Agency

Question 1

when does the principal become liable t the third party b/c of the actions of the agent? (2)

Answer 1

1. the agent and the principal both consent

2. the agent is subject to the principal’s control

Question 2

In an agent/principal relationship, who has to have capacity to contract?

Answer 2

the principal must have contractual capacity b/c the contract is really between him and the third party

agent does not have to have capacity to contract b/c he is just an intermediary

Question 3

Does agency law req a contract to be in writing?

Answer 3

no, agency law doesn’t req one in particular

but SoF may apply (can’t be completed in a year, for real estate)

Question 4

Is consideration required for an agency contract?

Answer 4

nope. not req

Question 5

What kid of authority does the agent have to have at the time of the contract to be able to bind the principal to the contract?

(2 kinds)

Answer 5

Agent must have actual authority. either:

Express Actual Authority: principal tells agent to act on his behalf

Implied Actual Authority: endorsing agent’s behavior or prior acts so it leads a reasonable 3rd party to think it’s ok

Question 6

Ways Actual Authority can terminate

Answer 6

1. after a specified time/event
2. change in circumstances (ex: sold the house)
3. if agent acquires adverse interest
4. when agent says so
5. when principal says so (unless the agency has become coupled with an interest so it’s irrevocable)
6. by death, incapacity, bankruptcy (unless coupled with interest to make it irrevocable

Question 7

Agency Coupled with Interest

Answer 7

makes the agency irrevocable

not just saying that it’s irrevocable in the contract between agency and principle but the agency is created for the agents benefit

BUT a fee or commission is not considered an interest in agency

Question 8

Is it ok if the agent delegates?

Answer 8

yes if the principal consents (express or implied

Question 9

apparent authority

Answer 9

substitute for actual authority

when the principal leads a third party to mistakenly believe the agent has authority.

equitable doctrine to protect the innocent third party who has relied on P holding A out as agent

Key: reasonable belief must have been created by the P and not the A alone

Question 10

how do you destroy apparent authority?

Answer 10

it can linger after actual authority ends so you have to go tell every third party who might believe he’s an agent

Question 11

Ratification (3 ways)

3 req

Answer 11

even if agent had no authority to bind the P the P can bind the contract by

1. expressly affirming
2. accepting benefits
3. suing the third party on it

requirements

1. knowledge: P must have knowledge of all material facts
2. all or nothing: must ratify it all
3. capacity: P still must have had capacity at the time of ratification

Question 12

Intervening Rights and Ratification

Answer 12

since ratification would be retroactive, protect the intervening rights of a BFP

Question 13

Adoption of Contract

Answer 13

the P ca adopt the contract. it’s only forward looking, not retroactive like ratification

ex: a corp can’t ratify contracts made before it was formed, but it can adopt them

Question 14

Since Agency if fiduciary relationship, what duties does A owe P?

what does the P owe the A?

Answer 14

• -duty of loyalty (put P’s interest above her own)
• -duty of care: sliding scale depending on any special skills A may have
• -Obedience

P to A:

• -pay him (unless it a gratuitous agency)
• -reimburse
• -indemnify

Question 15

What is the Principal/Third Party Relationship?

Answer 15

assuming that the agent had actual authority or substitute

the principal is liable to the third party

the third party is nearly always liable to P
–not if agent has special skill and the P is undisclosed
(celebrity chef acting as agent for unknown chef ex)

Question 16

what is the third party/agent relationship?

Answer 16

generally no liability since Agent is just a go between

unless the agent has an interest in the agency (typically no)

Question 17

Tort Liability while in Agency

Answer 17

was the tort committed by a servant acting within the scope of his employment?

–if yes, the master and servant are jointly and severally liable (master can be indemnified)

Question 18

Servant v. Independent Contract

Answer 18

the P is liable for the acts of the servant but not in the independent contractor

Question 19

Scope of Employment and Tort Liability

detour v. frolic

Answer 19

Master is not automatically liable for all of the servant’s tort actions–only while acting in scope of employment

Detour: minor deviation is usually w/in the scope
Frolic: substantial deviation is usually outside the scope

Question 20

Intentional Torts and Tort Liability with Agency

Answer 20

servant’s intentional torts are outside the scope unless:
–force is used to further the master’s business (bouncer)

–master ratifies the force

–master authorized servant to commit the tort

Question 21

Releases of Liability

Answer 21

in texas, min rule, if third party releases master from liability servant is not automatically released

Question 22

borrowed servant doctrine

Answer 22

Ex: F borrows B’s full time gardener and while working in F’s yard he negligently injures a person.

F is liable as the borrow-master if he had a legal right to control the gardener when accident happened

Question 23

direct liability of Master

Answer 23

master is liable for he own negligence if he fails to properly train/supervise employees or check an employee’s criminal record or job history?

Question 24

Partnership (in gen)

Answer 24

association of 2 or more ppl to carry on as co-owners as a business for profit, whether they intend to form a partnership or not

Question 25

Factors for Determining if Someone is a Partner (3)

Answer 25

Capital: contribution not req Control: right to control may be enough, even if control is never exercised Sharing Profits: just a factor NOT: wages, rent, repayment of debt or percentage of gross receipts

Question 26

Does partnership law req a writing?

Answer 26

partnership law does not req a writing but the statute of frauds might

Question 27

joint venture

Answer 27

treated like a partnership but it req an express agreement on how losses will be shared

Question 28

Estoppel

Answer 28

if no partnership was formed, parties may still be liable as if they are partners to protect reasonable reliance by third parties -must look to se if each creditor relied on the acts/statements

Question 29

Partnership Interests in Property when is it presumed partnership property? when is presumed partners property?

Answer 29

partnership property: - partnership property if: 1. it is acquired in the partnerships name or 2. if it's acquired in one partner's name and it's apparent from the doc that the partner is acting for partnership presumed to be partnership's if partnership funds are used presumed to be partners if in partners name by partners money and no sign he was acting for partnership

Question 30

Rights of the Partnership in the Partnership Property Rights of the Partners in the Partnership Property

Answer 30

rights of partnership totally unrestricted since the property belongs to it right of the partner is limited to using the property for partnership purposes - -no personal matters unless partnership consents - -can't use it as collateral for personal loans - -can't devise the property - -personal creditors can't attach to it

Question 31

Partner's economic rights in partnership (share of the profits) transferable? community property?

Answer 31

it is transferable as any other type of financial asset the transferee gets the partner's share of the profits but doesn't get the partner's right to be a partner the partner's economic rights are community property is acquired during life of community

Question 32

Default Sharing of Profits and Losses among partners

Answer 32

unless otherwise provided profits shared equally (not in proportion to contribution) losses shared in same proportion as profits

Question 33

Liability to third parties

Answer 33

partners can't limit the rights of third parties w/o that third party's consent so if the partners agree that one partner won't be liable to third parties, the third party can still hold him liable --but if he has to pay, he can use the agreement to get indemnity

Question 34

Does a partner have a right to compensation for running the partnership day to day?

Answer 34

no, unless otherwise agreed, no compensation for running the day to day aspects of the partnership

Question 35

Right to Indemnification between partners

Answer 35

if one partner has to pay personal money on a partnership debt, the other party is entitled to indemnity with interest

Question 36

Duties partners owe each other

Answer 36

duty of care duty of loyalty duty of good faith partner's can't eliminate these duties, but they can define them in the agreement

Question 37

Admission of New Partners to the Partnership new partner liability

Answer 37

unless otherwise agreed new partner requires unanimous consent new partner's liability: --debts before partner: only lose economic interest in partnership --debts after partner: fully liable

Question 38

relationship between partners and third parties actual authority apparent authority

Answer 38

it's agency law: principal/agent actual authority of partner: - -partnership agreement or - -majority vote of partners - -stat: makes every partner an agent for carrying on business in the usual way apparent authority: - -partners's title - -prior conduct ratification and adoption

Question 39

what is a partner conveys partnership property w/o authority?

Answer 39

partnership can get property back from initial transferee b/c he should have checked on authority but the partnership can't get it back from a subsequent BFP b/c he had no reason to check

Question 40

partner's liability for partnership's obligations? how are the partners liable

Answer 40

partner liable for all of them joint and severally liable, between partner and partnership and between partners BUT Plaintiff must first exhaust the partnership resources before going after partner's personal assets

Question 41

withdrawal of Partner event of withdrawal (how) effect

Answer 41

event of withdrawal - -notice of express intent to leave - -occurrence of an agreed upon event - -partner's expulsion, death, bankruptcy, incapacity - -appointment of trustee, receiver, liquidator for partner - -redemption of a transferee's interest effect: --not a big deal. usually the other partners just buy him out and partnership continues

Question 42

Liability of Withdrawing Partner

Answer 42

to existing creditors: keep liability unless released by creditors, expressly or implied to subsequent creditors: liability will exist if they were unaware of withdrawal (so he needs to tell creditors of withdraw) to other partners: liability if withdrawal was wrongful - -breach of contract - -partnership for a particular undertaking and withdrawals before it's finished

Question 43

apparent authority of withdrawn partner

Answer 43

partner's authority to bind the partnership to an innocent third party who didn't know he had withdrawn lasts up to 1 year partner can protect itself by notifying creditor he is gone

Question 44

when winding up the partnership is required

Answer 44

- -business becomes illegal - -all assets sold outside the usual course of business - -judicial decree - -term is up or undertaking accomplished - -unanimous consent (or in a partnership at will, majority in interest agree) partners who have not wrongfully withdrawn may wind up

Question 45

Distributions of Partners Assets on Winding Up

Answer 45

first: to creditors (includes any partners that are creditors) second: to partners for their capital accounts (contributions + profits - losses)

Question 46

Apparent Authority when Winding Up

Answer 46

bind the partnership to innocent third parties on new business even after req winding up partnership protects itself by notifying potential creditors

Question 47

if partnership assets are insufficient to cover liabilities

Answer 47

- -creditors split the assets on a pro rata basis - -debts/capital contributions are partnership losses, partners bear in same proportion as profit creditor's rights: partnership creditors have priority over partner's creditors on partnership property, and equal claims on partnerships separate property

Question 48

LLP

Answer 48

limited liability partnership no vicarious liability for the partners --so only the partnership and the tortfeasing partner are liable same as a general partnership in other ways

Question 49

LP

Answer 49

Limited partnership partnership with 1 general partner and 1 limited partners (limited to investment) benefit: limited partners can only lose their capital contributions --except where a limited partner takes part in control

Question 50

Safe Harbor

Answer 50

when a limited partner can take some actions in the partnership that isn't considered control - -employed by partnership - -advising the general partners - -guaranteed a note for the LP - -office or director of the corporate general partner so control in the partnership (to ruin the limited partner status would be a safe harbor thing plus more)

Question 51

Reliance Test for Limited Partner

Answer 51

If limited partner's conduct leads 3rd party to mistakenly but reasonably believe that he is a general partner then he will be treated like one for that 3rd party

Question 52

Do you have to file an LP?

Answer 52

Yes. if you don't it will be a general partnership and everyone will be completely liable limited partner can avoid future liability by filing certificate or withdrawing w/in reasonable time after discovery of not filing

Question 53

rights/obligations of the limited partner

Answer 53

- -promise to contribute must be singed/in writing to be enforceable - -may withdraw only if agreement permits - -liable only for amount contributed

Question 54

rights/obligations of general partner

Answer 54

just like partnership. joint/severally liable

Question 55

LLLP

Answer 55

limited liability limited partnership shields the limited partners (LP) and the general partners (LLP) a way for someone to remain a general partner and shield exposure to personal liability

Question 56

LLC

Answer 56

limited liability companies no liability for members (other than a tortfeasor) profits/losses split in proportion to capital contribution (unless otherwise in agreement) form: filing certificate of formation with SoS, pay fee name must have LLC in it managed like a corp or a partnership --managers run the LLC unless otherwise provided in certificate

Question 57

PLLC

Answer 57

professional limited liability company members and managers must be licensed to render professional services in texas or elsewhere

Question 58

what are the two best partnership like entities to pick?

Answer 58

LLP and LLC