Ny Bar - Agency & Partnership

Front 1

What is agency?

Back 1

Legal relationship whereby an agent is authorized to represent a principal in business dealings with third parties.

Front 2

When will the principal be liable for TORTS committed by the agent?

Back 2

If:
1) a principal-agent relationship exists
2) the tort was committed by the agent within the scope of that relationship

Front 3

What 3 things does the principal agent relationship require?

Back 3

ABC:
1) Assent
2) Benefit
3) Control

Front 4

What is Assent?

Back 4

An informal agreement between a principal that has capacity and an agent

Front 5

What is Benefit?

Back 5

The agent's conduct must be for the principal's benefit

Front 6

What is Control?

Back 6

"The Principal must have the right to control the agent by having the power to supervise the manner of the agent's performance"

Front 7

What is a subagent?

Back 7

When P instructs A to do a task, and A hires another agent, A2, that commits a tort

Front 8

Is there Vicarious Liability for Subagents?

Back 8

NO VICARIOUS LIABILITY FOR SUBAGENTS, unless there is A, B, and right to C the subagent tortfeasor

Front 9

What is a borrowed agent?

Back 9

When P1 borrows P2's agent who then commits the tort

Front 10

Is there Vicarious Liability for Borrowed Agents?

Back 10

NO VICARIOUS LIABILITY FOR BORROWED AGENTS, unless there is A, B, and right to C the borrowed agent tortfeasor

Front 11

What is the difference between agent and independent contractor?

Back 11

There is no right to control the independent contractor because there is no power to supervise the manner of his performance

Front 12

Is there Vicarious Liability for Independent Contractors?

Back 12

NO VICARIOUS LIABILITY FOR INDEPENDENT CONTRACTORS --

Front 13

What are the 2 exceptions to independent contractor liability?

Back 13

1) The Ultra-Hazardous Activity Exception: if they commit a tort while engaged in ultra-hazardous activity, there WILL BE VL (brake repair)

2) Estoppel: If they are held out wit the appearance of agency, you will be estopped/prevented from denying VL

Front 14

What is the 3-part test for Agency Scope?

Back 14

1) Was conduct "of the kind" agent was hired to perform/within the job description?

2) Did the tort occur "on the job"?

3) Did the agent intend to benefit the principal?

Front 15

What is Frolic?

Back 15

A new and independent journey, outside the scope of agency

Front 16

What is Detour?

Back 16

A mere departure from an assigned task, within the scope of agency

Front 17

Is partial benefit enough to satisfy the 3rd prong of scope?

Back 17

YES, in NY, partial benefit is enough to be within the scope of agency

Front 18

Are intentional torts within the scope of agency?

Back 18

Generally, NO

Front 19

What are the 3 exceptions to intentional torts?

Back 19

Intentional torts are within the scope if the conduct was:
1) intentional conduct that was specifically authorized by the principal
2) if it was natural from the nature of employment
3) if it was motivated by a desire to serve P

Front 20

Are P's vicariously liable for torts committed by the agent?

Back 20

Generally, YES

Front 21

Are P's liable for contracts entered into by the agent?

Back 21

Generally, YES
Principal is liable for contracts entered into by its agent if P authorized the agent to enter into the contract

Front 22

What are the 4 types of authority?

Back 22

1) Actual Express Authority
2) Actual Implied Authority
3) Apparent Authority
4) Ratification

Front 23

What is Actual Express Authority?

Back 23

Authority that agent reasonably believes she possesses based on P's express dealings with her.
Oral - OK
Private - OK
Narrow - OK

Front 24

What is the one exception to actual express authority?

Back 24

LAND; if contract involves conveyance of land, the express authority to enter that contract MUST be in writing to authorize the transaction

Front 25

When can express authority be revoked?

Back 25

1) Unilateral act of either party, or

2) Death or incapacity of P

Front 26

When can express authority NOT be revoked?

Back 26

If P gave the agent durable power of attorney (the written expression of authority to enter into a contract with conspicuous survival language)

Front 27

What is Actual Implied Authority?

Back 27

Real authority given by conduct; Authority that agent reasonably believes P has given

Front 28

What are the 3 reasons for actual implied authority?

Back 28

1) Necessity
2) Custom
3) Prior Dealings

Front 29

What is Necessity?

Back 29

When there is implied authority to do all tasks that are necessary to accomplish an expressly authorized task (taking care of business)

Front 30

What is Custom?

Back 30

When there is implied authority to do all tasks that are customarily performed by persons with the agent's title or position (like lawyer or accountant)

Front 31

What are prior dealings?

Back 31

When there is implied authority to do all tasks that A believes to have been authorized to do from prior acquiescence

Front 32

What is the 2-part test for Apparent Authority?

Back 32

1) P "cloaked" A with the appearance of authority, and

2) 3rd Party reasonably relies on appearance of authority

Front 33

What are the two situations for Apparent Authority?

Back 33

1) Secret Limiting Instructions - when A has actual authority, but P has secretly limited that authority + A acts beyond the scope of that limitation

2) Lingering Authority - when actual authority has been terminated but afterwards A continues to act on P's behalf

**In BOTH situations, P is liable for A's actions

Front 34

What is the test for Ratification?

Back 34

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 the benefits

Front 35

Can there be partial ratification for P to still be liable?

Back 35

NO, Ratification cannot alter the terms of the contract. It must be a ratification of the complete, entire deal, as-is

Front 36

If there is no authority, is P or A liable on the contract?

Back 36

P -> not liable
A -> liable

Front 37

If there is authority, is P or A liable on the contract?

Back 37

P -> liable
A -> not liable

Front 38

When can an authorized agent be liable on unauthorized contracts?

Back 38

When there is an undisclosed principal

Front 39

What are the 3 duties owed to P?

Back 39

1) Duty of Care / to exercise reasonable care
2) Duty to Obey
3) Duty of Loyalty

Front 40

What are the 3 elements of Duty of Loyalty?

Back 40

There shall be no:
1) Self-dealing
2) Usurping
3) Secret Profits

Front 41

If there is a breach of duty, what can P do?

Back 41

P may:
1) recover losses caused by the breach, and
2) also may DISGORGE profits made by the evil breaching A

Front 42

What are the formalities of Partnership formation?

Back 42

None. No formalities to becoming a general partnership; it is deemed by law to be one even if you do not want it

Front 43

What is a general partnership?

Back 43

An association of 2 or more persons who are carrying on as co-owners of a business for profit

Front 44

What is prima facie evidence of a partnership?

Back 44

Sharing of profits; the contribution of capital or services in return for a share of the profits.

Must NOT be in return for wages, gross receipts, interest, etc. ONLY for PROFITS

Front 45

What type of relationship does a partner have with the partnership?

Back 45

Partners are agents of the partnership for carrying on usual business

Front 46

Is the partnership bound by the torts of individual partners?

Back 46

YES. The partnership is bound by torts committed by partners in the scope of the partnership business

Front 47

Is the partnership bound by the contracts of individual partners?

Back 47

YES. The partnership is bound by contracts entered by partners with authority

Front 48

What is the most general rule of GP?

Back 48

General Partners are personally liable for debts of the partnership!

Front 49

Are incoming partners liable for pre-existing debts?

Back 49

As a rule, NO. Incoming partners are not liable for debts, BUT any money paid into that partnership by them may be used to satisfy those prior debts.

Front 50

Are outgoing partners liable for subsequent debts?

Back 50

YES. An outgoing partner still retains liabilities on all future debts until they die UNLESS NOTICE of their withdrawal has been given to all known or potential creditors

Front 51

What is the general rule of GP liability by estoppel?

Back 51

One who represents to a 3rd party that a partnership exists will be liable as if a partnership exists

Front 52

What is a Limited Partnership?

Back 52

A partnership with at least 1 general partner and at least 1 "limited partner" and therefore a limited liability structure

Front 53

How do you form a Limited Partnership?

Back 53

File a certificate of LP with the Dept. of State including the names of all general partners

Front 54

What is the liability and control of the LP General Partners?

Back 54

Still general, still personally liable for all debts and obligations of this business form + ALSO have the right to exercise management power and control

Front 55

What is the liability and control of the LP Limited Partners?

Back 55

Limited liability; not liable for debts and obligations of the business form + ALSO may not exercise managerial control

Front 56

What is a Registered Limited Liability Partnership (RLLP)?

Back 56

A general partnership engaged in professional services

Front 57

How do you form a RLLP?

Back 57

File a certificate of registration with the Dept of State

Front 58

What are the liabilities of the RLLP?

Back 58

NO partner will be liable for the debts and obligations of this business form. Always liable for own torts and for those under your supervision

Front 59

What is the original purpose of the Limited Liability Company (LLC)?

Back 59

It is designed to give members of business the same limited liability that is given to shareholders in a corp BUT ALSO the benefits of partnership tax status

Corp tax -> BAD
Partnership tax -> GOOD

Front 60

How do you form a LLC?

Back 60

File Articles of Organization + publish a summary of those articles once a week for 6 weeks in a row in 2 newspapers to duly form an LLC

Front 61

What are the liabilities of a LLC?

Back 61

The members/owners are not liable for debts and obligations of the business form, but they can control the business, just like in a general partnership

Front 62

What are the 5 characteristics of LLCs?

Back 62

1) Members control, but may delegate to managers
2) Limited Liquidity, member interests are not freely transferable
3) Limited Life, events of dissolution
4) Limited Liability
5) Limited Tax

Front 63

What relationship do partners have with each other in the partnership?

Back 63

Partners are FIDUCIARIES OF EACH OTHER and the partnership

Front 64

What are the three things under duty of loyalty that partners owe each other?

Back 64

1) They may never engage in self dealing
2) They may never usurp partnership opportunities
3) They may never make a secret, undisclosed profit at the partnership's expense

Front 65

What is an Action for Accounting?

Back 65

It is the only form of action that may be brought by a partnership against one of its own evil, disloyal partners to recover losses caused by the breach. Partners may also disgorge the ill-gotten gains from the evil partner.

Front 66

What are the 3 rights in partnership property?

Back 66

1) Specific Partnership Assets
2) Share of Profits and Surplus
3) Share in Management

Front 67

What are specific partnership assets?

Back 67

Things like land, leases, or equipment owned by the partnership as partnership assets. No individual partner may transfer these assets to a 3rd Party

Front 68

What is the share of profits and surplus?

Back 68

Personal property owned as such by individual partners and may therefore be transfered to a 3rd Party

Front 69

What is the share in management?

Back 69

It is the asset owned only by the partnership itself and not by individual partners (like the rights to vote) and may not be transfered to a 3rd Party

Front 70

How do you determine if something belongs to the partnership or the individual?

Back 70

It depends on whose money was used to buy the property? If partnership $$, then partnership property.
If personal $$, then personal property.

Front 71

How do partners MANAGE the partnership?

Back 71

Absent an agreement, each partner is entitled to EQUAL control (vote)

Front 72

Do partners get paid a salary?

Back 72

Absent an agreement, partners get NO SALARY

Front 73

Do partners get paid anything for their services?

Back 73

Partners do receive compensation for one thing only - helping to wind up the partnership's business

Front 74

How do partners share in profits?

Back 74

Absent an agreement, PROFITS SHARED EQUALLY

Front 75

How do partners share in losses?

Back 75

Absent an agreement, LOSSES SHARED LIKE PROFITS

Front 76

If the agreement is silent on Profits + Losses, how is it split?

Back 76

Profits -> equal
Losses -> like profits

Front 77

If the agreement says "Profits shared 60/40," how is it split?

Back 77

Profits -> 60/40
Losses -> 60/40

Front 78

If the agreement says "Losses shared 60/40," how is it split?

Back 78

Profits -> equal
Losses -> 60/40

Front 79

What are the 3 steps to Partnership Dissolution?

Back 79

1) Dissolution
2) Winding up
3) Termination

Front 80

What is Step 1: Dissolution?

Back 80

Any Material change in the partnership caused by the death or withdrawal of any single general partner

Front 81

What is Step 2: Winding Up?

Back 81

The middle period in which the remaining partners must liquidate the partnership assets to satisfy the partnership's creditors

Front 82

What is Step 3: Termination

Back 82

The Real End :(

Front 83

What is the liability during winding up for old business?

Back 83

The partnership + therefore the individual general partners still retain liability on all transactions entered into to wind up the old business with existing creditors

Front 84

What is the liability during winding up for new business?

Back 84

The partnership + therefore its individual general partners still retain liability on all new business transactions UNTIL notice of dissolution is given to all known or potential creditors

Front 85

May each level of priority of distribution be partially satisfied?

Back 85

NO, each level of priority must be fully satisfied before beginning the next level

Front 86

What are the levels of priority for distribution?

Back 86

1) Creditors (outside, non-partner creditors; AND inside, partner creditors who have loaned money to the partnership)

2) Capital Contributions by partners (MUST BE REPAID)

3) Profits and surplus (if there is anything left, absent an agreement, they share equally)

Front 87

What is the general rule of partnership payment?

Back 87

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 88

What if Partner X cannot be fully repaid by partnership assets for his capital contributions?

Back 88

The partnership is still liable to X, and the capital contribution MUST BE REPAID. So, the loss is equally shared among partners absent an agreement, and even X must pay the partnership for the liability for his own capital contribution.