This site is 100% ad supported. Please add an exception to adblock for this site.

Agency & Partnership 2


undefined, object
copy deck
Formation of agency relationship
1. Manifest of consent by P
2. for A to act on behalf and subject to control
3. A's consent
REST (2d) AGENCY §1. Principal; Agent. 1) Agency is fiduciary relation resulting from:
Manifestation of consent by one person to another; Act on his/her behalf and subject to his/her control; and Consent by the other to do so.
Authority (definition)
REST (2d) AGENCY §7. Authority. Power of agent to affect legal relations of principal by acts done in accordance with principal’s manifestations of consent to agent.
1) Actual express
2) Actual implied
3) Apparent
4) Inherent agency
5) Ratification
Actual Authority
1. Objective manifestation of power to A
2. Not necessary that T have knowledge of P
Actual Express Authority
1. P tells A (verbal or written) in detail what A is authorized to do; and
2. A acts within the scope of the directions.

– focus on P-A rel'p, T’s knowledge doesn’t matter here
Actual Implied Authority
Subjective test (what agent reasonably believed)

1) agent’s understanding of his authority
2) past similar practice (key factor)
3) T’s reliance
Apparent Authority
REST (2d) AGENCY §8. Apparent authority. Power to affect legal relations of another person by transactions with third person, as professed agent for the other, derived from other’s manifestations to third person.
1. A's tx with T
2. P manifestation to T that x is A
3. P is bound

– focus on P-T rel’p
Inherent Agency Power
“is derived solely from the agency relation”
REST (2d) AGENCY §8A. Inherent Agency Power. Indicates power of agent derived not from authority, apparent authority or estoppel, but solely from agency relation – exists for protection of persons harmed by deals with servant or agent.
Inherent Agency Power
Inherent fact patterns
– undisclosed principals
– managers that have broad powers, appear to be owners
– agent departs from authorized method of goods disposal
Policy: Agent is fiduciary of P, fairer that risk of loss falls to P, not T when A disobeys.
REST (2d) AGENCY §82. Ratification. Affirmation by a person of a prior act which did not bind him but which was done or purportedly done on his behalf.
Ratification Requires:
1) acceptance of results of act with intent to ratify
2) full knowledge of all material circum
Tort liability for employees:
Vicarious Liability: Under many circumstances, P can be vicariously liable for A’s torts, even when P is without fault.

1) Master/servant relationship
2) Within scope of employment
Control Factors
1. discretion allowed by S/IC
2. employee hiring, firing, training
3. duration of K and power to terminate
4. ownership of premises, equipment
5. payment of operational expenses (utilities)
6. hours of operation, details of operation
7. rent (how tied to sales?)
8. reporting requirements
Factors Against Control
1. daily maintenance of premises
2. current bus expendit
3. fix customer rates
4. no demand share of profits
5. hire/fire employees
6. employees wages/working condit
7. setting stds for employee skills/productivity
8. supervise work routine
9. discipline employees
∆ no control over…→no agency relp→no liab
Distinguish contractual relationship
Humble: commission agency agreement (unilateral termination, commission paid op expenses)
Hoover: lease and dealer’s agreement (lease terminable by either party) (agreement allowed operator to sell products other than Sun)
If a franchise K so regulates the activities of the franchisee as to vest the franchisor with control within the definition of agency, the agency relationship arises even though the parties expressly deny it.
SEE control factors
Scope of Employment Doctrine
REST (2d) AGENCY §228. Scope of Employment doctrine. Affirmation by a person of a prior act which did not bind him but which was done or purportedly done on his behalf.
Scope of Employment
Conduct of a servant is w/in scope of employ if:
1. it is the kind he is empl to perform,
2. subst w/in authorized time & space limits,
3. it is actuated at least in part by a purpose to serve the master
4. if force is intentionally used by S ag another, the force is not unexpected by M
Considerations in entity formation
– Taxation
partners pay individual tax only “flow thru”
– Non-tax
liability runs to partners (personal liability for debts of P)
transfer of interest (limited liquidity, depends on P agree)
– Logistics
Formation occurs when:
PS – act like one (or agree)
C – must file papers with state
 Exit strategy (go in thinking about)
Elements of Partnership
* Right to share in profits
* Obligation to share losses
Formation of Partnership
UPA (1997) §202. Formation of Partnership. (a) Association of 2 or more persons to operate as co-owners of for profit business forms a partnership, even w/o intent.
(c) To determine if p’ship is formed, apply rules: (3) Persons who share profits presumed P, BUT exceptions:
Factors in Formation (UPA)
(1) parties’ intention,
(2) right to share in profits,
(3) obligation to share in losses,
(4) ownership and control of PP property and business,
(5) community power in administration and reservation of control in the agreement (control test)
(6) language of the agreement,
(7) conduct of parties to TPs, and
(8) the rights of parties on dissolution.
Other Factors in Formation
1. Burden of establishing PP is upon the person who alleges it exists.
2. Intention of parties—key factor, but not alone determinative. Courts may find partnership exists even if the parties did not intend it and vice versa.
3. Co-Ownership—partners share CONTROL; does not require equality of control or o’ship.
4. Sharing of profits —if you do not share profits, no PP exists.
––but just b/c share profits, doesn’t automatic = PS
Profit sharing + control = PP. Profit sharing + intent= PP
5. Obligation to share losses—in absence of the contrary agreement, any loss must be compensated equally among partners. Not a requirement; default, can be agreed out of.
Fiduciary Obligations In Partnerships
* Duty of Loyalty
* Duty of Care
* Agency: Every partner is an agent of the PS for business purposes
Partnership Agreement CANNOT control
UPA §103. Partnership Agreement; Nonwaivable Provisions
(b) Agreement controls partners rel’p except cannot:
(1) eliminate statements to Ps; (2) restrict right to records; (3) eliminate duty of loyalty (but can id activities that don’t violate duty if not unrx and can authorize specific tx that would violate); (4) unrx reduce duty of care; (5) eliminate obligation of good faith, fair dealing.
Basic fiduciary duties
1) p must account for profits acq in way against PS interests
2) cannot acquire PS asset w/o consent
3) can’t divert PS opportunity to self
4) can’t compete with PS within scope of PS business
Liability of P'Ship to TP
1. Admissions of Partners: PP bound by an admission or rep made by any partner
2. Notice:
3. Partner’s wrongful act:
4. Liability for Intentional Torts:
5. Liability for mismanagement:
6. Joint & Several Liability:
7. New Partner’s Liability:

Deck Info