Lecture 39 - Conflicts Of Laws, Agency And Partnership

Front 1

When do conflicts of interest arise?

Back 1

People and goods routinely cross state borders. Litigation arising from these interstate transactions may involve the conflicting laws of 2 states. Conflict of laws deals with what law the NY court should use when a claim involves parties from different states or in claims between 2 New Yorkers where the claim arose in State X.

Front 2

What happens if another state’s statute or case law has to be introduced in a NY state or federal court?

Back 2

If another state’s statute or case law has to be introduced in a NY state or federal court, then those court’s “must” take judicial notice of the law.

Front 3

What are conflict cases?

Back 3

Conflict cases also arise in lawsuits commenced in the federal court, or commenced in the state court and then removed in the federal court on basis of diversity jurisdiction. Then federal court has to decide which state’s law is to govern that controversy.

Front 4

What is covered under the Erie doctrine’s “outcome determinative test”?

Back 4

Federal courts apply the conflict of laws rules of that state where the federal court is sitting.

Front 5

In tort cases where a conflict arises between the laws of 2 states, what does NY do?

Back 5

NY uses the "government interest analysis test" to determine which state has the greatest interest in having its law resolve that issue in the litigation.

Front 6

What occurs in breach of contract cases?

Back 6

In breach of contract cases, NY uses the "center of gravity" theory by grouping the contacts of each conflicting state and then applying the law of the state that has the most significant contacts with that contract case.

Front 7

In tort cases, NY distinguishes between laws that are what 2 things?

Back 7

1. regulate conduct to prevent injuries from occurring (standards of care or rules of the road) and
2. laws that assign, limit, or prohibit liability after the tort has occurred. For example, POPE vicarious liability or charitable immunity.

Front 8

If 2 states' conduct regulating laws are in conflict, then which state imposes law?

Back 8

The law of the state where the tort occurred almost always applies because that state has the greatest governmental interest in regulating tortious conduct within its borders. For example, when the conduct occurs in the defendant's domicile and he would not be liable under that state's law, then he should not be liable because the law of the plaintiff's domicile would render him liable. Conversely, when a plaintiff is injured in his own domicile, and the law of his state would permit him to recover, then the defendant should not be allowed to interpose his own state's law as a defense.

Front 9

What happens if the conflict of laws involve a post-accident loss?

Back 9

If however, the conflict of laws involves a post-accident loss allocating rule and the parties (plaintiff and defendant) have a common domicile, then the law of the common domicile will be applied.

Front 10

What happens where the parties are domiciled in different states?

Back 10

Where the parties are domiciled in different states, then the NY court almost always apply the loss allocating rules of the state where the tort occurred unless displacing that state's law would advance the law of another state having a greater interest in the case and the state where the accident occurred had no real interest in applying its law in that case.

Front 11

Example: H and W domiciled in State X were involved in an accident and W was injured due to the negligence of H. State X has an intrafamily immunity statute, but NY has abolished it. If W commences a suit against H in the NY Supreme Court, what law should the NY court apply?

Back 11

In conflict of law cases, matters of civil procedure generally are governed by the SUPERB law of the forum where the case is tried.

Front 12

Explain what SUPERB is

Back 12

S - service of process (CID'S MAIL)
U - issues of untimely claims (s/l), but where a claim arises outside of NY and a non-resident plaintiff comes into NY to sue, then the NY court will borrow the s/l of State X or will use the NY s/l, whichever period is shorter. (LEAP DAD'S CAT).
P - pleadings
E - rules of evidence
R - provisional remedies (LIAR)
B - burdens of proof
In W's action against H, the NY court will apply its own SUPERB NY law.

Front 13

NY courts' choice of substantive tort law that regulates safety and conduct within the state is governed by what law?

Back 13

The law of the state where the plaintiff's injury occurred. Thus, to determine if H's conduct was negligent, the court would apply NY law because NY is where W's injury occurred.

Front 14

What happens when the conflict involves post-accident remedial rules?

Back 14

When the conflict involves post-accident remedial rules, which assign, prohibit, limit, cancel, or allocate financial losses, then the law of the jurisdiction where the tort occurred is less important. When the conflict of laws involves issues of who bears the burden of the financial loss resulting from the tort, NY applies a governmental "interest analysis" test by applying the rules

Front 15

What two rules are being applied to when the conflict involves post-accident remedial rules?

Back 15

(a) When the parties do not share a common domicile, then NY generally applies the loss allocating law of the state where the accident occurred or
(b) When the parties share a common domicile, then NY applies the loss allocating law of that common domicile.
Thus, the NY court would apply State X's intrafamily immunity, preventing W from recovering from H because State X has the paramount interest in having its law applied to its domiciles. Displacing State X's law would not promote or advance NY's interest which is for the protection of NY family members and not for the protection of State X family members.

Front 16

The following are examples of what?

Back 16

1. Charitable immunity.
2. A state law limiting personal injury and wrongful death recoveries for non-economic loss (pain and suffering) to $200,000.
3. NY's law abolishing parental liability for a parent's negligent supervision of a child.
4. NY's no fault law on accidents occurring within NY. For example, CT and NJ allow recovery for non-economic losses without the plaintiff having to show "a serious injury". Thus, if driver and passenger come in from NJ and are involved in a NY accident, then the NY passenger can sue the NY driver in the NY court and because they share a similar domicile, NJ and not NY's law will apply. Since no fault involves a loss limiting rule and plaintiff and defendant share a common domicile, then the Court will apply NJ’s law and allow plaintiff to recover even though plaintiff hasn’t suffered a serious injury.

5. Contributory negligence or comparative negligence as well as joint and several liability for joint tortfeasors and any limitations on this doctrine for non-economic damages except for ARM WIN claims

Front 17

A contract including a UCC Sale of Goods contract can expressly designate what?

Back 17

Which law is to be applied in the event of litigation provided that contract has a reasonable connection with that state.

Front 18

What is special in NY on non-consumer contracts of $250,000 or more?

Back 18

The choice of state law does not have to be reasonably related to the contract and the NY court must enforce that choice of law clause.

Front 19

In the absence of an express choice of law clause contained in the contract, the NY court applies the "grouping of contacts" theory to establish which state has the most significant contact with a contractual transaction and with the contracting parties. Here, the court applies the SPEND test. Explain SPEND.

Back 19

S - the state where the subject matter of the contract was located
P - the state where the contract was to be performed
E - the state where the contract was executed
N - the state where the contract was negotiated
D - the domiciles of the contracting parties

Front 20

Liability insurance contracts are governed by what law?

Back 20

The law of the state in which the risk insured is located.

Front 21

To encourage sophisticated business people to choose NY as an international forum for resolving disputes, the GOL provides that in any non-consumer contract involving at least $1 mill and where the contract consists of what 3 things?

Back 21

1. consents (A SCAM) to MOP jurisdiction in NY and
2. selects NY as the place of trial and
3. expressly provides a NY choice of law clause, then (a) the NY court cannot invoke forum non conveniens and (b) the court must apply NY law without considering the SPEND factors and without applying any conflict of law analysis.

Front 22

The effectiveness of a transfer of an interest in real property is always governed by what law?

Back 22

The law of the state where the realty is located regardless of whether the transfer is by will, intestacy, by a sale ($), or by an AID gift.

Front 23

On gifts of personal property, where should you look?

Back 23

Look to the state where the personal property is located where the gift was made. That state has the most significant interest in having its law governed. The effectiveness of an inter vivos transfer.

Front 24

The effectiveness of a testamentary transfer in a will of personal property located anywhere or a testamentary transfer of NY real property is determined by what?

Back 24

The NY surrogate on whether the decedent's will was valid according to the laws of SWEDEN.

Front 25

To determine the validity of intestate transfers of personal property, where should you look?

Back 25

Look to the law of intestacy of the decedent's domicile at the time of death. To determine intestate rights to real property owned by the decedent, look to the intestacy laws where the realty was located.

Front 26

Where does the agency relationship arise?

Back 26

The agency relationship arises when a principal agrees to allow an agent to bind the principal to a contract that was negotiated and executed by the agent. An agent is distinguishable from a mere employee who lacks the authority to ind the principal to any contract. An employee merely "serves" an employer (a servant) whereas an agent acts for and can bind the principal to a contract.

Front 27

Because the agent is a fiduciary makes her bound to what?

Back 27

She is bound at all times to exercise the utmost good faith and loyalty to the principal.

Front 28

An agent’s NY tortious conduct, transactions of business, or an agent’s activities involving NY real estate give rise to what?

Back 28

Personal jurisdiction over a non-resident principal.

Front 29

Under the doctrine of respondeat superior, if an agent's tortious conduct is closely connected with what the agent is employed to do (in furtherance of and within the scope of the principal's business), then the agent's tortious conduct imposes what type of liability?

Back 29

POPE vicarious liability on the principal.

Front 30

When do agent or employees activities fall within scope of employment?

Back 30

An agent or employee's activities fall within "the scope of employment" when the purpose of performing those activities is to further the employer's interest or to carry out the duties incumbent upon the agent or employee in furthering the employer's business.

Front 31

What is a principle liable for?

Back 31

A principal is liable for the SIR M fraudulent statements of the agent or the employee committed in furtherance and within the scope of the agency.

Front 32

If an injured plaintiff can prove the employer (or the principal) failed to exercise reasonable care in hiring, retaining, or controlling the agent or the employee which failure created a foreseeable unreasonable risk of harm to others then the principal or employer's negligence renders him liable for what?

Back 32

Negligently hiring or retaining the unfit employee.

Front 33

Is liability vicarious?

Back 33

This liability is not vicarious and is separate and distinct from respondeat superior liability.

Front 34

What is the agency relationship?

Back 34

The agency relationship is a contract and may be created impliedly by estoppel of expressly (in a signed writing).

Front 35

By the express terms in the agency contract, if it is not capable of full performance and completion within one year (a 2 year agency contract), then to be binding it must be what?

Back 35

Be in writing and signed by the party to be charged with its breach (the defendant).

Front 36

If the transaction involves the transfer of an interest in real property on behalf of the principal then except for a lease of one year or less, A's authority is what?

Back 36

To bind the principal must be in writing signed by the principal (usually in a signed power of attorney). A principal is bound by any notice that was given to her agent, and all facts that were known by the agent, even though this information was never conveyed to the agent by the principal. It is the agent’s duty to make such disclosures and the law presumes the agent discharged this duty.

Front 37

An agent has 2 types of actual authority, explain the first one.

Back 37

1. express authority conferred orally or in writing by the principal
When a third party deals with agent, she does so at her peril and she must make an effort to discuss the scope of the agent’s actual authority and whether that authority has been revoked by the principal.

Front 38

Under expressed authority, what is Power of Attorney (POA)?

Back 38

Express authority is frequently created in a POA. A NY POA must not only be signed by the principal, but it now must also be signed by the agent and both signatures must be acknowledged like a deed by a notary.

Front 39

Under expressed authority, what makes a POA effective?

Back 39

The P and the A do not have to sign together, but the POA is not effective until signed by both.

Front 40

Under expressed authority, how is the agent’s accountability ensured?

Back 40

To ensure the agent's accountability, the POA may designate a "monitor" to compel the agent to produce the records for any transaction for the monitor to review.

Front 41

Under expressed authority, what does the new 7 page POA limit?

Back 41

The new 7 page POA limits the agent's authority to make gives up to only $500 per year per donee. In order for a POA to authorize the agent to make larger gifts including gifts to the agent herself, a four page gift rider is required and the principal's signature must be notarized as well as witnessed by 2 disinterested witnesses, one of whom can be the notary.

Front 42

Under expressed authority, what occurs even if this broad gift-giving power is given to the agent allowing pre-death transfers to be made by the agent to herself?

Back 42

Even if this broad gift-giving power is given to the agent allowing pre-death transfers to be made by the agent to herself, such a transaction creates a presumption impropriety and self-dealing requiring the agent to ultimately prove that such AID gifts were made in the principal's best interest.

Front 43

Under expressed authority, what is a revocation of a NY POA?

Back 43

A revocation of a NY POA is not effective against any 3rd party who received a copy of the POA until actual notice o such revocation is received by the 3rd party.

Front 44

Under expressed authority, what must be done to effectively revoke POA?

Back 44

To effectively revoke a POA where the agent is authorized to effect an interest in real property (e.g. self the principal's realty), then the principal must also record the revocation in the property's chain of title.

Front 45

Under expressed authority, what happens if the POA is the principal’s spouse?

Back 45

If the appointed POA agent is the principal's spouse, then a subsequent DADS decree automatically revokes the POA by operation of law (it's a TRIP JAW document).

Front 46

Under expressed authority, what happens to POA under a principal’s death?

Back 46

A principal's death also revokes a POA by operation of law.

Front 47

An agent has 2 types of actual authority, explain the second one.

Back 47

2. Implied authority, which is inferred from the express authority given to the agent. It includes the incidental, customary, and necessary authority that ordinarily would be given to carry out the express authority. Where the agent is given the express authority to manage the principal's business (the manager), then she has implied authority to hire employees, accountants, or lawyers, as well as to rent space or purchase or sell merchandise in the ordinary course of that business and even to borrow money from a bank.
Express limitations imposed by P on the agent's implied authority are not binding on 3rd persons dealing with the agent unless they had actual knowledge of the limitation.

Front 48

Under implied authority, an attorney has implied authority where?

Back 48

An attorney has implied authority to settle a client's claim IN COURT. However, express authority given by a client to negotiate an out of court settlement does not constitute implied authority for the attorney to enter into a binding settlement agreement without the client's express authority.

Front 49

Under implied authority, where does apparent (aka ostensible) authority arise?

Back 49

Apparent (aka ostensible) authority arises by law where the PRINCIPAL's words or conduct are communicated to a 3rd person creating the appearance of an agency relationship and a 3rd person reasonably relies upon the apparent authority of the agent. However, an agent's own words cannot endow herself with apparent authority. It must be the principal who created the appearance of authority. For example, the principal's manifestations may be made directly to the 3rd person or made to the community by a sign or advertisement. Frequently, when an employer hires an independent contractor, but creates the appearance that the independent contractor is acting as the employer's authorized agent, then this gives rise to an agency by apparent authority.

Front 50

Under implied authority, where a principal negligently or intentionally allows another to hold himself out as the principal's agent, then if a third party relies on that appearance of authority, the principal is not allowed what?

Back 50

Will not be allowed to deny the agency's existence under the doctrine of agency by estoppel.

Front 51

What does an Independent Contractors (IC) agree to and how is it different than an employee or an agent?

Back 51

An IC agrees to perform services, but unlike an employee or an agent, the IC is not controlled by the employer and is not subject to control in the performance of that undertaking.

Front 52

The employer of an IC is not vicariously liable for the IC's torts except in what 4 instances?

Back 52

1. the employer took control of the contractor's performance
2. the work delegated to the IC endangered BIP.
B - business invitees (e.g. where an IC negligently maintained a store's elevator, escalator, or automatic door opener
I - it was inherently dangerous (e.g. demolition work or the use of dynamite)
P - the public way was endangered (e.g. work done on the exterior of a building and an object falls onto the sidewalk injuring the plaintiff or an IC snow plow operator pushes snow out onto the road creating a hazardous condition)
3. the employer negligently hired or retained an unqualified or careless contractor or
4. the task involved a non-delegable duty. For example
(a) the non-delegable duty of a NY realty owner or a general contractor on a construction site to provide construction workers with a CRAPED safe place to work even though it exercised no control over the subcontractor whose negligence injured a construction worker or
(b) a lawyer's duty to have process properly and timely served (CID's MAIL)

Front 53

What is an Agent's Liability?

Back 53

An agent whose relationship is fully disclosed is not personally liable for agency contracts entered into on the principal's behalf except when the agency TOUTS^2 her own activity.

Front 54

Explain the first T from TOUTS^2.

Back 54

T - an agent who acts tortiously is personally liable to those injured and if the blameless principal is vicariously liable for the POPE agent's tortious conduct, then the principal as a claim against the agent for indemnification.

Front 55

Explain the O from TOUTS^2.

Back 55

O - an agent acted outside her authority by the fact she was not given express or implied authority to enter the contract, which gives rise to the claim by a third party with whom the agent contracted for breach of the implied warranty of authority. Here, the reason the agent is liable in damages is because the party with whom the agent dealt has no claim against the principal.

Front 56

Explain the U from TOUTS^2.

Back 56

U - the agent acted on behalf of
(1) an undisclosed principal or
(2) an unnamed principal (aka a partially disclosed principal) Essay 2, February 2014.
Where a principal prefers to remain unknown to 3rd parties, then the agent for that undisclosed or unnamed principal becomes personally liable on those contracts and when the principal's identity becomes known (at the EBT), then the principal can be added as a named party in the lawsuit and the plaintiff can recover a judgment against both P and A.

Front 57

Explain the second T from TOUTS^2.

Back 57

T - the agent served 2 principals without full disclosure and the informed consent of both.

Front 58

Explain the first S from TOUTS^2.

Back 58

S - self-dealing by a "faithless agent" with the principal's business opportunities.

Front 59

Explain the second S from TOUTS^2.

Back 59

S - a NY attorney who orally or in writing orders a stenographic copy of an EBT or a trial transcript becomes personally liable on that bill if it is not paid by the client unless the lawyer disclaimed that liability in writing when ordering the transcript.

Front 60

An agent owes a high degree of loyalty to the principal and cannot do what 6 things?

Back 60

1. act adversely to the principal's interest
2. compete with the principal's business
3. misappropriate a business opportunity that first should have been offered to the principal
4. engage in self-dealing by buying from or selling to the principal without full disclosure to the principal.
5. simultaneously serving another principal without full disclosure and the consent from both.
6. Accept any benefit from a 3rd person.

Front 61

What happens if the agent breached the duty of loyalty?

Back 61

If the agent breaches the duty of loyalty (1 to 6 above), then the principal can sue the "faithless agent" to recover all wages or commissions paid to the agent plus recover any resulting detriment to the principal. This faithless agent rule is also applied to faithless employees.

Front 62

A NY attorney who orally or in writing orders a reporter to type up an EBT or trial transcript is personally liable for what?

Back 62

For those services unless the lawyer disclaimed such liability when ordering the transcript.

Front 63

An agency is terminated by "A BID". Explain A from A BID.

Back 63

A - an act of the agent or principal unilaterally terminating the agency contract. "You're fired" or "I quit" or by mutual agreement.
Since the agency relationship is a fiduciary one either party has the unilateral "power", but may not necessarily have the contractual "right" to terminate the agency relationship at any time. If the parties are contractually committed to a longer period of time (a 3 year contract).
If by terminating the relationship, it breaches the agency contract, then the breaching party is liable for breach of contract damages.
Although an agency's termination revokes an agent's "actual authority", it does not necessarily revoke the agent's apparent authority to deal with third parties and to contractually bind the principal. This requires actual or constructive notice to 3rd parties of the agency's termination. See partnership lecture - liability of a retiring partner.

Front 64

Explain B from A BID.

Back 64

B - bankruptcy of the principal

Front 65

Explain I from A BID.

Back 65

I - incompetency, but if the principal and agent have signed a NY POA, then by statute it is automatically a durable POA, which is not terminated by the mental incompetency of the principal unless it expressly provides for its termination by the mental incompetency of the principal.

Front 66

Explain D from A BID.

Back 66

D - death terminates an agency including an agent acting under a POA.
An agent's actual and apparent authority is automatically terminated by operation of law by BID.
A 3rd person who deals with an agent assumes the risks of BID. An agent who acts after the agency has been terminated (e.g. after the principal's death) may be personally liable to the 3rd person for the agent's breach of the implied warranty of authority.
A lawyer shall disclose the death of a client and her failure to do so is tantamount to making a misrepresentation prohibited by the ethics rules.

Front 67

What is a partnership (PS)?

Back 67

A PS is an association of 2 or more who can contractually bind each other to a contract and can carry on a business as co-owners for their mutual profit. Each partner is jointly and severally liable for partnership torts and contracts. If the partnership agreement (or the agency agreement) has no fixed duration, then any partner can call for its termination "at will" without breaching the partnership agreement.

Front 68

What do partners owe each other?

Back 68

Partners owe each other a duty of the highest loyalty because partners are fiduciaries for each other. When thinking of fiduciaries, think of equity and equitable remedies such as injunction (LIE), receivers (LIAR), constructive trusts (T-CUP), unclean hands, unjust enrichment, laches, and accounting actions.

Front 69

What happens when one partner sues another?

Back 69

When one party sues another party for wrongful partnership conduct, the proper procedure is to sue in equity for dissolution of the partnership and to seek a partnership accounting.

Front 70

What does the GAP do?

Back 70

The GAP business judgment rule also applies to partners.

Front 71

How do you determine whether or not a partnership exists?

Back 71

In determining whether a partnership exists, look to the intent of the parties to determine if they mutually intended to become partners.

Front 72

Sharing of profits is prima facie evidence of a partnership except where profits were received in payment of DRAWS. Explain DRAWS.

Back 72

D - a debt
R - rent
A - an annuity paid to a partner's surviving spouse
W - wages
S - the sale of the good will of a business

Front 73

Who has the capacity to become a partner?

Back 73

Anyone who has the capacity to enter a contract.

Front 74

Absent contrary language in the partnership agreement, every partner has 3 property rights. PMS. Explain the P from PMS.

Back 74

P - the right to use partnership property for partnership purposes
A partner has no right to possess, to use, or to convey away partnership property other than for partnership business. She cannot pass title in a will, make an AID gift, or sell partnership property for personal purposes.

Front 75

Explain the M from PMS.

Back 75

M - the right to participate in management.
Management is an equal right regardless of each partner's contribution to capital and regardless of a partner's percentage of profits. A simple majority vote governs in the management of partnership affairs. However, absent contrary language in the partnership agreement, a unanimous vote is required to bring a new partner into the partnership activity that would contradict the partnership agreement.

Front 76

Explain the S from PMS.

Back 76

S* - a partner's right to the return of capital invested and the right to share in any profits.
Unless otherwise agreed, profits are shared equally, losses are shared in the same ratio as profits are shared.
* The only partnership property right that
(b) is subject to attachment (FIND CJ) or to judgment execution by the personal creditor of the partner
(c) can be assigned away by a partner in consideration of a personal obligation
(d) passes through the deceased partner's estate.

Front 77

What are new partners held liable to?

Back 77

New partners are not personally liable for prior debts up to the time of retirement regardless of any hold harmless agreement made between the partners themselves. On debts incurred by the partnership except to the extent of partnership interest S* (her contribution to capital). Thus, partnership creditors who hold claims that arose prior to the entrance of a new partner cannot look to the personal assets of the new partner if the partnership is insolvent.
A new partner is personally liable on an existing partnership lease, but only for the unpaid rents accruing after she became a partner.

Front 78

A partner is personally liable for all partnership debts up to the time of her retirement on partnership debts incurred after retirement. The retiring partner remains personally liable to any partnership creditor who does 1 of 2 things. Explain.

Back 78

1. previously extended credit to the partnership and who had no actual notice of the partner's retirement and who continued to rely on the credit of that new partner in extending new credit to the partnership (reliance is essential) or
2. never previously extended credit to the partnership, but who knew of and relied upon that partner's association with a partnership and the creditor had no CONSTRUCTIVE notice of the partner's retirement.

Front 79

Do partnership rules remain the same to a principal who remains liable for a terminated agent's contracts?

Back 79

These same rules apply to a principal who remains liable for a terminated agent's contracts based on the agent's apparent authority, which continues to exist after the agent was fired until proper notice is given of the agency's termination.

Front 80

Can a law firm’s departing partner secretly solicit away partnership clients for personal gain?

Back 80

A law firm’s departing partner cannot secretly solicit away partnership clients for personal gain. She can however advise clients with whom she has had a prior relationship of her pending resignation and advise the client of freedom of choice.

Front 81

What is a partnership dissolution?

Back 81

Dissolution is a "change" in the partnership relationship caused by any partner ceasing to be associated in carrying out the partnership agreement. Think of dissolution as the death of the partnership, but that it still has to wind up partnership affairs by honoring executory contracts, paying partnership creditors, and collecting partnership accounts receivable. When this is completed (the burial) the partnership is then "terminated". Even though a partnership has dissolved, a partner may continue to incur additional partnership liabilities and can even borrow money to honor existing partnership debts until its acocunts receivables have been collected.

Front 82

There are 3 ways to dissolve a partnership. Explain the first one.

Back 82

1. dissolution by operation of law
(a) any time it becomes illegal to continue the partnership.
The conviction of a lawyer for a NY felony or a federal or sister state conviction for any crime, which if committed in NY would be a felony under NY's penal law results in automatic disbarment of the lawyer and disbarment is not stayed pending an appeal.
(b) bankruptcy of a partner or
(c) death of a partner dissolves the partnership unless the partnership agreement states otherwise.
When a partner dies, but the partnership business is continued by the surviving partners, then the deceased partner's estate can seek to recover (S*) either 1. 9% interest from the date of death on the capital contribution that should have been paid and the profits that should have been paid, which also must be paid to the estate, 2. the partnership profits attributable to the use of the deceased partner's S* interest plus the return of S*.

Front 83

There are 3 ways to dissolve a partnership. Explain the second one.

Back 83

2. Dissolution by court decree.
Only if a partnership is for a fixed term does a partner have to go to court to obtain a judicial dissolution.
The Court will dissolve a partnership prior to its fixed expiration date based on CLUB J.

Front 84

Under the second dissolution of a partnership, what does CLUB J stand for?

Back 84

C - a partner cannot carry on his share of partnership work (drugs or stroke)
L - it can only be carried on at a loss
U - a partner is of unsound mind
A partner's mental incompetency does not dissolve a partnership by operation of law as it does in the ordinary agency relationship (A BID).
B - partner's persistent breach of the partnership agreement
J - any other grounds that the court finds just and equitable.
The CLUB J misconduct of a partner does not prevent that partner's unclean hands from seeking the equitable remedy of an accounting to establish his S* property interest.

Front 85

There are 3 ways to dissolve a partnership. Explain the third one.

Back 85

3. Dissolution by an act of a partner. (the right vs. power dichotomy)
A partner always has the "power" to withdraw from a partnership before its term expires, but if that partner lacks the contractual "right", she can be sued for money damages for breaching the partnership contract.
In a partnership for a fixed term if one partner wrongfully withdraws prior to the end of the term, the remaining partners have the right to continue the partnership business in the partnership name for the balance of the term. They can continue to possess all of the partnership property provided they either buy out or secure (by a bond) the breaching partner's interest in the partnership (S*), but less any damages caused by that partner's breach.

Front 86

Does the assignment of the partner's interest (S*) cause a dissolution?

Back 86

No, but the assignee is not entitled to
1. interfere in partnership business management
2. to demand an accounting or
3. inspect partnership books and records until the partnership term expires

Front 87

An assignee (by sale, gift, or by will) is entitled to what?

Back 87

Simply entitled to receive any profits that are paid to the assignor and at the end of the fixed term; the assignee can demand a dissolution. However, if it was a partnership at will an assignee can immediately demand a dissolution and ask the court for an accounting to recover the assignor’s contribution to capital and assignor’s share of any profits.

Front 88

What happens to the estate of a deceased partner?

Back 88

The estate of a deceased partner becomes an assignee of the deceased partner’s S* interest and if the partnership is for a term that has not expired, then the estate’s only right is to receive the decedent’s share of profits when paid and to demand an accounting when the term expires.

Front 89

What type of partnership accounting exists?

Back 89

There can be either an informal accounting (where the partners agree) or a judicial accounting commenced in the Supreme Court where the partners cannot agree.

Front 90

What does accounting serve to do?

Back 90

An accounting strikes a balance on the partnership books by determining and valuing partnership assets and less debts and liabilities of the partnership.

Front 91

Partnership debts must be paid off in the following order of priority. List them from 1 to 4.

Back 91

1. Wages owed to partnership employees
2. Debts owed to partnership creditors
3. Debts owed to partners other than for the return of capital contributed. For example, a loan made by a partner to the partnership and
4. Partners' capital contributed. This is deemed a true partnership debt and all capital contributed must be repaid by the partnership. If there is not enough partnership money to repay all the capital contributed by partners, it is considered a partnership loss that must be shared by each partner in the same ratio as profits are shared.