Agency & Partnership

Question 1

Creation of Agency Relationship

Answer 1

1. Both parties must assent to the agency
2. Agent must act on behalf of principal
3. Agent must act under the control of the principal

Question 2

Undisclosed or Partially Disclosed

Answer 2

Undisclosed- 3rd party has no knowledge of the existence or identity of principal.
Partially Disclosed-3rd party knows of principal’s existence but not identity.
Agent is liable for contracts entered into under these conditions.

Question 3

Factor to Determine Whether an Agent is an Employee

Answer 3

1. amount of control the principal exerts over how the agent performs his work
2. whether the agent is engaged in a distinct occupation or business
3. if the type of work the agent is doing is customarily done under the supervision of the principal
4. the skill required in the agent’s occupation
5. who supplies the tools required for the agent’s work and place of performance
6. the length of time the agent is engaged by the principal
7. whether the agent is paid by the job or by the hour
8. whether the principal and agent intend to create an employment relationship AND
9. whether the principal is in business

Question 4

Duties of Principal to Agent

Answer 4

1. compensate the agent for services rendered
2. reimburse the agent for reasonable expenses incurred by the agent in the scope of his agency
3. indemnify and exonerate the agent for any liability that results from his non-negligent and good faith performance of duties
4. cooperate with the agent in the performance of his duties
5. exercise due care toward the agent

Question 5

Duties of Agent to Principal

Answer 5

1. perform the contract and render services with reasonable care
2. obey the principal in all reasonable directions, outside illegal or unethical orders
3. act with the care, competence, and diligence normally exercised by agents in similar circumstances or exercise the agents higher skill level
4. indemnify the principal against loss created by the agent’s wrongful behavior or failure to act with reasonable care.

Question 6

Duty of Loyalty

Answer 6

Agent has a duty of loyalty. Agent cannot self-deal by acting for his own benefit instead of for the benefit of the principal. An agent cannot usurp a business opportunity belonging to the principal, unless the employer knows and consents. Breaching the fiduciary duties may result in the agent being liable for damages.

Question 7

Actual Authority

Answer 7

Created by the manifestation of the principal to the agent of the principal’s request that the agent act for the benefit of the principal in a particular way, and that the principal agrees to be bound by the actions of the agent. Can be express or implied.

Question 8

Express Authority

Answer 8

The principal directly requests the agent to act on the principal’s behalf in a specific manner. If a contract must be in writing, the grant of authority to an agent must also be in writing.

Question 9

Implied Authority

Answer 9

Includes the authority to do anything necessary to accomplish the principal’s express request of his agent or those things the agent believes the principal wishes him to do based on his reasonable understanding of the principal’s expressed request.

Question 10

Apparent Authority

Answer 10

A principal is accountable for the results of 3rd party beliefs about an actor’s authority to act as an agent when the belief is reasonable and is traceable to a manifestation of the principal. Requires some overt action by the principal.

Question 11

Agency by Estoppel

Answer 11

3rd party may successfully assert that a person is stopped from denying an agency relationship if the principal intentionally or carelessly caused a reasonable belief in the third party that an agency relationship existed, or having notice of such belief and that it may induce others to change their positions, the principal didn’t take reasonable steps to notify them of the facts.

Question 12

Ratification

Answer 12

Allows a principal to grant retroactive authority for his agent’s earlier unauthorized actions. Must:

1. manifest assent that the act shall affect the person’s legal relations OR
2. conduct that is justifiable only on the assumption that the person so consents

Question 13

Delegation

Answer 13

If the authority given involves the agent using his own judgment, he cannot delegate his responsibilities absent an emergency or explicit agreement of the principal

Question 14

Respondeat Superior

Answer 14

An employer will not be liable if the employee has substantially deviated from the authorized route, but will be liable if the deviation is slight. However, an employee can return to the scope of employment after a deviation.

Question 15

Intentional Torts

Answer 15

Employers will not be liable for intentional torts of an employee unless the tort occurred during an attempt to serve the interest of the employer.

Question 16

Tortious Conduct of Independent Contractor

Answer 16

Principal is not responsible for the tortious conduct of an independent contractor. Exceptions:

1. inherently dangerous activities
2. non-delegable duties
3. negligent selection of a contractor

Question 17

Termination of Agency Relationship

Answer 17

Both the agent and principal can terminate the relationship at any time. Agency is not terminable at the will of either party if:

1. agency is coupled with an interest OR
2. agent has a power given for security (i.e. when the agency was created for the purpose of the payment of a debt owned by the principal to the agent)

Question 18

General Partnership

Answer 18

Association of 2+ people to carry on as co-owners of a business for profit. No particular formalities or statutory requirement for formation and the contract may be oral or inferred from the conduct of the parties.

Question 19

Profits and Losses

Answer 19

Absent a provision to the contrary, partners share losses in proportion to their share of profits. Receiving profits is prima facie evidence of the formation of a partnership.

Question 20

Partnership Liability

Answer 20

All partners are jointly and severally liable for all debts, obligations, and liabilities of the partnership. An incoming partner is liable for all the obligations of the partnership arising before his admission as though he had been a partner when the obligations were incurred, except that his liability will be satisfied only out of partnership property.

Question 21

Partnership Agreement

Answer 21

Governs the relations among the partners. If silent on certain provisions, the Uniform Partnership Act will govern.

Question 22

Indemnify

Answer 22

The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred in the ordinary course of business. But not entitled to compensation for acting in the partnership business.

Question 23

Property Rights of a Partner

Answer 23

1. specific partnership property
2. interest in the partnership AND
3. right to participate in management

Question 24

Fiduciary Duties

Answer 24

Partners stand in fiduciary relationship to one another. No person can become a member of the partnership without consent of all the partners.

Question 25

Dissolution of Partnership

Answer 25

Caused by:

1. termination of the definite term or particular undertaking specified in the partnership agreement
2. express will or withdrawal of any partner
3. expulsion of any partner
4. any event that make is unlawful for the business to be carried on
5. death of any partner
6. decree of court
7. circumstance provided for in the partnership agreement

Question 26

Payment of Liabilities

Answer 26

1. owing to creditors other than partners
2. owing to partners other than for capital profits
3. owing to partners in respect of capital
4. owing to partners in respect of profits

If there insufficient funds, the partners must contribute the amount necessary to satisfy the liabilities.

Question 27

LLP Election

Answer 27

An Election must be executed by a majority of the partners or by one or more partners authorized to execute the election. the election must state

1. name of partnership (must include words limited liability partnership or LLP)
2. business, profession, or other activity in which the partnership engages
3. partnership elects to be an LLP
4. that the election is authorized
5. and any other matter the partnership wishes to include.

Question 28

Dissolution of LLP

Answer 28

Continues until a cancellation of LLP election (stating that it is duly authorized)

1. executed by a majority of partners or by one or more partners authorized to execute cancellation (unless otherwise agreed) AND
2. recorded in the office of the clerk of the superior court where the LLP record its LLP election

Question 29

Limited Partnership Formation

Answer 29

Consists of general partners, who manage the business and are personally liable without limitation for partnership obligations, and limited partner who contribute capital and share in profits but take no part in the control or manage of the business and whose liability is limited to their contributions. Requires a signed certificate to be filed with the Secretary of State stating:

1. name of the limited partnership
2. address of the registered office and name and address of the initial agent for service of process
3. name and address of each general partner AND
4. any other matters the general partners want to include

Question 30

Election to Become Limited Partnership

Answer 30

1. compliance with Code Section 14-2-1109.1 (if corp) OR
2. approval of all partners, members, or shareholder, or such other approval as is sufficient under applicable law and governing docs.

Question 31

Election to Become Limited Liability Partnership

Answer 31

1. the name must include LLLP or limited liability limited partnership

Question 32

Limited Partners

Answer 32

Not liable for partnership obligations and do not become obligated by participating in the management or control of the business.

Has the right during ordinary business hours and upon request to inspect and copy partnership records, books, and records of account, and to obtain from the general partners true info as to the financial condition and a copy of the tax returns.

Question 33

Becoming a Limited Partner

Answer 33

1. comply with the partnership agreement or if the partnership agreement doesn’t provide in writing, upon the written consent of all partners OR
2. in the case of an assignee of a partnership interest, to the extent provided in the partnership agreement or by consent of all the partners

Question 34

General Partners

Answer 34

Have the same rights and powers and are subject to the same liabilities as a partner in general partnerships. More can be admitted as provided in the partnership agreement or if no agreement by the written consent of all partners.

Question 35

Assignment of Partnership Interest

Answer 35

Is assignable and doesn’t dissolve partnership. Assignee is allowed to receive the assignor’s partnership interest and cannot exercise partnership rights.

Question 36

Dissolution

Answer 36

Dissolved at the time of

1. any event specified in the partnership agreement
2. written consent of all partners
3. an event of withdrawal of a general partner unless there remains at least one general partner and the written agrrement permits the business to be carried on or within 90 days all partners other than the withdrawn partner agree in writing to continue the business
4. entry of a decree of judicial dissolution