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14 Apr 2012
Undisclosed Principle:
In some cases, agents will negotiate on the behalf of an undisclosed principle. The agent does
not reveal the identity, but gives all the details for the information. However, the third party can
still sue the undisclosed principle later as long as they have followed their duties.
In some cases, the agent will negotiate for someone else without telling the third party. In this
case, the third party is not told that the agent is representing a third party. The third party
would therefore sue the agent. If the agent was told not to tell the third party that he was
representing the principle, then the third party can sue the agent who can then sue the
o GM wants to accumulate some land area in a new area but did not want to reveal their
identity as the owner’s of the new land. However, GM does not want to reveal their
identity because it would impact their future business plans. They could therefore use
an agent to purchase the land on the behalf of an undisclosed party who will be
revealed at a later date.
Duties of Agent:
Fiduciary Duty
2) You have a “duty to account”
a. You must account for all expenditures on the behalf of your principle to the principle.
3) The agent has a duty of good faith.
a. You will always put the duty of the principle first above your own
b. You can’t steal or get involved in a conflict of interest
c. You cannot compete with the principle.
Business Organizations: Sole
Proprietorships, Partnerships,
Sole Proprietorships:
Simplest kind of business organization that consists of one person who carries on business by
They may have employees and agents working on their behalf but all business decisions rest on
their behalf
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The sole proprietor has unlimited liability their individual and business assets are subject to
claims from creditors.
o In the case of a business failure, the creditors would be able to go after business assets
as well as the personal assets such as a house, personal car etc.
“When we define a partnership, it subsists when two or more people carry on business in
common with a view to a profit.”
When all of the partners are out in the world doing business, their actions are binding on the
Definition of partnership:
o Partnership subsists sometimes, parties may not be conscious or aware of the fact that
their actions are a part of the partnerships
We must look at whether they are a partner, or whether we are two sole
If two people are sole proprietors but are working together, the law may say
that they are a partnership
o “…two or more people carry on business together” – being in business with someone for
some time
They must be making management decisions with each other and must be
working together to profit
o “… business in common view to a profit
If you share the risks associated to reach a profit with someone else, then you
are in business with a common view to a profit
Ex. If there was an arrangement where an employee was only paid out
of net profits after tax deductions, then they would be considered
working with a view to a profit and considered a party.
Partnerships can consist of two or more persons.
o This does not mean that it has to be two or more human beings as this can include the
various business entities such as sole proprietors, corporations etc.
Partnership Act:
o Codifies the facts that were established under the common law
o Recites the definition above of a partnership and then gives examples where there will
not be deemed to be a partnership
When there is a debt being shared to the creditor, based on the percent of
profits of the company, then there is no partnership
When an employee is not dependent on the final profits of a company
When a partner dies, the partnership has ended, as the estate of the partner
cannot be considered a partner.
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