Gilbert Exam Strategies ‘A. AGENCY ‘Agency problems concern the liability of one person (the purported principal) for the aus of anuther (dhe purported agent) allegedly doue vu le principal's bell, Geu- erally, the issue is liability to a third party, but rights and liabilities between the principal and agent may also be involved. When analyzing ageney problems, the following approach may be helpful: 1. Are There Problems Between the Principal and Agent? Determine first that an agency relationship in fact exists (.e., look to see if there is consent and capacity of the parties, a writing if required by the Statute of Frauds or an equal dignity statute, and a proper agency purpose). Ifs0, consider: a. Has the agent breached any duty owed to the principal—e., improper performance, breach of fiduciary duty, breach by subagent? b, Is the principal entitled to any property or benefits acquired by the agent during the relationship (patents, inventions, ete.)? c. Can the principal obtain indemnification from the agent when she is li able to a third party (see below)? d. Has the principal breached any duty owed to the agent—e.g., compensa- tion, cooperation, etc.? © Can the agent obtain indemnification (wou the principal for losses or damages sustained in performing for the principal? 2. _ Is the Principal (and/or Agent) Contractually Liable to a Third Party Based on the Agent's Acts? “This is the most frequent type of agency problem, and requires analysis of sev- eral factors: a. Does the agent have the power to bind the principal? b. Iso, what is the source of the agent's power? (1) Look for actual authority: Has there been a manifestation of con- sent (express ot implied) from the principal to the agent that the agent should act for the principal? (2). If there is no actual authority, is there apparent or ostensible author- ity; ie., has the principal manifested to a third party that the agent has authority to act on the principal's behalf? CY, PARTNERSHIP & LIMITED LIABILITY COMPANIES | 0) Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 Gilbert(3) IFthere is no actual or apparent authority, did the principal (i) intentionally or carelessly cause a third party to believe that the agent had authority to act on the principal's behallfs or (ii) fail to take reasonable steps to notify the third party who detrimentally relies on the appearance of authority, such that the principal is estopped from denying the agent’s authority? © Te the agent had author term, death or incapacity of the principal or agent, etc.? If so, is notice of the termination required to be given to third parties? was it te inated —e ¢ , by expiration af the agency 4. Even if the agent had no original authority to act, has there been a subsequent ratification of his act by the principal? Consider whether the act is capable of ratification, and whether the ratification is effective to establish liability (é., consider the “relation back” theory, no partial ratification, etc.). What is the nature of liability on the contract? (1) If the agent acted teithoue authority (so the agent alone is ordinarily li able) is the agent liable for breach of warranty and/or on the contract itself? Can a third party recover against the principal in quasi-contract? (2) Ifthe agent acted with authority, was the principal named in the contract? (a) If there is a “disclosed” principal, are both the agent and principal liable on the contract? Is extrinsic evidence admissible to establish the intent of the parties? (b) If there is an “undisclosed” principal, are both the agent and princi- pal liable on the contract? Can the principal and/or agent enforce the contract against the thied party? Can the third party insist on per- sonal performance by the agent? (c)_ If there is an “unidentified” principal, are both the agent and princi- pal liable on the contract? Is extrinsic evidence admissible to estab- lish the intent of the parties? 3. Is There an Issue of Tort Liability to a Third Party Because of the Acts of Another? Distinguish tortious acts generally (where an employer-employee relation is usually required to impose liability] from misrepresentations (usually made by an agent, rather than an employee). a. For tortious acts other than misrepresentations, consider: (1) Isthere an employer-employce relationship between the actor and the em- ployer—ie., does the employer have the right to control the physical acts of the employee? Consider whether actor is an independent contractor. (Wn | AGENCY, PARTNERSHIP & LIMITED LIABILITY COMPANIES Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 GilbertAlso note possible liability for acts of subservants or “borrowed employ- ces” and possible liability even when the employer has no right to control (c.g. highly dangerous acts). (2) Was the tortious act within the course and scope of the employee's em- ployment? Consider the various relevant factors—e.g., authorization by employer, motivation (including “mixed motive” acts), “fellow servant rule,” liability apart from respondeat superior (common carriers, indepen- dent duty to third party, ete.) b. For misrepresentations by an agent, consider: (1) Was the misrepresentation tortious—i.e., are the requisite elements of sci- center, reliance, etc, present? (2) If so, was the agent actually (expressly or impliedly) or apparently autho- rized to make representations? B. PARTNERSHIP Partnership problems may involve the effect of the partnership relation itself, the effect of a dissolution of the partnership, or the effect of a partner's dissociation from the partnership under the Revised Uniform Partnership Act (*RUPA”). 1. If the Effect of the Partnership Relation Is an Issue, Consider: a. _Isthere a partnership—ice., an “association to carry on.as co-owners a business for profit”? Remember that intent is not necessary. Note whether the partner- ship agreement must be in writing, whether all purported partners have the capacity to be partners, and whether there are sufficient indicia of partnership status (ie., joint ownership of property, sharing of profits, etc.) (1) If there is no partnership by agreement, is there one by estoppel? b. Ifa parmership exists, are any of its general characteristics relevant to the facts at hand? (1) Aggregate characteristics—joint and several liability, taxing of income? (2) Entity characteristics—capacity to sue or be sued, conveyance of prop- erty, bankruptcy? ©. Is there an issue concerning relations between the partners? Consider: (1) Has there been a breach of duty (ie., fiduciary obligations, management and inspection rights, etc.) by any partner? AGENCY, PARTNERSHIP & LIMITED LIABILITY COMPANIES | (0 Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 Gilbert(2). IFso, what remedies are available to the injured partner(s}? Dissolution? Accounting? Action at law? 4. Is chere an issue regarding liability to third persons (creditors)? Recall that partners function as agents for the partnership, and consider: (1) Did the partner(s) have authority to bind the partnership (e., any limita- tions on, or termination of, authority)? (2). Is contract liability involved so partners are jointly and severally liable under the RUPA and jointly but not severally liable under the UPA? (3) Is tort liability at issue so partners are jointly and severally liable under both the RUPA and UPA? (4) Did the parmers form a limited liability partnership so that the partners are not personally liable for all of the partnership's debts and obligations? ¢. Is there an issue concerning the partnership property or partners’ property rights? Consid (1) Isthe property in question partnership property? If so, what are the part ners’ rights in the property? (2) Ifa partner has an interest in the partnership, of what does that interest consist? (a) Cana partner assign his interest? (b) If so, what are the rights of the assigning partner and the assignee? 2. Ifthe Partnership Is Formed Under the RUPA, and the Effect of a Partner's Dissocia- tion Is an Issue, Cor a, Isa cause for the partner's dissociation shown—i.e., partner provides the part nership with notice to withdraw, partner expelled per partnership agreement, ete? b, Ifa partner is dissociated, what is the effect of the dissociation on that partner and the partnership? Consider: (1) Hasan event occurred that requires the dissolution and winding up of the partnership (e.g., receipt by partnership at will of parmer’s notice to with: draw, event making it unlawful to carry on the partnership business)? (2) If not, what are the rights and liabilities of the dissociated partner after her dissociation? Uh) | AGENCY, PARTNERSHIP & LIMITED LIABILITY COMPANIES Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 Gilbert3. If the Effect of a Dissolution of Partnership Is an Issue, Consider: 1s a cause for dissolution shown—ice., expiration of partnership term, at the will of partner (at any time), etc.? If there is an attempted judicial dissolution, are proper grounds shown? b. Ifthe partnership is dissolved, what are the partners’ rights? Distinguish rights where there is no violation of the partnership agreement trom rights where the agreement is violated. If relevant, what are the rights and obligations of the surviving partner(s) regarding a deceased partner’s estate? c.f there isa dissolution, what is the effect on creditors of the partnership? Note liability for existing debts (not discharged without novation), and lability of partners who continue the business. d. If there is a winding up of the partnership, who may wind up? What transac- tions may be entered into by those entitled to wind up? e. IF assets are available after the partnership is dissolved, to whom are they distributed and in what order? 4. If the Partnership Is Possibly a Limited Partnership, Consider: a. Has limited partnership been properly formed—i.e., has a certificate of lim- ited partnership been filed? b. Does the name of the partnership comply with statutory provisions? c. Has there been a change in partnership membership? Consider: (1) Have all partners consented to the admission of any new partners? (2). Ifa partner has assigned bis interest in the partnership, what are the rights of the assigning partner and the assignee? (3) Ifa general or limited partner has withdraten from the partnership, what effect does the withdrawal have on the partnership? d. What are the rights and liabilities of the general and limited partners? Did a limited partner do anything to lose her limited liability, e.g., permit her name to be used improperly in the name of the partnership, or participate in control of the business? €. Has an event occurred that requires the partnership to be dissolved and wound up? If so, may both the general and limited partners wind up? f. IF assets are available after the partnership is dissolved, to whom are they distributed and in what order? AGENCY, PARTNERSHIP & LIMITED LIABILITY COMPANIES | Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 Gilbert¢. LIMITED LIABILITY COMPANIES Limited liability company (“LLC”) problems may concern the formation of the LLC or any of the basic characteristics of the LLC. 1. If Formation Is an Issue, Consider: a. Has the appropriate filing been made—ice. have articles of organization been filed? If so, do the articles contain the information required by stattte? 2. Ifthe Basic Characteristics of the LLC Are in Issue, Consider: a. How will the LLC be taxed? b. How will LLC profits and losses be shared? c._ Ismanagement vested in the members or in managers? Distinguish the vor- ing of manager-managed LLCs and member-managed LLCs. dd Whar are the liabilities of the members and/or managers for LLC obliga~ tions? e. Cana member transfer his interest in the LLC? f. What events will cause an LLC to dissolve? () | AGENCY, PARTNERSHIP & LIMITED LIABILITY COMPANIES Gilbert Law Summaries on Bullitt, Priscitta 6 pages ©2010 Gilbert