Additional Property and Agency Flashcards Preview

BAR PREP! > Additional Property and Agency > Flashcards

Flashcards in Additional Property and Agency Deck (50):

Corp. Liability

Who is liable for what the Corp does?

Liability  for what the Corp does


D or O à NOT liable


SH have limited liability – liable only for the price of their stock (i.e. have to pay for their stock but not liable for what corp. does)


Corp. is liable for what the corp. does



    Corp. Organization

What acts are necessary for formation?

Acts for Formation:

Each incorporator signs certificate & acknowledges it before a notary.
Deliver it to NY Dept. of State, who confirm w/ the law & filing fees are paid & the Dept. files the certificate.

When dept files à conclusive evidence of valid formation (de jure corporation)


Next, organizational meeting (or can do it by written consent), where they:

MUST adopt any bylaws
MUST elect the initial board of directors
then the BOD takes over management



Corp. Organization Certificate of Incorporation

Information in Certificate of Incorporation:


Name & address of corp. (Corp., Inc. Ltd.)
Name & address of each incorporator (recall, only need 1+)
Agent for service of process MUST be NY sec. of State
Must also give an address for forwarding process to corp.

MAY also name a registered agent for service of process

MAY make a stmt of duration (no stmt = perpetual)
Corporate Purpose
Stock information



Corp. Organization

What is an ultra vires act?

Ultra Vires Act: beyond the scope of the certificate’s Corporate Purpose


Ultra vires contracts are valid & enforceable (used to be void at CL)

SH can seek an injunction


Responsible officers & directors are liable to the corp. for ultra vires losses


éTIP – any time bar gives purpose in certificate think of ultra vires



 Corp. Organization

3 Formation Requirements





Paper (Certificate of Incorporation)





    Corp. Organization

Stock Information in Certificate

Stock Information in Certificate:

Authorized stock – max. # can sell
# of shares per class
info on par value, rights, preferences & limitations of each class
info on any series of preferred shares


BUT NOTE: at least one class of stock or bonds must have unlimited voting rights & at least one class of stock must have unlimited dividend rights.



Agency & Partnership


Definition: any material change (including death or withdrawal)
Termination: real end of partnership
Wind Up: time b/w when remaining partners liquidate partnership assets to pay creditors


Priority: (1) all outside creditors + inside creditors, (2) capital contributions, (3) share of profits (equal in absence of agreement)


Distribution Rule: each P must receive their loans + capital contributions + share of profits –share of losses


Old Business & New Business à individual general partners still retain liability on brand new business transactions unless notice of dissolution given




Chart: Requirements for the Running of Benefits & Burdens



Chart: Distinguishing Characteristics of Covenants & Equitable Servitudes


     Agency & Partnership

What is the only type of action a Partnership can bring against a P for breach?

Action for Accounting = the ONLY form of action that can be brought for a partnership against one of its own partners for breach


Can recover losses caused by breach and disgorge profits made by the breaching.



Agency & Partnership

Rights & Liabilities B/w Partners

Rule: General partners are fiduciaries of each other & the partnership


Duty of Loyalty: (1) self-dealing, (2) usurp partnership opportunities, (3) secret undisclosed profit at partnership’s expense.


Specific partnership assets (land, leases) & share in mgmt = owned by the partnership & may not be transferred to 3rd parties


Share of profits & surplus = personal property that individual partners can transfer


Partnership $ use to buy property = partnership property
Personal $ used to buy property = personal property


Agency & Partnership

Limited Liability Company: Formation, Liability, Estoppel

Limited Liability Company

Purpose: Limited liability of SH in Corp but benefits of Partnership Tax.


Formation: file articles of organization AND must publish a summary of the articles once a week for 6 weeks in a row in 2 newspapers


Liabilities: members (i.e. owners) not liable for the debts & obligations of company itself


Must operate like a partnership to get tax benefits:

members control but may delegate to managers
limited liquidity – membership interest no freely transferable
limited life – events of dissolution that is stated in the articles

LLC = limited liability + limited liquidity + limited life + limited tax



     Agency & Partnership

Registered Limited Liability Partnership: Formation, Liability, Estoppel

Registered Limited Liability Partnership


Formation: file a certificate of registration w/ Dept. of State that includes the profession you are practicing


Liabilities: no partner is liable for the debts & obligations of the RLLP but partners are always liable for their own personal wrongdoing



       Agency & Partnership

Default Rules - Rights & Liabilities B/w Partners

In ABSENCE OF AGMT, N.Y. Default Rules…


Management – each partner entitled to equal control (i.e. 1 partner, 1 vote)


Salary – partners get NO salary

Exception – winding up  partnership


Profits - shared EQUALLY
Losses – shared like profits


éEx:  Losses are shared 60/40 by agmt.  Profits still shared EQUALLY.  Always the default.




Agency & Partnership

Partnership Formation

Rule: “association of 2 or more persons carrying on as co-owners of a business for profit”


Prima facie partnership: contribution of money or services in return for a share of the profits


NOT in return for à wage, salary, fixed rate of interest



Agency & Partnership

Limited Partnership: Formation, Liability, Estoppel

Limited Partnership


Defined: Partnership w/ at least 1 General Partner & at least 1 Limited Partner


Formation: file limited partnership certificate that includes names of ALL GENERAL partners w/ Dept. of State


Liability & Control:

General Ps = personally liable but get to manage
Limited Ps = limited liability so cannot manage



        Agency & Partnership

What duties does the Agent owe to the Principal?

Duty to exercise reasonable care


Duty to obey reasonable instructions (i.e. not lie or break the law).


Duty of loyalty - Self-dealing, usurping P’s opportunity, secret profits



Losses caused by the breach &
recovery of profits made by breaching agent




      Agency & Partnership

Liabilities of Partners to 3rd Parties

Rule: General partners are personally liable for all partnership obligations & debts.


Partners are agents of partnership so it is liable for torts & contracts entered into w/in the scope of the partnership business.


Incoming partners = not liable for prior debts but capital contribution can be used to satisfy prior debts


Outgoing partners = retain liability on even future debts until notice of their withdrawal has been given to all known & potential creditors

Exception à liability terminates on death


Estoppel: one who represents to a 3rd party that a general liability exists will be liable as if a partnership exists.



Agency & Partnership

Apparent Authority

Apparent Authority – 2 part test:

Principal cloaked agent w/ appearance of authority, and
3rd party reasonably relies on appearance


Secret Limiting Instrument = agent has actual authority but P secretly limited it


Lingering authority = actual authority terminated & agent continues to act on P’s behalf




Agency & Partnership



Ratification: authority can be granted after the K has been entered if:


P has knowledge of material facts re: K, and
P accepts its benefits


NY – ratification must be complete – cannot alter any terms of the K



    Agency & Partnership

Implied Authority


Implied Authority: authority which agent reasonably believe the P has given b/c:


Necessity – required to complete express tasks


Custom – all tasks customarily performed by persons w/ agent’s title


Prior dealing b/w P & A – agent believe to have been authorized by prior acquiescence of P



Agency & Partnership

Liability on the Contract

Liability on the Contract


If no authority for K à P not liable & A liable.


Authority on K à P liable & A not liable.


Exception: P partially disclosed (identity disclosed) or fully undisclosed (fact of P’s existence not known), authorized agent may be liable at the election of the 3rd party.



Agency & Partnership

Intentional Torts


Rule: intentional torts are generally outside the scope of employment UNLESS


Specifically authorized by the P


Natural in the nature of employment & still in the scope of agency


Conduct was motivated by a desire to serve P



Agency & Partnership

Revocation of Express Authority


P can revoke express authority by:

unilateral act of either party
death or incapacity of P


Exception:  Durable POA – written expression of authority to enter into a transaction

Conspicuous language saying survives incapacity or death



       Agency & Partnership

Independent Contractor Torts


Rule: no vicarious liability for independent contractor’s torts


Ultrahazardous Activity Exception


Estoppel Exception: if P holds out his IC w/ the appearance of agency, P will be estopped from denying vicarious liability


Compare to agent à  A & B present but not C.





      Agency & Partnership

Principal’s Liability for Agent’s Contracts

Rule: P liable for Ks entered into by agent if P authorized the agent to enter the K


Express à oral (except land), revocable unless durable POA
Implied à necessity, custom, prior dealings
Apparent à P cloaks & 3rd party relies
Ratification à knowledge + acceptance of benefits

Authorized agents not liable unless undisclosed P.



Agency & Partnership

Liability of Principal for Agent’s Torts


Liability of Principal for Agent Torts


Is agent employee or independent K-or?


Employee = act w/in the scope of employment?


Independent K-or = inherently dangerous activity?  duty nondelegable?  P negligent in selecting?



Agency & Partnership

What is the 2 part test to determine if a Principal is liable for the tort of an agent?

Principal-agent relationship exists: (1) Assent, (2) Benefit, (3) Control, and


Tort committed in the scope of employment.

Conduct “of the kind” hired to perform?
Occurred “on the job?”

Frolic = new & indpt journey
Detour = mere departure from assigned task

Intended to benefit P?


Sub-agents = missing A & C usually


Borrowed agents = missing C usually





Rule: pursuant to police powers, Govt may enact statutes to reasonably control land use



undue hardship and
would not affect value of surrounding property value


Non-conforming use:  once lawful nonconforming use cannot be eliminated all at once w/o paying just compensation


Unconstitutional Exactions:  those amenities that Govt. seeks in exchange for granting permission to build (small park, several new street lights, wider roads)

must be reasonably related both in nature and scope to the IMPACT of the proposed development OR UNCONS



      Agency & Partnership

Liability of a Limited Partner to 3rd Parties

Liability of a Limited Partner to 3rd Parties

Was partnership formed properly (i.e. filing made)?

no = no LL

Is the partner a general partner?

yes = no LL

Is the partner participating in control of the business such that the person dealing w/ partnership reasonably believes that he is a general partner? 

yes = no LL

Is the partner knowingly permitting his name to be used improperly in the partnership name?

yes = no LL

Otherwise, partner’s liability limited to contribution



Servitudes: Easements

What are the characteristics of a negative easement?

Negative easements bar the subservient landowner from building something that would block your (L-A-S-S):


Streamwater from artificial flow


Minority states: scenic view


MUST be in writing & signed by that Grantor



Servitudes: Easements

Easement in Gross

Some personal or pecuniary advantage not related to the use or enjoyment of his land.


Servient land burdened but no dominant land exists.



right to swim in someone’s pond
right to lay power lines across someone’s land



       Landlord-Tenant Law

What is the Doctrine of Retaliatory Eviction?

If T lawfully reports LL for housing code violations, LL is barred from penalizing T by:


raising rent
ending the lease
harassing T
taking any other reprisals



      Servitudes: Easements

Easement Appurtenant

Benefits holder in physical use or enjoyment of his property.
It takes 2 parcels of land – dominant & servient tenement

Ex: A grants B right of access across his land (#1) to get to B’s land (#2).  Since 2 parcels, appurtenant.  A has the servient tenement & B holds the easement appurtenant to B’s dominant tenement.  IT IS ALWAYS AN EASEMENT TO THE DOMINANT PARCEL.

EA Passes AUTOMATICALLY w/ the dominant tenement regardless of whether mentioned in conveyance


Burden passes automatically w/ SERVIENT estate unless purchaser is bona fide purchaser w/o notice of easement



Rule Against Perpetuities (RAP)

NY Statute

Where an interest would be invalid b/c made on condition of attaining age of 21 years or more, age contingency is reduced to 21 years
Common law fertile octogenarian principle is modified: presumes woman over the age of 55 cannot have a child – possibility that might have a child by adoption is disregarded


NY suspension rule (tested w/ Trusts and will): applies CL RAP to restrictions on power to sell or transfer

Interest void if suspends power to sell or transfer for period longer than lives in being plus 21 years
I.e. for a conveyance to be valid under the suspension rule, there must be persons in being who could join together in a conveyance of the full fee simple title within lives in being plus 21 years.



Landlord-Tenant Law

Implied Covenant of Quiet Enjoyment

Rule: T has a right to quiet use and enjoyment of the premises w/o interference from LL
Applies to both residential & commercial leases



LL actually wrongfully evicts or excludes
Constructive Eviction: (SING)

éSubstantial Interference – chronic problem b/c LL fails to act

éNotice: T gives LL notice & LL fails to correct

éGet out: T vacates w/in reasonable amt of time after LL fails to fix problem

LL NOT generally liable for other T’s wrongful acts, except (1) common areas, & (2) duty not to permit nuisance on premises.



Landlord-Tenant Law

Duty to Deliver Possession


LL Duty to Deliver Possession


English Rule (Majority): must deliver actual physical possession so if holdover T, LL breaches & owes T damages


American Rule (Min.): must deliver legal possession (i.e. keys & title)



Landlord-Tenant Law

Implied Warranty of Habitability

Standard: Premises must be fit for basic human habitation.

Does NOT apply to commercial leases

Breach: no heat, no running water or plumbing


T’s Entitlements: (MRRR)

Move out & terminate lease
Repair himself & deduct from rent
Reduce rent or withhold all until ct. determines fair rental value
Remain in possession & seek money damages



Future Interests

Vested Remainders

Vested Remainder Subject to Open

Remainder vested in a group, at least one of whom is qualified to take possession
Each class member’s share is subject to partial dimunition
Ex: To A for life, then to B’s children.
A is alive & B has 2 kids, C & D. 
C & D have vested remainders subject to open.



Rule Against Perpetuities

What is cy pres?

Cy pres = “as near as possible”

Both Wait & See and Uniform Statutory RAP embrace cy pres


If a given transfer violates the RAP, court may reform it in a way that most closely matches grantor’s intent, while still complying w/ the RAP.


E.g. if conveyance would have violated RAP b/c conditioned on reaching excess of 21 yrs., the flawed age contingency will be knocked down to 21 yrs.



Future Interests

Vested Remainders

What is the difference between vested remainder & contingent remainder?

Vested Remainder Subject to Complete Defeasance = if conditional language occurs after the comma, following the language of remainder, it is a condition subsequent.


Contingent remainder = if conditional language occurs before the remainder language, it is indeed a condition precedent and have to have a contingent remainder



Future Interests

Vested Remainders

What is the Common Law of Convenience?

Open class: possible for others to join
Closed class: maximum # has been set so person’s born thereafter are shut out


To determine whether a class is open or closed:

class closes whenever any member can demand possession
Ex: To A for life, then to B’s children.  A is alive, B has 2 kids, C&D.  Class closes at B’s death AND RofC says it closes at A’s death b/c that is when C&D can demand possession, even though B is still alive & could have more kids.  Afterborn children get nothing.


Womb Rule: Child of B in womb at A’s death will share w/ C&D.


If A predeceases C or D à share goes to devisees.


éNY – statute – see WILLS



Future Interests:

Contingent Remainders

What is the Rule in Shelley’s Case?

Common Law:

O conveys: “To A for life, then on A’s death, to A’s heirs.”
A is alive so A has no heirs (i.e. unascertained).
Present & future interests merge giving A fee simple absolute. (to promote alienability)
Rule of law (i.e. not construction) so applies even if contrary to grantor’s intent.



Rule is virtually abolished (NY)
A would have a life estate, A’s unknown heirs have a contingent remainder & O has a reversion b/c A could die w/o heirs.



Future Interests:

Vested Remainders

Vested Remainder Subject to Complete Defeasance

VRSTCD: when conditional language follows language that taken alone & set off by commas would create a vested remainder, the condition is a condition subsequent.

Right to possession could be cut short b/c condition subsequent.

Ex:  O conveys to A for life, remainder to B, provided however that if B dies under age of 25, to C.
A = LE; B = VRSTCD; C = shifting executory interest. 
If A dies & B is not 25 yet he still takes but he needs to live to age 25 for his estate to retain interest.
O has a reversion b/c it is possible tat C or C’s heirs may not exist when condition is breached.



Future Interests:

Contingent Remainders

What is the Doctrine of Worthier Title?

Grantor, who is alive, may not create a future interest in his heirs (b/c they are unascertained).


Ex: O conveys, “To A for life, then to O’s heirs.”
If Doctrine did not apply it would just be life estate for A & contingent remainder for O’s heirs but b/c of Doctrine, contingent remainder is void, thus giving O a reversion.


Promotes alienabilty.


Rule of construction so grantor’s intent controls – if he really wants to create a contingent remainder in yet unknown heirs –that intent is binding.


éNY – abolished w/ respect to transfers taking place after 9/1/67.



Future Interests:

Vested Remainders

When are remainders vested?


A remainder is vested if it is BOTH created in an ascertained person and is not subject to any condition precedent.


Only remainders are capable of being vested



Defeasible Fees:

Fee Simple Subject to Condition Subsequent

NY - Fee on Condition

Fee Simple Subject to Condition Subsequent


“To A but if X event occurs, grantor reserves the right to re-enter and re-take.”

Grantor must use clear durational language and reserve the right to re-enter.


NOT automatic – estate only terminates when condition occurs and Grantor re-enters.


Future interest: right of re-entry (NY – right of reacquisition) which is synonymous w/ right of termination


Future Interests:

Contingent Remainders

What is the Rule of Destructibility?

CL RULE: If the condition precedent has not been fulfilled by the end of the proceeding estate (i.e. still contingent), the contingent remainder is destroyed.


Ex 17: To A for life, and if B reaches age 21, to B.”  A has died leaving behind B who is only 19.


Today: O or O’s heirs would hold the estate subject to B’s springing executory interest.


éNY – abolished rule of destructibility




Present Estates:

            Fee Tail

Fee Tail


“To A and the heirs of his body.”
Pass directly to lineal blood descendants no matter what.
Today it creates fee simple absolute – attempt to create it renders estate fee simple absolute.
Future interests (if it is recognized) reversion in Grantor & remainder in 3rd party.

éNY has abolished this.



Present Interests:

Life Estates

What is the New York rule on ameliorative waste?

NY Rule on Ameliorative Waste


Life tenant may make improvements that a prudent fee simple owner would make under the circumstances UNLESS the remaindermen object


Look for improvements that prudent, reasonable fee simple owner would make under circumstances.