Agency

Question 1

Creation of an Agency Relationship

Answer 1

when principal manifests intent that agent act on his behalf if both parties consent to the agreement.

Question 2

Actual Authority

Answer 2

Authority that the agent reasonably thinks he possesses based on the principals dealing with him.

This can be granted either via the partnership agreement or by consent of the partners.

For consent, need majority vote of partners if act is within ordinary course of business.

Question 3

apparent authority

Answer 3

authority that a third party would reasonably believe a partner has based on being held out by the partnership as a partner.

Not binding if (1) lacked actual authority, and (2) third person knew that the partner lacked authority

Question 4

Agency Liability

Answer 4

A principal will be bound to a contract if agent had actual authority or apparent authority.

Exceptions:

1. contract beyond scope of business
2. 3rd party knew agent did not have authority

Question 5

Ratification

Answer 5

A principal’s ratification of an agent’s conduct will make the principal liable for those contracts entered into by an agent without actual or apparent authority.

Ratification occurs when the principal:

(1) knows of all material facts /contract terms; AND
(2) manifests assent to them through words or conduct.

Question 6

Forming General Partnership

Answer 6

A general partnership is an association of two or more persons to carry on as co-owners of a business for profit.

• does not require any formalities
• courts look at the intent of the parties to determine whether a GP was formed
• an agreement to share profits raises a presumption of a partnership.

Question 7

Becoming a partner

Answer 7

To be a partner in a general partnership, one must agree with at least one other person to carry on as co-owners for a business for profit.

If receive profits, presumed to be a partner EXCEPT IF

• profits are received in payment of rent, or
• when it is actually gross returns and not profits that are being shared.

Question 8

Liability in General Partnership

Answer 8

all partners are jointly and severally liable for

• all obligations of the partnership.
• for any torts committed by a partner/employee in the ordinary course of the partnership business or with authority of the partnership

Question 9

where a judgement is arising from a partnership obligation, a judgement creditor may/may not

Answer 9

Must exhaust partnership assets first before executing against partner’s individual assets

judgment can only bing a partner who was served

Question 10

Limited Partnership Creation

Answer 10

Need to file certificate of limited partnership with the secretary of state

Question 11

what happens if assets at dissolution are less than money owed to creditors

Answer 11

Assets are reduced to cash, cash used to pay creditors, and any left over debts are divided evenly among the members (unless they have an agreement saying different distribution-oral or written)

Question 12

duty of loyalty in partnership

Answer 12

requires

1. account for profits/benefits derived by partner for partnership
2. don’t engage in things that are adverse to interest of partnership
3. refrain from competing with partnership

Question 13

Duty of care in partnership

Answer 13

refrain from engaging in intentional misconduct, reckless conduct, or violations of the law