Agency Liability in K: P becomes liable to 3P via actions of A 1) IF A and P I) BOTH Consent, and II) A is subject to P's Control 2) No writing

g required, BUT SOF may require 3) No Consideration required Liability in K Capacity 1) P must have contractual capacity 2) K is b/w P and 3P, not A, he is just intermediary Actual Authority Creation 1) MUST exist when A enters in to a K 2) Express P tells A to act on P's behalf 3) Implied P's conduct leads A to believe A has authority Termination of Actual Authority (6 ways) 1) After I) Specified time/event, OR II) Reasonable Time 2) By change of circumstances I) Subject matter destroyed 3) Agent Acquires Adverse Interest I) Join competitor 4) Agent says so I) Agency is consensual so he can disavow 5) When P says so I) UNLESS, coupled with an Interest Irrevocable 6) Death/Incapacity/Bankruptcy I) UNLES, coupled w/ interest Delegation of Actual Authority 1) If P consents (express/implied) Okay Substitutes for Actual Authority 1) Apparent Authority ***Apparent Authority*** 1) P leads 3P to mistakenly think A has authority 2) Protects innocent 3P who rely on P's conduct 3) Reasonable Belief MUST be created by P, NOT A alone 4) ***CAN survive after Actual Authority ends Ratification of Actual Authority Sub for Actual 1) How to Ratify I) If A has NO Authority, P CAN by (a) Affirming K (b) Accepting Benefit of K, OR (c) Suing 3P on K 2) REQUIRES I) P has knowledge of ALL MATERIAL Facts II) P must accept ENTIRE TRXN, (All or Nothing) III) P must have Capacity at BOTH (a) Time of Ratification, AND (b) Time of Original K (Ratification is retroactive) 3) Intervening Rights BFP I) MUST protect intervening right of BFP II) Ex. 'A' sells P's car to 3P1, P later sells to 3P2 (a) 3P2 is BFP, can't honor 3P1 even in more money b/c BFP Relationship b/w A and P A is FIDUCIARY 1) Duty of Loyalty I) P's interest above her own II) NO Self Dealing

2) 3)

III) Cannot Usurp Biz Opportunity Duty of Care I) Depends on any special skills A may have Duty of Obedience

Relationship P to A 1) P must pay, unless gratuitous 2) Reimburse, AND 3) Indemnify Relationship P to 3P (Assuming Authority) 1) P is liable to 3P 2) 3P is liable to P I) UNLESS (a) A has Special Skills, AND (b) P is undisclosed (3P does NOT know P exists) Relationship A to 3P 1) Generally none b/c A is just intermediary ***Liability in TORT (VL to Protect Innocent 3P) 1) TEST I) Was tort committed by servant acting w/in scope of employment II) If YES Master & Servant Jointly and Severally 2) Servant I) Did ER have right to control how S did the job (even if control not exercised) II) IC issues (a) Tools, workplace (b) Part of ER's regular biz (c) Long term (d) Skill required (e) Salary paid to Servant or by Job Scope of Employment 1) M is NOT automatically liable for S's torts 2) ONLY Liable if within scope of employment 3) Issues I) Detour (minor deviation) W/in Scope II) Frolic (substantial dev) OUTSIDE Scope III) Intentional Torts Usually OUTSIDE (a) UNLESS (a) Force used to further M's Biz (b) M ratifies Use of Force, OR (c) M authorized S to commit tort Liability of M/S 1) Joint and severally liable to 3P 2) Can sue S, M, or Both 3) BUT Only 1 total satisfaction Direct Liability 1) M is liable for its OWN Negligence IF I) M fails to properly train, or II) Supervise EE, or III) Check an EE's criminal record or history Agency MINI REVIEW Contracts 1) Is P liable to 3P on K entered into by A? 2) Does Agent have Actual or Apparent Auth when K? 3) Did P Ratify OR Adopt K? I) If YES P is Liable, NOT Agent Agency MINI REVIEW TORT 1) Is ER liable for Tort committed by EE? 2) Tort by I) SERVANT, AND

3)

II) In Scope of Employment? If YES M and S are JOINTLY and SEVERALLY LIABLE

3) 4) 5)

NO Right to Compensation Management Rights Indemnification and Interest

GENERAL PARTNERSHIPS Pship 1) Association of 2 or more to I) Carry on as co-owners II) A biz for profit III) Whether intend or not 2) Writing NOT Required, but SOF May require Factors of Pship 1) Capital $$$ Contribution is NOT REQUIRED to be Pner 2) Control Right to Control may be sufficient I) Even if NEVER Exercised II) Owners have Right to control operations 3) Sharing Profits I) No presumption, but a factor Joint Venture 1) Like Pship 2) BUT, requires EXPRESS Agmt on how LOSSES shared

Partners also OWE Duties to Each other 1) Owe Duties of (1) Care, (2) Loyalty, and (3) GF 2) CANNOT Eliminate these 3) MAY Set Standards if NOT Manifestly Unreasonable 4) Partners must render FULL INFORMATION about pship on request Relation b/w Partner and 3P 1) Agency Principles I) Partnership is Principal II) Partner is Agent Creation of Actual Authority in Pship 1) Created by I) Pship Agmt II) Majority vote of Partners, OR III) Statute (a) Statute makes every partner an agent for carrying on biz in usual way (b) Can be negated by partners Creation of Apparent Authority - Factors 1) Partner's Title, AND 2) Prior Conduct Pship Conveying REAL Property WITHOUT AUTHORITY 1) Pship CAN get property back from initial transferee (who should have checked authority) 2) BUT, NOT from subsequent BFP (who has no reason to check) Pship Torts 1) Partners are OWNERS ALL that matters is if tort was committed w/in ordinary course of pship biz ***Partner's Liability for Pship Obligation 1) Join and Several 2) BUT P must First, exhaust pship resources 3) Exception for LLP I) No liability on K or Tort of others II) UNLESS (a) Directly involved (b) Supervising the Tortfeasor, OR (c) Aware of Tort and did nothing to stop it Forming an LLP 1) File certificate of formation w/ Secretary of State and pay fee (MUST Renew Annually) 2) NAME, must include phrase "Limited Liability Pship" OR Abbreviation (Notice) 3) BUY at least 100,000 Liability insurance OR segregate 100k of funds (protects 3P) Withdraw of Partner Events of Withdrawal 1) Notice of Express will to withdraw 2) Occurrence of agreed upon event 3) Partner's I) Expulsion II) Death III) Bankruptcy IV) Incapacity 4) Appointment of Trustee, Receiver, or Liquidator for Pner 5) Redemption of Transferee's interest ***Effect of Withdraw of Partner 1) NO BIG DEAL

Pship Estoppel 1) If NO Pship formed, MAY Still be liable as if partners to protect 3P 2) Reasonable Reliance by 3P like Apparent Authority Pship Property Interest RULE 1 1) Acquired by I) PSHIP name, or II) PARTNER'S name (a) If Apparent from Document he is acting for Pship (b) Ex. Says he is partner, or mentions pship 2) THEN IS Partnership Property Pship Property Interest RULE 2 1) IF Use Pship FUNDS 2) THEN PRESUMED Pship Property Pship Property Interest RULE 3 1) If Acquired I) In PARTNER's NAME II) Without Pship funds, AND III) NO Sign he is acting for pship 2) THEN PRESUMED PARTNER Property ***Rights in Pship Property 1) Partnership I) Rights are TOTALLY UNRESTRICTED II) b/c pship owns the property 2) Partner I) VERY Limited II) Can ONLY Use for Pship purposes III) Right is NOT Transferable ***Partner's Economic Interest in Pship 1) P's share of Profits I) IS Transferable (Assignable/Devisable) II) Community Prop if Acquired during Community ***SHARING PROFITS AND LOSSES 1) REVIEW Relationship Among Partners 1) Default Statute 2) Partners can K around them PSHIP AGMT RULES

2)

Pship usually buys out withdrawing pner AND continues in Biz w/out them 2)

Liability of Withdrawn Partner 1) To Existing Creditors UNLESS Released by creditor (express/implied) 2) To Subsequent Creditors Who were unaware of withdrawal I) BUT, can protect self by notifying potential creditors 3) To Other Partners If withdrawal was wrongful I) Ex. Breach of K Withdrawing Partner 4) May Have apparent authority to bind pship to innocent 3P for 1 year I) BUT, pship can protect itself by notifying creditors

3)

(b) 3P reasonably believes, based on LPner conduct, LPner is in fact a GPner; tougher to show; 153.102 II) As long as LPner is clear to 3P, then shes safe TX Safe Harbor; 153.103 I) List of tasks that do not constitute Participating in Control (a) Voids 1st Element from Middle Road Test Use 153.102 and 153.103 together to see if LPner is participating in control

Rights and Obligations of Limited Partners 1) Promise to Contribute MUST BE IN SIGNED Writing to be enforceable 2) MAY Withdraw ONLY if Agmt Permits General Partners 1) Jointly and Severally Liable 2) Exception LLLP I) Shields GPner from Personal Liability II) JUST Like LLP Formula 1) LP [shields LPners] + LLP [Shields GPners] = LLLP LLC Formation 1) Filing of Cert of Formation w/ SOS and Pay fee 2) Name includes LLC, LC, or abbrev 3) Professional PLLC I) Members and managers must be licensed to render professional services in TX or ELSEWHERE 4) Profits/Losses I) Split in proportion to capital contributions II) UNLESS otherwise provided in agmt LLC Management 1) Flexible structure like corporation or pship 2) BUT, MANAGERS RUN LLC I) Unless otherwise provided in certificate CONCLUSION LLP and LLC are BEST 1) Limited Liability ALL owners shielded from VL, Unlike GP or LP I) General Pship Joint and Several Liability II) LLP NO Liability (a) UNLESS Directly Involve, supervising tortfeasor III) LP (a) GPner Joint and Several, UNLESS LLLP (b) LPner NO Liability, UNLESS CONTROL IV) LLC NO LIABILITY 2) Flexible Management I) All owners may exercise control, unlike LP II) HOW they control determined by Agmt 3) Less Tax to Pay I) Income passed through owners, II) Unlike corp Subject to Double Tax (a) Corp pays tax on its income, (b) THEN Shareholder pay tax again on distribution as dividend 4) Conversion/Merger I) IF Choose wrong form can (a) Convert to another, OR (b) Merge onto another

Winding Up Pship 1) Rarely required I) Biz becomes illegal II) All assets sold outside usual course III) Judicial decree IV) Term is up or undertaking is accomplished, or V) Unanimous consent VI) if AT WILL Majority in Interest Agree 2) Who Can? I) Pners who have NOT Wrongfully Withdrawn 3) ***May still have Apparent Authority to Bind Pship to 3P on new biz even after winding up I) BUT, can protect by notifying potential 3P/Creditors Distribution of Assets Winding Up (Rank) 1) To Creditors (including partners who are creditors) 2) To Partners for what is in their Capital Accounts I) [Contribution] + [Profits] [Losses] 3) IF Pship Assets Insufficient to Cover Liabilities I) Partners Bear Equally 4) Creditors Rights I) Pship Creditors (a) >>Priority>> Partner's Creditors on Pship Property (b) EQUAL Claim on Partner's SP Limited Pship (LP) 1) Pship with I) One or more General Partners (Generally Liable), AND II) One or more Limited Partners (Liability Limited to their investment) 2) Formation Formalities I) File Cert. of Formation w/ SOS along w/ fee, (a) and must have Written Limited Pship AGMT II) NAME includes Limited Partnership, Limited, or Abbrev 3) Law Applied I) General pship law governs (a) Except where LP statute is inconsistent Liability of Limited Partners 1) General Rule Limited Pners can ONLY lose their capital contribution 2) Exception I) Where LPner takes part in CONTROL II) Control NOT defined but HAS Safe Harbors Control of Limited Partner Safe Harbor and Control 1) TXs Middle Road*** I) LPner is liable only if they are like GPner Liable as GPner IF: (153.102) (a) Participates in control and (protection from Safe Harbor too)