Business Associations Outline

 
 
Business Associations
with Professor Dibadj
 
Spring 2016 Outline
 
 
 
 
 
TABLE OF CONTENTS
 
The Law of Agency
The Law of Partnership
The Corporate Form
Protection of Creditors
The Voting System
Duty of Care
Duty of Loyalty
Executive Compensation
Shareholder Lawsuits
Transactions in Control
Mergers & Acquisitions
Public Contests for Corporate Control
Trading in CorporatioSecurities
 
 
The Law of Agency
Is there a Principal-Agent relationship?
Manifestation of consent by the principal that the agent act on the principal’s behalf; AND
Subject to the principal’s control; AND
The agent manifests consent.
There must be an agreement or understanding between the parties but does not need to be a contract.
Look at what the parties said, what they did, how they acted, their course of dealing over time, even silence may be used to show a party’s consent.
It is not essential that the agent receive compensation.
Did the agent have authority to conduct the transaction?
Actual Authority:
Express authority: explicit instructions given
Implied authority: involves examining the principal’s explicit instructions and asking what else might be reasonably included in those instructions to accomplish the job.
This also includes those actions that the agent reasonably believes the principal wishes him to do, based on the agent’s reasonable understanding of the authority granted by the principal.
Apparent Authority:
This is what a third party reasonably believes the principal has authorized the agent to do.
Here we look at manifestations between the principal and the third party.
There is no requirement that the third party alter his position in reliance on the purported authority (unlike estoppel).
There must be a manifestation by the principal (directly or indirectly) to the third party.
Inherent Authority: The law will sometimes hold an undisclosed principal liable for certain unauthorized transactions of his agent when:
A third party has made a detrimental change in position, and
If the principal had notice of the agent’s conduct and that it might induce third parties to change their positions, and
The principal did not take reasonable steps to notify the third parties of the facts.
Estoppel: This is an equitable doctrine which prevents the principal from denying that an agency relationship exists and usually arises in agency situations in which the principal has done something improper.
There must be acts or omissions by the principal, either intentional or negligent, which create an appearance of authority in the purported agent.
There must merely be some culpable act or omission by the principal, not necessarily a manifestation (unlike apparent authority).
The third party reasonably, and in good faith, acts in reliance on that appearance of authority.
The third party changes her position in reliance upon that appearance of authority.
Did the principal, through word or deed, manifest his assent to affirm the agreement?
Affirmation may be express or implied (e.g., implied by the principal accepting the benefits of the transaction).
Given the situation will the law give effect to that assent?
If so, does the issue involve a tort or a contract?
Is there an Employee (“EE”)—Employer (“ER”) relationship?
Did the Principal have right to exert control over the means and manner in which the Agent performed the task(s)?
Is there a Franchisor—Franchisee relationship?
Who is the principal (employer) in a franchise situation?
If you have financial control, you are liable.(Humble Oil—gas station car rolls case)
Who assumes the financial risk or profit and loss? Profit and loss are a proxy for control. (Hoover—car on fire at gas station case)
The core question in franchisor-franchisee situations is often whether the franchisor sufficiently controls the franchisee to establish an agency relationship.
If so, the franchisor is vicariously liable for claims against franchisees acting within the scope of their employment.
If the Agent is an EE, did the tort occur within the scope of the employment, or was it clearly outside the scope?
If the tort was intentional, with no purpose to serve the ER, was it foreseeable (characteristic of the risks that arise from the employment)?
Even if there is not an EE/ER relationship, is there sufficient control to create a “non-employee agent,” and if so, did the tort occur within the scope of that control?
Even if there is no control exercise over the Agent, does the event fall into an exception such as an inherently dangerous activity, a non-delegable duty, or negligent hiring?
Even if ther