Agency & Partnership Outline

Lee HoffossAgency & Partnership Outline

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AGENCY & PARTNERSHIP__________

Professor M. R. FranksSouthern University Law Center

Course OutlineFall 2002

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AGENCY

Agency = Mandate

Principal – the person who authorizes another to act for him. The person to whom the agent is obligated.

Agent – the person who is authorized to act on behalf of another which is the principal.

A mandate is an order from the principal directing specific authority to his/her agent to perform some specific action or authority, such as a contract.

A procuration is a juridical act by which a person, the principal, confers authority on another person, the representative or agent, to represent the principal in legal relations. The procuration can be addressed to the representative or to a person with whom the representative is authorized to represent the principal in legal relations.

Authority of an Agent

May be conferred by:1. Law2. Contract, or3. Unilateral Act of Procuration

Items Requiring Express Authority by a Principal to an Agent

1. Inter vivos donation2. Successions3. Loans, debts, surety4. Endorse promissory notes5. Enter into compromises6. Make health care decisions

Termination of an Agency

1. When revoked by the principal2. When the agent resigns or renounces the power3. Upon death of the principal or agent4. Upon bankruptcy of principal or of the agent


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5. Upon interdiction of the agent6. Upon interdiction and appointment of curator for the principal7. Upon occurrence of resolutory condition specified in the power8. When purpose of the power becomes impossible9. When purpose of the power is accomplished

MASTER / SERVANT(Employer / Employee)

Employer – a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.

Employee – an agent employed by a master to perform services in his affairs whose physical conduct in the performance of the service is controlled or is subject to the right of control by the employer (master).

Independent Contractor – a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other’s right to control with respect to his physical conduct in the performance of the undertaking. He may or may not be an agent.

Determinative Factors for Employees and Independent Contractors

1. Extent of control the master may exercise over the details of the work2. Whether the one employed is engaged in a distinct occupation or business3. Whether the employer or workman supplies the tools4. Length of time for which the person is employed5. The skill required in the particular occupation6. Whether the work is a part of the regular business of the employer7. Method of payment, whether by the job or by the hour8. Whether the principal is or is not in business

WORKERS’ COMPENSATION

Statutory Employer (Elements)

1. Employees of contractor2. Engaged to perform work that is part of the principal’s trade

3 “Wicked Sisters”

1. Fellow servant rule2. Assumption of risk3. Contributory negligence


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TRADE SECRETS

Trade Secret – may consist of any formula, pattern, device, or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.

Secrecy need not be absolute and the owner of the secret needs only to take reasonable precautions to ensure that it would be difficult for others to discover the secret without using improper means.

One does not need a covenant not to compete to keep trade secrets from being disclosed.

Liability of Disclosing a Trade Secret

One is liable to the other if:1. He discovered the secret by improper means2. His disclosure or use constitutes a breach of confidence reposed in him by the other

disclosing the secret to him3. He learned the secret from a third person with notice of facts that it was a secret and

that the third person discovered it by improper means or that the third person’s disclosure of it was otherwise a breach of his duty to the other

4. He learned the secret with notice of the facts that it was a secret and that its disclosure was made to him by mistake.

Trade secrets are not patented. Matters of general knowledge in an industry cannot be appropriated by one as a trade secret.

NON-COMPETITION COVENANTS

1. Non-competition covenants must be reasonable as to scope of activitya. And durationb. And geographic area

2. Duration in Louisiana is 2 years3. Non-competition agreement is simply void if:

a. Unreasonable as to scope (Exxon not in cosmetics business)b. Unreasonable as to durationc. Unreasonable as no geographic area specified

UNINCORPORATED BUSINESS ENTITIES

SOLE PROPRIETORSHIP

Easiest form of business. The only caveat is unlimited liability as to the owner.

Can use any name that one desires to be known as, but must file a Trade Name Affidavit with the Clerk of Court in the parish of operation. This will allow the creditors to be put on notice as to who is responsible for the debts.


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GENERAL PARTNERSHIP

Definition / Elements

1. Two or more general partners2. Each must have proprietary interest3. To combine efforts and resources4. Take part in the sharing of profits and losses 5. Equal shares unless otherwise agreed6. Participation in management7. Partnership agreement need not be in writing8. Unlimited liability as to each partner (tort, contract, etc.)9. Further excellent discussion

i. A legal entity of mutual agency.ii. A juridical person, distinct from its partners.

iii. Trustees and succession representatives, in their capacities as such, and unincorporated associations may be partners.

Requirements for a Partnership

1. Two or more people;2. Oral or written contract for partnership;3. Partnership objective must be for profit;4. Each partner has an ownership in the business;5. Each partner agrees to carry a loss.

Name Usage

One can use any name with or without partners’ names in it. Can use a fictitious name, but have to file a Trade Name Affidavit with the Parish Clerk of Court. If no name is adopted, then the business must be conducted in the name of all the partners.

Immovable Property

1. If the contract of partnership was in writing and recorded with the Secretary of State at the time when immovable property is acquired by the partnership, then the property is owned by the partnership and it is effective towards third parties.

2. If the partnership was in writing, but not recorded with the Secretary of State, then the partnership still owns the property, but not effective towards third parties.

3. If the partnership was not in writing on the date of the acquisition, then the property is owned by the individual partners. In order to put it in the partnership name, the partners would have to place the partnership in writing and then transfer the property by a separate act.


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Agents of the Partnership / Partnership Agreements

Partners act as agents of the partnership. Each can bind the partnership. All partners have to agree, unless otherwise agreed in the partnership agreement, to:

1. Amend the partnership;2. Admit new partners;3. Terminate the partership; or4. Permit a partner to withdraw without just cause if the partnership is for a term.

A majority must agree to decisions affecting the management or operation of the partnership unless otherwise stipulated in the partnership agreement.

Termination of a Partnership

1. Unanimous consent of the partners;2. Judgment of termination from a court;3. Bankruptcy;4. Reduction to one person;5. Expiration of term;6. Attainment of a goal; 7. The impossibility of attaining the object of the partnership; or8. In accordance with the provisions of the contract.

When a partnership terminates, the business ends except for purposes of liquidation. The authority of the partners is also terminated except for liquidating the partnership. If a third person is not aware that the partnership is terminated and acts in good faith with one of the partners, then the partnership is liable for that act. If the partnership is terminated because it goes to one member, then that person is not bound to liquidate the partnership and can continue it as a sole proprietorship.

Division of Partnership / Paying of Creditors

(Order of Priority in Payment)1. Secured creditors;2. Unsecured creditors who are not partners;3. Unsecured creditors who are partners.4. If there are any assets left over, then the capital contributions shall be restored to the

partners;5. If there is anything left after that, then the surplus shall be divided among the partners

based on their respective proportional interests (percentage they contributed).LIMITED PARTNERSHIP or PARTNERSHIP IN COMMENDAM


1. At least one general partner and one limited partner2. Liability limited to limited partner as only to the percentage of the contributed

amount;


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3. Limited partner may not participate in management4. Name cannot appear in partnership name unless it is also the same name as that of the

general partner or of a predecessor business entity;5. Can use only one name of the general partner;6. Can use an assumed name;7. The firm name must state “in commendam” or “limited partnership”;8. Articles of limited partnership must be in writing and be filed with the Secretary of

State;9. Has the benefit of partnership taxation.

What the Limited Partner is Allowed to do:

1. Be an employee or contractor of the partnership or general partner;2. Be an employee, officer, director, or shareholder of a general partner that is a

corporation or a member or manager of a general partner that is a limited liability company;

3. Consult and advise a general partner;4. Act as a surety for the partnership;5. Take any action required or permitted by law to bring or pursue a derivative action in

the right of the partnership;6. Request or attend a meeting of the partners;7. Liquidating the partnership; or8. Proposing, approving, disapproving, by voting or otherwise, any of the following:

i. Continuation or termination of the partnership;ii. Alienation, exchange, lease, mortgage, pledge, or other transfer of the

assets of the partnership;iii. Incurrence of debt by the partnership other than in the ordinary course of

its business;iv. A change in the nature of the business;v. Admission or expulsion of a general partner; and

vi. Amendment to the contract of the partnership.

If a Limited Partner allows their name to be used in the name of the partnership, he/she assumes liability as a general partner.

A limited partnership or partnership in commendam must be in writing and filed with the Secretary of State’s office.

Until the appropriate paperwork is filed, the partnership is a general partnership and the limited partner assumes the same liability as does the general partner.

LIMITED LIABILITY PARTNERSHIP (LLP)


1. Add-on feature 2. To a general or limited partnership3. Limits liability in torts only to partners


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4. Partner is liable for virile share of contract debts of partnership5. Must be renewed annually for $100.00 with the Secretary of State

Application for LLP to Secretary of Statte

1. Name, including the suffix “LLP” or “Registered Limited Liability Partnership”2. Address of Principal Office;3. Number of Partners;4. Purpose of the partnership;5. Major vote to execute partnership.

Partners in an LLP must be natural persons (no juridical persons such as corporations)

LIMITED LIABILITY COMPANY (LLC)


1. May or may not have centralized management2. May or may not have continuity3. Liability limited as to all members4. Partners are known as members5. Free transferability of interests6. Elect partnership tax status (check-the-box)

Articles of Organization Must Include:

1. Names, including “LLC” or “Limited Liability Company”;2. Purpose3. Limits on Authority4. Powers Conferred

Must file articles of organization and initial report with the Secretary of State, but does not have to include an operating agreement.

LLC can have one member and has perpetual existence even after the death of one of the members.Must have a majority vote of the members to pass or approve things.

Articles of Organization can either limit or eliminate liability, but not with fraud or unfair financial gain. Members and managers are not individually liable for debts of the LLC.

Dissolution of an LLC

1. Members vote to dissolve;2. Juridical dissolution; and3. Affidavit if owes no debts.


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Upon dissolution, must file articles of dissolution with Secretary of State that are signed by one or more managers. Certificate of dissolution must be signed by one or more of the members stating that the company has been liquidated.

Agency & Partnership Outline

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