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Agency (Torts (3rd Party v. Principal (Agent is employee (Respondeat…
Agency
Torts
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3rd Party v. Principal
Agent is employee
Respondeat superior: Doctrine imposes vicarious liability upon a principal for the torts his agent commits in the scope of employment.
• Agent performs tasks assigned by the employer or
engages in a course of conduct subject to employer’s control.
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Strict liability doctrine, so no defenses.
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Contracts
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3rd Party v. Principal
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Types of authority:
• Actual: Manifestation of the principal to the agent that the agent acts for the benefit of the principal in a particular way and that the principal agrees to be bound by the agent’s actions.
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Implied:
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Things the agent believes the principal wishes him to do based on his reasonable understanding of the principal’s expressed request.
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Definition
Agency involves only three types of people—an agent, a principal, and a third party.
Corporations
Formation
Commencement: Corporate entity begins at the filing of the Articles of Incorporation with the Secretary of State’s office.
Promoter liability:
Promoter: person who causes a corporation to be formed, organized, and financed. Usually they become shareholders, officers, and directors of the new corporation.
Promoters are personally liable as the corporation’s agent on pre-incorporation contracts entered on the corporation’s behalf.
• Contract can specifically disclaim a promoter’s personal liability.
• Personal liability continues until a novation—the corporation adopts the contract and all parties agree that the promoter will be discharged from the contract.
Corporation is not liable on any pre-incorporation agreements unless it assumes liability by its own act after the Articles of Incorporation are filed.
• Can be express or implied.
Defective incorporation:
De jure corporation: organized in compliance with the statute but failed to comply with a statutory provision.
De facto corporation: statutory compliance is insufficient for de jure status. Formed if:
• Good faith, colorable attempt to comply; and
• Corporate principals, in good faith, acted as if they were a corporation.
Corporation by Estoppel:
Creditor who has always dealt with the principals as if they were a corporation is estopped from later alleging that the corporation is defective.
Defendant who has held himself out as a corporation cannot avoid liability by claiming there is no corporation.
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Federal Securities Law
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Available causes of action:
• Against those who made misrepresentations in connection with the purchase of securities
• Against those who traded in the stock while under a duty either to disclose or to abstain from trading until the inside information is disclosed
Elements:
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• Scienter (intent to deceive, manipulate, or defraud)
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Issuance of Stock
Every corporation must authorize and issue at least one class of common stock and may authorize one or more classes of preferred stock:
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Shareholders’ preemptive rights: right of existing shareholders to acquire unissued shares in the corporation in proportion to their holdings of the original shares when the corporation seeks to issue additional stock:
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Dividends: A distribution by a corporation to its shareholders of cash or property of the corporation:
• Shareholder has no inherent right to be paid a dividend.
• Board of directors has discretion to decide whether and when to declare a dividend.
Voting: Unless the Articles of Incorporation state otherwise, each share is entitled to one vote.
Partnership
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Working Life
Partners’ powers:
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Authority:
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Restrictions: Third party must know about restrictions on authority or the partnership will be bound.
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Liability:
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• Partner is entitled to indemnification by the partnership for any payments he makes on the partnership’s behalf.
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• Incoming partner is not personally liable for any partnership obligation incurred prior to her admission as a partner.
Creation
General partnership: an association of two or more persons to carry on as co-owners a business for profit.
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• Key test: intent of the parties, no matter what it is called.
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Limited partnership:
Types of partners:
General partners: manage the business and are personally liable without limitation for partnership obligations.
Limited partners: contribute capital and share in profits, but take no part in the control or management of the business, and whose liability is limited to their contributions.
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Dissociation/Dissolution
Dissociation refers generally to a partner’s separation from the partnership including death, withdrawal, bankruptcy, or expulsion.