Agency & Partnership

1. when there is a principle-agent relationship; AND
2. the tort was committed by the agent within the scope of that relationship

1. Assent (an informal agreement between the principal who has capacity and the agent)
2. Benefit (the agent's conduct must be for the principal's benefit)
3. Control (the principal must have the right to control the agent by having the power to supervise the manner and method of the agent's performance)

* the principal will be liable for the sub-agent's tort ONLY if there is assent, benefit, and control between the principal and the sub-agent tortfeasor
* typically, the principal does not assent to the sub-agent's help and does not have the right to control
* so likely, no vicarious liability

* only if there is assent, benefit, and control between the borrowing principal and the borrowed agent
* typically, although the borrowing principal may assent to and benefit from the borrowed agent, the borrowing principal does not assume the right to control the borrowed agent
* likely not vicariously liable

There is no right to control an independent contractor because there's no power to supervise the manner of his performance.

Factors to consider - Does the hired person:

1. have a separate and distinct business/occupation

2. get paid on a project completion basis

3. bring/use their own tools?

* Without control, there can be no vicarious liability for a independent contractor's tort

* except:

1. Inherently dangerous activities (hired to do something inherently dangerous, involving a real risk to third parties); and

2. Estoppel (if you hold the contractor out with the appearance of agency, you will be estopped from denying liability)

1. The conduct must be "of the kind" the agent was hired to perform to be within the scope generally

2. The tort must occur on the job. Conduct must be a detour rather than a frolic (frolic is a new and independent journey vs. a near departure.)

3. Did the agent, even in part, intend to benefit the principal with the conduct? Will be enough to be within the scope of the relationship.

Intentional torts of an agent are ordinarily outside the scope of agency, and thus vicarious liability.

However, they will be inside the scope if:

1. Specifically authorized by the principal;
2. Naturally incident from the nature of employment;
3. Motivated by a desire to serve the principal

A principal is liable for contracts entered into by its agents if the principal authorized the agent to enter into the contract. Principal liable only for authorized contracts.

The principal must have the capacity to enter into a contract and bind himself personally.

An agent will be personally liable for an unauthorized contract

1. Actual Express Authority
2. Actual Implied Authority
3. Apparent Authority
4. Ratification

* When the principal used words to express authority to agent
* narrowly limited to actual limited words within the grant
* can be oral or private
* however if the contract itself must be in writing, then the express authority must be in writing as well... so always in writing for land

1. By a unilateral act of either the principal or the agent; OR
2. Death or incapacity of the principal

* except if the principal gives the agent durable power of attorney (a written expression of authority to enter a transaction with clear survival language)

Durable power of attorney typically survives incapacity but not death.

Implied authority, is authority which the agent reasonably believes the principal has given because of:

1. Necessity (there is implied authority to do all tasks which are necessary to accomplish an expressly authorized task)
2. Custom (there is implied authority to do all tasks which by custom are preformed by persons with the agent's title or position)
3. Prior acquiescence by the principal (there is implied authority to do all tasks which the agent believes to be authorized from prior conduct by the principal - SILENCE can imply authority to continue doing things i.e. failure to object to an unauthorized act.

1. the principal "cloaked" the agent with the appearance of authority; AND

2. the third party reasonably relies on the appearance of authority

Secret Limiting Instructions: Principal will still be liable if agent has actual authority, but exceeded the secretly limited that authority imposed by principal.

Lingering Authority: Principal will still be liable if actual authority is terminated but agent continues to act on principal's behalf, until persons with whom agent usually contracts receive notice of termination.

Authority can be granted after a contract has been entered into if:

1. Principal has knowledge of all material facts regarding the contract; AND

2. the principal accepts its benefits

except: ratification cannot alter the terms of the contract

The principal is liable on its authorized contracts, and as a rule an authorized agent is not liable on its authorized contract.

The undisclosed principal: If the principal is partially disclosed (only the identity of the principal concealed) or undisclosed (fact of principal concealed) authorized agent may nonetheless be liable at the election of the third party. Contracting party can sue agent personally.

In return for reasonable compensation and reimbursement of expenses, agents owe principals:

* duty of care: (Keep principal informed of what is going on)
* duty to obey instructions that are reasonable
* duty of loyalty

An agent may not do any of the following:* self-dealing (agent cannot receive a benefit to the detriment of the principal)
* usurping the principal's opportunity, OR
* secret profits (making a profit at the principal's expense without disclosure)

there are no formalities

an association of two or more persons for carrying on as co-owners of a business for profit

* sharing of profits
* the contribution of money or services in return for a share of profits creates a presumption that a general partnership exists (a strong presumption)

* partners are agents of the partnership for apparently carrying on the usual partnership business

* general partnership is liable for each partner's torts in the scope of partnership business and for each partner's authorized contracts

* each general partner is also personally liable for all debts of the partnership

An incoming partner is generally not liable for prior debts, but any capital paid to the partnership by that brand new partner can be used by the partnership to satisfies those prior debts.

They retain liability for future debts until actual notice of their disassociation is given to all known creditors and even potential creditors typically in newspapers of general circulation where the partner primarily carries on business.

OR

until 90 days after filing a notice of dissociation with the state

One who represents to a third party that a general partnership exists will be liable as if a general partnership exists

they are fiduciaries of each other and the partnership (so all the fiduciary duties apply):

1. No self-dealing; or

2. cannot usurp partnership opportunities; or

3. make a secret undisclosed profit at the partnership's expense.

A remedy to a suspected breach of the duty of loyalty is to cause an accounting to be done:

General partnership may recover for losses that are caused by the breach of fiduciary duties and may recover losses caused by breach and requii disgorge profits

1. Land,

2. Leases, and

3. Equipment

are owned only by the partnership itself, so they may not be transfer by individual partners without partnership authority

Share of profits and surplus is personal property, owned by individual partners;

therefore, it may be transferred by individual partners to third parties

* Management is an asset owned only by the partnership and it may not be transferred by individual partners to third parties; therefore, you cannot sell your right to vote or move it down to people via intestate succession.

* Absent an agreement, each partner is equal control (vote)

ask:

1. whose money was used to buy the property
2. if the partnership money was used to buy it, it goes to the partnership, if personal money it becomes personal property

absent an agreement, no - unless they are helping "wind up" the business

* absent an agreement, profits are shared equally
* absent an agreement, losses shared like profits

there are three stages:

1. dissolution,

2. termination, and

3. winding up

In the absence of an agreement that sets forth events of dissolution, a general partnership dissolves upon notice of express will of any general partner to dissociate,

OR any material change in the partnership (bankruptcy, incapacity, death or withdrawal of any single general partner)

termination

the period between dissolution and termination in which the remaining partners liquidate the partnership's assets to satisfy the general partnership's creditors

the partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed before winding up began

the partnership and its individual general partners retain liability on brand new transactions during winding up until actual notice of dissolution is given to creditors or until 90 days after filing a statement of dissolution with the state

Each priority level must be fully satisfied before the next can be:

1. first, the partnership must pay all creditors (all outside non-partner trade creditors plus all partners insiders who have loaned money to the partnership and have become creditors thereby.)
2. second, the partnership must repay all capital contributions into the partnership by partners (the partnership is now liable to its own partners the full repayment of their capital contributions)
3. third, profits, if any are shared equally among partners without an agreement.

Generally, each partner must be repaid his or her loans and capital contributions, plus the partner's share of any profits, or minus that partner's share of any losses.

a partnership with at least one general partner at least one limited partner

file with the state a "limited partnership certificate" that includes the name of all general partners

he is liable for all limited partnership obligations, but exercise substantial managerial control.

* have limited liability and are not liable for the obligations of the limited partnership itself.

* although the law in most states is still that a limited partner may not manage the business, under the newly revised uniform limited partnership act, may manage without forfeiting their limited liability status

must register with the state by filing a statement of qualification and annual reports

no partner, not even general partners, are liable for the obligations of the limited partnership.

partners will only be liable for their own investments in the partnership.

a hybrid between a corporation and a partnership in which the owners (members) have the same rights and limited liabilities as shareholders in a corporation plus, the benefits of partnership tax treatment.

MUST file articles of organization, and may adopt an operating agreement

owners have the choice between managing the business or they may delegate their control to a team of managers

limited liquidity: a full membership interest may not be transferred without unanimous consent of the members or as provided otherwise in the operating agreement

a limited life - the company will dissolve upon unanimous consent of the members or as provided otherwise in the operating agreement

how agency relationship is formed

An agency relationship is relationship is created when a person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement

authority the agent reasonably thinks he possesses based on the principal's dealings with him - it can be express or implied.

apparent authority exists when the principal "holds out" the agent has having certain authority, causing third parties to reasonably believe that the agent has such authority

* formed when two or more people associate to carry on as co-owners of a business for profit

* a person who receives a share of the profits from a business is presumed to be a partner

* each partner is an agent of the partnership for the purpose of its business

* a partnership can be bound on a contract entered into by a partner with actual or apparent authority

authority that a partner reasonably believes he has based on his communications with the partnership

the act of any partner apparently carrying on in the ordinary course of the partnership business or business of the kind carried out by the partnership will bind the partnership unless the partner had no authority to act for the partnership and the third party with whom the partner dealt knew the partner lacked authority.

by getting unanimous consent of all the partners

* Yes. Each partner is jointly and severally liable for partnership obligations, which means that each partner is personally liable for the full amount.

* however, when a partner enters a contract he had no authority to enter into on behalf of the partnership, the partnership is not bound by the contract.

*the principal will not be liable unless they ratify the contract

The members/owners are not liable for any debts of the company, if the company has partnership characteristics.

An LLC must satisfy 2 of 3 characteristics to qualify for no personal liability:

1. Members control business and operations but may delegate to one or more managers;

2. Limited Liquidity: the right to receive profits and losses can be transferred but management rights are not tranferrable

3. Limited life: events of dissolution will generally cause dissolution.