Business Associations: Summary and Exam Prep

This lecture provides an overview of agency law, a core concept in business associations. It explains the definition and key elements of an agency relationship, including mutual consent, action on behalf of the principal, and the principal's right to control the agent. The text distinguishes between different types of authority an agent can possess, such as actual (express and implied) authority, apparent authority, and authority created through ratification. It also outlines the fiduciary duties owed by agents to principals (loyalty, care, obedience) and the principal's duties to the agent (compensation, reimbursement, indemnification). Finally, the lecture discusses liability to third parties for both contracts and torts, methods for terminating agency, and highlights relevant case law, doctrinal debates, practical applications, and policy considerations.The three key elements of agency are assent by both parties (mutual consent), action on behalf of the principal, and control exercised by the principal.An agency relationship can be formed when one person asks a friend to do something on their behalf, and the friend agrees, even without a formal contract or payment, like asking a friend to pick up dry cleaning.Ratification occurs when a principal approves or adopts an act performed by an agent who did not initially have the authority to do so. By ratifying, the principal becomes bound as if the agent had authority from the start.Watteau v. Fenwick held a principal liable for acts of an agent that exceeded actual authority, provided the acts were of the type usually entrusted to such an agent, reflecting a broad view of liability.One defining characteristic of a corporation is the limited liability of shareholders, meaning their personal assets are protected from the corporation's debts and obligations.The board of directors is responsible for the centralized management of a corporation, typically overseeing daily operations and appointing officers.Piercing the corporate veil is a doctrine where courts disregard the separate legal entity status of a corporation to hold shareholders personally liable for the corporation's debts or obligations, usually when there is fraud, injustice, or the corporation is a mere alter ego.In a general partnership, all partners are jointly and severally liable for partnership debts, while in an LLP, partners typically have limited liability for partnership debts and are shielded from liability for the malpractice of other partners.The duty of loyalty requires partners to act with the punctilio of an honor the most sensitive, meaning they must be honest, candid, and fair in all aspects of the partnership relationship and cannot take advantage of opportunities meant for the partnership.A derivative suit is a lawsuit brought by a shareholder on behalf of the corporation to enforce a right or remedy a wrong when the corporation's management fails to do so.