Monday, February 16, 2009
Reminder: No Class on Wednesday, February 18, 2008
I just wanted to provide one more note that we will not meet until next Monday. I hope you have a great week, and I'll see you one week from today.
Monday, February 9, 2009
Cases for Upcoming Classes
Monday, February 2, 2009
Independent Board of Directors: NYSE
Today we discussed the rule requiring independent boards for companies listed on the New York Stock Exchange. The tests for independence, and some commentary, are available here.
Friday, January 16, 2009
Q & A Related to Class 1
Question: When you were talking about the liability for the promoter of a corporation for pre-incorporation activity, you presented a question that asked once the articles of incorporation are filed, is the promoter liable if the corporation breaches any pre-incorporation contracts? I took from that discussion that the promoter is liable for those pre-incorporation contracts, (under MBCA 2.04) but why? Is it because the promoter created an arms-length transaction with the person at the other end of the contract (since the corporation didn’t exist at the time) and thus is directly tied to the transaction?
Answer: Yes. The Model Business Corporation Act (MBCA) § 2.04, Liability for Preincorporation Transactions, provides:
Note that the promoter can disclose the corporation does not yet exist and that he or she has no intention of being bound. If made expressly part of the agreement, the promoter should be able to escape personal liability. Because the corporation did not exist, there is no other party to be bound; as such, knowing no corporation had been formed, the promoter remains bound unless released. The message – form the corporation first, then sign contracts!
Question: Under the fourth example, if the articles are not filed or are defectively filed, can the defectively formed entity enforce the contract? Is the answer to that question, it depends…as in the courts will only allow the enforcement of such a pre-incorporation contracts where equity demands (such as part-performance)?
Answer: We will discuss this more in some of the cases we’ll cover, but the short answer is, yes, sometimes a defectively created company can enforce a contract. In fact, that’s kind of what happens in the first case we’ll discuss. There are two concepts that can allow this to happen: (1) de facto corporation doctrine and (2) corporation by estoppel. A court will often find a de facto corporation where the promoters (a) tried in good faith to incorporate, (b) had a legal right to incorporate, and (c) acted as a corporation. For corporation by estoppel, courts will enforce the contract where (a) the party claiming it is not a corporation thought it was a corporation all along and (b) that party would earn a windfall if allowed to claim the corporation did not exist. There can, in some situations, be some overlap between these two concepts. Either one can suffice.
Answer: Yes. The Model Business Corporation Act (MBCA) § 2.04, Liability for Preincorporation Transactions, provides:
“All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this Act, are jointly and severally liable for all liabilities created while so acting.”
Note that the promoter can disclose the corporation does not yet exist and that he or she has no intention of being bound. If made expressly part of the agreement, the promoter should be able to escape personal liability. Because the corporation did not exist, there is no other party to be bound; as such, knowing no corporation had been formed, the promoter remains bound unless released. The message – form the corporation first, then sign contracts!
Question: Under the fourth example, if the articles are not filed or are defectively filed, can the defectively formed entity enforce the contract? Is the answer to that question, it depends…as in the courts will only allow the enforcement of such a pre-incorporation contracts where equity demands (such as part-performance)?
Answer: We will discuss this more in some of the cases we’ll cover, but the short answer is, yes, sometimes a defectively created company can enforce a contract. In fact, that’s kind of what happens in the first case we’ll discuss. There are two concepts that can allow this to happen: (1) de facto corporation doctrine and (2) corporation by estoppel. A court will often find a de facto corporation where the promoters (a) tried in good faith to incorporate, (b) had a legal right to incorporate, and (c) acted as a corporation. For corporation by estoppel, courts will enforce the contract where (a) the party claiming it is not a corporation thought it was a corporation all along and (b) that party would earn a windfall if allowed to claim the corporation did not exist. There can, in some situations, be some overlap between these two concepts. Either one can suffice.
Tuesday, January 13, 2009
Next Class Topic: Law & Economics; Revised Syllabus Posted
I have updated and revised the syllabus because so many people do not yet have the text. The books should be available soon, so we'll pick up with the reading assignments starting next Wednesday, January 21, 2009. There is no reading assignment for class tomorrow (January 14, 2oo9). Please click here for the revised syllabus.
For tomorrow, we'll talk about law and economics, which will hopefully lead to some good discussion and provide a foundation for the law and cases we will consider this semester.
In preparation for class tomorrow, consider the following, posted by the good folks over at Truth on the Market:
For tomorrow, we'll talk about law and economics, which will hopefully lead to some good discussion and provide a foundation for the law and cases we will consider this semester.
In preparation for class tomorrow, consider the following, posted by the good folks over at Truth on the Market:
Monday, January 12, 2009
Bookstore Update
The bookstore claims that they will have as many as 45 books by late Wednesday. You should obtain your book from whomever you wish, but I wanted you to know this (hopefully) should be an option if you would prefer to deal with the bookstore here.
Revised Syllabus Pending; Book Information
As noted, I will provided a revised syllabus later today or tomorrow that will adjust for the fact that textbooks are not available for everyone. I have placed one copy of the book on reserve in the library, but obviously that will not serve everyone's needs.
I cannot guarantee the quality of any of the book sellers, but Amazon has a number of copies available, both new and used. click here for Amazon options.
I cannot guarantee the quality of any of the book sellers, but Amazon has a number of copies available, both new and used. click here for Amazon options.
Subscribe to:
Comments (Atom)
