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Emily's MBE Questions > Agency & Partnerships > Flashcards

Agency & Partnerships Flashcards

1
Q

What is agency (definition)

A

Fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other person so to act

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2
Q

What degree of control is needed for agency?

A

Degree need not be significant

Sufficient if principal specifies tasks agent should perform

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3
Q

What is the equal dignities rule?

A

Agency agreements must be in writing when agent is to enter into certain contracts within SOF or agency agreement itself would fall within SOF

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4
Q

For valid agency relationship to exist, check for the following:

A

Capacity

Consent

Writing if required

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5
Q

What fiduciary duties does an agent owe to the principal?

A

Duty of care = carry out agency w rsble care

Duty of loyalty = owe undivided loyalty to principal

Duty of obedience = must obey all rsble directions of their principal

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6
Q

What duties does a principal owe to an agent (these are not fiduciary duties)?

A

Compensation

Cooperation

Indemnity/reimbursement

Express contractual duties

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7
Q

What remedies does an agent have for principal’s breach of duties?

A

Contractual remedies

Possessory lien

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8
Q

What remedies does a principal have against an agent for breach of duty?

A

Contract remedies

Tort remedies

Constructive trust

Action for secret profits

Withhold compensation

Terminate agency

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9
Q

What is actual authority?

A

Actual authority = based on principal’s dealings with the agent

Express = conveyed by principal in words, based on the agency agreement

Implied = agent rsbly believes exists as a result of principal’s words or actions

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10
Q

What are some things implied authority can be based on?

A

Incidental to express authority

arising out of custom known to the agent

resulting from prior acquiescence by the principal

to take emergency measures

to delegate authority where it’s necessary or customary

to pay for and accept delivery of goods

to give general warranties

to manage investments

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11
Q

After determining that there was actual (express or implied) authority, need to first determine whether it was actually terminated before saying they had the go ahead. What are some grounds for termination?

A

the happening of an event specified in a contract that terminates authority

lapse of a rsble time if termination isn’t specified in contract

a change in circumstances, including destruction of subject matter, insolvency, change in business conditions, etc

agent’s breach of fiduciary duty

either party’s unilateral termination

operation of law (for ex, by changes of law, by person’s death if the agent knows about it, by change in mental capacity)

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12
Q

When is agency irrevocable?

A

When it’s an agency coupled with an interest or a power given as security - can’t be revoked if agency was given to protect the agent’s rights and it is supported by consideration

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13
Q

What is apparent authority?

A

Based on third party’s rsble belief

When principal holds out another as possessing authority and based on this holding out, a third party is rsbly led to believe that authority exists

If the principal’s words or conduct would lead a rsble person in the third party’s position to believe that the agent has authority to act on the principal’s behalf, the agent has apparent authority to bind the principal

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14
Q

What is ratification?

A

After-the-fact authority

Express: oral or written affirmation

Implied: principal accepts benefits

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15
Q

For ratification to occur, the principal must:

A

(1) have knowledge of, or reason to know, all material facts regarding the contract

(2) accept the entire transaction and

(3) have capacity

Be aware of some third party thing intervening and cutting off ratification ability

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16
Q

who is bound on a contract between agents, principals, and third parties?

A

Generally, if agent had actual or apparent authority to enter a contract for the principal, or if the principal ratified a previously unauthorized contract, the agent can’t be held personally responsible

If parties to the contract intended for the agent to be liable, the agent can be found liable even though he normally wouldn’t be

And if agent didn’t actually have authority to enter into contract, agent can be held liable for damages for breaching an implied warranty that a principal w contractual capacity exists and they they, the agent, had authority to contract for the principal

BUT if the principal is UNIDENTIFIED or UNDISCLOSED, either the principal or the agent can be held liable

but remember: whether the principal was disclosed, unidentified, or undisclosed only matters when considering agent liability - any type of principal will be bound as long as the agent had authority so you don’t need to discuss then

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17
Q

when may third parties be liable to the principal and agent?

A

Principal = disclosed = only the principal, not the agent, may enforce the contract and hold third party liable

Principal = unidentified or undisclosed = either principal or agent may enforce contract and hold party liable

Principal can’t enforce contract if there’s been an affirmative fraudulent misrepresentation of the principal’s identity or if there is an unforeseen increased burden to the third party due to the fact that performance is due to the other principal and not the agent

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18
Q

What is vicarious liability?

A

employer liable for torts in scope of employee’s employment

Not liable for independent contractor’s actions generally

Except if the activity involved was inherently dangerous, the duty was nondelegable, or the principal knowingly selected an incompetent IC - then employer can be held vicariously liable for IC’s actions

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19
Q

How do you determine if someone is an employee or an independent contractor?

A

Principal/employer retains the right to control the manner in which an employee performs their works

Principal does not reserve/have a right to control the manner in which work is performed by an IC

If principal has right to tell agent how to achieve the results he desires, the agent is an employee

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20
Q

What are some factors to consider when determining if principal has high two control the method and manner of work:

A

Degree of skill required (greater the skill, greater the likelihood of IC)

Tools and facilities used

Period of employment

Basis of compensation

Business purpose

Distinct business

characterization and understanding of parties

customs of the locality regarding work supervision

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21
Q

What three factors are helpful to assess if the employer’s tort was committed within the scope of employment?

A

Was the conduct “of the kind” that the agent was hired to do?

Did the tort occur “on the job”? (detour = minor deviation from employer’s directions, liable; frolic = substantial deviation from employer’s directions, not liable)

Was the conduct actuated/motivated at least in part to benefit the principal?

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22
Q

Generally, employers is not liable for the intentional torts of an employee. But intentional torts will be viewed as within the scope of employment if the conduct is:

A

(1) a natural incident of the employee’s duties (as where force is authorized or the nature of the work gives rise to hostilities);

(2) where the employee is promoting the employer’s business or is motivated to serve the employer; or

(3) specifically authorized or ratified by the employer

23
Q

Who is liable for a borrowed employee?

A

Key issue is who has the primary right of control over the employee - the loaning principal or the borrowing principal? That employer is liable

24
Q

Need to discuss both direct and vicarious liability on the exam. Every person is liable for their own torts. Thus, an employer is liable for their own negligence if they…

A

Fail to properly train or supervise employees or ICs

Fail to check an employee’s or IC’s criminal record or job history

25
Q

Even if respondeat superior doesn’t apply, principal may still be vicariously liable in circumstances if the agent acted with apparent authority. A principal is vicariously liable where an agent appears to deal or communicate on behalf of the principal and the agent’s apparent authority enables the agent to:

A

(1) commit a tort or

(2) conceal its commission

26
Q

What is a partnership?

A

Two or more persons associate to carry on as co-owners a business for profit, whether they intended to form a partnership or not

27
Q

What are factors for deciding whether a partnership exists?

A

Profit sharing = raises presumption of partnership

Right to participate in control = also raises presumption

Below are just evidence but don’t raise presumption:

Property held in joint tenancy or in common

Parties designate their relationship as a partnership

Venture requires extensive activity

Sharing of gross returns

28
Q

what is partnership by estoppel?

A

Partner liability imposed when a party is not a partner in fact

to protect rsble reliance by third parties

  • when a person holds themselves out as a partner or consents to being represented by another as a partner, he’ll be liable to third parties
  • when a person holds another out as a partner, he makes that person his agent to bind him to third parties
29
Q

What are the default voting rules for a partnership?

A

All partners have equal rights in management and equal votes

One partner, one vote

Ordinary business decision = majority of votes

extraordinary business decision = unanimous

30
Q

What is the management rights of partners?

A

All partners have an equal right to participate in management of partnership unless partnership agreement states otherwise

31
Q

What are the distributions rights of partners?

A

Partners have whatever rights are granted in the partnership agreement as to distribution of profits

If silent, partners share profits equally

Losses are shared in the same manner as profits

32
Q

What are the remuneration rights of partners?

A

Partners have no right to renumeration for their services to the partnership except for winding up the partnership business

33
Q

When does a partner in a partnership have apparent authority to bind the partnership to transactions?

A

When they are within the ordinary course of the partnership’s business or business of the kind carried out by the partnership

Partners have apparent authority to bind the partnership to any contract within the scope of the partnership business

If contract is outside scope, partnership generally will not be bound unless the partner has actual authority

But a partnership will not be bound by a partner’s act if the partner lacked actual authority and the person with whom the partner dealt either knew or rec’d notification of such fact (delivered at his place of business even if he didn’t read it)

34
Q

What is the liability of partners?

A

Each partner is jointly and severally liable for partnership obligations

But must first exhaust partnership resources before going to personal resources

Each partner is personally and individually liable for the entire amount of partnership obligations

so where one partner pays the whole obligation of a partnership, they’re entitled to indemnification from the partnership

35
Q

Can partners limit liability to third parties?

A

No, partners cannot limit a third party’s rights to hold each partner liable without the third party’s consent

36
Q

What is the liability of an incoming partner and an outgoing partner?

A

Incoming = partner isn to personally liable for partnership obligations that arose before their admission

Outgoing = remains liable for obligations arising while stye were a partner unless there has been payment, release, or novation

37
Q

Under RUPA, when does a partner have notice of a fact?

A

When the partner:

(1) has actual knowledge of the fact

(2) is notified of the fact, or

(3) has reason to know of the fact based on the surrounding circumstances

38
Q

What duties are owed in a partnership?

A

Duty of care and loyalty to partnership

And statutory duty of disclosure and obedience

39
Q

What is the partner’s duty of loyalty?

A

Account to partnership for any benefit

no taking adverse positions to partnership

no competing w partnership

40
Q

What is the partner’s duty of care?

A

No grossly neg or reckless conduct

41
Q

What is the partner’s duty of disclosure?

A

Provide complete and accurate information regarding partnership

42
Q

What is the partner’s duty of obedience?

A

obey all rsble directions of partnership and not outside scope of authority

43
Q

What is partnership capital?

A

the property or money contributed by each partner for purpose of carrying on the partnership’s business

44
Q

What is partnership property?

A

everything the partnership owns, including both capital and property subsequently acquired

45
Q

When is property deemed to be partnership property?

A

Titled property is partnership property if it is acquired in the partnership’s name or in a partner’s name where it is apparent from the doc that they are acting for a partnership

46
Q

When is property presumed to be partnership property?

A

property is rebuttably presumed to be partnership property if it was purchased with partnership funds, regardless of whose name is on title

47
Q

When is property presumed to be a partner’s separate property?

A

Property is rebuttable presumed to be a partner’s property if:

(1) it’s held in the name of one or more partners,

(2) the instrument transferring title gave no sign that they’re acting for a partnership, and

(3) partnership funds were not used to acquire the property

48
Q

What other factors will courts look at to presume property was intended to be partnership property?

A

using partnership funds

use of property by the partnership

property in the partnership books as a partnership asset

relationship bt the property and the business operations

improvement of the property w partnership funds

maintenance of the property with partnership funds

49
Q

What rights does a partner have in partnership property?

A

partner is not a co-owner of the partnership property and has no interest in partnership property which can be transferred

Partner can simply use partnership property for partnership uses

No rights in property

50
Q

what is a partner’s ownership interest in a partnership?

A

partnership interest = like stock

personal property of the partner

comprised of management rights and financial rights

partner can’t unilaterally transfer his management rights and thereby make the transferee a “partner” - default rule for admission of a new partner is it has to be unanimous vote

but partner can unilaterally transfer his financial rights

51
Q

What is dissociation?

A

when a partner withdraws from a partnership

52
Q

A partner becomes dissociated from the partnership by:

A

(1) oral or written notice of the partner’s express will to withdraw

(2) happening of an agreed event

(3) valid expulsion of the partner

(4) the partner’s bankruptcy

(5) partner’s death or incapacity

(6) decision of court that partner is incapable of performing a partner’s duties

(7) termination of a business entity that is a partner

53
Q

what is an at will partnership and what is a term partnership?

A

At-will partnership = no agreement to remain partners

term partnership = agreement to remain partners for amount of time or until completion of project

54
Q

When is a partner deemed to have wrongfully dissociated?

A

If the dissociation is in breach of an express term in partnership agreement

Wrongful in term partnership if the partner withdraws, is expelled, or becomes bankrupt before the end of the term

Emily's MBE Questions (17 decks)

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