Agency - Actual and Apparent Authority, Ratification

Partners and Managers in LLCs - Acts

Under partnership law, each partner is an agent of the partnership for acts in the ordinary course of business, but acts outside the ordinary course require authorization from all partners

Partnership MEEs

If 2 people operate a business together, consider both partnership implications and whether one might be an agent for the other or for the business entity in certain transactions. If acting outside ordinary course of business: the partner had no actual authority (it wasn’t ordinary business and laced unanimous approval) - the partnership wasn’t bound to the contract.

LLCs and Partnerships

Standard agency principles apply to LLCs and partnerships

Lacking authority for K

State that the agent lacked authority so the K wasn’t initially binding - then pivot to facts indicating the board or principals later approved or benefited from the deal (ratification).

Undisclosed Principal

If the agent was actually authorized by the principal to act, the principal is still bound by the K (bc the agent had actual authority) and can be held liable by the 3rd party once discovered. But bc the 3rd party didn’t know of any principal, the agent is personally on the hook as well as a K party.

Implied actual authority

If an MEE fact pattern has an agent doing something that wasn’t explicitly directed but is a natural part of achieving an assigned goal, this falls under implied actual authority.

Actual Authority vs Apparent Authority

Remember the Flow: Actual Authority → Principal to Agent; Apparent Authority → Principal to 3rd Party

Apparent Authority

The principal’s conduct causes a 3rd party to reasonably believe that the agent has the authority to act on the principal’s behalf, even if the agent does not have actual authority.

Ratification

Full disclosure of the facts to the principal - knowing and voluntary affirmation of an agent’s unauthorized act = bound as if authority existed from the outset

Actual Authority

Express authority arises from the manifestations (words or conduct) of a principal to an agent that the agent has power to deal with others on behalf of the principle.