BUSINESS ORGINIZATIONS OUTLINE
AGENCY
Authority…
Actual = arises from manifestation of a principal to an agent that the agent has power to deal with others as a representative of the principal
Apparent = arises from the manifestations of a principal to a third party that the other person is authorized to act as an agent of the principal…
Inherent = arises form the agency itself and without regard to either actual or apparent authority. It is authority arising by implication from the authority actually or apparently granted…
Incidental = authority to do incidental acts that relate to a transaction that is authorized…
Implied = authority that is inferred from prior course of conduct by the principal…
THE PARTNERSHIP
Sharing Profits and Losses
Divided according to agreement…
UPA § 18 – each partner is repaid his contributions; share equally in profits; share in losses according to share of profits…
Richert v. Handly pg. 38
The court viewed the share of losses as follows: If A puts in $100,000 and B puts in none, but they are to split the profits, if the partnership losses money…under UPA §18, B would have to pay back to A $50, 000 of the loss of his monetary contribution.
The minority view is to view A’s contribution of money and B’s contribution of services as equal contributions. Thus, when the company loses money, B would not have to pay A for the loss of his monetary contribution because he has already shared in the losses by the loss of the value for his services…
However, usually money counts and services do not…and under UPA § 18(f) it expressly provides that one is not entitled to receive payments
Limited Liability Partnerships
Narrow Shield Statutes
Limits liability only for negligence or malpractice…
Broad Shield Statutes
Limits liability for all debts of the partnership
Exceptions…
If a partner is personally involved in act
If a partner was in direct control or supervision of the person who committed the act.
Stacking problem
This occurs where a partner will want those liabilities for which he is liable to be the priority of for the partnership to pay.
Management…
Limiting Authority…
Limit by Agreement…
UPA § 18 provides that unless otherwise agreed, any partner has equal rights in the management and conduct of the partnership…
Limit by majority vote…
UPA § 18… differences arising from ordinary matters connected with the partnership…may be decided by majority vote…
Therefore, if authority is concerned with “ordinary matters” may limit by majority vote.
Acts binding on Partnership…UPA §§ 13 – 15
Acts within the scope of the partnership business…AND performed on behalf of the p
p owes P for the bread it purchased, Stroud must discharge the liability or obligation.
RULE: The acts of a partner, if performed on behalf of the partnership and within the scope of the partnership business, are binding on all copartners.
Smith v, Dixon pg. 64
FACTS:
The suit resulted from refusal to convey land, and thus a breach of a sales agreement between the parties. Dixon sought specific performance or an alternative judgment of damages, the latter of which the lower court awarded.
Following the purchase of land, The Smiths formed a partnership called E.F. Smiths, whose principal operation was farming. The partnership agreement was oral and was never written. W.R. Smith was the predominant member of the Smiths. The partnership authorized W.R. to negotiate the sale of the land, but the price at which W.R. sold the property being lower than what was agreed upon, the partnership contends the contract is unenforceable since it was not signed or agreed upon by all the partners.
ISSUE:
Is a partnership bound by the acts performed by a partner?
HOLDING:
