Agency & Partnership Flashcards
def of agency, requirements for agency relationship
def = fiduciary relationship that arises when one person appoints another to act on their behalf and the agent consents. Agent must be subject to principal’s control.
- capacity (P: contractual, A: minimal mental capacity)
- consent of both parties
- Writing (if agency is ks under SoF, “equal dignities rule”)
- Method of formation
- ->act of parties, estoppel, or statute
duty of agent + principal, both parties’ remedies
agent: duty of care, duty of loyalty, duty of obedience
- -> remedies against P = contractual, possessory lien
principal: not fiduciary duties
but: compensation/reimbursement, indemnification, noninterference
- -> remedies against A = contract, tort, constructive trust, action for profits, withhold compensation, terminate agency
liability of principal for agent’s contracts
-a principal is liable if agent acted with actual (express or implied) or apparent authority, or if principal later ratifies the transaction
~actual authority = authority an agent RB has based on principal’s words or conduct
~apparent authority = when a principal holds a 3P out as being their agent, and a 3P RB had authority
~ratification = agent lacks authority but principal subsequently validates the act
–ratification requires: P had knowledge of all material facts, accepted entire transaction, has capacity
liability of P/A to third parties
- P is liable to 3P if agent acted with authority
- A is not liable to 3P in general
- -> disclosed principal: agent is not liable unless agreed to
- -> undisclosed/unidentified principal: A liable if had authority
- P can enforce contract against a 3P if disclosed
- Either P or A may enforce contract against a 3P if undisclosed/unidentified
liability of P for A’s torts
- respondeat superior: P is J+S liable if A committed tort within the scope of their employment
- -> A is employee if P controls A’s physical conduct, manner in which work done (likely if lower skill needed, using work tools, long period of employment, time-based compensation, business purpose, characterized as employment)
- -> doesn’t apply if A is an independent contractor, UNLESS activity inherently dangerous, involved a nondelegable duty, principal knowingly selected incompetent contractor
- -> scope of employment: conduct of the kind hired to perform, tort occurred on the job, conduct actuated to benefit the principal
- -> intentional torts: P not liable unless natural incident of job, employee motivated to serve employer, authorized/ratified by employer
- apparent authority: if A’s apparent authority allows A to 1) commit a tort or 2) conceal its commission
- consider also estoppel theory
def of partnership, requirements to form
def = association of two or more persons to carry on as co-owners a business for profit
proof to infer a partnership: sharing of profit (raises a presumption), right to participate in control, title to property, calling relationship a partnership, sharing of gross returns
or can be formed by estoppel if partner consents to holding out
other requirements
- anyone with capacity to k can be a partner
- can add new partners only if all parties consent
- p-ship can’t have an illegal purpose
partners’ rights (6) + duties + liability
rights:
- equal management rights
- equal vote (decisions outside ordinary course require unanimous vote)
- equal right to profits + losses (by # of partners)
- right to inspect + copy partnership books
- right to contribution if paid more than liability
- right to transfer financial rights
- no right to compensation unless winding up
- no right to transfer management rights (new partner only with unanimous vote)
duties:
- must indemnify every partner
- DoL
- DoC
- duty of disclosure: provide complete + accurate information
- duty of obedience
liability: J+S liable for all obligations of the partnership; after partnership assets are exhausted
~new partners: NL for previous debts
~dissociating partners: remain L unless payment, release, novation; can be liable for another 2 years if party didn’t have notice/RB a partner
partnership liability
each partner is an agent of the partnership for the purposes of its business
-tort: partnership is liable for conduct of partners/employees in the scope of their employment or with authority
-contract: partnership is liable for all contracts entered into by a partner in the scope of business or with actual (partnership agreement, vote of partners)/apparent authority
~partner can bind partnership to transactions in the ordinary course unless third party is aware (subjectively) that partner lacks actual authority
-dissociated partners: partnership can continue to be bound for 2 years if other party didn’t have notice
partnership property ~ how to determine for titled vs. untitled property; partners’ rights in partnership property
titled property: consider title, source of funds, whether purchased in titleholder’s capacity as partner
untitled property: consider funds, use, record in partnership books, relationship with business, improvement with partnership funds, maintenance with partnership funds
rights:
- partner cannot transfer interest
- partner can use partnership property for partnership purposes
dissociation/dissolution
Dissociation
- change in the relationship of partners caused by any partner ceasing to be associated in the business. can happen through express will, event, death, expulsion, bankruptcy…
- ->wrongful dissociation = withdrawal, expulsion, bankruptcy in a term partnership
Dissolution
-at-will pship: when a partner dissociates by express will
-term pship: when a partner dissociates due to withdrawal, bankruptcy, death; remaining partners can agree to dissolve within 90 days
~if don’t dissolve, partner entitled to buyout of partnership interest
limited partnership (definition, formation, rights, liability, dissolution)
- definition = partnership with at least one GP and at least one LP
- form through: certificate of LP filed with SoS
- rights: GPs manage the business; LPs don’t have management rights but some voting rights, can inspect books
- liability: GPs are J+S liable, LPs can only lose value of investment
- dissolution: 90D after GP dissolves, 90D after last LP dissociates, vote of majority in interest
limited liability company
-characteristic: taxed like a partnership, but members enjoy limited liability
-can be member-managed or manager-managed
~whoever manages gets to vote, bind to contracts, owes fiduciary duties
-distributions based on contributions
-liability only if pierce the corporate veil
