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47 Cards in this Set

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When is a Principal (P) liable to a third party (T) in contract?
A P bcomes liable to T through the actions of his agent (A) if A & P both consent, and A is subject to P's control, and A has authority from P for the action giving rise to the claim. P must have contractual capacity, but A does not. Agency law requires no writing, but the SOF or another law may.
When does an A have actual authority to act on P's behalf?
When the A has express actual authority -- P expressly tells A to act on P's behalf, even if P is mistaken about the agent or the subject matter of the K.

When A has implied authority -- P's conduct lead A to believe A has authority to act for P.
How can actual authority terminate?
1. After a specified time, a reasonable time, or a specified event occurs

2. By change of circumstances (e.g.subject matter destroyed,).

3. When A acquires an interest adverse to P's (e.g. joiningP's competitor)

4. When A says so; when P says so [if power is not irrevocable "coupled with an interest"]

5. on death, incapacity, or bankruptcy, unless power is irrevocable [coupled with an interest]

* Agents rigth to share in proceeds of sale is not n interest in the subject matter of the agency.
When is revocation of an agency effective?
Revocation of agency is effective upon receipt.
When may an agent delegate his authority?
A may delegate authority as long as P consents (express consent or implied through circumstances)
When does an agent who lacks actual authority have Apparent authority to act for the P?
When the P leads a third party to mistakenly believe that the A has authority to act on P's behalf.
What is the effect of P's silence when A represents he has the authority to act for P in P's presence?
The P's silence in the face of the A's statement of authority can create apparent authority.
Does apparent authority linger after actual authority terminates?
Apparent authority can linger after actual authority has been terminated. One example, A buys supplies and P pays for them under actual authority. P terminates Actual authority, but A buys supplies again. Under apparent authority, P is bound to pay for the supplies because A had apparent authority.
How is apparent authority terminated?
While destroying actual authority, all the principal must do is tell agent "don't do it again." However, to destroy apparent authority, P must inform ALL third parties that agent has no authority.
How does a P ratify a contract that A did not have actual authority to enter into for P.
Even if A had no authority, P can ratify by:
1. expressly affirming the K
2. Accepting the benefit of the K, or
3. Suing on the K,

If the P had knowledge of all material facts, accepts the entire transaction, and has contractual capacity at the time of ratification and time of original K (ratification is retroactive)
Can ratification take place when there is a later bona fide purchaser?
Because ratification is retoactive, the P may not ratify a K that cuts off the intervening rights of a subsequent bona fide purchaser (page 4 of lecture handout example)
What is "adoption" of a K by a P?
Where an A enters into a K w/out actual authority of the P, the P may adopt the contract, but the adoption is not retroactive, and both the P and the A are liable on the contract, unless there is a novation.
What duties does the A owe the P?
1. Duty of loyalty (must disclose all material facts and get permission before benefitting from the Agency agreement, or before engaging in competition w/ P.

2. Duty of reasonable care

3. Duty of obedience (must follow P's reasonable instructions)
What duties does the P owe the agent?
P must
1. compensate (unless gratuitous)
2. reimburse for costs incurred for the principal, and
3. indemnify A
What duties does a P owe a third party and vice versa? [where the A had authority to act]
the principal is always liable to the third party.

The third party is always liable to a disclosed P or partially disclosed P.

The third party is even liable to an undisclosed P unless:
a. Holding T liable would unduly burden T

b. P fraudulently concealed her identity, or

c. T was bargaining for A's personal skills /reputation
When is A liable to T, and vice versa?
T is not liable to A unless A's power is coupled w/ an interest.

A is not liable to T unless:
1. P is undisclosed or partially disclosed, or A breached her warranty of authority by claiming she hd authority where she didn't.
When is the P liable in tort to a 3rd party (vicarious liability)
Where a tort is committed by a servant/employee acting w/in the scope of her employment, the master and servant are jointly and severally liable to the injured party.
What factors point to S (rather than Independent Contractor)?
***1. Employer has the right to control perormance, even if not exercised.
2. Employer supplies tools & workplace
3. Employment is long term
4. Little special skill required.
5. The work is part of the regular business of employer
6. pmt is made in regular intervals (not by the job).
When is the Servant (S) acting w/in the scope of her employment such that Master (M) is jointly and severally liable for S's tort(s)?
1. If S was doing what S was hired to do, the tort was w/in scope of employment

2. If S was deviating from normal tasks:
a. A minor deviation or "detour" is usually w/in scope
b. A substantial deviation, or "frolic" is usually outside the scope of employment.
When is an M liable for its own negligence when S is outside of the scope of employment?
M is directly liable for its own negligence if M fails to train or supervise employees or fails to check an employee's criminal or job history.
What is the definition of partnership?
A partnership is an association of 2 or more persons carrying on as coowners a business for profit.
What factors are considered to determine who is a partner?
1. Intent to form a P
2. Control: right to control my be enough even if control is never excercised.
3. Capital -- a capital contribution is NOT required to be a partner
4. Profit -- a person receiving a share of profits is presumed to be a partner, but this presumption may be rebutted. Profits as wages, rent, repayment of a debt or interest on a loan does not raise the presumption, nor does sharing in gross receipts.
When are parties liable under partnership by estoppel?
Where a person holds herself out to be partners with another, if a third party relies on such representation, she and the third party may be liable under the partnership by estoppel doctrine.
** partnership by estoppel only applies to K actions.
What factors are used to determine whether property is partnership property?
Whether property is owned by the partnership is determined by intent. Some factors used to consider:
1. Who furnished the funds used to buy the property
2. How the property was used.
3. Who paid for repairs, maintenance, and insurance,
4. Any pertinent agreement, and
5 How title is take [not dispositive, since title to parnership property can be held in anyone's name]
What rights do partners have in partnership property?
A partner has a right to use partnership property for partnership purposes, unless consent is given by the other partners.
What rights does the partnership have in partnership property?
The partnership's rights in partnership property are unrestricted.
What is a partner's interest in the partnership?
1. The right to receive a share of the profits.

2. A partner's interest in the partnership may be attached by her judgment creditor, assigned, devised, or transferred, but that just redirects profits, it does not confer management right or other attribute of ownership.
How are profits and losses shared in a partnership?
Unless otherwise agreed, profits are shared equally by the partners. UOA, losses are shared in proportion to profits.
Who has the management rights in the partnership?
Unless otherwise agreed, a majority in numbers will rule the partnership's decisions.
What is a partner-lender entitled to upon loaning money to the partnership?
A partner lending money to the partnership has a right to be paid back with interest.
What duties does the partner owe the partnership?
Every partner is a fiduciary who owes the partnership a duty of care, a duty of loyalty, and a duty to render full information about the partnership on demand.
How are new partners admitted to the partnership?
Unless otherwise agreed, admission of a new partner to the partnership requires unanimous consent.
What is the liability of a new partner for debts incurred before his admission to the partnership?
The new partner is liable for the partnership's previous debts, but can ony lose his interest in the partnership (no personal liability beyond that amount).
What is the liability of an outgoing partner for the partnership's outstanding debts?
The retiring or leaving partner continues to be liable for outstanding obligations unless expressly or impliedly released by a particular creditor.
What is the rule for relations between partners and third parties?
Agency principles are applied; the partnership is the P, a partner is the Agent of the partnership.
How is actual Authority created in the partners?

...Apparent authority?
Acutal Authority: 1 The partnership agreement
2. Majority vote of the partners, or
3. Statute -- (this may be negated by agreement of partners)

Apparent Authority: 1. A partner's title
2. The way the partnership has conducted business in the past, or
3. The way similar firms in the area conduct business.
Who is liable for partnership obligations?
1. The partnership itself is liable for conduct of partners w/in the scope of the partnership
2.Partners are jointly liable with the partnership for K claims; jointly and severally liable for tort claims.

For K claims:

Partners are jointly liable
What is the special Ohio rule from recovering from individual partners?
While partners are jointly liable, Ohio case law requires a judgment creditor to exhaust partnership resources before going after partners for K'al claims. (check with lecturer on this)
What are the causes of partnership dissolution?
1. End of a definite term
2. Accomplishment of a particular undertaking if pship is for ltd purpose.
3. A partner's express will or withdrawal (may be liable for breach of K)
4. Expulsion of partner pursuant to partnership agreement.
5. Operation of law
-death/bankruptcy of any p'ner
-on the bankruptcy of the p'ship
-If p'ship becomes unlawful

6. Entry of a judicial decree.
Who can wind up the dissolved p'ships ongoing affairs?
A partner who has not wrongfully dissolved can wind up affairs.
What happens with new business for the dissolved partnership?
1. A partner may continue to have apparent authority to bind the p'ship after dissolution even if he's not winding up the p'ship affairs.

2. p'ship can avoid liability by providing notice of dissolution to potential creditors who were unaware of the dissolution.
What type of notice is required to potential creditors upon dissolution for the p'ship to avoid liability?
1. Prior creditors -- personal notice
2. Creditors knowing of p'ship before dissolution -- newspaper notice.
3. Those who didn't know of p'ship before dissolution -- no notice at all.
What is the order of distribution of p'ship assets after dissolution?
1. Third-party creditors
2. to partners other than for capital/profits.
3. To partners for capital
4. To partners for profits
Who has priority when both the partner and partnership are insolvent?
Partnership creditors have priority (over partners) in partnership assets

Under Ohio P'ship law, separate (partner's individual creditors) have priority on separate property.

Under Fed. bankruptcy law, both sets of creditors have equal claims on the partner's separate property.
What are the requirements for continuing partnership business after dissolution?
1. All partners who have not wrongfully dissolved must consent.
2. creditors of dissolved p'ship automatically become creditors of the continuing p'ship
3. Continuing partners must compensate the withdrawing partner, either the amt they agree to or if no agreement, the withdrawing p'er gets his interest in the p'ship on the date of dissolution, plus a pro rata share of profits.
What does a partner who wrongfully dissolves get?
A partner who wrongfully dissolves is not entitled to compensation for goodwill (ie, p'ship's reputation) and is liable to other p'ers for breach of K.
What is the test for agency?
Agency is the fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.
(2) The one for whom action is to be taken is the principal.
(3) The one who is to act is the agent.