Agency/Partnerships
what is the general idea of Vicarious liability (respondeat superior)?
A principal may be liable for the tortious acts of his agent.
True or false: Partnership assets are first applied to pay off obligations to creditors (creditors may include partners who made loans to the partnership) before being distributed to the partners.
True.
WHen may a partnership for a Term or Undertaking be dissolved?
When the term or undertaking ends or when the partners agree.
In what kinds of legal situations is the principal going to be liable to third parties for the actions of the agent?
o In contracts cases o In torts cases
Why create an agency relationship?
o To extend the principal's economic reach. o To acquire the agent's expertise. o To make money.
When is a partnership bound by a partner's apparent authority? When a partner acts in the (blank) (e.g., ordering stationery on the firm's letterhead).
ordinary course.
Who may wind up a partnership? 1. Any (blank) 2. Legal representative of the (blank).
partner; last surviving partner.
When there is a written partnership agreement, is that supreme over state law? 1. (Yes or no?), in most instances. When is a written partnership agmt not supreme over state law? 2. Not when state law is (blank).
yes; mandatory.
Who does not have legal capacity to contract and form a partnership?
-Humans who are incapacitated due to age, illness or intoxication.
is a principal generally liable for the intentional torts of an agent?
No (they are not considered to be within the scope of employment).
When is a principal liable for contracts that an agent enters on behalf of the principal? when the agent (blanked) with (blank).
acted; legal authority.
What is actual implied authority? Allows an (blank) to take whatever (blanks) are (blank) to achieve the (blank's blanks), based on the (blank's) (blank) understanding of the (blanks) and (blanks) of the (blank).
agent; actions; necessary; principal's objectives; agent's understanding; manifestations; objectives; principal.
What is Implied authority by position? the (blank) will have (blank) authority to carry out the (blank) of her position.
agent; implied; customary duties.
What is the intent requirement for actual authority? The agent must (blank) that he is doing what the principal (blanks) him to do ((blank) intent) and the belief must be (blank) ((blank) intent).
believe; wants; subjective; reasonable; objective.
HOw can an agency relationship be terminated? (blank) party can terminate the relationship (blank).
either; unilaterally.
What are the Characteristics of an independent contractor? • Maintain a high level of (blank) • Free to work for other (blank) • Paid on a (blank) • Has his own (blanks), not provided by the (blank)
independence; people/principals; fixed fee; tools; principal/employer.
When is there a presumption of a partnership relationship? When two or more persons share (blanks).
profits.
What are the Three duties that all agents owe to principals—even if the agent is unpaid?
1) Duty to exercise reasonable care 2) Duty to obey reasonable instructions 3) Duty of loyalty
What are the Three components of an agency relationship (the ABCs of agency)?
1. Assent 2. Benefit 3. Control
What are 4 exceptions to the general rule that a principal does not have vicarious liability for torts committed by an independent contractor?
1. The task is inherently dangerous. 2. The principal was negligent in hiring the independent contractor (i.e., didn't do due diligence and hired an incompetent contractor). 3. The principal retains control over some of the tasks to be performed by the independent contractor and the tort occurs within those tasks. 4. Nondelegable duty.
What is a detour? Does an employer have vicarious liability for the actions of an employee who is on a detour?
A minor deviation from an assigned path. Yes (still considered to be "on the job").
What is a frolic?Does an employer have vicarious liability for the actions of an employee who is on a frolic?
A significant deviation from an assigned path. No (not considered to be "on the job").
To have minimal capacity, an agent must be able to: (blank) to the agency relationship; (blank) the tasks on behalf of the (blank); and Be subject to the (blank's blank).
Assent; perform; principal; principal's control.
What is the assent requirement for the formation of an agency relationship?
Both parties must manifest assent to the relationship.
Division of profits and losses is generally dictated or determined how?
By the partnership agreement.
Who cannot be a principal?
Minors; incapacitated persons; unincorporated associations. All lack legal capacity.
Once dissociated from a partnership, does the partner still have fiduciary duties? Or the right to participate in the management of the partnership?
No and no.
What is the default rule regarding whether partners have a right to demand distributions?
No right.
How is actual implied authority created?
Principal conveys authority (by words or conduct) to the agent to take whatever steps are necessary to achieve the principal's objectives.
Why is the independent contractor/employee distinction relevant?
Principal has more responsiblity/liability for the acts of an employee than for the acts of an independent contractor.
How is apparent authority created? Key words? (blankly blank).
Principal's words, written or spoken, that cause a third party to reasonably believe that the principal consents to having acts done on the principal's behalf by the agent (i.e., the third party reasonably believes the agent has authority to act). Reasonably believe.
What is the control requirement for the formation of an agency relationship?
The agent must agree to work subject to the principal's control.
What is the benefit requirement for the formation of an agency relationship?
The agent must agree to work to the principal's benefit.
Are independent contractors agents? Yes/No. They are (blank) agents.
Yes. nonemployee.
What is a partnership? 1. A/an (blank) 2. of (blank) persons 3. to carry on a (blank) 4. as (blanks).
association; two or more; for-profit business; co-owners.
What are the two requirements for formation of a partnership? 1. (blank) (profit-sharing) 2. sharing of (blank).
co-ownership; control.
What are the 4 subcomponents of a partner's duty of loyalty to a partnership? 1. can't (blank) with partnership business 2. Can't advance an interest that is (blank) to the partnership 3. Can't (blank) a partnership opportunity 4. can't use partnership property or business to derive a (blank) without (blanking) the partnership.
compete; adverse; usurp; profit; notifying.
What makes an agent an employee rather than an independent contractor? 1. (blank) 2. has the right to (blank) 3. the agent's (blank) of work.
employer/principal; control; physical conduct.
Who can be a principal? Almost any person or (blank) that has (blank) capacity.
entity; legal.
Who can be an agent? Any person or (blank) who has (blank) capacity.
entity; minimal.
What are some Exceptions in which a principal may be held vicariously liable for intentional torts (i.e., situations where cts consider intentional torts to be w/i the scope of employment)? o The conduct occurred within the (blank) of employment (i.e, on work (blank) during work (blank); o The agent was (blanked) in (blank) part to (blank) the principal o The act was (blank) (i.e, was within the scope of the agent's assigned (blanks).
general time and space limits; premises; hours; motivated; some; benefit; of a kind that the agent was hired to perform; duties. Intentional torts may be in the scope of employment if they are during work hours, the agent was motivated to act for the principal's benefit, and the act was within her assigned duties.
Is every partner an agent of the partnership?
yes.
What agreement is required for formation of a partnership?
1. agreement 2. to conduct a for-profit business 3. as co-owners.
What defines an employer-employee relationship?
1. typically exert a great amount of control over employees. 2. Including control over the day-to-day activities of the employees, such as i) giving the employees tools to work at the workplace, ii) paying employees on a structured pay period, and iii) directing the ways in which employees should finish and perform the tasks.
How does apparent authority end?
Communication from the principal to the 3d party.
What is the default rule regarding new partners? All the existing partners must (blank).
Consent.
What are the four types of legal authority?
1. Actual express 2. Actual implied 3. Apparent 4. Ratification
What are the 8 reasons for involuntary dissociation?
1. An event triggered in the partnership agmt. 2. Expulsion of a partner pursuant to procedures set forth in the partnership agtm. 3. Becomes unlawful for partnership to carry on business with a certain partner. 4. A partner goes bankrupt. 5. A partner is expelled by court order. 6. A partner dies. 7. A partner becomes incapacitated. 8. One of the entities associated with partnership dissolves.
What are the two steps in the process of terminating a partnership?
1. Dissolution 2. Winding up.
What are the 3 main reasons why partnerships are dissolved?
1. Occurrence of a dissolving event set forth in the partnership agmt. 2. Occurrence of an event that makes it unlawful for the partnership to continue, if cure cannot be made within 90 days. 3. Judicial determination.
What are the subduties of a partner's duty of care?
1. Partners must not engage in reckless or grossly negligent conduct. 2. Can't engage in intentional misconduct. 3. Can't engage in a knowing violation of the law.
What are the consequences of a partnership?
1. Separate legal entity that can own property, sue and be sued. 2. Joint and several personal liability for the partners regarding the obligations of the partnership. 3. No entity-level tax'n.
What are the rules regarding whether travel is within the scope of employment?
1. Traveling between work/home is usually not within the scope of employment. 2. Travel for work purposes (business trips, visiting clients) is within the scope of employment.
What is a partnership at will?
An open-ended partnership with no fixed termination tied to duration or a particular undertaking.
How is apparent authority of a partner terminated or limited?
By communication to the 3d party.
As a matter of state law, can a partnerhsip eliminate the duty of loyalty?
No.
Can a partnership agmt prevent a partner from withdrawing?
No.
Do the duties of care and loyalty apply to prospective partners or former partners?
No.
Do you need to have specific intent to form the entity known as a partnership?
No.
Does a principal generally have vicarious liability for torts committed by an independent contractor?
No.
Does there need to be a written partnership agreement?
No.
If the third party has knowledge that the partner lacked authority, can the 3d party assert apparent authority and bind the partnership to a contract?
No.
Is An incoming partner personally liable for contract or tortious obligations incurred prior to his becoming a partner?
No.
Is evidence in writing necessary to form an agency relationship
No.
Is there a requirement of consideration to create an agency relationship?
No.
Must Financial contributions/capital contributions have an effect on the division of profits and losses?
No.
Must the Division of profits and losses be the same?
No.
Does actual express authority immediately terminate upon the death of the principal? yes/no. Only when terminates when the agent has (blank) of the principal's death.
No. actual knowledge.
Generally, how is voluntary dissociation by a partner accomplished? By giving (blank) to the partnership that the partner wants to (blank).
Notice; withdraw.
What is the default rule regarding transfers of partnership interests?
Partners have the right to transfer a partnership interest to a 3d party.
What is a principal?
Someone who directs an agent's acts.
What is an agent?
Someone who does things on behalf of a principal.
When there is no partnership agreement regarding division of profits and losses, how are they determined?
State-law default: Profits will be divided equally, and losses will follow profits.
What usually determines management/voting rights of partners? what is the default rule regarding management of the partnership?
The partnership agreement. In the absence of a partnership agreement, all the partners have equal rights to manage the partnership.
How is actual express authority created?
The principal creates actual express authority by using words (written or spoken) to convey authority to the agent.
What makes an agent an independent contractor rather than an employee?
The principal does not control or have the right to control the agent's physical conduct of work.
Why does it matter if an agency relationship exists?
When a valid agency relationship exists the principal can be held liable to 3d parties for the actions of the agent.
Does Actual express authority terminate immediately upon the death of the agent?
Yes
Does a partnership that is dissolved continue to exist?
Yes, but only to wind up its business.
Are partners personally and jointly and severally liable for all obligations (Debts and liabilities) of the partnership?
Yes.
Can a partnership agmt place certain restrictions on withdrawal?
Yes.
Can minors serve as agents?
Yes.
Do Creditors have priority over partners to the partnerships' asset?
Yes.
Do all agents, even unpaid agents, owe fiduciary duties to their principals?
Yes.
Does The agent have actual implied authority (absent express instructions to the contrary) to act within general business custom/trade usage?
Yes.
If the partnership continues after a partner dissociates, must the partnership buy out the dissociated partner's interest?
Yes.
Is An incoming partner liable to the extent of his capital contribution for contract or tortious obligations incurred prior to his becoming a partner?
Yes.
Is every partner a fiduciary of the partnership?
Yes.
May Any partner, legal representative, or transferee request judicial supervision of the winding up?
Yes.
May partners agree to restrict the ability of partners to transfer their interests?
Yes.
What are three subduties of the duty of loyalty? 1. Can't (blank) with principal 2. Can't take (blank) away from the principal; 3. Can't take in (blank) by virtue of her (blank).
compete; business; secret profits; position. 1. The agent cannot compete with the principal (i.e., leave employment and take a customer list). 2. The agent cannot take business away from the principal (i.e., moonlight or do jobs on the side). 3. The agent cannot take in secret profits by virtue of her position. i. Profits gained due to the agency relationship must be disclosed or disgorged to the boss.
What is the default rule regarding voting on ordinary and extraordinary business matters? 1. Ordinary business requires (blank) of a (blank). 2. Extraordinary/special business requires (blank) of (blank).
consent; majority of partners; consent; all partners.
When may a partnership be dissolved? By (blank) of all partners, by occurrence of an event designated as a triggering event in the (blank), or by operation of (blank).
consent; partnership agreement; law.
What is the priority of distributions upon dissolution of a partnership?
creditors first.
When is a partner's belief that an action is necessary to carry out express authority reasonable? When such action is part of the (blank) and (blanks) of the (blank).
custom; ordinary dealings; trade.
Can a creditor go after any partner for the entire sum owed by the partnership? Yes, but often the partnership creditor must (blank) the (blank)'s funds before going after the partners' (blanks).
exhaust; partnership; personal assets.
What is a statemetn of dissolution?
filing that gives 3d parties notice that the partnership has been dissolved after 90 days.
Is a limited partner in an LLP generally personally liable for the obligations of the LLP? No, unless she also serves as a (blank) or participates in the (blank) of the partnership.
general partner; control.
What three questions might courts ask in determining whether an act performed by an employee was within the scope of employment (thus subjecting the principal to vicarious liability for the employee's torts)? o Did the agent (blank) to (blank) the principal? o Was the agent's conduct (blank)? o Did the tort occur ("blank")? (i.e., was it a (blank) or a (blank))?
intend; benefit; of the kind that she was employed to perform; "on the job"; frolic; detour.
What does ratification require? that (i) the principal has (blank) of all the (blank) facts of the (blank); (ii) the principal (blanks) the (blank's) (blanks). (iii)The principal (blankly) (blanks) to the (blank) or engages in conduct that indicates (blank); (iv) The ratification is (blank) (before the third party (blanks) from the contract).
knowledge; material; contract; accepts; contract's; benefits; expressly; assents; contract; affirmation; timely; withdraws.
Can partners enter into contracts on behalf of the partnership? Yes, if they have (blank) (actual, implied, apparent, or ratified).
legal authority.
Which 3 state laws are mandatory? 1. (blank) to (blank) parties. 2. Can't deny (blanks) access to the partnership's (blanks). 3. (blanks) cannot be eliminated.
liability; third; current partners; books and records; fiduciary duties.
As a general rule, how can you discern between actual authority and apparent authority?
look to the communication. When the principal is communicating with the agent, there is actual authority; when the principal is communicating with the third party, there is apparent authority.
When one or more parties disclaim the creation of an agency relationship, what will courts look to decide whether an agency relationship existed? (blanks of blank), which can range from a formal letter, to spoken words, to physical actions.
manifestations of assent.
Can a partnership limit the duty of loyalty by describing it differently? Yes, as long as the limitation is not (blank).
manifestly unreasonable.
Who may form a partnership? 1. Natural (blanks) 2. or legal (blanks) 3. with (blank) capacity to (blank).
persons; entities; legal; contract.
What are 3 ways to tell whether a 3d party's belief regarding apparent authority is reasonable? 1. (blank) dealings 2. (blank) customs and (blank) standards. 3. the agent's (blank).
prior; trade; industry; position. 1. prior dealings i. If the principal and the third party have had similar dealings before and the principal has not revoked the agent's authority by express communication to the 3d party. 2. trade customs and industry standards. 3. The agent's position i. if the agent is appointed to a specific position (such as vice president or treasurer), the principal will be found to have made a manifestation that the agent has the customary level of authority possessed by a person in the agent's position.
When may a principal be directly (not vicariously) liable to a third party harmed by an agent's conduct? 1. if the principal (blanks) or (blanks) the agent's conduct; 2. is (blank) in (blanking or blanking) the agent; 3. delegates a (blank) to the agent.
ratifies; authorizes; negligent; hiring or supervising; nondelegable duty.
When does a partner have implied authority to enter into contracts on behalf of partnership? When the partner has a (blank) that an action is (blank) to carry out (blank).
reasonable belief; necessary; express authority.
How is an LLP formed?
requires paperwork to be filed with the state.
If you are a partner and are worried that an action you are contemplating might be disloyal, what can you do just to be safe? There is a (blank) option: you must make (blank) of all (blank) facts to the partnership and if a certain percentage of them agree, they can (blank) or (blank) the activity.
safe harbor; full disclosure; material; ratify; authorize.
When is A partnership liable in tort for torts that are committed by partners? When the partners act within the (blank) of the (blank) (i.e., within the (blank) of partnership (blank) or with (blank) from the partnership).
scope; partnership; ordinary course; business; authorization.
If there is no partnership agreement, then what governs the partnership?
state-law default rules.
What are the requirements for respondeat superior (vicarious liability) to apply? 1) The principal has (blank) such that the agency relationship is an (blank) relationship; and 2) The (blank) committed by the agent was committed while the agent was acting (blank).
sufficient control; employer-employee; tort; within the scope of employment.
Who are the parties to a contract when the principal is undisclosed?
third party and agent (unless the agent had authority to contract on behalf of the principal w/o disclosing the principal's existence, in which case both the agent and the principal would be parties to the contract).
Who are the parties to a contract when the principal is fully disclosed by the agent?
third party and principal.
Who are the parties to a contract when the principal is partially disclosed (identity not given to 3d party)?
third party, principal, and agent.
What the rule regarding usurping a business opportunity of the partnership? If a business opportunity is presented to a partner that is the (blank), the partner must (blank); he cannot take the opportunity for himself without first (blanking) the other partners and (blanking) their permission to do so.
type of business the partnership engages in; present the opportunity to the partnership; informing; receiving.
When does a partner have express authority to enter into contracts on behalf of partnership?
when it says so in the partnership agmt or the partners have voted.
What power does the person who is winding up have?
The person winding up a partnership may dispose of and transfer partnership property, and discharge partnership liabilities. Can also preserve partnership business/assets to maximize value as a growing concern.
When is a partnership at will terminated?
Generally, when any partner decides to dissociate.
