L201 Agency Test

Respondeat Superior Liability

"Let the master answer". Under this doctrine, a principal who is an employer is liable for torts committed by agents who are 1) employees and 2) commit the tort while acting within the scope of their employment

Conflicts of Interest

- An agent may not acquire a material benefit from a third party in connection with an agency transaction - When conducting principal's business, an agent may not deal with himself (sometimes extended to family members) - May not compete with the principal regarding the agency business (cannot purchase specific land he is asked to acquire himself) - An agent cannot serve a double agency role with both involved parties unless expressly allowed by both sides (middleman)

Tests for who qualifies as an "employee" under the common law (relevant to the CBS vs. FCC case)

- Skills required - The source of instrumentalities and tools - The location of work - Whether the hiring party can assign additional projects - The hiring party's control over when and how long to work - The hired party's role in hiring and paying assistants - Whether the work is part of the regular business of the hiring part - Whether the hiring party is in business - Tax treatment of the hired party

Two scenarios in which agency is unescapable?

1) Legislative restriction (trying to escape due to race, religion, age, origins) 2) Agency coupled with interests (agency coupled with the interests in collateral payoff)

3 P's of a corporation

1) People 2) Planet 3) Profit

What other reasons outside of the Restatement (thirds) legally end an agency?

1) The agent's loss of capacity to perform the agency business (loss of license essentially) 2) Changes in the law that make the agency business illegal 3) The principal's bankruptcy 4) The agent's bankruptcy 5) Impossibility of performance by an agent 6) A serious breach of the agent's duty of loyalty 7) The outbreak of war

What makes an agent NOT liable for making an unauthorized contract?

1) The third party actually knows that the agent lacks authority 2) The principal subsequently ratifies the contract 3) The agent adequately notifies the third party that he does not warrant his authority to contract

Duties of Principal to Agent

1) To compensate the agent 2) To reimburse the agent for money spent in the principal's service 3) To indemnify the agent for losses suffered in conducting the principal's business

Who can assert an ultra vires?

1) a shareholder seeking to enjoin a corporation from executing a proposed action that is ultra vires 2) by the corporation suing its management for damages caused by exceeding the corporation's powers 3) by the state's attorney general, who may have the power to enjoin an ultra vires act or dissolver a corporation that exceeds its power

Examples of Implied Authority

1) an agent hired to manage a business normally has implied authority to make contracts that are reasonably necessary for conducting the business or that are customary in the business. 2) An agent given full control over real property has implied authority to contract for repairs and insurance and may rent the property if customary 3) Agents appointed to sell the principal's goods may have implied authority to make customary warranties on these goods.

What powers cannot be delegated under MBCA

1) declaring dividends 2) filling vacancies on the board or its committees 3) adopting and amending bylaws 4) approving repurchases of the corporation's shares

Three duties of a principal to an agent

1) duty to compensate 2) duty to reimburse 3) duty to indemnify

Five duties an agent owes a principal?

1) duty to loyalty 2) duty to account 3) duty to care and skill 4) duty to communication 5) duty to obedience

What can cause direct liability for a principal?

1) giving the agent improper or unclear instructions 2) failing to make and enforce appropriate regulations to govern the agent's conduct 3) hiring an unsuitable agent 4) failing to discharge an unsuitable agent 5) furnishing an agent with improper tools, instruments, or materials 6) failing to properly supervise an agent

Scope of employment Test

1) it was of the kind of action that the employee was employed to perform 2) it occurred substantially within the authorized time period (of employee work) 3) it occurred substantially within the location authorized by the employer 4) it was motivated at least in part by the purpose of serving the employer

How can an agent expressly bind herself to a contract?

1) making the contract in her own name rather than in the principal's name 2) joining the principal as an obligor in the contract 3) acting as surety or guarantor for the principal

Conditions to determine usurping corporate opportunities

1) must come to the director or officer in her corporate capacity 2) must have a relation or connection to an existing or prospective corporate activity 3) the corporation must be able financially to take advantage of the opportunity

Requirements for Ratification

1) the act must be one that was valid at the time it was performed 2) the principal must have been in existence at the time the agent acted (adoption if a corporation) 3) when the contract or other act occurred, the agent must have indicated to the third party that she was acting for a principal and not for herself. 4) the principal must have legal capacity at the time of ratification 5) the principal must have knowledge of all material facts 6) the principal must ratify the entire act or contract 7) in ratifying, the principal must use the same formalities required to give the agent authority to execute the transaction

What is the basis for respondeat superior?

1) the economic burdens of employee torts can best be borne by employers 2) that employers often can protect themselves against such burdens by purchasing insurance 3) that the resulting costs frequently can be passed on to consumers, thus "socializing" the economic risk posed by employee torts

Under the MBCA, conflicting interest are not voided when?

1) the transaction has been approved by a majority of informed, disinterested directors 2) the transaction has been approved by a majority of the shares held by informed, disinterested shareholders 3) the transaction is fair to the corporation

What does the MBCA say about corporate powers?

A corporation has the power to do anything that an individual may do

Paramount Rule

A court can defend a corporation holding that a board may oppose a hostile takeover provided the board had a preexisting, deliberately conceived plan justifying its opposition.

"Gniadek v. Camp Sunshine" case

A discontinuing camp counselor reached out to a past student to travel to meet another past student. The student agreed and travelled with the counselor only to be assaulted. Gniadek sued the camp under the allegation that the counselor was working on the business's behalf. Court originally found that Newton was not an employee or agent of the camp and this was reaffirmed in an appeal case.

What do directors and officers owe to a corporation?

A fiduciary duty

Pseudo-Foreign Corporation

A foreign corporation may conduct most of its business in a state other than the one in which it is incorporated. (need more than 50% of business to be regulated under California law)

Freeze-out

A freeze-out is usually accomplished by merging a corporation with a newly formed corporation under terms by which the minority shareholders do not receive shares of the new corporation but instead receive only cash or other insecurities

White Knight Tender Defense

A friendly tender offeror makes an offer so management can choose them instead (raider known as black knight)

Model Business Corporation Act (MBCA)

A model statute for adoption by state legislature hoping to improve the rationality of corporation law

Duty to Act with Care and Skill

A paid agent must act with care, competence, and diligence normally exercised by agents in similar circumstances.

Subagent

A person appointed by an agent to perform tasks that the agent has undertaken to perform for his principal. However, sometimes agents only have the ability to bind other agents to their original principal, not themselves (EX: hiring new employees)

Capacity

A person has the capacity to be a principal if that person has capacity to do the acts for which the agent has been retained.

Disclosed Principal

A principal is disclosed if a third party knows or has reason to know the principal's existence and identity

Undisclosed Principal

A principal is undisclosed when the third party lacks knowledge or reason to know both the principal's existence and the principal's identity

Unidentified Principal

A principal is unidentified if the third party knows of the existence of a third party but not its identity (requires third party to rely upon agent's credibility instead of the principal's)

Reverse Share Split

A process by which shares of corporate stock are effectively merged to form a smaller number of proportionally more valuable shares leaving undesirable shareholders with less than one (means that they can be bought out at any time under corporation law)

Ratification

A process whereby a principal binds himself to an unauthorized act done by an agent, or by a person purporting to act as an agent

Promoter

A promoter of a corporation incorporates a business, organizes its initial management, and raises its initial capital (often has liability on the contracts he negotiates on behalf of the prospective corporation)

When is a promoter released from liability for contracts it made before corporation was formed?

A promoter retains liability on a pre-incorporation contract until novation occurs. For novation to occur, the corporation and the third party must agree to release the promoter from liability and to substitute the corporation for the promoter as the party liable on the contract

Qualifying to Do Business as a Foreign Corporation

A state may require that foreign corporations qualify to conduct intrastate business in the state, that is, conducting business transaction within the state

Intrinsic Fairness Standard

A transaction is fair if reasonable persons in an arm's length bargain would have bound the corporation to it

"Drake Manufacturing Company, Inc. vs Polyflow, Inc." Case

After missing payments, a corporation argued that they did not owe the other corporation as they were not qualified to sue within that state of business. Favored that the company doing out of state transactions was not qualified and therefore could not and should not have brought the original suit to court.

Automatic Novation Clause

Allows for a pre-incorporation contract to automatically novate at the time of a company's first incorporation

Can a party revoke if the agency rules prohibit it?

Although either party has the power to terminate in such cases, there is no right to do so. This means though they must not continue on, they are liable for any damages relevant to the agency.

Termination of an Agency

An agency can terminate in many ways that fall under two general headings: 1. termination by act of the parties 2. termination by operation of law

Does a contract have to be written for an agency to form?

An agency contract may be oral unless state law provides otherwise. (some require writing to pay an agent). MOST IMPORTANTLY THE AGENCY RELATION NEED NOT BE CONTRACTUAL AT ALL (THUS CONSIDERATION REQUIRED TO FORM A CONTRACT IS NOT NECESSARY TO FORM AN AGENCY).

Termination by Operation of Law

An agency relationship usually is terminated by: 1) the death of an individual principal 2) the death of an individual agent 3) the principal's permanent loss of capacity (insanity) 4) the cessation of existence or suspension of power (dissolution of a corporation) 5) upon the occurrence of circumstances from which the agent should reasonably conclude that the principal no longer would want the agent to take action

Implied Warranty of Authority

An agent also may be liable to a third party if he contracts for a legally existing and competent principal while lacking authority to do so

Duty to Obey Instructions

An agent has a duty to act within their actual authority and to obey the principal's reasonable instructions for carrying out the agency business.

Duty to Segregate, Record-Keep, and Account

An agent has a duty to segregate principal properties from agents, not mingle with principal's property, and keep accounts of the principal's money and other property.

What is an agent's main fiduciary duty?

An agent has a fiduciary duty to act LOYALLY for the principal's benefit in all matters connected with the agency relationship.

Actual Authority of an Agent to Contract

An agent has actual authority to take an action "designated" or "implied" in the principal's manifestations to the agent and acts necessary or incidental to achieving the principal's objectives of the agency. 1) Express authority - actual authority that the principal has specified in very specific or detailed language 2) Implied authority - an agent can do whatever it is reasonable to assume that his principal wanted him to do, in light of the principal's manifestations to the agent and the principal's objectives of the agency.

Confidentiality

An agent may not use or communicate confidential information of the principal for the agent's own purpose or that of a third party. (DUTY TO CONFIDENTIALITY EXTENDS PAST THE TERMINATION OF AGENCY)

Duty to Provide Information

An agent must use reasonable efforts to provide the principal with facts the agent knows, or has reason to know, when the agent knows or should know the principal wants the facts or the facts are material to the agency. (UNLESS A SUPERIOR LOYALTY IS OWNED TO A SEPERATE PARTY)

Gratuitous Agent

An agent who receives no compensation for his services. (may sometimes lower the duties owed by both parties and make it easier to terminate the agency)

Preincorporation Share Subscription

An agreement to purchase a specific number of shares of a business once it is incorporated at a predetermined set price

Tender Offer

An offer to purchase the stock of a firm targeted for acquisition at a price just high enough to tempt stockholders to sell their shares

Acting within Authority

An officer or director has a duty to act within the authority conferred on her by the articles of incorporation, the bylaws, and the board of directors

Ultra Vires ("beyond the powers")

Any act not permitted by the corporate statute or by the corporation's articles of incorporation was void due to lack of capacity

Notice to Third Parties

Apparent authority ends only when it is no longer reasonable for a third party to believe that the agent has actual authority. 1) For third parties who have previously dealt with the agent or who have begun to deal with the agent, actual notification is necessary (can be accomplished by 1) a direct personal statement or 2) a writing delivered to the third party personally) 2) For all other parties, constructive notification suffices (EX: posting an excerpt in a newspaper or place of relevant circulation)

Apparent Authority

Arises when the principal's manifestations cause a third party to believe reasonably that the agent is authorized to act in a certain way.

"DePetris & Backrach, LLP vs. Srour" Case

Attorneys promised $75,000 worth of defendant claims for any court bound person working with a firm. They did not have the authorized authority to make these claims and therefore were held on apparent authority under implied warranty of authority when tried in court

Board Initiative

Board approval is necessary to propose such actions to the shareholders, who then must approve the action. (necessary for large company changes)

Corporate Constituency Statutes

Broaden the legal objectives of corporations to help consider others outside of shareholders such as employees, suppliers, and customers. Pushes corporations to maximize corporate profits over the LONG TERM.

Nondelegable Obligations

Certain duties must be personally performed and cannot be delegated to an agent. (EX: making statements under oath, voting in public elections, signing a will, guitarists subcontracting another guitarists)

Intervening Events

Certain events occurring after an agent's contract but before ratification can cut off the principal's power to ratify. Being: 1) the third party's withdrawal from the contract 2) the third party's death or loss of capacity 3) the principal's failure to ratify within a reasonable time 4) where it would be inequitable to bind the third party

Nominating Committee

Choose management's slate of directors that is to be submitted to shareholders at the annual election of directors

Isolated transaction

Completed within 30 days and is not one in the course of repeated transactions of a like nature (owning business related property or having a stock of goods in a foreign state is likewise qualification as being settled there)

Actual Authority

Consent must be communicated to the agent. 1) Express Authority - actual authority that the principal has manifested to the agent in very specific or detailed language 2) Implied Authority - generally agents have implied authority to act in a way the agent reasonably believes is necessary to perform his duties (EX: when told to cut a tree, how the agent decides to cut the tree)

Foreign Corporation

Corporation filed in a different state

Alien Corporation

Corporation thats been incorporated in another country

Control Share Law Tender Defense

Dependent on state. When a raider acquires 20% of a targets shares in a short period (say 90 days) the control share law renders the shares nonvoting

Conflict of Interest Types

Direct: having a personally benefitting connection Indirect: having a somewhat relevant personal connection (EX: family, friends)

Audit Committee

Directly responsible for the appointment, compensation, and oversight of independent public accountants

Officer and Director Duties of Loyalty

Directors and officers owe a duty of utmost loyalty and fidelity to the corporation. 1) cannot self-deal 2) cannot usurp a corporate opportunity 3) cannot oppress minority shareholders 4) cannot trade insider information

"CBS Corp vs. FCC" Case

During a Superbowl halftime show, Janet Jackson and Justin Timberlake were contracted by CBS to perform. This performance ended in sexual dancing/lyrics which results in Janet Jackson's right breast being shown for one second on live TV. The FCC then fined CBS $550,000 on the basis that these performers were agents of the corporation. After applying the employee tests, the court deemed that CBS was indeed in business, regularly produces shows for national broadcast, and most importantly that CBS held extensive but not determinative control over the means to achieve the halftime show. Due to these factors and the ongoing conditions surrounding the employment of artists, the courts favored CBS over the FCC.

Wall Street Rule

Either support management or sell the shares

Express vs Implied Ratification

Express Ratification - when the principal manifests assent that his legal relations be affected, such as stating orally that he wishes to be bound by a contract that has already been made. Implied Ratification - arises when the principal's conduct justifies a reasonable assumption that he consents to the agent's act (EX: partial performance of a contract made by an agent or the principal's acceptance of benefits under such a contract)

"Frontier Leasing Corp. vs Links Engineering" Case

Fleming, a manager at Bluff Creek, entered into a credited lease of a beverage cart under apparent authority before defaulting on the cart. The higher manager tried to claim he had no authority to sign this and Bluff Creek sued for breach of contract. Court sided under argument of both actual and apparent authority for Fleming in favor of Bluff Creek.

General Agent vs. Special Agent

General Agent - continuously employed to conduct a series of transactions (EX: a McDonalds manager) Special Agent - employed to conduct a single transaction or small, simple group of transactions (EX: a cabinet installer)

Executive Committee

Given authority to act for the board on most matters when the board is not in session

Shareholder Litigation Committee

Given the task of determining whether a corporation should sue someone who has allegedly harmed the corporation

Long-Range Acquisition Strategy Tender Defense

Having a long-run plan that the court can observe

Business Judgement Rule

Helps protect officers and directors from liability for financial actions and helps prevent the court from imposing their vision over the corporations. 1) The managers must make an informed decision (must make a reasonable investigation) 2) The managers may have no conflicts of interest 3) The managers must have a rational basis for believing that the decision is in the best interests of the corporation (must have a logical connection to the facts presented)

How do notifications work with agents?

If a third party gives proper notification to an agent with actual or apparent authority to receive it, the principal is bound as if the notification has been given directly to him. (vice-versa as well)

Duties of Reimbursement and Indemnity

If an agent makes expressly or impliedly authorized expenditure while acting on the principal's behalf, the agent is entitled to reimbursement. Agency law implies a promise by the principal to indemnify an agent for losses that should fairly be borne by the principal is indemnity. (NOT REQUIRED TO ENDEMNIFY IF: results from unauthorized acts or solely from the agent's negligence or other fault)

Qualification Requirements for Foreign Corporations

If required to qualify to do instrastate business in a state, a foreign corporation must apply for a certificate of authority from the secretary of state, pay an application fee, maintain a registered office and a registered agent in the state, file an annual report with the secretary of state, and pay an annual fee

What creates an agency?

If the parties' written or spoken words or other conduct indicate an agreement that one person is to act on behalf of and under the control of another, the relationship exists. If the facts establish an agency, neither party need know about the agency's existence or subjectively desire that it exist. Can even occur when both expressly wish for no agency to occur.

Safe Harbor Rule

If transaction is completed in 30 days and not part of a repeated transaction then its protected

Freeze-Out Merger

In a merger with a controlling shareholder, some shareholders (usually the public shareholders) are required to surrender their shares in the disappearing corporation for cash.

Inside vs. Outside Directors

Inside directors: is an officer of the corporation who devotes substantially full time to the corporation Outside directors: do not have such a binding affiliation

Poison Pill Tender Defense

Issuing new preferred shares threatening dilution for the raider

"Treadwell vs JD Construction Co" Case

Jesse Derr changed the name of his corporation halfway through business and started to build a house under this fake corporation before abandoning the job. Court decided Derr was personally responsible as JCDER was a theoretical "undisclosed principal" and was not held jointly liable.

"Guth vs Loft" Case

Loft, president of a company, asked his vice president, Guth, to acquire the rights to Pepsi soda syrup so that they could produce it themselves. Guth instead chose to acquire the shares through a family corporation and after Pepsi grew, Loft sued on this acquisition. The court favored that Guth usurped corporate power and demanded he transfer his shares and received dividends to Loft.

Stock Trading Surveillance Program Tender Defense

Looking for advance notice that a raider might be coming

What are directors and officers liable for?

Losses to the corporation resulting from their lack of due care or due diligence (managers need only meet the standard of the ordinarily prudent person in the same circumstances)

Board of Directors (BOD)

MBCA permits a corporation to be managed by or under the direction of the board of directors

"MDM Group Associates, Inc. v. CX Reinsurance Company Ltd." Case

MDM, a ski-insurance company selling policies covering dips in skiing seasons, wrote contracts for CX, an insurance provider, and following a low season and high payouts ($23 million) on behalf of MDM to ski resorts, CX backed out of the agency. The jury originally ruled that CX (being the principal) owed a fiduciary duty to MDM but after an appeal this was overturned as the principal owes "some" but no legally barring fiduciary duties to the agent.

Can agents give themselves apparent authority?

No, and apparent authority does not exist where an agent creates an appearance of authority without the principal's consent (direct or tacit).

"North Atlantic Instruments, Inc. vs Haber" Case

North Atlantic acquired TMI, which Haber was the president and 1/3 owner of. After signing into a confidentiality contract over all company materials if he were to leave, Haber left to join Apex Signal Corp. and began trying to acquire the same contacts from TMI. Under New York employment rules, it was deemed that Haber broke the confidentiality rules asked of TMI employees and caused harm; ruled in favor of North Atlantic.

Effect of Termination on Agent's Authority

Once an agency terminates by any means just described, the agent's actual authority (expressed and implied) ends as well. Nonetheless, such "ex-agents" may retain apparent authority to bind their former principals.

Duty Not to Receive a Material Benefit

Other than receiving the compensation the principal gives the agent for acting as her agent, an agent should not profit or receive any other benefit from acting on behalf of the principal unless specifically stated and allowed by the principal. (EX: bribes, kickbacks)

Intrinsic Fairness Test

Reasonable person at arms length bargain would have made the same deal

Golden Parachutes Tender Defense

Requires corporation to make a large severance payment to top level executives when there is a change in control

Vicarious Liability

Requires only that the agent be at fault

MBCA Duty of Care Test

Requires that a director or officer make a reasonable investigation and honestly believe that her decision is in the best interests of the corporation

Business Purpose Test

Requires that the freeze-out accomplish some legitimate business purpose and not serve the special interests of the majority shareholders or the managers.

Direct Liability

Requires that the principal be at fault

Compensation Committees

Review and approve the salaries, bonuses, stock options, and other benefits of high-level corporate executives.

Friendly Shareholders Tender Defense

Selling new shares to people likely to be loyal to the company, such as employees etc.

What did the Dodge vs Ford case establish?

Set precedent for companies to maximize short term profit (meaning must pay dividends if available, etc)

"Smithstearn Yachts Inc. vs. Gyrographic Communications, Inc." Case

Smithstearn Yacths Inc. made a contract for marketing materials from Gyrogrpahic Communications Inc. but later tried to ratify the contract under an LLC name, causing Smithstearn to sue. The court ruled that Smithstearn adopted this contract simply by suing on it.

"Coggins vs New England Patriots Football Club" Case

Some guy bought out of Old Patriots but bought his way back in as a majority shareholder. Tried to pull a freeze-out merger and transfer only his personal power to the New Patriots but was stopped by a smaller shareholder and it was deemed illegal for a freeze-out.

Quo Warranto Action

States ability to prevent a transaction or dissolve a corporation under ulta vires

Long Arm Jurisdiction

States have statues allowing courts to reach out of the state and pull foreign parties back (for doing things like criminal torts, contractual disagreements, etc)

Pac-Man Tender Defense

Target corporation instead tries to buy the raiders shares

Termination by Act of the Parties

Termination by act of the principal and/or agent occurs: 1) at a time or upon the happening of an event stated in the agreement 2) when a specified result has been accomplished, if the agency was created to accomplish a specified result 3) by mutual agreement of the principal and the agent 4) at the option of either party (called revocation when done by the principal and renunciation when done by the agent)

Estoppel

That a person may be liable for an actor's transaction with a third party who justifiably is induced to make a detrimental change in position because he believed the actor had authority to act for the person. The liable person must either: 1) intentionally or carelessly cause the third party's belief 2) having notice that such belief might cause a third party to change his position, fail to take reasonable steps to notify the third person of the facts

Board Authority under Corporation Statues

The board's authority includes not only the general power to manage or direct the corporation in the ordinary course of its business but also the power to issue shares of stock and to set the price of shares. Among its other powers, the board may repurchase shares, declare dividends, adopt and amend bylaws, elect and remove officers, and fill vacancies on the board

Going Private

The process by which all publicly owned shares of common stock are repurchased or retired, thereby eliminating listing fees, annual reports, and other expenses involved with publicly owned companies.

Duty of Good Conduct

The restatement also includes a general duty that agents act reasonably and refrain from conduct that is likely to damage the principal's enterprise.

Greenmail Tender Defense

The target's repurchase of it's shares at a price that profits the raider barring they sign a standstill agreement

What must be true of a third party to create apparent authority?

The third party must REASONABLY believe in the agent's authority

Adoption of Pre-Incorporation Contracts

Theo only way a corporation may become bound on a promoter's pre-incorporation contracts is by the corporation's adoption of the promoter's contracts

Unocal Test

To make a defense, a board of directors must show: 1) it had reasonable grounds to believe that a danger to corporate policy and effectiveness was posed by the takeover attempt 2) it acted primarily to protect the corporation and its shareholders from that danger 3) the defense tactic was reasonable in relation to the threat posted by the corporation

Objective of a corporation?

Traditionally has been to enhance corporate profits and shareholder gain

Scorched Earth Tactics Tender Defense

Tries to defame the potential raider in every way possible

Total Fairness Test

Two basic aspects: - Fair dealing - Fair price

Authority

Two main forms: 1) Actual authority 2) Apparent authority

Duty to Compensate Agent

Typically stipulated in written contracts but if not it is determined by the relationship and circumstances of the agency. For no disclosed amount, it is determined by market price, similar act payments, or reasonable value. For act specific compensation, it is imperative that the principal not impede the agent in doing their asked tasks.

Duty of Loyalty

Under this duty an agent must subordinated his personal concerns by: 1) avoiding conflicts of interest with the principal 2) not disclosing confidential information received from the principal

Lock-Up Option Tender Defense

Used in conjunction with white knight. Agrees that if the raider succeeds in acquiring the company, then they will sell a valuable piece of the company to the white knight

Domination

Using the company as an Alter Ego or a mere personal instrumentality or extension of yourself. Things that show the corporation does not really matter to the shareholder as a seperate legal entity 1) Failure to hold regular SH meetings 2) Failure to keep accurate records 3) Failure to follow basic corporate formalities 4) Commingling of assets 5) Using company assets for personal use

Improper Use

Using the corporation to: 1) Defraud creditors (under capitalization/thin capitalization, looting) 2) Evade laws (using the corporate form to evade laws, liabilities, or obligations)

Termination of Agency Powers Given as Security

When a principal is using the agent under the reward of a security. Cannot be terminated by: 1) Principal revocation 2) Principal's or agent's loss of capacity 3) The agent's death 4) The principal's death However, unless it is held for the benefit of a third party, the agent can voluntarily surrender it and it is automatically terminated when the principal performs her obligation.

Nonexistent Principal

When an agent who purports to act for a legally nonexistent principal, such as an unincorporated association, is personally liable when the agent knows or has reason to know the principal does not exist

Difference between employee agents and non-employee agents?

With an employee agent, the biggest seperation is the principal's right to control the manner and means of the agent's performance or work. With non-employee agents, the principal simply looks for results.

What can you do about legal situations if you don't qualify?

You can defend a lawsuit in that state but you cannot begin a lawsuit

Imputed Knowledge

information that is learned by an agent that is treated as if the principal is equally aware of it

Agency

the fiduciary relationship that arises when one person (a principal) manifests assent to another person (an agent) that the agent will act on the principal's behalf and be subject to the principal's control.