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Unformatted text preview: CORPORATIONS CONDENSED OUTLINE Characteristics of a Corporation 1. Formal creation: articles of incorporation, bylaws (easily amendable) a. shall engage in any lawful business b. Charity lots of discretion 2. Shareholders a. Duty of care b. Duty of loyalty 3. Separation of ownership and control a. If ownership is not separated co-mingling of assets, etc, then the corporate veil can be pierced 4. Complete, unfettered transfer of ownership a. Except in closed corporations: transfer agreements, voting pools, etc. b. In closed corps, there is greater unity of shareholders and management 5. Indefinite duration: lasts even when directors, shareholders die 6. Limited liability: shareholders not personally liable for debt of corporation a. Piercing the corporate veil: make them personally liable 7. Corporation is a legal personality; it can sue and be sued a. Derivative and direct suits Dodge v Ford Motor Co. Corporations: goal is to maximize profit of shareholders. If directors withhold dividends for arbitrary reasons, they will be held liable. But otherwise courts do not get involved in ordinary business decisions AGENCY AND PARTNERSHIP 1. Agency Principles A. Liability in Contract Three Types of Authority: 1. Actual 2. Implied: agents reasonable belief that he has authority from the principal a. It is based on past circumstances, nature of relationship/task, past course of dealings b. Totality of circumstances test 1 Mill Street Church of Christ v Hogan: Bill Hogan believes he has authority to hire his brother to help him paint the church bc they suggested to him that he need an assistant. Bs brother gets injured and church is liable Court imposes liability on church b/c he is the least cost avoider 3. Apparent: third partys reasonable belief that the agent has authority to act on behalf of the principal Restatement 27: conduct of the Principal, reasonably interpreted, causes the third person to believe that the principal consents to have the act done on his behalf by the person purporting to act for him 370 Leasing Corporation v Ampex Corporation: Joyce, third party, reasonably believes that Kays, A, has authority to enter into a contract on behalf of Ampex. Kays breaches contract and Joyce sues Ampex for liability. Holding: principal, Ampex, acted in such a manner that would lead a reasonably prudent person (Joyce) to suppose that Kays had the authority he purported to exercise Agent has authority to do thigns which are usual and proper in the business he is employed in 4. Inherent Authority Hidden Principal Problem protects the harmed third party Catch-all provision: Inherent agency power is a term used to indicate the power of agent derived not from authority, apparent authority, or estoppels but solely from the agency relation and exists for the protection of persons dealing with a servant or other agent Watteau v Fenwick: W leases hotel to Humbles. Humbles name is on the door. H is only allowed to buy beer and water but ends up buy cigars from P and does not sell. P sues W, the allowed to buy beer and water but ends up buy cigars from P and does not sell....
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