage
