MEE Flashcards
An agency relationship is created when:
(1) parties voluntarily consent to enter into an agency relationship
(2) agent is subject to the principal’s control
The agency relationship may be terminated by the parties if the:
(1) agent or principal manifests to the other the desire to cease the agency relationship
(2) express terms of the agency expire
(3) purpose of the agency relationship is fulfilled
The agency relationship may be terminated by operation of law if the:
(1) agent or principal dies
(2) agent or principal loses capacity
(3) agent materially breaches a fiduciary duty owed to the principal
An agent may bind a principal to a contract if the agent is ____.
acting within his actual or apparent authority
Once a principal is validly bound to a contract by his agent, the principal is ____
liable under the terms of the contract
An agent acts with actual authority (express or implied) when the agent ____, in accordance with the principal’s ____ that the principal wishes the agent to act.
reasonably relies; manifestations to the agent
Actual express authority exists when the principal ____.
directs the agent to engage in the precise task in question
Actual implied authority exists when the agent believes, that the principal based on a reasonable interpretation of the principal’s words or conduct ____.
wishes the agent act on his behalf
An agent acts with apparent authority when:
(1) principal holds the agent out as having authority to act on the principal’s behalf
(2) principal’s conduct, when reasonably interpreted, causes a third party to rely on the agent’s appearance of authority when deleting with the agent
An employer (principal) may be liable for torts committed by an employee (agent) if:
(1) employer-employee relationship exists
(2) employee’s commission of the tort occurs within the scope of employment
A principal is not liable in tort for the _____.
unauthorized conduct of an independent contractor
The principal’s amount of control over the agent is the key factor in determining whether ____.
an agent is an independent contractor
(Principal/Agent Vicarious Liability)
Other relevant factors include:
(1) nature of the work
(2) skill required in the particular occupation
(3) who supplies the equipment or tools to perform the work
(4) method of payment (hourly, salary)
(5) length of the employment
(6) how the parties characterize the transaction
A general partnership is a type of partnership that has no ____.
limited personal liability
A general partnership is formed when:
(1) two or more person
(2) associate as co-owners
(3) to carry on a business for profit
An limited partnership consists of ____.
one or more general partners and one or more limited partners
General partners remain ____ for all debts of the limited partner, while limited partners are ____ for debts only to the extend of their investment in the limited partnership.
personally, jointly and severally liable; personally liable
A limited partnership is formed when a ____.
written certification of limited partnership is executed in substantial compliance with state law and filed with the secretary of state
A limited liability partnership limits a partner’s potential liabilty for _____ that is committed by another partner.
professional malpractice
Any partnership may become an limited liability partnership upon the:
(1) approval of the partners by vote
(2) filing a statement of qualifications with the secretary of state
General partners are ____ for all obligations of the partnership arising from any wrongful act or omissions of any partner acting.
jointly and severally liable
General partners are jointly and severally liable for all obligations of the partnership arising from any wrongful act or omissions of any partner acting:
(1) within the ordinary course of business
(2) with the authority of all other partners
Limited partners are ____ for obligations of the limited partner arising from the wrongful acts or omissions of other partners (they are always liable for their own misconduct).
not personally liable
Each partner is an ____ of the partnership.
agent
The actions of every partner that are made within the ordinary course of business to carry on the partnership’s business bind the partnership, unless the partner taking the action:
(1) has no authority to act on behalf of the partnership
(2) other side has knowledge or notice that the partner lacks authority
Each partner owes a limited fiduciary duty of care to the partnership and other partners, which requires that each partner refrain from engaging in:
(1) grossly negligent or reckless conduct
(2) intentional misconduct
(3) a knowing violation of the law
Each partner owes a fiduciary duty of loyalty to the partnership and other partners, which requires that each partner:
(1) act in good faith and fairly toward the other partners
(2) account for any property, profit, or benefit derived by the partner from the partnership business
(3) refrain from:
(a) completing with the partnership
(b) usurping a business opportunity
that properly belongs to the
partnership
If a partner breaches the duty of care or loyalty, he may be held ____.
personally liable for damages
Dissolution of a partnership does not ____.
immediately terminate the partnership
The partnership enters a “winding up” phase, which continues until ____.
the winding up of the partnership’s affairs is completed
There are three main causes of dissolution:
(1) actions taken by the partners (dissolution)
(2) operation of law (partnership’s business becomes illegal)
(3) court order (a judicial dissolution may be granted if it becomes impracticable to continue the partnership’s business)
Under the (uniform partnership act) UPA, any change in partner membership ____ of the partnership unless there is ____.
automatically triggers dissolution; an agreement to the contrary
Under (revised uniform partnership act) RUPA, absent an agreement to the contrary, the “disassociation” (occurs when a partner ceases his association with carrying on the partnership business) of a partner does not automaticaly trigger dissolution unless:
(1) partnership is an at-will partnership
(2) there is an occurrence of an event that the partners specified in the partnership agreement that would cause dissolution (term partnerships)
Under RUPA, a term partnership may be dissolved before its term expires if:
(1) at least half of the partner’s express their will to wind up the business within 90 days after a partner’s disassociation by
- death
- bankruptcy
- becoming incapacitated
- wrongful disassociation
(2) all of the partners agree to amend the partnership agreement by expressly agreeing for dissolution
A corporation is formed when ____.
the articles of incorporation are filed with the secretary of state (unless the articles specify a delayed effective date)
(Corporation)
The articles may be amended if there is a ____.
majority vote from the directors and shareholders
(Corporation)
Minor amendment may be made by ____.
the board of directors without shareholder approval
Corporate bylaws are ____ that must be initially adopted by ____.
written rules of conduct; the incorporators or board of directors
The bylaws may contain any provision for ____to the extent that is consistent with the law and articles of incorporation.
managing the business and regulating the affairs of the corporation
If there is a conflict between the articles and bylaws, the ____ govern.
articles of incorporation
The bylaws may be amended or repealed by the ____.
corporation’s shareholders
The board of directors may also amend or repeal the bylaws unless ____.
the shareholders expressly specify otherwise
Shareholders of a corporation are ____ for the debts of the corporation.
not personally liable
Courts will allow a creditor to ____ and hold a shareholder personally liable for the debts of a corporation when:
pierce the corporate veil
(1) shareholder has dominated the corporation to the extent that the corporation may be considered the shareholder’s alter ego
(2) shareholder failed to follow corporate formalities
(3) corporation was undercapitalized
(4) there is fraud or illegality present
Once the corporate veil has been pierced, courts generally hold ____ liable.
all of the shareholders
A corporation must hold an ____ of shareholders at a time that is fixed in accordance with the bylaws.
annual meeting
____ can be held in certain situations.
special meetings
Shareholders who are entitled to vote must be provided with ____.
sufficient notice of all annual and special meetings
____ must be present in order for the shareholders to take action at a meeting.
a quorum
Unless otherwise set forth in the articles, a quorum exists when ____.
at least a majority of the shares entitled to vote are present
The articles may provide that holders of certain types of shares ____ unless specific conditions are satisfied.
cannot vote
Shareholders elect directors either ____ or ____.
directly (each share equals one vote); cumulatively (voters can put multiple votes on one or more candidates)
____ are nice favorable to minority shareholders.
cumulative voting
A vote by proxy allows a shareholder to vote ____.
without physically attending the meeting by authorizing another to vote her shares on her behalf
A valid proxy must exist in the form of a ____.
verifiable electronic transmission or a signed written appointment form
A proxy is freely revocable unless the recipient of the proxy has ____.
an economic interest in the shares
A shareholder possesses the right to ____ during normal business hours so long as the purpose of the inspection is proper.
inspect corporate books and records
Shareholder approval is required for the corporation to ____ of its property if the disposal is not in the corporation’s usual and regular course of business.
sell, lease, exchange, or otherwise dispose of all, or substantially all
If the disposal of assets is in the corporation’s usual and regular course of business, shareholder approval is ____.
not required (unless otherwise set forth in the articles of incorporation)
Subject to any limitation imposed by law or the articles, the board of directors has full control over ____.
the affairs of the corporation
The board of directors generally delegates day-to-day management of the corporation’s business to ____.
officers elected by the board
The board may remove officers at ____.
any time or without cause
Directors and officers owe the corporation a fiduciary duty of care. This duty includes:
(1) take reasonable steps to monitor the corporation’s management
(2) satisfied that proposals are in the corporation’s best interests
(3) disclose material information to the board
(4) make reasonably informed decisions
In suits alleging that a director or officer ____, courts will apply the BJR (business judgment rule).
violated his duty of care owed to the corporation
Under the BJR, a court will not second guess the decisions of a director or officer so long as the decision are made:
(1) in good faith
(2) with the care an ordinary prudent person in a like position would exercise under similar circumstances
(3) in a manner the director/officer reasonably believes to be in the best interests of the corporation
If a director or officer breaches the duty of care, he may be held ____.
personally liable for damages
Directors and officers have a duty to avoid ____ in making business decisions for the corporation.
implicating their personal conflicting interests
A director/officer that enters into a conflicting interest transaction may be protected if:
(1) disinterested shareholders approve the transaction
(2) non-interested members of the board authorize the transaction
(3) transaction, at the time of commitment, is established to have been fair to the corporation
The corporate opportunity doctrine prohibits directors and officers from ____.
usurping business opportunities that rightfully belong to the corporation for their own benefit
A merger occurs when ____.
one of two existing corporations is absorbed by the other corporation
A consolidation occurs when ____.
two existing corporations combine into one new corporation
A merger or consolidation both require:
(1) recommendation of an absolute majority of the board of directors
(2) agreement of each corporation by an absolute majority of shareholders
After a merger or consolidation occurs, dissenting shareholders opposed to the action may either:
(1) challenge the action
(2) receive payment determined at fair market value of their shares immediately before the merger or consolidation took effect
A derivative claim is a lawsuit brought by ____.
a shareholder on behalf of the corporation
(Derivative Claims)
The shareholder is suing to ____. If successful, the proceeds go to the corporation.
enforce the corporation’s rights when the corporation has a valid cause of action, but has failed to pursue it
(Derivative Claims)
If the award to the corporation benefits the defendants, the court may ____.
order that damages be paid directly to the shareholder who brought the action
A shareholder must make a _____ before commencing a derivative action.
written demand on the board
After submitting the demand, the shareholder must wait ____, unless ____.
90 days to file the derivative action; the board rejects the demand during the 90-day period
Under the common law, and in some jurisdictions today, the plaintiff shareholder does not have to _____.
make a demand on the board if it would be futile to do so (the board is interested in the transaction being challenged)
A direct claim is a lawsuit brought by a ____.
shareholder to enforce his own rights
(Direct Claims)
The shareholder must prove ____.
actual injury that is not solely the result of any injury suffered by the corporation
If a direct claim is successful, ____.
the proceeds go to the shareholder
