Business Orgs Outline
Chapter 1 - Agency
1) What is an Agent?
An agent acts on behalf of the principal.
Example: An employee of the principal.
If not an employee, they are an independent contractor.
2) Basics of Creating an Agency
The principal manifests an offer of agency.
The agent consents to agency.
Agency creates a fiduciary responsibility (duty of fidelity/good faith).
The relationship does not need to be formal.
The principal must exert some form of control.
3) Classifying Agents
Employee Agents
Specific employees with authority.
Non-agent employees refer to the servant side of the master-servant relationship.
Independent Contractors
Not considered employees.
No master-servant relationship exists.
Gratuitous Agents
Same rights and duties but have a lower duty of care to the principal.
4) Important Case Law
Gordon v. Doty
No contract is needed; an agreement suffices.
A principal-agent relationship forms when one person acts on behalf of another subject to control.
Jenson Farms v. Cargill
A principal-agent relationship exists between a creditor and debtor when the creditor intervenes in the debtor's business affairs.
5) Power of Attorney
Uniform durable power of attorney allows agency to continue upon disability or incapacitation.
Springing rights can lead to disputes, hence not recommended.
6) Important Terms Related to Agency
Universal agent
General agent
Special agent
Sub-agent
Capacity to contract
Ratification
Termination of Agency
1) Termination by Principal
Revocation.
2) Termination by Agent
Renunciation.
Liability of Principal to Third Parties in Contract
1) The Agent's Authority
Actual Authority
Expressly or implicitly authorized by the principal.
Implied Authority
Not expressly granted but reasonably inferred from conduct.
Based on customs and industry norms.
Express Authority
Specifically stated actions by the principal.
Apparent Authority
Based on the principal’s conduct leading third parties to believe the agent has authority.
Inherent Authority
Authority inferred from the agency relationship or position.
2) Ratification
Botticello v. Stefanovicz
Elements of ratification to be evaluated.
3) Estoppel
Hoodeson v. Koos Bros
Courts may hold principals liable when non-agents act in a manner suggesting agent authority.
Agent’s Liability on the Contract
1) Cases Discussed
Atlantic Salmon v. Curran
Agents making contracts for partially disclosed principals can incur liability if not properly disclosed.
Fully Disclosed Principal
Principal alone is bound if agent discloses their agency.
Partially Disclosed Principal
Agents and principals may be liable.
Undisclosed Principal
The agent is liable for the contract.
Liability of Principal to Third Parties in Tort
1) Employment Type Differentiation
Employee vs. Independent Contractor.
2) Tort Liability and Apparent Agency.
3) Scope of Employment.
4) Statutory Claims.
5) Independent Contractors.
Fiduciary Obligation of Agents
1) Duties During Agency
Agent’s duties to the principal:
Fiduciary Duties (COALD)
Care
Obedience
Accounting
Loyalty
Disclosure
Loyalty: Must prioritize principal's interests.
Obedience: Act within authority and comply with lawful instructions.
2) Principal’s Duties to Agent
Duty of good faith - fair treatment.
Indemnity obligations for agent’s incurred losses.
Chapter 2 - Partnerships
1) Definition of a Partnership
Must involve:
Two or more people.
Co-owners conducting a business for profit.
2) Factors in Determining Partnership
Intention of the parties.
Right to share profits.
Obligation to share losses.
Ownership and control rights.
Partnership agreement language.
Conduct toward third persons.
Rights to dissolution and capital contributions.
3) Case Law
Fenwick v. Unemployment Compensation Commission
Distinction between partners and employees affects liability status.
4) Partnership by Estoppel
5) Fiduciary Obligations of Partners
Duties towards partnership and fellow partners.
6) Chapter Insights
Breach of fiduciary duties can lead to serious legal consequences.
Proper documentation and clear communication in partnership agreements are crucial for minimizing disputes.
Chapter 3 - Corporations
1) Corporate Structure and Characteristics
Limited liability for owners, directors, and officers.
Centralized management and free transferability of ownership.
2) Taxation Types
C-Corp (double taxation) vs. S-Corp (pass-through taxation).
3) Formation Process
Articles of incorporation filed; bylaws govern operations.
4) Corporate Formalities
Necessary to maintain limited liability protections.
5) Piercing the Corporate Veil
Criteria for disregarding corporate form and holding shareholders liable.
Chapter 4 - The Duties of Officers, Directors, and Others
1) Duty of Care
Business Judgment Rule preventing interference unless conducted in bad faith or beyond discretion.
2) Corporate Opportunity Doctrine
Duty to present corporate opportunities to the corporation first.
3) Dominant Shareholders and Ratification
Self-dealing transactions must not harm minority shareholders.
4) Derivative Actions
Shareholder lawsuits on behalf of corporation for harm suffered.
5) Insider Information Regulations
Legal frameworks regulating trading based on nonpublic material information.
Chapter 5 - Problems of Control
Proxy Fights
Overview of mechanisms for shareholders to affect board representation.
Private vs. Public Corporations
Regulatory differences in proxy requirements and shareholder interactions.
Reimbursement Rules
Guidelines governing corporate reimbursement for proxy contest expenses.
Corporate Voting Mechanisms
Voting procedures and requirements for significant corporate changes.
Mergers and Acquisitions
Overview and requirements pertaining mergers and acquisitions in corporate law.