BLAW 3430 4

Duties of Principle and Agent: Contractual Duties

-Expect Compensation- A principle is responsible for compensating the agent unless Agent agreed otherwise -Indemnification and reimbursement- A principle has an obligation to indemnify (compensate for a loss)an agent whenever the agent makes a payment or incurs a loss or expense while acting as authorized on behalf of the principle. -Reimburse- If agent makes a payment, principle has a duty to reimburse.

Dissolution of an LLC

1) the expiring of the LLC's agreed duration or the happening of any events specified in the articles 2) the written consent of all the members 3) not reasonable to continue the practices of the LLC. Illegal activity could be a reason.

torts

A corp is liable for the torts its agents commit in the course of their employment.

Corporation

A creature of the state Principle attributes of a corporation 1) legal entity 2) provides limited liability to its shareholders 3) its shares of stock are freely transferable 4) its existance may be perpetual 5) its management is centralized, and in some cases is considered 6) a person and 7) a citizen

corporation

A legal entity separate from its shareholders, with rights and liabilities entirely distinct from theirs. A corp. is liable out of its own assets for its debts. The shareholders have limited liability of the corporations debts (their liability doesnt extend passed the amount of their investment)

Assent

A person can manifest assent through written or spoken words or other conduct. Agency by contract (most usual method to create a contract, must fulfill all requirements of a contract)

Common Law Contract

Agent

An Agent

As a fiduciary (a person in a position of trust and confidence)

2 problem areas arise in tort and contracts

Chapter 29

torts- doctrine of respondiat superior LET THE SUPERIOR RESPOND

Let the superior be responsible . The principle is responsible for acts of the agent as long as the agent is acting within the course and scope of employment. (Even if it was in flagrant disobedience of his instructions)

management

Shareholders elect a board of directors that manage the business affairs of the corporation. The board appoints officers to run the day-to-day operations of the business.

Disclosed principle- agent will not be liable, principle will be the one sued.

The principle is disclosed when and agent and a third party interact . The third party has notice of the principle and their identity

subchapter S corps

To elect to be taxed how a partnership is. Corporations income is taxed only once at the shareholders level. The corp must be domestic and have less than 100 shareholders.

agency

a consensual relationship in which one person (the agent) acts as a representative of, or acts on behalf of, another person (the principle) with power to affect the legal rights and duties of the principle.

equity securities

a source of capital creating an ownership interest in the corporation. Selling off shares of ownership

fiduciary duty- begins with formation of agency relationship and ends with its termination RELATIONSHIP BETWEEN THE P AND A ARE OF THE HIGHEST LOYALTY

an agent has a fiduciary duty to act loyally for the principals benefit in all matters connected with the agency relationship. This duty is imposed by law upon the agent and is owed by an employee to his employer.

duties of agents to principle principle expects from them (good spouse or dog to its owner)

an agent owes her principal the duties of obedience, good conduct, diligence, and loyalty; the duty to inform; and the duty to provide an accounting(notify them). An agent is liable for any loss she causes to the principal through her breach of these duties.

power of attorney (your their agent and attorney at fact)

an instrument that states an agents authority. Most common agency agreement besides employment. Power of attorney is a formal manifestation from principle to agent, who is known as an "attorney in fact", as well as to third parties, that evidences the agent's appt. and the nature or extent of the agents authority.

Sole Proprietorship

an unincorporated business consisting of one person who owns and completely controls the business. Formed w/o formality and no documents need to be filled out. Only Sole Proprietor is taxed. They have unlimited liability for the sole proprietors debts.

agency relationship involves:

assent, control by the principle, and the agents acting on behalf of the principle

principle

company. principle has a right to control the actions of the agent

public

created to administer a unit of local civil govt. and is created by specific legislation which determine the corporations purpose and powers.

debt funding- the board of directors may issue bonds without the authorization or consent of the shareholders

debt securities (also called bonds are issued) generally involve the corporations promise to repay the principal amount of a loan at a stated time and to pay interest, usually at a fixed rate, while the debt is outstanding.

Domestic

domestic in the state in which it was incorporated in.

Corporation as a person

enjoys the right of a person to be secure against unreasonable searches and seizures, as provided for in the fourth ammendment. They do not enjoy the 5th which prevents from self incrimination

restated

fiduciary relationship that arises when one person (a principle) manifests assent to another person (an agent) that the agent shall act on the principles behalf and subject to the principles control, and the agent manifests assent or otherwise consents so to act.

private

founded by and composed of private persons and has no government duties. This may be profit or non-profit

foreign

if in another state besides where it was incorporated in

directors and officers

must act within their respective authority. For any loss that the corporation suffers b/c of unauthorized acts they are held liable in some jurisdictions. Fiduciary duty- they may not compete with the company

termination of a corporation

occurs not due to a death but from its dissolution or merger into another company.

Limited Partnership

one general partner and at least on limited power.. Formed by filing certificate of limited p. with the state. May elect seperate tax- so tax partners. Limited partners have limited liability in the part. debt. limited part. have no right to participate in control. Publically trade LP's are subject to corporate income taxation.

publicaly held

one whose shares are owned by a large number of people and are widely traded. There is no minimum number of shareholders

LLC

organization that provides limited liability to all its owners (members) and permits all members to participate in the management. An LLC's operating agreement determines how the profits/losses are allocated. If it doesnt specify then it is granted by the value of the members contributions. Has a duty of care and loyalty.

Limited partnership

partnership formed by two or more persons under the laws of a state and that has one or more general partners and one or more limited partners. The liability of a limited partner for partnership debts or obligations is limited to the extent of the capital he has contributed or agreed to contribute. A gen. partner owes a fiduciary duty to the limited due to control in management.

profit nonprofit

profit- founded for the purpose of operating a business for profit from which payments are made to the shareholders in the form of dividends non-profit- may make a profit but may not be distributed to its members, directors, or officers but may be used for charitable, educational, or scientific purpose for which the corp. was organized.

Limited Liability Company- LLC provides many of the advantages of an general part. plus limited liability for all its members. All members can participate in management and control of the business

provides limited liability to all its owners (members) and permits all of its members to participate in management of the business. May elect seperate tax where members are taxed. Public LLC's subject to corporate income taxation

Dissolution

refers to those situations when the revised act requires a partnership to wind up and terminate. A partnership continues after dissolution solely to wind up its business. The partnership is terminated once everything is completed.

privately held or closely held corporation

shares of stock are held by a small number of people . In most, the shareholders are active in the management and control of the business.

bylaws

the bylaws are the rules and regulations that govern the internal management of a corporation. Bylaws are necessary to the organization of the corporation and their adoption is typically one of the first items of business at the organizational meeting held promptly after incorporation.

Winding up

the process of liquidation.

undisclosed principle- Agent is fully liable for breaches of contract

third party has no notice of a principle

Partially disclosed principle- agent primarily liable- both agent and principle can be sued

third party knows about principle but doesnt know their identity

general partnership- common law contract

unincorporated business corporation that consists of two or more people who co-own a business for profit. Its formed without formality and no documents need to be filed. May elect to not to be a seperate taxable entity in which only the partners are taxed. partners have unlimited liability for the partnerships debts. Each partner has an equal right to control.

agent

you. one who represents the principle in business dealings with a third person. The result of the agents functioning is the same as if the principle had dealt directly with the third person. All employees are agents but not all agents are employees (independent contractors)