Agency and Partnership - Ramsey Flashcards
(27 cards)
What is an agency relationship and how is an agency relationship created?
An agency is the fiduciary relation which results when one person manifests an intent that another person act on his behalf and both parties consent to the agreement.
When is a principal contractually bound to the acts of the agent?
When the agent acted with actual or apparent authority, or when ratification is present. Exception: If principal is undisclosed or partially disclosed, the agent will also be liable on the K (but principal is still liable too).
Actual authority
Authority that the agent reasonably thinks he possesses based on the principal’s dealings with him. Actual authority can be express or implied from the actions of the principal.
Apparent authority
Arises when the principal “holds out” the agent as having certain authority, causing third parties to reasonably believe the agent has such authority. Can also be established through an agent’s title or position.
General partner liability
All partners are jointly and severally liable for all obligations of the partnership.
What are an agent’s fiduciary duties?
Owed to the principal and they are the duty of care and duty of loyalty.
Duty of care
Duty to carry out her agency with reasonable care.
Duty of loyalty
Duty to put the principal’s interests first/treat principal fairly.
Liability of principal for torts of agent
Aka respondeat superior or vicarious liability. A master is liable for torts committed by a servant within the scope of the servant’s employment. The master and the servant are both jointly and severally liable. A principal is not liable for torts committed by an independent contractor in connection with his work.
How do you tell the difference between a servant or independent contractor?
If a person is subject to the control of another as to the MEANS used to achieve a particular result, he is a servant. If a person is subject to the control of another as to his RESULTS ONLY (but not how to achieve those results), he is an independent contractor.
When will intentional torts be viewed as within the scope of employment?
Generally, an employer is not liable for the intentional torts of an employee because intentional torts are outside the scope of employment. Intentional torts will be viewed as within the scope of employment if the conduct is: (1) natural from the nature of the job; (2) motivated to serve the employer; or (3) specifically authorized or ratified by the employer.
Direct liability in torts
Every person is liable for his own torts. Thus, a master is liable for his own negligence if he fails to properly train or supervise employees, or fails to check an employee’s criminal record or job history. So a master can be found not vicariously liable for an employee’s negligence but can be directly liable for its own negligence in failing to check the driving record of its delivery person for example if that was the issue. Exam tip: Always discuss both direct and vicarious theories of master liability.
When is a partnership formed?
When two or more people associate to carry on as co-owners a business for profit.
Subjective intent is irrelevant and no state filing or other formalities are required.
When is a person presumed to be a partner?
A person who receives a share of the profits from a business is presumed to be a partner.
Who is an agent of a partnership?
Each partner is an agent of the partnership for the purpose of its business and therefore can bind the partnership to a contract.
How is voting done in a general partnership?
Decisions regarding matters within the ordinary course of the partnership business require a majority vote of the partners.
Matters outside of the ordinary course of business require the consent of all partners.
How are profits and losses shared in a general partnership?
Unless otherwise agreed, profits are split equally among the partners. Losses follow profits, but profits do not follow losses.
What is the liability to third parties in a partnership?
Just like principal liability under agency law. So you can be bound in contracts and torts through the same avenues as a principal and agent.
Every partner is an agent of the partnership.
Each partner is jointly and severally liable for all of the obligations of the partnership. But the plaintiff must first exhaust partnership resources before seeking to collect from an individual partner’s assets.
What are the fiduciary duties partners owe?
Partners in general partnerships owe fiduciary duties of loyalty and care to eachother AND to the partnership. They also owe a statutory duty of disclosure.
Note that the duty of care here requires each partner to refrain from engaging in grossly negligent or reckless conduct.
A partnership agreement cannot eliminate the duties of loyalty or care, but it can eliminate the duty of disclosure.
When is property considered partnership property?
It is partnership property if it is acquired in the partnership’s name or in a partner’s name where it is apparent from the document that she is acting for a partnership. It is presumed to be partnership property if partnership funds are used.
It is presumed to be a partner’s property if acquired in her name without partnership funds and there is no sign that she is acting for a partnership.
Tell me about a partner’s ownership interest in the partnership.
A partner’s ownership interest is called his “partnership interest.”
The partnership interest is personal property of the partner, and is comprised of management rights and financial rights. Unless otherwise agreed, a partner cannot unilaterally transfer his management rights (everyone has to agree) but a partner can unilaterally transfer his financial rights.
What are the two forms of partnership?
An “at-will partnership” (default form) is one where the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.
A “term partnership” is where the partners have agreed, explicitly or implicitly, to remain partners for a definte term or until the completeion of a particular undertaking.
What must happen when a partner dissociates from a partnership?
(1) Partnership is dissolved and the business is wound up. This means that the partnership business will be liquidated (sold off).
(2) The partnership continues in existence with the dissociated partner becoming entitled to a buyout of his partnership interest.
When a partner dissociates by express will in an at-will partnership, the partnership is dissolved and its business must be wound up.
What’s the priority of distribution when a partnership dissolves?
(1) All creditors (outside and inside)
(2) Repay all capital contributions paid into the partnership by partners
(3) Profits or losses, if any
