Agency/Partnerships/Corp

Question 1

Creation of Agency relationship

Answer 1

created when one principal manifests intent that another (agent) act on his behalf and be subject of his control.
Requires 3 components: (1) Assent - agent and principal manifest assent through words or conduct; (2) Benefit - A agrees to work on behalf of P and for P’s benefit; (3) Control - A’s actions are subject to P’s control.

Question 2

Consideration for agency

Answer 2

No consideration is required.

Question 3

Termination of agency

Answer 3

Either party may unilaterally terminate agency relationship. Generally, A’s authority may be
revoked by P,

by agreement,

changed circumstances,

passage of time,

A’s breach of fiduciary duty,

A’s death,

or P’s death or incapacity after notice to A

If A’s power is coupled w/ interest, P’s death doesn’t revoke A’s authority

Question 4

Contract L to 3rd Parties (agency)

Answer 4

. Contract Liability—depends upon A’s authority to bind P; P is contractually liable to a third party (3P) for acts of an A with actual or apparent authority

Question 5

Actual authority

Answer 5

P causes A to reasonably believe A has authority to act.

Express: created by P’s express words or writing - A must reasonably believe (subjective) she is doing what the principal wants her to do (objective); P’s actual contrary intent is ineffective

Implied: Allowed A to take whatever reasonable steps are necessary to achieve P’s objective, within accepted business practice or custom.

Question 6

Doctrine placing liability on innocent P for A’s acts

Answer 6

Vicarious liability asserts that a principal is liable for acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime.

Question 7

7 Elements for IC

Answer 7

1. Bears risks/benefits from good management
2. maintains high level of independence
3. free to work for others
4. agrees to be paid a fixed fee
5. receives payment based on results
6. is liable for work performed, &
7. Accepts responsibility to remedy defects at her own escpense

Question 8

Minor in P/A relationship

Answer 8

A minor may serve as an agent, but lacks the capacity to serve as principal. This is because to become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

Question 9

5 duties agent owes P

Answer 9

Duty of care
Duty to provide info
duty of loyalty
duty of obedience
Duties not to usurp biz opportunity, not to take financial gain, provide accounting, and no commingling

Question 10

Subagent

Answer 10

person appointed by agent to perform functions that agent has agreed to perform on behalf of p. Agent is L to P for conduct of subagent

Question 11

When may a person who has not represented that an individual is authorized to act as an agent be estopped from denying the existence of the agency relationship?

Answer 11

Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal, and either the principal intentionally or recklessly caused the belief, or failed to take reasonable steps to correct such belief.

Question 12

When agent contracting on behalf of disclosed P, 3 steps for agent to avoid L

Answer 12

1. enter into K on behalf of disclosed P
2. Affirmatively disclose to 3rd party existence and identity of P
3. not agree to become party to K

Question 13

Special agent

Answer 13

Limited authority regarding specific transaction/string of transactions

Question 14

when can P become responsible for A’s conduct

Answer 14

1. The principal authorizes or ratifies the agent’s conduct
2. The principal is negligent in selecting, supervising, or otherwise controlling the agent, or
3. The principal delegates to an agent performance of a non-delegable duty to use care to protect other persons or their property, and the agent breaches the duty

Question 15

Required capacity for P

Answer 15

To become a P and be bound by agent’s actions, P must have capacity to consent to relationship + enter into transaction to which agent purports to bind P

Question 16

Fraudulent concealment

Answer 16

either P or agent must have notice that 3rd P wouldn’t have dealt w/ principal. Mere suspicions or doubts not enough to give notice

Question 17

5 types of principles

Answer 17

1. Individual
2. Master / Employer
3. Entrepreneur
4. Corporation
5. Partnership

Question 18

7 types of agents

Answer 18

1. Individual
2. Servant / Employee
3. Independent contractor
4. Gratuitous agent
5. General and special agents
6. Trustee
7. Subagent

Question 19

profit sharing exceptions p-ship

Answer 19

(i) A debt (including installment payments);
(ii) Interest on a loan;
(iii) Rent;
(iv) Wages or other compensation paid to an employee or independent contractor;
(v) Goodwill payments stemming from the sale of a business (including installment payments);
(vi) Annuities (or other retirement or health benefits) paid to a surviving spouse or beneficiary, representative, or designee of a deceased or retired partner.

Question 20

partner by estoppel

Answer 20

When a person represents himself either orally, in writing, or implied by conduct as a partner (or consents to or allows another to represent himself as a partner), he will be a partner by estoppel, and he will be liable to third parties if the third party reasonably relied on the representation and suffered damages as a result.

Question 21

Implied authority

Answer 21

Allows A to take whatever reasonable steps are necessary to achieve P’s objective, within accepted biz practice/custom

Question 22

Apparent authority

Answer 22

3P reasonably believes A has authority to act and the belief must be generated by some act of principal (e.g., past dealings)

Question 23

Partnership

Answer 23

A partnership is the association btw 2+ persons to carry on as a co-owner a business for profit regardless of intent