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Unformatted text preview: Corporations Outline Prof. Hansmann Fall 2003 C ORPORATIONS O UTLINE O VERALL P OINTS 1. In considering who should be held liable, think of the following: a. Incentives b. Deterrents c. Who is the best cost avoider? 2. Be sure to ask if the transaction at issue violates the: a. Duty of loyalty i. Self-dealing transactions Need: 1. Disclosure and approval beforehand, 2. Disclosure and ratification afterward; OR 3. Entire fairness ii. Corporate opportunities iii. Insider trading b. Duty of care A CTING THROUGH OTHERS : THE L AW OF A GENCY Introduction to Agency Paradigmatic agency form: One person extends the range of her own activity by engaging another to act for her and be subject to her control. o Example: Sole proprietor hiring first employee. Problems of agency law relevant to corporations: 1. Formation and termination. 2. Principals relationship to third parties. 3. Nature of the duties agent owes to principal Agency Formation, Agency Termination, and Principals Liability Agency is the fiduciary relation that results from ( RST 2d Agency 1 ): 1. The manifestation of consent by one person (P) to another (A) that the other shall act on his behalf and subject to his control, and 2. Consent by the other to so act Types of agents: 1. Employee/servant: P has a right under his deal with A to control the details of the way in which A goes about his task the order in which he addresses the tasks or the precautions he uses, for example. 2. Independent contractor: A is a professional who is bound to provide independent judgment or when it is an established business that does not agree to minute control (like a house contractor). Types of authority: 1 Corporations Outline Prof. Hansmann Fall 2003 1. Actual authority a. Express: Expressly given b. Implied: Goes with the office 2. Apparent authority: Happens if P gives observers the appearance that A is authorized to act as he is acting. 3. Inherent power: Gives general A power to bind P, whether disclosed or undisclosed, to an unauthorized contract as long as a general A would ordinarily have the power to enter such a contract and the third party does not know that matters stand differently in the case. Nogales Service Center v. Atlantic Richfield Co. Can exist in 3 situations: a. A does something similar to what he is authorized to do, but in violation of orders. b. A acts purely for his own purposes in entering into a transaction which would be authorized if he were actuated by a proper motive. c. A is authorized to dispose of goods and departs from the authorized method of disposal. Either P or A can terminate an agency at any time. In no event will the agency continue over the objection of one of the parties....
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- Fall '07