Fall 2012 Business Organizations
AGENCY
Reciprocal Duties of Agent and Principal (20-39)
Community Counseling Service
Need for non-competition clause in contract – but must be careful not to violate public policy
What is the duty of a party to the firm when he is planning to leave but hasn’t yet left?
You cannot seek out firm’s clients while you are still working there
Hamburger
Did not solicit clients’ business while he was still their employ
Anderson Rule: categorical – fiduciary duty obliges the fiduciary to act in the best interests of his client or beneficiary and to refrain from self-interested behavior not specifically allowed by the employment contract.
Easterbrook and Fischel Rule: difficult to apply in practice – socially optimal fiduciary rules approximate the bargain that investors and agent would strike if they were able to dicker at no cost. (not a great rule because there are always transaction costs)
Limitations on the right to discharge
Foley
Must decide what the relationship between the parties is: independent contractor, employee, etc?
Cannot be fired for irrational reasons or for certain protected reasons (if employee)
Employees invest and rely, therefore they need protection
Alleged public policy: employees doing the right thing for their employer
Court says there is no public interest in helping a private employer
Employer’s interest ≠ public interest
Employer handbook can be used as evidence to prove it is not at-will employment
Tortious breach of good faith and fair dealing – Court says no, there would be no duty to mitigate for contract breaches, therefore it’s not a good idea
Duty to Creditors (39-49)
Blackburn
3P reasonably believed A was acting with the authority of P, P did nothing to discourage her belief
Sennot
All partners are agents for the principal, by default
PARTNERSHIP
Partnerships and other Non-Corporate Forms
GPs
An association of two or more people to carry on, as co-owners of a business for profit
A lot of litigation is
Reciprocal Duties of Agent and Principal (20-39)
Community Counseling Service
Need for non-competition clause in contract – but must be careful not to violate public policy
What is the duty of a party to the firm when he is planning to leave but hasn’t yet left?
You cannot seek out firm’s clients while you are still working there
Hamburger
Did not solicit clients’ business while he was still their employ
Anderson Rule: categorical – fiduciary duty obliges the fiduciary to act in the best interests of his client or beneficiary and to refrain from self-interested behavior not specifically allowed by the employment contract.
Easterbrook and Fischel Rule: difficult to apply in practice – socially optimal fiduciary rules approximate the bargain that investors and agent would strike if they were able to dicker at no cost. (not a great rule because there are always transaction costs)
Limitations on the right to discharge
Foley
Must decide what the relationship between the parties is: independent contractor, employee, etc?
Cannot be fired for irrational reasons or for certain protected reasons (if employee)
Employees invest and rely, therefore they need protection
Alleged public policy: employees doing the right thing for their employer
Court says there is no public interest in helping a private employer
Employer’s interest ≠ public interest
Employer handbook can be used as evidence to prove it is not at-will employment
Tortious breach of good faith and fair dealing – Court says no, there would be no duty to mitigate for contract breaches, therefore it’s not a good idea
Duty to Creditors (39-49)
Blackburn
3P reasonably believed A was acting with the authority of P, P did nothing to discourage her belief
Sennot
All partners are agents for the principal, by default
PARTNERSHIP
Partnerships and other Non-Corporate Forms
GPs
An association of two or more people to carry on, as co-owners of a business for profit
A lot of litigation is