Partners have been characterized as agents of the partnership. But this is wrong to the extent that it implies that the law of agency should be applied to partnership. In fact, agency is a distinct set of default rules that apply to a particular type of relationship. Each business association has its own set of default rules that apply to a specific type of relationship. It follows that the commentary of the Restatement (Third) of Agency may be misleading to the extent that it implies otherwise by purporting to deal with partnership-type firms. Moreover, the Revised Uniform Limited Liability Company Act is particularly misguided in dispensing with agency rules and implicitly importing the law of agency into the law of limited liability companies. Similar principles apply to corporate law and the relationship among the shareholders, the corporation and the board of directors.


Law and Economics

Date of this Version

January 2008