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64 Cards in this Set
- Front
- Back
When will a principle be liable for torts committed by an agent? |
1. when there is a principle-agent relationship; AND
2. the tort was committed by the agent within the scope of that relationship |
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What does a principle-agent relationship require to exist? |
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) 3. Control (the principal must have the right to control the agent by having the power to supervise the manner and method of the agent's performance) |
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When will the principle be vicariously liable if its agents get the help of a "sub-agent" and the sub-agent commits a tort? |
* the principal will be liable for the sub-agent's tort ONLY if there is assent, benefit, and control between the principal and the sub-agent tortfeasor
* typically, the principal does not assent to the sub-agent's help and does not have the right to control * so likely, no vicarious liability |
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When will the principal be vicariously liable for a "borrowed agent's" tort? |
* only if there is assent, benefit, and control between the borrowing principal and the borrowed agent
* typically, although the borrowing principal may assent to and benefit from the borrowed agent, the borrowing principal does not assume the right to control the borrowed agent * likely not vicariously liable |
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what is the key distinction between an agent and an independent contractor? |
There is no right to control an independent contractor because there's no power to supervise the manner of his performance. Factors to consider - Does the hired person: 1. have a separate and distinct business/occupation 2. get paid on a project completion basis 3. bring/use their own tools? |
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What is the vicarious liability rule for independent contractors? |
* Without control, there can be no vicarious liability for a independent contractor's tort
* except: 1. Inherently dangerous activities (hired to do something inherently dangerous, involving a real risk to third parties); and 2. Estoppel (if you hold the contractor out with the appearance of agency, you will be estopped from denying liability) |
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What is the scope of principle-agent relationship, for the purposes of determining whether a principal can be liable for the torts of their agent? |
1. The conduct must be "of the kind" the agent was hired to perform to be within the scope generally
2. The tort must occur on the job. Conduct must be a detour rather than a frolic (frolic is a new and independent journey vs. a near departure.) 3. Did the agent, even in part, intend to benefit the principal with the conduct? Will be enough to be within the scope of the relationship. |
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When is a principal vicariously liable for the intentional torts of an agent? |
Intentional torts of an agent are ordinarily outside the scope of agency, and thus vicarious liability.
However, they will be inside the scope if: 1. Specifically authorized by the principal; |
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When is the principal liable for contracts entered into by its agent? |
A principal is liable for contracts entered into by its agents if the principal authorized the agent to enter into the contract. Principal liable only for authorized contracts. The principal must have the capacity to enter into a contract and bind himself personally. An agent will be personally liable for an unauthorized contract |
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What are the four types of authority / authorization? |
1. Actual Express Authority
2. Actual Implied Authority 3. Apparent Authority 4. Ratification |
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What is actual express authority? |
* When the principal used words to express authority to agent
* narrowly limited to actual limited words within the grant * can be oral or private * however if the contract itself must be in writing, then the express authority must be in writing as well... so always in writing for land |
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How can express authority be revoked? |
1. By a unilateral act of either the principal or the agent; OR
2. Death or incapacity of the principal * except if the principal gives the agent durable power of attorney (a written expression of authority to enter a transaction with clear survival language) Durable power of attorney typically survives incapacity but not death. |
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What are the three ways in which authority can be implied? |
Implied authority, is authority which the agent reasonably believes the principal has given because of: 1. Necessity (there is implied authority to do all tasks which are necessary to accomplish an expressly authorized task)2. Custom (there is implied authority to do all tasks which by custom are preformed by persons with the agent's title or position) 3. Prior acquiescence by the principal (there is implied authority to do all tasks which the agent believes to be authorized from prior conduct by the principal - SILENCE can imply authority to continue doing things i.e. failure to object to an unauthorized act. |
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What is the test for determining if an agent had apparent authority? What two variations should you be aware of? |
1. the principal "cloaked" the agent with the appearance of authority; AND
2. the third party reasonably relies on the appearance of authority Secret Limiting Instructions: Principal will still be liable if agent has actual authority, but exceeded the secretly limited that authority imposed by principal. Lingering Authority: Principal will still be liable if actual authority is terminated but agent continues to act on principal's behalf, until persons with whom agent usually contracts receive notice of termination. |
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What is the test for ratification of agent's action? |
Authority can be granted after a contract has been entered into if:
2. the principal accepts its benefits except: ratification cannot alter the terms of the contract |
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What is the general rule for liability on a contract? |
The principal is liable on its authorized contracts, and as a rule an authorized agent is not liable on its authorized contract.
The undisclosed principal: If the principal is partially disclosed (only the identity of the principal concealed) or undisclosed (fact of principal concealed) authorized agent may nonetheless be liable at the election of the third party. Contracting party can sue agent personally. |
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What are the duties an agent owes to a principal? |
In return for reasonable compensation and reimbursement of expenses, agents owe principals: * duty of care: (Keep principal informed of what is going on)* duty to obey instructions that are reasonable * duty of loyalty |
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What is included in the duty of loyalty? |
An agent may not do any of the following:* self-dealing (agent cannot receive a benefit to the detriment of the principal)
* usurping the principal's opportunity, OR * secret profits (making a profit at the principal's expense without disclosure) |
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what are the formalities for forming a general partnership? |
there are no formalities |
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what is the definition of a general partnership? |
an association of two or more persons for carrying on as co-owners of a business for profit |
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what is the key factor in determining a general partnership? |
* sharing of profits
* the contribution of money or services in return for a share of profits creates a presumption that a general partnership exists (a strong presumption) |
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What are the liabilities of members of a general partnership, generally? |
* partners are agents of the partnership for apparently carrying on the usual partnership business
* general partnership is liable for each partner's torts in the scope of partnership business and for each partner's authorized contracts * each general partner is also personally liable for all debts of the partnership |
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What is an incoming partner's liability for pre-existing debts? |
An incoming partner is generally not liable for prior debts, but any capital paid to the partnership by that brand new partner can be used by the partnership to satisfies those prior debts.
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What is a disassociating / outgoing partner's liability for subsequent debts? |
They retain liability for future debts until actual notice of their disassociation is given to all known creditors and even potential creditors typically in newspapers of general circulation where the partner primarily carries on business. OR until 90 days after filing a notice of dissociation with the state |
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how can a general partnership be formed by estoppel? |
One who represents to a third party that a general partnership exists will be liable as if a general partnership exists |
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what is the relationship of partners to each other and the partnership? |
they are fiduciaries of each other and the partnership (so all the fiduciary duties apply): 1. No self-dealing; or 2. cannot usurp partnership opportunities; or 3. make a secret undisclosed profit at the partnership's expense. |
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What is an action for accounting? |
A remedy to a suspected breach of the duty of loyalty is to cause an accounting to be done: General partnership may recover for losses that are caused by the breach of fiduciary duties and may recover losses caused by breach and requii disgorge profits |
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What is a partner's rights in specific partnership assets in a general partnership? |
1. Land, 2. Leases, and 3. Equipment are owned only by the partnership itself, so they may not be transfer by individual partners without partnership authority |
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What is a partner's rights to the share of the profits in a general partnership? |
Share of profits and surplus is personal property, owned by individual partners; therefore, it may be transferred by individual partners to third parties |
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What is a partner's right to share in management in a general partnership? |
* Management is an asset owned only by the partnership and it may not be transferred by individual partners to third parties; therefore, you cannot sell your right to vote or move it down to people via intestate succession.
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How do you determine whether the fact pattern involves property owned by the partnership or personal property owned by an individual? |
ask: 1. whose money was used to buy the property2. if the partnership money was used to buy it, it goes to the partnership, if personal money it becomes personal property |
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does a member of a general partnership get salary? |
absent an agreement, no - unless they are helping "wind up" the business |
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what is a general partner's share of profits and losses in a general partnership? |
* absent an agreement, profits are shared equally
* absent an agreement, losses shared like profits |
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how do you dissolve a general partnership? |
there are three stages: 1. dissolution, 2. termination, and 3. winding up |
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what is the definition of "dissolution" of a general partnership? |
In the absence of an agreement that sets forth events of dissolution, a general partnership dissolves upon notice of express will of any general partner to dissociate, OR any material change in the partnership (bankruptcy, incapacity, death or withdrawal of any single general partner) |
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what is the real end of the general partnership called? |
termination |
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what is "winding up"? |
the period between dissolution and termination in which the remaining partners liquidate the partnership's assets to satisfy the general partnership's creditors |
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what is a general partner's liability to old business when dissolving the partnership? |
the partnership and therefore its individual general partners retain liability on all transactions entered into to wind up old business by satisfying creditors who existed before winding up began |
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what is a general partner's liability to new business when dissolving the general partnership? |
the partnership and its individual general partners retain liability on brand new transactions during winding up until actual notice of dissolution is given to creditors or until 90 days after filing a statement of dissolution with the state |
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what is the priority of distribution of money at dissolution of the general partnership? |
Each priority level must be fully satisfied before the next can be: 1. first, the partnership must pay all creditors (all outside non-partner trade creditors plus all partners insiders who have loaned money to the partnership and have become creditors thereby.)2. second, the partnership must repay all capital contributions into the partnership by partners (the partnership is now liable to its own partners the full repayment of their capital contributions) 3. third, profits, if any are shared equally among partners without an agreement.
Generally, each partner must be repaid his or her loans and capital contributions, plus the partner's share of any profits, or minus that partner's share of any losses. |
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what is a limited partnership? |
a partnership with at least one general partner at least one limited partner |
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how do you form a limited partnership? |
file with the state a "limited partnership certificate" that includes the name of all general partners |
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what is the liability of a general partner in a limited partnership? |
he is liable for all limited partnership obligations, but exercise substantial managerial control. |
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what is the liability of a limited partner in a limited partnership? |
* have limited liability and are not liable for the obligations of the limited partnership itself.
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how do you form a registered limited liability partnership? |
must register with the state by filing a statement of qualification and annual reports |
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what are the liabilities of partners liable for the obligations of the registered limited liability partnerships? |
no partner, not even general partners, are liable for the obligations of the limited partnership. partners will only be liable for their own investments in the partnership. |
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what is an LLC? |
a hybrid between a corporation and a partnership in which the owners (members) have the same rights and limited liabilities as shareholders in a corporation plus, the benefits of partnership tax treatment. |
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what are the formation requirements for an LLC? |
MUST file articles of organization, and may adopt an operating agreement |
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who controls an LLC? |
owners have the choice between managing the business or they may delegate their control to a team of managers |
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what is the liquidity of an LLC? |
limited liquidity: a full membership interest may not be transferred without unanimous consent of the members or as provided otherwise in the operating agreement |
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what is the life of an LLC? |
a limited life - the company will dissolve upon unanimous consent of the members or as provided otherwise in the operating agreement |
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When doing an principal - agent question, what rule should you always start with? |
how agency relationship is formed |
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What is the rule statement for the creation of an agency relationship? |
An agency relationship is relationship is created when a person (the principal) manifests an intent that another person (the agent) act on his behalf and both parties consent to the agreement |
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what is the rule statement for actual authority? |
authority the agent reasonably thinks he possesses based on the principal's dealings with him - it can be express or implied. |
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what is the rule statement for "apparent" authority? |
apparent authority exists when the principal "holds out" the agent has having certain authority, causing third parties to reasonably believe that the agent has such authority |
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Rule statement for partnership formation |
* formed when two or more people associate to carry on as co-owners of a business for profit
* a person who receives a share of the profits from a business is presumed to be a partner |
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what is the effect of being partners? |
* each partner is an agent of the partnership for the purpose of its business
* a partnership can be bound on a contract entered into by a partner with actual or apparent authority |
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what is actual authority in the context of a partnership? |
authority that a partner reasonably believes he has based on his communications with the partnership |
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how can a partner bind the partnership without actual authority?
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the act of any partner apparently carrying on in the ordinary course of the partnership business or business of the kind carried out by the partnership will bind the partnership unless the partner had no authority to act for the partnership and the third party with whom the partner dealt knew the partner lacked authority. |
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how can you get actual authority to do things outside of the partnership's business? |
by getting unanimous consent of all the partners |
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are partners personally liable for contracts? |
* Yes. Each partner is jointly and severally liable for partnership obligations, which means that each partner is personally liable for the full amount.
* however, when a partner enters a contract he had no authority to enter into on behalf of the partnership, the partnership is not bound by the contract. |
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What result when an the agent holds himself out to have apparent authority but the principal does not? |
*the principal will not be liable unless they ratify the contract
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What are the liabilities that accompany an LLC? |
The members/owners are not liable for any debts of the company, if the company has partnership characteristics. |
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What partnership characteristics need to be met in order to qualify for no liability as an LLC? |
An LLC must satisfy 2 of 3 characteristics to qualify for no personal liability: 1. Members control business and operations but may delegate to one or more managers; 2. Limited Liquidity: the right to receive profits and losses can be transferred but management rights are not tranferrable 3. Limited life: events of dissolution will generally cause dissolution. |