BE Outline for law school PDF

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best damn outline for law school BE or corporations...

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Lipton

Fall 2019

Business Enterprises Outline Introduction | Agency | Partnerships | Corporations | Federal Securities Laws | LPs, LLPs, and LLCs

Introduction 

Business law is fundamentally about power, who owns wealth/has power to control it

Proprietorships: businesses that have no separate legal status apart from their owner  

Advantages: control; simplicity; less expenses; pass-through taxation Disadvantages: no limited liability; dependent on owner management; not easily transferable

General partnership: an association of two or more persons carrying on a business for profit as co-owners  

Advantages: control; flexibility; less expenses; pass-through taxation Disadvantages: no limited liability; can’t transfer management interest

Limited Partnership (LP): an entity which has a general partner that operates the business and one ore more limited partners that contribute investment capital but don’t participate in management  

Advantages: limited liability; separate ownership and control; flexibility; less expenses Disadvantages: must file with state; more complex accounting; not readily transferable

Limited Liability Partnership (LLP): another form of incorporated partnership  

Advantages: limited liability; flexibility; pass-through taxation Disadvantages: charter must be obtained from state; register ownership interest with SEC

Limited Liability Company (LLC): an incorporated partnership that allows members to actively participate in management if they wish  

Advantages: limited liability; separate ownership and control; perpetual life Disadvantages: charter must be obtained from state; more complicated accounting; register ownership with SEC

Corporation: a business that has a separate legal status apart from its owner  

Advantages: limited liability; separate ownership and control; easily transferable [if public]; perpetual life Disadvantages: double taxation; most expensive structure of businesses

Burwell v. Hobby Lobby Stores, Inc., et al. (SCOTUS 2014) 

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ISSUE: does RFRA permit HHS to demand that three closely held corporations provide health-insurance coverage for methods of contraception that violate the sincerely held religious beliefs of the companies’ owners? o Congress included corporations within RFRA’s definition of “persons”; RFRA protects the free-exercise rights of these corporations which protects the religious liberty of the humans who own and control those companies  The corporations here are closely held organizations, each owned and controlled by members of a single family, and no one has dispute the sincerity of their religious beliefs o Modern corporate law doesn’t require for-profit corporations to pursue a profit at the expense of everything else, so they may pursue other objectives, including religious ones ISSUE: since RFRA protects the closely held corporations’ religious freedoms, does the HHS contraceptive mandate substantially burden the exercise of religion? o RFRA prohibits the government from taking action that substantially burdens the exercise of religion unless that action constitutes the least restrictive means of serving a compelling government interest o The government could accomplish providing contraceptive coverage in other ways; imposing the requirement on the three companies wasn’t the least restrictive means of accomplishing the government’s interest in providing contraceptive coverage o This turns on stocks – it’s hard to pinpoint the line between whether a company is “closely held” is about control, shares, or both

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Fall 2019 

Just the few family members were voting SHs who voted for themselves, making them directors

Brands Use Social Media to Back Same-Sex Marriage Uber Rider Might Lose an Eye from Driver’s Hammer Attack

Agency CONTRACT LIABILITY OF PRINCIPAL See Restatement of the Law, Third, Agency handout - §§ 1.01-03, 2.01-03, 3.01-03, 4.01, 4.06 Agency: the fiduciary relationship that arises when a principal manifests assent to an agent that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act [Restatement 3d of Agency § 1.01]    

Empowers one person to act on behalf of another pursuant to the authority created by the agency relationship Permits the agent to cause the principal to incur obligations and liabilities The principal will be responsible for the acts of the agent where the agent is acting within the scope of the agent’s authority ELEMENTS: (1) assent by principal, (2) assent by agent, and (3) the agent’s conduct in question was within their authority to do as expressed by the principal

Consequences of an agency relationship:  

Inward looking: the imposition of fiduciary duties on the agent and the principal Outward looking: those that affect the legal rights of third parties

Contract Liability of Principal (express or implied) 1.

2.

Actual authority [Restatement 3d of Agency § 2.01] 1. An agent acts with actual authority when i. At the time of taking action that has legal consequences for the principal ii. The agent reasonable believes iii. In accordance with the principal’s manifestations to the agent iv. That the principal wishes the agent to so act o Agent reasonably believes, because of the principal’s manifestations to the agent, that the principal wishes the agent to so act o Creation of an agency relationship based on actual authority may confer upon the agent the power to:  Enter contracts to which the principal will be bound  Commit tortious acts for which the principal may be held liable o When an agent enters a contract on behalf of a principal, that agent must consider whether he will also become a party to the contract that he signs, and, hence, potentially liable under the contract in the event of nonperformance on the part of the principal o Whether the agent is a party to such contracts will depend on whether the agent enters the contract on behalf of  A disclosed principal: the third party is aware that the agent is acting as an agent + the third party knows the identity of the principal + principal and third party will ordinarily be the sole parties to the contract; agent won’t be  An unidentified principal: the third party is aware that the agent is acting as an agent + the third party doesn’t know the identity of the principal + the principal and third party will be parties to the contract; the agent will also be a party unless the contract says otherwise  An undisclosed principal: the third party is unaware that the agent is acting as an agent; third party thinks it’s dealing with a principal + principal, agent, and third party are all parties to the contract Apparent authority [Restatement 3d of Agency § 2.03] a. Power held by an agent or other actor + to affect a principal’s legal relations with third parties + when third party reasonably believes the actor has authority to act on behalf of the principal + that belief is traceable to the principal’s manifestations o Situations in which individuals who lack actual authority might reasonably seem to possess such authority or situations in which an agent who possesses actual authority may exceed the scope of that authority  look to industry customs

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Fall 2019 Actions of an individual who lacks actual authority may be attributed to a principal so long as two requirements are met: 1. It must be reasonable for a third party to have believed that the individual possessed actual authority  If a reasonable person would not have believed that an individual possessed actual authority to act on behalf of the principal, then that individual’s acts may not be attributed to the principal  The scope of an individual’s apparent authority will be limited to what is reasonable to expect from a person occupying the position in question 2. This belief must be traceable to the principal’s manifestations  If the third party’s mistaken belief can’t somehow be traced back to a manifestation by the principal, then the doctrine of apparent agency provides that the principal isn’t liable for the acts of a putative agent o RATIONALE: it’s unjust for a principal to deny the existence of an agency relationship ex post when that principal has given a third party a reasonable basis for believing that such a relationship existed ex ante Ratification b. Even if an individual lacks any authority to act on behalf of a principal, the principal may voluntarily assume the legal consequences of that individual’s act if the principal so chooses; after-the-fact principal affirms the agent’s acts expressly or acts in a matter o May occur where the principal affirms the agent’s acts expressly or acts in a manner showing affirmation or acquiescence (acts as if they’re okay with the deal, have knowledge of the facts, accepts the benefits) o Binds the principal and relates back to the time of the unauthorized acts o

3.

A. Gay Jenson Farms Co. v. Cargill, Inc. (Supreme Court of Minnesota 1981) *the creation of the agency relationship; actual authority   

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FACTS: Warren owed a group of farmers money, so they sued Warren’s creditor HOLDING: Cargill-Warren relationship met all three elements of agency REASONING: factors which indicated Cargill’s control over Warren: (a) Cargill finances Warren with a revolving balance; (b) Warren pays the bills by issuing drafts, stamped with both parties’ names on it; (c) Cargill gets the right of first refusal to Warren’s grain; and (d) Cargill takes a security interest in the grain LAW: A principal-agent relationship exists between a creditor and debtor when the creditor intervenes in the business affairs of the debtor

White v. Thomas (Arkansas Court of Appeals 1991) *principles of attribution; apparent authority 1.

2. 3.

4.

FACTS: White authorized Simpson to bid up to $250k for property, but Simpson mistakenly bid $327.5k, so she negotiated to sell 45 of the 217 acres of the property to the Thomases; when White learned of the deal, he was upset, but decided to go through with the purchase while repudiating the deal to sell part of the tract HOLDING: there is nothing inequitable about White repudiating Simpson’s deal with the Thomases and ratifying the auction bid; they were two completely different transactions REASONING: White never held Simpson out as having authority to enter the deal with the Thomases; the Thomases questioned Simpson’s authority, but made no effort to contact White or check her documentation and Simpson’s own assertions weren’t enough to create apparent authority  actual authority – Simpson didn’t have such authority to sell the land back; she only had authority to buy the land for less than a certain amount  apparent authority – there’s no question that the Thomases had reasonable belief that Simpson had authority to sell the land BUT her authority was not traceable to anything White said or did to create that belief LAW: a purported agent’s claims regarding the existence or scope of her authority, without more, is insufficient to create apparent authority

TORT LIBAILITY OF PRINCIPAL See Restatement of the Law, Third, Agency handout - §§ 2.04, 7.04, 7.07 1.

2.

Direct liability a. When an employer tells the employee to do something that results in a tort i. Employer and employee are both directly liable Respondeat superior (vicarious liability) [Restatement § 2.04]

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Fall 2019 a.

3.

An employer is subject to liability for torts committed by employees while acting within the scope of their employment; this makes the principal directly liable for the tort committed by their agent on the principal’s behalf  An employee is liable for torts committed by any of its employees so long as the employee was acting within the scope of his employment; not based on the principal’s actions, so even if the principal did something wrong, it’s still held liable same as the agent o To establish liability, it’s sufficient for the plaintiff to show that: i. The tortfeasor was an employee of the defendant  Employee: an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work [Restatement § 7.07(3)] ii. The tortfeasor committed the tort while acting within the scope of his employment  An employee acts within the scope of employment when performing work assigned by the employer + engaging in a course of conduct subject to the employer’s control [Restatement § 7.07(2)] ii. Whether the agent’s course of conduct was in no way intended to benefit P Apparent agency a. Agency: may not be agency but someone thought they were b. Authority they are an agent, but someone thought they had more authority to act than they did c. Elements: (1) principal acted in a manner that would lead a reasonable person to believe the employees were agents; (2) a reasonable person would in fact rely on that manifestation; (3) plaintiff relied to his detriment on that manifestation (no knowledge of agency); and (4) plaintiff was injured

Butler v. McDonald's Corporation (Rhode Island District Court 2000) *principles of attribution; apparent agency  

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FACTS: Butler’s hand was injured in a McDonald’s franchise, so Butler [via his parents] sued McDonald’s Corporation rather than the owner of the franchise HOLDING: denied McDonald’s motion for summary judgment: although McDonald’s didn’t owe a duty of care to Butler as a landlord, McDonald’s could be found liable due to its agency relationship with the franchisee  Butler could have reasonably also concluded that the restaurant was owned by McDonald and operated by McDonald’s employees REASONING: a reasonable jury could find that an agency relationship existed and that McDonald’s could be held vicariously liable  whether Butler relied to his detriment upon the care and skill of the allegedly negligent operator and/or employees of the franchise restaurant also presented a factual issue LAW: through the doctrine of respondeat superior, a party can be held vicariously liable for torts of another; this situation arises from an employer-employee relationship or a principal-agent relationship  agency is the fiduciary relation which results from the manifestation of consent by one person to another that the other shall act on behalf and subject to his control, and consent by the other so to act; three elements that must be shown for an agency relationship to exist: (1) the principal must manifest that the agent will act for him, (2) the agent must accept the undertaking, and (3) the parties must agree that the principal will be in control of the undertaking; it’s essential that the principal have the right to control the work of the agent, and that the agent act primarily for the benefit of the principal

Ira S. Bushey & Sons v. US (2nd Cir. 1968) *principles of attribution; respondeat superior 

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FACTS: Seaman got drunk and used his access to the drydock to open the valve, let in water, and cause serious property damage; the drydock owner sued the US government for the property harm based on respondeat superior, since the seaman was a government employee LAW: conduct of an employee is within the scope of employment if, but only if it is actuated, at least in party by a purpose to serve the employer  foreseeability test – some torts cannot be prevented, but the employer should still be liable because there are certain risks created by employment; if the employee’s conduct is too attenuated from the condition of the employment, then the employer isn’t liable HOLDING: affirmed the trial court holding the government liable for damages caused to the drydock where it was reasonably foreseeable that a crewmember might cause some damage, whether negligently or intentionally; it was immaterial that the employee’s specific acts weren’t foreseen REASONING: it’s foreseeable that when sailors are put together and packed on a ship, they would get drunk and commit vandalism  what is reasonably foreseeable in this context of respondeat superior is quite a different thing from the foreseeably unreasonable risk of harm that spells negligence; the foresight that should impel the prudent man to take

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Fall 2019 precaution is not the same measure as that by which he should perceive the harm likely to flow from his long-run activity in spite of all reasonable precautions on his own part; an employer should be held to expect risks, to the public also, which arise out of and in the course of his employment

When a third party justifiably changes its position in belief that a person who lacked actual or apparent authority was an agent of a principal, the principal will sometimes be estopped from denying that an agency relationship existed AGENT’S DUTIES TO PRINCIPAL See Restatement of the Law, Third, Agency handout - §§ 8.01, 8.08 Duty of care: agent must use proper care to carry out his duties (White v. Thomas) Duty of loyalty: agent can’t receive compensation in connection with agency other than from the principal, unless the principal (1) knowingly and (2) voluntarily agrees Reading v. Regem (King’s Bench Division 1948) *duty of loyalty; unjust enrichment  

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FACTS: plaintiff was a soldier for England in Cairo who used his uniform to illegally earn money  the Crown found out and then confiscated his money, so he sued to get it back HOLDING: the Crown is entitled to the money; P must not be allowed to unjustly enrich himself on his employer’s behalf (conversion)  the Crown is entitled to whatever the soldier profited (disgorgement), even though no harm was done to the Crown REASONING: P wasn’t acting in the course of his employment + the uniform of the Crown and the position of P as an employee of the Crown makes P liable to the Crown + without his employment with the Crown, he could not have earned the money  it’s irrelevant that the smuggling operation is one the principal could have performed because it was an illegal operation  the rule encourages disclosure and bargaining; force the agent to further the principal’s interests LAW: employees cannot unjustly enrich themselves by virtue of his service without his employer’s approval, and if the employee does, the money must be relinquished to the employer

Tarnowski v. Resop (Supreme Court of Minnesota 1952) *duty of care; kickbacks 

 

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FACTS: agent misrepresented to plaintiff-principal that the seller had more revenue and locations than in reality, so the principal instructed agent to enter into contract with the seller based on those misrepresentations; when the principal found out about the misrepresentations, he tried to rescind on the contract with the seller, but the sellers refused, so the principal sued the sellers for the return of his deposit and they settled; principal sued his agent for the secret commission and to make whole HOLDING: principal can recover ALL unjust enrichment earned by the agent at the principal’s expense REASONING: the right to recover profits made by the agent in the course of the agency is not affected by the fact that the principal, upon discovering a fraud, has rescinded the contract and recovered that which he parted  the fact that the principal sued the seller and was made whole does NOT prevent the principal from recovering from the agent the profits which the agent has made  there’s clear harm to the principal – he over-paid for the product (kickback) LAW: all profits made by an agent in the course of an agency belong to the principal, whether they are the fruits of performance or the violation of a...