SmartBarPrep's Attack Sheets (Both MEE and MBE)

A. Agency Relationships | B. Authority & Principal’s Contractual Liability
1. Creation of Agency Relationship
Definition: Agency is a fiduciary relationship, where a
person or entity (the agent) acts on behalf of another (the
principal) AND both parties agree to the relationship.
Elements: An agency relationship exists if:
1) Assent – formal or informal agreement;
2) Benefit – the conduct primarily benefits the
principal; AND
3) Control – the principal has the right to control the
agent (control doesn’t need to be significant).
Characterization by Parties: The characterization of
the relationship by the parties is irrelevant.
2. Types of Agency Relationships
§ Universal Agent – has broad authority, authorized for
ALL acts the principal can perform.
§ General Agent – has authority to conduct a series of
transactions over a period of time.
§ Special Agent - has limited authority either for a
specific act/transaction OR a specified period of time.
3. Termination of Agency Relationship
An agency relationship terminates when:
a) Manifestation that the relationship is terminated by
either party;
b) Specified term of authority expires;
c) Death of principal or agent (by operation of law);
OR
d) Incapacity of principal or agent (by operation of
law) – except if a durable power of attorney exists.
Death of Principal:
Common Law à revoked regardless of whether 3rd party
has notice of principal’s death.
Some States à NOT revoked until 3rd party has notice of
the death.
Agency Contracts: Principal can terminate the agent at
any time. BUT, principal may be liable for damages if
agent is terminated prior to the expiration of a contract
(unless agent materially breached contract). | 1. Actual Authority: A principal is bound to a contract
entered into by its agent if the agent had actual authority.
Two Types – occurs when:
Express Authority – by principal’s explicit directions to
the agent (either orally or in writing)
Implied Authority – either:
(a) action is necessary to carry out agent’s expressly
authorized duties;
(b) agent acted similarly in prior dealings between
principal/agent; OR
(c) customary for agent in that position
(silence/acquiescence can give rise to a reasonable
belief of authority in the future).
Agent has actual authority when acting within their
reasonable understanding of authority, even if principal
later shows the agent was mistaken.
2. Apparent Authority: A principal is bound to a
contract entered into by its agent if the agent had apparent
authority.
Apparent Authority occurs when:
1) 3rd party reasonably believes the agent has
authority to act on behalf of the principal; AND
2) That belief is traceable from principal’s
manifestations.
A principal holds the agent out as having authority
when he: (a) gives a position or title indicating authority;
(b) previously held out and did not published a revocation;
OR (c) cloaked the agent with the appearance of authority.
– Not applicable if 3rd party had knowledge that the agent
did not have actual authority.
– Continues until principal communicates termination to
3rd parties.
Unidentified/Partially Disclosed Principal à Apparent
Authority CAN exist.
Undisclosed Principal à Apparent Authority CANNOT
exist.AGENCY
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3. Inherent Agency Power – Protects 3rd parties when
dealing with agents even if there is no actual or apparent
authority.
Two groups of Inherent Agency Power:
First Group: Subjects an employer to liability when an
agent acts in furtherance of employer’s business and his
conduct harms a 3rd-party.
Second Group: If an agent violates Principal’s orders and
there is no actual/apparent authority, inherent agency
applies when:
1) An agency relationship exits; AND
2) Agent engaged in acts that are generally of a
kind that would fall within his actual authority,
but for the violation of Principal’s instructions.
4. Ratification – Makes the principal liable for agent’s
contracts entered into without authority.
Ratification occurs when the Principal:
1) Has knowledge of all material facts or contract
terms; AND
2) Assents to the same through words or conduct.
(Agent also remains liable if principal was not disclosed)
Rest. 2nd – Undisclosed principal CANNOT ratify.
Rest. 3rd – Undisclosed principal CAN ratify.
C. Agent’s Contractual Liability
- Generally, an agent has NO liability if they:
(1) Fully disclose the principal to a 3rd party; AND
(2) Act within the scope of authority.
- Agent will be liable if:
(a) Conduct was unauthorized; OR
(b) Principal was undisclosed or partially disclosed
(no name given) to the 3rd party.
- Agent may seek Indemnification from a principal if: (1)
agent is liable; AND (2) his conduct was authorized.
D. Vicarious Liability for Agent’s Torts
1. Liability for Agent’s Torts: Under the doctrine of
respondeat superior, an employer is liable for an
employee’s negligent acts if the employee was acting
within the scope of the employment.
Agent acts within Scope of Employment when:
a) Performing work assigned by the employer; OR
b) Engaging in course of conduct subject to
employer’s control.Scope Factors – Courts analyze these to determine
scope of employment:
i) Conduct is of the kind employee is employed to
perform.
ii) Occurs substantially within authorized time and
space limits;
iii) It is motivated (in whole or part) to serve the
employer.
Time, place, and purpose test.
Not Within Scope of Employment: Conduct is NOT
within scope if unrelated and not intended to serve any
purpose of the employer.
- BUT see exception below.
Employer Liability Even If Outside Scope of
Employment: An employer will be liable for acts outside
the scope of employment if:
a) Employer intended the conduct;
b) Employer was negligent or reckless in selecting,
training, supervising, or controlling the employee;
c) It is a non-delegable duty; OR
d) Agent had apparent authority and 3rd party
reasonably relied.
Intentional Torts: Generally outside the scope.
Exceptions:
a) Act was expressly authorized;
b) Act was a natural product of agent’s duties; OR
c) Motivated by a desire to serve the principal.
2. Liability for Independent Contractors: Generally, an
employer/principal has NO liability for an Independent
Contractor’s torts.
Exceptions:
1) Inherently Dangerous Activities.
2) Non-delegable duty owed by principal.
3) Estoppel (principal holds out contractor as his
agent, 3rd party reasonably relied on contractor’s
skill, and 3rd party suffered harm).
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3. Independent Contractor vs. Employee: Primary
focus is whether the principal had the right to control the
manner and method in which the job was performed.
Courts analyze the following to determine if an employee or
contractor:
1) type of work;
2) pay rate;
3) who supplied the equipment/tools;
4) degree of supervision;
5) degree of skill required;
6) was work for the benefit of the employer’s
business;
7) extent of control principal has over work details;
and
8) whether agent/contractor is engaged in a distinct
business.
E. Fiduciary Duties Between Principal and Agent
Duties Owed by Agent to the Principal:
1) Duty of Care – duty to use reasonable care when
performing agent’s duties.
2) Duty of Loyalty – duty to act solely and loyally for
principal’s benefit.
3) Duty of Obedience – duty to obey all reasonable
directions.Purchased by Jazemine McSween, [email protected] #13000390

Definitions | C. Amending the Partnership Agreement
Pship = Partnership | The partnership agreement may be amended at any time
with a unanimous vote.
A. Creation of Partnerships
1. General Partnerships (GP): A GP is formed when:
1) two or more persons;
2) as co-owners;
3) carry on a business for profit.
- Intent to form a partnership is NOT required.
- A joint venture or sharing in gross profits does not
automatically create a partnership.
2. Limited Partnerships (LP): An LP is composed of at
least one general partner and limited partner(s).
An LP is formed upon filing a Certificate of Limited
Partnership with the Secretary of State, which must
include:
1) name of Pship;
2) address of Pship;
3) name and address of each partner;
4) whether the Pship is an LLP; AND
5) signed by a general partner.
3. Limited Liability Partnership (LLP): In an LLP, all
partners have limited personal liability.
To become an LLP:
1) It must be approved by the same vote necessary
to amend the partnership agreement; AND
2) A Statement of Qualification must be filed with the
Secretary of State containing:
i. name and address of partnership;
ii. statement that Pship elects to become an
LLP; and
iii. a deferred effective date (if any).
- Filing does not create a new partnership.
- The LLP remains liable for any obligations before it
became an LLP. | D. Authority to Bind the Partnership
B. Creditor vs. Partner
A person who receives a share of the profits is presumed
to be a partner UNLESS received in payment:
a) of a debt;
b) for wages as an employee or independent
contractor;
c) of rent;
d) of an annuity or retirement benefit;
e) of interest/loan charges; OR
f) for the sale of goodwill of a business.
1. Authority to Bind the Partnership: A partner is an
agent of the Pship, and generally has authority to bind the
Pship for its business (including contracts). To bind the
Pship, the partner MUST have authority.
Express Actual Authority: A partner receives such
authority from the partners.
- Acts within the ordinary course of business must be
approved by a majority of the partners.
- Acts outside the ordinary course of business must
approved unanimously.
Ordinary course of business = normal and necessary for
managing the business.
Implied Actual Authority (Incidental Authority): A
partner may take actions reasonably incidental or
necessary to achieve the partner’s authorized duties.
Apparent Authority: A partner has apparent authority for
acts:
a) considered within the ordinary course of the Pship
business; OR
b) of the kind carried on by the partnership.
– A partner’s act will NOT bind the Pship when:
1) partner lacked authority; AND
2) the 3rd party knew or received notice of lack of
authority.
2. Binding the Partnership After Dissolution: A
partner’s authority is limited after dissolution.
Actual authority – limited only to acts appropriate for
winding up the business.
Apparent authority – a partner has apparent authority
to bind the Pship if:
1) partner’s acts would have normally bound the
Pship; AND
2) 3rd party did not have notice of dissolution.PARTNERSHIPS
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E. Liability of Partners | Generally, a judgment creditor CANNOT levy execution of
a judgment for a Pship debt against a partner unless:
1) The partner is personally liable;
2) A judgment is rendered against the partner; AND
3) Pship assets are exhausted/insufficient to satisfy
the judgment.
1. Liability of General Partners:
Personal Liability: General partners are personally liable
for all obligations of the Pship UNLESS (a) otherwise
agreed by claimant or (b) provided by law.
UPA (1997) = partners are jointly and severally liable.
UPA (1914) = partners are jointly liable.
Incoming Partners: Partners admitted into an existing
partnership are NOT liable for obligations incurred prior to
their admission.
- BUT, risk losing capital contribution paid to Pship
2. Liability of Limited Partners:
Personal Liability: Limited partners are NOT personally
liable for obligations of the LP.
Exceptions:
a) Liable for their own misconduct;
b) At risk of losing their capital contribution to the
Pship; OR
c) May become personally liable if partner
participates in management (depends on the
state).
Liability for Participating in Management:
- ULPA (2001) = no personal liability created when
a limited partner participates in the management
or control of the business.
- ULPA (earlier versions) = personal liability created
for participating in management (but removal of a
director is not considered participation in
management and control).
- RULPA = personal liability created, but is liable
only to persons who transact business with the LP
reasonably believing that the limited partner is a
general partner.
a) RULPA has a safe harbor provision
excluding certain acts from liability.
3. Liability of Limited Liability Partners
Under RUPA, a partner in an LLP is NOT liable for
partnership obligations. But partners are liable: (a) for
their own misconduct; OR (b) when the partner signs a
personal guarantee for the obligation.
4. Judgments Against a Partnership
A judgment against the Pship is NOT a judgment against
the individual partners.
- BUT, a judgment may be sought against the
Pship and individual partners in the same action.
F. Rights of Partners Among Themselves
1. Sharing of Profits and Losses: Unless otherwise
agreed, profits are shared equally, and losses are
shared in the same ratio as profits. Any partner who pays
more than his fair share in losses is entitled to contribution
from the other partners.
2. Right to Management & Control: Unless otherwise
agreed, each partner has equal rights in the management
and control of the business.
- A disagreement for ordinary Pship business need
only be approved by a majority of the partners.
- Acts outside the ordinary course of business MUST
be approved unanimously.
3. Use of Partnership Property
Personal use of Pship property requires the consent of the
other partners.
4. Judgment Against a Partner
A judgment solely against a partner CANNOT be satisfied
with Pship property because the partner has no ownership
interest in Pship property. However, a creditor may seize
the partner’s financial interest in the Pship.
5. Remuneration (Payment for Partner’s Services)
A partner is NOT entitled to remuneration for services
performed for the Pship unless:
a) There is an agreement to the contrary; OR
b) It is for reasonable compensation for services
rendered in winding up the Pship business.
G. Assignment of Partnership Interests
1. Assignment of a Partnership Interest
A partner can only transfer:
1) his interest in the share of profits and losses; AND
2) the right to receive distributions.
- Any other rights CANNOT be transferred, unless the
partnership agreement provides otherwise.
- ALL partners must consent for an assignee of a
partnership interest to become a partner.Purchased by Jazemine McSween, [email protected] #13000390

H. Special Rules for Limited Partnerships
1. Rights of Partners in a LP
General partner – Has full management rights and
control.
Limited partner – Has NO say or control as to how the LP
is run, and DOES NOT have the right to manage or control
day-to-day business. Generally, they are passive, and
have voting rights only in extraordinary situations (i.e. sale
of Pship or all its assets, amending Pship agreement, or
admitting a new partner).
2. Limited Partner’s Right to Inspect Records
- Limited partners have the right to inspect and copy
records the LP is legally required to keep (RULPA).
- Upon reasonable demand, a limited partner may obtain:
(i) true and full info regarding the state of the business and
financial condition; (ii) LP’s tax returns; and (iii) any info
just and reasonable – may be exercised for any purpose.
I. Duties Owed by Partners
1. Duty of Care – A partner owes the fiduciary duty of care
to the Pship and other partners.
Under RUPA, a partner only breaches this duty if he
engages in:
a) Grossly negligent or reckless conduct;
b) Intentional misconduct; OR
c) A knowing violation of law.
If a partner breaches, he may be held personally liable to
the Pship for any losses.
A breach of the duty has been found in the following
situations:
§ Violating an agreement or policy of the Pship.
§ Failing to thoroughly investigate facts before
entering into contracts (if it’s gross negligence).
§ Acting outside the scope of Pship business without
the consent of the other partners.
2. Duty of Loyalty – A partner owes the fiduciary duty of
loyalty to the Pship and other partners. This requires the
partners to act in the best interests of the Pship.
Under RUPA, a partner must:
1) Account for any property, profit, or benefit derived
from Pship property or business (including
refraining from appropriating Pship assets);
2) Not have an interest adverse to the Pship (a
conflict of interest); AND
3) Not compete with the Pship (unless agreed
otherwise).