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business law final > week 6 class notes - agency, partnership, corporate law > Flashcards

week 6 class notes - agency, partnership, corporate law Flashcards

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1
Q

what does an agent do?

A

creates a contract between the principal and the third party

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2
Q

the agreement between agent and principal is a ___

A

contract

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3
Q

what is an express agreement?

A

a written agency contract

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4
Q

does a real estate agent meet the definition of an agent?

A

no

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5
Q

the agent and principal have a duty to act in

A

good faith

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6
Q

how are agents paid?

A
  • principal pays agent fee - fixed or reasonable amount
  • principal obligated to reimburse agent for reasonable expenses
  • agent paid immediately on performance (common law)
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7
Q

can an agent act for both the principal and third party?

A

no, unless with express permission of principal

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8
Q

agency by conduct / agency by estoppel

A

principal creates the impression that they gave authority to an agent. impression allows “agent” to contract with third party, principal cannot then deny contract.

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9
Q

what is apparent authority?

A

arises when a third party reasonably infers, from the principal’s actions or words, that the agent has the power to act on the principal’s behalf, even if the agent does not have actual authority.

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10
Q

breaches of authority does what to the agent?

A

renders them liable for damages to the principal

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11
Q

what is agency by operation of law?

A

occurs in cases of emergency, such as a ship captain preserving cargo when unable to contact the owner.

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12
Q

what is an agent of necessity?

A

for necessaries of life, generally where pre-existing legal relationship between principal and agent of necessity

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13
Q

ratification

A

occurs when a principal approves an agent’s unauthorized actions after the fact, making the agreement legally binding. Even if the agent originally lacked authority, the principal can later adopt the contract, thereby assuming responsibility for it.

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14
Q

methods of ratification

A

can be express (explicit approval) or implied (acceptance through conduct, such as benefiting from the contract).

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15
Q

what happens if a principal fails to repudiate an agreement?

A

If the principal does not promptly reject an unauthorized agreement, this may be seen as acceptance and bind the principal.

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16
Q

disclosed principal

A

agent makes it clear they are acting on behalf of a principal

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17
Q

How should an agent sign a contract in a disclosed agency?

A

The agent signs the principal’s name and may add “as agent” or “per” (short for per procurationem, meaning “on behalf of another”).

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18
Q

Can a third party sue an agent in a disclosed agency?

A

No, once agency is disclosed, the third party has no remedies against the agent—only against the principal.

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19
Q

Does an agent have rights to the benefits of a principal’s contract?

A

No, an agent has no rights to the benefits of a contract made on behalf of the principal.

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20
Q

What is an unnamed principal in agency law?

A

The third party knows the agent is acting for a principal but does not know their identity. The principal and third party are still bound by the contract.

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21
Q

What happens in an undisclosed agency?

A

The agent does not reveal they are acting for a principal. The third party assumes the agent is the principal, making the agent personally liable.

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22
Q

Is an agent liable in an undisclosed agency?

A

Yes, the agent is liable to perform the contract and can be sued for breach.

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23
Q

Can an agent enforce a contract in an undisclosed agency?

A

Yes, the agent can enforce the contract against the third party, even if the principal was undisclosed.

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24
Q

What is a breach of warranty of authority?

A

occurs when an agent falsely claims to have authority, leading a third party to rely on incorrect information. also occurs when an agent lies about existence or identity of principal

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25
What happens if an agent lies about the existence or identity of a principal?
The third party can sue the agent, and if the lie was intentional, the agent may be liable for fraud.
26
What if an agent falsely claims to have authority from an existing principal?
The agent is personally liable for damages if they lacked actual authority.
27
In an undisclosed agency, can the principal enforce the contract?
Yes, the principal can come forward and enforce the contract.
28
Who can the third party sue if the agent misrepresented their authority?
The third party can sue either the principal or the agent—but not both.
29
When is a principal liable for the torts of their agent?
A principal is liable if the agent commits a tort while carrying out their duties under the agency agreement.
30
Is a principal liable for an agent’s fraudulent misrepresentation?
Yes, if an agent commits fraud to induce a third party into a contract, both the agent and the principal can be held liable.
31
What happens if an agent makes an innocent misrepresentation?
The third party can avoid (rescind) the contract but cannot claim damages.
32
How is fraudulent misrepresentation different from a breach of warranty of authority?
Fraudulent misrepresentation: The agent lies to induce a contract—both the principal and agent are liable. Breach of warranty of authority: The agent misrepresents their authority—only the agent is liable.
33
fraudulent misrepresentation
applies when the agent misleads the third party on behalf of the principal.
34
How can an agency relationship be terminated?
Agency can be terminated expressly (clear statement) or impliedly (by actions). with notice. If for a specific act, it ends automatically once completed.
35
How does incapacity affect an agency relationship?
If the principal becomes incapacitated (death, mentally), the agency may end—except when the principal is a minor.
36
What happens to an agency relationship if the principal goes bankrupt?
The agency automatically terminates, and if the agent contracts afterward, they may be liable for breach of warranty of authority.
37
Does a principal need to inform third parties when terminating an ongoing agency?
yes, failure to inform can make the principal liable if a third party relies on the agent’s apparent authority.
38
What happens if an agent continues acting after termination?
The agent may be liable to the principal for acting without authority.
39
How is a partnership different from joint ownership?
A partnership is a contractual relationship with partners as agents of each other. Joint ownership allows for transferability, and co-owners are not agents of each other.
40
What governs partnerships?
Partnerships are governed by the Partnership Act.
41
How are assets divided in a partnership?
Assets in a partnership are divided only upon liquidation, unless the agreement states otherwise.
42
What is a partnership by estoppel?
If people present themselves as partners, they cannot deny the relationship and are liable as partners under the Partnership Act.
43
Who is liable for torts committed in a partnership?
The entire firm is liable for torts committed by a partner in the ordinary course of business.
44
What happens to a retiring partner's liability?
A retiring partner is liable for debts incurred during their partnership but not for debts after they retire, if proper notice is given.
45
What defines the rights and duties between partners?
Rights and duties are usually set in a written agreement or governed by the Partnerships Act in the absence of one.
46
Can a partner compete outside the partnership?
A partner cannot compete without consent; if they do without consent, any profits from competition must go to the partnership.
47
What happens when a partner assigns their share?
The assignee only has the right to profits, not management, and takes the assigned partner's share of assets at dissolution.
48
When does a partnership automatically dissolve?
A partnership dissolves automatically at the end of a term or completion of a specific venture.
49
What happens upon dissolution regarding assets?
Assets are liquidated, and partners' shares are determined once assets are sold. Payments are made in a set order: debts, advances, capital contributions, then profits
50
What must happen to notify clients of dissolution?
Partners must notify customers directly, publish in the Gazette, and provide general notice.
51
What happens when a partner dies?
The partnership dissolves unless stated otherwise in the agreement. The deceased partner's estate is liable for debts until the date of death.
52
What is a Limited Partnership (LP)?
A limited partnership limits liability for debts and protects personal estates of partners, except for at least one general partner, who has unlimited liability. Common in industries like mining, oil, and film.
53
Who can bind a limited partnership?
Only general partners can bind the partnership in contracts. Limited partners cannot.
54
What are the restrictions on limited partners?
Limited partners cannot control management, and if they do, they become general partners with unlimited liability.
55
What information must be filed for a limited partnership?
Information like firm name, nature of business, partners, capital contributions, and date of formation must be filed before registration.
56
What happens if a limited partnership does not register?
If not registered, all partners may be considered general partners with unlimited liability.
57
What is a Limited Liability Partnership (LLP)?
LLPs are for professionals like lawyers and accountants. Partners are not personally liable for the negligence of other partners but are still liable for their own negligence.
58
How does an LLP (limited liability partnership) differ from an LP (limited partnership)?
LLPs protect partners from the negligence of other partners, while LPs limit liability based on the partner's role (general or limited).
59
How is a corporation managed?
Directors are chosen by shareholders at the annual meeting to manage the corporation. They appoint officers to carry out operations.
60
What is the incorporation process?
Articles of incorporation must be filed with a fee, and a certificate of incorporation is issued. This creates a legal entity separate from its shareholders.
61
What is the difference between a public and private corporation?
Public corporations offer shares to the public and have stricter financial disclosure requirements. Private corporations are typically smaller, with fewer reporting obligations.
62
What is the indoor management rule?
legal doctrine that protects third parties who deal with a corporation in good faith, allowing them to assume that the corporation has adhered to its internal rules and procedures.
63
What are the fiduciary duties of a director?
Directors must act in the best interests of the corporation, avoid conflicts of interest, and not make profits at the corporation's expense.
64
What are the liabilities of directors?
Directors may be personally liable for acts ultra vires, selling shares at a discount, declaring improper dividends, or causing environmental harm.
65
What is a minority shareholder’s right?
A minority shareholder can take action against the majority if their rights are affected or the corporation’s actions are unlawful.
66
What is the oppression remedy?
If the majority’s actions are oppressive, minority shareholders can seek relief through the court, such as forcing the company to buy shares from the aggrieved shareholder.
67
What is derivative action?
A shareholder can sue on behalf of the corporation if the directors refuse to act, provided internal remedies have failed.
68
How can a corporation dissolve?
A corporation can be voluntarily dissolved if it is solvent, or involuntarily if it is insolvent. This is done by filing articles of dissolution.
69
What happens during a corporation's dissolution?
The corporation winds up operations, surrenders its charter, and settles all debts. In bankruptcy, the corporation ceases to exist.
70
How is transferability of interest different in corporations and partnerships?
Corporations allow easy transfer of shares, while partnerships restrict the transfer of interest without agreement from other partners.

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