Agency & partnerships

Question 1

3 elements to establish agency relationships

Answer 1

Consent (An agent acting for the benefit of the principal)
Control (agent is subject to principal’s control)
Capacity (agent doesn’t need capacity)

Question 2

What fiduciaries duties does agent owe to the principal?

Answer 2

Duty of care
Duty of loaylty

Question 3

What fiduciaries duties does principal owe to the agent?

Answer 3

None. But he owes CL duties:
1) indemnity
2) compensation for services

Question 4

What are the types of authority?

Answer 4

Actual (express or implied) – based on what principal did
Apparent authority – P lead 3rd to believe A has authority

Question 5

When is the P liable on contract to 3rd parties

Answer 5

When A had Actual or Apparent authority or ratified the contract. (Agent won’t be liable)

Question 6

When is the P liable for torts to 3rd parties

Answer 6

When employee commited the tort within the scope of employment

Question 7

what is detour and frolic?

Answer 7

Detour is minor diviation from scope of employment.
Frolic is major deviation from scope of employment

Question 8

Does agent need to have capacity to be an agent?

Answer 8

No. Principal must have capacity, but agent can be a minor.

Question 9

What are the requirements for ratifification

Answer 9

1. have knowledge of all material facts
2. accept the entire transcation
3. Have capacity

Question 10

What is a partnership?

Answer 10

1) two or more persons
2) co-owners of a business
3) for profit
No need of writing, intent, filing or other requirements

Question 11

what are the factors in partnership formation

Answer 11

Shared profits
Right to participate in control of business

Question 12

Is splitting and sharing revenues creates a presumption of partnmership?

Answer 12

No. unlike sharing profits, sharing revenue does not create a presumption of partnership

Question 13

What is a partnership by estoppel?

Answer 13

allows to hold personns who pretend to be partners, to hold them liable as partners.
NEED RELIANCE ON THAT STATEMENT BY 3rd PARTY

Question 14

can partnership agreement be oral?

Answer 14

Yes, if does not violate SoF. it can also provide the manner in which the business is run.

Question 15

Is partnership a separate legal entity?

Answer 15

Yes

Question 16

How many votes is needed for a extraordinary business decision?

Answer 16

Unlike ordinary business decisions that require a majority vote, extraordinary require unanimous vote

Question 17

what are the default rules?

Answer 17

1) 1 vote for 1 partner
2) losses and profits shared equally (not percentage based)
3) No salary for partners
4) unanimous vote to admit new partners

Question 18

Can you cut off apparent authority of partners?

Answer 18

Only as to real estate AND only by filling partnership agreement with secretary of state

Question 19

Can plaintiff go after personal property of partners?

Answer 19

Yes, partners jointly and severaly liable if partnership resources have been exhausted

Question 20

What are partner’s remedies if plaintiff went after its assets?

Answer 20

Can sue partnership to indemnify or sue other partners for their pro rata share

Question 21

Are limitaitons on liability to 3rd parties effective?

Answer 21

Yes and No. 3rd parties can go after whoever they want, but the agreement is effective among the partners, so can sue other for indemnification

Question 22

Is a newly added partner liable for existing debts?

Answer 22

No

Question 23

To whom do partners owe fiduciary duties?

Answer 23

To partnership and other partners

Question 24

If partner acted negligently, is he in breach of his duty?

Answer 24

NO. unlike agency relationships, breach of duty of care in partnerships requires GROSS negligence or Recklessness

Question 25

What property belongs to partnership?

Answer 25

Presumption when acquired: 1) in partnership's name; or 2) by a partner for the partnership; or 3) payed by partnership funds

Question 26

What interests do partners have in partnerships?

Answer 26

financial rights and management rights

Question 27

What is a dissociation by express will?

Answer 27

Partner gives notice to partnership that he wants to leave

Question 28

When does wrongful dissociation occur?

Answer 28

when partner is in breach of an express term or is expelled or becomes bankrupt. Partner will be liable for any damage caused by the dissociation.

Question 29

What happens when a partner dissociates?

Answer 29

dissolution of partnership; OR dissociated partner is entitled to a buyout of their interest

Question 30

What happens when a partner dissociates by express will?

Answer 30

Partnership MUST dissolve

Question 31

What happens when a partner dissociates not by his will (e.g. death) (wrongful dissociation)

Answer 31

Parnership must dissolve only if 1/2 of partners decide to dissolve within 90 days.

Question 32

Is dissociated partner liable for partnership obligations?

Answer 32

For pre-dissociation liabilities -- YES For post-dissociation liability -- yes, for 2 years, unless you notify creditors or by filling a statement of dissociation (takes effect 90 days after)

Question 33

Can a partner dissociate from term-partnership?

Answer 33

Yes, but it will be a wrongful dissolution.

Question 34

What is LP?

Answer 34

limited partnership -- partnership with at 1+ general and 1+ limited partner

Question 35

How to form LP, LLP or LLC?

Answer 35

1) must file certificate with Secretary of State 2) name must include language to inform the public. I.e. LP, L.L.C. etc.

Question 36

What is special about LP?

Answer 36

General managers have managerial rights and own fiduciary duties to the partnership and other partners, they are liable for everything. Limited parners don't have managerial rights and cannot be personally liable. Profit is distributed based on CONTRIBUTION

Question 37

What is special about LLP?

Answer 37

A general partnership where all partners have limited liability

Question 38

What does limited liability means?

Answer 38

it limits liability as to partnership's debts, not liability for a partner's own wrongful acts

Question 39

What is special about LLC

Answer 39

1) Members manage LLC , unless operating agreement provides otherwise (need unanimous vote to approve amendments) 2) Fiduciary duties attached to managment control 3) can't unilaterally trasnfer managerial rights (same as in partnership) 4) dissociation does not happen if a member dissociates at express will

Question 40

What is a business judgment rule?

Answer 40

Protects managment from ordinary negligence (in partnerships it is provided by statute, here it is CL)

Question 41

What does LLC dissolve?

Answer 41

1) upon event specific in operating agreement 2) consent of all members 3) after 90 days without members 4) judicial dissolution (if unlawful conduct was or will be, frustration, conduct harmful to a member)