Lee Hoffoss

Agency & Partnership Outline

1

AGENCY & PARTNERSHIP

__________
Professor M. R. Franks
Southern University Law Center
Course Outline
Fall 2002
__________
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.
Law
2.
Contract, or
3.
Unilateral Act of Procuration
Items Requiring Express Authority by a Principal to an Agent
1.
2.
3.
4.
5.
6.

Inter vivos donation

Successions
Loans, debts, surety
Endorse promissory notes
Enter into compromises
Make health care decisions

Termination of an Agency
1.
2.
3.
4.

When revoked by the principal

When the agent resigns or renounces the power
Upon death of the principal or agent
Upon bankruptcy of principal or of the agent

Lee Hoffoss
Agency & Partnership Outline
2

5.
6.
7.
8.
9.

Upon interdiction of the agent

Upon interdiction and appointment of curator for the principal
Upon occurrence of resolutory condition specified in the power
When purpose of the power becomes impossible
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 others 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.
2.
3.
4.
5.
6.
7.
8.

Extent of control the master may exercise over the details of the work
Whether the one employed is engaged in a distinct occupation or business
Whether the employer or workman supplies the tools
Length of time for which the person is employed
The skill required in the particular occupation
Whether the work is a part of the regular business of the employer
Method of payment, whether by the job or by the hour
Whether the principal is or is not in business
WORKERS COMPENSATION

Statutory Employer (Elements)

1.
2.

Employees of contractor
Engaged to perform work that is part of the principals trade

3 Wicked Sisters
1.
2.
3.

Fellow servant rule

Assumption of risk
Contributory negligence

Lee Hoffoss
Agency & Partnership Outline
3

TRADE SECRETS
Trade Secret may consist of any formula, pattern, device, or compilation of information which
is used in ones 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 means
2.
His disclosure or use constitutes a breach of confidence reposed in him by the other
disclosing the secret to him
3.
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 persons
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.
2.
3.

Non-competition covenants must be reasonable as to scope of activity

a. And duration
b. And geographic area
Duration in Louisiana is 2 years
Non-competition agreement is simply void if:
a. Unreasonable as to scope (Exxon not in cosmetics business)
b. Unreasonable as to duration
c. 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.

Lee Hoffoss
Agency & Partnership Outline
4

GENERAL PARTNERSHIP
Definition / Elements
1.
2.
3.
4.
5.
6.
7.
8.
9.

Two or more general partners

Each must have proprietary interest
To combine efforts and resources
Take part in the sharing of profits and losses
Equal shares unless otherwise agreed
Participation in management
Partnership agreement need not be in writing
Unlimited liability as to each partner (tort, contract, etc.)
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.
2.
3.
4.
5.

Two or more people;

Oral or written contract for partnership;
Partnership objective must be for profit;
Each partner has an ownership in the business;
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.

Lee Hoffoss
Agency & Partnership Outline
5

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.
2.
3.
4.

Amend the partnership;

Admit new partners;
Terminate the partership; or
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.
2.
3.
4.
5.
6.
7.
8.

Unanimous consent of the partners;

Judgment of termination from a court;
Bankruptcy;
Reduction to one person;
Expiration of term;
Attainment of a goal;
The impossibility of attaining the object of the partnership; or
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
1.
2.
3.
4.
5.

(Order of Priority in Payment)

Secured creditors;
Unsecured creditors who are not partners;
Unsecured creditors who are partners.
If there are any assets left over, then the capital contributions shall be restored to the
partners;
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

Definition / Elements
1.
2.

At least one general partner and one limited partner

Liability limited to limited partner as only to the percentage of the contributed
amount;

Lee Hoffoss
Agency & Partnership Outline
6

3.
4.
5.
6.
7.
8.
9.

Limited partner may not participate in management

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;
Can use only one name of the general partner;
Can use an assumed name;
The firm name must state in commendam or limited partnership;
Articles of limited partnership must be in writing and be filed with the Secretary of
State;
Has the benefit of partnership taxation.

What the Limited Partner is Allowed to do:

1.
2.
3.
4.
5.
6.
7.
8.

Be an employee or contractor of the partnership or general partner;

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;
Consult and advise a general partner;
Act as a surety for the partnership;
Take any action required or permitted by law to bring or pursue a derivative action in
the right of the partnership;
Request or attend a meeting of the partners;
Liquidating the partnership; or
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 States 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)
Definition / Elements
1.
2.
3.

Add-on feature
To a general or limited partnership
Limits liability in torts only to partners

Lee Hoffoss
Agency & Partnership Outline
7

4.
5.

Partner is liable for virile share of contract debts of partnership

Must be renewed annually for $100.00 with the Secretary of State

Application for LLP to Secretary of Statte

1.
2.
3.
4.
5.

Name, including the suffix LLP or Registered Limited Liability Partnership

Address of Principal Office;
Number of Partners;
Purpose of the partnership;
Major vote to execute partnership.

Partners in an LLP must be natural persons (no juridical persons such as corporations)
LIMITED LIABILITY COMPANY (LLC)
Definition / Elements
1.
2.
3.
4.
5.
6.

May or may not have centralized management

May or may not have continuity
Liability limited as to all members
Partners are known as members
Free transferability of interests
Elect partnership tax status (check-the-box)

Articles of Organization Must Include:

1.
2.
3.
4.

Names, including LLC or Limited Liability Company;

Purpose
Limits on Authority
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.
2.
3.

Members vote to dissolve;

Juridical dissolution; and
Affidavit if owes no debts.

Lee Hoffoss
Agency & Partnership Outline
8

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.