Term
Agency Question 01
When is the principal liable for the torts of a subagent? |
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Definition
Agency Answer 01
There must be assent, benefit, AND the right to control the actual subagent tortfeasor. Bar tests are always about benefit. |
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Term
Agency Question 02
In NY, what three requirements are there for a Principal-Agent relationship? |
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Definition
Agency Answer 02
(1) Assent, an informed agreement between the principal who has capacity and the agent (consent is key),
(2) Benefit, the agent's conduct must be for the principal's benefit, and
(3) Control, the principal must have the right to control the agent by having the power to supervise the manner of the agent's performance. |
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Term
Agency Question 03
How is control determined? |
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Definition
Agency Answer 03
To find control, the principal must have the right to control the agent by having the power to supervise the manner of the agent's performance. |
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Term
Agency Question 04
When can a principal be vicariously liable for the torts of an independent contractor? |
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Definition
Agency Answer 04
Ultra hazardous activities exception and estoppel. If As a rule, there is no vicarious liability for independent contractors because there is no right to control. There are two exceptions:
(1) where the independent contractor commits a tort while engaging in Ultrahazardous activities, there will be vicarious liability for the principal.
(2) If you "hold out" your independent contractor with the appearance of agency you are estopped from denying vicarious liability for their torts. |
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Term
Agency Q05
Safia went to E-Stop-L Gas Station to have her brakes repaired. E-Stop-L had an independent contractor arrangement with the brake repairer, Jeff. Jeff negligently repaired Safia's brakes, resulting in an accident. Is E-Stop-L liable? |
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Definition
Agency Answer 05
As a rule there is no vicarious liability for an independent contractor's torts except for ultra-hazardous activities or estoppel. In this case, brake repair is ultra-hazardous activities for independent contractor liability and therefore there is vicarious liability for the independent contractor's tort of negligence. Moreover, if E-Stop-L held out the independent contractor as a agent/with the appearance of agency, they will be estopped from denying vicarious liability. |
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Term
Agency Question 06
What are the factors for evaluating the scope of the Principal-Agent relationship? |
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Definition
Agency Answer 06
Of the kind, on the job, intend to benefit.
(1) Was conduct "of the kind" agent was hired to perform? If the conduct was within the job description it is likely in the scope of agency.
(2) Did the tort occur "on the job"? Frolic v. Detour (where and when test) Frolic - is a new and independent journey, so not within scope. Detour - is a mere departure from an assigned task, so still within the scope of employment. The most tested.
(3) Did the agent intend to benefit the principal? If the agent, even in part, intended to benefit the principal that is enough to be within the scope of employment. |
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Term
Agency Q07
Emily instructs Brit to drive across town to deliver files to a branch office. On the way back, Brit stops to pick up shirts at the dry cleaner for work the next day. In the parking lot, Brit hits a pedestrian. Is Emily liable? |
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Definition
Agency Answer 07
Yes. Employer- employee is always principal-agent and automatically meets Assent, benefit and right to control. "the principal will be liable for its agent's torts within the scope of agency. In this case the agent was on a detour, a mere departure from an assigned task, because the tort occurred on the way back to work. Thus it is within the scope of agency and there will be vicarious liability. |
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Term
Agency Question 08
Is there principal liability for the intentional torts of the agent? |
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Definition
Agency Answer 08
As a rule intentional torts are outside the scope of agency. However, Exceptions. Intentional torts are within the scope if the conduct was:
(1) Specifically authorized by the principal
(2) Natural from the nature of employment, or
(3) Motivated by a desire to serve the principal |
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Term
Agency Question 09
Abe is hired as the temp-to-perm bouncer at Ruth's bar. Abe wont let Lemerson in, and she makes trouble. Ruth tells Abe to throw her down the side steps. "You got it, boss." Lemerson sues. Is Ruth on the hook? |
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Definition
Agency Answer 09
As a rule, Intentional torts are outside the scope of agency. However, intentional torts are within the scope if the conduct was:
(1) Specifically authorized by the principal
(2) Natural from the nature of employment, or
(3) Motivated by a desire to serve the principal.
Here it was all three, so there will be vicarious liability. |
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Term
Agency Question 10
What kinds of authority are there? |
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Definition
Agency Answer 10
There are four types of authority: actual express, actual implied, apparent or ratification. |
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Term
Agency Question 11
Oz hires Jeff to acquire rare Teddy Roosevelt letters. Jeff signs contracts for twelve of them that he finds. Oz only wants seven. Is Oz liable for the other five contracts? |
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Definition
Agency Answer 11
Yes. Principal is liable for contracts entered into by its agent if the principal authorized the agent to enter the contract. |
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Term
Agency Question 12
What is actual express authority? |
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Definition
Agency Answer 12
There is actual express authority where the principal used words to express authority to agent. Like "make a contract with X." It can be oral. Authority is narrowly construed. Does not apply to land for an interest in real estate that could last longer than one year. If the conduct involves land the express authority to enter into contracts must be in writing.
Express authority can be unilaterally revoked by either party, or by death or incapacity of the principal, unless there is a durable power of attorney. |
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Term
Agency Question 13
What is actual implied authority? |
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Definition
Agency Answer 13
Actual implied authority is authority which agent reasonably believes the principal has given, because:
(1) Necessity: There is implied authority to do all tasks: which are necessary to accomplish an express task. Actual express authority to negotiate a contract is implied authority to rent a conference room
(2) Custom: There is implied authority to do all tasks: customarily performed by persons with the agent's title or position
(3) Prior dealings between the principal and the agent. There is implied authority to do all tasks: which the agent believes to be authorized by prior acquiescence by the principal. |
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Term
Agency Question 14
What is apparent authority? |
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Definition
Agency Answer 14
Apparent Authority is governed by a Two-Part Test: (1) Principal "Cloaked" agent with the appearance of authority and, (2) third-party reasonably relies on appearance of authority.
Two likely hypotheticals:
(1) Secret Limiting Instruction - Agent has actual authority, but principal has secretly limited that authority. Agent acts beyond the scope of the limitation.;(2) Lingering Authority - Actual authority has been terminated. Afterwards, agent continues to act on principal's behalf. |
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Term
Agency Question 15
What is authority by ratification? |
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Definition
Agency Answer 15
Authority can be granted after the contract has been entered, if:
(1) Principal has knowledge of all material facts regarding the contract, and
(2) Principal accepts its benefits.
(3) Except: Ratification cannot alter the terms of the contract (ratification must be complete/total, not partial). |
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Term
| Agency Q16;;Dayna tells Brit that she is an expert in negotiating real estate transactions. Brit whispers into Dayna's ear at party that he wants her to negotiate the sale of 85 Avenue A. Dayna negotiates the sale of 85 Avenue A for Brit. Is Brit bound? |
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Definition
| Agency Answer 16;;No. Ordinarily, the principal will be liable on its authorized contracts. In this case, because the contract involved the sale of land the express authority must have been in writing and therefore the oral whisper was not enough to confer authority to enter into this contract. |
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Term
| Agency Question 17;;Oz collects rare books. He hires Emily to find a rare book to complete his collection. Emily searches everywhere for the rare book. As Emily is about to pay for the book, Oz dies. Is Oz's estate bound by the contract? |
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Definition
| Agency Answer 17;;No. The principal will be liable on its authorized contracts. In this case, authorized express authority terminated upon principal Oz's death therefore there was no express authority to enter the contract and the estate will not be liable. Emily is personally liable on the contract, since she acted without authority. |
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Term
| Agency Q18;;Ru owns an antique bookstore. A shipment of Teddy Roosevelt manuscripts arrives from Savannah. Ru tells his employee Ruth not to sell a special T.R. diary. Ru goes to lunch. Ruth sells the diary. Is Ru bound on the sales contract? |
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Definition
| Agency Answer 18;;Yes. The principal will be liable on its authorized contracts. In this case there was not actual expressed or implied authority to sell the diary. Nonetheless there was apparent authority because the principal Ru did cloak the Ruth with the appearance of authority and the buyer reasonably relied on Ruth's appearance of authority. Thus Ru is liable based on apparent authority |
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Term
| Agency Q19;;For years, Ruth has sold goods as Lemerson's agent. Lemerson finds out, however, that Ruth has been stealing money from her. Lemerson terminates Ruth. Ruth continues selling to customers and runs away with their money. Is Lemerson bound? |
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Definition
| Agency Answer 19;;The principal will be liable on its authorized contracts. In this case actual and implied authority has been terminated. Nonetheless apparent authority still lingers because the principal has cloaked the agent with the ongoing appearance of authority and customers may continue to reasonably rely on the lingering authority until they receive notice of termination." |
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Term
| Agency Q20;;Ru gives Oz a power of attorney to purchase steel drums. Oz enters a contract to purchase 11,000 wooden barrels. Ru tells Oz "great job, I love wooden barrels, but I only need 10,000." Is Ru bound to the extra 1,000 barrels? |
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Definition
| Agency Answer 20;;Probably not, and in NY, definitely not. The principal will be liable on its authorized contracts. In this case there was no actual expressed or implied authority to purchase wooden barrels since the power of attorney was for steel drums. Nor is there any evidence of apparent authority to procure wooden barrels. Nonetheless the principle arguably ratified the contract through knowledge and acceptance of its benefits, but her statement that she needs only 10,000 barrels is not a complete ratification. In NY ratification is not valid if not complete. (i.e. there is an attempt to change the terms of the deal). |
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Term
Agency Question 21
What is a power of attorney? |
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Definition
Agency Answer 21
Power of attorney is a written expression of authority to enter into a transaction. |
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Term
Agency Question 22
How does a power of attorney become durable? |
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Definition
Agency Answer 22
A power of attorney is durable if it includes conspicuous survival language such as "survives death or incapacity." |
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Term
Agency Question 23
When is an agent liable on an authorized contract? |
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Definition
Agency Answer 23
As a rule, if authorized, an agent is not liable on the contract. Exception: If principal is partially disclosed (only the identity of principal concealed) or undisclosed (fact of principal concealed), authorized agent may nonetheless be liable at the election of the third-party. |
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Term
Agency Question 24
What are the three duties an agent owes to her principal? |
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Definition
Agency Answer 24
(1) Duty to exercise reasonable care
(2) Duty to obey reasonable instructions (i.e., not lie or break the law), and
(3) Duty of Loyalty. |
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Term
Agency Question 25
What are the three ways an agent can breach the duty of loyalty? |
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Definition
Agency Answer 25
(1) Self-dealing - Agent cannot receive a benefit to the detriment of the principal
(2) Usurping the principal's opportunity, or
(3) Secret profits. |
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Term
Agency Question 26
What is self-dealing? |
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Definition
Agency Answer 26
Where an agent receives a benefit to the detriment to the principal. |
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Term
Agency Question 27
Plackter authorizes Emily to buy diamonds. Emily spots choice diamonds, and secretly buys them for herself for $1 million. Emily then resells the diamonds for $2 million. What duties, if any, has Emily breached? |
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Definition
Agency Answer 27
Emily as Plackter's agent has breached the duty of loyalty by self-dealing (i.e. receiving a benefit at the principal's detriment), by usurping the principal Plackter's opportunity to buy the diamonds and making a secret profit at Plackter's expense. |
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Term
Agency Q28
Plackter authorizes Emily to buy diamonds. Emily spots choice diamonds, and secretly buys them for herself for $1 million. Emily then resells the diamonds for $2 million. What remedies, if any, does Plackter have against Emily? |
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Definition
Agency Answer 28
The principal Plackter may recover any loses caused by the breach and also may force the breaching agent to disgorge any profits they made. |
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Term
Partnership Question 29
What formalities are required for the formation of a partnership? |
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Definition
Partnership Answer 29
There are NO formalities to becoming a general partnership (unlike for any other business form). Can be deemed to be general partnership by conduct alone. |
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Term
Partnership Question 30
What is a general partnership? |
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Definition
Partnership Answer 30
A general partnership is an association of two or more persons who are carrying on as co-owners of a business for profit. Fact pattern may look like a lending arrangement or employee arrangement, look for it. The contribution of capital or services in return for a share of profits, if any, is prima facie evidence of general partnership. |
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Term
Partnership Question 31
What significance is the sharing of profits? |
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Definition
Partnership Answer 31
The contribution of capital or services in return for a share of profits, if any, is prima facie evidence of general partnership. |
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Term
Partnership Question 32
When is the partnership liable for the torts of a parnter? |
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Definition
Partnership Answer 32
Partnership is bound by torts committed by partners in scope of partnership business. |
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Term
Partnership Question 33
What is an incoming partner's liability for pre-existing debts? |
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Definition
Partnership Answer 33
As a rule an incoming partner is not liable for prior debts, though any money contributed to the partnership by an incoming partner can be used by the partnership to satisfy prior debts. |
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Term
Partnership Question 34
What is an outgoing partner's liability for subsequent debts? |
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Definition
Partnership Answer 34
An outgoing partner retains liability for future debts until they die unless notice of their withdrawal is given to all known, and potential, creditors. |
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Term
Partnership Question 35
What is the rule of General Partnership Liability by Estoppel? |
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Definition
Partnership Answer 35
One who represents to a third-party that a partnership exists will be liable as if a partnership exists. |
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Term
Partnership Q36
Ruth lent Ru money to start a club. Sunday, Ruth told Jeff "My partner Ru and I need a sound system." Jeff let Ru test his speakers. Monday, Ru and Ruth fight and drop the club idea. Tuesday, Ru blows out the speakers. Can Jeff sue Ruth |
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Definition
Partnership Answer 36
General partners are liable for all partnership obligations, including co-partner's torts. In this case, however RUth and Ru probably never really formed a general partnership because they had a lending arrangement that was unlikely to be based on the sharing of profit. Nonetheless Ruth has represented to a 3rd party that she is a partner in a partnership with Ru and will be liable as a result. Therefore she is liable for Ru's tort as if a co-partner. |
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Term
Partnership Question 37
What is a limited partnership? |
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Definition
Partnership Answer 37
A limited partnership is a partnership with at least one general partner with unlimited liability and at least one limited partner with limited liability. |
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Term
Partnership Question 38
What liability does a general partner have in a limited partnership? |
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Definition
Partnership Answer 38
General Partners are still liable for all debts and obligations of the business but they may exercise substantial managerial control. With liability comes control. |
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Term
Partnership Question 39
What liability does a limited partner have in a limited partnership? |
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Definition
Partnership Answer 39
Limited Partners are not liable for partnership debts and obligations, but they may not exercise substantial managerial control. |
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Term
Partnership Question 40
What is a registered limited liability partnership? |
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Definition
Partnership Answer 40
This for is available only to partnerships engaged in professional services. In a RLLP, no partner will be liable for the partnership's debts or obligations. Each partner is liable only for their own wrongdoings and for the wrongdoings of those under their direct supervision. |
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Term
Partnership Question 41
What is the purpose of forming a Limited Liability Company(LLC) |
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Definition
Partnership Answer 41
The Original Purpose Limited Liability Companies (LLC) is to provide owners of businesses the limited liability of a shareholder in a corporation and the beneficial tax status of a corporation. The members (owners) are not liable for any debts of the company. |
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Term
Partnership Question 42
What four things are limited in an LLC? |
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Definition
Partnership Answer 42
Limited liability, limited liquidity, limited life and limited tax. |
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Term
Partnership Question 43
What is the partnership duty of loyalty? |
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Definition
Partnership Answer 43
Partners, just like agents, cannot engage in self-dealing, usurp partnership opportunities or make a secret undisclosed profit at the partnership's expense. |
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Term
Partnership Question 44
What is a partner's remedy for a breach of a duty of loyalty |
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Definition
Partnership Answer 44
If there is a breach the remedy is an action for an accounting. It is the only form of action that can be brought by a partnership against one of its own partners for the breech of loyalty. The partnership may recover losses caused by the breech and force disgorgement of profits made by the breeching partner. |
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Term
Partnership Question 45
What are the three kinds of partnership property |
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Definition
Partnership Answer 45
(1) Specific partnership assets: Specific Partnership Assets. Includes land, leases and equipment owned only by the partnership, therefore no individual partner may take partnership assets without partnership authority.
(2) share of profits and surplus: Each partner's share of profits is personal property owned by each individual partners. Therefore individual partners may freely transfer their share profits and surplus to a third party.
(3) Share in management. This is an asset that belongs only to the partnership and not to individual partners. Therefore individual partners may not transfer their share of management to a third party (can't sell your vote.) |
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Term
Partnership Question 46
Jared buys a car in Jared's own name with Jared's money which Jared uses in partnership business. Jared dies. Does Jared's spouse Plackter get the car or is it a specific asset of the partnership? |
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Definition
Partnership Answer 46
Plackter gets it. "In this case because Jared bought the car with her own money it is his own car and he may freely transfer it, including to Plackter via inheritance. |
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Term
Partnership Q47
In the partnership wrap-up, Jeff thinks the van should go back to him as his personal property. Abe thinks it is an asset, and wants half its value. Bow will a court resolve the conflict? |
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Definition
Partnership Answer 47
When partners in wrap-up have conflict over whether specific property is partnership assets or personal property, the court will ask who's money was used to buy the property. If partnership money was used it's partnership property. If personal money was used it's a personal asset. |
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Term
Partnership Question 48
Abe, Brit, and Emily agree to contribute money and share profits 60-30-10. How do they vote? |
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Definition
Partnership Answer 48
Equally (one partner, one vote). |
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Term
Partnership Question 49
Dayna and Lemerson are partners. Lemerson works 96 hours a week. Dayna sleeps all day. Does Lemerson get any salary? |
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Definition
Partnership Answer 49
Absent a specific agreement - no. Each gets a share of the profits since that is the basis of their association. Exception: will get a salary for helping to wind-up partnership business. |
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Term
Partnership Question 50
If Agreement is silent on profits and losses, how are they divided? |
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Definition
Partnership Answer 50
Absent a specific agreement, profits are shared equally. In addition, in the absence of an agreement losses are shared just like profits, which here means equally. |
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Term
Partnership Question 51
If Agreement says "Profits shared 60/40," how are the losses shared? |
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Definition
Partnership Answer 51
Since there is an agreement on profits but no agreement on losses, the losses will be share the same as the profits, so 60/40. |
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Term
Partnership Question 52
If Agreement says "Losses shared 60/40," how are the losses shared? |
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Definition
Partnership Answer 52
In the absence of an agreement profits are shared equally. Since there is a specific agreement on losses they will be shared 60/40 but the agreement on losses is immaterial to the agreement on profits. |
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Term
Partnership Question 53
Ruth gives the new partnership its fine name, Howdy Partnership. Plackter puts up all of the money in. Safia does all of the work. Brit does nothing. How are profits shared? |
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Definition
Partnership Answer 53
Equally. In the absence of a specific agreement, profits are shared equally. All other factors are immaterial. |
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Term
Partnership Question 54
What is dissolution? |
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Definition
Partnership Answer 54
Dissolution occurs upon any material change in partnership caused by the death or withdrawal of any single partner. This just begins the process of ending the partnership. |
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Term
Partnership Question 55
What is termination? |
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Definition
Partnership Answer 55
Termination is the real end of the partnership. |
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Term
Partnership Question 56
What is "winding up"? |
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Definition
Partnership Answer 56
Winding Up: The period between dissolution and termination, in which the remaining partners liquidate the partnerships assets to satisfy the partnership creditors. |
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Term
Partnership Q57
Ruth and Dayna dissolve YouDunn Partners. Liquidated, YouDunn has $1,000,000. How is it distributed, if (1) YouDunn owes $600K to trade creditors, (2) Ruth loaned YouDunn $100K, (3) Dayna made capital contributions of $200K? |
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Definition
Partnership Answer 57
First all outside creditors are paid the full $600,000. Then the inside partner creditor Ruth is paid back the loan of $100,000. Third, capital contributions are repaid;Dayna is repaid all $200,000. The remaining $100,000 is profit and surplus. In the absence of a specific agreement on profits, they will be divided equally to each partners. ($50,000 apiece). |
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Term
Partnership Q58
Ruth and Dayna dissolve YouDunn Partners. Liquidated, YouDunn has $700K to distribute. How is it distributed, if (1) YouDunn owes $600K to trade creditors, (2) Ruth loaned YouDunn $100K, (3) Dayna made capital contributions of $200K? |
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Definition
Partnership Answer 58
First all outside creditors must be paid in full. Secondly, inside creditor partner Ruth is repaid his $100,000. The exhausts all partnership assets, but Dayna is still owed $200,000. That is a loss. In the absence of a specific agreement losses are shared equally
Ruth will pay $100,00, as will Dayna. Thus Ruth returns the $100,000 to cover his portion of the loss. Dayna takes $100,00, thus reducing his loss to the appropriate amount of $100,000 |
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Term
Partnership Question 59
What is the priority of dissolution in the wrap-up of a partnership? |
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Definition
Partnership Answer 59
Each level of priority must be fully satisfied before beginning the next level in this order:
(1) First, creditors must be paid. All outside non-partner trade creditors must be paid and secondarily all inside partners who have made loans to the partnership must be repaid.
(2) Second, capital contributions by partners must be paid. These are not loans.
(3) Profits and surplus, if any. Are shared equally among partners in the absence of an agreement. |
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Term
Partnership Question 60
What is the distribution rule? |
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Definition
Partnership Answer 60
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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Term
Partnership Question 61
What is required for a prima facie showing that a partnership exists? |
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Definition
Partnership Answer 61
A partnership is an association of 2 or more persons carrying on as co-owners of a business for profit. |
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Term
Partnership Question 62
What is the distribution rule? |
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Definition
Partnership Answer 62
Upon dissolution of a partnership, each partner must recover their loan and capital contributions, plus their share of profits, but also minus (cover) their losses |
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Term
Partnership Question 63
When can a partner expect a salary? |
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Definition
Partnership Answer 63
Absent contract, partners cannot expect salaries except for duties undertaken in wrap-up of the partnership. |
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Term
Partnership Question 64
Can a partner who puts in most of the capital expect most of the profits of a partnership? |
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Definition
Partnership Answer 64
No. Absent an agreement, equal control, no salary, equal profits and equal losses. |
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