Bar 10

• Duty of Loyalty
• 1) to account for all profits derived by the partner
• 2) not to deal with the partnership with adverse interests, AND
• 3) not compete with the partnership
• Duty of Care - refrain from engagint in negligent, reckless, or unlawful conduct

• 1) Duty of Care
• 2) Duty to Obey
• 3) Duty of Loyalty

Breaching a duty not to use inside info for personal benefit.

• Tippers are liable if:
• 1) gives inside info to someone else
• 2) who trades on the basis of the info, AND
• 3) tip was made for improper purpose
• Tippees are liable if:
• 1) tipper breached a duty, AND
• 2) tippee knew tipper breached duty

Trading info about supply and demand for a stock in breach of a duty of trust and confidence owed to the source of info.

• The Corp adopts the contract by:
• 1) Express Board of Directors Resolution OR
• 2) Implied Adoption through knowledge of the contract and acceptance of its benefits.

• Elements:
• 1) Misrepresentation of a material fact,
• 2) Use of Interstate Commerce,
• 3) Scienter, AND
• 4) Connection with actual purchase of sale of a security.
• For recovery of damages, also:
• 5) Reliance
• 6) Cause of Loss

• A shareholder may assert the corp's rights if:
• 1) shareholder had ownership at time of the wrong, AND
• 2) shareholder made a written demand on the directors to sue

For directors and officers, there is no liability for consequences of a business decisions if they exercised due care, acted in good faith, and had a rational basis for the decision.

• Duty of Care
• Duty to Disclose material corp info to other members
• Duty of Loyalty

• Mandatory Indemnification: if won
• Discretionary Indemnification: if did not win, grant of indeminfication if:
• 1) acted in good faith AND
• 2) believed action was in the best interests of the corp,

• 1) Board adopts a resolution,
• 2) Written notice given to shareholders,
• 3) Approval by majority of votes entitled to be cast by shareholders,
• 4) Filing with the state.
• Also, there is a Dissenter's Right of Appraisal.

• A shareholder who dissents to a fundamental change may force the corp to buy her shares at FMV.
• Procedure:
• 1) Before vote, file written notice of objection,
• 2) Not vote in favor, AND
• 3) Written demand to be bought out.

• A shareholder may take action to dissolve the corporation if:
• 1) the directors become deadlocked in management,
• 2) the directors are committing fraud or crimes, OR
• 3) the directors are wasting corporate assets.

• Any profits realized by directors, officers, or shareholders owning >10% must return profits to the corporation if made a purchase and sale within 6 months.
• Applies to publically held corporations:
• 1) with >$10mil in assets and 500+ shareholders, OR
• 2) whose share are traded on a national exchange.

There is a principal-agent relationship and the tort was comitted within the scope of that relationship.

• Req's:
• 1) Assent - an informal agreement b/w Principal and Agent
• 2) Benefit - Agent's conduct is for Principal's benefit, AND
• 3) Control - Principal must have Right to Control by having power to supervise the manner of the Agent's performance

• Scope is determined by factors:
• 1) Kind of conduct
• 2) Frolic or Detour
• 3) Intent of Agent to benefit the Principal

• Principal uses written or oral words to express authority.
• EXCEPTION: Must be in writing if Contract is subject to the Statute of Frauds.
• Revocable by:
• 1) Unilateral Act of either Principal or Agent, OR
• 2) Death or Incapacity of Principal, UNLESS Agent has Durable Power of Attorney.

• Agent reasonably believes he has authority through Principal's conduct or circumstances.
• Factors:
• 1) Necessity
• 2) Custom
• 3) Prior Dealings

• Elements:
• 1) Principal cloaked agent with appearance of authority, AND
• 2) 3rd Party reasonably relies on the appearance of authority.

• Authority can be granted after the contract has been entered if:
• 1) Principal has knowledge af the material facts of the contract, AND
• 2) Principal accepts its benefits,
• EXCEPTION: No altered terms

• Generally: Agent is not liable
• Exception: if principal is partially disclosed or undisclosed, authorized agent may be liable at the election of the 3rd party

An association of 2 or more persons who are carrying on as co-owners of a business for profit.

• 1) All Creditors must be paid, THEN
• 2) All Capital Contributors must be paid, THEN
• 3) Profits and Surpluses are shared equally, absent agreement to the contrary.