Definition

Question 1

General Partnership

Answer 1

A general partnership (“GP”) is defined as an association of two or more persons to carry on as co-owners a business for profit. There is no requirement that the parties subjectively intend to form a partnership, only that they intend to run a business as co-owners. Moreover, there are no formalities required to form a GP. Courts generally look to the intent of parties to determine whether a GP exists.

Question 2

Liability in a GP

Answer 2

In a GP, all partners are jointly and severally liable for all obligations of the partnership, whether the obligations arise in contract or tort.

Question 3

GP Authority. What are the 3 authorities

Answer 3

In order to determine if the partnership is bound by the contract, the partner must have had the express, implied, or apparent authority to enter into the contract and bind the partnership.

Question 4

Actual Express Authroity

Answer 4

Express authority is that authority contained within the four corners of the partnership agreement, those expressly granted by the partnership, or a statement of authority filed with the state.

Question 5

Actual Implied authority. What should you think to?

Answer 5

Implied authority is authority that the partner reasonably believes she has as a result of the actions of the partnership.

Think of how long they have been incorporated and what their past skills in the coporation are

Question 6

De Jure corporation

Answer 6

A de jure corporation is one that is formed in accordance with the law. To be valid, the articles of incorporation must be filed with the appropriate state office, which is usually the secretary of state. Upon filing the articles of incorporation, the corporation comes into existence unless the articles specify a future date to begin.

Question 7

Promoter liability

Answer 7

A promoter is someone who enters into contracts, prior to incorporation, for the benefit of the to-be corporation, such as lease and vendor agreements, to help bring it into existence. A promoter is personally liable for the contracts that it knowingly enters into regardless of if it was for the benefit of the corporation

Question 8

Novation

Answer 8

A novation is a substitute agreement between all relevant parties to extinguish the original contract, thereby releasing the original obligor of liability.

Question 9

Express adoption

Answer 9

A corporation may expressly or impliedly adopt a contract after it has been validly formed. Once adopted, the corporation becomes liable on the contract. However, adoption does not relieve the promoter of liability absent a novation. Express adoption occurs when the corporation has expressly assumed the liability whereas implied adoption may occur when the corporation accepts the benefits of the transaction.

Question 10

Corporation by Estoppel

Answer 10

At common law, one dealing with a business as a corporation may be estopped from denying its corporate status. Typically, this applies to contracts and not tort victims.

Question 11

Corporations liability for pre-incorporation agreements

Answer 11

A corporation is not liable for pre-incorporation contracts unless the contract is expressly or impliedly adopted by the corporation once the corporation is validly formed. The promoter is still liable to third parties unless there is novation.

Question 12

Piercing the corporate veil

Answer 12

A benefit of incorporating is that the investors are shielded from personal liability, and they are only at risk to the extent of their investment. The corporate shield can, however, be pierced thereby resulting in the corporation’s existence being ignored and the shareholders of the corporation being held personally liable. Courts will look at the totality of the circumstances to determine if the conditions are such that the corporate veil should be pierced. Factors the court will consider include, but are not limited to, alter ego, inadequate capitalization, and fraud.

Question 13

Partnership - Duty of Care

Answer 13

A partner owes a duty of care to the partnership and to other partners to refrain from engaging in negligent, reckless, or unlawful conduct. A partnership may pursue a legal action against a partner for breach of the partnership agreement or for violating a duty owed to the partnership that caused the partnership harm.

Question 14

Misrepresentation

Answer 14

Misrepresentation requires a false representation, scienter (knowledge), intent to induce, causation, justifiable reliance, and damages.

Question 15

Shareholder direct action

Answer 15

In a shareholder direct action, a shareholder may sue the corporation for breach of a fiduciary duty owed to the shareholder by a director or an officer.

Question 16

Directors -duty of care

Answer 16

Directors have a duty to act with the care of an ordinary prudent person in a like position and similar circumstances and to make decisions in good faith. In deciding how to act, the director is required to use any additional knowledge or special skills that he possesses.