Restatement (3d) of Agency
§ 1.01: Agency is the fiduciary relationship that arises when one person (principal) manifests assent to another person (agent) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.
§ 2.01 Actual Authority: An agent acts with actual authority when, at the time of taking action that has legal consequences for the principal, the agent reasonably believes, in accordance with the principal’s manifestations to the agent, that the principal wishes the agent so to act.
Express- ex- corporations need a certified authorization from the board of directors about who can write checks (who is the agent)
Implied- the implied power to bind another person. It’s not expressed, but if you tell someone they’re in charge of running a store, they must have the power to arrange certain items of business operation.
See § 2.02 Scope of Actual Authority.
§ 2.03 Apparent Authority: Apparent is the power held by an agent or other actor to affect a principal’s legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal’s manifestations.
§ 3.11 Termination of Apparent Authority
The termination of actual authority does not by itself end any apparent authority held by the agent.
Apparent authority ends when it is no longer reasonable for the third party with whom the agent deals to believe that the agent continues to act with actual authority.
Baxter Porter (Miss. 1986) – “Any officer in a close corp., irrespective of the particular office he holds, should have power to bind the corp. by acts apparently carried to further the usual business of the corp.” ; compared to P/s apparent authority – presumed (although cmt. to 8.41 indicates that not all courts feel this way and that may be too broad a position to shift burden to corp. to show lack of authority)
§ 2.04 Respondeat Superior: An employer is liable for torts committed by employees while acting in the scope of their employment.
In a Partnership/corporation, the entity can only act through its agents; the agent (e.g. director) is authorized by the principal (the partnership/corporation) to act
3 Branches of Agency Law
Law of Authority- whether a given person has authority to bind another person (the principal). Corporations can only act via their agents, so the corporation is the principal who gives authority to its agents. In partnerships, every partner has authority to bind other partners
Respondeat Superior- restatement § 204; this is a torts theory
Fiduciary Relationship- agent has a relationship with the principal that is fiduciary (like a lawyer and a client). Because of this relationship, there is a duty of loyalty. Important part of partnership and corporation’s law.
Entity Existence à Need for Written Agreement à UPA § 18
UPA § 6 à A partnership is an association of two or more persons to carry on as co-owners of a business for profit.
UPA § 7 à Determining the Existence of a Partnership:
Except as provided by § 16, persons who are not partners as to each other are no partners to third persons.
Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share an profits made by the use of the property
The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.
The receipt by a person of a share of the profits of a business is prima facie evidence that he is partner in the business, but no such inference shall be drawn if such profits were received in payment:
as a debt by installments or otherwise,
as wages of an employee or rent to a landlord,
as an annuity to a widow or representative or a deceased partner
as interest on a loan, though the amount of payment vary with the profits of the business,
as the consideration for the sale of a good-will of a business or other property by installments or otherwise.
Written Agreement: Vital unless you want to be bound to the general partnership law of the state. Also, dealing contractually with issues that are likely to arise in the future will save a great deal of headache in the future.
Note that § 18 of the UPA lays out the general “Rights and Duties of Partners” unless you have an agreement that states otherwise.
§ 40 of UPA: Unless there is an agreement, § 40 lays out the rules for distribution in a partnership.
Advantages of a written agreement
avoids future disagreements over what the arrangement actually was (general partnerships)
In the absence of a written agreement, the relationship between the parties is governed by state partnership statutes, which are extremely unlikely to reflect the expectations and understandings of the partners
Loaned property – partners often lend rather than contribute property for the partnership. A written agreement will clarify any loans, thus protecting that partner’s interest in the loaned property
Lawyers- failure to at least advise clients to consider a written agreement is subject to malpractice.
There is an inherent conflict of interest when an attorney creates a partnership agreement for multiple partners
Management of a Partnership
National Biscuit v. Stroud (1959) (actual authority)
§ 9 UPA: every partner is an agent of the partnership for the purpose of carrying on the business and binds the partnership unless he has no authority and the third party has knowledge that he has no such authority.
§ 18(e) UPA: All partners have equal rights in the management and conduct of the partnership business.
§ 15 UPA: All partners are jointly liable for all debt and obligations of the partnership….
Dissolution: if a partner no longer trusts his co-partner, dissolution is about the only foolproof solution.
§ 31 of UPA Causes of Dissolution
§ 701 of RUPA: calls it dissociation, allows a partner to get o
Charging Order: Basically a way for a person that you owe money to attach and take the benefits of your partnership interest as a means of satisfying a judgment.
RUPA § 1001: If a partnership becomes a Limited Liability Partnership
Partnership Dissolution (Part VI of UPA, §§ 29-43)
§ 29 UPA à Dissolution of a partnership is the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on as a distinguished form the winding up of the business.
§ 30: On dissolution the partnership is not terminated, but continues until the winding up of partnership affairs is completed.
§§ 601-603 of RUPA deals with “dissociation”: the modern stance on dissolution is much different.
Four Fundamentals of Dissolution § 601
When a partner wishes to get out or dies, etc. that partner dissociates from the partnership
§ 31 UPA did not use the word “dissociate” and had no provision for expelling partner, had to be dealt with by contract.
Dissociation and Dissociation does not end the partnership
Leads to a winding up of the partnership, business continues but during the winding up the scope of the partnership is narrowed to in effect tending to what business is already there.
See § 30 UPA
But See § 801 et seq. of RUPA à No longer is the partnership dissolved every time a partner leaves
The eventual end of the partnership does not end the business –
business can continue under the old partnership act (UPA), the old partnership has been dissolved and the new/remaining partners form a new partnership
RUPA makes clear that the partnership does not come to an end just because exiting partner dissociates
RUPA dissolution à termination of the partnership
RUPA dissociation à termination of partner
Well written partnership contracts have successfully contracted around dissolution, leads to a winding up only to the extent of getting rid of the exiting partner.
Partners always have the right to dissolve the partnership – § 601
§ 31 UPA
§ 601 RUPA: partner has the power to dissociate.
§ 701 RUPA: dissociation without dissolution
if a partner is dissociated without dissolution, the partnership shall cause the dissociated partner’s interest in the partnership to be purchased for buyout price determined by subsection (b).
Methods of Dissolution
§ 31(1)(b) partnership dissolved without violation of agreement by express will of