Rules

Question 1

General partnership

Answer 1

A general partnership is an association of two or more persons to carry on as co-owners a business for profit. No formalities are needed and parties need not specifically intend to form a partnership, only to run a business as co-owners. An agreement to share profits raises a presumption of partnership.

Question 2

LLP

Answer 2

A partnership becomes a limited liability partnership (LLP) by filing a registration with the secretary of state and the partnership becomes an LLP at the time of filing or on date specified in the registration.

Question 3

To join a GP

Answer 3

To become a partner in general partnership, one must agree with at least one other person to become a co-owner in a business for profit. A person who receives a share of the profits of a business is presumed to be a partner, except when the profits are received in payment of rent or when it is gross returns and not profits being shared.

Question 4

Vicarious liability of partners generally

Answer 4

Partnership is liable for breach of contract of agents (partners) acting in ORDINARY COURSE OF BUSINESS unless agent had no apparent or actual authority or other other side had knowledge agent lacked authority

Partners are also liable for torts committed by an employee of a partnership in the ordinary course of partnership business or with the authority of the partnership.

Question 5

Vicarious liability of general partners

Answer 5

General partners are jointly and severally liable for all partnership obligations, arising in contract or tort.

When a partner is compelled to pay or satisfy the whole of a partnership obligation, he is entitled to indemnification. If partnership is unable to indemnify, he can seek contribution from other partners

Question 6

Vicarious liability of limited partners

Answer 6

Limited partners are not personally liable beyond their liability to make agreed upon contributions. However, a partner remains liable for their own wrongful acts

Question 7

Agency

Answer 7

Agency is a fiduciary relationship that arises when one person (principal) appoints another (agent) to act on the principal’s behalf. Requires:
- CONTROL by the principal and
- CONSENT of two parties

Question 8

Liability of the principal

Answer 8

Principal IS LIABLE for breach of contract, if when agent entered into the agreement, he had actual or apparent authority or principal ratified agent’s behavior

Question 9

Actual authority

Answer 9

Agent REASONABLY believed he was acting with EXPRESS authority (authority contained within agency agreement and expressly granted by the principal) or IMPLIED authority (implied from like prior behavior or facts and circumstances) from the principal.

Question 10

Termination of actual authority

Answer 10

Termination occurs by either party’s unilateral determination

Question 11

Apparent authority

Answer 11

Apparent authority arises when person dealing with agent does so with reasonable belief in agent’s authority, generated by some act or neglect on the part of the principal inducing reasonable reliance.

Question 12

Ratification

Answer 12

A relationship is created by ratification when an agent purports to act on behalf of a principal without any authority but the principal subsequently validates the act and becomes bound.

For ratification to occur, the principal must know or have reason know all material facts, accept the transaction, and have capacity.

Question 13

Formation of agency relationship requires

Answer 13

• principal must have contractual capacity
• agent only needs minimal capacity
• only requires writing if SOF governs
• no consideration necessary

Question 14

Duties of agent

Answer 14

• Duty of care: to carry out agency with reasonable care, depending on special skills and compensation
• Duty of loyalty: highest duty law can impose, must treat principal fairly in all respects
• Duty of obedience: obey all reasonable directions

Question 15

Duties of principal

Answer 15

• Duty to compensate or reimburse
• Duty to cooperate
• Duty under contract

Question 16

Management

Answer 16

All partners have an equal right to participate in the management and control of the partnership unless there is a partnership agreement that provides otherwise.

General partners cannot unilaterally transfer management rights; new partners require unanimous vote

Question 17

Duties of partners

Answer 17

• duty of loyalty (cannot be eliminated): act in good faith and fairly to other partners, account for profits, and refrain from competing with partnership
• duty of care: must refrain from engaging in negligent, reckless or unlawful conduct or intentional misconduct
• duty of obedience: must obey all reasonable directions of partnership; must refrain from acting outside scope of partner’s actual authority
• duty of disclosure (may be eliminated): to provide complete and accurate info without demand and on demand

Question 18

Profits/losses

Answer 18

In general partnership, profits are generally shared equally among partners, while losses are shared in the same manner as profits. In LP, LLPs, or LLCs, distributions are typically made in proportion to the value of the partner’s contribution.

Question 19

Partners’ actual authority

Answer 19

A partner has actual authority to bind the partnership if the decision is in the ordinary course of business and it’s approved by a majority of partners.

Even if they lack actual authority they may still have apparent authority

Question 20

Partner’s apparent authority

Answer 20

A partner always has apparent authority to bind the partnership if a third party would reasonably believe that they have authority by virtue of their being held out as a partner by the partnership.

The act of a partner in the ordinary course of partnership business or business of the kind carried out by the partnership will bind the partnership unless they had no actual authority and the third party knew or received notice that the partner lacked authority.

Question 21

Every partner is

Answer 21

an agent of the partnership and the acts of a partner will bind the partnership if the partner acted with actual or apparent authority.