AGENCY / PARTNERSHIP BAR OUTLINE Agency I.

Tort Liability Principal will be vicariously liable for torts committed by its agent: Two part test: Principal-Agent Relationship and tort committed within Scope of relationship. o Relationship requires: Assent, Benefit, Control (ABC) Assent informal agreement between Principal and Agent Benefit As conduct must be for Ps benefit Control P must have the right to control A (power to supervise the manner of the performance) Sub-Agent / Borrowed-Agent: GR = no liability (no right to control) Independent Contractor GR = no liability Exception: Ultra Hazardous Activity, Estoppel (hold out Ind K as agent = estopped from denying Vic Liab.) Scope action in job description, Frolic or Detour, Ps benefit o Frolic new and independent journey outside scope o Detour mere departure from assigned task poss in scope o Benefit for P even slight intent to benefit P Intentional Torts GR = outside scope Authorized by P Natural from the nature of employment Motivated by desire to serve P o Think Bar Bouncer Contract Liability Principal will be liable for contracts entered into by its agent only if P authorized A to enter. Actual Expressed Authority may be oral, except if K requires SOF, then Authority needs writing Revocable unless Durable Power of Attorney (expressed written authority w/survival language. Revoked by Death, Incapacity, Unilateral Act Implied Authority agent reasonably believes he has authority due to necessity, custom or prior dealings Necessity those which are necessary to accomplish an expressed task Custom those which are customarily performed by persons with agents title or position (think Lawyers all matters for client) Prior Dealings those which agent believes to have been authorized from prior dealings Apparent Authority P cloaked agent with appearance of authority and Agent relies on appearance of authority. Ratification authority after K entered only valid if P has knowledge of material facts and P accepts benefits of K. Exception: P cannot alter any terms of K must except K as is. Authorized Agents are not liable for K unless; Principal is Partially Disclosed or Undisclosed. Duties owed by A to P Duty of Care Duty to Obey (instructions that are reasonable) Duty of Loyalty Self-Dealing (competing ventures) = Agent cannot receive a benefit to the detriment of principal Usurping Ps opportunity = A takes opportunity for self instead of giving to P Secret Profit = making a profit at Ps expense without disclosure Remedies: P may recover losses that are caused by breach and dis-gorge the profits (ill-gotten gains)

II.

III.

Partnership I. Formation No formalities to becoming a General Partnership subject to SOF An association of two or more persons who are carrying on as co-owners of a business for profit. Estoppel requires that someone who represents to a third party that a partnership exists, will be liable as if a partnership exists.

Agency / Partnership 2012

II.

Liability to 3rd Parties GR: Partners are liable for all partnership obligations. Agency Principles apply Partners are agents of the partnership for apparently carrying on usual partnership business. Therefore, the general partnership is liable for each partners torts in the scope of the partnership business and for each partners authorized contracts. Incoming partner is generally not directly liable for prior debts, but any $ paid into the partnership by the new partner can be used to satisfy prior debts. Dissociating (withdrawal) Partner retains liability on future debts until actual notice of dissociation is given to creditors or until 90 days after filing notice of dissociation with state.

III.

Liability between Partners General Partners are fiduciaries of each other and the partnership. Therefore, GP owe to each other and the partnership the Duty of Loyalty, which means that GP may never engage in self-dealing; may never usurp partnership opportunities and may never make a secret profit at the partnerships expense. Action for Accounting In an action for accounting, a partnership may recover 1) losses caused by breach and 2) the partnership may disgorge profits made by breaching partner.

IV.

Rights to Partnership Property Contribution requires a partner to receive contribution from fellow partners where the partner paid more than his share of partnership liability. Inspection requires a partner to have a right to inspect and copy the partnership books. Management requires that all partners have an equal right to participate in the management of the partnership unless a partnership agreement provides otherwise. Lawsuits requires that a partner may sue his partnership and/or be sued by the partnership . Indemnification requires a partner to be paid by fellow partners for expenses incurred on behalf of the partnership. Distributions (Profits) requires that partners have whatever rights are granted in a partnership agreement as to distribution of profits, if one exists, if no such agreement exists, then the partners share profits and losses equally.

V.

Dissolution At-Will Partnership Dissolution of an at-will partnership requires the ending of the business where 1) at will partnership, and 2) one partner notifies the other partners of an intention to withdraw. Non At-Will Partnership Dissolution of a not at will partnership requires a majority vote of the partners to dissolve within 90 days of the dissociation of one partner. (Bankruptcy, incompetence, death, resignations, retirement) or the happening of an event specified in the agreement. Partnership Liability Old Business The partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business with existing creditors. New Business The partnership and therefore its individual general partners retain liability on brand new transactions during winding up until actual notice of dissolution is given to creditors or 90 days after filing a statement of dissolution with the state.

Agency / Partnership 2012

Distribution of Assets Distribution of assets requires the partnership to pay (1) all creditors. (Creditors include: all classic 3rd party creditors and All partners who loaned $ to partnership that became a creditor) (2) Must repay all capital contributions paid into partnership by partners. (3) Profits/ Losses (if any) equally divided unless agreement states otherwise. VI. Alternative Unincorporated Organizations Limited Partnership (LP) Limited Partnership requires one or more general partner and one or more limited partner and limits liability for a limited partner to the capital that she contributed to the partnership. LP formation requires a certificate of limited partnership signed by all general partners and setting forth the name of the partnership. Failure to file LP with state results in NO limited partnership and ALL partners are fully liable. General Partners are responsible for managing partnership, Limited are not. Limited Liability Partnership (LLP) or (RLLP -registered) LLP requires an existing partnership, unanimous vote to change status, and registering / filing a statement of qualification with the state and submission of annual reports. No partner is liable for debts and obligations of LLP. Partner is still liable for personal torts, but not of Co-partners. Limited Liability Corporation (LLC) A LLC requires a business organization to be taxed like a partnership, but the owners/members liability is limited to that of shareholders, and can be run as a partnership or a corporation. LLCs require a writing (articles of incorp) filed with state and liability is limited for limited partners. Partners do not have management rights, but partners share profits and losses according to the value of contributions.

Agency / Partnership 2012