TABLE OF CONTENTS
Agency: [6]……………………………………………………………………………………………………… 1
Cases – Agency: [6]……………………………………………………………………………………… 3
Code Sections – Agency: [6]…………………………………………………………………………. 4
Partnership: [31]……………………………………………………………………………………………… 6
Cases – Partnership: [31]………………………………………………………………………………. 8
Code Sections – Partnership……………………………………………………………………….. 11
Corporate Form: [106]…………………………………………………………………………………… 18
Cases – Corporate Form: [106]…………………………………………………………………… 21
Code Sections – Corporate Form………………………………………………………………… 22
Corporate Structure: [154]……………………………………………………………………………… 25
Cases – Corporate Structure: [154]……………………………………………………………… 27
Code Sections – Corporate Structure…………………………………………………………… 32
Limited Liability Companies: [494]…………………………………………………………………… 34
Cases – LLC: [499]……………………………………………………………………………………… 35
Code Sections – LLC………………………………………………………………………………….. 35
Duty of Care and Duty to Act in Good Faith: [154]…………………………………………… 42
Cases – Duty of care, good faith: [499]…………………………………………………………. 43
Code Sections – Duty of care, good faith……………………………………………………… 44
Duty of Loyalty (self-int’d transactions): [609]…………………………………………………… 46
Cases – Duty of Loyalty: [609]…………………………………………………………………….. 47
Code Sections – Duty of Loyalty………………………………………………………………….. 52
Distributions to SHs: [1225]……………………………………………………………………………. 53
Cases – Distributions to SHs: [1225]……………………………………………………………. 55
Code Sections – Distributions to SHs…………………………………………………………… 55
Shareholder Suits: [912]………………………………………………………………………………….. 56
Cases – Shareholder Suits [912]…………………………………………………………………… 58
Code Sections – Shareholder Suits [912]………………………………………………………. 60
Keyed to [Eisenberg, Ninth]
Agency: [6]
Agent: Defined – a person who by mutual assent acts on behalf and subject to the control of another – the principal.
Special Agency: authorization to conduct only a single transaction, or only a series of transactions not involving continuity of service (R2 (3)).
General Agency: authorization to conduct a series of transaction involving continuity of service.
Principal: Defined – a person on whose behalf and subject to whose control an agent acts. Three types:
Disclosed: when an agent and a third party interact, the third party has notice that the agent is acting for a principal and has notice of the principal’s identity.
Partially disclosed (unidentified): when an agent and a third party interact, the third party has notice that the agent is acting for a principal but does not have notice of the principal’s identity.
Undisclosed: when an agent and a third party interact, the third party has no notice that the agent is acting for a principal (ie, the agent represents himself as the “principal.”)
Agency Costs: Sum of the following –
Monitoring expenditures by the principal (incentive for agent to act in principal’s best interest)
Bonding expenditures by the agent (guarantee that agent will act in principal’s best interest)
Residual loss (difference between optimal decision and actual decision from principal’s viewpoint)
Tort liability: In R3 (Agency) terms, in the context of a principal’s liability in tort for an agent’s actions, the agent is an “employee” rather than a “servant.” The key question in determining the principal/employee’s liability is whether the employee was acting within the scope of his employment.
Tort liability in respondeat superior:
i. Vicarious liability: An employer is subject to vicarious liability for a tort committed by its employee acting within the scope of employment. (R3 7.07(1))
ii. Scope of employment: An employee acts within the scope of employment when performing work assigned by the employer or engaging in a course of conduct subject to the employer’s control. An employee’s act is not within the scope of employment when it occurs within an independent course of condu
of loyalty that prohibits him from profiting from his position as agent
Liability to principal for violation of duty: An agent is liable to the principal for profits made whether in the course of performance or in violation of his duty (ie, principal doesn’t have to suffer damages to be entitled to agent’s profits; see Reading)
i. Liability extends even when performance benefits the principal (eg, case of stablehand who rents out horses for profit, benefiting health of horses: still owes principal proceeds).
Agent is liable to principal for damages resulting from violation of duty of loyalty (See Tarnowski)
Cases – Agency: [6]
Jenson Farms [handout]
SC of Minn. (1981)
Issue: Did Cargill’s financing activities make Warren its actual agent?
Rule: Warren was the actual agent of Cargill because Cargill (i) consented to the agency (by directing Warren to implement its recommendations), (ii) Warren acted on Cargill’s behalf (by supplying grain completely financed by Cargill), and (iii) Cargill exercised control over Warren (by interfering with Warren’s internal affairs by having de facto control of the elevator).
Analysis:
Cargill gave “suggestions” (not implemented) not “direction”
Grain sales to Cargill only a fraction of Warren’s total sales
Evidence of control indicative only of a lender-borrower relationship
Tarnowski v. Resop [19]
SC of Minn. (1952)
Issue: Is an agent liable to the principal (1) for the agent’s secret commission and (2) for damages to the principal?
Rule:
(1) All profits made by an agent in the course of an agency belong to the principal, whether fruits of performance or the violation of an agent’s duty. (R2 407(2))
(2) If an agent has received a benefit as a result of violating his duty of loyalty, the principal is entitled to recover from him what he has so received, its value, or its proceeds, and also the amount of damage thereby caused, except that if the violation consists of the wrongful disposal of the principal’s property, the principal cannot recover its value and also what the agent received in exchange therefore. (R2 407(1))
