I Agency, Partnership and Limited Liability Companies by RICHARD J. CONVISER Professor of Law IIT/Kent College of Law Seventh Edition Mat #41611690 II The publisher is not engaged in rendering legal or other professional advice, and this publication is not a substitute for the advice of an attorney. If you require legal or other expert advice, you should seek the services of a competent attorney or other professional. Gilbert Law Summaries is a trademark registered in the U.S. Patent and Trademark Office. © 2010 by Thomson/West © 2014 LEG, Inc. d/b/a West Academic 444 Cedar Street, Suite 700 St. Paul, MN 55101 1-877-888-1330 West, West Academic Publishing, and West Academic are trademarks of West Publishing Corporation, used under license. Printed in the United States of America. ISBN: 978-1-62810-020-4 III Summary of Contents CAPSULE SUMMARY GILBERT EXAM STRATEGIES PART ONE: AGENCY Chapter One: Creation of Agency Relationship Key Exam Issues A. Introduction B. Requirements for Agency Relationship Chapter Two: Rights and Duties Between Principal and Agent Key Exam Issues A. Agent’s Duties to Principal B. Principal’s Duties to Agent Chapter Three: Agent’s Power and Authority to Bind Principal on Contracts Key Exam Issues A. Introduction B. Sources of Power C. Termination of Agents Authority and Power Chapter Four: Ratification Key Exam Issues A. Introduction B. Prerequisites for Ratification C. How to Ratify D. Limitations on Power to Ratify Chapter Five: Notice, Notification, and Knowledge Key Exam Issues A. Notice B. Notification C. Knowledge Chapter Six: Liability on Agent’s Contract Key Exam Issues A. Agent Acting Without Authority B. Agent Acting with Authority Chapter Seven: Tort Liability for the Acts of Others Key Exam Issues A. Liability of Employer for Torts of Employee—Respondeat Superior B. Liability of Principal for Torts of Agent—Outside Respondeat Superior C. Liability of Principal for Tortious Representations of Agent PART TWO: PARTNERSHIP Chapter Eight: Nature and Formation of Partnership Key Exam Issues A. Governing Law IV B. Basic Nature of Partnership C. Aggregate vs. Entity Characteristics of Partnership D. Formation E. Partnership by Estoppel Chapter Nine: Effect of Partnership Relationship Key Exam Issues A. Relations Between Partners B. Relations as to Third Persons Chapter Ten: Partnership Property and Partners’ Property Rights Key Exam Issues A. Partnership Property B. Partners’ Property Rights Chapter Eleven: Dissociation, Dissolution, and Winding Up of a Partnership Key Exam Issues A. Dissociation Under RUPA B. Dissolution C. Conversions and Mergers Under RUPA Chapter Twelve: Limited Partnerships Key Exam Issues A. In General B. Formation of Limited Partnership C. Name of Limited Partnership D. Changes in Membership E. Nature of Partner’s Contribution F. Rights and Liabilities of Partners G. Rights of One Erroneously Believing Herself to Be a Limited Partner H. Dissolution and Distribution I. Conversions and Mergers Under ULPA J. Foreign Limited Partnerships PART THREE: LIMITED LIABILITY COMPANIES Chapter Thirteen: Limited Liability Companies Key Exam Issues A. Introduction B. Formation C. Basic Characteristics of an LLC REVIEW QUESTIONS AND ANSWERS EXAM QUESTIONS AND ANSWERS TABLE OF CASES INDEX V Capsule Summary PART ONE: AGENCY I. CREATION OF AGENCY RELATIONSHIP A. INTRODUCTION 1. Scope and Purpose of Agency The law of agency concerns the rights and liabilities created when one person acts for another. 2. Agency Definitions Because of inconsistency among the courts regarding agency terminology, the Restatement of Agency definitions are generally followed in this Summary. a. Agency Agency is a fiduciary relationship arising from the mutual “manifestation of consent” that an agent shall act on behalf of and subject to the control of the principal. An objective standard is used so that the relationship is dependent on what the agent believed the principal intended. An agency can arise even absent true mutual consent, i.e., through apparent or ostensible agency. b. Principal A disclosed principal is one whose identity is known to the person transacting business with the agent. However, if the person knows the agent is acting for another, but does not know the principal’s identity, the principal is an unidentified principal. (1) Undisclosed Principal A principal is undisclosed when the third party transacting business with the agent does not know that the agent is acting for another. c. Agent The Restatement (Second) of Agency differentiated between general agents and special agents, and courts often use these terms. A general agent has authority to conduct a series of transactions involving a continuity of service. A special agent has authority for only a single transaction or a series of transactions not involving a continuity of service. (1) Factor A factor is a commercial agent employed to sell consigned merchandise in