BarBri CA Agency and Partnership Flashcards

Terms Definitions
When will a principal be vicariously liable for torts committed by agent?
Principal will be liable for torts committed by agent if:
(2) the tort was committed by the agent within the SCOPE of that relationship.
Principal-Agent Relationship Requirements

ASSENT - an informal agreement b/w P who has capacity and A

BENEFIT - The A's conduct must be for the P's benefit

CONTROL - The P must have control over the A by having the power to supervise the manner of A's performance
Vicarious Liability of Principal for torts of Sub-Agents and Borrowed Agents
None unless there is A, B, and C (Assent, Benefit, and Control).

For subagent we don't usually have A or C, for borrowed agent we don't usually have C.
Factors Distinguishing An Agent From An Independent Contractor
There is no right to control an independent contractor because there is no power to supervise the manner of their performance.
Vicarious Liability of Principal for torts of an Independent Contractor
RULE: There can be NO vicarious Liability for independent contractor's torts

(1) Ultra hazardous activity; and
(2) Estoppel - if you 'hold out' independent contractor with appearance of agency you are estopped from denying liability
Scope of Principal-Agent Relationship

(1)Was conduct 'of the kind' agent was hired to perform? (Was conduct in job description? If yes, likely within scope);

(2)Did tort occur 'on the job' (Frolic vs Detour)? Frolic is a new and independent Journey (outside scope) and Detour is a near departure from an assigned task (w/in scope).;

(3)Did A intend to benefit P? If so, even in part, that is enough and the conduct is w/in the scope.
Principal's Liability for Agent's Intentional Torts
RULE: Generally, intentional torts are outside the scope of liability.

EXCEPTIONS - Intentional Torts are w/in the scope if the conduct was:
(1) Specifically authorized by P
(2) Conduct was natural from Employment
(3) Motivated by a Desire to serve P
Liability of Principal for contracts entered into by its agent
P is liable for contracts entered into by A if P AUTHORIZED the agent to enter the contract
Types of authority for agent to enter into a contract

(1)Actual Express Authority;

(2)Actual Implied Authority;

(3)Apparent Authority;

(4) Ratification
Actual Express Authority
P used words to express authority to A.

Rule: Oral, Private, Narrow

Exception -- Equal Dignity Doctrine: If the contract itself must be in writing, then the express authority must also be in writing.
Revocation of Express Authority
RULE: Express Authority will be revoked by either
(1) Unilateral act of either party; or
(2) Death or incapacity of P.

EXCEPTION: Express Authority cannot be revoked if the principal gives the agent a DURABLE POWER OF ATTORNEY (Power of Attorney = written expression of authority)(Durable=Conspicuous survivor language)
Actual Implied Authority:
Authority which agent reasonably believes he has because of:

(1) Necessity: implied authority to do all tasks which are necessary to accomplish an expressly authorized task;

(2) Custom: implied authority to do all tasks which are customarily w/in the agent's title or position.

(3) Prior Dealings b/w P&A: implied authority to do all tasks which the agent believes to have been authorized to do by P's prior acquiescence.
Apparent Authority
(1) P cloaked A w/ the appearance of authority; AND
(2) 3rd party reasonably relies on appearance of authority.
Secret Limiting Instructions, as applied to apparent authority.
Apparent Authority situation in which Agent has actual authority, but principal has secretly limited that authority. In common fact pattern, Agent acts beyond the scope of the limitation. (e.g. store clerk, contrary to owner's instructions, sells antique grandfather clock). P will still be bound b/c clerk was cloaked in appearance of authority and 3rd party reasonably relied.
Lingering Authority in context of apparent authority
Situation in which actual authority has been terminated. Afterwards, agent continues to act on principal's behalf. P will still be bound. (e.g. P fires long time A, but A continues to enter deals on P's behalf and runs away w/ 3rd Party's money -- P will still be bound b/c P has cloaked A with the lingering appearance of authority and also, customers may continue to rely reasonably upon A's appearance of authority, until they receive notice of her termination).
RULE: Authority can be granted after the K has been entered, if:
(a) P has knowledge of all material facts regarding the K; AND
(b)P accepted its benefits.

EXCEPTION: Ratification cannot alter the terms of the K (otherwise authority is void)
Rules of liability on the K (with regard to Agent/Principal)
(1) If no authority, P not liable on the K. If no authority, A is liable for K;
(2)If authority, P is liable on the K. If authority, A is not liable on the K.

EXCEPTION: if P is partially disclosed or undisclosed, the authorized A may nonetheless be liable at the ELECTION of the 3rd party
Duties Agent Owes to Principal
1. Duty to exercise reasonable Care;

2. Duty to obey reasonable instructions

3. Duty of Loyalty
Duty of Loyalty
(a) No self dealing - A cannot receive a benefit to the detriment of P;

(b) No usurpation of opportunity of principal;

(c) No secret profits
Remedies Available to P against A for violation of duty
Principal may recover
(1)LOSSES caused by an Agents breach; AND
(2) Principal may DISGORGE PROFITS made by the Agent
GENERAL Partnership Formation
FORMALITIES: There are no formalities in becoming a general partnership.

DEFINITION: A general partnership is an association of 2 or more persons who are carrying on as co-owners of a business for profit.

SHARING OF THE PROFITS: Contribution of money, capital, or services, in return for a share of profits creates a presumption that a general partnership exists.
Liabilities of General Partners to 3rd Parties
1. Agency Principles Apply:
(a) Partners are agents of the Partnership for carrying on usual Partnership business;
(b) Partnership is bound by torts committed by Partners in scope of Partnership business;
(c) Partnership is bound by Ks entered by Partners w/ authority.

2. General Partners are Personally Liable for Debts of the Partnership
Incoming Partner's Liability For Pre-existing Debts
Generally, incoming Partners are not liable for pre-existing debts but any contributions can be used to satisfy those pre-existing debts;
Dissociating Partner's liability for Subsequent Debts
Dissociating Partners retain liability on future debts until:
actual notice of dissociation is given to creditors; OR
until 90 days after filing of Notice of Dissociation with the State.
General Partnership By Estoppel
One who represents to a 3rd party that a general partnership exists will be liable as if a general partnership exists.
Limited Partnerships (Definition)
DEFINITION: Partnership in which there is at least one general partner and at least one limited partner, and therefore, has a two-tiered structure.
Limited Partnerships (Formation)
To form, you must file a Limited Partnership Certificate that includes the names of all general partners.
Limited Partnerships (Liability and Control)
GENERAL PARTNERS are liable personally for all limited partnership obligations but they also have the right to control the limited partnership.

LIMITED PARTNERS have limited liability and are not obligated for the obligations of the limited partnership itself. They have limited control and may not manage the business w/out forfeiting the limited liability.
Registered Limited Liability Partnerships (RLLP)

Must file (1) a Statement of Qualification; AND (2) Annual Reports
Registered Limited Liability Partnerships (RLLP)

1. NO Partner is Liable for the obligations of the partnership itself.

2. The individuals may be sued individually for their own torts.
Limited Liability Companies

(Original Purpose)
ORIGINAL PURPOSE: Give owners, a.k.a. Members, same limited liability of Shareholders of a corporation, as well as the tax Benefits of Partnerships
Limited Liability Companies

Must file:
(1) Articles of Organization; AND
(2) Operating Agreement.
Limited Liability Companies

Members are NOT liable for Debts and Obligations of the LLC itself
Limited Liability Corporation

(Characteristics or Attributes)
(1) Members control, but Articles may delegate control to managers.
(2) Limited Liquidity -- Member interests are not freely transferable.
(3) Limited Life -- Events of dissolution.

THEREFORE LLC = Limited Liability, Plus Limited Liquidity, Plus Limited Life, and Limited Tax
Relationship between General Partners
General Partners are FIDUCIARIES of Each other and the Partnership

They owe a duty of loyalty.
Duty of Loyalty (For Partners)
Partners, as w/ agents, may NOT:
(1) Engage in Self-Dealing;
(2) Usurp Partnership Opportunities; OR
(3) Make Secret Profits
Action for Accounting
Cause of Action in which Partnership may recover losses caused by the breach and may also disgorge profits made by the breaching partner.
Specific Partnership Assets
Land, leases, or equipment, owned only by the partnership. Therefore, no individual partner may transfer these assets w/out partnership authority
Partner's Rights in Partnership Property: Share of Profits and Surplus(Transferability)
Personal property owned as such by individual partners.

Therefore, individual partners may transfer their interests in the share of profits and surplus to others.
Partner's Rights in Partnership Property: Share in Management
Owned only by the partnership itself.

Therefore, no individual Partner may transfer their share in management to some 3rd party.
Partner's Rights in Partnership Property: Conflict b/w Specific Partnership Assets and Personal Property
TEST: Whose $ was used to buy the property?

If partnership $ was used, then property is partnership property. If personal $ was used, then property is personal property.
Rights and Liabilities b/w Partners

ABSENT AN AGREEMENT, Partners have EQUAL control (vote)
Rights and Liabilities b/w Partners


EXCEPTION: Partners do receive compensation for winding up partnership business
Rights and Liabilities of Partners: Partner's Share of Profits and Losses


** Don't be tricked by (a) facts that provide for disproportionate sharing of losses but silent on profits (default rule will apply); and (b) facts indicating partners made different contributions but silent on agreement of sharing profits or losses(default rules apply)
Dissolution (Definition)
1. In a 'partnership at will,' where there is no agreement, dissolution occurs automatically upon notice of express will by any General Partner to disassociate.

2. In a Partnership not at will, where there is an agreement, dissolution occurs upon the happening of an event specified in the agreement or upon the majority vote of the partners to dissolve w/in 90 days of disassociation.
Termination and Winding Up


WINDING UP = Period b/w dissolution and Termination in which remaining partners must liquidate the partnership assets to satisfy the partnership creditors.
Compensation for Winding Up
Partners do receive compensation for winding up
Liability for Winding Up
(Old Business)
OLD BUSINESS: Partnership, and therefore, its individual general partners, retain liability to wind up on all transactions to wind up the business.
Liability for Winding Up
(New Business)
Partnership, and therefore, its individual general partners, still retain liability for New Business until:
(1) actual notice of dissolution is given to creditors; OR
(2) until 90 days after filing a Statement of Dissolution w/ the State.
Priority of Distribution
Each level of priority must be fully satisfied b/f beginning the next level in this order:
(1) All outside and inside creditors;
(2) Capital Contributions;
(3) Profits, if any, or losses are shared equally (unless agreements says otherwise)
Rule for distribution to partners at termination of business
RULE: 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.
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