Agency & Partnership Flashcards
(36 cards)
Agency
A fiduciary relationship that arises when one person (the principal) appoints another (the agent) to act on the principal’s behalf and the agent consents to act.
Agency Duty of Care
An agent owes a duty to their principal to carry out their agency with reasonable care.
Agency Duty of Loyalty
The agent owes a duty of undivided loyalty to the principal. Including:
1) Act solely for the benefit of the Principal;
2) May not use position for self-profit;
3) Refrain from dealing with principal as adverse party;
4) May not compete regarding subject matter of agency;
5) May not use principal’s property for own purposes.
Agency Duty of Obedience
Agent must obey all reasonable direction of their principal.
Agent’s duties to principal
- Loyalty
- Care
- Obedience
Fiduciary in nature
Principal’s duty to Agent
- Compensation
- Reimbursement
- Cooperation
NOT FIDUCIARY
Types of Authority
Actual - Authority that the Agent reasonably believes he has based on his dealing with the principal.
Apparent - Principal holds Agent out as having authority on their behalf; and Principal’s conduct causes a 3rd party to reasonably rely on the agents appearance of authority.
Ratification - An agent purports to act on behalf of principal but lacks authority to do so, and principle subsequently ratifies (consents to) the acts.
** Principal on the hook for these types of authority (not agent).
Actual Authority
Principal acts and agent reasonably thinks he has authority to act.
Express - oral or written grant of authority
Implied - words, conduct, custom or acquiescence that agent reasonably believes grants authority
** affects agent’s belief **
Apparent Authority
Principal holds Agent out as having authority to act on their behalf; and Principal’s conduct causes an innocent 3rd party to reasonably rely on the agents appearance of authority.
** affects third party belief**
Ratification
An agent purports to act on behalf of the principal without any authority at all, but the principal subsequently validates the act and becomes bound.
Express - oral or written affirmation of contract
Implied - principal accepts the benefits of contract
To ratify:
1) Principal must have knowledge of all material facts regarding K;
2) Principal must accept the entire transaction; and
3) Ratification cannot be used to alter the rights of intervening parties.
Undisclosed or Partially-disclosed Principal
Undisclosed: Third party is not aware that Agent is acting on behalf of the Principal
Partially Disclosed: Third party has notice that Agent is acting on another’s behalf but is unaware of the Principal’s identity
** Principal is still on the hook, but the AGENT is also on the hook.
Respondeat Superior
An employer is liable for torts of an employee when they are acting within the scope of their employment. An employer is generally not liable for torts committed by an independent contractor.
Employee: ER has control over manner and method of how person accomplishes task.
Independent Contractor: controls how task is performed
** Employer generally not liable for intentional torts except when the act is (1) natural from nature of job (2) motivated to serve ER; or (3) specifically authorized or ratified by ER.
Factors contributing to Independent Contractor Status
Skill required, Tools and facilities, period of employment, basis of compensation, and business purpose
Situations where Independent Contractor can bind Principal
- Activity is inherently dangerous;
- The duty is nondelegable; or
- Principal knowingly selected incompetent contractor
Is Employee acting within the scope of employment?
Factors:
1) Was the conduct similar to kind that agent was hired to perform?
2) Did the tort occur on the job?
- - - Minor deviation (a detour) is within scope
- - - Major deviation (a frolic) is not
3) Was the conduct actuated to benefit the principal?
- If yes, then apply respondeat superior doctrine.
General Partnership Formation
A partnership does not require intent and will form when:
1) two or more persons carry on as co-owners
2) in a business for profit.
Profit sharing raises a presumption of partnership (not gross returns/revenues)
A separate legal entity.
How to rebut presumption?
- Lack of Control
- No sharing of losses
- Totality of circumstances test
General Partnership by estoppel
Hold out to world that you are a partnership, even though you’re not, creates a partnership by estoppel.
Management of General Partnership
Unless otherwise agreed, all partners have equal rights in the management of the business and equal votes. Not right to salary.
Majority vote required for an ordinary business matters.
Extraordinary business manners require ALL partners.
General Partnership Finances and Losses
Profits are shared equal by number (default) or by agreement.
Losses follow profit agreement.
General Partnership Liability
Tort: Partnership is liable for loss/injury for tortious act done by partner or employee acting in the ordinary course of business; or with authority of partnership (similar to respondeat superior).
Contracts: Partnership is liable for contracts by partners with actual or apparent authority.
- - - Statutory apparent authority: by statute, partner is agent, and has authority to bind the partnership in the ordinary course of business.
Statement of Partnership Authority
A statement filed with secretary of state and county where partnership is located, and it gives CONSTRUCTIVE notice to 3rd parties that partners cannot transact in the partnership’s REAL PROPERTY.
Cannot cut off apparent authority for anything other than real property.
Liability of General Partners
Each partner is jointly and severally liable for debts of business but Plaintiff must exhaust partnership resources before seeking from individual partner assets.
Cannot limit rights of 3rd parties by protecting a partner by agreement to protect from losses, but this will be binding on the partners themselves. So that protected partner will collect form partners if had to pay losses.
New Partners in General Partnership
Requires unanimous vote of partners to admit new partner.
Not personally liable for partnership obligations that occurred before he joined.
General Partnership Fiduciary Duties
Partners in partnership owe duties of (1) Care and (2) loyalty to the Partnership and to each individual partner.
Also, Statutory Duty of Disclosure (not fiduciary)
