Agency & Partnership

Front 1

Elements of Agency Relationship

Back 1

A manifestation of consent by one person (principal) to another (agent) that the other shall act on his behalf and subject to his control, and consent by the other so to act.

Front 2

Required Capacity to Form Relationship

Back 2

The principal must have capacity in order to appoint an agent, but an agent needs only minimal capacity, such that a minor may be an agent.

Front 3

Agency Requiring Writing

Back 3

Where authority is to last more than one year or the agent is authorized to sell land on behalf of the principal, the authority must be evidenced in a writing signed by the principal.

Front 4

Types of Principals

Back 4

Disclosed; Undisclosed; Partiall Disclosed. The type of agency is determined at the time the contract was formed.

Front 5

Disclosed Principal

Back 5

3rd party knows of agency relationship and has notice of the indentity of principal. Agent is not personally liable.

Front 6

Undisclosed

Back 6

3rd party has no knowledge of existence or identity of the principal. Agent is personally liable.

Front 7

Partially Disclosed

Back 7

3rd party knows of existence, but not indentity, of the principal. Agent is personally liable.

Front 8

Types of Agents

Back 8

General; Special; Subagent; Gratuitous

Front 9

General Agent

Back 9

Employed by principal to transact all business of a particular kind. The principal may not limit agent's authority unless restriction is known to the third party.

Front 10

Special Agent

Back 10

Employed by principal for a single transaction, or for specific but limited duties. A special agent cannot bind his principal beyond the terms of the specific grant of authority.

Front 11

Subagent

Back 11

Persons entitled to do work for the original agent. This creates a second agency. If the principal has allowed subagency, subagent has same power and responsibilities to the principal. If a subagent is appointed without authority, no agency relationship exists between the principal and subagent.

Front 12

Gratuitous Agent

Back 12

Agent who performs without compensation. Creates agency, as no consideration is required.

Front 13

Duties of Principal to Agent

Back 13

(1) Principal must compensate agent for services rendered, either agreed-upon amount or reasonable value.(2) Principal must indemnify and exonerate agent for any liability resulting from non-negligent and good-faith performance of duties. (3) Principal must reimburse agent for reasonable expenses. (4) Principal must cooperate with agent in performance of duties.(5) Principal must exercise due care towards agent. Duty exists for course of relationship.

Front 14

Agent's Remedies for Principal's Breach

Back 14

An agent may seek normal breach of contract remedies. An agent may also set off any money owed to him against monies collected on behalf of principal.

Front 15

Duties of Agent to Principal

Back 15

The agent owes the principal a duty of reasonable care and loyalty. The agent cannot engage in self-dealing. The agent cannot take business opportunities, unless principal gives consent.

Front 16

Duties of Subagent

Back 16

If appointed with authority, subagent owes both principal and agent the same duties of reasonable care and loyalty. If without authority, subagent only has duties towards the agent. In either case, only the agent has duty to compensate subagent.

Front 17

Principal's Remedies for Agent's Breach

Back 17

A principal may sue for damages resulting from breach of either duty. Any transaction resulting from breach of loyalty is voidable by the principal.

Front 18

Agent's Ability to Bind the Principal

Back 18

A principal is liable on contracts that the agent enteres into on the principal's behalf if the agent acted with authority of any kind (actual, apparent, or ratified).

Front 19

Actual Authority

Back 19

Actual authority is created by the manifestations of the principal to the agent, both express and implied. An agent has implied authority to perform any action incidental to the primary grant of authority.

Front 20

Apparent Authority

Back 20

An agent has apparent authority if the actions or communications between the principal and the third party lead that third party to reasonably believe the agent had authority.

Front 21

Agency by Estoppel

Back 21

A principal may be estopped from denying that a person had agency power if the principal allows the person to be in a position where it appears the person is acting as the principal's agent.

Front 22

Termination of Actual Authority

Back 22

Actual authority may be terminated at any time by either party. However, if the contract provided otherwise, the non-breaching party has an action for damages.

Front 23

Termination of Apparent Authority

Back 23

To terminate apparent authority, the principal must notify the third party of the termination of authority and retrieve any documents from the agent that may give rise to a belief of agency.

Front 24

Termination of Agency Couple with Interest

Back 24

If the agency is coupled with an interest, the agency may not be terminated by the principal. An interest exists when the agent has an interest in the subject matter of the agency.

Front 25

Termination by Operation of Law

Back 25

Death or incapacity of either party automatically terminates the agency, unless coupled with an interest or wher a durable power of attorney has been given. A durable power of attorney will terminate on the death of the principal.

Front 26

Ratification

Back 26

Ratification allows a principal to grant retroactive authority to an agent's prior unauthorized act. A principal may ratify a contract only if: (1) when the contract was made, the agent told the third party she was acting on behalf of a principal; (2) the principal agrees to accept the entire contract; and (3) the circumstances have not changed since the contract was made (e.g., still legal, third party has not withdrawn, etc.). In order to be effective, the principal must know of all material facts concerning th transaction.

Front 27

Delegation

Back 27

If authority given involves the agent's judgment, he cannot delegate his responsibilities absent emergency or explicit agreement.

Front 28

Respondeat Superior

Back 28

An employer is liable for the torts of his employees if the torts were committed within the scope of employment. A principal is generally not liable for the torts of an independent contract, unless the principal has delegated a nondelegable duty.

Front 29

Agent vs. Independent Contractor

Back 29

The critical factor in determining whether the tortfeasor is an employee or independent contractor is the degree of control the principal has over the manner in which the work was performed.

Front 30

Acts Within the Scope of Employment

Back 30

Generally, intentional torts are outside the scope of employment unless the employee performs a job where such torts are likely to arise (e.g., a bouncer), or the employer encourages or ratifies the tort. Negligent acts are within the scope of employment if the act was motivated by a desire to serve the employer. A minor deviation for person purposes (a detour) will not remove the employee from the scope of employment, but a major deviation (a frolic) will.

Front 31

Formation of a Partnership

Back 31

Creation of a partnership requires nothing more than an association of two or more persons to carry on as co-owners a business for profit. There are no formalities. An agreement to share profits raises a presumption of the intent to create a partnership.

Front 32

Authority of Partners

Back 32

Every partner is an agent of the partnership, and may bind the partnership when acting in the ordinary course of business. Acts outside the ordinary scope will not bind the partnership unless the partner is granted actual authority to perform.

Front 33

Notice to Partner

Back 33

Notice to any partner constitutes notice to the partnership.

Front 34

Liability of Partner

Back 34

Every partner is jointly and severally liable for all obligations of the partnership. Incoming partners are not personally liable for prior obligations. Retiring partners remain liable of obligations created prior to retirement.

Front 35

Partnership Property

Back 35

A partner does not have an ownership interest in specific items of partnership property. A partner has no right to assign specific items of partnership property to secure or satisfy a personal debt, but the partnership can assign such interest.

Front 36

Partner's Obligations to Each Other

Back 36

Partners stands in a fiduciary relationship with each other. Partners must deal fairly with each other and the partnership, refrain from competing with the partnership, disclose material information to their co-partners, and exercise partnership powers for the benefit of the partnership and not for themselves alone.

Front 37

Compensation of Partners

Back 37

A partner is not entitled to remuneration, except for reasonable compensation for services rendered in winding up.

Front 38

Profits and Losses

Back 38

Partners share losses in the same proportion as they share profits. At default, they share equally.

Front 39

Determining Partnership Property

Back 39

If a partnership uses property belonging to a partner, it may become partnership property. Intent controls, and courts will look to whether the property was acquired in the partner's or partnerships' name, whether it was acquired with partnership funds, and whether the property is closely related to the partnership's business in determining intent.

Front 40

Contribution and Indemnification

Back 40

A partner who incurs expenses on behalf of the partnership may have a right to indemnification from the partnership. Moreover, a partner who must pay more than his share of a judgment may seek contribution from his co-partners.

Front 41

Charging Lien (Creditors of Partners)

Back 41

A creditor cannot obtain the partner's interest in the firm, however a creditor may obtain a charging lien entitling the creditor to the partner's share of the partnership's profits.

Front 42

Effect of Partner Assigning Interest

Back 42

Generally, a partner's interest is freely assignable, giving the assignee rights to receive the partner's distributions, but the assignee does not have the right to participate in management.

Front 43

Dissolution

Back 43

Dissociation occurs when: (1) partnership has notice of partner’s express will to withdraw; (2) event agreed in agreement as causing dissociation; (3) partner’s expulsion pursuant to agreement; (4) partner’s expulsion by unanimous vote of other partners; (5) judicial determination; (6) partner becomes debtor in bankruptcy or executes assignment for benefit of creditors; (7) death; (8) appointment of guardian, committee, or conservator for partner.

Front 44

Power to Dissociate

Back 44

All partners have power to dissociate at any time, rightfully or wrongfully, by expressly stating intention to do so.

Front 45

Wrongful Dissolution

Back 45

Partner’s action is wrongful if it is in breach of express provision of partnership agreement.

Front 46

Continuation of Partnership

Back 46

Following dissolution, any partner may waive the right to have the partnerships business wound up and terminated.

Front 47

Distribution of Assets on Winding Up

Back 47

Assets are divided in the folllowing order: (1) to outside creditors; (2) to partners, first for any advances, then return of capital contributions, and finally for profits.