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Business Associations/Corporations
University of Nebraska School of Law
Bradford, C. Steven



Businesses Create To Grow and Create Value

PV, FV, EV – including risk
profit maximization

i. agents – management acting for principals – shareholders
1. is principal always interested in profit?
2. Calpers v. Ben and Jerry’s – whose money?


i. good operating environment, reputation, good will, politics, etc.
ii. cannot really prove any direct benefit
iii. MBCA § 3.02:unless its articles of incorporation provide otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including without limitation power:
1. (13) to make donations for the public welfare or for charitable, scientific, or education purposes.
a. (15) furthering business, thus not requirement in 13

Corporation Treated As A Person

who is the client representing?

i. conflict b/t managers and interest of business – ethics/liability

Ultra Vires

beyond the power of the corporation

A. Business Entities

Double Taxation

all income of a corporation is taxed twice

i. as corporate income and personal income

Limited Liability

corp, limited partnership, LLC have limited liability
general partnership, sole proprietor = unlimited

Default Categories – No Paperwork

sole proprietorship

i. one person

general partnership

i. more than one person
Sole Proprietorship

Business IS The Individual

primary source of law = agency

A. Agency Intro

RSA § 1

fiduciary relation

i. agent owes certain duties to principal
1. capacity defines scope of agency relationship

consent by one person to another that the other will act on his behalf and subject to his control

i. consent by the principal

consent by the other so to act

i. agent’s consent

consent is through words and acts – agreeing to hire, agreeing to work

A. Authority

Actual Authority

RSA §§ 7 & 26

i. agent acts according to principal’s manifestation
1. manifestation from P to A – reasonable conclusions
a. created by written/spoken words or any conduct
i. that leads to the reasonable conclusions
ii. may do what is reasonably necessary to get the job done

Apparent Authority

RSA § 8 & 27

i. agent acts according to authority given by P to a 3rd party
1. manifestation from P to 3rd party – reasonable conclusions
a. includes any other conduct (?)
b. does not require detrimental reliance by 3rd party
2. an agent cannot create apparent authority

Inherent Authority

RSA § 8A

i. inherent in the duties, expected in what A does for P

RSA § 377

i. one must act subject to a duty in accordance with his promise
ii. if acting within inherent authority no breach of duty under this stat.

remember, inherent authority makes P liable to 3rd party BUT

i. does not bar a suit between P and A

getting rid of liability b/t P and 3rd party for inherent authority requires:

i. the P to tell 3rd party that the A does not have that authority

Contracting Out Of Agency

okay b/t P and A, BUT courts will protect 3rd parties (see apparent agency)

B. Principal’s Liability

Is A Principal Contractually Liable?

a. RSA § 144
i. P is liable if he is disclosed or partially disclosed for K’s made by agent
1. acting within authority IF
a. K is made in proper form AND
b. contracting parties know P is a party
ii. RSA § 4
1. disclosed: 3rd party knows A acting for P and P’s identify
2. partially disclosed: 3rd party knows A is acting for P but no identity
b. RSA § 140 (a)
i. if agent has actual authority, is liable
ii. liable for contracts
c. RSA § 140 (b)
i. if agent has apparent authority, is liable
d. RSA § 140 (c)
i. if agent has inherent authority, is liable
1. power arising from the agency relation and not dependent upon authority or apparent authority

Is A Principal Tortiously Liable?

agent must be a servant

i. RSA § 250 – non-liability for physical harm of non-servants
ii. RSA § 220 – what is a servant?
1. does P control the physical conduct of A?
a. evidence by specific instructions (McD’s)
b. if not, independent contractor
2. completing task v. telling how to complete task

RSA § 219 – when master liable for torts of his servants

i. S must be acting within the scope of employment
1. RSA § 228 within scope if and only IF
a. (a) conduct is of the kind he is employed to perform;
b. (b) it occurs substantially within the authorized time and space limits
c. (c) it is actuated, at least in part, by a purpose to serve the master, AND
d. (d) if force is intentionally used by the servant against another, the use of force is not unexpectable by the master
ii. S must have committed a tort

RSA § 230 – forbidden acts

i. an act, although forbidden, or done in a forbidden manner
1. may be within scope of employment

RSA § 219 (2) – master is not liable for torts of servants outside scope of employment UNLESS

i. (a) master intended the conduct or the consequences, OR
ii. (b) the master was negligent or reckless, OR
iii. (c) the conduct violated a non-delegable duty of the master, OR
iv. (d) the servant purported to act or to speak on behalf of the principal and there was reliance upon apparent authority, or he was aided in accomplishing the tort by the existence of the agency relation

note: insurance often excludes intentional acts by servants/agents

C. Agent’s Liability

Is An Agent Contractually Liable?

a. RSA § 328
i. agent not liable if principal is disclosed or partially disclosed AND
1. has power to bind P
b. RSA § 4
i. disclosed: 3rd party knows A acting for P and P’s identify
ii. partially disclosed: 3rd party knows A is acting for P but no identity
c. RSA § 377 & 401
i. A may be liable to P for breach of contract
ii. agent subject to liability for breach of a duty
d. RSA § 329
i. A may be liable to 3rd party
1. breach of implied warranty

ave an entity under some other statute = not a partner
1. i.e. corp.

Must Look To The Partnership Agreement

RSA § 103 (a)

i. except as other wise provided in (b), relations among the partners and b/t the partners and the p/s are governed by the partnership agreement.
ii. to the extent the p/s agreement does not otherwise provide, this act governs relations among the partners and between the partners and p/s

RSA § 103 (b)

i. partnership agreement MAY NOT:
1. (1) vary rights under § 105 EXCEPT:
a. eliminate duty to provide statements to all partners
2. (2) unreasonably restrict the right to books/records §403 (b)
3. (3) eliminate duty of loyalty via §§ 404(b) OR 603(b)(3) BUT
a. a p/s agreement may identify acts that do not violate IF
i. not manifestly unreasonable OR
b. authorize a specific act/trans that o/w would violate duty
4. (4) unreasonably reduce DOC via §§ 404(c) OR 603(b)(3)
5. (5) eliminate good faith/fair dealing via § 404(d) BUT
a. p/s agreement may prescribe stds of measurement IF
i. not manifestly unreasonable
6. (6) vary power to dissociate a partner under § 602(a) EXCEPT
a. to require the notice under §601(1) be in writing
7. (7) vary the right of a court to expel a partner via §601(5)
8. (8) vary requirement to wind up p/a via § 801 (4),(5),(6)
9. (9) vary law applicable to LLP via § 106(b) OR
10. (10) may not restrict the rights of third parties
a. a 3rd party is not party to K

Course Of Business

RUPA § 401 (j)

i. a difference arising as to a matter in the ordinary course of business of a p/s may be decided by a majority of the partners.
ii. an act outside course of business = unanimity

must draft around this provision

C. Property Ownership

Partnership Treated As A Separate Entity For Property Purposes

RUPA § 203

i. property acquired by the partnership is partnership property

RUPA § 204 (a)

i. property is p/s property if acquired in the name of:
1. (1) the partnership
a. e.g. “to Bubba’s Burritos”
b. defined in (b)(1)&(2)
2. (2) one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner OR
a. of the existence of a partnership but without an indication of the name of the partnership
i. e.g. “to Jon, partner”
ii. e.g. “to Job of Bubba’s Burritos”

RUPA § 204 (b)

i. property is acquired in the name of the partnership by a transfer to:
1. (1) the partnership in its name; OR