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54 Cards in this Set

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  • Back
What is the basic test for when a principal will be liable for the torts of her agent?
1) Does a principal-agent relationship exist, AND
2) Was the tort committed by the agent within the scope of the relationship?
When does a principal-agent relationship exist?
There must be:
1) ASSENT: an informal agreement between the principal who has capacity and the agent
2) BENEFIT: the agent’s conduct must be for the principal’s benefit, AND
3) CONTROL: principal must have the right to control the agent by having the power to supervise the manner of the agent’s performance
Note: ABC
When is a principal liable for the acts of a subagent?
There is no vicarious liability for a subagent’s tort UNLESS:
1) Assent (almost never find for subagent)
2) Benefit, AND
3) Right to control the subagent tortfeasor (almost never find for subagent)
When is a borrowing employer liable for its borrowed agent’s tort?
There’s no vicarious liability for a borrowed agent’s tort UNLESS:
1) Assent
2) Benefit
3) Right to control the borrowed agent tortfeasor (almost never find for a borrowed agent)
Why is an independent contractor not an agent?
There is no right to control an independent contractor because there’s no power to supervise the manner of its performance.
Is there vicarious liability for the torts of an independent contractor?
Generally no. Exceptions:
1) Ultra hazardous activities
2) Estoppel: if you hold out the IC with the appearance of agency, you’ll be estopped from denying vicarious liability
How do you determine if the act of the agent was within the scope of the principal-agent relationship?
1) Was the conduct “of the kind” the agent was hired to perform (e.g. job description)
2) Did the tort occur on the job (e.g. frolic or detour)
3) Did the agent intend to benefit the principal (even in part)?
What is a frolic?
A new and independent journey. Outside scope of agency (compare detour).
What is a detour?
A mere departure from an assigned task. Inside scope of agency (compare frolic).
When is a principal liable for the intentional torts of its agents?
Generally intentional torts are outside the scope of agency. Exceptions:
1) Specifically authorized by the principal
2) Natural from nature of employment
3) Motivated by a desire to serve the principal
When is a principal liable for contracts entered into by its agent?
A principal will be liable if it AUTHORIZED the agent to enter the contract. Four types of authority:
1) Actual express
2) Actual implied: agent reasonably believes the principal has given (necessity, custom, prior dealings)
3) Apparent
4) Ratification
What are the special rules for actual express authority in the area of principal liability for contracts?
1) May be oral, subject to the equal dignity rule
2) May be private
3) Will be narrowly construed by courts
Express authority will be REVOKED by:
1) Unilateral act by either party, OR
2) Death or incapacity of the principal
When may the express authority of a principal NOT be revoked?
When P gives the agent a durable power of attorney:
1) A written expression of authority to enter into a transaction
2) That includes conspicuous survival language.
What are the factors for finding actual implied authority in the area of principal liability for contracts?
1) Necessity: there is implied authority to do all tasks which are necessary to accomplish an expressly authorized tasks
2) Custom: implied authority to do all tasks customarily performed by persons with the agent’s title or position.
3) Prior dealings: implied authority to do all tasks which A believes to have been authorized to do by prior acquiescence by P
What is the test for apparent authority in the area of principal liability for contracts?
1) P cloaked A with appearance of authority, AND
2) Third party reasonably relies on appearance of authority
What is the threshold rule for principal liability for contracts entered into by its agents?
The principal is liable on its authorized contracts.
What is the test for ratification in the area of principal liability on contracts?
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 its benefits
Exception: Ratification CANNOT ALTER the terms of the contract.
Is an agent personally liable on an authorized contract?
Generally no. Exception: If P is partially disclosed (only identity of P concealed) or undisclosed, authorized agent may nonetheless be liable at the election of the third party.
What duties does an agent owe its principal?
1) Care (exercise reasonable care)
2) Obedience (obey reasonable instructions)
3) Loyalty: no self-dealing, usurping P’s opportunity, or secret profits.
What is an agent’s duty of loyalty to its principal?
1) Self-dealing: A may not receive a benefit to the detriment of P
2) Usurping P’s opportunity, OR
3) Secret profits at P’s expense
What remedies are available to a principal where the agent breaches her duty by making secret profits?
P may
1) Recover losses caused by the breach, AND
2) Disgorge profits made by the breaching agent
What are the major issue areas in partnership law?
1) Partnership formation
2) Liabilities of partners to third parties
3) Rights and liabilities between partners
4) Partnership dissolution
What law governs partnerships in CA?
RUPA: Revised Uniform Partnership Act
What are the formalities required to form a general partnership?
NONE! There are no formalities to becoming a general partnership.
What is a general partnership?
An association of two or more persons who are carrying on as co-owners of a business for profit.
In a close call, how will you know if there is a general partnership?
The contribution of money or services in return for a share of PROFITS creates a presumption that a general partnership exists.
What are the rules for partnership liability to third parties?
Partners are agents of the partnership for carrying on usual partnership business. Thus:
1) Partnership is bound (each partner personally liable) by torts committed by partners in scope of partnership business
2) Partnership is bound (each partner personally liable) by contracts entered by partners with authority
Are incoming partners liable for pre-existing debts of the partnership?
Generally no, but any money paid into partnership by incoming partner can be used to satisfy prior debts.
Are dissociating partners liable for subsequent debts of the partnership?
Dissociating (leaving) partners retain liability on subsequent debts UNTIL:
1) Notice of dissociation is given to creditors, OR
2) Ninety days after filing notice of dissociation with the state
When will there be general partnership liability by estoppel?
One who represents to a third party that a general partnership exists will be liable as if a general partnership exists.
What is the basic rule for general partner liability?
General partners are liable personally for all partnership obligations.
What is a limited partnership?
A partnership with at least one general partner and at least one limited partner.
How is a limited partnership formed?
Must file a limited partnership certificate with the state that includes the names of all general partners.
What is the liability and control of a general partner in a limited partnership?
1) Liability: for all limited partnership obligations
2) Control: right to manage business
What is the liability and control of a limited partner in a limited partnership?
1) Liability: not liable for limited partnership obligations
2) Control: generally may not manage the business
How is a registered limited liability partnership formed?
Must register by filing a statement of qualification plus annual reports.
What is the liability of partners in a registered limited liability partnership?
No partners (not even general partners) are liable for the debts and obligations of the business.
What is the purpose of a limited liability company?
1) Give owners (members) same limited liability of a corporation, AND
2) The beneficial tax treatment of a partnership
How is a limited liability company formed?
1) Must file articles of organization
2) May adopt an operating agreement
What are the characteristics of a limited liability company?
1) Limited liability for members
2) Members control, but Articles may delegate control to managers
3) Limited liquidity: member interests are not freely transferable
4) Limited life: events of dissolution
What is the relationship between general partners and the partnership?
General partners are fiduciaries of each other and the partnership. Owe:
1) Duty of loyalty: same as with agents (no self-dealing, usurping partnership opportunities, secret profits)
What is the remedy for a breach of the duty of loyalty by a general partnership?
Action for accounting (lawsuit). Partnership may recover
1) Losses caused by the breach, AND
2) Disgorge profits made by breaching partner
What are a partner’s property rights in specific partnership assets?
Specific partnership assets = land, leases, and equipment owned by the partnership. No individual partner may transfer them without partnership authority.
What are a partner’s property rights in the “share of profits and surplus” of the partnership?
This is personal property owned by individual partners (individual partners may transfer to a third party unilaterally).
What are the various forms of partnership property rights?
1) Specific partnership assets (no unilateral transfer)
2) Share of profits and surplus (personal property)
3) Share in management (no unilateral transfer)
What is the “share in management” property right in a partnership?
This is an asset owned by the partnership itself and not individual members. Cannot be transferred to a third party.
In a close call, how will you know whether something is a specific partnership asset or the personal property of a partner?
Ask whose money was used to by the property? Partnership money = specific partnership asset.
What are the default rules for partnerships?
Absent an agreement:
(1) Each partner is entitled to equal control (one partner, one vote)
(2) Partners get no salary, exception for helping to wind-up partnership business
(3) Profits are shared equally, losses are shared like profits (e.g. silent to losses, but not profits)
When does partnership dissolution occur?
In the absence of an agreement that specifies events of dissolution, dissolution occurs automatically upon the notice of express will of one general partner to dissociate.
What is the winding up of a partnership?
The period between dissolution and termination in which remaining partners liquidate partnership assets to satisfy partnership creditors.
When is a general partner entitled to a salary?
Absent an agreement, only for helping to wind up.
When are partners liable for transactions entered into during the winding up phase?
1) Old business: the partnership and therefore individual general partners remain liable on all transactions to wind up old business with existing creditors
2) New business: the partnership and therefore individual general partners remain liable on new business transactions UNTIL notice of dissolution is given to creditors OR until 90 days after filing statement of dissolution with the state.
What is the priority of distribution in the dissolution of a partnership?
Each level of priority must be fully satisfied before beginning the next level:
1) Creditors (including partners that loan money to the partnership)
2) Capital contributions by partners
3) Profits and surplus, if any (shared equally absent an agreement)
What are partners entitled to following dissolution?
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.