Business Transactions Flashcards
Agency
Formation of agency:
Agency is a fiduciary relationship that arises when one person (the “principal” appoints another (the “agent”) to act on the principal’s behalf and the agent consents to act.
Modes of creating agency
by parties (agreement) or by operation of law (by estoppel- is the same as operation of law, third party reliance or by Statute- statutes creating agencies are usually designed to accomplish a limited purpose)
Duties of agent
CLOE Agent – Care, Loyalty, obedience, express in contract.
Duties of Principal to agent
CECI – Compensation, Express contractual duties, cooperation, indemnity
Type of Authority does Agent have
Actual – express of implied. In contract or the parties reasonably believes.
Apparent- exists when the (i) principal “holds out” another as possessing authority and based on this holding out, a (ii) third party is reasonably led to believe that authority exists. Exception: when agent does not have actual authority not liable, ultra vires acts. except – when entered the contract for a principal and he permits an impostor to be in a position to appear to have agency authority.
Ratification elements-(i) principal have knowledge of all material facts (ii)accept the entire transaction) (iii) principal have capacity. Company KARMA – Capacity, Knowledge, accepts, ratifies, material acts
Ratification elements
Company KARMA – Capacity, Knowledge, accepts, ratifies, material acts
Frolic and detour:
Frolic and detour: a detour or small deviation from employer’s direction is within scope of employment. Frolic: major deviation, no.
Partnership
Duties to the other partners:
CLOD – Care, loyalty, obedience, disclosure.
Corporation
Types of creation:
de jure corporation, we need a person (name of each incorporator), a paper (articles of incorporation), and an act (file at secretary of state).
De Facto: courts recognize limited corporate liability if there was a colorable, good-faith attempt to incorporate and actual use of the corporate form, such as by contracting in the corporate name.
By estoppel: most jurisdictions recognize limited corporate liability if a third party deals solely with the purported corporation and– and the parties acted that there were a corporation
Fraud in the corporation? Piercing the corporate veil (PCV)
Piercing the corporate veil (PCV) – Shareholders generally cannot be liable for corporate debts, but the court might pierce the corporation veil in close corporations only. Two req. (i) the shareholders must have abused the privilege of incorporating and; (ii) fairness must require holding them liable. Major factors in corporate veil piercing: FUc’n A: Fraud Undercapitalization Alter-ego
Notice reqs.
Notice: The corporation must provide shareholders entitled to vote with notice of any meeting between 10 and 60 days before the meeting date.
Proxy – irrevocable if
Proxy – irrevocable if PEACE
P – PLEDGED shares for a loan
E – Person ENTITLED to the shares (owner of record on the corporate books)
A – An AGREEMENT between shareholders to vote the shares in a particular way and they execute an irrevocable proxy for that purpose
C – A CREDITOR of the corporation who has been given an irrevocable proxy for extending new credit, or agreeing to continue credit to the corporation
E – An EMPLOYEE is given a proxy
Under the business-judgment rule,
explain
a court will presume that a director acted in good faith, * upon reasonable information to the directors, and * in the honest belief that the decision was in the corporation’s best interests and the director made a FULL disclosure of his or her interest in that transaction, and approved by all or directors.
Exculpatory provision in a corporation
in the articles of incorporation may limit or eliminate director’s personal liability for damages of shareholders or directors. Exception: (i)received a benefit not entitled, (ii)intentional harms the corporation, (iii) approved unlawful distributions, (iv)intentionally committed a crime.
Proxy allowed to vote if
Allowed to vote:
A proxy is (1) a writing (fax and email are fine), (2) signed by the record shareholder (email is fine if the sender can be identified), (3) directed to the secretary of the corporation, (4) authorizing another to vote the shares.
