Agency
What is apparent authority
Arises b/c of conduct by the principal (i) which causes the 3rd party to REASONABLY BELIEVE that the purported agent has authority to make the contract in question, and (ii) which leads the 3rd party to REASONABLY RELY upon the appearance of authority in entering into the contract
Can a duty of loyalty be waived by partners?
Yes, a duty of loyalty can be waived if a partner discloses the pursuit of an opportunity and seeks permission from other partners.
What are basic shareholder rights?
They vote at shareholder meetings, typically each year to vote on directors.
Can inspect corporate record, to show who owns stock or is a "record owner"
How are shareholders held liable?
Shareholders are generally only liable up to the amount they have paid for their shares.
What is the better remedy to dissolution for a close corporation?
Two types of actual authority and explain what each means
Express:created by words, oral or written → narrowly construed
-if the principal grants express actual authority due to the principal's mistake or the agent's fraud, the grant of authority will NOT be invalidated
and
implied: implied after considering the full circumstances
T or F. Owning joint property itself does not create a partnership. The sharing of profits creates only a rebuttable presumption of the existence of a partnership.
True.
Difference between Derivative Action or Direct Action?
What
When a shareholder initiates a derivative suit, she is suing to vindicate a corporation’s legal rights. A direct action is when a shareholder sues to vindicate her legal right.
- The court will ask who sustained direct harm and who should receive relief.
- Suits alleging directors’ breach of duty of care or duty of loyalty are easy examples of derivative suits.
Are corporations liable for shareholders' actions?
Shareholders are rarely liable for actions of the corporation, but directors and officers can be held liable for breaches of fiduciary duty.
What is the Wilkes test for freezeouts?
Was there something less drastic that the corporation could have done than to freeze out Wilkes and refuse his shares?
What 3 things is required for a principal-agent relationship?
1) Assent- informal agreement b/w the P who has capacity, and A
2) Benefit-- agents conduct MUST be for P's benefit
3) Control-- P must have right to control A, by having power to supervise the MANNER of A's performance
What does conveyance of a partnership property look like?
What Does “Good Faith” Add to a Director’s Duty of Care and Duty of Loyalty?
There is a lack of good faith and a breach of duty of loyalty whenever a director knowingly, for any reasons, does not act in the corporation’s best interest.
How are shareholders held liable? AND Are corporations liable for shareholders, directors, officers, actions?
Shareholders are generally only liable up to the amount that they have paid for their shares
Shareholders are rarely, if ever, liable for actions/negligence of the corporation (other than losing their investment). Directors and officers can be held liable if they have breached a fiduciary duty to the corporation or to the shareholders
Rules for accounting and distributing accounts
Methods of termination of actual authority
1) contractually
2) death of principal or agent
3) mental incapacity of the principal or agent
4) unilateral act of cancellation by the principal or agent
Can a partnership limit or eliminate any fiduciary duty?
T OR F. Even though a board acts negligently, if the transaction is fair to the corporation, business judgment rule may prevail.
TRUE
In a partnership, what is the rule for neither party being liable to each other for contribution of any loss sustained?
Process of dissolution
HYPO: P gives A power of attorney ONLY to purchase steel drums. A enters K to purchase 10,000 wooden barrels. P tells A "great job, i love wooden barrels but I only need 1,000." Is P Bound?
NO. Generally, P liable ONLY on authorized K's. HERE, no express, implied or even apparent authority to buy wooden barrels and power is NARROWLY construed and thus CANT extend.
Nonetheless, P arguably RATIFIED the K through (1) knowledge; AND (2) Acceptance of its benefits, fulfilling two-part ratification test;
However, ratification here NOT valid, b/c it is NOT complete-- P tried to change the terms of the K (from 10,000 to 1,000) which is NOT allowed and THUS this is an unauthorized K and THUS no liability
What is a Limited partnership and how is it different from a partnership?
A limited partnership is a form of business structure that is similar to, but in some respects different from, a partnership. Limited partnerships do not pay income tax on its earnings. And there are partners.
Unlike a partnership, a limited partnership has two kinds of partners. (1) general partners and (2) limited partners
When to use the BJR versus Intrinsic Fairness Test?
The BJR is a broad shield protecting officers/directors with the burden on the plaintiff to prove that a fiduciary duty such as care was breached by defendant officers/directors. If the plaintiff can show officers/directors acted in self-interest (another fiduciary breach), then the intrinsic fairness test places the burden on defendant officers/directors to show that the transaction was fair to the corporation
What claims and remedies a creditor may have?
Creditors may seek judicial dissolution if: (1) the creditor’s claim has been reduced to judgment, execution of the judgment has been returned unsatisfied, and the corporation is insolvent; or (2) the corporation has admitted in writing that the creditor’s claim is due and owing and the corporation is insolvent.
10b-5 claim and the elements
10-b prohibits making a false or misleading statement of material facts in connection with the purchase or sale of securities.