ITS THE PRINCIPLE
disclosed principal
When an authorized agent contracts for a disclosed principal, the principal and the third party are parties to the contract, and the agent ordinarily is not personally liable unless the agent agrees otherwise.
express actual authority
An agent has express actual authority when the principal communicates to the agent, orally or in writing, that the agent may take a particular action. The principal's manifestation is interpreted from the perspective of a reasonable agent in the agent's position.
what are an agent's duties?
duty of loyalty, duty of care and obedience, duty of disclosure and accounting
what are a partner's duties to the partnership?
duty of loyalty & duty of care and good faith
dissociation
Dissociation is a partner’s departure from the partnership. It may occur by notice of express will, an agreed event, expulsion, bankruptcy, incapacity, death, or other statutory event. Dissociation does not necessarily cause dissolution.
unidentified principal
When the third party knows the agent is acting for a principal but does not know the principal's identity, both the principal and the agent are ordinarily parties to the contract unless the agreement provides otherwise.
An agent has implied actual authority to take acts reasonably necessary or incidental to carry out the agent's express authority, acts customary for an agent in that position, and acts the agent reasonably believes the principal wishes the agent to take because of the principal's prior conduct or the surrounding circumstances.
agent's duty of loyalty
An agent must act loyally for the principal’s benefit in matters connected with the agency.
Without informed consent, the agent may not obtain a material benefit from a third party, act for an adverse party, compete with the principal concerning the agency, use the principal’s property or confidential information for personal purposes, or usurp an opportunity belonging to the principal.
partner's duty of loyalty
A partner must account for benefits derived from partnership business or property, refrain from dealing with the partnership as or for an adverse party, and refrain from competing with the partnership before dissolution.
The partnership agreement may identify specific activities that do not violate loyalty if the modification is not manifestly unreasonable.
wrongful dissociation
Dissociation is wrongful when it breaches an express term of the partnership agreement or, in a term partnership, occurs before the end of the term through specified voluntary or fault-based events.
A wrongfully dissociating partner is liable for resulting damages and may have payment deferred until the term ends.
When the third party does not know that the agent acts for a principal, both the undisclosed principal and the agent are ordinarily liable on an authorized contract.
The undisclosed principal may enforce the contract unless the principal's identity or performance is material to the third party, but the third party may assert against the principal defenses and claims arising from dealings with the agent.
termination of actual authority
Actual authority terminates upon the occurrence of an agreed event, expiration of a reasonable time, revocation by the principal, renunciation by the agent, death or loss of capacity of the principal when the agent has notice, or other circumstances making the agent's belief in authority unreasonable.
A power given as security may be irrevocable to the extent necessary to protect the holder's interest.
agent's duty of care and obedience
An agent must act with the care, competence, and diligence normally exercised by agents in similar circumstances, comply with lawful instructions, and act within authority.
A gratuitous agent must exercise the care the agent actually possesses or holds out as possessing.
partner's duty of care and good faith
A partner must refrain from grossly negligent or reckless conduct, intentional misconduct, and knowing violation of law.
Every partner must discharge duties and exercise rights consistently with the obligation of good faith and fair dealing.
effect of dissociation on authority
A dissociated partner loses actual authority to participate in management. For a limited period, the partnership may remain bound by the dissociated partner’s apparent authority for ordinary-course transactions with a third party who reasonably believes the person remains a partner and lacks notice of dissociation.
Filing a statement of dissociation may provide constructive notice after the statutory period.
principal's duties to agent
A principal must comply with contractual obligations, deal fairly and in good faith, indemnify an agent for authorized payments and liabilities, and compensate the agent when the relationship or circumstances create a right to compensation.
apparent authority
An agent has apparent authority when the principal's manifestations cause a third party reasonably to believe that the agent is authorized to act for the principal.
Apparent authority must be traceable to the principal, not merely to the agent's own statements.
A principal may create apparent authority through words, conduct, position, prior dealings, or failure to correct a known misunderstanding.
agent's duties of disclosure and accounting
An agent must provide material information relevant to the agency that the agent knows the principal would wish to have, keep and render accounts, segregate the principal’s property, and deliver money or property received on the principal’s behalf.
partner's responsibilities regarding partner information & books and records
A partnership must provide partners access to books and records and, on demand, information concerning the partnership’s business and affairs when reasonably required.
A partner must furnish material information without demand when appropriate.
buyout after dissociation
If dissociation does not cause dissolution, the partnership must generally purchase the dissociated partner’s interest for the amount the partner would receive if the business were sold at the greater of liquidation value or going-concern value, minus damages and amounts owed, with interest.
how does a principal ratify an unauthorized act
A principal ratifies an unauthorized act by affirming the act or accepting its benefits with knowledge of the material facts.
Ratification requires that the principal existed and had capacity at the time of the act and at ratification, and that the principal ratify the entire transaction before the third party withdraws or circumstances materially change.
Valid ratification relates back and treats the act as authorized from the outset.
lingering apparent authority
Termination of actual authority does not automatically terminate apparent authority.
Apparent authority continues as to a third party until the third party receives actual notice or the circumstances make continued reliance unreasonable.
Public notice may be sufficient for persons who did not previously deal with the agent.
how is an agency relationship created?
An agency relationship arises when a principal manifests assent that an agent act on the principal's behalf and subject to the principal's control, and the agent consents.
No contract, consideration, writing, or compensation is generally required. The parties' labels do not control; the relationship depends on consent, acting on another's behalf, and control.
partner transaction with partnership
A partner may lend money to, borrow from, or transact other business with the partnership and generally has the same rights and obligations as a nonpartner, subject to fiduciary duties and the partnership agreement.
events causing dissolution
An at-will partnership dissolves when a partner gives notice of an express will to withdraw.
A term partnership dissolves upon expiration of the term, completion of the undertaking, unanimous agreement, or specified dissociations followed by the required vote to wind up.
Judicial or statutory dissolution may occur when continuation is unlawful, impracticable, or inequitable.