Agency & Partnership Flashcards
(41 cards)
Agency
fiduciary relation
Results from the manifestation of consent
-By one person to another
-That the other shall act on his behalf and subject to his control
Acting primarily for benefit of the principal
-And consent by the other so to act
Consent can be written or oral statement
or by implication from parties conduct
- Control
Degree of control need not be significant
Sufficient if principal specifies tasks agent should perform
creation of agency relationship
Capacity
Principal must have contractual capacity
Agent doesn’t need contractual capacity
Exception: if agent has literally no mental capacity, they cannot act for principal
Equal dignities rule
Agency agreements must be in writing when agent is to enter into certain contracts w/i statute of frauds or agency agreement itself would fall w/i SoF
MY LEGS
Consideration is not necessary for creation of an agency relationships
can be created by an act of the parties or by operation of law
agent’s duties to principal
fiduciary duty to principal
Duty of care
Carry out agency w/ reasonable care
Duty of loyalty
Owe undivided loyalty to principal
Treat principal fairly
Cant use principal prop
Can’t compete
Can’t use position as agent to profit
Duty of obedience
Obey all reasonable directions of principal
If agent disobeys , agent will be liable to the principal for any loss that the principal suffers
Principal’s remedies for agent breach of duties
Contract action
Tort actions for secret profits
Equitable actions for accounting
Imposition of a constructive trust
Terminate agency
w/e to do justice
principals duties to agent
Not fiduciary in nature
Indemnify (reimburse) agent’s losses in carrying out principal’s instructions
Compensate agent for services
actual authority
An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal the agent reasonably believes, in accordance w/ the principal’s manifestations to agent the principal so wishes the agent to act…this standard requires both
- An agent actually holds the belief (part 1), which is a subjective standard; and
-Agent’s belief be reasonable (part 2) which is an objective standard
Express = by principals words oral or written
implied= authority agent reasonably believes they have as result of principals words or action
implied actual authority examples
Incidental to express
Arising out of custom known to agent
Result from prior acquiescence
Take emergency measures
Delegate authority ministerial acts
Circumstances requires
Performance is impossible w/o delegation
Delegation is customary
Pay and accept delivery of goods
Give general warranties , collect payment and deliver
Manage investments in accordance w/ prudent investor standard
termination of actual authority
Specified time
Specified event
Reasonable time
Change of circumstances
Breach of fiduciary duty
Unilateral act
Death
apparent authority
Apparent authority is the power held by an agent or other actor to affect a principal’s legal relations w/ third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations
3 Key Factors Apparent Authority
Manifestations traceable to the principal
Communicated to a third party
Third party reasonably believes Agent is Principal’s agent
termination
tell 3rd party no longer agent/authorized
types of apparent authority
Power of position: based on agent’s title or position
Do things typically associated with title
Prior act
Principal previously permitted agent to exceed express or implied authority and knows 3rd party is aware of rhis , principal bound through apparent authority
Unilateral agent representation are insufficient to create actual or apparent authority
Only statement of authority comes from purported agent’s claim
Imposter
Principal negligently permits an imposter to be in position to appear to have agency authority
Principal will be held liable for action
Agency by estoppel
Lingering apparent authority
Apparent authority can exist even when not actual authority
ratification
the affirmance of a prior act done by another whereby the act is given effect as if done by an agent acting with actual authority
After the fact authority
Ratifes by :
Manifesting assent that the act shall affect the person’s legal relations, or
Conduct that justifies a reasonable assumption that the person so consents
Ratification requires
1) knowledge of all material facts
2) accept entire transaction
3) have capacity
methods of ratifying
Express ratification: the principal agrees to assume liability for the contract, notwithstanding the agent’s lack of authority
Implied ratification: accepting the benefit of what company had done for principal
A person is not bound by a ratification made without knowledge of material facts involved in the original act when the person was unaware of such lack of knowledge
whose bound for contracts involving ( disclosed vs. undisclosed/ partially disclosed principals)
Actual authority, apparent authority or ratification = principal bound
Principal of undisclosed or partially disclosed principal= agent also bound
Agent for disclosed principal
A principal is disclosed if, at the time of making the contract in question, the other party to it has notice that the agent is acting for a principal
This communicated knowledge automatically shifts liability on the contract to the principal
Agent for unidentified Principal
A principal is unidentified if when an agent and a third party interact the third party has notice that the agent is acting for a principal but doesnt know who principal is
Agent for undisclosed Principal= agent liable too
Unless excluded by the contract, the principal is a party to the contract
The agent and the 3rd party are parties to the contract and the principal and 3rd party have the same rights, liabilities, and defenses against each other as if the principal made the contract personally
vicarious liability
master liable for torts in scope of servant’s employment
Respondeat superior
Apparent authority
Principal
Directly liable for own negligence in hiring, retaining, supervising agent
Directly liable for agent’s tort if gave actual authority or ratified
Other circumstances involving independent contactors
respondeat superior (distinguish independent contractor)
master= principal who employs an agent with right to control agent
servant= agent so employed by master
Control how accomplish task
independent contractor = person contractually obligated to do work, but not controlled in how the work is done
Factors for right to control
Skill required = IC
Tools and facility = Emp
Period of employment = EMP
Basis of compensation= time = Emp, job = IC
Business purpose = Emp
Distinct business= IC
scope of employment for agent
Factors
Conduct of kind agent hired to perform
Did tort occur on job
Detour = minor deviation from employers directions
frolic= substantial deviation from employer’s directions
Was conduct actuated at least in part to benefit principal
Intentional torts
Employer generally not liable for employee’s intentional torts
Exception: conduct natural from employment duties
Where employee is promoting employer’s business or motivated to serve employer
Specifically authorized or ratified by employer
Liability for act of borrowed employees
Borrowed servant: employee of one employer doing services for another ( look at who has the primary right of control)
liability for acts of INdependent contractors
Principal incur liability for acts where
inherently dangerous activities
nondelegable duties have been delegated
principal knowingly selected incompetent IC
General Partnership Creation
A general partnership is an association of two or more persons to carry-on as a co-owner a business for profit.
Formation
- Profit sharing
Receive share of profits = presumed partner
UNLESSS share received as payment of debt, as wages or compensation for services rendered, as rent payment, retirement benefit, interest on loan, salee of goodwill of business
Gross returns= revenues
Not partner just splitting revenues
- Right to participate in control of business
-Loss sharing
Factors that don’t raise presumption of partnership
Title to prop is held in Joint tenancy or in common
Parties designate their relationship as a partnership
Extensive activity
Sharing of gross returns
No writing required to form
SoF apply to have enforceable agreement to remain partners for more than 1 year
Partnership by Estoppel
Partner liability imposed when a party is not a partner in fact
Person by words or conduct rep himself as partner or consents to being rep by another as a partner= will be liable to 3rd parties who extend credit to actual or apparent partnership
Liability of person who holds another out as partner
Makes person his agent to bind him to 3rd parties
mere failure to deny a representation of partnership does not give rise to liability as a purported partner, BUT actually consenting to be held out as partner does
partnership agreement
is a written oral or implied contract between or among the partners which may alter the default statutory rules in governing the internal affairs of the partnership and the relations among partners.
may not unreasonably restrict access to books or records, eliminate the duty of loyalty, unreasonably reduce duty of care, eliminate good faith and fair dealing, vary the power to withdraw as a partner, vary the courts right to expel a partner, vary requirements to wind up, and restrict the rights of TPS.
Entity status
Partnership is a legal entity distinct from partners
Title in land may be liable in partnership name
Partnership may sue or be sued in partnership game
Revised Uniform Partnership Act ( RUPA) is default rules when partnership agreement doesn’t provide a particular provision
management and operation of general partnership
Voting default rules
1 partner= 1 vote
Ordinary business decision= majority rule
Extraordinary business decision = unanimous vote
Adding new member
No right to salary or other compensation = default rule
Change with partnership agreement
Exception = reasonable compensation for services rendered in widing up the partnership business
liability under general partnership
Partnership = principal under agency law
Partner = agent under agency law
Tort
Partnership is liable for loss or injury caused to person as reult of tortious conduct of partner acting in ordinary course of business of partnership or w/ authority of the partnership
Contract
Partnenrship liable for all K entered into by partner in scope of partnership business with actual or apparent authority
Statement of authority = doc filed publicly limiting partners’ authority to transfer real property
Transactions involving real prop
Grants of and restrictions on partner authority to transfer in statement are binding on 3rd party is statement also recorded in county where prop is located
3rd parties have constructive notice if secretary of state and county fillings made
3rd party benefited by filed grants of authority and burdened by filed restrictions on authority
Transactions not involving real prop
Grants in statement are binding on partnership
Restrictions not binding on 3rd party
3rd party benefited by filed grants of authority and not burdened by filed restrictions on authority
Each partner is jointly and severally liable for partnership obligations
But only as guarantors
Any creditor has to exhaust partnership resources first
Entitled to contribution from other partners
Could agree one partner not responsible for liabilities
Only binding among partners not 3rd party
Newly admitted partner not liable for debts incurred before admission
fiduciary duties owed to partners and partnership
Duty of care
Refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law
Duty of loyalty
Account to partnership for any benefit
No taking adverse positions to partnership
No competing w/ partnership
Statutory duty of disclosure
Provide complete and accurate info concerning partnership
Furnish to partner
w/o demand any info concerning partnership’s business and affairs reasonably required for proper exercise of partner’s rights and duties
On deman any other info concerning partnership’s business and affairs
duty of obedience
partnership agreement may not elminate duties of loyalty or duty of care
partnership property
Property acquired by a partnership is property of the partnership and not of the partners individually.
Prop is partnership prop if acquired in the name of any of the following
The partnership
Prop is presumed to be partnership prop if purchased with partnership assets
Prop acquired in the name of one or more of the partners w/o an indication in the instrument transferring title to the prop of the persons capacity as a partner and no partnership funds were used= is presumed to be separate prop, even if used for partnership purposes
rights in partnership Property
Totally unrestricted
Partner not a co-owner of partnership prop and has no interest in partnership prop which can be transferred
Partner has no interest in partnership prop
Partnership interest
Personal prop of partner
Restrictions on what can do with it
Comprised of
- Management rights = right in management of biz and obtain info
Cannot be unilaterally transferred
- Financial right = partners right to receive his share of any profit distributions made by partnership
Can unilaterally transfer
Transferor is still partner
