Pg 1 Flashcards
What is the MBCA?
The Model Business Corporations Act.
This is the starting point for statutes that are enacted by each state.
What does ultra vires mean?
Beyond the scope of power
What are the Uniform Acts?
Verbatim statutes that states are encouraged to enact. I.e: UCC
What are all of the different types of entities?
- sole proprietorship – corporation – professional corporation – LLC – LP – LLP – LLLP – partnership – S Corporation - B Corporation - joint stock company – nonprofit – joint venture – business trust – municipal corporation
What types of entities are rarely seen?
Joint stock and business trust
What are the things to consider when choosing an entity form?
– liability protection – transferability of interests – formalities – management and control of the entity – taxation – how to raise funds – evidence of ownership and how important that is for close corporations – location of incorporation
What is the controlling authority hierarchy for corporations?
- statutes
– articles of incorporation (AOI) - bylaws
– resolutions
What is the order of priority of payment?
– outside creditors
– bondholders
– preferred stock
– common stock
***Creditors are paid before equity holders. Common stock only gets paid if everyone before them does
What is agency?
The law of delegation
What is the basic concept of agency?
Fiduciary relationship that comes from the manifestation of consent by one person to another for that person to act on his behalf, subject to his control and consent.
Are agency relationships considered to be separate business entities?
No
What is the only way that artificial entities such as corporations and businesses can act?
Through their agents
An officer of a corporation is called what?
An agent of that corporation
What is required for an agent to act on the behalf of someone else?
Consent of the principle that is either actual, apparent, or implied, and then the agent’s consent to do so.
If there is an agency relationship, is it necessary that it is known to third parties?
No
In order to prove an agency relationship, what do the courts look at?
All relevant surrounding circumstances
What is a principal?
Someone that action is being taken for.
What is a principal liable for?
All actions of his agent if they are done within the agent’s scope of authority.
Who controls an agent?
The principal
What is an agent?
Someone who acts for another
Is an agent liable for the acts of the principal?
No
Where does the authority of an agent come from?
The consent of the principal
Does an agent act for his own benefit?
No, he acts at the direction of the principal and for the benefit of the principal
When does the common law of agency apply?
Unless it was clearly displaced by a statutory scheme
What are the main sources of agency law?
Restatement of Agency II
and
Restatement of Agency III
Who wrote the Restatements of Agency?
The American Law Institute
Are the Restatements of Agency considered to be binding authority?
No, but they are very influential and persuasive.
What are the three elements of agency that create an agency relationship whether or not it was intended?
– mutual consent by the principal and the agent for the agent to act on the principal’s behalf and subject to his control.
– an action by the agent on behalf of the principal that is primarily for the benefit of the principal.
– the agent must act subject to the principal’s control.
What is required in order to meet the element of agency where there is mutual assent of both the agent and the principal for the agent to act on behalf of the principal?
The principal has to manifest consent to the agent that is either written, oral, or implied. The agent must also manifest assent in some way, which could be as simple as following the principal’s instructions.
When an agency relationship is created, that gives the agent authority to do what?
Act on the principal’s behalf to bind the principal with third parties as if the agent is the principal himself.
What is required for the element of agency that needs an action by the agent on behalf of the principal?
He must act primarily for the benefit of the principal and not for his own or anyone else’s benefit.
Does the degree of control over the agent by the principal matter in an agency relationship?
No, it can be very attenuated. The principal just needs to have ultimate responsibility to control the end result of the agent’s actions.
What are different things that are included in the definition of a person?
Agent, principal, individual, organization.
Are agency relationships limited to natural persons?
No, they include corporations, trusts, partnerships, and LLCs.
What is an officer?
Someone that has express authority from the corporation’s charter, bylaws, directors, or the board’s acquiescence to do things like hire, borrow money, execute conveyances and mortgages, etc. This authority extends to any contract or act that is incident to the ordinary business of the corporation, but not to extraordinary transactions.
What are examples of different officers?
CEO, president, general manager, COO
If someone is dealing with a corporation, what are they smart to do first?
Get evidence of the agent’s authority through a certified copy under corporate seal of a resolution of the Board of Directors.
Who keeps the corporate seal for corporations?
The secretary and he has power to affix the seal.
What does a corporate seal do?
It is prima facie evidence of a corporation’s approval.
