Agency and Corporations Overview

Flashcards covering terms and definitions relevant to agency and corporate law.

Power of Attorney

is a legal instrument that authorizes an agent (also called an “attorney-in-fact”) to act on behalf of a principal. It evidences the agent’s appointment and specifies the nature and extent of their authority—whether general or limited to specific tasks.

Fiduciary

A ___ is someone who acts for someone else's benefit while placing their own interests secondary to that person's interests. A ___ relationship is one of utmost trust and confidence, loyalty and good faith.

Duty of Obedience

 Agent must act in principal's affairs only as authorized by the principal and must obey all reasonable instructions and directions

Due Diligence

____ is the process of thoroughly investigating and evaluating a business, individual, or investment before entering into an agreement or transaction. It helps identify risks, liabilities, and opportunities, ensuring informed decision-making.

 an agent owes a duty of utmost loyalty and good faith to the principal.

It can be breached when (including but not limited too): • The agent competes with the principal • The agent makes a secret profit • The agent uses confidential information obtained in the course of the agency for his own benefit. When the agent breaches the duty, they are liable to the principal for the breach. They are also liable in tort for any losses caused by the breach and must make restitution for any profits or property received in breach of this duty

Fiduciary Duty (what is it and what is the recourse when it is broken)

Gratuitous Agent

A ______ is someone who acts as an agent for another person (the principal) without expecting or receiving compensation for their services.

Independent Contractor (factors used to distinguish between IC and EE)

 Courts will consider: (a) the extent of control which, by the agreement, the one who hired the work may exercise over the details of the work; (b) whether the one employed is engaged in a distinct occupation; (c) the kind of occupation, with reference to whether the work is usually done under the direction of the employer or by a specialist without supervision; (d) the skill required in the particular occupation; (e) whether the employer or worker supplies the tools and place of work; (f) the length of time involved; (g) the method of payment (by the time or the job); (h) whether the work is a part of the regular business of the employer; (i) whether the parties believe they are creating an employment relationship; and (j) whether the principal is or is not in business.

Agency

the consensual relationship that the principal and agent may form by contract or agreement.

When does an agency terminate?

An agency relationship can terminate through various means, including the completion of the purpose, mutual agreement, expiration of the agreed-upon term, death or incapacity of either party, or by operation of law, such as bankruptcy or illegality of the subject matter

Characteristics of a corporation

 It is a legal entity. Which can sue and be sued. • It owes its existence to a state, which also regulates it. • It provides limited liability to its shareholders. • Its shares of stock are freely transferable. • Its existence may be perpetual. • Its management is centralized. • For some purposes, it is considered a person; and • For some purposes, it is considered a citizen

Public Corporation

A corporation created to administer a unit of local civil government or one created by the United States to conduct public business. Example: Cities • 

 For legal purposes, a corporation is considered a citizen of both the state where it is incorporated and the state where its principal place of business (or "nerve center") is located

Where is a corporation a citizen?

Bylaws

rules governing a corporation's internal management. They are adopted as one of the first items of business at the organizational meeting held promptly after incorporation. May contain any provision for managing the business not inconsistent with law or the corporate charter. May be repealed by the board of directors. 

Piercing the corporate veil

 This legal concept allows courts to hold shareholders personally liable for a corporation’s debts or actions when the corporation is used to commit fraud, circumvent the law, or when corporate formalities are ignored, effectively disregarding the entity’s separate legal status.

Officers

These individuals are appointed by the board of directors to manage the day-to-day operations of a company, acting as agents of the board to ensure the organization carries out the directors' decisions. Common positions include Chief Executive Officer (CEO), Chief Operating Officer (COO), Chief Financial Officer (CFO), and Corporate Secretary. 

Directors

individuals elected by shareholders to form a board of directors, which is the governing body of a corporation, responsible for overseeing the company's affairs and making major policy decisions.

Shareholders

In corporate law, ____, are individuals, companies, or institutions that own shares, representing partial ownership, in a corporation, and are entitled to certain rights, including voting rights and the right to receive dividends. They own the business

Quorum

minimum number necessary to be present at a meeting in order to transact business

A board of directors, acting as a fiduciary on behalf of shareholders, wields significant power, including setting strategic direction, overseeing management, and making major decisions like hiring/firing executives, approving dividends, and managing mergers/acquisitions.

What are the powers of a board director

Limited Liability partnership

An unincorporated business association consisting of at least one general partner and at least one limited partner

Partnership Distributions

A _______ refers to the transfer of cash or property from a partnership to a partner related to their interest in partnership capital or income. Because they cannot have a salary

Criminal liability of a partner in a partnership

 This refers to the legal responsibility a partner may bear for criminal acts committed by themselves or, in some cases, by other partners in the course of the partnership’s business. Generally, a partner is only criminally liable for their own conduct or for crimes they authorize, participate in, or have knowledge of.

OSHA

Occupational Safety and Health Administration, is a federal agency that sets and enforces workplace safety and health standards, ensuring employers provide a safe and healthy environment for their employees

EEOC

Equal Employment Opportunity Commission, is a federal agency that enforces laws prohibiting employment discrimination, covering aspects like race, color, religion, sex, national origin, age (40 or older), disability, and genetic information.

Respondeat Superior

is a legal doctrine that holds an employer or principal responsible for the actions of their employees or agents within the scope of their employment,

Subchapter S Corporation

permits a corporation meeting specified requirements to elect to be taxed essentially as though it were a partnership. These types of corporations must be a domestic corporation with no more than 100 shareholders, each shareholder must be an individual or estate or certain type of trust rather than a business entity, no shareholder may be a nonresident alien, and there may be only one class of stock.

Business Judgment Rule

precludes imposing liability upon directors or officers for honest mistakes of judgment. To benefit from this rule, a director or officer must make an informed decision, in good faith without any conflict of interest, and have a rational basis for believing their actions were in the best interests of the corporation. If directors and officers act in good faith and with due care, courts will not substitute their judgment for that of the board or officer

It is a legal entity. Which can sue and be sued. • It owes its existence to a state, which also regulates it. • It provides limited liability to its shareholders. • Its shares of stock are freely transferable. • Its existence may be perpetual. • Its management is centralized. • For some purposes, it is considered a person; and • For some purposes, it is considered a citizen

List the 8 attributes of a corporation

The law provides partners with: (a) the right to use and possess partnership property for partnership purposes; (b) a transferable interest in the partnership; (c) the right to share in distributions; (d) the right to participate in management; (e) the right to choose associates; and (f) enforcement rights, which include the right to information and inspection of the books and the right to take legal action against the partnership or another partner. 

6 rights the law provides to Partners

Private Corporation

Corporation founded by and composed of private persons for private purposes; has no governmental duties. 

Domestic

Corporation created under the laws of a given State

Foreign Corporation

A type of Corporation created under the laws of any other State or jurisdiction; must obtain a certificate of authority to do business. Doing or transacting business within a particular state makes a foreign corporation subject to local litigation, regulation and taxation. 

Closely-held

A Corporation that is a private company whose shares are owned by a small number of people—often family, friends, or business partners—and are not publicly traded. These businesses often have less formal structure and governance compared to public corporations.

Actual Authority

Authority that a principal intentionally gives to an agent, either explicitly (express) or implicitly (implied), allowing the agent to act on the principal's behalf.

Implied Authority

A type of actual authority that is not expressly stated, but is assumed to be granted as necessary to carry out the agent’s express duties.

Apparent Authority

Authority that a third party reasonably believes an agent has, based on the principal’s words or conduct—even if the agent doesn’t actually have that authority.