Agency

Front 1

Three agency problems

Back 1

Liability of principal to 3d parties for torts of an agent; liability of principal to 3d parties for contracts entered by an agent; and duties which agents owe to principals

Front 2

How to determine whether the principal will be vicariously liable for TORTs committed by agent? (respondeat superior or vicarious liability) Two-part test:

Back 2

Principal will be liable for torts committed by agent if: (1) a principal-agent relationship exists, and (2) the tort was committed by the agent within the scope of that relationship.

Front 3

The principal-agent relationship requires (3 elements)

Back 3

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

Front 4

Sub-agent tortfeasor situations arise when …

Back 4

principal will instruct an agent to do some task, and agent gets a helper

Front 5

There is no vicarious liability for a sub-agent’s tort unless _________. Usually, will not find ____ nor ___, but may find ____.

Back 5

there is assent, benefit, and control over the subagent tortfeasor … assent nor control …benefit

Front 6

Borrowed agent tortfeasor situations arise when …

Back 6

Employer 1 will borrow Employer 2’s agent

Front 7

There is no vicarious liability for a borrowed agent’s tort unless _________. Usually, will find ____ and ___, but not ____.

Back 7

there is assent, benefit, and control over the borrowed agent tortfeasor … assent and benefit …control

Front 8

Contrast Agent with Independent Contractor. Factors: there is no right to control an independent contractor because ________.

Back 8

there is no power to supervise the manner of its performance.

Front 9

Rule: ______ liability for an independent contractor’s torts.

Back 9

no vicarious

Front 10

Exception to general rule of no vicarious liability for independent contractor’s torts (two)

Back 10

(1) Ultrahazardous activity exception (if an IC commits a tort whilst engaged in a ultrahazardous activity, there will be vicarious liability for that tort); (2) estoppel (if you hold out your IC with the appearance of agency,you will be stopped from denying vicarious liability)

Front 11

When writing an essay, if there is a general rule and an exception always ________.

Back 11

start with the general rule.

Front 12

Use “in this case”

Back 12

to start the analysis section

Front 13

Scope of principal-agent relationship is determined by three factors:

Back 13

Was tortious conduct "of the kind" agent was hired to perform (was the conduct within the job description); did the tort occur "on the job" (a frolic - new and independent journey - is outside scope of agency; a detour - mere departure from an assigned task - is inside scope of agency); did agent intend to benefit the principal (even partly suffices to be inside the scope).

Front 14

Intentional torts - general rule re agency

Back 14

Intentional torts are outside scope of agency

Front 15

Intentional torts are within the scope of agency if the conduct was…

Back 15

specifically authorized by principal; natural from the nature of employment; motivated by desire to serve the principal

Front 16

Whether principal is liable for contracts entered into by its agents? One Test:

Back 16

Principal is liable for contracts entered into by its agent if the principal authorized the agent to enter into the contract (on essay, start ALL K issues with this general rule: principal will be liable only on its authorized contracts. In this case …)

Front 17

There are ________ types of authority given by principal to an agent to enter into a contract:

Back 17

four … actual express, actual implied, apparent, or ratification

Front 18

Actual expressed authority to enter into a contract means that __________.

Back 18

principal used words to express authority to an agent – Rule: can be oral or private (e.g., whisper), but words narrowly construed; Exception: but if the contract itself must be in writing, then the express authority must be in writing as well (e.g., land contracts)

Front 19

Express authority will be revoked by ______, or ______; it will not be revoked if ___________.

Back 19

unilateral act of either party or death/incapacity of the principal; the principal gives the agent a durable power of attorney

Front 20

A durable power of attorney is…

Back 20

a written expression of authority to enter into a transaction (PoA), with conspicuous survival language (durable).

Front 21

Actual implied authority is _______.

Back 21

authority which agent reasonably believes the principal has given because of (1) necessity (all tasks that are necessary to accomplish an expressly authorized task); (2) custom (all tasks that are customarily performed by persons with the agent’s title or position); (3) prior dealings between principal and agent (all tasks that an agent believes to be authorized to do from prior acquiescence by the principal)

Front 22

What is the two-part test for apparent authority?

Back 22

(1) Principal "cloaked" agent with the appearance of authority, and (2) 3d party reasonably relies on the appearance of authority

Front 23

Secret Limiting Instruction hypo

Back 23

Agent has actual authority, but principal has secretly limited that authority. Agent acts beyond the scope of the limitation. – apparent authority, so principal is liable.

Front 24

Lingering Authority hypo

Back 24

Actual authority has been terminated. Afterwards, agent continues to act on principal's behalf. – lingering apparent authority, so principal is liable - until 3d party receives notice of agent’s termination.

Front 25

Ratification

Back 25

Authority can be granted after the contract has been entered if (1) P has knowledge of all material facts regarding the contract, and (2) P accepts its benefits, (3) except that ratification cannot alter the terms of the contract - if P tries, there is no ratification

Front 26

General rules of principal-agent liability on the contract

Back 26

General Rule: (a) if no authority, principal is not liable on contract, and agent is; (b) if authority, principal is liable on the contract, and agent is not; (c) Exception: unless undisclosed or partially disclosed principal

Front 27

Exception to general rules of principal-agent liability on a contract

Back 27

If principal is partially disclosed (only identity concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the third party.

Front 28

Agents have a right to ______ from the principal, and to be indemnified for ______. In return for compensation, agents owe three classic duties.

Back 28

receive compensation … expenses

Front 29

Duties agents owe to principal:

Back 29

(1) duty to exercise reasonable care, (2) duty to obey reasonable instructions (i.e., not break the law), (3) duty of loyalty - no self-dealing (agent cannot receive benefit to the detriment of the principal); usurping the principal's opportunities; or secret profits

Front 30

What are the remedies for a breach of the duty of loyalty?

Back 30

P may recovery losses caused by the breach, and disgorge profits made by the breaching agent.

Front 31

Partnership – four issue areas …

Back 31

(1) Partnership formation, (2) liabilities of partners to 3d parties, (3) rights and liabilities between partners, and (4) partnership dissolution

Front 32

Partnership - formalities required

Back 32

None - no formalities to becoming a general partnership

Front 33

What is the definition of a general partnership?

Back 33

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

Front 34

What creates a presumption of a general partnership and what does not?

Back 34

sharing of profits - contribution of money or services in return for a share of profits creates a presumption that a general partnership exists, but not in return for salary, wage, commission, fixed rate of interest, gross revenues, or receipts

Front 35

In determining liability of general partners to third parties, what is the first step, i.e., what principles apply?

Back 35

Agency principals apply. Partners are agents of the partnership for carrying on usual partnership businesses; Partnership is bound by torts committed by partners in scope of partnership business; Partnership is bound by contracts entered by partners with authority.

Front 36

General partners are ___________ liable for _____________.

Back 36

personally … all debts and obligations of the partnership

Front 37

Incoming partners' liability for prior debts?

Back 37

Generally not liable for prior debts. But any money paid in to the partnership by an incoming partner may be used by the partnership to satisfy the prior debts.

Front 38

Dissociating partner's liability for subsequent debts?

Back 38

Dissociating partners retain liability on future debts until actual notice of their dissociation is given to creditors OR until 90 days after filing “notice of dissociation” with the state.

Front 39

General partnership liability by estoppel.

Back 39

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

Front 40

On the essay for general partnerships, always start with the ________, which is ________.

Back 40

general rule … general partners are liable for all partnership obligations, including co-partner’s torts.

Front 41

A limited partnership is _________.

Back 41

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

Front 42

A limited partnership is formed by __________.

Back 42

filing a limited partnership certificate that includes the names of all general partners with the state

Front 43

A general partner of an LP ______.

Back 43

is liable for all limited partnership obligations, but has the right to manage the business.

Front 44

A limited partner of an LP ___________.

Back 44

has limited liability. They are not liable for the limited partnership’s obligations. In CA and most states, limited partner may not manage the business without forfeiting their limited liability status.

Front 45

A registered limited liability partnership is formed by …

Back 45

Registering with the state, by filing a statement of qualification plus annual reports

Front 46

In a registered limited liability partnership (RLLP), what is the liability of partners?

Back 46

no partner is liable for the debts and obligations of the partnership, not even general partners (but partners are always liable for their own torts)

Front 47

What was the original purpose of a limited liability company?

Back 47

to give to owners, who are called members, the same limited liability as shareholders of a corporations, plus the benefits of partnership taxation

Front 48

How is a limited liability company formed?

Back 48

file articles of organization and adopt an operating agreement to become a company, not a corporation

Front 49

What are owners' liabilities in an LLC?

Back 49

Owners (who are called members) are not liable for debts and obligations of the company itself

Front 50

LLCs must take on two of these three characteristics of partnerships:

Back 50

(1) Members control, but articles may delegate control to managers, (2) limited liquidity (member interests are not freely transferable, (3) limited life (events of dissolution)

Front 51

LLCS =

Back 51

limited liability + limited liquidity + limited life + limited tax

Front 52

General partners are _____________ of each other and of the ____________.

Back 52

fiduciaries … partnership

Front 53

Duty of loyalty for general partners means:

Back 53

GPs may not engage in (1) self-dealing, (2) usurping of partnership opportunities, and (3) making of secret profits at the expense of the partnership

Front 54

What remedy does a partnership have against a general partner who breaches duty of loyalty?

Back 54

Action for accounting - partnership may recover losses caused by a breach, and may disgorge profits made by the breaching partner.

Front 55

Partners' rights in partnership property

Back 55

Specific partnership assets (land, leases, equipment) which are owned only by partnership, and therefore no individual partner may transfer these assets without partnership authority; Share of profits and surplus is personal property owned as such by individual partner, and therefore may be transferred by individual partner to 3d party; share in management - asset owned only by the partnership itself, and therefore may not be transferred by individual partners to 3d party (e.g., right to vote)

Front 56

In a conflict between specific partnership assets and personal property, the test is _________.

Back 56

whose money was used to buy the property? If personal money, then personal property; if partnership money, then partnership property.

Front 57

Default, gap-filling rules cover ______, ______, and ______.

Back 57

management, salary, and partner’s share of profits and losses

Front 58

____________, each partner is entitled to _____________ control.

Back 58

Absent an agreement… equal.

Front 59

____________, partners get ________ salary - exception: ____________.

Back 59

Absent an agreement … no salary … Ps get compensation for helping to wind up the partnership business.

Front 60

____________, profits are shared __________.

Back 60

Absent an agreement … equally.

Front 61

____________, losses are shared __________.

Back 61

Absent an agreement … like profits

Front 62

Partnership dissolution - default rule:

Back 62

without an agreement that specifies events that will dissolve the partnership, dissolution occurs automatically upon notice of express will of one general partner to dissociate.

Front 63

___________ means the real end of a partnership

Back 63

Termination

Front 64

What is winding up of a partnership?

Back 64

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

Front 65

What is a Partnership's liability for winding up old business?

Back 65

Partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business with existing creditors

Front 66

What is a partnership's liability for winding up new business?

Back 66

Partnership and therefore its individual general partners retain liability on new business transactions until notice of dissolution is given to creditors, or until 90 days after filing “statement of dissolution” with state.

Front 67

What is the priority of distribution on partnership dissolution?

Back 67

Creditors, capital contributions by partners, profits and surplus (If any)

Front 68

Which creditors must be paid?

Back 68

Outside, non-partner trade creditors plus all partners who have loaned money to the partnership and have become creditors thereby

Front 69

What is a partnership's obligation to repay capital contributions?

Back 69

A partnership is liable to its own partners for the full repayment of their capital contributions

Front 70

How should a partnership distribute profits and surplus, if any, on dissolution.

Back 70

Absent agreement, profits and surplus are shared equally

Front 71

What is the basic rule for partnership's obligations to partners on dissolution?

Back 71

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

Front 72

Principal is liable to third parties for agent's torts under the theory of…

Back 72

respondeat superior.

Front 73

Principal will be liable for torts committed by agent if…

Back 73

assent, benefit, control + scope

Front 74

Principal usually doesn't have enough control over ______ and ________ to be liable.

Back 74

sub-agents and borrowed agents