Agency and Partnership

• 1. Liability of Principle to 3rd Parties for Torts of Agents
• 2. Liability of Principle to 3rd parties for K entered by agent
• 3. Duties which Agents owe to Principals

• Principle will be liable if:
• 1. Principle/Agent Relationship
• 2. Tort committed in Scope of relationship

• 1. Assent: Must be an agreement
• 2. Benefit: Agents conduct must be for Principals benefit
• 3. Control: Principal must have the right to control the agent

** Liability of a sub-agent requires same 3 prongs (typically there is no right of control)

The key distinction is the right to control.  You can control your agent but cannot control an Independent Contractor and thus you are not vicariously liable for IC.

• 1. Actual Express Authority
• 2. Actual Implied
• 3. Apparent
• 4. Ratification

Can be oral, but must be in writing if subject matter falls in SOF

• 1. Unilateral Act by either party to revoke
• 2. On the death of the Principal - unless Durable Power of Attorney given. Otherwise, agent is liable for the K

• 1. Necessity: Implied authority to accomplish an expressly authorized task
• 2. Custom: Implied that a person with a title or function has the right to K
• 3. Prior dealings between P and A. P has accepted in the past

When it appears to the buyer that A has the authority: like selling an item in a store even though the owner said not to sell it.

• 1. P has knowledge of all material facts of K
• 2. P accepts the benefits of the K
• 3. CANNOT alter the terms of K or it is not ratification
• Ex. P gave A authority to buy 10 steel drums but A bought wooden drums, P can accept or reject them all, but not a portion

• 1. Duty of Care
• 2. Duty to obey instructions that are reasonable
• 3. Duty of loyalty (no self-dealing). Principal can disgorge profits or breach of K claim

• 1. General Partnership Formation
• 2. Liabilities of General partners to 3rd parties
• 3. Rights and liabilities between GP's
• 4. G Parnerships dissolution
• 5. Alternative Unincorporated Business Organizations

• 1. No formalities
• 2. Two or more people carrying on as co-owners of biz 4 profit
• 3. Key Factor: a contribution of money or services in return for a share of profits is a presumption that a partnership exists

Partners are agents of the partnership and each GP liable for the torts and K's of the partnership and other partners

New partners are not liable for prior debts but their contributions can be used to pay the debts

Liable on future debts of partnership until notice of disaccociation is given to creditors or 90-days after filing notice of dis-association w/ state

You will be held to the liabilities of a partnership if you represent you are part of the partnership even though you are not

Duty of Loyalty: No self-dealing

• 1. Specific Assets: Land and equipment are owned by the partnership and cannot be sold by an individual partner
• 2. Share of Profits: Profits are personable property, you can sell or assign your interest

• Absent an Agreement:
• 1. Partners have equal Management - even if one owns more than the other
• 2. There are no salaries, only profit share - except can get money for winding up

** Must be unanimous vote for dissolution or bulk asset sale

• Absent an Agreement:
• 1. Profits are shared equally, no matter what percentage you own.
• 2. Losses are shared the same proportion as the profits.

Any Partner can give notice to the other partners of his intent to dissolve the party.  Otherwise he can just disassociate from the partnership.

**If a partner dissolves partnership early, he might be liable under breach of K so he may just want to disassociate rather than dissolve

• Dissolution is just the start of Winding Up.
• Termination is when the partnership actually ceases.

Partners liquidate all partnership assets to pay creditors

• 1. Old Business: Partners remain liable on existing contracts
• 2. New Business: Partners remain liable on any new business of any partner while winding up

• 1. Outside Creditors paid first
• 2. Inside Creditors paid 2nd
• 3. Capital contributions MUST BE PAID
• 4. Profits and surplus if any

Every partner must be paid back for loans and capital, so if there is not enough money to pay back then the individual partners need to pay in their own money

• 1. File a LP Cert w/ SOS
• 2. GP liable for all debts of partnership
• 3. LP only liable up to their capital investment

** Modernly LP's can manage w/o losing their GP status