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Agency > Partnerships > Flashcards

Partnerships Flashcards

1
Q

General definition

A

Association of 2 or more persons to carry on as co-owners in a business for profit. Not a legal entity.

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2
Q

Formation: requisities

A
  1. contract capacity: P who lacks capacity is only liable to extent of capital contribution
  2. No formalities (can be express or implied). SOF only applicable for 1 year rule
  3. Legality of purpose
  4. Consent
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3
Q

Proof of partnership existence

A

Express intent governs. If no express intent look to

  1. Title to prop
  2. designation of entity by parties
  3. amount of activity
  4. Sharing of gross returns
  5. sharing of profits
  6. Sharing of losses
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4
Q

Prima facie evidence of partnership

A

Sharing of profits unless sharing is actually repayment of debt, payment of wages, rent, consideration for sale of goodwill of business

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5
Q

Partnership by estoppel: Liability of person who holds himself out at partner

A

or allows another to do so = liable to 3rd parties who extend credit in reliance

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6
Q

Partnership by estoppel: liability of person who holds another out as partner

A

Makes that person his agent to bind him to third parties

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7
Q

Partnership property: capital vs property

A 
Capital = $ contributed by partners for purpose of carrying on business
property = everything partnership owns including the capital
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8
Q

What is included in partnership property?

A

No limits. Controlling factor is parties intent to devote property to partnership purposes

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9
Q

Partner’s rights in partnership property

A

Partners own property as tenants in partnership

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10
Q

Partner’s rights in partnership property: incidents of ownership

A

P’s have

  1. right to possession for PS purposes
  2. Not assignable, mortgageable, attachable or subject to any individual claims of the partners
  3. Right of ownership vests in the surviving partner after death of another
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11
Q

Partner’s interest in the partnership

A

P has interest in the PS (his share of profits and surplus). Treated as personal property. Assignable without dissolving PS and attachable.

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12
Q

Relations between Partners: Fiduciary duty

A

Owe each other F duty. P can not gain for himself at the expenses of the PS

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13
Q

Relations between Partners: Management rights

A

Equal rights in mgmt absent agreement

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14
Q

Relations between Partners: distributions

A

Each partner shares equally in profits and surplus absent agreement

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15
Q

Relations between Partners: losses

A

contribute to losses according to share of profits

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16
Q

Relations between Partners: Renumeration

A

no general right of renumeration for services rendered to PS. Surviving partner has right to renumeration for winding up

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17
Q

Relations between Partners: breach of agreement to work for PS

A

Where P has impliedly or expressly agreed to devote time to PS and fails to do so she may be charge in accounting for damages caused to PS

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18
Q

Relations between Partners: idemnification

A

A PS must indemnify every partner fpr payments made and personal liabilities

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19
Q

Relations between Partners: contribution

A

where one P has been required to pay more than his share of PS debt, he may require contribution for pro rata shares

20
Q

Can a partner sue another partner? Can a partner sue or be sued by the PS?

A

No. Exception where the subject of litigation does not involve a complex accounting or unrealted to the PS

21
Q

Application of agency law to partnerships

A

Every partner is an agent of the partnership for the purpose of its business. The act of every partner for apparently carrying on in the usual way of business will bind the PS and thereby bind the other partners.

22
Q

Actual authority: sources

A

PS agreement, majority or unanimous vote of partners

23
Q

Actual authority: when unanimous vote required

A

Unless agreement says otherwise, unanimous consent required to

  • submit to arb
  • assignment for benefit of creditors
  • confession of judgment
  • disposition of PS’s goodwill
  • Generally, engage in business other than that contemplated by PS agreement
24
Q

Apparent authority: real property

A

If title held in PS name = title may be conveyed by any partner. if Partner lacked apparent or actual authority, PS may recover from transferee so long as not a BFP

If title in fewer of the Ps names = any of them can convey.

If title in name of all partners = only a conveyance by all named passes an equitable interest as well as legal title

25
Q

Apparent authority: Mortgages

A

same as real prop

26
Q

Apparent authority: leases

A

contract law.

27
Q

Apparent authority: Personal property

A

Contract laws govern

28
Q

Apparent authority binds PS

A

to any contract within the scope of PS business. If its outside the scope, PS is not bound unless they have actual authority

29
Q

When is knowledge imputed to the partnership

A

If P is a participant in the transaction = imputed if he acquired the information while a partner or if acquired before he became a partner, knowledge was present to his mind

If P with information is not a participant = imputed if partner reasoable could and should have communicated it to the participating partner. Fraud is exception

30
Q

When is the partnership liable for the fraud of a partner on a 3rd party?

A

When Partner is acting within the scope of P business = PS is liable
When not, no liability to PS

31
Q

When P seeks to defraud the PS in transaction with thrid party

A

if the 3rd party is aware of the fraud, PS is not liable.

32
Q

When is the PS liable for the P’s breach of trust to third parties

A

IF P misapplies money or property of thrid parties received in the scope of his apparent authority or within the scope of his ordinary course of business

33
Q

What is a partner’s liability?

A

Liable for contracts in the scope of the PS business or that are expressly authorized and tort liability of other partners and employees

34
Q

Nature of partner liability

A

Partners are jointly and severally liable for torts and breaches of trust and joint liability for all other debts and obligations

35
Q

Extent of Partner liability

A

personally and individually liable for the entire amount of PS obligations.

36
Q

Liability of incoming partners

A

liable for prior obligations only to the extent of her capital contribution

37
Q

Liability of retiring partners

A

liability of obligations incurred during his time as partner unless there has been payment, release or novation. Liable for acts after retirement unless notice is given

38
Q

Criminal liability

A

Partner not liable for the criminal acts of another partner taken in course of ordinary business unless an accessory after the fact etc.

39
Q

Dissolution by act of partners

A

happens pursuant to PS agreement
mutual assent of all Ps
Explusion of partner
express will of one P

40
Q

Dissolution by operation of law

A

PS business becomes illegal
P dies
Bankruptcy of either P or the PS

41
Q

Dissolution by decree of equity court

A

On request of P and showing of

  • breach of PS agreement such that it is not practicable to go on
  • unprofitability
  • misconduct that prejudices the business
  • incompetnace
  • incapability
42
Q

How to terminate apparent authority after dissolution

A

Notice is required. Personal notice required to current and past creditors. Publication notice for others. Failure to give notice will result in partners being personally bound to third parties who extend credit to the PS

43
Q

Authority of Ps to transact business after dissolution

A

Dissolution terminates the authority of any P to act as agent for the either the PS or any other P. P does have authority to wind up.

44
Q

Order of PS liabilities being paid

A
  1. outside creditors
  2. Partner’s advances
  3. Partner’s contribution to capital
  4. surplus and profits
45
Q

Right to continue business after dissolution

A

Remaining Ps have right to continue the PS business after dissolution if
-P dissolves the PS in contravention of the agreement
-Partner is expelled
-Partners agree to continue
Creditors retain their rights as they were.

Agency (3 decks)

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