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48 Cards in this Set
- Front
- Back
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Agency Relationship
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Created when one person (AGENT) consents to act on behalf of, and subject to the control of, another person (PRINCIPAL)
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Outline of Agency Law
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(1) Does an agency relationship exist?
(2) If so, what duties run from P to A, and from A to P? (3) If so, to what extent can A bind P to T in contract or tort? |
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Knowledge of Agency Relationship
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IRRELEVANT!
If two parties are acting in a consensual relationship where one acts on behalf of, and subject to, the control of the other, then they are Principal and Agent EVEN IF THEY DON'T REALIZE IT **No requirement to file any document **No consideration or writing req'd. EXCEPT: If the agency falls within the Statute of Frauds [in MS, it cannot be performed in 15 mos--the agreement must be in writing] |
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Equal Dignities Rule
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Rule that if an agent is going to enter into contracts on behalf of the P that would be within the statute of frauds, the agency agreement must be in writing as well.
DOES NOT APPLY IN MS! |
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Agency Termination
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Given the potential for liability and vulnerability of a Principal in an agency relationship, the law makes an agency relationship an at-will agreement.
**NO need to prove cause or anything else for the Principal to terminate an agency. |
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Termination of Agency: Contract Claims
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If the agency is terminated, an agent may still have a contract claim against their principal
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Termination of Agency: Third Party Rights
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3rd party who have dealt with the agent before termination fo the agency may still rely on that agency until they receive reasonable notice.
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Duties of Agent to Principal
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The delegation of authority by a Principal to an Agent brings with it fiduciary duties
(1) Duty of Care (2) Duty of Loyalty |
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Duty of Care
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An A owes their P the duty to act in an agency with the care adn diligence of a reasonable person
**OR if that agent is an expert in the area of the agency, teh A must act with the care an diligence of a reasonable expert **The duty of care does not require perfect performance. A is liable for damages to the P attributable to the failure to live up to the duty of care. |
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Duty of Loyalty
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Agent must put the interests of their P FIRST in the area of their agency. Agent must not put his own interests first.
"punctillo of highest honor" **May not compete with P nor may he take a business opportunity from the P if they are within the area of the agency. Remedy: Recission or Restitution for P |
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Duties of Principal to Agent
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P owes clearly defined duties:
(1) Compensation (2) Indemnification (3) Reimbursement |
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Compensation
(P's Duty) |
P must pay A for the value of services unless A agrees to act gratuitously.
**The amount of the compensation is measured by contract principles, unless agent mitigates damages. |
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Indemnification
(P's Duty) |
Unless agreed to the contrary, P must indeminify the A for all liabilities incurred in reasonably performing duties on behalf of P
EXCEPTION: Loss solely the fault of A and Illegality on A's part |
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Reimbursement
(P's Duty) |
Unless agreed to the contrary, P must reimburse A for the reasonable expenses incurred by A necessary to perform the duties of A.
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Vicarious Liability of P
(Torts) |
Depends on the type of AGENT involved
(1) Independent Contractor OR (2) Servants |
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Servant
(Vicarious Liability) |
An A where P not only sets the objective of the agnecy but also controls means of A's performance.
Most employer/employee relationships are master/servant relationships (even part time employment) **P is generally liable for the torts of a servant under the doctrine of respondeat superior if the torts are within scope of agency. |
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Independent Contractors
(Vicarious Liability) |
An agent that is not a servant.
The P sets the objective but not the manner of the performance Ex) Attorney/Client **P generally not liable for torts of an independent contractor |
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Exceptions to Vicarious Liability
(Torts) |
(1) Intentional Torts: P normally not liable for A's intentional torts except where violence inherent part of the job OR natural result of business
(2) Frolic & Detour: frolic is where there is a substantial deviation from duties but a detour is just a small deviation. P will not be liable for frolic. |
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Vicarious Liability
(Contracts) |
P is liable for a contract made by their A if the agency as actual or apparent authority to make the contract.
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Actual Authority
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Authority A reasonably believes that A has from P based on words and conduct of P.
**May be implicit or explicit |
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Apparent Authority
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Authority that a 3rd Party reasonably believes an Agent has based on the words and conduct of the party.
**The focus of actual authority is on the agent's reasonable belief whereas the focus of apparent authority is on the 3rd party's reasonable belief. |
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Ratification
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Even where A does not have actual authority at the time of making the contract, the P may give actual authority to the A afterward by ratification
**the P knowingly accepted, either implicitly or explicitly, accepts the benefits of the contract. |
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P's Rights Against the 3rd Party
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If P is liable on the contract to the 3rd Party, then the 3rd Party is liable to P as well.
EXCEPTION: IF A did not disclose that he or she was acting for someone else |
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Undisclosed Principal
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The 3rd Party is not bound if the 3rd party can show fraudulent misrepresentation of P's identity and undue burden on 3rd party for performing contract
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Agent's Liability on the Contract
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If the P is DISCLOSED, A is NOT LIABLE on the contract to the 3rd party.
If P is UNDISCLOSED to 3rd party, A is liable on the contract to the 3rd Party, but the A has the right of reimbursement if acting with authority. |
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Partnership
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Two or more people who associate to carry on as co-owners of a business for profit.
**ANY legal person can be a partner. (joint venture is the same as partnership for bar exam purposes) |
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Formation of a Partnership
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No subjective intent required.
Must intend to do business for a profit. Agreement may be implied through conduct. **Sharing profits consitutes presumption of partnership unless the payments were recieved in payment of debt, salary, rent, etc. |
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Partnership Property
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Property is deemed to be partnership property:
(a) if titled in the name of the partnership (b) if the title indicates that hte partners hold in their capacity as partners (c) if acquired with partnership funds ***Not partnership property if it is held in the name of one or more partners and it was not acquired with partnership funds or it is held in the name of one or more partners with no mention of the partnership. **A partner is NOT a co-owner of partnership property. Partner's creditors may not reach partnership property to satisfy non-partnership debts of a partner |
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Partner's Interest in Partnership
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A partner's interest in the partnership consists of
(1) Management Interest (2) Monetary/Economic Interest **A judgment creditor of an individual partner may reach the partner's transferable interest in the firm to satisfy the judgment. |
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Transferability of Partnership Interest
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A partner's ECONOMIC interest in the firm is transferable.
**Partner MAY NOT transfer their management rights in the partnership. **MAY transfer their interest in the right to share profits & losses. |
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Assignability of Partnership Interest
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Partner's economic interests are assignable.
**The result is that the assignee receives the partner's economic interest but the assignee gets no rights in management. **Moreover, such an assignment does not dissolve the partnership. |
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Relations between Parties
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Absent an agreement to the contrary, all partners have equal voice in management of partnership.
**Matters within ordinary business can be decided by majority, but matters outside the ordinary course require the consent of all partners. |
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Partners' Fiduciary Duties to other Partners
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Partners owe the others the agency law duties of loyalty and care.
The duty of care is limited to a duty not to commit grossly negligent or reckless conduct, intentional misconduct, or knowing violation of the law. |
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Partners Compensation
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Absent an agreement to the contrary, a partner is entitld to NO compensation/salary
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Partners Indemnification
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Partnership must reimburse a partner for payments made reasonably within partnership business
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Partners Contribution
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Where on partner pays more than their share of a partnership debt, they are entitled to payment from the partnership of the amounts she paid above her share, plus interest.
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Partners' Rights Upon Dissolution
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The assets of the partnership are liquidated/sold. Then, the liabilities of the partnership are satisfied in the following order:
(1) Creditors, including partners who are creditors, must be paid before any partners receive anything (2) Partners get back their partner contributions (3) If money remains, it is profits that must be split evenly, or according to any agreements. (4) If there is not enough money to repay creditors and the capital contributions have not been repaid, the resultant loss must be divided among the partners. |
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Liability of the Partnership to 3rd Parties
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Each partner is an agent of the partnership for purpose of business and agency law applies unless partner had no authority to enter deal and 3rd party knew this.
**The emphasis in partnership is on the apparent authority of the partner dealing with 3rd parties (i.e. what authority a 3rd party would reasonably believe a partner has based upon being held out by the partnership as a partner) (1) Partnership agreement may limit the ability of a partner to bind the firm, but 3rd parties must know of this limitation (2) Partnership/Partners are liable for acts of partner acting w/o actual but with apparent authority Notice to partner=imputed to partnership |
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Liabilities of Partners to 3rd Parties
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**Partners are jointly and severally liable for all obligations of the partnerships.
**Each partner is personally liable, but the Plaintiff is only entitled to ONE recovery. **Partner who pays more than her pro rata share may receive contribution of other partners. If a person is admitted to an existing partnership, she has no personal liability for debts incurred before she joined. **Outgoing partner liable for obligations incurred 90 days after she has filed notice of dissociation with SOS |
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Partner Dissociation
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If a partner is dissociated and the partnership is not dissolved, the partnership must purchase the dissociated partner's interest at the greater of
(1) the partnership's liquidation value (2) the value of the business as a going concern |
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Events of Dissolution
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(1) If the partnership is at will (not for a definite time or purpose) then notice of intent to withdraw is enough
(2) If the partnership is a partnership for a definite time or for a definite undertaking, dissolution occurs (a) within 90 days of death, incapacity, wrongful dissociation if at least 1/2 remaining partners agree (b) express consent of partners (c) expiration of time/undertaking partnership was set up for. (3) The happening of event of dissolution defined in agreement |
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Winding Up
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**Partnership is bound by partner's act after dissolution if the act is appropriate for winding up the partnership.
**Also bound by a partner's post-dissolution acts where the party with whom the partner dealt had no knowledge of the dissolution. **IF a partner files a statement of dissolution with the SOS, 3rd parties will be deemd to have notice of the dissolution 90 days after statement is filed. |
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Partners Liquidation After Winding Up
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Assets are distributed in the following order:
(1) Creditors, including partners who have loaned the partnership money (2) Partners, for their capital contributions (3) Partners, for their share of the surplus and profits. |
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Exceptions that CANNOT be varied in a Partnership Agreement
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(1) Partners' access to partnership books and records
(2) Partners' fiduciary duties except as long as not unreasonable to do so. (3) Power of court to dispell a partner from a partnership (4) Rights of 3rd parties cannot be varied (5) Partner duty of good faith and fair dealing with partnership |
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Partnership by Estoppel
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If a person represents himself as being a partner in a partnership or consents to other persons representing him as a partner, he is liable to ap erson who has given credit on the basis of the representation.
**No duty to deny a false representation. In order to become a partner by estoppel, a person must actually consent to representation. **IF one or more partners holds out another person as a partner, both the partnership and partners who made representation may be liable for the acts of the person. |
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Limited Liability Partnerships (LLPs)
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**A partnership becomes LLP by filing notice with Secretary of State.
Partners in LLP are not liable for the obligations of the partnership or those of others. **Partnership name must contained LLP (Existing partnership may convert to an LLP in which case partners have no personal liability for debts after conversion) |
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Limited Partnerships
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To create, formalities are required.
If they are not met, a general partnership is formed. Must be at least one general partner and one limited partner. Formed by filing with SOS a certificate containing: (a) name of partnership + words LP (b) name/address of registered agent (c) name/address of general partner (d) latest date of dissolution |
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Liability of Limited Partners
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No liability for the obligations of the limited partnership as long as there is substantial compliance with the formalities of formation.
If there is NOT substantial compliance with the formalities, the partnership is general partnership and the purported limited partners are personally liable. EXCEPT (a) the limited partner is also a general partner; (b) the limited partner is in "control" of the partnership; or (c) the limited partner allows their name to be used in the partnership and a creditor had no knowledge that the limited partner was a limited partner BUT: a person who in good faith believes himsel to be a limited partner can avoid liability by either filing an appropriate certificate with SOS or filing a certificate giving notice of withdrawal from LP |
