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88 Cards in this Set
- Front
- Back
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The Agency relationship is a ___ relationship. 4 consequences... |
Fiduciary relationship 1. Duties between principal and agent 2. A can bind P in contract 3. P is liable for A's actions in tort 4. A's knowledge imputed to P |
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2 agency relationships... |
1. Employer-Employee / Master-Servant (more control) 2. Employer-Independent Contractor (less control) |
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Types of Principals 1. Disclosed 2. Undisclosed 3. Partially disclosed |
1. When TP has notice the A acts for the P and has notice of the P's identity 2. TP has no knowledge of P's existence or identity 3. TP knows there is a P but dn know who it is |
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Types of Agents 1. General Agent 2. Special Agent |
1. P uses the A for all business of a type 2. P employs A for one transaction |
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P's duties to A |
1. Compensate (unless gratuitous) 2. Reimburse for expenses 3. Indemnity and exonerate for liability arising from good faith performance 4. Cooperate 5. Due care |
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A's duties to P |
1. Perform with reasonable care 2. Obey reasonably 3. Act with care normally used in circumstances 4. Indemnify P against loss arising from unreasonable behavior |
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A's duty of loyalty includes |
1. No self dealing 2. No usurpation of business opportunity 3. Confidentiality 4. No compete 5. Account for money/property 6. Candor 7. If act for more than one P, must inform both |
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A may bind P when... |
He acts within the scope of his authority |
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Types of authority 1. Actual express authority 2. Actual implied authority 3. Apparent authority |
1. P manifests that A should act to benefit P, and P agrees to be bound. Direct request. 2. A can do anything necessary to accomplish P's express request, reasonable understanding 3. TP led to believe A acts with P's authority |
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P is liable for A acting under apparent authority when... |
-TP's belief is reasonable and traceable to a manifestation by the P. -P knowingly or negligently allows the supposed A to exercise apparent authority, or overextends actual authority
-Agent cannot alone create apparent authority |
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Ratification ___, but must be one the P ___. Once ratified the act ___. |
-P gives retroactive authority to the A -One the P could have authorized at the tiem -Has same effect as if originally authorized |
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The P is liable for the A's actions in tort under the doctrine of ___, in which the key factor is ___. A ___ is substantial deviation and the P will ___. A ___ is a slight deviation and the P will ___. |
-Respondeat superior -Key factor is scope of employment -Frolic is substantial; P not liable -Detour is slight; P liable |
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-EE picked up car and drove home for breakfast -EE picked up car and drove it to the garage -EE picked up car and drove a quicker route -EE drove home for breakfast, then returned to the garage |
-Frolic: not liable for accidents -completely in scope of employment: liable -Detour: liable for accidents -Frolic, then return to scope: liable for accidents on the way to the garage |
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-P hires painters, who bring their own supplies -P hires mine blasters, who bring own supplies -P hires contractor who is an ex-con -Landlord hires painters to paint tenant's apartment -Landlord hires contractor to repair a dangerous roofing situation in tenant's apartment |
-Independent contractor: no liability for P -IC, but inherently dangerous activity: P liable -IC, but duty to select IC non-negligently -IC, but LL has duty of care beyond careful selection of IC. -IC, but LL has duty of dangerous disrepair, can't delegate to IC |
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With borrowed employees, even if the original employer ___ he will not be liable unless___ |
Even if ER continues to pay EE, won't be liable unless continues to exercise control
Rebuttable presumption that original ER retains right to control.
Joint control: both original and borrower ER liable |
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When may A delegate his duties? |
-If A must use own judgment, can't delegate -Can delegate in emergency -Can delegate if P agrees -Can't delegate if duty is for personal services |
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Termination of the agency relationship |
-Either P or A can terminate at any time (can still sue for breach) -Death or incapacity of P or A -P must notify, or it must be reasonably understood that the agency is terminated -Terminating an apparent authority situation requires P notifying all TPs involved who might still think A acts with P's authority |
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Agency not terminable if... |
-There is an interest in the subject matter (insurance policy) -There is power given for security (mortgagee has power to collect and apply rent from the premises) |
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Pship arises when ___; may be for ___, for ___, or ___ |
Two or more partners agree and intend to carry on business. For a specific thing For a term At will |
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A person is a Partner if ___ and if ___ but not if ___ |
-He shares in profits -And shares ultimate control -But not if just gets paid with profits |
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Pship by estoppel...
-If person holds self out as P -If Pship or other people hold person out as P |
-If a person holds out as being a P in a Pship, can be held liable to creditors or reliance
-If a Pship or other people hold a person out as a P, he is an agent |
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Each P acts as ___ for the Pship, unless ___ and ___ |
Acts as an agent for the Pshi Unless the P has no authority and the TP knows he has no authority |
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All Ps are ___ for obligations of the Pship. If one P pays more than pro rata, he is entitled to ___ from the Pship or ___ from other Ps.
Dormant Ps. Incoming Ps. Retired Ps. |
-Jointly and severally liable. -Entitled to indemnification by Pship -Or contribution by other Ps.
-Dormant Ps are liable -Incoming Ps not liable for obligation from before his entry -Retired Ps liable for before, can be discharged |
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Pship is liable for P's losses when the P ___ |
-Acts in the ordinary course of Pship business, or with authority |
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Pship agmt may not |
-Unreasonably restrict right of access to books/records -Eliminate or reduce fiduciary duties -Eliminate or reduce obligation of good faith and fair dealing, but can say the standard |
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Ps' contributions can be ___ or ___, and he is enttitled to be ___ But each P must also contribute to ___ according to ___ |
-Contributions can be cash or labor -Entitled to repaid for contributions -Contribute to losses according to share of profits |
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Rights of the Partners |
-Indemnify each P for course of business -Right to interest for funds in excess of those he agreed -Right to compensation -Right to accounting -Right to management and control; can change by Pship Agmt |
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Fiduciary duties of the Ps toward each other |
-Duty of care in conduct and winding up -Duty of loyalty (good faith, no compete, disclose, account) -Duty to keep books; right of inspection -Can't make new members without all consent |
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Pship property: -originally brought in -subsequently acquired -purchased with Pship funds -real property |
-Forms the capital of the Pship -Unless otherwise stated, property of Pship -Unless otherwise, belongs to Pship -Must be taken in Pship name, or using Pship funds |
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Dissociation. Dissolution. |
Dissociation=a P withdraws Dissolution=winding up |
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Dissociation occurs when... |
-Pship has notice -Event happens and causes dissociation -P is expelled, as per Pship Agmt -P expelled by unanimous vote if it's unlawful to continue with the P, the P is a Pship that has dissolved. -Judicial determination |
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Wrongful dissociation |
-P has power to dissociate -Wrongful if breach, or before term expired -Liable to Pship and other Ps for damages |
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Whether right or wrongful. Dissociating P rights, duties, shares |
-Right to participate terminates -Duties of loyalty for future events terminates -Shares purchased at either liquidation value or as if Pship were wound up -Offset damages from wrongful and other amounts owed -Obligations continue for 2 years if TP thinks he's still a P |
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Terms for dissolution |
-Dissolution: begining to wind up -Winding up: settling Pship affairs -Termination: all Pship affairs wound up |
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Mandatory dissolution when... |
-Pship at will, Pship gets notice of other P's intent to withdraw -Pship for term, term expires; or undertaking, and completed; or 90d after death/incap -Event agreed to as triggering winding up -Event makes unlawful continuing |
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Permissive dissolution when... |
-Unanimous consent -P asks and judge says econ purpose is unreasonably frustrated; not reas pract to continue working with other P; or otherwise unreas -P's interest transfers, and judge says equitable to wind up |
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Pship still bound to TPs after dissolution if |
-P's action is appropriate for winding up -Or, would have bound Pship and TP had no notice of dissolution -P's actions that are inappropriate for winding up is liable to Pship for damages |
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In winding up, assets of Pship are distributed in order of ... |
-First, creditors (including partners as creditors) -Second, distribute to Ps in accord with rights -Ps can vary this by Agmt, but not as to creditors or own liabilities |
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LLPs |
-General Pship that complies with statute -Register as LLP, always refer to self as LLP, RLLP -Protected from liability for obligations; liable for negligence of self and those supervised |
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Liability of Ps in an LLP |
-Not personally liable for obligations of LLP -Personally liable for own wrongful acts -If convert from GP, changes to LLP -Must maintain insurance, maintain accounts as security for liability, each P guarantees payments, or confirm net worth above amount |
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When an LLP can't make a distribution |
-Can't distribute if would cause drop below ability to pay debts, or assets less than liabilities needed if dissolved |
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LLP is same as GP for... |
-Fiduciary duties to each other -Dissolution |
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An LP has both ___ and ___ |
-General partners: manage business, personally liable -Limited partners: contribute capital, share profits, liability limited to contribution
Must have at least one of each |
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Filing certificate of LP |
-With Sec of State -Name of LP, including "LP" "L.P." or "Lim Pship" -Address of business -Name & address for gen Ps -Whether LP or LLP -Signed by all gen Ps |
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Corporations are created by ___, which must include ___ |
-Created by filing articles of incorp with Sec of state -Name of corp ("corp" "company" "Inc" "limited), must be different than others -Name and addresses of incorporaters -Number of shares corp authorized to issue -Filing fee -Effective on filing unless otherwise, no more than 90d |
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After incorporation, either the ___ or the ___ must hold a ___ in order to... |
Either named initial directors, or the incoporators Hold an organizational meeting To adopt officers, adopt bylaws, carry on business |
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De jure corporation De facto corporation Pierce corporate veil |
-Complied with all statutory requirements -Even if did not follow statute, good faith colorable effort -Even if a corporation, court may disregard |
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Reasons for piercing corp veil |
1. control so complete there is no separate corp, instead alter ego of SH 2. fraud/improper 3. Intermingling of activities 4. Inadequate capitalization (sufficient to meet debts; not enough on its own as a factor) 5. Fail to comply with corporate formalities 6. Liability: more likely pierced in tort than K |
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Promoters are not ___ and have no power ___, therefore are ___ unless ___, ___, or ___ occur |
Not agents No power to bind future corporation Personally liable for Ks Unless K specifically disclaims liability, adoption, or novation |
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-Paul enters into lease on behalf of future Corp -Paul enters into lease and the K includes provision that LL will only look to future Corp, and Paul signs as "disclaiming personal liab, all liab to be assumed by future Corp." -Paul enters into lease, and then Corp, when formed, adopts -Paul enters into lease, Corp, when formed, agrees with Paul and LL to substitute Corp in place of Paul |
-Paul personally liable -Paul is not liable; future corp is liable -Paul is liable, but may seek indeminification from Corp -Paul is not liable; novation |
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Post-filing requirements |
-Completed at organizational meeting (incorporators, or initial directors if so named in articles) -Naming/electing directors -Appoint officers -Adopt bylaws -Other things, optional |
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Corporation by estoppel |
Despite failing at requirements, ct treats as corp 1. When K dispute, estop TP from saying no corp if unjust to the corp 2. When K dispute, estop corp from saying no corp if unjust to deprive TP from relief |
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Management of corp business and corp power must be by ___ which acts ___. Unless otherwise in articles |
By direction of board Acts collectively. |
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Board action requires presence of a ___ which is a ___, and a vote of ___ is valid. Unless otherwise in articles. |
Presence of a quorum A majority of directors Vote of majority of present directors. (maj for quorum; maj of quorum to be effective) |
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If there is no meeting, the board may conduct business if ___ |
There is unanimous written consent, signed by all members of the board. |
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General meetings may be held ___ Special meetings must have ___ (at least ___) including... but not ___ unless ___.
Articles can ___ but not ___ notice. |
General mtgs: Without notice okay Special mtgs: Must have notice (at least 2d), including date, time, place, but not purpose unless it's for removal of a director.
Articles can modify but not eliminate notice requirement |
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-Doug does not get notice of the special mtg, and files written objection before the mtg takes place -Doug does not get notice, but he does attend, though does not vote |
-No waiver -Waiver (non-noticed Director's attendance of participation) |
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Corporate officers or agents may enter transactions that are ___ |
Expressly or impliedly authorized by Articles Bylaws Employment K Board resolution Reasonably related to duties Not declare dividends Also consider apparent authority (agency) |
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If corp exceeds its corp purpose, the action is ___, and may be asserted by ___ but not by ___ |
Ultra vires action Asserted by shareholders, or corp against directors But not by third parties |
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Duty of good faith: Directors and Officers must conduct duties... |
1. In good faith 2. With the care that ordinarily prudent person would do in like position 3. Manner they reasonably believe is in best interest of corp |
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Business judgement rule... |
*Reputtable* presumption that Directors and Officers, in making business decisions acted.. 1. Informed 2. In good faith 3. Honest belief in best interest of corp
Not consulting fortune teller |
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LLC duty of care |
-Managers have duty of care like corp managers -Business jment rule can apply |
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Duty of loyalty |
Directors, Officers, Employees of Corp must be loyal and not promote own interests that are injurious |
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Ways to be injurious to a corp |
-Self dealing (getting corp to buy own property) -Usurp business opp (TP approaches you in capacity as corp officer, you take the opp) -Directly compete (support competition) |
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Self dealing does not violate duty of loyalty if |
-D or O in a conflict of interest transaction, but notifies other Ds, other Os, or SHs of all material facts -No worries if after disclosure, majority of Ds or SHs vote to authorize
Means the conflicted transaction is voidable |
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With usurpation of business opp, a court will consider... and it does not violate duty of loyalty if... |
-Opp discovered while person acting in capacity -Corp has closely related business -Board was interested or expected to acquire -Opp is corp's line of business -Corp funds/facilities used to discover/develop
No usurpation if after full disclosure, corp was given opp to pursue first and declined/unable |
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Directors and officers are not ___ but are liable for ___ and ___.
In usurpation of business opp, a court may award ___ or ___. |
Not pers liab for debts/oblig of corp Liab to corp for dmgs from violating fid duties Liab to corp for unauthorized axns (ultra vires, or outside their authority)
If usurped, damages or order to convey the items |
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LLC managers are ___ for liabilities, but are ___ for ___ |
Not personall liab for company's liabilities But are liable for breach of duties of loyalty and care. |
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SH, collectively have power to ... |
1. Elect directors 2. Remove directors with or w/o cause 3. Amend bylaws 4. Approve fundamental changes (amendments, merger, dissolution, sale of all corp assets) |
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For mtgs, each SH of record must be given ___. Annual mtgs: state ___, ___, ___ Special mtgs: state ___, ___, ___, and ___ |
Give timely written notice, 10-60d prior -Annual: state place, date, hour -Special: state place, date, hour, purpose |
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To act, need ___, meaning ___ of the ___, and then affirmative vote of ___ of ___ |
Need a quorum, meaning majority of shares entitled to vote Need vote of majority of shares present at mtg |
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Electing directors: Straight voting Cumulative voting |
-Straight: one vote per share to each candidate -Cumulative: can pool votes Ex: 50 shares, 2 openings on board=100 votes |
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Removing directors: Straight voting Cumulative voting |
-Straight: removed with or without cause by majority of shares that can vote to elect -Cumulative: can't remove if votes against removal are enough to elect |
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If amendments to articles are proposed... 1. Notice for the SH mtg must include... 2. Quorum |
1. Include copy of amd and explain the purpose of mtg is to consider 2. Quorum must be at least majority of votes |
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If plan for merger submitted to SH for approval 1. Notice at SH meeting must include 2. Quorum |
1. Explain purpose of mtg, and if corp won't survive merger, include summary of surviving entity's articles 2. Quorum must be at least majority of votes entitled to vote |
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SH approval of a merger is not required if... |
1. Corp will survive, or is acquiring corp 2. Corp articles will not change 3. Merger won't affect outstanding shares and issuance of shares does not require SH approval 4. Merger between parent and sub, and parent owns at least 90% of power |
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SH may vote by proxy when ___ and a proxy is valid for ___ unless ___ or unless ___ |
-When written authorization signed, or electronic transmission. Not face-to-face. -Valid for 11 months unless otherwise provided in proxy agmt -Or, if SH revokes proxy: writing delivered to corp, subsequent proxy at SH mtg, or person shows up or votes at SH mtg
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To be irrevocable, a proxy agmt must ___ and ___ |
Must state explicitly "irrevocable" And be paird with an interest |
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Voting agreements are ___ where SH ___ Voting trusts are ___ where ___ |
-Voting agmts: contracts, SH agree to bind each other to vote certain way. Valid except for directors. -Voting trusts: legal transfer of title to trustee, and trustee votes |
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SH have rights to... Unqualified right to... Qualified right to... Qualified by... |
-Rights to info -Unqualified right to examine articles, bylaws, minutes of SH minutes, and list of SH of record -Qualified right to inspect (make copies) of accounting books, records & minutes of director mtgs -Quaified by good faith demand for proper purpose and with specificity |
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Where a fundamental change put to the vote, dissenting SHs have right to ___ |
-Obtain payment of fair value for their shares -Merger: any SH, except with statutory merger (sub merging with parent owning 90% of it) |
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Direct suits are brought by ___ for ___ and must prove...
Derivative suits are brought by ___ for ___ and involves ___. A prerequisite is ___. |
-Direct: by SH for their own harm, must prove bad faith like hostillity, exclusion, controlling managers just paying selves, or forcing min SH to sell stock cheap -Derivative: By SH on behalf of corp, involves breach of fid duty, request court enforce or redress. Prereq is written demand to directors, or showing that would be futile. |
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In an LLC, members may bring direct action against managers if ___
Members may bring deriviative action against managers if ___ |
Direct: if personally injured Derivative: if mismanagement by managers |
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Controlling SH have duty of ___ meaning must ___ Oppression occurs most often in ___ where min SH ___ Improper conduct by controlling SH is... |
Duty of good faith, refrain from getting benefit Occurs in closely held corps because min SH cannot easily sell shares with no ready market
Get loan or K from board, issue stock to dilute min SH, structurally change to exclude min SH, improper fire min SH, no dividends while increasing salaries of certain EEs |
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Generally a TP may not sue individual SHs bc __ Exception is ___ |
Because Corp is distinct from SH Exception: pierce corp veil |
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A court will rarely pierce the corp veil, but will hold SH liable when ___, using these factors... |
When necessary to prevent great/grave injustice
Undercapitalizatoin Formalities not followed/observed Comingling of personal funds Corp is alter ego of SH; not treated as separate =Corp is a facade |
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Plaintiff seeking to pierce corp veil must prove... Fact patterns triggering are... |
1. SH control makes corp form a facade 2. Corp form used to obtain wrong/fraud; and 3. Injury or unjust loss results
-Close corporation where formalities not observed and funds intermingled -Parent and sub are not segregated in business records and finances |
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LLC members may pierce corp veil when... |
Same as for corps But fewer formalities, so less likely formalities are a factor |
