Agency Outline

AGENCY – INGRAM
SPRING 2007
GRADE: A-
Chapter 1: Introduction to Firms
A. Introduction
B. The Types of Firms
1. Sole Proprietorships – Sole proprietorship – what kind of people would want to incorporate sole proprietorships? Maybe an electrician or plumber, professionals like doctors or lawyers, contractors etc. They tend to be fairly small and fairly simple
· What are some of the things that the sole proprietors would come to a lawyer for? Needs for insurance is one example. Intellectual property rights, copyrights, patent, trademarks. Taxes, tax consequences. Questions as to how to get money to finance the business, or owing money to the business. Limited Liability – one thing that is very desirable is to limit the liability of the owners to what is invested in the business; no personal obligation. Licensing – there are a lot of businesses that you cannot operate without a license
· A lawyer has to be able to recognize and handle the problems that a person comes to them with
· How can you get investors to put money in, and yet only one person has the sole proprietorship? Loans. The lenders can be paid for the use of their money through interest
2. Partnerships -Partnership – two or more people, who are carrying on a business as co-owners of the business. That means the good will of the business. The intent has to be to make a profit. It can be very informal, like a handshake, simply starting to do business together, etc. It is probably a better idea to have something in writing, though. The death of one partner dissolves the partnership
· One other area that lawyers always seem to have something a little different – as to lawyers practicing with limited liability, often lawyers for tax and liability reasons, it is not uncommon for lawyers to want to practice in some other form than sole proprietorship or general partnership
3. Limited Partnerships – there is at least one general partner and at least one limited partner. The biggest distinction between general and limited partnerships have to do with management rights and limited liability of the limited partners. Management is vested in the general partners; limited partners don’t have management authority.
· If a limited partner assumes management responsibilities and a third party assumes they are general partners based on their actions, they will lose their limited liability as to such third party
4. Limited Liability Partnerships – An LLP is a general partnership where all partners have limited liability as to certain of the partnership’s debts. Except for a very few special provisions, it is subject to the same rules as a general partnership.
· The Limited Liability Partnership is taking over most general partnerships and Limited Partnerships
· Starting in 2003, lawyers in Illinois can be in LLPs. When someone in a firm commits malpractice, before, everyone was liable. Under the new enabling statute in Illinois, the liability is much more limited so that lawyers in the firm are liable only for those other lawyer’s and employee’s personal supervision. If someone is under your direct supervision, you will be liable, as will the partnership. But the other individual lawyers will not be liable. This does not limit the liability of the firm, or the supervising attorney
· Partners in LLP’s have no liability for certain debts of the entity beyond their capital contribution
· Most rules applicable to general partnerships also apply to LLP’s
· Withdrawal of any of the partners triggers at least a technical dissolution of the partnership, since all members have equal rights unless otherwise agreed
5. Limited Liability Limited Partnerships – it is a limited partnership where the general partners have the same protections against personal liability that general partners in an LLP possess.
6. Limited Liability Companies – it is a very flexible form of enterprise. While most statutes provide default rules governing such issues as management and sharing of profits and losses, the members of an LLC are generally free to change these default provisions by agreement.
· the biggest advantage to the LLC form of business enterprise when compared to general partnership is that members in an LLC do not have unlimited personal liability. This means that if limited liability is an important consideration, the LLC is preferable even to the limited partnership, because every limited partnership must have at least one general partner with unlimited personal liability.
7. Corporations – the equity owners of a corporation are called shareholders. The shareholders have only very limited voting rights. Day to day management decisions are vested with a board of directors.
· The primary advantage to the corporation is that all shareholders have limited liability for corporate debts.
C. What Does This Book Have to Do with These Kinds of Firms?
D. The Firm and Its Agents and Servants
· 1st – you look at the parties’ intentions. To find an agency relationship, the elements that courts usually look for is whether there is some manifestation from the principal to the agent that the principal consents to the agent working on its behalf, and also some manifestation by the agent to work for the principal. This is often inferred from the words or deeds of the two. The principal’s manifestation does not have to be direct, but the agent has to be aware of the principal’s desire for the agent to work on his behalf. The same goes for the agent’s manifestation to the principal
Three things to consider
1) The principal has the right of control over the result (whether or not they exercise that right)
2) the agent must act for the benefit of the principal (either primarily or partially)
· 3) does the agent have the power to alter the legal status of the principal as to other parties
Problem 1.1 -a) Dealer is not selling on behalf of Mercury Marine. They also have to option to sell other company’s products. b) Dealer cannot alter the warranty; they have no legal authority to change the warranty. c) They just perform the repairs, and only in accordance with the warranty. MM may have some right of control over the method by which the work is to be done. Most courts would agree as to a and b, but perhaps there would be some disagreement as to c because there might be some right of control
· Sometimes courts get a little confused as to what kind of control is required. Determining whether there is a principal agent relationship is done through whether there is a right of control over the method
· Restatement Agency section14: One who receives goods from another for resale to a third person is not thereby the other’s agent in the transaction: whether he is an agent for this purpose or is himself a buyer depends upon whether the parties agree that his duty is to act primarily for the benefit of one delivering the goods to him or it act primarily for his own benefit.
Problem 1.2 – The end result will be that Agent has to pay ABC the money plus interest on the money that he stole. Has the plaintiff been injured? He is not out of pocket. If he had bought the property from a stranger he would have paid the same amount that was paid here. What we are doing here is taking away the money from the defendant, not really remedying the plaintiff.
· What should the agent have done to act in the utmost good faith? He should have disclosed his interest in the property. It is not part of his obligation to the principal to sell it for no profit. Before he knew anything about what the principal is willing to pay, he might be able to say that I have an interest in a piece of property that you might want, so that he is not using any confidential information of the principal, then he is dealing at arm’s length, and that would be ok. He has to do that before he knows what the principal is willing to pay. And if he does that, then he is no longer the principal’s agent in the matter
· Whether a partnership can sue or be sued as an entity is a matter of civil procedure. For civil procedure purposes, partnerships are deemed to be entities that can be sued as such
E. The Firm and Its Owners
1. Partnerships
Swiezynski v. Civiello – the woman who was injured was a grocery store clerk and wanted to sue the partners of the corporation. It is important to determine whether they are this woman’s employers because if they are then they will be covered from workman’s comp.
I:
RL: The employers are made strictly liable for medical bills and lost income, but are made immune from any tort action against them
Notes:
· Suppose this was the worker’s day off. Then she would not get workman’s comp benefits. So she would be able to sue at common law. Depending on the cause of the injury, she could sue them as owners of the business or managers of the business
· If the people are going to run a business, they usually want to split off the ownership. Usually the ownership is put into a corporation or LLC. Often there are tax consequences
· Whether partners are immune from common law liability, it should be specified in state workman’s comp. act
2. Limited Partnerships
Chapter 2: Contractual Dealings by