Wa Bar Agency And Partnership

Front 1

Agency: Basic Definition

Back 1

the fiduciary relation created when two parties manifest the intention that the agent act on the principal's behalf and subject to the principal’s control. Three big issues – formation, fid. Duties, liability

Front 2

Formation and Continuation of agency requires

Back 2

1. contractual capacity of the principal but not the agent, and
2. consent of both parties to create and continue agency relationship, but
3. NO writing or other formality

Front 3

Fiduciary Duties owed by A to P

Back 3

i. Loyalty (including avoiding secret profit and COI),
ii. Obedience to reasonable directions, and
iii. Reasonable care under the circumstances

Front 4

Fiduciary Duties owed by P to A

Back 4

i. Reasonable Compensation & reimbursement for expenses
ii. Indemnification (reimburse liability if A gets sued)
iii. Cooperation with the agent’s efforts

Front 5

Contractual Liabilities to Third Parties

Back 5

A is capable of binding P in a K to third party
1. Principals are bound to third parties if the agent acted with:
a. Actual authority - what the agent reasonably believed based on P’s actions
1) Express - based on the principal's statements
2) Implied - based on inferences from the principal's statements or conduct
3) To Terminate Agent’s actual authority
i. must be by express terms (you’re fired),
ii. drastic change of conditions (like if house A is trying to sell burns down), OR
iii. Through operation of law (death or insanity of human P, or bankruptcy of business entity or other org. P)
b. Apparent authority - what the third party reasonably believed, based on the principal's statements or conduct. P letting A still use office after termination
c. Ratification - the principal’s approval of the agent's act, after the fact

Front 6

Contractual Liabilities to third parties - Agent's liability

Back 6

Agents are not personally bound to third parties if the principal's existence and identity were disclosed – Third party knew that A acting on behalf of P
a. Exceptions
i. Partially disclosed or undisclosed agency – TP can bind A if they knew A was acting on behalf of some P, but did not know identity of P, or if TP did not know A was acting as an agent
ii. Breach of Warranty of agency authority – A’s representation to TP that she is acting on behalf of P is deemed a promise or warranty, breach of that can lead to liability

Front 7

Tort Liability to third parties

Back 7

1. Respondeat superior makes employers ("masters") vicariously liable for torts committed by employees ("servants") acting within the scope of employment.
2. Employers are not liable for torts committed by independent contractors.
3. EE must be acting within scope of employment, includes minor and reasonable detours
4. Intentional torts typically not within scope of employment

Front 8

Partnership: Basic Definition

Back 8

an association of two or more persons to carry on as co-owners a business for profit. It is a legal entity distinct from its partners capable of owning prop, suing, and being sued in its own name. The Revised Uniform Partnership Act (1996) applies as default rules unless partners agree otherwise

Front 9

Partner is both agent and co-principal

Back 9

Each partner is an agent of the partnership. Each partner is also a co-principal of every other partner, as to partnership business.

Front 10

Partnership Formation

Back 10

Formation and continuation of partnership requires:
1. Intent of the parties (express or implied, with emphasis on sharing of profits, or to share losses (this is almost conclusive evidence), attempt to create another business entity)
2. NO writing, unless the partnership business cannot be completed within one year
3. NO consideration or capital contribution, or filing with the state necessary

Front 11

Duration

Back 11

Partnerships are classified as either:
1. At will - no agreement at the outset regarding duration (ending at any time is rightful) - or
2. For a definite term or particular undertaking (may owe damages for early termination)

Front 12

Property of Partnership

Back 12

– two types: Capital and partnership property
1. Capital – money or prop contributed by partners to partnership – supports concl. That partnership was formed
2. Partnership property – includes all assets titled in the partnership’s name (like car title), partnership capital, and all property subsequently acquired with that capital

Front 13

Use of Property

Back 13

can be owned by the partnership. Each partner has the right to use all partnership property, but only for partnership purposes

Front 14

Standards of Conduct Among Partners

Back 14

1. Fiduciary duty of loyalty;
a. Promote interest of Partnership
b. Avoid secret profit
c. Disclose business opportunities to other partners, and allow them to participate
2. Fiduciary duty of care;
a. Avoid intentional misconduct and knowing violations of the law
b. Avoid grossly negligent or reckless conduct
3. Obligation of good faith and fair dealing

Front 15

Rights and Powers of Partners

Back 15

can be divided in any manner agreed to, these are the default rules
1. Equal rights to manage, to profits, and to distributions on liquidation, access to books, losses shared on same basis as profits

Front 16

Relations of partners to third parties

Back 16

each partner binds the other partners in torts and K’s
1. K liability based on actual (oral or written) or apparent authority, or on ratification
2. Power to subject the partnership to liability for torts committed within the ordinary scope of partnership business OR with authority of co-partners;

Front 17

Liability of Partners

Back 17

All partners are personal liability, but secondarily for all partnership debts, usually joint and several
2. Any Partner who pays more than her share is entitled to contribution from the others
3. Creditor must first exhaust partnership assets before collecting from partners individually

Front 18

Ending a partnership

Back 18

1. Dissociation - the departure (exit, death, bankruptcy (for corp) or expulsion) of any partner
i. wrongful if before completion of term
ii Consequences – dissociated partner no longer has right to participate. If remaining partners continue business, DP entitled to payment of the value of his interest and indemnification against partnership liabilities
2. Dissolution - the decision to end the partnership existence
i. For at will – dissolution will result from any dissociation event unless other partners waive
ii. In partnership for a definite term – if majority elects dissolution after a partner's exit (death, bankruptcy, wrongful dissociation), or upon expiration of the term, or if all partners agree to end
3. Winding up - finishing all pending business transactions. Whoever winds up is entitled to remuneration for their services.
4. Termination - the completion of the winding up process.

Front 19

Distribution of assets

Back 19

must be in the following order:
1. debts to outside creditors
2. debts to partners (e.g., loans from partners)
3. return of partners' capital
4. profits (distributed equally unless agreed otherwise)
5. Losses are allocated according to the same proportions as profits (usually equally).

Front 20

Limited Liability Business Forms

Back 20

All require an organizational document filed with the Secretary of State, and a name that identifies their business form:
A. Limited Liability Partnership is a partnership in which all partners enjoy limited liability.
B. Limited Partnership has general partners who manage and are liable, and limited partners who do not manage and are not liable
C. Limited Liability Company protects all members from liability.
1. All members manage, unless the filed document elects manager-management.
2. New members require unanimous consent.

Front 21

Limited Liability Partnership: 3 key differences from other partnerships

Back 21

A. Filing with the state - must file a statement of qualification with secretary of state
B. Name must identify the partnership as an LLP
C. Partners liable for thier own debts and torts, not liable for partnership debts
D. On all other issues, general partnership rules apply

Front 22

Limited Partnership: 2 classes of partner

Back 22

A. General Partner(s) manage and are personally liable for partnership debts. They also have the authority to bind LP to third parties in K and tort.
B. Limited partners do not manage and are not personally liable

Front 23

Limited Partnership; Two other differences

Back 23

A. Must file cert of limited partnership with secretary of state
B. must include limited partnership in name

Front 24

LLC - Hybrid of Partnership and corporation

Back 24

A. there may be one owner or more called "members"
B. Certificate of formation must be filed with secretary of state.

Front 25

LLC - Second Document "optional LLC agreement"

Back 25

LLC agreement may establish any internal rules of governance, distribution of control, allocation of profits, or any other matter which members agree - comparable to corp. bylaws

Front 26

LLC Members

Back 26

A. Members can be admitted to LLC only by unanimous vote of other members.
B. Members can't withdraw unless all other members agree
C. Member may sell or transfer membership interest in which case they are dissociated and no longer a member, buyer has the right to profits the seller would have received but is not yet a member, and all remaining member s must consent to continue LLC or it will dissolve within 90 days

Front 27

LLC liability

Back 27

LLC is seperate legal entity responsible for its own K and tort obligations. Members are not liable except in unusual circumstances - court can pierce veil for same reason it can for Corp

Front 28

LLC Management

Back 28

Default rule is that members manage. LLC managed by its members, each member can participate in management, and each member is an agent for business.

Optional Alternative - manager-management
An LLC may opt for management by designated managers, the choice must be disclosed in the cert of formation filed with the state, to give notice to outside parties. Members may select one or more managers. Managers may also be a member but does not have to be. The LLC manager is agent for the business

Front 29

LLC voting power

Back 29

Based on proportion of ownership, not equality among members. members who contribute more money get more control. To control a vote among members, must have majority interest.