Agency/partnership

Front 1

What is the basic test for when a principal will be liable for the torts of her agent?

Back 1

1) Does a principal-agent relationship exist, AND
2) Was the tort committed by the agent within the scope of the relationship?

Front 2

When does a principal-agent relationship exist?

Back 2

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

Front 3

When is a principal liable for the acts of a subagent?

Back 3

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)

Front 4

When is a borrowing employer liable for its borrowed agent’s tort?

Back 4

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)

Front 5

Why is an independent contractor not an agent?

Back 5

There is no right to control an independent contractor because there’s no power to supervise the manner of its performance.

Front 6

Is there vicarious liability for the torts of an independent contractor?

Back 6

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

Front 7

How do you determine if the act of the agent was within the scope of the principal-agent relationship?

Back 7

Factors:
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)?

Front 8

What is a frolic?

Back 8

A new and independent journey. Outside scope of agency (compare detour).

Front 9

What is a detour?

Back 9

A mere departure from an assigned task. Inside scope of agency (compare frolic).

Front 10

When is a principal liable for the intentional torts of its agents?

Back 10

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

Front 11

When is a principal liable for contracts entered into by its agent?

Back 11

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

Front 12

What are the special rules for actual express authority in the area of principal liability for contracts?

Back 12

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

Front 13

When may the express authority of a principal NOT be revoked?

Back 13

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.

Front 14

What are the factors for finding actual implied authority in the area of principal liability for contracts?

Back 14

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

Front 15

What is the test for apparent authority in the area of principal liability for contracts?

Back 15

1) P cloaked A with appearance of authority, AND
2) Third party reasonably relies on appearance of authority

Front 16

What is the threshold rule for principal liability for contracts entered into by its agents?

Back 16

The principal is liable on its authorized contracts.

Front 17

What is the test for ratification in the area of principal liability on contracts?

Back 17

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.

Front 18

Is an agent personally liable on an authorized contract?

Back 18

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.

Front 19

What duties does an agent owe its principal?

Back 19

1) Care (exercise reasonable care)
2) Obedience (obey reasonable instructions)
3) Loyalty: no self-dealing, usurping P’s opportunity, or secret profits.

Front 20

What is an agent’s duty of loyalty to its principal?

Back 20

NO:
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

Front 21

What remedies are available to a principal where the agent breaches her duty by making secret profits?

Back 21

P may
1) Recover losses caused by the breach, AND
2) Disgorge profits made by the breaching agent

Front 22

What are the major issue areas in partnership law?

Back 22

1) Partnership formation
2) Liabilities of partners to third parties
3) Rights and liabilities between partners
4) Partnership dissolution

Front 23

What law governs partnerships in CA?

Back 23

RUPA: Revised Uniform Partnership Act

Front 24

What are the formalities required to form a general partnership?

Back 24

NONE! There are no formalities to becoming a general partnership.

Front 25

What is a general partnership?

Back 25

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

Front 26

In a close call, how will you know if there is a general partnership?

Back 26

The contribution of money or services in return for a share of PROFITS creates a presumption that a general partnership exists.

Front 27

What are the rules for partnership liability to third parties?

Back 27

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

Front 28

Are incoming partners liable for pre-existing debts of the partnership?

Back 28

Generally no, but any money paid into partnership by incoming partner can be used to satisfy prior debts.

Front 29

Are dissociating partners liable for subsequent debts of the partnership?

Back 29

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

Front 30

When will there be general partnership liability by estoppel?

Back 30

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

Front 31

What is the basic rule for general partner liability?

Back 31

General partners are liable personally for all partnership obligations.

Front 32

What is a limited partnership?

Back 32

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

Front 33

How is a limited partnership formed?

Back 33

Must file a limited partnership certificate with the state that includes the names of all general partners.

Front 34

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

Back 34

1) Liability: for all limited partnership obligations
2) Control: right to manage business

Front 35

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

Back 35

1) Liability: not liable for limited partnership obligations
2) Control: generally may not manage the business

Front 36

How is a registered limited liability partnership formed?

Back 36

Must register by filing a statement of qualification plus annual reports.

Front 37

What is the liability of partners in a registered limited liability partnership?

Back 37

No partners (not even general partners) are liable for the debts and obligations of the business.

Front 38

What is the purpose of a limited liability company?

Back 38

1) Give owners (members) same limited liability of a corporation, AND
2) The beneficial tax treatment of a partnership

Front 39

How is a limited liability company formed?

Back 39

1) Must file articles of organization
2) May adopt an operating agreement

Front 40

What are the characteristics of a limited liability company?

Back 40

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

Front 41

What is the relationship between general partners and the partnership?

Back 41

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)

Front 42

What is the remedy for a breach of the duty of loyalty by a general partnership?

Back 42

Action for accounting (lawsuit). Partnership may recover
1) Losses caused by the breach, AND
2) Disgorge profits made by breaching partner

Front 43

What are a partner’s property rights in specific partnership assets?

Back 43

Specific partnership assets = land, leases, and equipment owned by the partnership. No individual partner may transfer them without partnership authority.

Front 44

What are a partner’s property rights in the “share of profits and surplus” of the partnership?

Back 44

This is personal property owned by individual partners (individual partners may transfer to a third party unilaterally).

Front 45

What are the various forms of partnership property rights?

Back 45

1) Specific partnership assets (no unilateral transfer)
2) Share of profits and surplus (personal property)
3) Share in management (no unilateral transfer)

Front 46

What is the “share in management” property right in a partnership?

Back 46

This is an asset owned by the partnership itself and not individual members. Cannot be transferred to a third party.

Front 47

In a close call, how will you know whether something is a specific partnership asset or the personal property of a partner?

Back 47

Ask whose money was used to by the property? Partnership money = specific partnership asset.

Front 48

What are the default rules for partnerships?

Back 48

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)

Front 49

When does partnership dissolution occur?

Back 49

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.

Front 50

What is the winding up of a partnership?

Back 50

The period between dissolution and termination in which remaining partners liquidate partnership assets to satisfy partnership creditors.

Front 51

When is a general partner entitled to a salary?

Back 51

Absent an agreement, only for helping to wind up.

Front 52

When are partners liable for transactions entered into during the winding up phase?

Back 52

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.

Front 53

What is the priority of distribution in the dissolution of a partnership?

Back 53

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)

Front 54

What are partners entitled to following dissolution?

Back 54

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.