008 Agency; Partnerships

Front 1

How does an employee bind corp?

Back 1

For a corporation to be bound by the actions of an employee, the
employee must have had the authority to bind the corporation,

The authority given to the employee can be actual or apparent authority.

Actual authority is the authority which the agent reasonably believes he possesses.

This actual authority can be express or implied.

EXPRESS AUTHORITY--power specifically granted by P to A

IMPLIED--Actual authority may be implied to include actions customarily taken by persons similarly situated.

APPARENT authority exists if P represents to a 3P that the Agent has that authority
AND
a 3P REASONABLY RELIES on that representation.

The principal must have done or failed to do some act which causes the third party's belief.

Front 2

How is a General Partnership formed?

Back 2

general partnership is formed when two or more people carry on
as co-owners of a business for profit.

Although a writing is not required as
evidence of the partnership, it is required as evidence of a limited
partnership.

The sharing of profits creates a presumption that a partnership
exists.

Remember, joint ventures are also covered by the law of partnerships.

Joint Venture is a partnership for a LIMITED PURPOSE

Front 3

Types of authority that Agent has on Principal

Back 3

An agent may have ACTUAL or IMPLIED authority, or apparent authority when the principal holds the agent out as capable of doing an act, even if he is not capable of it.

Remember, a principal may always ratify the acts of an agent after they are done, even if they are outside that agent's authority.
Ratification occurs when a principal accepts an agent's transaction after learning of all the facts.

Front 4

formation of a LIMITED PSHIP

Back 4

Under the Tennessee Revised Uniform Limited Partnership Act, a limited partnership is formed when

one or more persons, but not less than all of the general partners, execute a certificate of lirnited partnership with certain specified contents and file that certificate with the secretary of state.

Contents:

1. Pship name (must contain "limited partnership or "L.P." with periods)
2. name/address of registered agent
3. name and address of each general partner; and
4. signature of each general partner

SUBSTANTIAL COMPLIANCE is generally sufficient

Front 5

Prima Facie evidence that a personis a partner

Back 5

receipt of a share of the profits is prima facie evidence that a person is a partner

HOWEVER

no sch inference will be drawn where profits are rec'd as:

1. wages of an employee
2. rent
3. payment of a debt.

Front 6

"Borrowed Employee" Rule

Back 6

This rule arises when one company loans an employee to another
company.

When that employee commits a tort, typically the loaning
principal remains the employer and is liable.

HOWEVER, if the borrowing
principal has the RIGHT TO CONTROL the employee's actions, then the borrowing principal is liable under RESPONDEAT SUPERIOR

Front 7

execution of an instrument by a partner

Back 7

The execution of an instrument by a partner in the partnership name in the ordinary course of a partnership's business or business of
the kind carried on by the partnership binds the partnership, UNLESS
the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing
KNEW or had received a NOTIFICATION that the partner lacked authority.

Front 8

When is P liable for torts of independent contractor?

Back 8

Employer is reposnsibel for torts of an IC if:

1. IC has breached a NON_DELEGABLE DUTY

2. if the act performed by the IC is INHERENTLY DANGEROUS

OR

3."EMPLOYEE by ESTOPPEL"  (IC is held out with the appearance of agency, you are estopped from denying vicarious liability foIContractor's  torts)

4. Where P was negligent in SELECTION of IC

5. Act performed is UNLAWFUL

6. Act performed constitutes a NUISANCE

Front 9

Creation of Agency Relationship

Back 9

Agency relationship results when:
1.One person (Principal) manifests an intention that another person (Agent) shall act ON HIS BEHALF
AND
2. A manifests CONSENT to the P to act FOR and ON BEHALF of the P

---
To create an agency, CONSENT must be manifested by BOTH the principal and the agent.

NO CONSIDERATION is required to create an agency relationship,
nor is any writing required

Front 10

when P secretly limits authority

Back 10

where P secretly limits actual authority of his A to act, and A acts beyond the scope of the limitation, P will be bound by agreement b/t A and 3P.

Front 11

Respondeat Superior

Back 11

A principal may be liable to third parties for torts committed by
her agent under the doctrine of respondeat superior.

To establish liability under this theory, there must have been:

1. an employer-employee relationship between the party whose act caused the injury
and the person sought to be held liable for the act.

In addition, the employee's wrongful conduct must have been committed within the SCOPE of the EMPLOYMENT relationship. An employer usually is not liable for the intentional torts of her employee since an intentional tort is clearly outside the scope of employment.
ee is deemed to be acting within scope of employment if:
1. his conduct was of the same nature as that which he was employed to perform
2. the conduct did not costitute a frolic or detour
AND
3. there was a motivation to serve the employer
-------
the most important consideration in determining whether an A is acting within the scope of employment is

WHETHER EMPLOYEE WAS PROMOTING EMPLOYER's INTEREST

Front 12

Respondeat Superior--intentional torts considered within scope of employment

Back 12

1. FORCE is authorized
2. tort is in promotion of EMPLOYER's BUSINESS
3. tort results from FRICTION INHERENT in the biz.

Front 13

Respondeat Superior--ee v. IC

Back 13

most SIGNIFICANT FACTOR-->whether EMPLOYER has RIGHT to CONTROL the MANNER and METHOD by which person PERFORMS his job

IC-->follows his OWN DISCRETION and emplpoyer has NO RIGHT TO CONTROL the METHOD and MANNER in which he performs his job.

Other factors include:
-characterization of the relationship b/t the parties
-degree of skill required to perform the work
-length of the employment period
-whether the person is engaged in a distinct business of his own
-whether the person was hired to further the Employer's biz interests

Front 14

Respondeat Superior--scope of employment

Back 14

an employee is deemed to be acting within scope of employment if:
1. his conduct was of the same nature as that which he was employed to perform
2. the conduct did not constitute a frolic or detour
AND
3. there was a motivation to serve the employer

Front 15

binding P by estoppel wrt property

Back 15

P who inentionally or negligently allows an A to hold himself out as owner of a property with INDICIA of ownership, is ESTOPPED to deny that A was the owner when the property is transferred to a BONA FIDE purchaser for VALUE

Front 16

when A is induce to enter a K by a bribe or other secret payment.. .

Back 16

P has a right to rescind the K because the contact has been created by FRAUD.

Front 17

when can a person become liable as partner absent an actual Pship situation?

Back 17

Partnership by estoppel.

a person who holds himself out to be
a partner may be liable to anyone who actually relies upon that
representation.

also

when a limited partner chooses to participate in the control of the business and the person dealing with the limited partner reasonably believes that the limited partner is a general partner., he will be liable as a general partner.

Front 18

when can partner bind Pship?

Back 18

All transactions that any of the partners enter into in furtherance of
the business.

Partners who lack the ACTUAL authority but have APPARENT
authority to act on behalf of the partnership will also bind the partnership.

Front 19

Who is liable for torts of Pship?

Back 19

Torts which occur
1.in the NORMAL COURSE OF the partnership BUSINESS
OR
2.with the AUTHORITY of the Pship

create liability for all the partners,

However, the partners who have no
culpability in committing the tort may sue the partner tortfeasors for
INDEMNITY.

*pship must be named as a party defendant

Front 20

How may a person who believes himself to be a limited partner and discovers that he actually a General Partner, protect himself from liability

Back 20

A general partner in a limited partnership is jointly and severally liable for ALL OBLIGATIONS of the Pship

THUS

1. He should immediately file a certificate of limited partnership with secretary of state.

A person who has a good faith and reasonable belief that he is a limited
partner, and who immediately files a certificate upon learning o fthe
mistake, wiII be protected as a limited partner.

EXCEPTION:

"Mistaken" General Partners are liable as such to those creditors who extend credit prior to the filing and who actually believed, in good faith, that the partner was a general partner at the time the transaction was completed

Front 21

Dissolution--Parternship at will

Back 21

Parternship at will--notification by any partner of his INTENT TO WITHDRAW dissolves the Pship

Under Tennessee law, an at-will partnership is formed when the partners have not agreed to remain partners for a definite term or until the completion of a particular undertaking.

In a partnership at will a partner
can dissolve tile partnership by dissociating from the partnership by means of notice to the partnership of the partner's express will to withdraw as a partner.

Accordingly, he then dissolves the partnership.

The partnership must wind up its business, UNLESS the partners waive the right to have the partnership's business wound up and the partnership terminated.

Front 22

Dissolution--Pship for a definite time or definite undertaking

Back 22

dissolution occurs:

1. If ALL PARTNERS vote to dissolve

2. 90 days after the DEATH, BANKRUPTCY or WRONGFUL DISSOCIATION of a partner, UNLESS a majority of the remaining partners agree to continue the Pship

3. upon the stated time or completion of the stated undertaking

Front 23

Death of a partner

Back 23

Dissolves the Pship after 90 days unless majority of the remaining partners agree to continue.

Dissolution is merely a change in the legal relationship of the partners - it does not mean that the business is ended.

However, when a partner dies and the business is continued without a settlement of the deceased partner's share, the estate representative has the option of receiving:


the value of the deceased partner's interested based on the greater of:
pship's liquidation value
OR
value of the pship as a going concern without the deceased partner.

values are determined as if the pship assets were sold and the pship was wound up on the date of the of dissociation.

plus interest.

Front 24

Dissolution--distribution of assets

Back 24

render an accounting

First, assets must be paid to creditors,

then to the partners for
advances, capital and surplus or profits.

If there are not enough assets to satisfy debts to creditors, the partners will become personally liable for these debts.

Front 25

Partner's use of Partnership real property

Back 25

Each partner may use property belonging to tile partnership for tile
purposes of the partnership for partnership purposes.

BUT has NO RIGHT to use the property for personal reasons.

Property will be found to belong to tile partnership if it is:

1.used for tile furtherance of the partnership business,
2. acquired with the use
of partnership funds,
OR
3. Titled in tile partnership name.

The death of any one partner will automatically vest the property rights of the partnership in the remaining partners.

Front 26

whether property acquired by a partner is pship or personal property

Back 26

Under Tennessee law, property acquired by a partner:

1. in his own name,
2. without any indication that the acquirer is a partner or that a
partnership exists
and
3. without use of partnership assets

is presumed to be property of the partner himself, in his individual
capacity, and not that of the partnership.

This is true even if the property is used for partnership purposes.

On the other hand, property acquired with partnership assets (e.g., the revenues of the business) is presumed to be partnership property.

Front 27

obligations incurred before general pship registered as a limited pship

Back 27

a partner remains liable for an obligation incurred by the pship before the pship registered as a LP

Front 28

proving an oral partnership

Back 28

must be proven by clear and convincing evidence

Front 29

Limited Partners entitlement to full information?

Back 29

Yes. The Revised Uniform Limited Partnership Act provides that, as
limited partners, they are entitled to full information regarding the state of
the business and financial condition of the partnership, and such other
information regarding the partnership as is REASONABLE,

Front 30

Assignment of Partner's interest

Back 30

Unless the pshp agreement provides otherwise the assignment of a partner's interest to another ONLY gives the assignee the right to receive distributions to which the partner would be entitled.

i.e. assignee does not become personally liable because of the assignment

Front 31

How are losses shared in a Pship

Back 31

partners share equally in profits and losses

UNLESS there is an agreement to the contrary.

Front 32

is a P who becomes a partner in an already existing partnership liable for only those partnership obligations after one's admission

Back 32

Generally, yes. However, no TN decisions have held that incoming partners are liable for payments of ongoing contractual obligations of the partnership that come due after they become partners. Other courts have found no liability.

Front 33

If a partner is required to pay more than his share of partnership debts . ..

Back 33

he can compel his partners to pay their pro rata shares.

Front 34

Bankruptcy of a partner wrt right to share in profits

Back 34

Partner's right to share in the profits terminates on that date of the bankruptcy filing.

lf the partnership continues in business, it must buyout his interest based on the greater of:(determined by experts)

1. the partnership's liquidation value
OR
2. the value of the business as a going concern without her as a partner.

These values are determined
as if the partnership assets were sold and the partnership wound up on the dissociation date.

Interest on the buyout price is calculated from the date of dissociation to the date ofpayment

Front 35

Authority of A to enter K

Back 35

P is liable on K entered into by an A if A had authority to enter into the K on the P's behalf

A may have actual authority--either EXPRESS or IMPLIED--or apparent authority to act on behalf of his Principal

Front 36

Can a K party recover attys fees from a purported P or A with whom 3P contracted or (in the case of a failed agency relationship) attempted to K

Back 36

generally atys fees are NOT RECOVERABLE from a purported A or P with whom the 3P contracted or (in the case of a failed agency relationship) attempted to contract.

UNLESS

there is a contractual provision authorizing recovery.

Front 37

A liability on K

Back 37

A not liable on K he enters into on behalf of a DISCLOSED P.

BUT

when an A purports to act on behalf of a P the A makes a WARRANTY that he has the authority that he purports to have.

Hence if the A lacks authority, A is liable to the 3P for ALL damages caused by the breach of WARRANTY.

Front 38

Liability owed by A to P

Back 38

1. Duty of Care
2. Duty of Loyalty
3. Duty of Candor

Front 39

Liability owed by A to P--1. Duty of Care

Back 39

An agent is LIABLE to the principal for LOSSES that the principal incurs as a result of the agents NEGLIGENCE or INTENTIONAL misconduct in carrying out the principal's INSTRUCTIONS.

--if A is compensated, then liable for related compensation

Front 40

Liability owed by A to P--2. Duty of Loyalty

Back 40

1. DUTY OF UNDIVIDED LOYALTY--breached if A has interests ADVERSE to the interest of his principal.

"Not honesty alone, but the punctilio of an honor the most sensitive"

An agent who breaches the DUTY OF LOYALTY forfeits his
COMPENSATION.

Front 41

Liability owed by A to P--3. Duty of Candor

Back 41

DUTY OF CANDOR--A has a DUTY to NOTIFY P of all MATTERS affecting the SUBJECT MATTER of the agency relationship
-thus knowledge by A is IMPUTED to P

-liability for breach of duty of candor is SOMEWHAT UNCLEAR

if the breach goes to the HEART OF A CONTRACT a court could find that A is liable to P for
-losses or damages arising from the breach
AND
for any related agency compensation.

Front 42

Right to an accounting

Back 42

accounting is an equitable action that considers all of the transactions of the partnership.

can be requested by a deceased partner's estate to determine the amount of the deceased partner's interest based on the greater of the pship's liquidation value or the value of the partnership without the deceased partner as a going concern. PLUS interest.

values are determined as of the date of dissociation i.e. death.

Front 43

TN statute provides presumption that an EE driving an ER's vehicle is acting w/in scope of epmt

Back 43

TN courts have held, however, that ER is not liable if there has been a "marked departure or deviation from EE's line of duty"

Front 44

although generally not liable for intentional torts of EEs,

Back 44

ER may be liable if intentional tort committed in furtherance of ER's interests

Front 45

When ER is aware that an agent EE is committing fraud or a similar intentional tort and acquiesces,

Back 45

not only can ER be vicariously liable for EE's intentional tort, may also be directly liable for reckless supervision

Front 46

In considering formation of an agency relationship (intent by P that A should act on her behalf + mutual intent by A to act on behalf of P),

Back 46

consider the limited purpose of the relationship (solicit business only or solicit + enter into Ks?)

Front 47

Actual Authority (A reasonably believes she has) = express (specific grant) or implied (actions customarily taken by similarly situated agents)

Back 47

Apparent Authority = P representation and 3P actual reliance

P cannot be liable on a K entered into by A without authority or ratification

Front 48

Apparent Authority may be based on position of employment (plant manager to hire plant workres)

Back 48

or on prior acts (responsibility to bind P in that manner in the past and 3P's knowledge)

*analyze scope of normal duties in apparent authority situations*

Front 49

IC v. EE analysis

Back 49

1. compensation by time or by job (commission-based)?
2. ER supervision and control
3. parties' determination
4. who supplies tools/ vehicle?

Front 50

Fiduciary duty of loyalty in a TN partnership requires:

Back 50

a p use or possess partnership property only on behalf of the p'ship; the P must account to the p'ship and hold as trustee for it any property, profit or benefit derived from in the conduct of the p'ship biz

Front 51

Under TN law, a P's duty of loyalty extends to individual partners as well as the partnership

Back 51

additionally, a P who breaches duty may be liable to other Ps for failure to obtain consent

Front 52

consent of ALL partners in TN partnership required for actions taken outside ordinary course of biz

Back 52

unless p agreement states otherwise

Front 53

In TN, an oral partnership must be proven by

Back 53

C&C evidence

Front 54

to remain immune from personal liability for a LPs debts, limited partner cannot participate in control of the biz

Back 54

even if not personally or jointly/ severally liable, a limited partner's investment interests in the LP may be at risk

Front 55

duty of a general partner in a LP:

Back 55

to act in gf, with teh care of an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner she reasonably believes to be in best interest of p'ship

Front 56

a general partner may only be removed as a general partner in accordance with the lp agreement

Back 56

exceptions: bankruptcy, reorganization, death or incompetency