Agency_and_Partnership_out..docx

Agency and Partnership Bar Review V.1 AGENCY Overview: Agency and Torts Agency and Contracts Agency and Business Associations Agency and Torts Tortfeasors are always liable for their own torts Principals may be liable for their agents if: Negligent hiring (hired someone wholly incompetent Vicarious liability: Principal may be liable without any fault of his own given status itself for the actions of agent: Independent Contractor: employer has not right to control this employee. Factors determining ?right to control? Paid by the job Highly skilled Has own business Short term worker Owns tools Different business locations NO vicariously liability to P UNLESS: Inherently Dangerous Activity Non- delegable duty: LL?s duty to make repairs, but not, services of process from atty/firm (where IC beat up person) Servants: employer has the right to control Factors determining ?right to control? Salary Low skill Not in own business Long term worker Has no tools Business location same as P Vicariously Liability if committed within scope of employment: What action was committed? When was he told to do it? Where was he supposed to do it? Why did he do it? At the direction of the employer? Commuting Rules: Commuting generally to and from the office is not within the scope of employment UNLESS: Employer requires employee to use own car within the day. (pharma rep) Intentional Torts: Use same 4 W test. Borrowed Servants: Test: Who controlled the servant at the time of the tort. BOTH employers may be vicariously liable Apparent Agency Theory of Vicarious Liability Negligent repair at gas station and sues nat?l oil company. Mechanic is not a servant of nat?l oil company unless victim reasonably relied upon ads that local gas station reparts are servants of nat?l oil company Never found reasonable reliance in MD Agency and Contracts: Liablity for P for K that A made with T Kind of Authority: Express: A does exactly what P told A to do. P is liable. Implied: A?s reasonable interpretation of what P told A to do P is liable if reasonable interpreation: Common Sense Past dealing Custom of trade Apparent Authority: T?s reasonable belief that A is authorized based on a past manifestation form P to T P and T have some kind of past relationship or statements Ratification: Retroactive reauthorization: P says ratified after A tells P of K. Date of contract relevant, not date of ratification. Ratification must occur before T learns and withdraws P must ratify the entire D Undisclosed P may NOT ratify. Enforcement and liability of Authorized K between A and T First Label the P at the time of Control: Disclosed: T knows A is working for P and T know?s P?s full partnerhip or corp name Partially disclosed principal: T knows A is working for a P, but does not know P?s corp. name Disclosure of trade name is only partial disclosure Undisclosed P: T thinks A is making a K for A Liability: Authorize K and P is disclosed A cannot enforce K nor be held liable, bc only P and T have K rights and A is not a party to K. Unauthorized K and P is disclosed A can be sued for breach of warranty of authority P is partially disclosed P , A, and T have rights and liability under K. P is undisclosed A can enforce and be held liable on K P can be held liable on K (T may learn of P and want to sue) P can enforce K against T UNLESS T contracted based on trust or confidence in A (contract to marry) T would have refused ot deal with P K language denies undisclosed P any rights ?K can only be enforced by named parties,? or ?No undisclosed Ps? BUT NOT, Non-assignment clauses. Doctrine of Election: Not followed in MD. May seek judgment against both P and A if P was undisclosed. Agency?s and Business Associations: Imputed Knowledge/Notice: If A learn of info within scope (4W?s), P has notice of it, UNLESS A is acting fraudulently against P. Competition Rules While working for P A can prepare to compete, but cannot actually compete. After quitting May compete but may not use confidential information learned from P Non-Compete Agreements Restrictive Covenants are valid if reasonable as to Time: up to 3 years Geography: area limited to Subject: same business Consider public interest: may not bar if service is needed and only a few and valuable workers around. Firing and Termination At will employees: may be fired without any reason and without liability EXCEPT: Abusive discharge: A can collect damages if discharge violates ?clear mandate of public policy? Examples: Fired for refusing to take a lie detector test, or refusal to have sex with clients No abusive discharge if another statute provides remedy for discharge, if fired for reasons other than employment based (LL and Boss), if fired for asking to speak to a lawyer before signing an employment doc. PARTNERSHIP Partnership Formation At least two persons No state filing No written agreement Test of intent to be partners Presumed to be partners if Sharing of Profits of business EXCEPT: Debtor/Creditor relationships ? debt repaid from profits Employee/employee: wages paid from profits LL/Tenant: rent paid from profits Rec?r of goodwill of sold business pd from profits (sell business to Partnership and rec payment for goodwill) Rec?r of retirement or health benefits from profits (usually after retirement) Agreement to share losses: not dispositive intent. Proves some but not all. Ok if someone agrees to absorb all losses. Agreement to share gross returns/receipts is not evidence of partnership intent Purported Partner Rule Partner purported by estoppel principles Someone not a partner but held liable as if were IF: PP represent himself as a partner OR consented to be held out as a partner; AND T extends credit to business reasonably relying on belief that PP is actual partner (relied on the wealth of person or solvency of PP) Representation: Publicly (via speech or billboard to a large audience), then anyone can rely. Privately, (one on one conversations) only the person whom it was made can rely Liability Partnership is an entity therefore may be sued and sue. If partnership assets are insufficient, then P?s are personally jointly and severally libable for partnership debts Voting Majority vote of partners: ordinary business matters Unanimous consent if: Sell partnership?s good will Do something outside the ordinary business Admit a new partner Absent agreement, all partners have equal voting power and equal inspection rights regardless of capital contribution New Incoming Partners Capital contributions of new P may be used to pay pre-existing partnership debt, but incoming P?s liability limited, does not include any personal assets for the preexisting K Dissociation When P quits, dies, goes bankrupt, or expelled, P is dissociated from partnership. Liability: 2 years if creditor reasonably believes that the dissociated P is still a partner. Cure: dissociated partners can file Statement of Dissociation with SDAT, which provides notice to creditors Dissociated partner is bought out by partnership, and has no management rights and owes no fid duties. Dissociation does not equal dissolution!!! Ability to bind partnership Partnership is liable for Ks for two years if T reasonably believes that the dissociated P is a P. Cure: Partnership files Statement of Dissociation with SDAT. Private agreements to pay debts Between Ps will not bind T. T may still sue other partners and partnership for debts. Partners are not entitled to salary compensation for their work as a P absent agreement. EXCEPT: P winding up business may be compensated. Fid. Duties: P?s owe the partnership dutyof are which is gross negligence P?s owe duties of good faith and fair dealing. P?s owe duty of loyalty Partnership may sue P for breach of fid duty Partnership Property Must distinguish property owned by individuals and partnership as an entity Factors finding partnership property Acuqired with partnership funds Not if property is titled in individual names Used in partnership?s in ord business Partnership pays property tax Partnership pays for improvements Must be used for partnership purposes, and not any personal purpose of P unless unanimous consent. Partnership creditors may execute on partnership property, but personal creditors cannot attach property. Profit Sharing Must share profits equally even if cap contributions are unequal, unless agreement. Personal credit CAN execute on a P?s right to profits. Cir. Court has power to issue charging order to force a P use profits to pay personal creditors. Quitting partnerships/ Dissolution Partnerships at will: No set term, any partner can quit without liability UNLESS quitting constitutes a breach of fid duty, i.e. partner sells clients or uses confidential info Partnership for term: quitting before term expired is breach of agreement, and P may be liable for damages. Judicial Dissolution: Court may order if: Economic purpose is unreasonably frustrated Another P engaged in conduct make is not reasonably practical to carry on business with that P Not reasonably practical to carry on the partnership business in conformity with partnership agreement Partnership continues until all winding up of business is completed. Partnership may merge. Partnerships/Agency K?ing P have authority to to make K or did Partnership ratify? Same agency law to torn or K, except A is the Partner and P is the Partnership. Scope of partnership business uses the 4As Joint Ventures Partnership for a limited time and limited purpose ? same law applies to joint ventures as partnerships Limited Liability Partnership File certificate of limited liability with SDAT and become an LLP. No P may be held personally liable for business? debts, either tort or contract. LIMITED PARTNERSHIPS Requirements At least one general partners and at least one limited partner. General partners: unlimited personal liability for business debts Limited partners: not personally liable for business debts. Limited partner may be held liable if: limited partner has 1) name in limited partnership name 2) creditor believes that limit partner is a general partner Limited partner 1) takes control of the business 2) creditor reasonable believes, based on the limited partner?s conduct, that the limited partner is a general partner. Limited partner allowed to be an employee or consultant to limited partnership Limited partner allowed to vote on limited partnership matters Limited partner allowed to be D/O/ S of corp that is gen. partner Cash Contributions: Must pay what has been agreed to pay, and liable for amt not paid Contribution: cash, property, past services note, promises to perfor services in future. Note: Cap contributions are not returned to limited partner if LP is insolvent. If paid, then LP must return if LP is insolvent. Formation File a certificate of LP with SDAT Contents Name includes ?limited partnership or LP? Name and address of 1) resident agent and 2) general partners (NOT limited Ps) and Latest date of dissolution. Failure to file (thus creation of regular partnership with open liability): Leads to PL of LP UNLES LP had good faith belief that filing complete and Within 30 days of knowing or should of known, files certificate and w/d Rights of LPs Profit sharing based on percentage of capital contribution Must own at least 5% limited partnership to inspect tax records and names of partners Bring a derivative suit ( like S, unlikely to get question like this) Petition Court for dissolution New partners: Admin a new general P, requires unanimous consent of the general partners, plus maj vote of limited partners who cote based on capital contribution. UNLESS agreement. Dissolution: w/d or death of LP DOES NOT cause dissolution w/d or death of GENERAL P DOES cause dissolution unless agreement Foreign Limited Partnership File with SDAT if LP formed in another state and wants to do business in MD MD w/o filing can lead to a fine and inability to sue in MD state court. Failure to file DOES NOT Invalidate the Foreign LP?s Ks Prohibit it from defending in MD state ct Create any liability for LPs LIMITED LIAIBLITY COMPANIES Requirements: One person Investors are called Members Members are NOT liable for LLCs debts Members: manages the LLC (differs from LP) Members share profits ? Based on capital contribution Must file with SDAT Failure to file personal property report for tax year : LLC forfeiting its right to do business AND Bring ct action (including derivative action) BUT still exists as an entity.