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Agency and Partnership Flashcards

1
Q

Agency

A

a consensual relationship between a principal and an agent

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2
Q

Formation of an Agency

A

Capacity
Consent
Formation by action or law
Writing is only required if within the SOF
NO CONSIDERATION IS REQUIRED

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3
Q

Capacity to form an agency

A

Principal must have contractual capacity the agent only needs minimal capacity, which can be a minor

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4
Q

Consent to form an agency

A

COnsent must be manifested by both principal and the agent

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5
Q

Method of Agency Formation

A

By action: where the principal and agent agree or the principal holds out the other or by ratification or

by operation of law: where the principal may be estopped from denying the existence or where an agency is created by state

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6
Q

Agents Duties

A

Loyalty: Disclsoe interest adverse to principal
Obedience: Listen to the agent
Care: Act with reasonable care
Under Contract: Comply with terms in the contract

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7
Q

Principal Duties

A

Compensate and reimburse: Must pay and reimburse the agent unless the agent agreed to do it for free
Cooperate: Must cooperate and help carry out agency functions
Under Contract: Comply with terms in the contract

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8
Q

Principal Remedies

A

1) A compensated agent can be held liable for damages based on breach of contract.
2) Any agent is subject to tort liability for damages resulting from his misuse
of the principal’s property, for intentional or negligent misperformance, or
for the failure to perform.
3) If an agent breaches her fiduciary duty of loyalty and secretly profits, the
principal may recover the profits or property.
4) The principal can bring an accounting action in equity to determine the
exact amount an agent owes the principal.
5) If the agent has committed an intentional tort, or intentionally breached her
fiduciary duty, the principal may, in addition to other remedies, withhold the agent’s unpaid compensation.
6) The principal may terminate the agency relationship when the agent breaches one of his duties.

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9
Q

Agent Remedies

A

1) A compensated agent can sue for breach of contract. If there is no compensation stated in the contract an agent is entitled to reasonable compensation. There is no duty to compensate a subagent.
2) An agent has a possessory lien on any money the principal owes her.

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10
Q

Liability to third parties from the principal

A

A principal is bound to a contract an agent entered if the agent acted with actual or apparent authority or the principal ratified it.

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11
Q

Actual Authority

A

The authority that the agent reasonably thinks she possesses is based on the principal’s dealing with her. This is expressed or implied based on the duties that come with the agency.

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12
Q

Apparent Authority

A

Even if the agent lacked actual authority at the time of the contract, the principal will be bound by the contract if (1) the principal held out the agent as having authority, and (2) based on the holding out, the third party reasonably believed that the agent had authority to act. If the principle did not hold the agent out they will not be bound to the contract unless they ratify it.

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13
Q

Ratification

A

A principal can be bound by a contract if the principal later ratifies the transaction. Methods of ratification include acceptance of the transaction’s benefits, silence if there is a duty to affirm, and suing on the transaction. If ratified, the contract will be treated as if it had originally been entered with authority.

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14
Q

Liability to third parties from Agent

A

Whether an agent can be held liable for a contract he enters on behalf of the principal depends on whether the principal was disclosed, unidentified, or undisclosed. This is the only time the type of principal is relevant.
1) Disclosed principal—Agent generally not liable.
2) Unidentified or undisclosed principal—Generally either the principal or agent can be held liable (third party chooses).

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15
Q

Liability to principal or agent from the third party

A

Where the principal is disclosed, only the principal (not the agent) may enforce the contract and hold the third party liable. If the principal is unidentified or undisclosed, either the principal or the agent may hold the third party liable.

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16
Q

Tort Liability of Principal

A

Respondeat Superior.

An employee is where the principal had the right to control the manner and method of agents’ work.

Needs to be in the course and scope of employment. NO frolics.

A principal is not liable for the acts of independent contractors unless: (1) inherently dangerous activities are involved; (2) nondelegable duties have been delegated; or (3) the principal knowingly selected an incompetent
independent contractor

Also liable when an agent appears to deal or communicate on behalf of the principal and the agent’s apparent authority enables the agent to (1) commit a tort or (2) conceal its commission.

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17
Q

Partnership

A

Association between two or more persons (or trust, corp, partnership, or other entity) to carry on as co-owners of a business for profit.

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18
Q

What governs partnerships?

A

RUPA and contract and agency rules

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19
Q

Requirements to form a general partnership?

A

Default formation. Can’t be for an illegal purpose, can’t add extra people without the consent of all partners.

20
Q

Factors to imply a partnership?

A

Intent
sharing of profits
Evidence: Title to property held in JT or TIC and parties designated their relationship as partnerships, the venture has extensive activity and sharing of gross returns

21
Q

What property belongs to a partnership?

A

Titled in the partnership name, purchased with partnership funds, listed in partnership books as an asset, used a lot for the business, maintenance, and improvements are with partnership funds. Partners have no right to the properties.

22
Q

What property is the personal property of the partner?

A

Held in the name of the partner, partnership funds aren’t used, used for personal not partnership activities

23
Q

Rights of Partners

A

All partners have equal rights in:
management and control,
share of profits, losses, and distribution unless the agreement says otherwise.
All partners can inspect books and records.
Partners have no right to remuneration unless winding up the business.
Partners must indemnify partners when paying for carrying on the business.
Can get a contribution for debts paid.
The partnership is sued in name or in the names of partners.

24
Q

Duties of a Partner

A

Loyalty: Account for all profits or benefits, may not compete, may not deal with an adverse interest
Care: No negligence reckless or unlawful conduct
Obedience: Obey all reasonable directions and not act outside of the authority
Provide complete and Accurate info about the partnership

25
Q

Liability of Partners

A

Each partner is considered an agent, and each partner has apparent authority to bind the partnership to any contract within the scope of the partnership business. The the acts of other partners bind the other partners unless there was no authority or the third party knew or had noticed the partner lacked authority. Partners are liable for torts and contracts made in the ordinary course of business.

26
Q

Dissociation

A

DIssociated when:
a. Notice of the partner’s express will withdraw
b. The happening of an agreed-upon event
c. The valid expulsion of a partner
d. The partner becoming bankrupt
e. The death of an individual partner, or the termination of a partner that is a
business entity, or
f. A court decision that a partner is incapable of performing her duties

27
Q

Dissolution

A

A partnership is dissolved when:
In a partnership at will: when a partner gives notice of her express will to withdraw. This automatically triggers dissociation.

In a partnership for a definite term or particular undertaking, when:
1) Within 90 days after a partner’s death, bankruptcy, or wrongful dissociation,
at least half the remaining partners express a will to wind up the business
2) All the partners express a will to wind up the business, or
3) The term expires or the undertaking is complete
Upon the happening of an agreed-upon event
Upon the happening of an event that makes it unlawful for the partnership to
continue, or
Upon a judicial decree
The partnership must then wind up the business.

28
Q

Priority of Distribution

A

Each level of priority must be fully satisfied before beginning the next level
1. Creditors
2. Capital Contributions
3. Profits and losses

29
Q

Formation of a Limited Partnership

A

ULPA needs one or more general partners and one or more limited partners. Need to file a cert. of limited partnership with the state. Need LP at end of name.

30
Q

Partners Contributions to a Limited Partnership

A
  1. Partner has no rights to distributions absent a contribution
  2. Contributions may be in the form of any benefit to the partnership (e.g., money,
    property, services, and promises to make such contributions)
31
Q

Liability of Partners in a LImited Partnership

A
  1. Limited partner
    a. Limited partners have no personal liability for obligations of the partnership
  2. General partner
    a. General partners are jointly and severally liable for all partnership obligations
    b. General partners may also be limited partners but they still have all of the
    liabilities and duties of a general partner
32
Q

Duties of Partners in an LP

A
  1. General partners owe the limited partnership fiduciary duties of care and loyalty
  2. Limited partners owe no fiduciary duty to the partnership and are free to
    compete with the partnership, except as otherwise provided in the partnership
    agreement
33
Q

Rights of General Partners in an LP

A
  1. Both general and limited partners have the right to distributions, which can be
    transferred, in whole or in part
  2. A partner may transact business with the limited partnership
  3. Any partner may maintain a derivative action on behalf of the partnership if the
    partner first makes a demand on the general partners or the demand would be futile
  4. Any partner may apply for a decree of dissolution whenever it is not reasonably
    practicable to carry on the business in conformity with the partnership agreement
  5. Each general partner has equal rights in management
  6. A general partner has a right to the partnership’s business information
  7. A general partner is not entitled to remuneration for services performed for the
    partnership
  8. A general partner is entitled to indemnification for liabilities incurred in the ordinary
    course of the partnership’s activities
34
Q

Rights of Limited Partners in an LP

A
  1. Both general and limited partners have the right to distributions, which can be
    transferred, in whole or in part
  2. A partner may transact business with the limited partnership
  3. Any partner may maintain a derivative action on behalf of the partnership if the
    partner first makes a demand on the general partners or the demand would be futile
  4. Any partner may apply for a decree of dissolution whenever it is not reasonably
    practicable to carry on the business in conformity with the partnership agreement
  5. Limited partners have no right to participate in management, except as provided by
    the partnership agreement
  6. Limited partners have the right to inspect and copy certain partnership records that
    are required to be kept in the records office
35
Q

Dissociation/DIssoclution of a Limited Partnership

A

Same as general but a limited partner has no right to dissociate before termination of the limited partnership and a limited partnership may be dissolved by the occurrence of
a. The happening of an agreed-upon event
b. The consent of all the partners holding a majority of the right to receive
distribution (“majority in interest”)
c. After dissociation of a general partner and the consent of the majority in
interest, if no general partner remains, after 90 days unless a new partner is
admitted, or
d. 90 days after dissociation of the last limited partner, unless a new limited
partner is admitted

36
Q

Formation of a Limited Liability Partnership

A

Approved by whatever vote is necessary to amend a partnership, the name has to be LLP, and have to file a statement of qualification with the secretary of state. Partners are not liable for acts of the partnership.
1. Financial rights and obligations of partners, including profit/loss-sharing and
indemnity, are identical to those of general partners in a general partnership
2. If partnership assets are insufficient to indemnify a partner for an L.L.P. obligation,
each partner forfeits a right to receive contributions in exchange for being relieved
of the obligation to contribute to the personal liability of other partners.

If a tort is committed by a co-partner, recall the partner’s liability is usually limited and won’t be personally liable unless they engaged in the tort.

37
Q

Formation of LLC

A

Taxed like partnerships by limited liability and is treated as an entity separate from its members. File a cert. of organization and put LLC at tend of the name.

38
Q

Member managed LLC

A

Each member has the authority to bind the company to contracts unless it lacks actual authority and 3rd parties know of the lack of authority. Owe duty of care and loyalty to other members of the LLC. Can discharge duties consistently with the contractual obligation of good faith and fair dealing. Members have a right to inspect and copy the LLC business records that are material to rights a duties

39
Q

Manager Managed LLC

A

Only the managers are subject to duties of care and loyalty. Other members may authorize or ratify an act that would otherwise violate the duty of loyalty BUT NOT the DUTY OF CARE. Managers have a right to inspect and copy the LLC business records that are material to rights duties and the duty to furnish info when needed.

40
Q

Piercing LLC Viel

A

Courts may pierce the LLC veil to reach personal assets of members in
circumstances similar to those justifying piercing in a corporation

41
Q

Distributions of an LLC

A

The uniform act calls for distributions in equal shares unless the operating
the agreement provides otherwise, but most states do not follow that approach and
allocate distributions on the basis of contributions unless the operating agreement
provides otherwise

42
Q

Dissociation of LLC

A

Can dissociate at any time, can be liable from damages if wrongful dissociate, same as partnership dissociation events

43
Q

Dissolution of an LLC

A

Happens when:
a. An agreed upon event of dissolution
b. The consent of all the members
c. The passage of 90 consecutive days during which the LLC has no members
d. Judicial decree
e. Administrative dissolution by the Secretary of state

44
Q

When can partners assign their interests?

A

Partners can assign their interest in profits loss or distributions to someone else but not their partnership rights.

45
Q

Sub Agent

A

A subagent is a person that is appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal.

Not all people appointed this way are subagents, some are coagents, and a coagent is given no duties not ones delegated. Employees are all coagents.

46
Q

Agency Termination

A

Happening of an event
Lapse of reasonable time
Change in circumstances
agents’ breach of fiduciary duty
either party’s unilateral termination
operation of law
Death terminates an agency by operation of law as soon as the agent or principal learns of the death.

47
Q

Estoppel Theory Independent Contractor

A

An employer is liable for tort actions of an independent contractor when they hold them out as employees and a third party believes that the independent contractor is an employee.

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