Ny Bar Exam Review - Agency And Partnership

Front 1

When will the principal be vicariously liable for torts committed by the agent?

Back 1

Principal will be lieable for torts committed by the agent if:
1) a principal-agent relationship exists; and
2) the tort was committed by the agent within the scope of that relationship.

Front 2

What does a principal-agent relationship require?

Back 2

1) Assent;
2) Benefit; and
3) Control

Front 3

What is assent?

Back 3

An informal agreement between a principal who has capacity, and the agent.

Front 4

What is benefit?

Back 4

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

Front 5

What is control?

Back 5

Principal must have teh right to control the agent, by having the power to supervise the manner of the agent's performance.
*Most important

Front 6

Is the principal liable for torts of subagents?

Back 6

There can be no vicarious liability for a sub-agent tort, UNLESS:
1) Assent;
2) Benefit; and
3) Right to control
that sub-agent tortfeasor.

Front 7

Is the principal liable for torts of borrowed agents?

Back 7

There can be no vicarious liability for a borrowed agent's torts UNLESS there is:
1) Assent ;
2) Benefit; and
3) The right to control
that borrowed agent.
*Usually won't find a right to control borrowed agents.

Front 8

What is an independent contractor?

Back 8

There is no right to control an IC because there is no power to supervise the manner of an IC's performance.

Front 9

What is the vicarious liability rule for ICs?

Back 9

There can be no vicarious liability for an IC's torts.

Front 10

What are the exceptions to the IC rule?

Back 10

1) Ultra-Hazardous Activity;
2) Estoppel

Front 11

What is the ultra hazardous activity rule?

Back 11

If IC commits a tort while engaged in an UHA, there will be vicarious liability even for an IC's torts.

Front 12

What is the estoppel rule?

Back 12

If you hold out your IC with the appearance of agency, you will be estopped from denying vicarious liability for your IC's torts.

Front 13

What factors do you consider in determining whether the act was in the scoep of principal-agent relationship?

Back 13

1) Was the conduct "of the kind" the agent was hired to perform?
2) Did the tort occur "on the job"? (Frolic v. Detour)
3) Did the agent intend to benefit the principal?

Front 14

How can you tell if the conduct was "of the kind" the agent was hired to perform?

Back 14

If the conduct was within the job description, it's likely to be within the scope of agency.

Front 15

What is a frolic?

Back 15

A frolic is a new and independent journey - the agent will frolic outside the scope of agency.

Front 16

What is a detour?

Back 16

A detour is a mere departure from an assigned task. Detour is still within the scope of agency.

Front 17

What is the rule with respect to whether the agent intended to benefit the principal?

Back 17

If the agent even in part intended to benefit the principal with his conduct, that's enough to call that conduct within the scope of agency.

Front 18

When will you know that there's a mere detour and thus that the conduct is within the scope?

Back 18

Where the EE is on the way back to work (a clue will be that the fact pattern says the ER "instructed" the EE to go and do something and he's on his way back)

Front 19

What is the rule for intentional torts?

Back 19

As a rule, intentional torts are outside the scope of agency.

Front 20

What are the exceptions to the intentional torts rule?

Back 20

1) Specifically authorized by the principal;
2) Natural from the nature of employment; or
3) Motivated by a desire to serve the principal
(Each alone is enough, but all three will often occur together - usually will be a bouncer in a bar)

Front 21

When is the principal liable for Ks entered into by its agent?

Back 21

Principal is liable for contracts entered into by its agent if the principal authorized the agent to enter the K.

Front 22

What are the types of authority?

Back 22

1) Actual express authority;
2) Actual implied authority;
3) Apparant authority;
4) Ratification

Front 23

What is actual express authority?

Back 23

Principal used words to express authority to agent.

Front 24

What is the rule with resepct to actual express authority?

Back 24

It can be oral or private, but the scope is narrow.

Front 25

What is the exception to the rule?

Back 25

Land (an interest in real estate which could last longer than one year) - then the express authority to enter that K must be in writing.

Front 26

How can express authority be revoked?

Back 26

1) By unilateral act of either party; or
2) By death or incapacity of the principal. (*more likely)

Front 27

What is the exception to the rule that express authority is revoked by death or incapacity of the principal?

Back 27

Express authority cannot be revoked if there is a durable power of attorney.

Front 28

What is a power of attorney?

Back 28

A power of attorney is a written expression of authority to enter into a transaction.

Front 29

What makes a power of attorney durable?

Back 29

Where there is conspicuous survival language ("survives incapacity" or "survives death") it will be a durable power of attorney.

Front 30

What is actual implied authority?

Back 30

Authority which agent reasonably believes the principal has given because:
1) Necessity;
2) Custom; or
3) Prior dealings

Front 31

What does necessity mean?

Back 31

There is implied authority to do all tasks which are necessary to accomplish an express task.

Front 32

What does custom mean?

Back 32

There is implied authority to do all tasks customarily performed by persons with the agent's title or position.

Front 33

What does prior dealings mean?

Back 33

Prior dealings b/t the principal and the agent. There is implied authority to do all tasks which the agent believed to be authorized from prior acquiesence by the principal.

Front 34

What is apparent authority?

Back 34

1) Principal "cloaked" agent with the appearance of authority; and
2) Third party reasonably relies on the appearance of authority.

Front 35

What are the two situations where apparant authority comes up?

Back 35

1) Secret limiting instruction;
2) Lingering authority

Front 36

What is the secret limiting instruction situation?

Back 36

Agent has actual authority, but principal has secretly limited that authority. Agent acts beyond the scope of the limitation.

Front 37

What is the lingering authority situation?

Back 37

Actual authority has been terminated. Afterwards, the agent continues to act on principal's behalf.

Front 38

How long may third parties reasonably rely on the appearance of authority after an agent has been terminated?

Back 38

Until they receive notice of termination.

Front 39

What is ratification?

Back 39

Authority can be granted after the contract has been entered if:
1) Principal has knowledge of all material facts regarding the contract; and
2) Principal accepts its benefits;

Front 40

What is the limitation on ratification?

Back 40

Ratification cannot alter the terms of the contract. Ratification in NY must be complete; cannot be partial.

Front 41

What are the rules of liability on the K?

Back 41

1) If no authority, principal is not liable on the contract and agent is liable on the contract.
2) If authority, principal is liable on the contract, and agent is not liable on the contract.

Front 42

What is the exception to this rule?

Back 42

If principal is partially disclosed (only the identity of principal concealed) or undisclosed (fact of principal concealed), then an authorized agent may nonetheless be liable at the election of hte third-party.

Front 43

So, what is the overall liability rule?

Back 43

Authorized agents are not liable UNLESS there is an undisclosed or partially disclosed principal.

Front 44

What duties does the agent owe to the principal?

Back 44

1) Duty to exercise reasonable care;
2) Duty to obey reasonable instructions (i.e., not lie or break the law);
3) Duty of loyalty

Front 45

What does the duty of loyalty forbid?

Back 45

1) Self-dealing - agent cannot receove a benefit to the detriment of the principal;
2) Usurping the principal's opportunity; or
3) Secret profits.

Front 46

What are the principal's remedies where the agent has breached a duty of loyalty?

Back 46

The principal may recover any losses caused by teh breach and also may disgorge any profits made by the breachign agen as well.

Front 47

What law governs partnerships in NY?

Back 47

NY still adheres to the Uniform Partnership Act (UPA)

Front 48

What formalities are required for partnership formation?

Back 48

There are no formalities to becoming a general partnership. A general partnership is unique in this sense among all other business forms. You will be deemed to be a general partnership by your conduct alone.

Front 49

What is the definition of a general partnership?

Back 49

A general partnership is an association of two or more persons who are carrying on as co-owners of a business for profit (will usually be a close call between a partnership and a loan or employee arrangement).

Front 50

What is the key to distinguishing a partnership from a loan or employee arrangements?

Back 50

Sharing of profits. The contribution of money or services in return for a share of the profits, if any, is prima facie evidence of a general partnership.

Front 51

What is the liability of partners to third-parties/

Back 51

Agency principles apply:
1) Partners are agents of the partnership for the scope of carrying on usual partnership business;
2) Partnership is bound by torts committed by partners in scope of partnership business;
3) Partnership is bound by contracts entered by partners with authority.

Front 52

What is the rule with respect to general partners and debts of the partnership?

Back 52

General partners are personally liable for the debts of the partnership.

Front 53

What is an incoming partner's liability for pre-existing debts?

Back 53

As a rule, an incoming partner is not liable for prior debts, except that any money which is contributed to the partnership by an incoming partner can be used by the partnership to satisfy prior debts.

Front 54

What is an outgoing partner's liability for subsequent debts?

Back 54

An outgoing partner retains liability on future debts until they die unless notice of their withdrawal has been given to all known and even potential creditors.

Front 55

What is general partnership liability by estoppel?

Back 55

One who represents to a third-party that a partnership exists will be liable as if a partnership exists.

Front 56

What is a limited partnership?

Back 56

A limited partnership is a partnership with at least one general partner and at least one limited partner.

Front 57

How is a limited partnership formed?

Back 57

You must file a certificate of limited partnership with the Department of State, that includes the names of all general partners.

Front 58

What is the liability and control of general partners in a limited partnership?

Back 58

General partners are still liable for all debts and obligations of the business form, but they may exercise substantial managerial control.

Front 59

What is the liability and control of limited partners in a limited partnership?

Back 59

Limited partners are NOT liable for partnership debts and obligations. They must pay full consideration for their interest. But, they may NOT exercise substantial managerial control.

Front 60

What is a registered limited liability partnership (RLLP)?

Back 60

An RLLP is limited to partnerships engaged in professional services. Must register by filing a certificate of registration with the Department of State that includes the profession to be practiced.

Front 61

What are the liabilities of the partners in an RLLP?

Back 61

For registered LLPs, no partner will be liable for the partnership's debts or obligations. Partners are always liable for theri own wrongdoing and that of those under their supervision (malpractice), but no liability for ongoing debts and obligations of business.

Front 62

What was the original purpose of the limited liability company (LLC)?

Back 62

To provide owners of business the same limited liability of shareholders in a corporation plus the beneficial tax status of a partnership.

Front 63

How are LLCs formed?

Back 63

Must file the Articles of Organization, plus, you must publish a summary of hte Articles once a week for six weeks in a row in at least two newspapers.

Front 64

What are the liabilities of members of an LLC?

Back 64

Members (owners) are not liable for any debts of the company.

Front 65

What are the partnership characteristics of an LLC?

Back 65

Must have two of the following three:
1) Members control, but may delegate to managers;
2) Limited liquidity - member interests are not freely transferable;
3) Limited life - events of dissolution.

Front 66

So, what does the LLC equal?

Back 66

LLC = Limited liability + Limited liquidity + Limited life + Limited tax

Front 67

What is the status of a partner vis-a-vis his other partners and the partnership?

Back 67

Partners are fiduciaries of each other and the partnership.

Front 68

What duty do partners owe each other and the partnership?

Back 68

Duty of loyalty. Partners, just like agents, may never: 1) engage in self-dealing; 2) usurp partnership opportunities; or
3) make a secret, undisclosed profit at the partnership's expense.

Front 69

What is an action for accounting?

Back 69

This is the only form of action that can be brought by a partnership against one of its own partners for breach of the duty of loyalty. In this action, the partnership may recover losses caused by the breach, and also disgorge profits made by the breaching partner.

Front 70

What are the partners' rights in partnership property?

Back 70

1) Specific Partnership Assets;
2) Share of profit and surplus;
3) Share in management.

Front 71

What is the rule with respect to specific partnership assets and what is included in this category?

Back 71

This includes land, leases, and equipment, owned only by the partnership. Therefore, no individual partner may transfer these partnership assets without partnership authority.

Front 72

What is the rule with respect to share of profits and surplus?

Back 72

Each partner's share of profits, if any, is personal property owned as such by each individual partner. Therefore, individaul partners may freely transfer their share of profits and surplus to third parties.

Front 73

What is the rule for the share in management?

Back 73

An asset that belongs only to the partnership and not any individual partner. Therefore, individuals partners may NOT transfer their share in management to some third party.
*Only the shaer in profit is liquid.

Front 74

What happens where there is a conflict between specific partnership assets and personal property?

Back 74

Ask: Who's money was used to buy the property. If partnership money was used to buy the property, it becomes partnership property. If personal funds were used, it's personal property.

Front 75

What is the default rule with respect to management of a partnership?

Back 75

Absent an agreement, each partner is entitled to equal control (vote). (doens't matter who contributes what or how they share profits)

Front 76

What is hte default rule for salary?

Back 76

Absent an agreement, partners get NO salary.

Front 77

What is the exception to this rule?

Back 77

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

Front 78

What are the default rules for partner's share of profits and losses?

Back 78

1) Absent an agreement, profits are shared equally;
2) Absent an agreement, losses are shared like profits.

Front 79

What is dissolution?

Back 79

Dissolution occurs upon any material change in the partnership caused by the death or withdrawal of any single general partner.

Front 80

What is termination?

Back 80

Termination is the real end of the partnership.

Front 81

What is winding up?

Back 81

Winding up is the period between dissolution and termination in which the remainign partners liquidate the partnership assets to satisfy the partnership's creditors.

Front 82

What is the compensation for winding up?

Back 82

As an exception to the general rule of no salary, partners do receive compensation for helping to wind up.

Front 83

What is hte partnership's liability for winding up?

Back 83

1) For old business: The partnership, and therefore the individual general partners, retain liability on all transactions entered into to wind up old business with existing creditors.
2) For new business: The partnership, and therefore, its individual general partners, still retain liability on new business trnasactions until notice of dissolution is given to all existing and even potential creditors.

Front 84

What is the rule with respect to priority of distribution?

Back 84

Eacha level of priority must be fully satisfied before beginning the next level.

Front 85

What is the order of priority?

Back 85

1) First, creditors must be paid (outside, non-partner creditors first, and inside, partner creditors who have made LOANS to the parntership second);
2) Second, capital contributions by partners must be paid (Any money paid in must be fully repaid right now);
3) Finally, profits and surplus, if any is shared equally among partners in the absense of agreement.

Front 86

What is the genearl rule if they ask what are the rights and liabilities of the partnesr in winding up?

Back 86

Each partner must be repaid his or her loans and capital contributions, plus that partner's share of the profits or minus that partners' share of the losses.