Outline

Question 1

Agency is…

Answer 1

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

Question 2

Agent’s Fiduciary Duties

Answer 2

Duty of care
Duty of loyalty
Duty of obedience

Question 3

Principal’s Duties to Agent

Answer 3

1. indemnify
2. compensate

Question 4

Actual Authority

Answer 4

Express or Implied

Authority agent:
1. reasonably believes she has
2. based on principals words or action

Effect on agent

Question 5

Implied Actual Authority

Answer 5

Can be inferred from:
1. words or conduct
2. custom, or
3. prior acquiescence

Question 6

Actual Authority is terminated when:

Answer 6

1. specified
2. circumstances have changed
3. duty is breached by agent
4. principal or agent dies
5. a party terminates it

Question 7

Apparent Authority

Answer 7

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

Question 8

Ratification

Answer 8

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

Question 9

Cannot ratify if:

Answer 9

1. illegal performance
2. other party withdrew
3. material change in circumstances

Question 10

Liability of agents Contract Acts

Answer 10

ONLY Principal will be liable if there was authority or ratification.

Agent AND principal will be liable if principal is undisclosed or partially disclosed.

Question 11

Liability for Agent’s Torts

Answer 11

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

Question 12

Principal may be liable for Independent Contractor’s Acts if:

Answer 12

1. inherently dangerous activities
2. Delegation of nondelegable duties
3. Principal knowingly hired incompetent contractor

Question 13

Detour

Answer 13

Minor deviation

Question 14

Frolic

Answer 14

substantial deviation

Question 15

Employer is only liable for intentional torts if they are:

Answer 15

1. within the nature of the job
2. to serve the employer
3. authorized or ratified by employer

Question 16

Partnership

Answer 16

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.

Question 17

Partner Voting

Answer 17

Equal rights in mgmt. and equal votes unless otherwise agreed.

Ordinary matters require majority vote.

Matter not ordinary require unanimous vote

Question 18

Sharing Profits

Answer 18

Profits are shared equally unless otherwise agreed.

Question 19

Sharing Losses

Answer 19

Losses are shared in the same manner as the profits are shared unless otherwise agreed.

Losses follow profits, not the other way around

Question 20

Partnership liability

Answer 20

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

Question 21

Partner liability

Answer 21

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

Question 22

Partnership fiduciary duties

Answer 22

1. Loyalty
2. Care
3. Disclosure

owed to each other and the partnership

Question 23

Transfer of interest in partnership

Answer 23

Partner CAN transfer financial rights

CANNOT transfer mgmt. rights

Question 24

Events of Dissociation of a Partner

Answer 24

1. Notice of intent to withdraw
2. Expulsion, death, bankruptcy
3. Agreed upon event (goal accomplished)
4. Appointment of a receiver for partnership

Question 25

Upon dissociation the partnership must:

Answer 25

dissolve or continue with a buyout

Question 26

Partnership must dissolve and wind up upon:

Answer 26

1. notice of withdrawal of partner unless all partners agree it can continue
2. Happening of an event
3. wrongful dissociation, death, or bankruptcy IF 1/2 remaining partners agree within 90 days to wind up
4. partnership becomes unlawful

Question 27

Liability of dissociated partner

Answer 27

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

Question 28

Limited Partnership

Answer 28

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

Question 29

Limited Liability Partnership

Answer 29

General partnership but all partners have limited liability

Must file with the state

Partners not personally liable for obligations

Question 30

Limited Liability Company

Answer 30

Members (owners) have limited liability and partnership tax benefits

Must file with the state

Profits and Losses based on contribution percentage