Business Association

Question 1

Define Agency

Answer 1

A voluntary, fiduciary relationship between two parties; a principal and an agent

Question 2

Gratuitous Agency

Answer 2

P does not compensate A for the work

Question 3

Contractual Agency

Answer 3

EE/ER or ER/IC

Question 4

Employee

Answer 4

ER has right to control what the EE does and how they do it

Question 5

Independent Contractor

Answer 5

ER has right to control what IC does, not how

Question 6

Factors to tell EE from IC

Answer 6

1) whether the work is typically performed by specialist without supervision
2) Who supplies the agent with tools and place to perform work
3) Length and exclusivity of the employment relationship
4) whether agent’s work is party of ERs regular business

Question 7

Requirements for creation of agency relationship

Answer 7

P must manifest intent to grant authority to another to act on their behalf and be subject to their control. A must consent

Question 8

Capacity required to create

Answer 8

minimum mental capacity

Question 9

Agency by Ratification

Answer 9

1) requisite contractual capacity to authorize actions AND
2) knowledge of all material facts concerning the transaction

Question 10

Duty of Care

Answer 10

• follow P’s reasonable instructions
  -perform duties with reasonable care
  indemnify P against loss of A’s wrongful behavior

Question 11

Duty of Loyalty

Answer 11

-prefer interests of P over A
-avoid self-dealing
- neither compete nor usurp business opportunities of P

Question 12

Duty to Account

Answer 12

• must account for money or property of P
• keep assets separate from A’s own

Question 13

Duty of Candor

Answer 13

-must fully disclose to P any relevant facts they reasonably assume P might want to know

Question 14

Duties of P to A

Answer 14

Compensation
reimbursement

Question 15

Actual Authority

Answer 15

A’s power to act on behalf of principal. The power has expressly or impliedly conferred

Question 16

Apparent Authority

Answer 16

A’s power to act on behalf of P, not expressly or impliedly granted. Arises when a third party reasonably infers, from P’s conduct, that P granted power to agent

Question 17

Liability of Fully Disclosed P

Answer 17

A is generally not personally liable on K

Question 18

Liability of Partially Disclosed P or undisclosed

Answer 18

(existence but not ID) A is personally liable on K with P

Question 19

Respondeat Superior

Answer 19

ER is vicariously liable (strictly) regardless of fault , if EE committed torts within scope of employment

Question 20

Scope of employment

Answer 20

when performing tasks assigned by ER or engaging in course of conduct subject to ER’s control

Question 21

Frolic and Detour

Answer 21

ER not liable if EE has substantially deviated (frolic) but will be liable if deviation is slight (detour)

Question 22

Intentional Torts

Answer 22

Generally ER is not liable unless within scope of employment

Question 23

Limited Partnerships

Answer 23

passive investors and general partners, must file a certificate with state that is signed by all LP’s and GP’s

Question 24

LLPs

Answer 24

Any partnership other than an LP can become and LLP
-no exposure for GP’s
-must file

Question 25

Duties in a Partnership

Answer 25

Care, Loyalty, Disclosure

Question 26

Dissociation

Answer 26

One partner chooses to leave a partnership

Question 27

Dissolution

Answer 27

Entire enterprise is wound up

Question 28

How to effectuate dissolution

Answer 28

• individual may file with court to dissolve partnership
  -economic purpose is unreasonably frustrated
  -working with particular partner is no longer reasonably practicable

Question 29

Corporation Formation

Answer 29

-Execution and Filing of Articles of Incorp
- signed
-name and address
-registered office
-number of shares

Question 30

Pre-incorp transactions

Answer 30

Promoters are personally liable, generally. Novation must occur to release promoters from liability

Question 31

Organizational Meetings

Answer 31

naming of directors, appointing of officers, adoption of bylaws

Question 32

De Facto Status

Answer 32

-good faith attempt to comply with statute
- corporate principals acted as if they were a corp

Question 33

De Jure Status

Answer 33

Corp complied with statute to form

Question 34

Corp by Estoppel

Answer 34

when contractual dispute arises court may estop either party from claiming that because the corp was not formed correctly, they aren’t liable under K

Question 35

Ultra Vires

Answer 35

corp cannot be obliged to undertake a K or activity that is beyond the scope of its powers, as described in bylaws

Question 36

Duty of Care

Answer 36

ordinarily prudent person in like position under similar circumstances acted in a manner they reasonably believe to be in best interest of corp

Question 37

Business Judgment Rule

Answer 37

creates a rebuttable presumption that when making business decisions, directors have acted on an informed bases, in good faith, with belief their decision was in corps best interest

Question 38

Duty of Loyalty

Answer 38

Self Dealing
Usurp Corporate Opportunity
Directly compete with corp

Question 39

Straight Voting

Answer 39

shareholders may not give more than one vote per share to any single nominee

Question 40

Cumulative Voting

Answer 40

Shareholders may allocate all of their votes to any candidate when there are multiple openings on board

Question 41

Shareholder Rights

Answer 41

-voting, information and inspection, appraisal rights, right to bring suit

Question 42

Direct Suit

Answer 42

when wrong or harm is direct to shareholder

Question 43

Derivative suit

Answer 43

equitable action brought by shareholder on behalf of corp

Question 44

Shareholder Duties

Answer 44

good faith

Question 45

LLCs

Answer 45

unincorporated assc. with one or more members

Question 46

PLLCs

Answer 46

Organized for sole purpose of rendering professional services and has members who are licensed in that profession

Question 47

Formation of LLCs

Answer 47

File Articles of Org, operating agreement