BUL NOTES PDF

Nature of Agency: Definition: agency is a relationship where one party (the agent) is authorized to act for and on behalf of another party (the principal) Representation: agents represent the principal in business dealings with third parties. Liability: if an agent who is an employee is...

Nature of Agency: Definition: agency is a relationship where one party (the agent) is authorized to act for and on behalf of another party (the principal) Representation: agents represent the principal in business dealings with third parties. Liability: if an agent who is an employee is negligent while conducting the principals business, the principal can be held liable for injuries or losses suffered by third parties. Scope of Agency Purposes: Generally Broad: a person can usually do anything through an agent that they could do themselves. Limitations: a principal cannot authorize an agent to do something that the principal is not legally allowed to do. Non-Delegable Acts: Some actions are so personal that they cannot be delegated to an agent, like contracts for personal services. Other Legal Relationships: Employment Relationship: An employer has the right to control the physical conduct of their employee. ◦ All employees are agents, but not all agents are employees. Independent Contractor: A person who contracts with another to do a particular job and who is not subject to the control of the other. Determining Employee vs. Independent Contractor: Control: the extent of control the principal has over the agent's work is a key factor. Occupation: whether the agent has a distinct occupation or business.  Supervision: whether the type of work is typically done under supervision or independently. Skill: the level of skill required for the agent's occupation Tools and Workplace: who provides the necessary tools and workplace. Duration: the length of time the agent works for the principal. Payment: whether the agent is paid by the job or by time worked. Regular Business: whether the agents work is part of the principals regular business. Belief: whether the principal and agent believe they are creating an employment relationship Business Status: whether the principal is in business. Creation of Agency: Three Key Elements: Assent, control by the principal, and the agent acting on behalf of the principal. Agency by Estoppel: A person can be held liable as a principal, even if no actual agency exists, if a third party reasonably relies on the appearance of an agency relationship to their detriment. Agency by Estoppel Elements: 1. A person ("principal") intentionally or carelessly leads a third party to believe someone else ("agent") has authority to act for them. 2. The principal knows about the third party's belief and doesn't correct them. 3. The third party reasonably and in good faith relies on this appearance. 4. The third party is harmed because they relied on the apparent authority. Formalities of Agency: Consensual Relationship: agency is formed by contract or agreement, but consideration is not required.  Written Agreement: not usually required, but appointments for longer than one year must be in writing. Capacity: Principal: must have legal capacity to enter into the agency relationship. Agent: does not need legal capacity Duties of Agent to Principal: Duty of Obedience: follow instructions Duty of Good Conduct: act appropriately Duty to Inform: keep the principal updated on relevant information Duty to Account: keep track of and report on all finances. Fiduciary Duty: act with loyalty and good faith, including avoiding conflicts of interest and protecting confidential information. Duties of Principal to Agent: Contractual Duties: fulfill obligations outlined in the agency contract Compensation: pay the agent as agreed Reimbursement: pay back authorized expenses made by the agent. Indemnification: cover losses the agent suffered while following instructions. Tort and other duties: provide safe working conditions for employees and warn of unreasonable risks. Termination of Agency: Agency can be terminated by: Lapse of time: when agreed upon time ends  Fulfillment of Purpose: objective is achieved Mutual Agreement: both parties agree to end Revocation of Authority: principal withdraws the agents authority Renunciation by the Agent: agent quits Operation of Law: death, incapacity, change in circumstances, destruction of subject matter, change in law. Bankruptcy: usually terminates agency relationships Disloyalty: agent breaches fiduciary duty Outbreak of War Irrevocable Agencies: agent has a security interest in the subject matter, making difficult to terminate. Agents Authority: Actual Authority: An agent's power to act on behalf of the principal is based on the principal's consent. Actual Authority can be: ◦ Express Authority: the principal explicitly grants the agent the power to act. ◦ Implied Authority: the agent's authority is implied form the nature of the agency relationship, the principals conduct, or custom and usage. Apparent Authority: Even if an agent lacks actual authority, a principal can be bound by the agent's actions if the principal creates the appearance of authority, and a third party reasonably relies on that appearance. Liability of the Principal for Contracts:  Disclosed Principal: third party knows that the agent is acting on behalf of a principal, and the principal's identity is known, the principal is generally liable on the contract. Partially Disclosed Principal: if the third party knows that the agent is acting on behalf of a principal, but identity is unknown, the principal is generally liable on the contract. Undisclosed Principal: third party unaware the agent is acting on behalf of a principal, both the agent and the principal can be held liable on the contract. Liability of the Principal for Torts: Respondeat Superior: a principal is generally liable for the torts of their employee if the tort was committed within the scope of the employees employment. Independent Contractors: a principal is generally not liable for the torts of an independent contractor. Except when the principal is negligent in hiring the contractor or if the work is inherently dangerous. Termination of Apparent Authority: Notice to Third Parties: when an agency relationship terminates, the principal should notify any third parties who have dealt with the agent of the termination. This notice helps to prevent the agent from continuing to bind the principal based on apparent authority. Introduction to Sales and Leases: Goods: defined as moveable personal property Sale: the transfer of title (ownership) of goods from a seller to a buyer in exchange for a price. Lease: A transfer of the right to possess and use goods for a period of time in exchange for consideration (payment)  ◦ Consumer: made by merchants to individuals for personal, family, or household use, where value is less than 25,000 ◦ Finance: more complex usually involving three parties instead of two: a lessor (owner), a supplier, and a lessee (user) Governing Law: Sales Transactions: Primarily governed by article 2 of the UCC. General contract law applies to areas not specifically addressed by Article 2. Lease Transactions: governed by article 2A of the UCC, with general contract law filling in gaps not covered by the article. Transactions Outside the UCC: contracts for services, employment, insurance, real property, and intangible assets are not governed by the UCC. Fundamental Principles of Articles 2 and 2A: Modernization and Uniformity: Both articles aim to update, clarify, and simplify, and standardize the laws governing sales and leases. Good Faith: All sales an d lease contracts must be performed in good faith. This means honesty in fact and, for merchants, it also requires adherence to reasonable commercial standards. Unconscionability: courts can refuse to enforce contracts or contract provisions that are deemed unconscionable. ◦ Procedural: relates to unfairness in the bargaining process ◦ Substantive: involves contract terms that are considered oppressive or grossly unfair. Commercial Practices:  Course of Dealing: a history of previous interactions between parties that establishes a common basis for interpreting their current agreement. Usage of Trade: standard practices or methods of dealing commonly observed in a particular place, industry, or trade. Merchants: individuals who deal in goods or hold themselves out as having specialized knowledge or skill in the goods or practices involved. Special rules often apply to transactions between merchants or those involving a merchant. Liberal Administration of Remedies: Freedom of Contract: the UCC allows parties flexibility to modify most provisions through their agreements. Validation and Preservation of Contracts: the UCC aims to reduce formality and uphold agreements when parties show an intent to contract, even if some terms are missing. Formation of Sales and Lease Contracts: Manifestation of Mutual Assent: similar to offer and acceptance in general contract law ◦ Definiteness of Offer: a contract doesnt necessarily fail if some terms are left open, as long as the parties intend to make a contract. UCC offers ways to fill in missing terms. ◦ Irrevocable Offers: ‣ Option: a separate contract to keep an offer open for a specific time. ‣ Firm offer: A signed, written offer by a merchant to buy or sell goods that is irrevocable for a max of three months. ◦ Variant Acceptances (Battle of the Forms): when an acceptance includes different or additional terms. The UCC focuses on the parties intent.  ◦ Manner of Acceptance: acceptance can be made in any reasonable way, it is effective upon delivery. Consideration: ◦ Modifications: contract mods for the sale or lease of goods dont need new consideration if made in good faith. ◦ Firm offers: are binding even without consideration. Form of the Contract: (Statute of Frauds) ◦ Requirement: sales contracts for $500 or more (and leases for $1000 or more) must be in writing to be enforceable. ◦ Written Compliance: must be signed by the party against whom enforcement is sought, indicate a contract was formed, and specify the quantity of goods. ◦ Alternative Methods: exceptions to the writing requirement exist for situations like written confirmation between merchants, admissions in court, specially manufactured goods, and part performance (delivery/payment and acceptance) Parol Evidence Rule: ◦ General Rule: when parties have a final written agreement, evidence of prior agreements or contemporaneous oral agreements that contradict the written terms is generally inadmissable. ◦ Exceptions: the written terms may be explained or supplemented by evidence of course of dealing, usage of trade, course of performance, or consistent additonal evidence. Promoter Liability: Promoters and Pre-Incorporation Contracts: ◦ A promoter acts on behalf of a corporation that has not yet been formed  ◦ Contracts made by a promoter before incorporation do not automatically bind the corporation ◦ The promoter is personally liable on pre-incorporation contracts unless specific steps are taken to shift liability to the corporation (through adoption of novation) Limited Partnerships: Definition: A limited partnership is a partnership formed by two or more people as defined by state law. It must have at least one general partner and one limited partner. Key Features: ◦ Statutory Basis: LPs can only be created by complying with a states LP statute. ◦ Limited Liability for Limited Partners: limited partners liability is capped at their capital contribution. (or agreed-upon contribution) ◦ General Partners: same rights and powers as partners in a general partnership, manage the business and face unlimited personal liability. Formation: ◦ Certifiacte of Limited Partnership: filing this certificat, adhering to state requirements, is essential for proper formation. Failure to comply can jeopardize the limited liability of partners. ◦ Partnership name: limited partners risk losing their limited liability if their surname is included in the partnership name (unless specific conditions are met) ◦ Contributions: Partners can contribute cash, property, services, or promises to contribute any of these. Rights and Responsibilities: ◦ Control and management: general partners have almost exclusive control. Limited risk losing  their limited liability if they participate in control. ◦ Voting Rights: determined by partnership agreement ◦ Choice of Associates: adding new partners, general or limted, requires consent of all partners. ◦ Withdrawal: general can withdraw at any time with written notice. Limited withdrawal is governed by partnership certificate. ◦ Assignment of Partnership Interest: assignable unless the agreement states otherwise. Assignees can become limited partners with the consent of all partners. ◦ Profit and Loss sharing: allocated as per partnership agreement. if silent, allocation is based on actual contributions. ◦ Distributions: determined by partnership agreement ◦ Loans: both general and limited partners can be creditors, with or without security. ◦ Information: all have the right to inspect and copy partnership records. ◦ Derivative Actions: a limited partner can sue on behalf of the LP if the general partners refuse to do so. Duties and Liabilities: ◦ General Partner Duties: owe a fiduciary duty of care and loyalty to the partnership ◦ Limited Duties: do not have the same fiduciary duties as general partners ◦ Liabilities: general face unlimited liability. limited have limited, except in cases of defective formation or excessive participation in control. Dissolution: ◦ Limited partner rights: limited typically do not have the power to dissolve, except through court case.  ◦ Causes of Dissolution: expiraiton of agreed upon term, withdrawal of a general partner, or a court ordered dissolution. ◦ Winding up: usually handled by the non wrongfully dissolving general partners, unless agree specifies otherwise. ◦ Distribution of Assets: follows a specific order: creditors, unpaid distributions, return of contributions, remaining partnership interests. Limited Liability Companies: An LLC is a noncorporate business structure offering limited liability to all owners and allowing all members to participate in management. So Company you can participate in management as a limited member. Formation: ◦ Must substantially comply with states LLC statute ◦ Articles of organization must be filed with designated state office. ◦ Must include LLC in name ◦ Contributions can include cash, services rendered, promissory notes, or other obligations ◦ Operating Agreement: a crucial contract outlining the rights and duties of members Rights of Members: ◦ Membership interest: comprises both a financial interest (right to distributons) and management interest (all other rights granted by the operating agreement and statute) ◦ Financial Rights: ‣ Profit loss and sharing typically allocated based on the value of contributions, unless specified otherwise.  ‣ Distributions usually made based on members contributions ‣ Withdrawal: can withdraw and demand payment for their interest after providing required notice ◦ Management Rights: ‣ In the absense of agreement, all members have equal management rights. However, management can be delegated to a subset of members. ‣ Voting: statutes usually define, can be altered by operating agreement ‣ Derivative Actions: member can sue on behalf of the LLC if those with the authority to do so refuse. Duties and Liabilities; ◦ Duties: ‣ Manager-managed LLC: managers have the duty of care and loyalty. Memebers usually dont have duties. ‣ Member-managed: members have the same duties of care and loyalty as managers in a manager-managed LLC. ◦ Liabilities: No member or manager is personally liable for the LLCs debts solely because of their status as a member or manager. Dissolution: ◦ Automatic: members dissociation, the end of the agreed upon term, written consent of all members, a court ordered dissolution. ◦ Dissociation: a member ceases to be associated due to withdrawal, death, incompetence, expulsion, or bankruptcy.  ◦ Distribution of Assets: follows a specific order: creditors, unpaid distributions, return of contributions, remaining LLC interests. Limited Liability Limited Partnerships: A limited partnership in which general partners have the same limited liability as in an LLP. A corporation is a separate and distinct legal entity from its shareholders, it has its own rights and liabilities. A corporation can enter into contracts, sue or be sued, own property in its own name. This separate legal entity status shields shareholders from personal liability for the corporations debts and obligations. Corporations are created under the laws of a specific state. Each state has an incorporation statute that governs the formation and operation of corporations. The state has the power to: Regulate the corp. and Amend or repeal the incorporation statute. Shareholders generally have limited liability, liability is limited to the amount they have invested in the corporations stock. Exceptions: personal guarantees of corporate obligations, wrongful acts committed by the shareholder Piercing the corporate veil: courts may disregard the corporate entity and hold shareholders personally liable in cases of: fraud, wrongdoing, circumventing the law. Shares of stock in a corporation are freely transferable unless there are restrictions set in the corporate charter or the shareholder agreements. Transferability increases the market value of shares  Article 8 of the UCC governs transfers. Perpetual Existence: Corporations generally have an indefinite lifespan. Changes in shareholders, directors, or officers does not impact existence. Termination of Existence: legal dissolution or merger into another business. Centralizes Management: Shareholders elect board of directors The board appoints officers Separates ownership and management Considered a Person and Citizen for certain purposes: As a person: constitutional rights like due process (5th and 14th amendment) and protection against unreasonable searches and seizures (4th amendment) As a citizen: determining federal court jurisdiction based on diversity of citizenship and not citizens under the 14th amendments privileges and immunities clause. Formation of a corp.: promoters, subscribers, incorporators, articles of incorporation, organizational meeting, bylaws. Piercing the Corporate Veil: closely held corporations and parent subsidiary relationships Ultra Vires Act: actions exceeding a corporations powers are considered ultra vires and can be addressed through various legal remedies. Liable for torts and crimes committed by their agents and employees under the doctrine of respondeat superior. Questions: The internal revenue service allows taxation of certain corporations to be similar to that of partnerships. In a contract to sell goods, the sale does not take place until the seller transfers the title to the goods to the buyer. The agent with actual authority will bind both agent and principal on most contracts when the agent is acting for an undisclosed principal The principal cannot either ratify the entire contract or certain parts of it, all or none A post-incorporation subscription is a contract between the subscriber and the corporation Some statutes permitting professional corporations apply only to specified professions Upon becoming entitled to a distribution, a partner has the status of a creditor with respect to that distribution All states have authorized the formation of limited liability companies An agent for an unidentified principal is liable on the contract to the third party no matter whether the particular transaction is authorized or not. Most of the codes provisions are not mandatory but allow the parties to vary or displace them by agreement The MBCA is not for closely held corporations and subchapter s corp A corporation is protected by the fourth amendments provision against unreasonable searches and seizures An agent who makes a contract with a third party on behalf of a disclosed principal usually is not a party to the contract. Generally assets are distributed first to creditors including members and managers who are creditors except with respect to liabilities or distributions in a limited liability company Registration of a foreign limited partnership is required in order to bring enforcement actions in the states courts.