Agency.............................................................................................................................................2
Gay Jensen Farms Co. v. Cargill (Implied Agency Relationship)............................................. 2
Ophthalmic Surgeons, Ltd. Paychex, Inc...................................................................................3
Community Counselling Service Inc. v. Reilly......................................................................... 4
Partnership - (only general).......................................................................................................... 4
Meinhard v. Salmon................................................................................................................... 6
Partnership Endgame Terminology......................................................................................6
McCormick v. Brevig.................................................................................................................8
Corporations...................................................................................................................................8
Campbell v. Loew’s (removing directors)............................................................................... 10
Corporation’s Purpose/Fiduciary Duties..................................................................................11
Dodge V. Ford Motor Co. (Mich. 1919)............................................................................ 12
Duty of Loyalty........................................................................................................................13
Self Dealing............................................................................................................................. 17
In Re Walt Disney Co. Derivative Litig. (disney standard)............................................... 17
In Re Caremark (failure to oversee=bad faith) (caremark standard)................................. 18
Duty of Care - Contrast Smith v Disney..................................................................................19
Shareholder Litigation............................................................................................................. 19
United/Tri-State v. Zuckerberg (Del. 2021) (Demand Futility Test ONLY DERIVATIVE).
20
Mergers and Acquisitions............................................................................................................22
Hostile Acquisitions/Transactions/Takeovers............................................................................24
Unocal Corp. v. Mesa Petroleum Co. Enhanced Scrutiny (Conditional Business Judgment
Rule).........................................................................................................................................24
Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Directors’ Duties in a Sale................ 25
Coster– Combined (Schnell/ Blasius + Unocal) Standard of Review (if met end of
inquiry)...............................................................................................................................26
Limited Liability Company (LLC).............................................................................................26
Piercing the Veil of Limited Liability......................................................................................... 27
K.C. Roofing Ctr. v. On Top Roofing, Inc. Veil Piercing Test (from Fletcher)................. 28
Disclosure and Corporate Regulation........................................................................................ 28
Insider Trading.............................................................................................................................29
EXAM........................................................................................................................................... 33
Demand - Derivative.............................................................................................................. 33
Demand - When a direct claim................................................................................................ 33
Duty of Care -.......................................................................................................................... 34
Duty of Loyalty — Conflicts of Interest..................................................................................34
Duty of Loyalty - Good Faith.................................................................................................. 35
1
, Revlon Duties...........................................................................................................................35
Election Interference................................................................................................................36
Securities Fraud.....................................................................................................................36
Agency
Restatement (Third) of Agency § 1.01 Agency Defined
Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent
to another person (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.
● Assent is determined objectively: it depends on outward words or conduct, not on
subjective thoughts
● Parties do not have to intend to create an agency relationship or to call it that (Cargill)
● Consideration is not necessary; an agent can act gratuitously (Cargill)
● Agency requires an agreement but not a contract (Cargill)
● Behalf: Agent represents its principal in transactions with third parties or is principal’s
employee
● Control: Principal initially states what agent shall and shall not do AND has the right to
give interim instructions (comment f) – Agent has duty to comply with all lawful
instructions (8.09(2))
● The principal does not have to actually benefit from the agent’s action to find an agency
relationship
● Examples
○ Ex of an agent:
■ You’re a GC and hire a plumber to help build a house plumber is your
agent
■ Officers and corporation
○ Ex of NOT an agent:
■ If you hire a plumber to install a sink in your apartment, they’re not acting
on your behalf – they’re not your employee they’re an independent
contractor
■ Officers and board of directors
■ Directors and shareholders
Gay Jensen Farms Co. v. Cargill (Implied Agency Relationship)
Takeaway: Agency relationships don’t have to be explicitly stated, they can be based on the
elements of consent by both parties and control exercised.
Test/Elements:
2
,Express/implied consent by principal: when principal allows agent to represent it to third parties
Express/implied consent by agent: when agent accepts benefits from principal
Control exercised by principal over agent: e.g. rights that agent has to give to principal
Principal’s Contractual Liability
An agent can bind a principal to a contract when
● the agent acts with actual authority (express or implied); (2.01)
○ A acts, reasonably believing that his action is in accordance w/ P’s manifestation
to A, that P wishes A to so act.
○ necessary or incidental to achieving the principal’s objectives (2.02)
■ P (expressly or implicitly) manifested consent directly to the A
● Implicity- ex. P approved multiple times in past
● the agent acts with apparent authority; or (2.03)
○ When a 3rd party reasonably believes an actor has authority to act on P’s behalf &
that belief is traceable to P’s manifestations. (Paychex)
■ P manifested directly to 3rd party or others made manifestation to 3rd
party (traceable to P)
■ P can make manifestation by having an A make statement to 3rd Party or
placing an A in a position within an organization
Ophthalmic Surgeons, Ltd. Paychex, Inc.
Takeaway: A principal is liable for actions of its agent within the scope of the agent’s apparent
authority, even if the actions exceeded the scope of the agent’s actual authority.
Apparent authority: The words or conduct of a principal, when conveyed to the third party can
establish the appearance of such authority.
Agent's Contractual Liability
If an agent enters a contract on the principal's behalf and binds the principal to it, the agent may
also become a party to the contract and liable under it, depending on
- whether the contract's terms provide that the agent is not a party or liable; and
- whether the agent discloses to the third party the principals' existence and identity
3
, Fiduciary Duties In general
Require one party to put the other party's interests ahead of her own
Are intended to
● protect those who delegate authority against negligence, disloyalty, and other misconduct;
● incent people to hire employees, join firms, and invest in businesses;
● reduce transaction costs by avoiding or shortening contracts; and
● reduce agency costs by aligning interests
Include separate duties of care and loyalty
Restatement (Third) of Agency § 8.01 General Fiduciary Principle
An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected
with the agency relationship.
In the concept of agency: An agent has duties:
● “Not to acquire a material benefit from a third party…through…use of the agent’s
position”.
● “Not to deal with the principal as or on behalf of an adverse party in a transaction
connected with the agency relationship”.
● “not to take personal advantage of an opportunity and not to give the opportunity to a
third person, when either the nature of the opportunity or the circumstances under which
the agent learned of it require that the agent offer the opportunity to the principal”;
● “Throughout the duration of an agency relationship…to refrain from competing with the
principal and from…assisting the principal’s competitors”. (Taser)
● “Not to use property of the principal” or “to use or communicate confidential information
of the principal for the agent’s own purposes or those of a third party”. (Taser)
● “To use reasonable effort to provide the principal with facts…when…the agent knows or
has reason to know that the principal would wish to have the facts, or the facts are
material to the agent’s duties to the principal” (Taser)
Community Counselling Service Inc. v. Reilly
Takeaways: Agents (such as employees) owe their principals fiduciary duties, including the duty
of loyalty. For an agent, duty of loyalty means putting the interests of the principal above the
agents.
See: Restatement of Agency 8.01
Partnership - (only general)
General Partnership: 2/ more people assent to carry on as co-owners of for-profit business
**Many of these are default rules that can be modified by the partnership agreement
4
Gay Jensen Farms Co. v. Cargill (Implied Agency Relationship)............................................. 2
Ophthalmic Surgeons, Ltd. Paychex, Inc...................................................................................3
Community Counselling Service Inc. v. Reilly......................................................................... 4
Partnership - (only general).......................................................................................................... 4
Meinhard v. Salmon................................................................................................................... 6
Partnership Endgame Terminology......................................................................................6
McCormick v. Brevig.................................................................................................................8
Corporations...................................................................................................................................8
Campbell v. Loew’s (removing directors)............................................................................... 10
Corporation’s Purpose/Fiduciary Duties..................................................................................11
Dodge V. Ford Motor Co. (Mich. 1919)............................................................................ 12
Duty of Loyalty........................................................................................................................13
Self Dealing............................................................................................................................. 17
In Re Walt Disney Co. Derivative Litig. (disney standard)............................................... 17
In Re Caremark (failure to oversee=bad faith) (caremark standard)................................. 18
Duty of Care - Contrast Smith v Disney..................................................................................19
Shareholder Litigation............................................................................................................. 19
United/Tri-State v. Zuckerberg (Del. 2021) (Demand Futility Test ONLY DERIVATIVE).
20
Mergers and Acquisitions............................................................................................................22
Hostile Acquisitions/Transactions/Takeovers............................................................................24
Unocal Corp. v. Mesa Petroleum Co. Enhanced Scrutiny (Conditional Business Judgment
Rule).........................................................................................................................................24
Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc. Directors’ Duties in a Sale................ 25
Coster– Combined (Schnell/ Blasius + Unocal) Standard of Review (if met end of
inquiry)...............................................................................................................................26
Limited Liability Company (LLC).............................................................................................26
Piercing the Veil of Limited Liability......................................................................................... 27
K.C. Roofing Ctr. v. On Top Roofing, Inc. Veil Piercing Test (from Fletcher)................. 28
Disclosure and Corporate Regulation........................................................................................ 28
Insider Trading.............................................................................................................................29
EXAM........................................................................................................................................... 33
Demand - Derivative.............................................................................................................. 33
Demand - When a direct claim................................................................................................ 33
Duty of Care -.......................................................................................................................... 34
Duty of Loyalty — Conflicts of Interest..................................................................................34
Duty of Loyalty - Good Faith.................................................................................................. 35
1
, Revlon Duties...........................................................................................................................35
Election Interference................................................................................................................36
Securities Fraud.....................................................................................................................36
Agency
Restatement (Third) of Agency § 1.01 Agency Defined
Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent
to another person (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.
● Assent is determined objectively: it depends on outward words or conduct, not on
subjective thoughts
● Parties do not have to intend to create an agency relationship or to call it that (Cargill)
● Consideration is not necessary; an agent can act gratuitously (Cargill)
● Agency requires an agreement but not a contract (Cargill)
● Behalf: Agent represents its principal in transactions with third parties or is principal’s
employee
● Control: Principal initially states what agent shall and shall not do AND has the right to
give interim instructions (comment f) – Agent has duty to comply with all lawful
instructions (8.09(2))
● The principal does not have to actually benefit from the agent’s action to find an agency
relationship
● Examples
○ Ex of an agent:
■ You’re a GC and hire a plumber to help build a house plumber is your
agent
■ Officers and corporation
○ Ex of NOT an agent:
■ If you hire a plumber to install a sink in your apartment, they’re not acting
on your behalf – they’re not your employee they’re an independent
contractor
■ Officers and board of directors
■ Directors and shareholders
Gay Jensen Farms Co. v. Cargill (Implied Agency Relationship)
Takeaway: Agency relationships don’t have to be explicitly stated, they can be based on the
elements of consent by both parties and control exercised.
Test/Elements:
2
,Express/implied consent by principal: when principal allows agent to represent it to third parties
Express/implied consent by agent: when agent accepts benefits from principal
Control exercised by principal over agent: e.g. rights that agent has to give to principal
Principal’s Contractual Liability
An agent can bind a principal to a contract when
● the agent acts with actual authority (express or implied); (2.01)
○ A acts, reasonably believing that his action is in accordance w/ P’s manifestation
to A, that P wishes A to so act.
○ necessary or incidental to achieving the principal’s objectives (2.02)
■ P (expressly or implicitly) manifested consent directly to the A
● Implicity- ex. P approved multiple times in past
● the agent acts with apparent authority; or (2.03)
○ When a 3rd party reasonably believes an actor has authority to act on P’s behalf &
that belief is traceable to P’s manifestations. (Paychex)
■ P manifested directly to 3rd party or others made manifestation to 3rd
party (traceable to P)
■ P can make manifestation by having an A make statement to 3rd Party or
placing an A in a position within an organization
Ophthalmic Surgeons, Ltd. Paychex, Inc.
Takeaway: A principal is liable for actions of its agent within the scope of the agent’s apparent
authority, even if the actions exceeded the scope of the agent’s actual authority.
Apparent authority: The words or conduct of a principal, when conveyed to the third party can
establish the appearance of such authority.
Agent's Contractual Liability
If an agent enters a contract on the principal's behalf and binds the principal to it, the agent may
also become a party to the contract and liable under it, depending on
- whether the contract's terms provide that the agent is not a party or liable; and
- whether the agent discloses to the third party the principals' existence and identity
3
, Fiduciary Duties In general
Require one party to put the other party's interests ahead of her own
Are intended to
● protect those who delegate authority against negligence, disloyalty, and other misconduct;
● incent people to hire employees, join firms, and invest in businesses;
● reduce transaction costs by avoiding or shortening contracts; and
● reduce agency costs by aligning interests
Include separate duties of care and loyalty
Restatement (Third) of Agency § 8.01 General Fiduciary Principle
An agent has a fiduciary duty to act loyally for the principal's benefit in all matters connected
with the agency relationship.
In the concept of agency: An agent has duties:
● “Not to acquire a material benefit from a third party…through…use of the agent’s
position”.
● “Not to deal with the principal as or on behalf of an adverse party in a transaction
connected with the agency relationship”.
● “not to take personal advantage of an opportunity and not to give the opportunity to a
third person, when either the nature of the opportunity or the circumstances under which
the agent learned of it require that the agent offer the opportunity to the principal”;
● “Throughout the duration of an agency relationship…to refrain from competing with the
principal and from…assisting the principal’s competitors”. (Taser)
● “Not to use property of the principal” or “to use or communicate confidential information
of the principal for the agent’s own purposes or those of a third party”. (Taser)
● “To use reasonable effort to provide the principal with facts…when…the agent knows or
has reason to know that the principal would wish to have the facts, or the facts are
material to the agent’s duties to the principal” (Taser)
Community Counselling Service Inc. v. Reilly
Takeaways: Agents (such as employees) owe their principals fiduciary duties, including the duty
of loyalty. For an agent, duty of loyalty means putting the interests of the principal above the
agents.
See: Restatement of Agency 8.01
Partnership - (only general)
General Partnership: 2/ more people assent to carry on as co-owners of for-profit business
**Many of these are default rules that can be modified by the partnership agreement
4
