Exam 3 Halpern Book Terms/Concepts Flashcards
In an Agency Relationship…
Agent is authorized to act on behalf of the principal
(the principal hires the agent to represent them)
A fiduciary is
a person who has a duty to act primarily for another person’s benefit.
Example: Lawyer is a fiduciary for their client
Agency law is state or federal law?
Primarily state law
Agency relationships are ___ relationships formed by?
Consensual relationships
formed by
Informal agreements OR formal written contracts
Circumstances for an agency relationship
- Created for a lawful purpose (not illegal)
- Almost anyone can act as an agent
- A person can serve as an agent regardless of age or competency
- Those without contractual capacity (minors) can not hire agents to make contracts on their behalf
Express agency
formed by a written or oral agreement
Implied authority (agency)
Formed by implication through conduct
Agency by estoppel
Formed when a principal leads a third party to believe that ANOTHER individual serves as their agent, but the principal made no agreement with the so-called agent
Agency by ratification
Individual MISREPRESENTS themself as an agent for ANOTHER party, and the principal accepts or ratifies the unauthorized act
Example of a legal document establishing an agency relationship
Power of attorney
Document gives an agent the authority to sign legal documents on behalf of the principal
Durable power of attorney
Created by a principal, expressing their wish for their agent’s authority to be unaffected by the principal’s subsequent incapacity
Apparent Agency (by Estoppel)
- Principal leads 3rd party to believe ANOTHER person is their agent
- Principal has made NO AGREEMENT with the “agent”
- Someone reasonably believes that the 3rd party is an agent, this creates it
2 Requirements for agency by ratification
Individual misrepresents themself as an agent for another party
Principal accepts or ratifies the unauthorized act
For ratification to be effective in agency by ratification, what must be met? (2 things)
Principal has COMPLETE knowledge of all material facts regarding the contract
Principal must accept/ratify the ENTIRETY of the agent’s act
3 types of business relationships in which agency laws are relevant
Principal-Agent
Employer-Employee
Employer-Contractor
How to identify Principal-Agent relationship
Parties have AGREED that the agent has the power to BIND the principal in contract
How to identify Employer-Employee relationship
Employer has the RIGHT to CONTROL conduct of the employees
How to identify Employer-Contractor relationship
Employer has NO CONTROL over details of conduct of the independent contractor
Independent Contractors
NOT employees
Hired for specific tasks
When determining employee or independent contractor CONSIDER
How much control the employer has over the worker’s day to day operations (also supervision, who supplies the tools)
a lot = employee
a little = independent contractor
Duties of PRINCIPAL to their Agent
Compensation (paid)
Reimbursment and idemnification (reimburse the agent for any expenses incurred by the agent while acting for principal)
Cooperation (assist in performance of the agent’s duties, NO INTERFERING)
Provide safe working conditions (comply w statutes on this)
Duties of AGENT to their Principal
Loyalty (act in interest of principal)
Notification (communicate offers to principal)
Performance (perform duties as the agreement specified, and perform with reasonable skill + care)
Obedience (follow lawful instruction/direction of principal)
Accounting (keep accurate account of transactions of money/property made on behalf of principal)
Equal dignity rule
Contracts that would normally fall under statute of frauds and need a writing IF negotiated by the principal MUST BE in writing, even if negotiated by an egent
Sole proprietorship
A business in which you are the only person
Benefits of sole proprietorship
Creation is easy
Total control of management
Keep all profits
Disadvantages of sole proprietorship
Personal liability for all losses
Funding limited to personal funds + loans
A partnership
Voluntary associated between two or more persons who co-own a business for profit
Advantages of partnership
Creation is easy
Income of business is personal income
Business losses can be deducted from taxes
Disadvantages of partnership
Personally liable for the debts of the partnership (meaning their partner)
Duties of Partners
- Loyalty
- Fiduciary duty to other partners (most important one, must act in good faith and try to benefit the partnership, and not do anything to undermine the partnership)
- Duty of Obedience
- Duty of Care
Forming a Partnership
- Explicit written agreement NOT required (but suggested)
- Articles of partnership = written agreement creating a partnership
Articles of Partnership include..
- Partners’ names
- Name of partnership
- Duration of partnership (specific event/date/indefinite)
- Division of profits/losses
- Establish division of management duties
- Capital contributions to be made by each partner
Partnership by estoppel
- Third party is aware of misrepresentation of partnership, and CONSENTS to it
- If a nonpartner represents themself as a partner, and a third party REASONABLY relies on this information, the nonpartner can be held liable for damages
Stages of Termination of a partnership
Dissolution
Winding-Up
Dissolution
Change in the relation of the partners, caused by any partner’s ceasing to be associated with the carrying on of the business
Winding-Up
Completing unfinished partnership business, collecting + paying debts, collecting partnership assets, and taking inventory
Partners MUST fulfill fiduciary duty during this phase, BUT can engage in business competing with the partnership’s business
General partnership
- Profits divided equally
- Management responsibilities equal
- Unlimited PERSONAL liability for partnership
Limited Partnership
- Has General Partner(s) and Limited Partner(s)
- Limited partners assume no liability beyond their investment, but do not have any part in the management. They pay taxes on their share of the profit.
Additional Requirements of Limited Partnership
- Limited in the title
- To create it, must file a certificate of partnership at the office
- If filed incorrectly, courts rule a GENERAL partnership exists
Limited Liability Partnership
- A partnership in which all the partners assume liability for ANY partner’s professional malpractice to the extent of the partnership’s assets
- If one partner in an LLP is guilty of malpractice, the OTHER partner’s personal assets can not be taken
- Essentially, extra protection is awarded to partners, makes it different than a LP
Corporation
Separate legal entity formed by issuing stock to investors, who own the corporation
Advantages of Corporations
Shareholders have limited liability
Issuing stock makes raising capital easy
Profits taxed as income to the shareholders, not the partners
Disadvantages of corporations
Corporation’s income is taxed twice
Formalities are required in establishing and maintaining corporate form
Board of Directors for Corporations
Elected by shareholders
Manage the business, hire the officers to run the day-to-day
De Facto Corporation
Has not substantially met the requirements of the state incorporation statute.
Joint Venture
Business relationship between two or more persons or corporations created for a specific business purpose
S Corporations avoid
Double taxation
Limited Liability Company (LLC)
Limited liability of a corporation
Taxed like a partnership
Said to combine most advantageous features
LLCs - Member Managed
Member-managed unless operating agreement specifies otherwise
All members partake in management
Consent of all members to do anything w company property
LLCs - Manager-managed
Members select group of managers
Managers don’t have to be members
Managers owe fiduciary duty
Dissolving an LLC
Specific event causing dissolution
Consent of all members
Passage of 90 days with no members
Issuance of a court order for dissolution
Cooperative (form of org.)
Formed to market products
Pool resources together to create an advantage
Can be incorporated or unincorporated
Joint stock company
Members hold transferable shares, goods are in names of partners
Shareholders HAVE personal liability
Typically, not a separate legal entity
Business Trust
Governed by trustees for beneficiaries
Limited liabilities
Taxed like corps
Syndicate
Investment group forming to finance a specific, large project
Joint Venture
Relationship between 2+ persons/corporations for specific business
Taxed like parternships
Usually revolve around 1 product
Usually equal management
All parties assume liability
Franchise
Agreement between franchisor + franchisee
Franchisee sells goods/services under the franchisor’s name/trademark
Chain-Style Franchise
Think fast food, they copy franchisor’s methods + practices
Distributorship Franchise
License to sell franchisor’s product in a specific area (think car dealership)
Manufacturing Arrangement Franchise
Franchisor provides technical knowledge to manufacture franchisor’s product (pharmaceuticals/beverage)
Characteristics of Corporations (ch 22)
Separate Legal entities
Unless articles of incorporation specify otherwise, shareholders do NOT participate in corporate management
Have control over income (can distribute dividends)
Express Corporate Powers
Existence
Litigate
Acquire Property
Contracts
Borrow/loan money
Implied Corporate Powers
Whatever is necessary (within the law) to execute their express powers
Ultra Vires Act
Corporate action BEYOND scope of authority
Typically makes these things ruled null & void
Public vs Private Corporation
Public: created by government for governmental duties
Private: Created for private purposes
Profit vs NonProfit Corporation
Profit: Operate for a profit, shareholders seek to make a profit
Nonprofit: Can earn profits, but don’t distribute them or issue stock. No shareholders. Corporation reinvests into business
Domestic, Foreign, Alien Corporations
Domestic: Do business in state of incorporation
Foreign: Do business in DIFF state from incorporation
Alien: Incorporated in another country
Legal Process of Incorporation
Select name
Draft and file articles of incorporation (provides basic info about company)
First meeting held (shareholders elect BoD, adopt a set of corporate bylaws)
Defective Corporation
Occurs when an error or omission is made during incorporation process, courts rule to NOT be a corporation, rather a defective corp.
Shareholders held personally liable for defective corporation’s action
Corporation by estoppel
Corporation prevented by court from denying its corporate status to try and avoid liability
Does not remedy the error or grant corporate status
Piercing corporate veil
Shareholders personally liable when they have used corporation to engage in illegal/wrongful acts
When would Courts Pierce Corporate Veil
Corporation lacked capital
Did not follow statutory mandates in business
Personal Interests + Corporate Interests are the same (corp has no separate identity)
Shareholders use corp for fraud
Self-Dealing
Putting your own interests above the corporations interests (violates Duty of Loyalty)
Duty of Care (Corporation)
Directors/officers must operate as if managing their own assets
Duty to Disclose Conflict of Interest(Corp)
If an issue may benefit a particular director, that director must disclose that and abstain from voting
Business Judgment Rule
Directors/officers not liable for a mistake of judgment that harms a corporation IF they acted in good faith and had best interest of the corp
Shareholder’s Derivative Suit
Filed by shareholder when directors fail to sue in a situation where the corporation has been harmed by individual/another corporation/director
One of the most important rights of a shareholder
Recovered Damages in a Shareholder’s Derivative Suit
Go to the corporation, NOT the shareholder. This is because the suit is filed on behalf of the corporation.
“Legal Death” of Corporation. What are the phases?
- Dissolution (legal termination). Dissolution can be voluntary or involuntary
- Liquidating (turn everything to cash and distribute)
“Employment-At-Will”
Any employee NOT under contract may quit for any reason/none at all, no required notice
Employer may also fire the employee at any time, with no notice, for almost any reason
Exceptions to Employment-At-Will
Key employees owe duty of loyalty while employed.
Can not be fired for an illegal reason
Title VII of Civil Rights Act Protects
Race
Color
Religion
National Origin
Sex
2 Ways to Prove Title VII Discrimination
Disparate Treatment
Disparate Impact
Disparate Treatment
Intentional Discrimination against a candidate/employee based on membership in a protected class
Disparate Impact
Unintentional Discrimination
Plaintiff establishes how policy appears, but proves the actual effect is disproportional
quid pro quo
A favor or advantage granted or expected in return for something
Defenses to Title VII Claims
Bona Fide Occupational Qualification
Merit Defense
Seniority Defense
Bona Fide Occupational Qualification
Allows employer to discriminate in hiring on basis of gender, religion, or national origin
(but not race/color) when doing so is “reasonably necessary” for performance of job
Ex: Hiring females only to model female clothing
Merit Defense
Decisions partially based on test scores
Tests can be used if they relate to job performance
Seniority Defense
System must apply equally to all
Follow industry practices
No genesis in discrimination
Maintained free of any illegal discriminatory purpose
Filing a Title VII Claim
Charge statement filed w EEOC
EEOC notifies alleged violator w/in 10 days of charge
EEOC investigates for reasonable cause
If Reasonable Cause found by EEOC in Title VII investigation
EEOC attempts to eliminate discriminatory practice through negotiating a settlement amongst parties
If no settlement, EEOC CAN file a suit against alleged discriminator. If the EEOC does not sue, the plaintiff receives a right-to-sue letter.
Age Discrimination in Employment Act (ADEA)
No refusing to hire or discriminating an applicant/employee 40 yrs old or older
Applies to employers w/ 20+ employees
Americans w Disabilities Act (ADA)
Prohibits discrimination
Requires employers to make “reasonable accommodations” to known “disabilities” of an “otherwise qualified” person with disability
Fair Labor Standards Act (FLSA)
Minimum wage paid to all
Overtime pay = 1.5 time
Exemptions: Executives, Administrative Employees, Professional Employees
Family + Medical Leave Act (FMLA)
Provide all eligible employees with up 12 weeks of UNPAID leave during any 12 month period for specified occurrences
This applies to employers w/ 50+ employees
Federal Unemployment Tax Act (FUTA)
Did not voluntarily quit or get fired for cause to collect benefits
Workers’ Comp Laws
Compensation for those injured on the job
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Ensures employees continue receiving benefits for 18 months by paying premiums
Employee Retirement Income Security Act
Federal law setting minimum standards for most voluntarily-established pension and health plans in private industry to provide protection for individuals enrolled in these plans
Occupational Safety and Health Act of 1970
Protect from hazards likely to cause death/harm
Responsible for safety standards, inspecting facilities to ensure compliance
