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.
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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:

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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.

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Agency Writing Sample

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.

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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:

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Agency Writing Sample

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:

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Agency Writing Sample

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.

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Agency Writing Sample

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:

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Agency Writing Sample

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 when
1. 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

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6. Position under the partnership agreement
7. Position under partnership law.
Analysis:

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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 partnership
5. 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.
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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.

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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:

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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

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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:

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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

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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.

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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.

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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:

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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

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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.

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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.

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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.

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(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.

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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.

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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.

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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, and
3. 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.

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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.

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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.

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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.

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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.
4.

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

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.

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

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

ii.

b.

F&G Invmts

i.
c.

A member of an LLC is not personally liable (same protection as

corporation)

Rossi Article

i.
ii.
d.

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.

The individual is tax and not the LLC.

Hamilton

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i.

ii.

iii.

e.

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

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.
3.

undercapitalization

4.

failing to hold regular shareholder and director meetings

failing to maintain separate bank accounts and

bookkeeping records

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

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.

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