Issue:

Agency Writing Sample

Agency Authority Answer

Issue:

The court must determine what authority Sally has as Teds mandatary (agent).

Answer/Rule:A mandate is a contract by which the principal confers authority on the mandatary to transact one or more affairs for the principal.

Under the Equal Dignity Rule a mandate contract is not required in any particular form. However, when the law prescribes a certain form for an act, a mandate authorizing the act must be in the same form required by law.

A principal may confer authority to the mandatary in two ways: implied and express.

First, under the implied powers of a general mandate the principal may confer on the mandatary general authority to do whatever is appropriate under the facts and circumstances. Acts that are incidental or necessary for the performance of the general mandate need not be specified. Nor do acts from a persons profession need to be specified under implied power.

In Clinton Feed, the court held that an agent has implied authority to bind the principal for the purpose of carrying on the business in the usual and customary way.

Then, there are seven activities for which express authority is required:

1. To alienate, acquire, encumber, or lease a thing (Immovable)2. An intervivos donation

3. to contract a loan, acknowledge the debt, become a surety

4. to make health care decisions

5. to enter into compromises or arbitrations

6. to draw or endorse a note and negotiable instruments

7. to accept or reject a succession

Moreover, the Von Wedel court held that an agent must have express authority to give an asset as a gift.

And the Toledano court held that if a mandatary represents both parties then the other party must be informed of the representation and any continued work, for either party, must be done by a separate mandate.

Analysis:

I. Prin.-Mandatary Relations Answer

A. Fiduciary Relationship(mandatarys duty to principal)

Issue:

Answer/Rule:Under Louisiana law an employee, servant, trustee, agent or mandatary is duty bound not to act in antagonism or opposition to the interest of his principal or his employee. Thus, the mandatary is bound to act with prudence and diligence by providing information and tendering an account of his performance. Moreover, the Mandatary is responsible for all losses that result for his lack of prudence; nevertheless, when the mandate is gratuitous (done w/o compensation), the court may reduce the mandatarys liability.

If the mandatary receives anything by virtue of the mandate (duly or unduly), he is bound to give it to the principle. And the mandatary owes interest to the principal of any money used for his personal use.

The Texana case states that the mandatary cannot lawfully acquire any private interest, gifts, gratuity, or benefit of his own in opposition to the principal or beyond the agreed compensation for his services. If the mandatary receives any of these benefits w/o full disclosure it is a betrayal of his trust and a breach of confidence, and he must account to the principal for all that he has received.

As stated by the Supreme Court, there does not need to be a showing of fraud or actual loss for the principal to show a breach of the fiduciary duty. The fiduciary has violated his duty by entangling his personal interest with those of the 3rd party.

The Gelfand court held that the fiduciary can be held accountable if he made it possible for others to make profits; however, it is at the courts discretion whether it compels a fiduciary to reimburse the principal for 3rd party profits.

B. Substitution (mandatarys duty to principal)

Issue:

The court must determine whether a mandatary without express or implied authority, substitute another in his stead and thereby delegate his authority so as to render the principal liable for the others negligence

Answer/Rule:

The general rule is that a mandatary is not authorized to permit or employ a sub-agent to perform the duties which involve the discretion of the agents special skills unless specially authorized in the agreement.

However, as stated in the Buisson case, there are two exceptions which allow the mandatary to appoint a substitute, where there is an emergency such that he becomes disabled, or when unforeseen circumstances prevent the mandatary from performing and he cannot communicate the event to the principal, it is necessary for the protection of the principal.

When authorized to appoint a substitute, a mandatary is responsible for the acts of the substitute when the mandatary fails to exercise diligence in selecting the substitute or in giving instructions. Conversely, when unauthorized to appoint a substitute, a mandatary is answerable to the principal for the acts of the substitute as if the mandatary performed the mandate himself. In all cases the principal have recourse against the substitute. The Hum court held that the principals implied consent is assumed if, under the normal course of business, a principal knew or should have known that his agent needed a subagent in order to perform the mandate. Thus the principal would be liable for both the subagent and the agent.

C. Principals Duty to his Mandatary

Issue: The court must determine whether the principals duty to the mandatary.

Answer/Rule:

The principal is bound to perform the obligation that the mandatary contracted for if the mandatary acts within the limits of his authority (the mandatary acts within the limits of his authority when he fulfill his duties in a manner more advantageous to the principal) or the mandatary acts after the termination of his authority, but the mandatary does not know that the mandate has terminated.

With respect to multiple mandataries and multiple principals, multiple mandataries are not solidarily liable to their common principal unless it is specified in the mandate. However, multiple principals are solidarily bound to their mandatary for an affair common to them.

The principal could be bound to the mandatary in two ways which are Ratification and Indemnification.

D. Ratification

Definition of ratification:

Ratification may be expressed or implied. According to Watson, three things must be present for ratification to occur 1.) the principal is silent; 2.) the principal must be fully informed of all material facts surrounding an act or transaction or 3.) the principal accepts benefits or any profits.

Although the mandatary is answerable to the principle for resulting loses when the mandatary exceeds his authority; the principle is not bound to the mandatary, if the mandatary exceeds his authority, unless the principal ratifies the act.

Additionally, Chambers states that the principal is liable for the tortuous act (intentional or negligence act) of the mandatary acting outside his duty if the principal ratifies the act.

The Richoux court states that a principal who employs an agent to do a legal act is not liable in damages for any illegal act of the agent.

E. Indemnification

There is an implied obligation on the part of the principal to indemnify an innocent agent for obeying his orders, where the act would have been lawful in respect to both the mandatary and the principal AND 1.) where the principal really has the authority which he claims, 2) OR where the mandatary acts in good faith and reasonably believes that the principal possesses the authority.

The principal is bound to the mandatary when the mandatary is w/o fault:

1.) to reimburse the mandatary for expenses and charges he incurred; 2.) to pay the mandatary remuneration that he is entitled; 3.) and to reimburse and pay the mandatary if the mandatary is not responsible for the mandate not being accomplished .

The exception is when losses are cause by the fault of the mandatary.

And the principal would owe interest on sums expended by the mandatary in performance of the mandate from the date of the expenditure.

Analysis:

Prin. Mandatary-TP Relations

Issue:

Answer/Rule:

When contracting with a third party to mandatary may contract as a disclosed agent, undisclosed agent or a partially disclosed agent.

A. In a disclosed agency, the identity of both the mandatary and the principal are known to the third party. Thus, the principal is bound and not the mandatary. To have a disclosed agency the following elements must be met:

1. 3rd party must know that the mandatary is acting on behalf of principal

2. 3rd party must know the identity of the principal.B. In an undisclosed Agency, the identity of the mandatary is unknown to the third party.

A mandatary who contracts in his own name without disclosing his status as a mandatary binds himself personally for the performance of the contract. In this case the 3rd party can sue either for the whole. Thus both the mandatary and the principal are solidarily liable until the mandatary discloses the principal. To have an undisclosed agency the following elements must be met:

1. 3rd party does not know that the mandatary is acting on behalf of principal

2. 3rd part y does not know the identity of the principal

C. In a partially disclosed agency the mandatary is disclosed and the principal is undisclosed. A mandatary who enters into a contract and discloses his status as a mandatary, though not his principal, binds himself personally for the performance of the contract. The mandatary ceases to be bound when the principal is disclosed. Thus, the mandatary is liable until identity of principal is disclosed. To have a partially disclosed agency the following elements must be met:

1. 3rd party knows mandatary is acting on behalf of the principal

2. 3rd party does not know identity of principal

Signing

Three ways a mandatary sign on behalf of the principal.

1. P, by A, is a agent

2. A as agent for P

3. COMPANY (include INC, LLC, etc) by A, TITLE (Vice President)

Apparent authority

For a third party to hold a principal liable under the doctrine of apparent authority it must be shown that the principal made some form of manifestation to the innocent third party; and, that the third party relied on the purported authority of the agent as a result of the principal's manifestations

Under woodlawn Park an undisclosed Principal may sue the 3rd Party. Principal Terminate

Issue: The court must determine whether the mandate terminated?

Rules:

Under Louisiana law, the mandate and the authority of the mandatary terminate upon

1. the death of the principal or of the mandatary,

2. Interdiction of the mandatary, and

3. Qualification of the curator after the interdiction of the principal.

Under Louisiana Law, the principal may terminate the mandate and the authority of the mandatary at any time.

Under Louisiana Law, a mandate in the interest of the principal, mandatary, or third party, may be irrevocable, only if the parties so agree, for as long as the object of the contract may require.

Under Louisiana Law, A mandate terminates upon the mandatary notifying the principal of his resignation or renunciation of his authority.

Class note: if injury to the principal, mandatary is liable

According to George v. Sandel, the Principal can terminate the mandate before the completion of the mandate. Upon terminating the agency, the principal must notify the third party and agent. If the principal fails to notify the 3rd party, he is bound to the mandate to the third party.

According to Succession of Zatarain, the mandate of an attorney named in a will to handle the testators estate differs from the usual mandate inasmuch as it commences rather than ends with the death of the principal. In addition, it does not confer upon the agent the power to delegate his authority to a subagent.

Analysis:

Partnership

Issue: The court must determine whether Ted has a partnership with Bob, Sally or Luke?

Rules:

A partnership is a juridical person, distinct from its partners, created by a contract between two or more persons to combine their efforts or resources in determined proportions and to collaborate at mutual risk for their common profit or commercial benefit.

Under Louisiana law a contract could be either written or oral. Additionally, jurisprudence has held that a contract may be form inadvertently by looking at the facts and circumstances surrounding the formation of the relationship at issue.

According to Hassiepen, the formalities of a written partnership agreement are unnecessary to prove the existence of a partnership. Thus setting out that a partnership arises when1. Parties join together to carry on a venture for their common benefit

2. Each party contributes property or services to the venture, and

3. Each party has a community of interest in the profits of the venture

In order to establish the existence of a partnership without a writing, there must be a showing that all the parties intended such a relationship

Moreover, the Porter court held that in order to establish the existence of a partnership without a written agreement, the plaintiff has the burden of proving

1. The parties must have mutually consented to form a partnership and participate in the profits which may accrue from the property, skill, or industry, furnished to the business in determined proportion by them

2. All parties must share in the losses as well as the profits of the venture

3. The property or stock of the enterprise must form a community of goods in which each party has a propriety interest

Also, according to Simpson the court listed the following factors to distinguish a partner from a position as employee:

1. Participation in profits and losses

2. Exposure to liability

3. Investment in the firm

4. Partial ownership of firm assets

5. Voting rights

6. Position under the partnership agreement

7. Position under partnership law.

Analysis:

Partnership Principles

Issue: The court must determine whether Ted has a partnership with Bob, Sally or Luke.

Rules:

A partnership is a juridical person, distinct from its partners, created by a contract between two or more persons to combine their efforts or resources in determined proportions and to collaborate at mutual risk for their common profit or commercial benefit. It may be adopted with or without the names of some or all the partners. However, if no name is adopted, then it is presumed that all the names of the parties are included.

Under Louisiana law, each partner participates equally in the Profits, Loses, Assets, and Benefits of the partnership unless otherwise specified by the partners. Each partner, though, participates only proportionally in contribution to capital. Additionally, there is a presumption that if the partners agreement sets the participation for only one category of either: Profits, Loses, Assets, or Benefits and is silent as to the others, the same participation applies to all categories. An exception is made regarding distribution of capital contribution.

Thereby, under Louisiana law, a contract could be either written or oral. Jurisprudence, additionally, has held that a contract may be form inadvertently by looking at the facts and circumstances surrounding the formation of the relationship at issue.

Written Contract

According to Louisiana law, when the partnership is created by a written contract, the contract of the partnership is governed by the provisions of conventional obligations. Thereby, in order for a partnership to own immovable property, the partnership must be in writing at the time of acquisition. If the contract of partnership was not in writing at the time of acquisition, then the individual partners, not the partnership, own the immovable property. Even if the partnership is later put into writing, this act does not transfer ownership of the immovable property to the partnership; there must be a separate act.

As to third parties, the individual partners own the immovable property until the contract of partnership is filed in the registry with the secretary of state.

According to Placke, a contract of partnership filled for registry with the secretary of state shall contain the:

4. Name of partnership5. Municipal address of its principal place of business in this state

6. Name and the municipal address of each party, including partners in commendams (properties held by partner in limited partnership), if any.However, if partnership is in writing and is not filed, the partnership does not automatically vest the ownership of the immovable property in the partnership until filing and registration of the partnership occurs. Once this occurs no separate act is needed. Inadvertent Contract When the partnership is form inadvertently by looking at the facts and circumstances surrounding the formation of the relationship at issue, the Hassiepen test will apply. According to Hassiepen, the formalities of a written partnership agreement are unnecessary to prove the existence of a partnership. A partnership arises when:4. Parties join together to carry on a venture for their common benefit

5. Each party contributes property or services to the venture, and

6. Each party has a community of interest in the profits of the venture

However, in order to establish the existence of a partnership without a writing, there must be a showing that all the parties intended such a relationship.

Oral Contract

When the partnership is created orally, the Medline test will apply. The Medline court held that in order to establish the existence of a partnership without a written agreement, the plaintiff has the burden of proving:

1. The parties must have mutually consented to form a partnership and participate in the profits which may accrue from the property, skill, or industry, furnished to the business in determined proportion by them.

2. All parties must share in the losses as well as the profits of the venture.

3. The property or stock of the enterprise must form a community of goods in which each party has a propriety interest

Factors to determine partner from employee

Additionally, the Simpson court listed the following factors to distinguish between a partner and employee:

8. Participation in profits and losses

9. Exposure to liability

10. Investment in the firm

11. Partial ownership of firm assets

12. Voting rights

13. Position under the partnership agreement

14. Position under partnership law.

Under Louisiana law, once a partnership is created and unless otherwise agreed, unanimity (total consensus) is required to:

1. Amend partnership agreement,

2. Admit new partners,

3. Terminate the partnership,

4. Permit a partner to withdraw without just cause if the partnership has a term

However, unless otherwise agreed (stipulated), only a majority vote is needed for decisions affecting:

1. Management of the partnership or 2. Operations of the partnership

Analysis:

Partners-Partners-Partnership

(Obligations and Rights of Partners Toward Each Other and Toward the Partnership)

Issue: The court must determine the obligations and rights of Ted toward Albert and toward the partnership

Under Louisiana law, each partner owes the partnership all that he has agreed to contribute to it. Thereby, the partner owes a fiduciary duty to the partnership and to his partners. He may not conduct any activity for himself or on behalf of a third person that is contrary to his fiduciary duty and is prejudicial to the partnership.

According to Grand Isle, the relationship imposes upon all the partners the obligation of loyalty to the concern and of the utmost good faith, fairness, and honesty in their dealings with each other with respect to matters pertaining to the partnership. The relationship forbids a partner for accruing or retaining for himself and private or secret advantage in connection with the partnership.

In addition, Brockman states that each partner must refrain from taking any advantage of another partner by the slightest misrepresentation or concealment of material facts. The elements of a cause of action for a breach of fiduciary duty, or a knowing participation in such, are:

1. A breach by a fiduciary of an obligation to another

2. A knowing collusion or participation in the breach fiduciary, and

3. Damages suffered by another as a result of the breach

The cause of action requires proof of fraud, breach of trust or action outside the limits of the fiduciarys authority. The fiduciary duty based on Louisiana law continues until the partnership is liquidated.

Therefore, according to Jansen, partners cannot negotiate a new deal for himself or on behalf of a third person that is contrary to his fiduciary duty and is prejudicial to the partnership unless there is full notice and full disclosure.

However, according to Grand Isle, if a partner engages in an activity in breach of his fiduciary duty without full notice and full disclosure, and profits result therefrom, the partner must account to the partnership and to his partners for the resulting profits. The profits that are wrongfully diverted are subject to a constructive trust and any profit realized belongs to the partnership. Thus, for the partnership to recover the profits for which the partner is accountable, either the partner must be allowed to recoup his original investment in the activity or the partnership must contribute its share of the investment.

In addition, according to Louisiana law, the rights of the partnership against a partner are not limited to the recovery of profits resulting from a partners breach of his fiduciary duty. The partnership may also recover damages from the partner for the harm it has suffered.

Nevertheless, Louisiana law states that a partner who acts in good faith for the partnership may be a creditor of the partnership for sums he disburses, obligations he incurs, and losses he sustains thereby. There is no right, though, of reimbursement for services rendered by a partner, unless the partnership agreement so provides.

Overall, according to Hobbs, if the partner is acting as a prudent administrator and he incurred any debts, losses or liability, the other partners are responsible for their share of losses, debt or liability although such act or omission should be injudicious and injurious to the partnership.

Under Louisiana law, a partner may share his interest in the partnership with a third person without the consent of his partners. However, the partner cannot make the third party a member of the partnership without written consent of the majority of the partners. The third party with whom a member of the partnership shares interest has no right to assert any claim against the remaining partners or partnership. The partner who shares his interest with a third party will be responsible for any damage to the partnership caused by the third person as though he caused it himself.

In addition, Louisiana law states that even if the partner has been excluded from management, he may inform himself of the business activities of the partnership and may consult its books and records. Any contrary agreement is null. However, he may not exercise his right in a manner that unduly interferes with the operations of the partnership or prevents other partners from exercising their rights in this regard.

Analysis:

Partners/Partnership-Third Parties

(Relations of the Partnership and the Partners with Third Persons)

Issue: The court must determine the relations of the partnership and the partners with third persons.

Under Louisiana law, a partner is a mandatary of the partnership for all matters in the ordinary course of its business except for the alienation, lease, or encumbrance of its immovables.

Hence, according to Brackley, an agreement by which a partner agrees to protect another partner against losses for which the latter is liable by virtue of his membership in the partnership is enforceable between the partners but ineffective with regards to third persons. Thereby, the third party may sue the partner and partnership for losses.

Further according to Gasten, the partners of an existing partnership may not be sued on a partnership obligation unless the partnership is joined as a defendant. The partnership, if any, is an indispensable party.

Thus, Brackely additionally states that the partnership is the principal obligor and is primarily liable for its debts. A partner is bound for his virile share of the debts of the partnership but may plead discussion of the assets of the partnership. Discussion is the right of a secondary obligor to compel the creditor to enforce the obligation against the property of the primary obligor or, if the obligation is a legal or judicial mortgage, against other property affected thereby, before enforcing it against the property of the secondary obligor. The partnership as a business entity is primarily liable and the individual partners liability normally only comes into existence when and if the partnership becomes insolvent. Thereby, the partnership creditor must first exhaust his rights against the partnership before he proceeds against the individual partners.

Since a partnership is primarily liable for its debts, where the partner who is sued with it has pleaded discussion, the creditor may be prohibited from enforcing judgment against the partner until the partnership has been cast in judgment and the partnership assets prove insufficient to satisfy the judgment. Discussion must be specifically pleaded as a dilatory exception, which is waived if not raised to answer or judgment by default.

However, under Louisiana law, if a partner who is acting as a mandatary contracts an obligation for the partnership in his own name, he is personally liable. The partnership is only bound to the obligation the partner contracted in his own name if the partnership benefits by the transaction or the transaction involves matters in the ordinary course of its business. If the partnership is so bound, it can enforce the contract in its own name.Analysis

Cessation of Membership

(Causes and Effects of Cessation)

Issue: The court must determine the causes and effects of cessation of a partner from a partnership.

Causes:

Under Louisiana law, a partner ceases to be a member of a partnership in six different ways. The causes are:

1. Death or Interdiction of the Partner

2. An Order for relief under Chapter 7 of the Bankruptcy Code

3. His Interests in the partnership being seized under a writ of execution and not released within 30 days

4. His expulsion from the partnership

5. His withdrawal from the partnership

6. Accordance with the provisions of the contract of partnership

Bankruptcy

According to Peck, when a partner is granted an order for relief under Chapter 7 of the Bankruptcy Code, he ceases to become a member of the partnership, but the partnership is not terminated. The partnership as an entity continues. Thereby, the proper party to assert the rights of the partnership is the partnership. The trustee has proper recourse to assert any claims of the debtor (bankrupt) whenever and wherever he desires. The recourse does not affect the right of a partnership to which a bankrupt member formerly belonged to continue to assert partnership rights. In such a situation, the bankrupt partner ceases to be a member, the bankruptcy trustee does not become a member of the partnership. The trustee is in the position of the bankrupt partner to the extent that he has a claim against the partnership for the bankrupt partners interest in the partnership.

Seizure of Interest

Under Louisiana law, a partner ceases to be a member of a partnership if his interest in the partnership is seized under a writ of execution only and is not released within 30 days. The seizure does not operate to dissolve the partnership but only terminates the partners membership. The seizure gives the partner time to negotiate a release of his interest and affords him some protection against losing his status as a partner due to a bad faith seizure. If cessation occurs, the cessation is retroactive to the date of seizure.

Expulsion

Under Louisiana law, a partnership may expel a partner for just cause when the conduct of a partner is detrimental to the interests of the partners or the partnership. Examples of conduct of a partner that would constitute just cause for expulsion would be:

1. Failure to perform obligations,

2. Engaging in activities that prejudice the business of the partnership, or

3. The willful or repeated breach of the partnership agreement

Unless stipulated otherwise, a majority of the partners must agree on the expulsion,

and the partner against whom the expulsion attempt is made is to have a vote on the matter. Thus, a sufficient number of votes must be cast in favor of the expulsion to amount to a majority vote of all partners. In addition, if a partner engages in conduct that constitutes just cause for expulsion, and damages result therefrom, the partner may be liable for the damages. However, an expelled partner is entitled to an amount equal to the value of his share even though he has been expelled for just cause.

Withdrawal of Partnership WITH TERM

Under Louisiana law, when a partnership has been constituted [for a term], a partner may withdraw without the consent of his partners before the expiration of the term provided he has just cause arising out of the failure of another partner to perform an obligation.

Just cause, however, is limited to causes that arises out of the failure of a partner to perform an obligation and does not cover the broader range of causes such as:

1. The hardship of a partner,

2. The nonprofitability of the partnership, or

3. The failure of the partnership to realize its objectives

A partner who attempts to withdraw without just cause remains liable as a partner and

may be liable for resulting damages.

Withdrawal of Partnership WITHOT TERM

Under Louisiana law, when a partnership has been constituted [without a term], a partner may withdraw from the partnership without the consent of his partners at any time, provided he gives reasonable notice in good faith at a time that is not unfavorable to the partnership. The withdrawal does not automatically terminate the partnership, but merely causes the cessation of the membership of the withdrawing partner.

Therefore, whether the notice is reasonable depends upon the circumstances. The failure to give reasonable notice in good faith at a favorable time would amount to a breach of the partners fiduciary duty. If a partner attempts to withdraw and does not give reasonable notice in good faith or a favorable time, he remains a partner and his liability as a partner continues. He may be thus liable for resulting damages.

Effects:

In all cases of cessation of membership under Louisiana law, whether voluntary or involuntary, the former partner or other interested person such as his successors or the seizing creditor is entitled to be paid an amount equal to the value of the former partners interest as of the time of cessation. The former partner is not entitled to an interest in the assets of the partnership but is only entitled to be paid an amount equal to the value of his interest as of the time his membership ceased. The value of the interest may be set by:

1. The partnership agreement,

2. Separate agreement, or

3. Judicial determination that order its payment.

Thus, if a partnership continues to exist after the membership of a partner ceases for purposes other than liquidation, unless otherwise agreed, the partnership must pay in money the amount equal to the value that the share of the former partner had at the time membership ceased as soon as that amount is determined together with interest at the legal rate from the time membership ceases.

Analysis:

Partnership Termination

(Causes and Effects of Termination)

General Partnership

Issue: The court must determine the causes and effects of termination of a partnership.

Causes:

Under Louisiana law, a partnership terminates in seven different ways. The causes are:

1. The unanimous consent of its partners

2. A judgment of termination

3. The granting of an order for relief to the partnership under Chapter 7 of the Bankruptcy Code

4. The reduction of its membership to one person

5. The expiration of its term

6. The attainment of, or the impossibility of attainment of the object of the partnership

7. Provisions of the contract of partnership

Nevertheless, a change in the number or identity of partners does not terminate a partnership unless the number is reduced to one.

Thus, when a partnership terminates, the business of the partnership ends except for purposes of liquidation.

According to Sharplin, a factual pleading is only required for termination of partnership because termination is not a formal declaration, but is simply the occurrence of factual grounds which compel formal liquidation of the affairs of the partnership.

In addition, Moore states that the partners power to bind his copartners, by note or acknowledgment, or to use the social name, ceases with termination. Any subsequent power is derived, not from previous relations of the parties as partner, but from a new contract. After the termination of the partnership, neither partner has authority, without special mandate so to do, to bind his former partners, either in the renewal of a partnership debt, either in the renewal of a partnership debt, the imposition of a new obligation on it, or in any manner vary the form or character of the obligation already existing. Ultimately, the partner can not bind a partner after termination. The partners must seek dissolution and liquidation according to Carr.

However, under Louisiana law, if a partnership terminates because its membership is reduced to one person, that person is not bound to liquidate the partnership and may continue the business as a sole proprietor. If the person elects to continue the business, his former partners are entitled to the equal value of their shares at termination, and they have the right to demand security for the payment of partnership debts. The former partners cannot compel liquidation if the sole ground for doing so is that the partnership has terminated because of the reduction. Nevertheless, if there is some other ground for liquidation, such as the inability of the remaining person can be forced to liquidate the business.

Furthermore, under Louisiana law, a partnership may be expressly or tacitly continued when its term expires or its object is attained, or when a resolutory condition of the contract of partnership is fulfilled. If the object becomes impossible, the partnership may be continued for a different object. Unless otherwise agreed, a partnership that is expressly or tacitly continued has no term.

Effects:

Once the partnership terminates, the partners who have knowledge of the termination no longer have authority to bind the partnership, except for purposes of liquidating it and completing the transactions initiated prior to the termination. The activities of liquidation include:

1. The concluding of business transactions,

2. The realization of assets,

3. The paying of creditors, and

4. The division of net assets among the partners.

Partners who have no knowledge of the termination can still bind the partnership for acts within what would have been its normal course of business. A partner who continues the business despite having knowledge of the termination cannot bind the partnership.

However, the termination of a partnership, for any reason, does not affect the rights of a third person in good faith who transacts business with a partner or a mandatary acting on behalf of the former partnership. The third person will have a right of action against the partnership and the person with whom he made the transaction. The third persons actual knowledge of the termination of the former partnership will be evidence of whether he was in good faith.

In any event, the partner who transacts business with knowledge of the termination is the principal obligor of any resulting obligation. The partner may be liable for resulting damages.

Partnership in Commendam

Issue: The court must determine the dissolution of partnership?

Rules:

Under Louisiana Law, a partnership in commendam consists of one or more general partners who have the powers, rights, and obligations of partners;

And one or more partners in commendam, or limited partners, whose powers, rights, and obligation of a limited partnership.

Under Louisiana Law, a contract of partnership in commendam must be in writing and filed for registry with the secretary of state as provided by law.

Until the contract is filed for registry, partners in commendam are liable to third parties in the same manner as general partners.Under Louisiana Law, For the liability of a partner in commendam to be limited as to third parties, the partnership must have a name that appears in the contract of partnership; the name must include language that clearly identifies it as a partnership in commendam, such as language consisting of the words "limited partnership" or "partnership in commendam"; and the name must not imply that the partner in commendam is a general partner.

Under Louisiana Law, A partner in commendam becomes liable as a general partner 1. if he permits his name to be used in business dealings of the partnership in a manner that implies he is a general partner.2. If the name of a partner in commendam is used without his consent, he is liable as a general partner only if he knew or should have known of its use and did not take reasonable steps to prevent the use.

3. If the name of the partner in commendam is the same as that of a general partner or if it had been included in the name of a predecessor business entity or in the name of the partnership prior to the admission of the partner in commendam, its use does not imply that he is a general partner.

Under Louisiana Law, A partner in commendam must agree to make a contribution to the partnership. 1. The contribution may consist of money, things, or the performance of nonmanagerial services. 2. The partnership agreement must describe the contribution and state either its agreed value or a method of determining it. 3. The contract should also state the time or circumstances upon which the money or other things are to be delivered, or the services are to be performed, and if it fails to do so, payment is due on demand.4. A partner in commendam is liable for the obligations of the partnership only to the extent of the agreed contribution. 5. If he does not make the contribution, or contributes only part of it, he is obligated to contribute money, or other things equal to the portion of the stated value that he has failed to satisfy. 6. The court may award specific performance if appropriate.

Under Louisiana Law, A contract of partnership in commendam must be in writing and filed for registry with the secretary of state as provided by law. Until the contract is filed for registry, partners in commendam are liable to third parties in the same manner as general partners.

Under Louisiana Law, A partner in commendam may not receive, directly or indirectly, any part of the capital or undistributed profits of the partnership if to do so would render the partnership insolvent. If he does so, he must restore the amount received together with interest at the legal rate.If the partnership or the partners do not force the partner in commendam to restore the amount received, the creditors may proceed directly against the partner in commendam to compel the restoration.

Under Louisiana Law, A partner in commendam does not have the authority of a general partner to bind the partnership, to participate in the management or administration (or control) of the partnership, or to conduct any business with third parties on behalf of the partnership.

Under Louisiana Law, A partner in commendam is not liable for the obligations of the partnership unless such partner is also a general partner or, in addition to the exercise of such partner's rights and powers as a partner, such partner participates in the control of the business. However, if the partner in commendam participates in the control of the business, such partner is liable only to persons who transact business with the partnership reasonably believing, based upon the partner in commendam's conduct, that the partner in commendam is a general partner.

A partner in commendam does not participate in the control of the business within the meaning of Paragraph A of this Article solely by doing one or more of the following:

(a) Being a contractor for or an agent or employee of the partnership or of a general partner.

(b) Being 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.

(c) Consulting with and advising a general partner with respect to the business of the partnership.

(d) Acting as surety for the partnership or guaranteeing or assuming one or more specific obligations of the partnership.

(e) Taking any action required or permitted by law to bring or pursue a derivative action in the right of the partnership.

(f) Requesting or attending a meeting of partners.

(g) Proposing, approving, or disapproving, by voting or otherwise, one or more of the following matters:

(i) The continuation, dissolution, termination, or liquidation of the partnership.

(ii) The alienation, exchange, lease, mortgage, pledge, or other transfer of all or substantially all of the assets of the partnership.

(iii) The incurrence of indebtedness by the partnership other than in the ordinary course of its business.

(h) A change in the nature of the business.

(i) The admission, expulsion, or withdrawal of a general partner.

(j) The admission, expulsion, or withdrawal of a partner in commendam.

(k) A transaction involving an actual or potential conflict of interest between a general partner and the partnership or the partners in commendam.

(l) An amendment to the contract of partnership.

(m) Matters related to the business of the partnership not otherwise enumerated in this Paragraph, which the contract of partnership states in writing may be subject to the approval or disapproval of partners.

(2) Liquidating the partnership.

(3) Exercising any right or power permitted to partners in commendam under this Chapter and not specifically enumerated in this Paragraph.ii) The enumeration in Paragraph B does not mean that the possession or exercise of any other powers by a limited partner constitutes participation by such partner in the business of the partnership.According to Barksdale, the court held that

4. General Partner owes fiduciary duty to the limited partners and to the partnership.

5. A partner has not a right to prefer his own interest to that of the firm, not deprive the partnership of a profitable bargain by taking to his own account.

6. The rule is especially true when considering a general partners duty to its limited partners since the general partner has complete authority to deal with the partnership business.

7. The general partner acting in complete control stands in the same fiduciary capacity to the limited partners as a trustee stands to the beneficiaries of a trust.

According to Manheim, the court held that

A partnership in commendam consists of one or more general partners who have the powers, rights, and obligation of partners.

A general partner, unlike a partner in commendam, may bind the partnership, participate in management or administration of the partnership, and conduct any business with third parties on behalf of the partnership.

A partnership in commendam terminates by the death of the General Partner unless it was continue with the consent of the remaining general partners or unless, within ninety days of his death, all the remaining partners agreed in writing to continue the partnership and appoint at least one general partner.

According to La Chomette, a partner in commendam is responsible for the capital contribution promised in regard to debt and liability. A partner in commendam can not withdraw capital contribution until all partnership debts are paid.

According to Black Coll., a line of credit from the limited partner can be considered as a capital contribution. The withdrawal of the line of credit is considered the withdrawal of the capital contribution. Limited partners can not withdrawal capital contribution until partnership is insolvent.

According to Marshall,

1. If a partner withdraws from a partnership, and yet suffers his name to continue and stand as part of the firm, he will be held liable notwithstanding his retirement.

2. If a name is used in the partnership and the one of the partner withdrawal from the partnership and when an article is properly advertise in the newspaper of the partner withdraw, the withdrawal partner is no long liable.

Partnership Dissolution

Issue:

The court must determine the dissolution of partnership?

Rules:

Under Louisiana Law, the creditors of a partnership shall be paid in the following order of priority:

1. Secured creditors in accordance with their security rights;

2. Unsecured creditors who are not partners; and

3. Unsecured creditors who are partners.

If any assets remain after the payment of all secured and unsecured creditors,

1. the capital contributions shall be restored to the partners, and

2. Finally, any surplus shall be divided among the partners proportionally based on their respective interests in the partnership.

Under Louisiana Law, the liquidation of a partnership is not final until

1. all its assets have been collected; 2. applied to its obligations and its remaining assets, and3. if any, have been appropriately distributed to the partners.According to Claiborne & Mather vs. Their Creditors, the partnership asset should be applied to the debit of the partnership first. Individual partners debit are collected secondary to the partnership debit and is equal to partner share.

According to Succession of Chas. M. Pilcher, the debts of the partnership must be paid prior to any of the partners debts.

The partnership of property is liable to the creditors of the partnership in preference to those of the individual partner, but the share of any partner may, in due course of law, be seized and sold to satisfy his individual creditors, subject to the debts of the partnership.

According to Smith v. Senecal, when money is loan to a partner for the capital contribution of the partnership; the partner and not the partnership is liable to the creditor. Thus, a partner does have a cause of action for the reimbursement of the capital contribution in the partnership.

According to Gueringer vs. His Creditors, Individual Partners are secondary liable to the partnership creditors; however, partnership creditors (after dissolution of partnership share (discussion)) and individual creditors are equal to a share of the partners assets.Limited Liability Company

1. LLC formation

a. A L. L. C is effectively formed when two documents are filed with the Office of Secretary of State.

b. The necessary documents to form a L.L.C. are Articles of Organization and Initial Report.

c. The Articles of Organization must include name (including LLC designation) and purpose of LLC

d. The Initial Report must include the location and municipal address of the LLCs registered office, the name and municipal address of each of the LLCs registered agents, and a notarized affidavit of acceptance executed by each of the registered agents, and the names and municipal addresses of the initial members or, if the LLC is to be manage-managed, the initial mangers.

e. The Article of Organization must be filed must be acknowledged or executed by authentic act

f. The Initial Report must be singed by the same person who signed the article ( or a duly authorized agent)

2. Difference of Member managed and manger managed Limited Liability Company.

a. Member managed is each member is mandatary of the LLC for all matters in the ordinary course of the LLCs business, except for the dispositions (alienation, lease or encumbrance) of the LLCs immovable property.

i. Voting Rights

1. each member receives one vote on matters brought before the members. All matters, except for the admission of new members of the compromise of a members contribution obligation( which requires unanimity) maybe be decided by a majority vote of the members.

b. Managed-managed Limited Liability Company is the manager rather than the members hold all of the normal mandatary authority.

i. Except for the few decision that require unanimous approval by members

1. Admission of new members

2. Compromise of contribution obligation.

ii. Except for the few decision that require majority approval

1. merger or an amendment to the articles or operating agreement.

3. The liability protection afforded to a member of an LLC are not personally liable for the obligation (for a debt, obligation, or liability of the limited liability company) of the LLC, except in the case of members or managers how have management authority and thereby a fiduciary duty to the company shall be liable to the LLC for any damages it incurs as a result of the member/managers gross negligence or intentional misconduct.

4. A creditor of a limited liability company who extends credit after a member signs a writing which reflects the obligation and before any such election to forfeit the membership interests is made may enforce the original obligation to the extent that the limited liability company refuses or is unable to honor the extension of credit.

5. The initial report and articles of organization must be made public. The member contribution is not required to be made public.

6. An enforceable operation agreement of an LLC may be made oral (handshake agreement) and writing.

7. When the LLC contains only the minimal organizational requirement for formations and a member dies, the legal consequences on the continuation of the LLC is the LLC continues; however, the member's membership ceases and the member's executor, administrator, guardian, conservator, or other legal representative shall be treated as an assignee of such member's interest in the limited liability company.

Registered Limited Liability Partnership

1. The requirements and filing for a partnership to become registered LLP are 1. To become a registered limited liability partnership, a partnership shall file with the secretary of state an application stating the name of the partnership, the address of its principal office, the number of partners, and a brief statement of the business in which the partnership engages.

2. The application shall be executed by a majority in interest of the partners or by one or more partners authorized by a majority in interest of the partners.

3. The application shall be accompanied by a fee of one hundred dollars.

4. The secretary of state shall register or renew any partnership that submits a completed application with the required fee.

5. Registration is effective for one year after the date the registration is filed, unless voluntarily withdrawn by filing with the secretary of state a written withdrawal notice executed by a majority in interest of the partners or by one or more partners authorized by a majority in interest of the partners.

6. The secretary of state may provide forms for application for or renewal of registration.

2. The liability protection afforded to a member of a LLP are that a partner is not individually liable for the liabilities and obligations of the partnership arising from tortious conduct committed in the course of the partnership business by another partner or a representative of the partnership.

3. The liability protection afforded to a member of a LLC is not personally liable for the obligation (for a debt, obligation, or liability of the limited liability company) of the LLC.4. The Partnership of Commendam is liable for the obligation of the partnership only to the extent of the agreed contribution.

5. Casesa. Advance

i. The certificate of organization shall be conclusive evidence of the fact that the limited liability company has been duly organized

ii. A capital contribution does not have to be in the form of cash, and that he made capital contributions to advanced via his past experience, good will, services rendered and equipment he contributed, which assisted this business in its infancy.

b. F&G Invmts

i. A member of an LLC is not personally liable (same protection as corporation)

c. Rossi Article

i. The individual is tax and not the LLC.

d. Hamilton

i. Piercing LLC veil (limited exception)

1. Where the shareholders acting through the corporation commit fraud or deceit on a third party

2. Where the shareholders have failed to conduct the business on a corporate footing.

a. The shareholder disregard the corporate formalities to such an extent that the shareholder and the corporation became indistinguishable or

b. Such unity existed that separate individualities cease and the corporation was operated as the alter ego of the shareholder

ii. The determination of whether to allow piercing of the corporate veil is made by considering the totality of the circumstance

1. failing to follow statutory formalities for incorporating and transacting corporate affairs,

2. undercapitalization

3. failing to maintain separate bank accounts and bookkeeping records

4. failing to hold regular shareholder and director meetings

iii. Have allowed a piercing of the c operate veil, there exists one majority stockholder, either an individual or a corporation, which is found to be operating the corporation as its alter ego or as an instrumentality of the shareholder

e. Sage

i. Laws that are classified as interpretative or procedural, however, can not be applied retroactively if so do so would run afoul foul constitution prohibitions against, laws that impair the obligation of contracts. I

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Alford, Sumbler, Varnado

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