(BQ) Part 2 book Business law - An the legal environment has contents: Relationship of principal and agent, relationship with third parties, formation and internal relations of general partnerships, environmental law, international business law, consumer protection, interests in real property,...and other contents.
PART VI AGENCY CHAPTER 28 Relationship of Principal and Agent 524 CHAPTER 29 Relationship with Third Parties 544 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Relationship of Principal and Agent CHAPTER 28 Practically all of the world’s business involves agents and in most important transactions, an agent on each side Warren Seavey Handbook on the Law of Agency CHAPTER OUTCOMES After reading and studying this chapter, you should be able to: Distinguish among the following relationships: (a) agency, (b) employment, and (c) independent contractor Explain the requirements for creating an agency relationship List and explain the duties owed by an agent to her principal List and explain the duties owed by a principal to his agent Identify the ways in which an agency relationship may be terminated y using agents, one person (the principal) may enter into any number of business transactions as though he had carried them out personally, thus multiplying and expanding his business activities The law of agency, like the law of contracts, is basic to almost every other branch of business law Practically every type of contract or business transaction can be created or conducted through an agent Therefore, the place and importance of agency in the practical conduct and operation of business cannot be overemphasized, particularly in the case of partnerships, corporations, and other business associations Partnership is founded on the agency of the partners Each partner is an agent of the partnership and as such has the authority to represent and bind the partnership in all usual transactions of the partnership Corporations, in turn, must act through the agency of their officers and employees Limited liability companies act through the actions of their members, managers, or both Thus, practically and legally, agency is an essential part of partnerships, corporations, and other business associations In addition, sole proprietors also may employ agents in the operations of their businesses Business, therefore, is conducted largely by agents or representatives, not by the owners themselves Although some overlap occurs, the law of agency divides broadly into two main parts: the internal and the external An agent functions as an agent by dealing with third persons, thereby establishing legal relationships between her principal and those third persons These relationships are the external part of agency law, which we will discuss in the next chapter In this chapter, we will consider the nature and function of agency, as well as other topics concerning the internal part of the law of agency Agency is governed primarily by state common law An orderly presentation of this law is found in the Restatement (Second) of the Law of Agency published in 1958 by the American Law Institute (ALI) Regarded as a valuable authoritative reference work, the Restatement is cited extensively and quoted in reported judicial opinions and by legal scholars In 2006 the ALI published the Restatement of the Law Third, B 524 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent 525 Agency, which replaced the ALI’s Restatement Second of Agency This chapter and the next chapter will refer to the Third Restatement as the Restatement NATURE OF AGENCY [28-1] Agency consensual relationship authorizing one party (agent) to act on behalf of the other party (principal) subject to the principal’s control Agent person authorized to act on another’s behalf Principal person who authorizes another to act on her behalf Scope of agency purposes whatever business activity a person may accomplish personally he generally may through an agent Agency is a consensual relationship in which one person (the agent) acts as a representative of, or otherwise acts on behalf of, another person (the principal) with power to affect the legal rights and duties of the principal Moreover, the principal has a right to control the actions of the agent An agent is, therefore, one who represents another, the principal, in business dealings with a third person, and the operation of agency therefore involves three persons: the principal, the agent, and a third person who deals with the agent In dealings with a third person, the agent acts for and in the name and place of the principal, who, along with the third person, is a party to the transaction The result of the agent’s functioning is exactly the same as if the principal had dealt directly with the third person However, if the existence and identity of the principal are disclosed, the agent acts not as a party but simply as an intermediary Within the scope of the authority granted to her by her principal, the agent may negotiate the terms of contracts with others and bind her principal to such contracts Moreover, the negligence of an agent who is an employee in conducting the business of her principal exposes the principal to tort liability for injury and loss suffered by third persons Scope of Agency Purposes [28-1a] As a general rule, a person may through an agent whatever business activity he may accomplish personally Conversely, whatever he cannot legally do, he cannot authorize another to for him In addition, a person may not appoint an agent to perform acts that are so personal that their performance may not be delegated to another, as in the case of a contract for personal services Other Legal Relationships [28-1b] Employment relationship one in which the employer has the right to control the manner and means of the employee’s performance of work Independent contractor person who contracts with another to a particular job and is not subject to the other’s control over the manner and means of conducting the work Practical Advice When appointing an agent, consider structuring the relationship as a principal and independent contractor Two other legal relationships overlap with the agency relationship: employer–employee and principal–independent contractor In the employment relationship, for the purposes of vicarious liability discussed in Chapter 29, an employee is an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work All employees are agents, even those employees not authorized to contract on behalf of the employer or otherwise to conduct business with third parties Thus, an assembly-line worker in a factory is an agent of the company employing her since she is subject to the employer’s control, thereby consenting to act “on behalf” of the principal, but she does not have the right to bind the principal in contracts with third parties Although all employees are agents, not all agents are employees Agents who are not employees are generally referred to as independent contractors (The Third Restatement does not use this term.) In these cases, although the principal has the right of control over the agent, the principal does not control the manner and means of the agent’s performance For instance, an attorney retained to handle a particular transaction would be an independent contractor– agent regarding that particular transaction because the attorney is hired by the principal to perform a service, but the manner of the attorney’s performance is not controlled by the principal Other examples are auctioneers, brokers, and factors Finally, not all independent contractors are agents because the person hiring the independent contractor has no right of control over the independent contractor For example, a taxicab driver hired to carry a person to the airport is not an agent of that person Likewise, if Pam hires Bill to build a stone wall around her property, Bill is an independent contractor who is not an agent The distinction between employee and independent contractor has a number of important legal consequences For example, as we will discuss in the next chapter, a principal is liable for the torts an employee commits within the scope of her employment but ordinarily is not liable for torts committed by an independent contractor The following case further explains the differences between an employee and an independent contractor Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 526 PART VI Agency In addition, under numerous federal and state statutes, the obligations of a principal apply only to agents who are employees These statutes cover such matters as labor relations, employment discrimination, disability, employee safety, workers’ compensation, social security, minimum wage, and unemployment compensation We will discuss these and other statutory enactments affecting the employment relationship in Chapter 41 Del Pilar v DHL Global Customer Solutions (USA), Inc District Court of Appeal of Florida, First District, 2008 993 So.2d 142 http://scholar.google.com/scholar_case?q=993+So.2d+142&hl=en&as_sdt=2,34&case=9058638460907179646&scilh=0 FACTS Danny Del Pilar sustained injuries when his car collided with a delivery van painted in yellow, the widely recognized DHL color, and displaying the DHL name and logo The truck was driven by a driver clad in a DHL uniform and laden with packages destined for DHL customers The van was owned not by DHL, but by Johnny Boyd, a driver for Silver Ink, Inc., a local company that was responsible at the time for picking up, sorting, and delivering all DHL packages in metropolitan Jacksonville, Duval County, Florida Boyd, working for Silver Ink on the DHL contract, was shuttling DHL packages when the accident occurred DHL, whose primary business focuses on shipping packages via air around the world, has no capability to pick up or deliver local packages in Duval County and, at the time of the accident, it relied exclusively on Silver Ink to provide such local services DHL’s agreement with Silver Ink essentially delegated to Silver Ink the responsibility to service DHL customers in the Jacksonville area The contract identified Silver Ink as an “independent contractor” and provided that “the manner and means by which Contractor performs the services shall be at Contractor’s sole discretion and control and are Contractor’s sole responsibility.” The agreement also, however, recited an exhaustive and detailed list of procedures that Silver Ink employees were to follow in processing, picking up, and delivering packages, and contained a provision under which Silver Ink was required to indemnify DHL in the event Silver Ink lost or damaged packages bound for DHL’s customers The agreement gave either party the power to terminate in the event of the other party’s breach Silver Ink employees were contractually required to “wear a DHL uniform and properly display the DHL Marks [sic] and uniform in a clean, professional, and businesslike manner”; the contract specified the particular articles of clothing and accessories considered part of the DHL uniform, the purchase of which was funded by DHL Silver Ink was required to submit to unannounced operational inspections and audits at DHL’s sole discretion and was required to maintain a fleet of delivery vans operated in DHL livery, designed and placed on the vehicles in strict accordance with specifications established by DHL Silver Ink’s operational hub was co-located with DHL’s Duval County facility and DHL employees monitored and reviewed Silver Ink operations on a daily basis Danny Del Pilar sued DHL for his personal injuries arising from the auto accident The trial court granted summary judgment for DHL after concluding that Silver Ink was an independent contractor for whose alleged negligence DHL is not vicariously liable Danny Del Pilar appealed DECISION Judgment reversed, and case is remanded OPINION Generally, a principal is not vicariously liable for the negligence of its independent contractor, but the principal is liable for the negligence of its agent Whether a person working on behalf of another is an agent or an independent contractor “is a question of fact … not controlled by descriptive labels employed by the parties themselves.” A particularly significant factor in the determination of status is “the degree of control exercised by the employer or owner over the agent More particularly, it is the right of control, and not actual control, which determines the relationship between the parties.” In most cases, the terms of a contract between the parties is a pertinent index of the principal’s right of control and should factor heavily into the inquiry, “unless other provisions of the agreement, or the parties’ actual practice, demonstrate that it is not a valid indicator of status [or] … belie the creation of the status agreed to by the parties.” In that case, “the actual practice and relationship of the parties should control.” Elements of control that tend to suggest a relationship in which the principal is vicariously liable for the agent’s negligence include, but are not limited to (1) the principal’s right to control the agent’s use of the principal’s trademarks; (2) reservation to the principal of the unilateral right to prohibit the agent from working on behalf of competitors; (3) a requirement that the agent’s employees must undergo training before they work on the principal’s behalf; (4) a requirement that the agent perform services using only equipment selected pursuant to the principal’s specifications; (5) a requirement that the agent, when working on behalf of the principal, use a vehicle with the principal’s logo, placed according to parameters established by the principal; (6) a requirement that the agent adhere to customer-service procedures established by the principal; and (7) a requirement that the agent submit to inspections conducted at the principal’s discretion Here, the contract between DHL and Silver Ink certainly recites in conclusory terms the status of independent contractor The balance of DHL’s contract with Silver Ink “leaves nothing to chance.” Somewhat inconsistently with the conclusory language purporting to confer broad discretion upon Silver Ink to fulfill its operational obligations, subsequent provisions list specific procedures and protocols that Silver Ink employees are to follow when picking up, sorting, and delivering DHL packages; everything from the process of scanning packages into DHL’s tracking system to procedures for redelivery after unsuccessful delivery attempts is set out in detail in the agreement Shippers and recipients are “DHL customers,” and the agreement contains an indemnity provision requiring Silver Ink to indemnify DHL for damages stemming from packages lost or damaged due to Silver Ink’s negligence, suggesting that DHL intends, in the first instance, to answer directly to its customers The contract requires Silver Ink employees to “wear a DHL uniform and properly display the DHL Marks and uniform in a clean, professional, and businesslike Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 manner,” with further specification of the particular apparel considered part of the DHL uniform Silver Ink must operate delivery vehicles painted in the DHL livery and must submit to unannounced operational inspections and audits at DHL’s sole discretion Silver Ink must pick up and deliver packages at times requested by DHL’s customers pursuant to DHL’s advertised guarantees The trial court erred in concluding, as a matter of law, that Silver Ink was DHL’s independent contractor The question of DHL’s control over Silver Ink operations should go to the jury Relationship of Principal and Agent 527 INTERPRETATION Whether a person is an employee or an independent contractor is a question of fact not controlled by descriptive labels employed by the parties themselves A particularly significant factor in this determination is the degree of control exercised by the employer or owner over the agent, and it is the right of control, not actual control, which determines the relationship between the parties CRITICAL THINKING QUESTION Do you agree that this case requires further fact finding? Explain CREATION OF AGENCY [28-2] Gratuitous agency an agency created without consideration Agency by estoppel imposed by law when a person (P) causes a third person (T) to believe that another person (A) has authority to act on P’s behalf As stated, agency is a consensual relationship that the principal and agent may form by contract or agreement The Restatement defines an agency relationship as “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.” Thus, the agency relationship involves three basic elements: assent, control by the principal, and the agent’s acting on behalf of the principal A person can manifest assent or intention through written or spoken words or other conduct Thus, whether an agency relationship has been created is determined by an objective test If the principal requests another to act for him with respect to a matter and indicates that the other is to act without further communication, and the other consents to act, the relation of principal and agent exists For example, Paula writes to Austin, a factor whose business is purchasing goods for others, telling him to select described goods and ship them at once to Paula Before answering Paula’s letter, Austin does as directed, charging the goods to Paula He is authorized to this because an agency relationship exists between Paula and Austin The principal has the right to control the conduct of the agent with respect to the matters entrusted to the agent The principal’s right to control continues throughout the duration of the agency relationship The relationship of principal and agent is consensual and not necessarily contractual; therefore, it may exist without consideration Even though the agency relationship is consensual, how the parties label the relationship does not determine whether it is an agency An agency created without an agent’s right to compensation is a gratuitous agency For example, Patti asks her friend Andrew to return for credit goods recently purchased from a store If Andrew consents, a gratuitous agency has been created The power of a gratuitous agent to affect the principal’s relationships with third persons is the same as that of a paid agent, and his liabilities to and rights against third persons are the same as well Nonetheless, agency by contract, the most usual method of creating the relationship, must satisfy all of the requirements of a contract In some circumstances a person is held liable as a principal, even though no actual agency has been created, to protect third parties who justifiably rely on a reasonable belief that a person is an agent and who act on that belief to their detriment Called agency by estoppel, apparent agency, or ostensible agency, this liability arises when (1) a person (“principal”) intentionally or carelessly causes a third party to believe that another person (the “agent”) has authority to act on the principal’s behalf, (2) the principal has notice of the third party’s belief and does not take reasonable steps to notify the third party, (3) the third party reasonably and in good faith relies on the appearances created by the principal, and (4) the third party justifiably and detrimentally changes her position in reliance on the agent’s apparent authority When these requirements are met, the principal is liable to the third party for the loss the third party suffered by changing her position The doctrine is applicable when the person against whom estoppel is asserted has made no manifestation that an actor has authority as an agent, but is responsible for the third party’s belief that an actor is an agent, and the third party has justifiably been induced by that belief to undergo a detrimental change in position Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 528 PART VI Agency Miller v McDonald’s Corporation Court of Appeals of Oregon, 1997 150 Or.App 274, 945 P.2d 1107 http://scholar.google.com/scholar_case?case=16078633099320931234&q=945+P.2d+1107&hl=en&as_sdt FACTS Joni Miller seeks damages from defendant McDonald’s Corporation for injuries that she suffered when she bit into a heart-shaped sapphire stone while eating a Big Mac sandwich that she had purchased at a McDonald’s restaurant in Tigard McDonald’s claims it is not liable because the 3K Corporation owns the restaurant 3K owned and operated the restaurant under a License Agreement with McDonald’s that required 3K to operate in a manner consistent with the “McDonald’s System.” This system includes proprietary rights in trademarks, “designs and color schemes” for restaurant buildings and signs, and specifications for certain food products as well as other business practices and policies 3K, as the licensee, agreed to adopt and exclusively use the business practices of McDonald’s Despite these detailed instructions, the Agreement provided that 3K was not an agent of McDonald’s for any purpose Rather, it was an independent contractor and was responsible for all obligations and liabilities, including claims based on injury, illness, or death directly or indirectly resulting from the operation of the restaurant Miller was under the assumption that McDonald’s owned, controlled, and managed the restaurant because its appearance and menu were similar to that of other McDonald’s restaurants In short, Miller testified, she went to the Tigard McDonald’s because she relied on defendant’s reputation and because she wanted to obtain the same quality of service, standard of care in food preparation, and general attention to detail that she had previously enjoyed at other McDonald’s restaurants The trial court granted summary judgment to McDonald’s on the ground that it did not own or operate the restaurant; rather, the owner and operator was a nonparty, 3K Restaurants, which held a franchise from McDonald’s Miller appeals DECISION Reversed and remanded OPINION Under these facts, 3K would be directly liable for any injuries that Miller suffered as a result of the restaurant’s negligence The issue on summary judgment is whether there is evidence to permit a jury to find McDonald’s vicariously liable for those injuries because of its relationship with 3K Miller asserts two theories of vicarious liability: actual agency and apparent agency Under actual agency, in order for McDonald’s to be vicariously liable for 3K’s negligence, McDonald’s must have the right to control the method by which 3K performed its obligations under the Formalities usually no particular formality is required in a contract of agency, although appointments of agents for a period of more than one year must be in writing Agreement A number of courts have applied the right to control test to a franchise relationship If, in practical effect, the franchise Agreement goes beyond the stage of setting standards and allocates to the franchisor the right to exercise control over the daily operations of the franchise, an agency relationship exists We believe that a jury could find that McDonald’s retained sufficient control over 3K’s daily operations so that an actual agency relationship existed The Agreement did not simply set standards that 3K had to meet Rather, it required 3K to use the precise methods that McDonald’s established, including the ways in which 3K was to handle and prepare food McDonald’s enforced the use of those methods by regularly sending inspectors and by its retained power to cancel the Agreement That evidence would support a finding that McDonald’s had the right to control the way in which 3K performed at least food handling and preparation Miller next asserts that McDonald’s is vicariously liable for 3K’s alleged negligence because 3K was an apparent agent of McDonald’s The crucial issues are whether the putative principal held the third party out as an agent and whether Miller relied on that holding out McDonald’s does not seriously dispute that a jury could find that it held 3K out as its agent Everything about the appearance and operation of the Tigard McDonald’s identified it with the common image for all McDonald’s restaurants Rather, it argues that there is insufficient evidence that Miller justifiably relied on that holding out In this case, Miller testified that she relied on the general reputation of McDonald’s in patronizing the Tigard restaurant and in her expectation of the quality of the food and service that she would receive Especially in light of McDonald’s efforts to create a public perception of a common McDonald’s system at all McDonald’s restaurants, whoever operated them, a jury could find that Miller’s reliance was objectively reasonable The trial court erred in granting summary judgment on the apparent agency theory INTERPRETATION If a franchisor exercises sufficient control over its franchisee’s operations, actual agency and/or apparent agency can exist and cause the franchisor to be held vicariously liable as a principal for the acts of the franchisee even if their written agreement provides that no agency relationship exists CRITICAL THINKING QUESTION Do you agree that a franchise relationship should under certain circumstances be treated as an agency relationship? Explain Formalities [28-2a] As a general rule, a contract of agency requires no particular formality, and usually the contract either may be oral or may be inferred from the conduct of the principal In some cases, however, the contract must be in writing For example, the appointment of an agent for a period of more than a year comes within the one-year clause of the statute of frauds and thus must be in writing In some states, the authority of an agent to sell land must be set down in a writing signed by the principal Many states have “equal dignity” statutes providing that a principal must grant his agent in a written instrument the authority to enter into any contract required to be in writing Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Power of attorney written, formal appointment of an agent who is known as an attorney in fact Relationship of Principal and Agent 529 See Chapter 15 for a discussion of state and federal legislation giving electronic records and signatures the legal effect of traditional writings and signatures A power of attorney is an instrument that states an agent’s authority A power of attorney is a formal manifestation from principal to agent, who is known as “an attorney in fact,” as well as to third parties, that evidences the agent’s appointment and the nature or extent of the agent’s authority Under a power of attorney, a principal may, for example, appoint an agent not only to execute a contract for the sale of the principal’s real estate but also to execute the deed conveying title to the real estate to the third party A number of states have created an optional statutory short-form power of attorney based on the Uniform Statutory Form Power of Attorney Act In 2006, a new Uniform Power of Attorney Act (UPOAA) was promulgated to replace the Uniform Statutory Form Power of Attorney Act At least sixteen states have adopted the 2006 Act Capacity [28-2b] Capacity of principal if the principal is a minor or an incompetent not under a guardianship, his appointment of another to act as an agent is voidable, as are any resulting contracts with third parties Durable power of attorney a written instrument that expresses the principal’s intention that the agent’s authority will not be affected by the principal’s subsequent incapacity or that the agent’s authority will become effective upon the principal’s subsequent incapacity Capacity of agent any person able to act may act as an agent since the act of the agent is considered the act of the principal The capacity of an individual to be a principal, and thus to act through an agent, depends on the capacity of the principal to the act For example, contracts entered into by a minor or an incompetent not under a guardianship are voidable Consequently, the appointment of an agent by a minor or an incompetent not under a guardianship and any resulting contracts are voidable, regardless of the agent’s contractual capacity The capacity of a person that is not an individual, such as a government or business association, to be a principal is determined by the law governing that entity Almost all of the states have adopted the Uniform Durable Power of Attorney Act providing for a durable power of attorney under which an agent’s power survives or is triggered by the principal’s loss of mental competence (In 2006, the new UPOAA was promulgated to replace the Uniform Durable Power of Attorney Act At least sixteen states have adopted the 2006 Act A power of attorney created under the UPOAA is durable unless it expressly provides that it is terminated by the incapacity of the principal.) A durable power of attorney is a written instrument that expresses the principal’s intention that the agent’s authority will not be affected by the principal’s subsequent incapacity or that the agent’s authority will become effective upon the principal’s subsequent incapacity On the other hand, because the act of the agent is considered the act of the principal, the incapacity of an agent to bind himself by contract does not disqualify him from making a contract that is binding on the principal Thus, any person able to act, including individuals, corporations, partnerships, and other associations, ordinarily has the capacity to be an agent The agent’s liability, however, depends on the agent’s capacity to contract Therefore, although the contract of agency may be voidable, an authorized contract between the principal and the third person who dealt with the agent is valid An “electronic agent” is a computer program or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part without review or action by an individual Electronic agents are not persons and, therefore, are not considered agents In 2000 Congress enacted the Electronic Signatures in Global and National Commerce (E-Sign) The Act makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce The Act validates contracts or other records relating to a transaction in or affecting interstate or foreign commerce formed by electronic agents so long as the action of each electronic agent is legally attributable to the person to be bound E-Sign specifically excludes certain transactions, including (1) wills, codicils, and testamentary trusts; (2) adoptions, divorces, and other matters of family law; and (3) the Uniform Commercial Code other than sales and leases of goods DUTIES OF AGENT TO PRINCIPAL [28-3] The duties of the agent to the principal are determined by the express and implied provisions of any contract between the agent and the principal In addition to these contractual duties, the agent is subject to various other duties imposed by law, unless the parties agree otherwise Normally, a principal bases the selection of an agent on the agent’s ability, skill, and integrity Moreover, the principal not only authorizes and empowers the agent to bind her on contracts Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 530 PART VI Agency with third persons but also often places the agent in possession of her money and other property As a result, the agent is in a position to injure the principal, either through negligence or dishonesty Accordingly, an agent, as a fiduciary (a person in a position of trust and confidence), owes her principal the duties of obedience, good conduct, diligence, and loyalty; the duty to inform; and the duty to provide an accounting Moreover, an agent is liable for any loss she causes to the principal through her breach of these duties A gratuitous agent is subject to the same duty of loyalty that is imposed on a paid agent and is equally liable to the principal for the harm he causes by his careless performance Although the lack of consideration usually places a gratuitous agent under no duty to perform for the principal, such an agent may be liable to the principal for failing to perform a promise on which the principal has relied if the agent should have realized that his promise would induce reliance Duty of Obedience [28-3a] Duty of obedience an agent must act in the principal’s affairs only as authorized by the principal and must obey all lawful instructions and directions of the principal Practical Advice Recognize that even if you agree to serve as an agent without compensation, you owe a fiduciary duty to the principal and are liable to her for your negligence Duty of good conduct within the scope of the agency relationship, an agent must act reasonably and refrain from conduct that is likely to damage the principal’s enterprise Duty of diligence an agent must act with reasonable care, competence, and diligence in performing the work for which he is employed Duty to inform an agent must use reasonable efforts to give the principal information material to the affairs entrusted to her The duty of obedience requires the agent to act in the principal’s affairs only as actually authorized by the principal and to obey all lawful instructions and directions of the principal If an agent exceeds her actual authority, she is subject to liability to the principal for loss caused to the principal An agent is also liable to the principal for unauthorized acts that are the result of the agent’s unreasonable interpretations of the principal’s directions An agent is not, however, under a duty to follow orders to perform illegal or tortious acts, such as misrepresenting the quality of his principal’s goods or those of a competitor The agent may be subject to liability to her principal for breach of the duty of obedience (1) if she entered into an unauthorized contract for which her principal is now liable, (2) if she has improperly delegated her authority, or (3) if she has committed a tort for which the principal is now liable Thus, an agent who sells on credit in violation of his principal’s explicit instructions has breached the duty of obedience and is liable to the principal for any amounts the purchaser does not pay Moreover, an agent who violates her duty of obedience materially breaches the agency contract and loses her right to compensation Duty of Good Conduct [28-3b] An agent has a duty, within the scope of the agency relationship, to act reasonably and to avoid conduct that is likely to damage the principal’s interests This duty reflects the fact that the conduct of agents can have a significant effect on the principal’s reputation A breach of this duty makes the agent liable to the principal and subject to rightful discharge or termination Duty of Diligence [28-3c] Subject to any agreement with the principal, an agent has a duty to the principal to act with the care, competence, and diligence normally exercised by agents in similar circumstances Special skills or knowledge possessed by an agent are circumstances to be taken into account in determining whether the agent acted with due care and diligence Moreover, if the agent claims to possess special skill or knowledge, the agent has a duty to act with the care, competence, and diligence normally exercised by agents with such skill or knowledge An agent who does not exercise the required care, competence, and diligence is liable to his principal for any resulting harm For example, Peg appoints Alvin as her agent to sell goods in markets where the highest price can be obtained Although he could have obtained a higher price in a nearby market by carefully obtaining information, Alvin sells goods in a glutted market and obtains a low price Consequently, he is liable to Peg for breach of the duty of diligence A gratuitous agent owes a standard of care that is reasonable to expect under the circumstances, which include the skill and experience that the agent possesses Thus, providing a service gratuitously may subject an agent to duties of competence and diligence to the principal that not differ from the duties owed by a compensated agent Duty to Inform [28-3d] An agent has a duty to use reasonable effort to provide the principal with facts that the agent knows, has reason to know, or should know if (1) the agent knows, or has reason to know, that the principal would wish to have the facts or (2) the facts are material to the agent’s duties to the principal However, this duty does not apply to facts if providing them to the principal would Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent 531 violate a superior duty owed by the agent to another person The rule of agency providing that notice to an agent is notice to her principal makes this duty essential An agent who breaches this duty is subject to liability to the principal for loss caused the principal by the agent’s breach and may also be subject to termination of the agency relationship Moreover, if the agent’s breach of this duty constitutes a breach of the contract between the agent and the principal, the agent is also liable for breach of contract Examples of information that an agent is under a duty to communicate may include the following: (1) a customer of the principal has become insolvent; (2) a debtor of the principal has become insolvent; (3) a partner of a firm with which the principal has previously dealt, and with which the principal or agent is about to deal, has withdrawn from the firm; or (4) property that the principal has authorized the agent to sell at a specified price can be sold at a higher price Duty to account an agent must maintain and provide the principal with an accurate account of money or other property that the agent has received or expended on behalf of the principal; an agent must not mingle the principal’s property with any other person’s property Fiduciary duty an agent owes a duty of utmost loyalty and good faith to the principal Duty to Account [28-3e] Subject to any agreement with the principal, an agent has a duty to keep and render accounts to the principal of money or other property received or paid out on the principal’s account Moreover, the agent may not mingle the principal’s property with any other person’s property and may not deal with the principal’s property so that it appears to be the agent’s property Fiduciary Duty [28-3f] A fiduciary duty, arising out of a relationship of trust and confidence, requires the utmost loyalty and good faith An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship This duty is imposed by law upon the agent and is also owed by an employee to his employer The principal may agree that conduct by an agent that otherwise would constitute a breach of the fiduciary duty shall not constitute a breach of that duty provided that in obtaining the principal’s consent, the agent (1) acts in good faith, (2) discloses all material facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment, and (3) otherwise deals fairly with the principal An agent’s fiduciary duty to a principal generally begins with the formation of the agency relationship and ends with its termination However, as discussed later, an agent may be subject to duties after termination with respect to the agent’s use of the principal’s property and confidential information provided by the principal An agent who violates his fiduciary duty is liable to his principal for breach of contract, in tort for losses caused and possibly punitive damages, and in restitution for profits he made or property received in breach of the fiduciary duty Moreover, he loses the right to compensation The principal may avoid a transaction in which the agent breached his fiduciary duty, even though the principal suffered no loss A breach of fiduciary duty may also constitute just cause for discharge of the agent The 2011 Restatement (Third) of Restitution and Unjust Enrichment provides that benefits derived from an agent’s breach of fiduciary duty may be recovered from third parties who acquire such benefits with notice of the agent’s breach of fiduciary duty The fiduciary duty arises most frequently in the following situations involving principals and their agents, although it is by no means limited to these situations Conflicts of Interest An agent has a duty not to deal with the principal as, or on behalf of, an adverse party in a transaction connected with the agency relationship An agent must act solely in the interest of his principal, not in his own interest or in the interest of another In addition, an agent may not represent his principal in any transaction in which the agent has a personal interest Nor may the agent act on behalf of adverse parties to a transaction without both principals’ approval to the dual agency An agent may take a position that conflicts with the interest of his principal only if the principal, with full knowledge of all of the facts, consents For example, A, an agent of P who desires to purchase land, agrees with C, who represents B, a seller of land, that A and C will endeavor to effect a transaction between their principals and will pool their commissions A and C have committed a breach of fiduciary duty to P and B Self-Dealing An agent has a duty not to deal with the principal as an adverse party in a transaction connected with the agency relationship The courts scrutinize transactions between an Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 532 PART VI Agency agent and her principal The agent may not deal at arm’s length with her principal The agent thus owes her principal a duty of full disclosure regarding all relevant facts that affect the transaction Moreover, the transaction must be fair Thus, Penny employs Albert to purchase for her a site suitable for a shopping center Albert owns such a site and sells it to Penny at the fair market value but does not disclose to Penny that he had owned the land Penny may rescind the transaction even though Albert made no misrepresentation The agent’s loyalty must be undivided, and he must devote his actions exclusively to the representation and promotion of his principal’s interests Practical Advice If you are the principal, consider obtaining from your agents a reasonable covenant that they will not compete with you after the agency terminates Duty Not to Compete During the agency relationship an agent must not compete with his principal or act on behalf or otherwise assist any of the principal’s competitors After the agency terminates without breach by the agent, however, unless otherwise agreed, the agent may compete with his former principal The courts will enforce by injunction a contractual agreement by the agent not to compete after termination if the restriction is reasonable as to time and place and necessary to protect the principal’s legitimate interest Contractual agreements not to compete are discussed in Chapter 13 where it is noted that such noncompetition contracts may be subject to different standards for Internet companies and their employees Misappropriation An agent may not use property of the principal for the agent’s own purposes or for the benefit of a third party Unless the principal consents, an agent who has possession of the principal’s property has a duty to use it only on the principal’s behalf even if the agent’s use of the property does not cause harm to the principal An agent is liable to the principal for any profit the agent made while using the principal’s property or for the value of the agent’s use of the principal’s property An agent’s duties regarding the principal’s property continue after the agency terminates, and a former agent has a duty to return any of the principal’s property she still possesses Confidential Information An agent may not use or disclose confidential information Practical Advice Do not agree to become an agent if you are not willing or able to fulfill all of the duties an agent owes, unless your agency contract clearly relieves you of those duties you find unacceptable obtained in the course of the agency for her own benefit or the benefit of a third party Confidential information is information that, if disclosed, would harm the principal’s business or that has value because it is not generally known Confidential information includes unique business methods, trade secrets, business plans, personnel, nonpublic financial results, and customer lists An agent, however, may reveal confidential information that the principal is committing, or is about to commit, a crime Many statutes provided protection to employees who “whistle-blow.” Unless otherwise agreed, even after the agency terminates, the agent may not use or disclose to third persons confidential information The agent, however, may use the generally known skills, knowledge, and information she acquired during the agency relationship Duty to Account for Financial Benefits Unless otherwise agreed, an agent has a duty not to acquire any financial or other material benefits in connection with transactions conducted on behalf of the principal Such benefits would include bribes, kickbacks, and gifts Moreover, an agent may not make a secret profit from any transaction subject to the agency All material benefits, including secret profits, belong to the principal, to whom the agent must account In addition, the principal may recover any damages caused by the agent’s breach Thus, if an agent, authorized to sell certain property of her principal for $1,000 sells it for $1,500, she may not secretly pocket the additional $500 Detroit Lions, Inc v Argovitz United States District Court, Eastern District of Michigan, 1984 580 F.Supp 542; affirmed, 767 F.2d 919 http://scholar.google.com/scholar_case?q=580+F.Supp.+542&hl=en&as_sdt=6,34&case=17442812739569541102&scilh=0 FACTS Jerry Argovitz was employed as an agent of Billy Sims, a professional football player Early in 1983, Argovitz informed Sims that he was awaiting the approval of his application for a U.S Football League franchise in Houston Sims was unaware, however, of Argovitz’s extensive ownership interest in the new Houston Gamblers organization Meanwhile, during the spring of 1983, Argovitz continued contract negotiations on behalf of Sims with the Detroit Lions of the National Football League By June 22, Argovitz and the Lions were very close to an agreement, although Argovitz represented to Sims that the negotiations were Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-22 INDEX Parent corporations, 653 Parker v Twentieth Century-Fox Film Corp., 57–58, 322–323 Parlato v Equitable Life Assurance Society of the United States, 551 Parol evidence, 347 Parol evidence rule, 273–276 Partial assignment, 286 Partial illegality, 242 Participating bonds, 665–666 Participating preferred shares, 670 Particular fund doctrine, 441 Parties jurisdiction over, 53–55 attachment, 55 in personam, 54 quasi in rem, 55 in rem, 55 venue, 55 liability of, 480–496 obligations of both, 362–365 anticipatory repudiation, 365 casualty to identified goods, 362 nonhappening of presupposed conditions, 364 right to adequate assurance of, 365 right to cooperation, 365 primary, 483–484 secondary, 484–489 third, 284–298 Partition, 1004 Partners creditors, 607 Partner’s transferable interest, 587 Partnerships creditors, 607 creditors’ rights, 587 definition of, 576 dissolution, 610 duties among partners, 583–586 duty of care, 586 duty of obedience, 586 fiduciary duty, 584–585 entity theory, 576 formation of, 576–582 firm name, 577 partnership agreement, 577 partnership capital and property, 581–582 tests of existence, 577–579 as legal aggregate, 576 as legal entity, 576 limited liability limited partnerships, 634–635 limited liability partnerships, 633–634 limited partnerships, 618–625 definition of, 619 dissolution, 624–625 duties, 622 formation, 619–620 rights, 620–622 nature of, 575–576 relationship of partners with third parties, 595–599 relationships among partners, 584–590 right to continue, 611 rights among partners, 586–590 enforcement rights, 590 legal action, 590 partner’s interest in partnership, 587 right to choose associates, 589–590 right to compensation, 589 right to indemnification, 589 right to information and inspection of books, 590 right to participate in management, 589 right to return of capital, 589 right to share in distributions, 588 right to share in profits, 588–589 rights in specific partnership property, 586–587 tests of partnership existence, 577–579 association, 578 business for profit, 578 co-ownership, 578–579 Party in default, 326 Party injured by breach, 325–326 Past consideration, 222 Patent and Trademark Office, 833, 842 Patent Cooperation Treaty, 843 Patents, 840–843 defined, 840 design, 841 infringement, 843 international, 959 issuance of, 842–843 patentability, 840–841 plant, 841 remedies, 843 utility, 840–841 Patient Protection and Affordable Care Act (PPACA), 76, 78 Payable to bearer, 446 Payable to order, 445 Pay-by-phone systems, 512 Payee, holder in due course, 466–467 Payment order, 515 definition of, 515 erroneous execution of, 516 unauthorized, 516 Payments recovering, 419 tender of, 490 termination of liability, 489–490 Payor banks, 504–505 customer’s death or incompetence, 508 customer’s duties, 508–509 disclosure requirements, 508 payment of items, 505 relationship with customers, 505–509 stop payment orders, 505–506 subrogation on improper payment, 507 Payroll Advance, Inc v Yates, 237 People v Farrell, 108–109 Perfect tender rule, 306, 355–358 agreement between parties, 357 cure by seller, 357 instalment contracts, 358 Perfection, security interest, 737–741 defined, 737 Perfection of security interest, 737–741 automatic perfection, 740 by control, 741 filing financing statement, 738–739 perfection by control, 741 possession, 739–740 Performance, 353–368 buyer, 358–362 acceptance, 360–361 inspection, 359 obligation of payment, 362 rejection, 359 revocation of acceptance, 360 conditions, 301–304 concurrent, 304 condition precedent, 304 condition subsequent, 304 express, 302–303 implied-in-fact, 303 implied-in-law, 303–304 defined, 353 discharge by agreement of parties accord and satisfaction, 307 mutual rescission, 307 novation, 308 substituted contracts, 307 discharge by breach, 304–306 anticipatory repudiation, 306 material breach, 305–306 substantial performance, 306 unauthorized material alteration of written contract, 307 discharge by operation of law, 308–311 availability of restitution, 310 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it INDEX bankruptcy, 310 commercial impracticability, 310 frustration of purpose, 309 impossibility, 308–309 statute of limitations, 311 subsequent illegality, 309 discharge by performance, 304 obligation of both parties, 362–365 anticipatory repudiation, 365 casualty to identified goods, 362 nonhappening of presupposed conditions, 364 right to adequate assurance of, 365 right to cooperation, 365 substituted performance, 365 by performance, 304 prevention of, 305 seller, 353–358 perfect tender rule, 355–358 place of tender, 354–355 time of tender, 354 specific, 323–324, 421 substantial, 306 substituted, 365 Performance bond, 752 Periodic tenancy, 998–999 Perpetual existence, 641 Personal computer (online) banking, 512 Personal defenses, 469, 471–473 Personal property bailments, 979–984 conversion, 133 defined, 132 definition of, 969 transfer of title to, 971–974 by accession, 973 by confusion, 973–974 by gift, 972 by possession, 974 by sale, 971 by will or descent, 973 trespass, 133 Uniform Commercial Code, 165 Personal rights, 287 Petition of Kinsman Transit Co., 151 Pharmakon Drug Company, 25–26 Philip Morris USA v Williams, 123–124 Physical compulsion, 197 Physical disability, 142 Physical duress, 187 Plain Dealer Publishing Co v Worrell, 562 Plaintiff, 56 defined, Plaintiff’s conduct, 395 Plant patent, 841 Pleadings, 56 judgment on, 57 Pledge, 737 Pledges, 983 PMSI See Purchase money security interest (PMSI) Point sources, 935–937 Point-of-sale systems, 512 Ponzi schemes, 13 Possession, 739–740 by bailee, 980 restoration to bailor, 980 transfer of personal property by, 974 Possessors of land, duties of, 145–147 Possibility of reverter, 997 Possibility test, 266 Postconventional level, 17 Postincorporation subscription, 648 Postjudgment remedies, 787 Power of attorney, 529 Power of avoidance, 366–369 Powers given as security, 538 irrevocable, 537 Powers of government, 75–79 federal commerce power, 75–76 federal fiscal powers, 77–79 borrowing and coining money, 78 eminent domain, 78 spending power, 78 limitations on Contract Clause, 80 due process, 83–84 equal protection, 84–86 First Amendment, 80–83 state regulation of commerce, 76–77 regulations, 76 taxation, 77 PPACA See Patient Protection and Affordable Care Act (PPACA) Preconventional level, 17 Prediction, 202 Preemptive rights, 667 Preexisting contractual duty, 218 Preexisting public obligations, 218–222 Preferential transfer, avoidance of, 745–746 Preferred stock, 670 Pregnancy Discrimination Act, 853 Preincorporation subscription, 648 Prejudgment remedies, 786–787 Preliminary hearing, 116 Premiums, 978 Prepayment, 444 Presale disclosures, 911 Presentment, 485 Pretrial conference, 56–57 I-23 Pretrial motions, 56 Pretrial procedure, 57 Prevention of significant deterioration (PSD), 933 Price fixing, 878–879 Prices open, 341 recovering, 415–416 Primary liability, 480 Primary parties, liability of, 483–484 Primary-line injury, 887 Principal debtor, 263 Principals See also Agents agents act with apparent authority, 558 contract liability of, 545–554 contractual duties, 534 contractual liability of, 553–554 criminal liability of, 558–559 disclosed, 559 duties of agent to, 529–532 duties to agent, 533–534 incapacity of, 536 nonexistent or incompetent, 561 tort and other duties, 534 tort liability of, 554–558 torts of independent contractor, 558 undisclosed, 545, 561 unidentified, 545, 560 vicarious liability of, 556 Prine v Blanton, 1037–1038 Privacy, invasion of, 130–131 Privacy Act, 100 Private carrier, 984 Private corporation, 642 Private law, defined, Private nuisance, 928 Private placements, 801–802 Private Securities Litigation Reform Act of 1995, 795 Privilege, 129 absolute, 129 conditional, 129 constitutional, 129 Privity of contract, 394, 400 Probable cause, 117 Probate, estate, 1042 Procedural due process, 83–84 Procedural law, defined, Procedural rules, 94 Procedural unconscionability, 239, 339 Proceeds, 734 Product liability See also Strict liability; Warranties overview, 387–388 Product market, 882 Products, misuse or abuse of, 401 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-24 INDEX Products liability, 403–404 design defect, 403–404 failure to warn, 404 manufacturing defects, 403 Professional corporations, 645 Profit corporation, 642 Profitability, 20 Profits, short-swing, 815 Profits a prendre, 1009 Promise to pay, 440 Promisee, 170 Promises collateral, 263 conditional, 218 enforceable by statute, 225 illusory, 217–218 made to debtor, 264 original, 263 pay debt barred by statute of limitations, 223 pay debt discharged in bankruptcy, 223 voidable, 223 Promisor, 170 Promissory estoppel, 171–172, 186, 223–224, 272 Promoters, 646–647 contracts, 646 defined, 646 fiduciary duty, 647 Property, 83–84, 967–974 See also Intellectual property; Personal property; Real property bailments, 979–984 definition of, 968–969 documents of title, 984–987 insurance, 974–979 kinds of, 969–970 fixtures, 969–970 real and personal, 969 tangible and intangible, 969 partnership, 582 Property dividends, 672 Property insurance, 975–977 co-insurance clauses, 975–976 multiple insurers, 976 types of fire covered, 975 types of polices, 977 Prosecute, defined, Prospectus, 662 Proxies, 687–688 Proxy, 811 Proxy solicitations, 811–812 Proxy statements, 811 PSD See Prevention of significant deterioration (PSD) Public corporation, 642 Public disclosure of private facts, 131 Public duty, 218 Public invitee, 146 Public law, defined, Public nuisance, 928 Public obligations, preexisting, 218–222 Public officials, corruption of, 241 Public policy violations, 235–241 common law restraint of trade, 235–236 corrupting public officials, 241 exculpatory clauses, 237–238 tortious conduct, 241 unconscionable contracts, 239–241 Public Service Commission of Maryland v Panda-Brandywine, L.P., 291–292 Public use, 1021 Publicly held corporation, 643 Puffing, 202 Punitive damages, 123, 319 Purchase money security interest (PMSI), 732, 743 Pure comparative negligence, 153 Q Qualified fee estate, 996 Qualified indorsements, 458 Quasi contracts, 173 Quasi in rem jurisdiction, 55 Quiet enjoyment, 1001 Quitclaim deed, 1017 Quorum, 686 R Race states, 1017 Racketeer Influence and Corrupt Organizations Act (RICO), 110 Radlax Gateway Hotel, LLC v Amalgamated Bank, 781–782 Rajaratnam, Raj, 13 Ratification, 250, 552–553, 698 Rational relationship test, 79, 84 Rawls, John, 16 Ray v Alad Corporation, 713 RCRA See Resource Conservation and Recovery Act (RCRA) REACH See Registration, Evaluation, and Authorization and Restriction of Chemicals (REACH) Real defenses, 469–471 defined, 468–469 discharge in insolvency proceedings, 469 discharge of which the holder has notice, 469 fraud in the execution, 469 fraudulent alteration, 470–471 infancy, 469 unauthorized signature, 470 void obligations, 469 Real Estate Analytics, LLC v Vallas, 324 Real Estate Settlement Procedures Act (RESPA), 916 Real property, 995–1010 concurrent ownership, 1004–1006 community property, 1006 condominiums, 1006 cooperatives, 1006 joint tenancy, 1004 tenancy by the entireties, 1006 tenancy in common, 1004 contracts, 166 defined, 132 definition of, 969 freehold estates, 995–997 fee estates, 995–996 future interests, 996–997 life estates, 996 leasehold estates, 998–1004 creation and duration, 998–999 landlord’s obligations, 1001–1004 tenant’s obligations, 1000–1001 transfer of interests, 999 nonpossessory interests, 1006–1009 nuisance, 132 public and private controls, 1019–1024 eminent domain, 1021–1022 private restrictions on land use, 1022–1024 zoning, 1020–1021 transfer of, 1014–1019 adverse possession, 1019 contract of sale, 1015 deeds, 1016–1017 secured transactions, 1017–1019 trespass, 132 Real Property Electronic Recording Act, 1017 Realty, 969 Reasonable person standard, 141–142 children, 141 mental disability, 142 physical disability, 142 standard for emergencies, 142 superior skill or knowledge, 142 violation of statutes, 142 Receiving bank, 515 Recklessness, 126 Recordation, 1017 Redemption, mortgages, 1018 Redlining, 914 Reed v King, 203–204 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it INDEX Reformation, 8, 322 Registration, Evaluation, and Authorization and Restriction of Chemicals (REACH), 939 Regulation A, 803–804, 806 Regulation B, 913 Regulation D, 801 Regulation FD, 818 Regulation Z, 914, 916 Regulations, 94–95 Regulatory license, 233 Rehabilitation Act, 859 Reimbursement, 534, 753 Rejection, 186, 359 Reliance damages, 318 Reliance interest, 316 Remainders, 997 Remand, defined, 47 Remedies See also Contract remedies; Sales remedies buyer, 417–423 contractual provisions affecting, 423–424 modification or limitation of remedy by agreement, 425 seller, 411–417 Remedies in equity, 323–325 injunction, 325 specific performance, 323–324 Renunciations, 225, 490 Reorganization, 779–782 See also Bankruptcy acceptance of plan, 780 confirmation of plan, 780–781 effect of confirmation, 782 plan of, 780 proceedings, 779–780 Repair, landlord’s obligations, 1003–1004 Replevin, 421 Reporting issuers, 805–806 Repudiation, 414, 420–421 Request for admissions, 56 Requirements contract, 183, 218 Res ipsa loquitur, 148 Rescission, 8, 912 Resource Conservation and Recovery Act (RCRA), 939–940 RESPA See Real Estate Settlement Procedures Act (RESPA) Respondeat superior, 556–557 Restatements, 8–9, 124 Restitution, 173, 248–249, 272, 325–326 party in default, 326 party injured by breach, 325–326 statute of frauds, 326 voidable contracts, 326 Restitution interest, 316 Restraint of trade, 235–236, 876–881 boycotts, 880 concerted action, 877 defined, 235 employment contracts, 236 horizontal restraint, 877 market allocations, 880 price fixing, 878–879 sale of business, 236 standards, 876–877 tying arrangements, 880–881 vertical restraint, 877 Restricted securities, 801 Restrictive covenants, 1022–1024 covenants running with the land, 1022–1023 defined, 1022 in subdivisions, 1023 termination, 1023 validity, 1024 Restrictive indorsements, 457 Resulting trusts, 1033 Revenue license, 233 Reverse, defined, 47 Reverse discrimination, 856–857 Reversions, 996–997 Revised Model Business Corporation Act (RMBCA), 640, 651, 712 Revised Uniform Partnership Act (RUPA), 575, 584, 595 Revised Uniform Principal and Income Act, 1035 Revised Uniform Securities Act of 1985, 796 Revised Uniform Unincorporated Nonprofit Association Act (UUNAA), 578 Revised United Limited Partnership Act (RULPA), 618–619 Revocation, offer, 184–186 Revocation of acceptance, 361 Ricci v Destefano, 855–856 RICO See Racketeer Influence and Corrupt Organizations Act (RICO) Right of rescission, 912 Right to adequate assurance, 365 Right to cooperation, 365 Rightful dissociation, 602–603 Rights among partners choosing associates, 589–590 compensation, 589 enforcement, 590 indemnification, 589 information and inspection of books, 590 legal action, 590 I-25 management, 589 return of capital, 589 share in distributions, 588 share in profits, 588–589 specific partnership property, 586–587 of bailor and bailee, 980–983 of beneficiary, 296 contract, 286 defined, of intended beneficiary, 296 limited liability company members, 626–627 assignment of interest, 628 profit and loss sharing, 626 voting, 628 limited partnerships, 620–622 assignment of interest, 621–622 choice of associates, 621 control, 620 derivative actions, 622 distributions, 622 information, 622 loans, 622 profit and loss sharing, 622 voting rights, 621 withdrawal, 621 of sureties, 752–753 contribution, 753 exoneration, 752–753 reimbursement, 753 subrogation, 753 Risk, voluntary assumption of, 395 Risk of loss, 377–381 in absence of breach, 378–381 agreement of parties, 378 all other sales, 380–381 contracts involving carriers, 379 goods in possession of bailee, 280 trial sales, 378–379 breach by buyer, 378 breach by seller, 378 Risks assumption of, 154, 157 voluntary assumption of, 401 RMBCA See Revised Model Business Corporation Act (RMBCA) RNR Investments Limited Partnership v Peoples First Community Bank, 598 Road show, 800 Robbery, 113 Robinson v Durham, 375 Robinson-Patman Act, 887–888 cost justification, 888 meeting competition, 888 secondary-line injury, 887–888 tertiary-line injury, 888 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-26 INDEX Rosewood Care Center, Inc., v Caterpillar, Inc., 264 Rubin v Yellow Cab Company, 557–558 Rule 10b-5, 815–816 Rule 144, 805–806 Rule 147, 804 Rule 506, 801–802 Rule making, informal, 92 Rule of reason standard, 876–877 Rule utilitarianism, 15 Rulemaking defined, 91 formal, 92 hybrid, 92 Rules defined, 91 interpretative, 93–94 legislative, 91–92 procedural, 94 RULPA See Revised United Limited Partnership Act (RULPA) RUPA See Revised Uniform Partnership Act (RUPA) Ryan v Friesenhahn, 143–144 S Sackett v Environmental Protection Agency, 96–97 Safe deposit boxes, 984 Sale of business, 236 Sale of goods, 267–268 admission, 268 compliance with statute of frauds, 271 defined, 268 delivery or payment and acceptance, 269 specially manufactured goods, 268 Sale on approval, 378 Sale or return, 379 Sales, defined, 165, 335 Sales and leases, 334–351 Article and 2A, Uniform Commercial Code, 338–341 expansion of commercial practices, 340 freedom of contract, 340–341 good faith, 338 liberal administration of remedies, 340 sales by and between merchants, 340 unconscionability, 338–339 validation and preservation of sales contracts, 341 bulk sales, 381–383 consideration, 345 consumer leases, 335 finance leases, 335–336 form of contract, 346–347 parol evidence, 347 statute of frauds, 346–347 governing law, 336 international sales, 337 manifestation of mutual assent, 341–345 auctions, 345 definiteness of offer, 341–342 manner of acceptance, 345 variant acceptances, 342–344 personal property, 971 real property, 1015 trial sales, 378–379 Sales remedies, 411–429 buyer, 417–423 buyers, 417–423 cancel the contract, 419 cover, 419 enforce security interest in goods, 422 recover consequential damages, 422–423 recover damages for breach in regard to accepted goods, 422 recover damages for nondelivery or repudiation, 420–421 recover identified goods on seller’s insolvency, 421 recover incidental damages, 422 recover payments, 419 sue for replevin, 421 sue for specific performance, 421 seller, 411–417 cancel the contract, 416 identify goods to contract, 413 reclaim goods upon buyer’s insolvency, 416 recover damages for nonacceptance or repudiation, 414 recover incidental damages, 416 recover the price, 415–416 resell goods to recover damages, 413 stop delivery of goods, 413 withhold delivery of goods, 412 Sanchez v Western Pizza Enterprises, Inc., 239–240 Sarbanes-Oxley Act, 108, 684, 695, 697, 795 Satisfaction, 307 of contracting party, 302 defined, 302 of third party, 303 Saudi Arabia v Nelson, 952 Schoenberger v Chicago Transit Authority, 553 Schreiber v Burlington Northern, Inc., 822 Scienter, 204 Scope of liability (proximate cause), 149–152 foreseeability, 149–150 superseding cause, 150 Seasoned issuers, 798–799 SEC See Securities and Exchange Commission (SEC) Second Restatement, 146 Secondary liability, 481 Secondary obligor, 732, 750 Secondary parties, liability of, 484–489 Secondary-line injury, 887–888 Section 12(a)(2), 807 Section 17(a), 808 Section 402A, 395 Secured bonds, 665 Secured claim, 768 Secured creditors, 742 Secured party, 731 Secured transactions, 731–750 See also Suretyship attachment, 734–737 collateral, 732–734 default, 747–749 essentials of, 731–732 in personal property, 731–750 priorities among competing interests, 742–746 against buyers, 744 against lien creditors, 745 against other secured creditors, 742–744 against trustee in bankruptcy, 745 against unsecured creditors, 742 Securities definition of, 796–797 exempt, 800 registration requirements, 810 restricted, 801 Securities Act of 1933, 796–808 definition of security, 796–797 emerging growth companies, 799–800 exempt securities, 800 exempt transactions for issuers, 800–804 crowdfunding exemption, 803 intrastate issues, 804 limited offers, 800–803 Regulation A, 803–804 exempt transactions for nonissuers, 804–806 Regulation A, 806 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it INDEX Rule 144, 805–806 liability, 806–808 antifraud provisions, 807–808 criminal sanctions, 808 false registration statements, 806–807 unregistered sales, 806 registration of securities, 798–800 communications, 799 disclosure requirements, 798 integrated disclosure, 798–799 shelf registrations, 799 Securities and Exchange Commission (SEC), 794 See also Securities regulation Securities and Exchange Commission v Edwards, 797 Securities Enforcement Remedies ad Penny Stock Reform Act of 1990, 795 Securities Exchange Act of 1934, 643, 808–824 criminal sanctions, 824 disclosure, 809–814 periodic reporting requirements, 810 proxy solicitations, 811–812 registration requirements, 889 tender offers, 812–813 liability, 814–824 antibribery provision of FCPA, 822–823 antifraud provisions, 815 civil monetary penalties for insider trading, 820–821 express insider trading liability, 820 fraudulent tender offers, 821 insider trading, 817–819 misleading proxy statements, 821 misleading statements in reports, 815 requisites of Rule 10b-5, 815–816 short-swing profits, 815 Securities Litigation Uniform Standards Act of 1998, 795–796 Securities regulation, 957–958 Security agreement, 731, 736–737 after-acquired property, 737 authenticating record, 736–737 consumer goods, 737 defined, 736 future advances, 737 pledge, 737 Security entitlement, 733 Security interest, 373, 422 against buyers, 744 holder in due course, 463 against lien creditors, 745 against other secured creditors, 742–744 perfection of, 737–741 priorities among competing interests, 742 against trustee in bankruptcy, 745 against unsecured creditors, 742 Seigel v Merrill Lynch, Pierce, Fenner & Smith, Inc., 507 Self-dealing, 531–532 Sellers breach by, 378 cure by, 357 default of, 417 insolvency of, 421 performance, 353–358 perfect tender rule, 355–358 place of tender, 354–355 time of tender, 354 sales remedies, 411–417 cancel the contract, 416 identify goods to contract, 413 reclaim goods upon buyer’s insolvency, 416 recover damages for nonacceptance or repudiation, 414 recover incidental damages, 416 recover the price, 415–416 resell goods to recover damages, 413 stop delivery of goods, 413 withhold delivery of goods, 412 Semiconductor Chip Protection Act of 1984, 836 Sender, 515 Separation of powers, 73 Service mark, 832 Servient parcel, 1007 Setoff, 288 Settlement charges, 916–917 Settlor, 1030, 1033 Sexual harassment, 857 Shareholders, 682, 685–689 approval of charter amendments, 712 dissenting, 712, 717–719 enforcement rights of, 689–693 right to dissent, 693 right to inspect books and records, 689–690 suits, 691–692 proposals, 811–812 role of, 685–693 sale of control, 714 tender offer, 714 voting agreements, 688 voting rights of, 685–689 I-27 approval of fundamental changes, 687 concentrations of voting power, 687–688 election of directors, 686–687 meetings, 685 quorum and voting, 686 removal of directors, 687 restrictions on transfer of shares, 689 Shareholders’ liability, 677 Shares acquisition of, 672, 675 amount of consideration for, 667–668 authority to issue, 666 classes of, 669–670 compulsory exchange, 714–715 issuance of, 666–668 liability for, 669 no par value, 668 par value, 667–668 payment for, 669 preemptive rights, 667 purchase of, 714 redemption of, 672, 675 restrictions on transfer of, 689 treasury, 668 valuation of consideration, 669 Shawnee Telecom Resources, Inc v Brown, 718–719 Shelf registrations, 799 Shelter rule, 452 Sherman Antitrust Act, 106, 875–876 Sherrod v Kidd, 183–184 Shipment contracts, 355, 373 Short-form merger, 715 Short-swing profits, 815 Short-term commercial paper, 800 Sight draft, 438 Signatures authorized, 481, 491 drawer’s, 493 forged, 483 genuineness of, 493 unauthorized, 483 warranties, 491 SIP See State implementation plan (SIP) Situational ethics, 15 Sixth Amendment, 118 Skebba v Kasch, 172 Skills, 142 Slander, 128 Small Business Liability Relief and Brownfields Revitalization Act, 941 Small claims court, 49 Smith, Adam, 18 Social contract, 21 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-28 INDEX Social egalitarians, 16 Social ethics theories, 16–17 Social responsibility, 20–22 Social Security, 867–868 Soldano v O’Daniels, 145 Soldiers’ and sailors’ wills, 1041 Sole proprietorship, 572 Sonny Bono Copyright Extension Act, 837 South Florida Water Management District v Miccosukee Tribe of Indians, 936–937 Sovereign immunity, 951 Spam, 109 Special courts, 48 Special indorsements, 456–457 Special meetings, 685 Special trial courts, 49 Special warranty deed, 1017 Specific performance, 8, 323, 421 Speelman v Pascal, 286 Spendthrift trusts, 1031 Stakeholder model, 21 Stare decisis, 8, 52 State action, 74 State courts, 49 appellate, 49 inferior trial, 49 small claims, 49 special trial courts, 49 trial, 49 State implementation plan (SIP), 933 state lemon laws, 911 State of Dakota v Morse, 112 State of Qatar v First American Bank of Virginia, 457 State of the art, 398 State v Kelm, 114 Stated capital, 667, 673 Statute of frauds, 260–261 See also Contracts in writing compliance with, 270–271 contract modification or rescission within, 269–270 contracts within, 261–270 electronic records, 261–262 executor-administrator provision, 265 marriage provision, 265 modification or rescission, 269–270 one-year provision, 266–267 sale of goods, 267–268 suretyship provision, 263–264 exceptions, 347 form of contract, 346–347 modification of contracts, 346 noncompliance effects, 271–273 full performance, 272 promissory estoppel, 272 restitution, 272 partnerships, 577 restitution, 325–326 writing(s) or record, 346 Statute of limitations, 310 Statute of repose, 401 Statutes gambling, 234 licensing, 232–233 long-arm, 54 usury, 234 violation of, 142 violations of, 232–235 Statutory Close Corporation Supplement, 683 Statutory irrevocability, 184 Statutory liens, 774 Statutory limitations, 864 Statutory powers, 654 Steinberg v Chicago Medical School, 168–169 Stewart, Martha, 13 Stine v Stewart, 295–296 Stipulated provisions, offer, 188–189 Stock common, 670 preferred, 670 Stock options, 670 Stop payment orders, 505–506 Stop Trading on Congressional Knowledge Act of 2012, 817–819 Straight voting, 686 Strict liability, 154–158 abnormally dangerous activities, 928–929 activities giving rise to, 155–156 abnormally dangerous activities, 155 keeping of animals, 156 defenses to, 157 defined, 154 in tort, 395–401 defective condition, 397–398 merchant sellers, 397 requirements, 396–399 unreasonably dangerous product, 399 Strict scrutiny test, 79, 84–85 Strougo v Bassini, 692–693 Subchapter S corporations, 645 Subject matter jurisdiction, 50–52 concurrent federal, 50–51 exclusive federal, 50 exclusive state, 52 federal, 50 stare decisis in dual court system, 52 Subjective fault, 105 Subjective impossibility, 308–309 Subjective satisfaction, 302 Sublease, 999 Subrogation, 753 Subscribers, 648 Subsequent alteration, 401 Subsequent debt, 601 Subsequent illegality, 187, 309 Subsequent will, 1039 Subsidiary corporations, 653 Substantial evidence test, 97 Substantial performance, 306 Substantive due process, 83 Substantive law, defined, Substantive unconscionability, 239, 339 Substitute check, 437, 505–506 Substituted contracts, 221, 307 Substituted performance, 365 Successive assignments of same right, 290 Sue, defined, Summary judgment, 57 Summary jury trial, 66 Summons, 56 Superfund, 940–941 Supermajority provision, 686 Superseding cause, 150 Supplemental evidence, 276 Supremacy Clause, 72 Supreme Court, 47–48 Supreme law, Sureties defenses of, 754–756 duties of, 752 formation of, 752 personal defenses of, 754–756 rights of, 752–753 contribution, 753 exoneration, 752–753 reimbursement, 753 subrogation, 753 types of, 750–751 Surety, 263 Suretyship, 749–757 See also Secured transactions nature and formation, 750 particular kinds of, 751–752 Suretyship provision, 263–264 defined, 263 main purpose doctrine, 263–264 original promise, 263 promise made to debtor, 264 Surplus, 672 Surplus test, 673 Surviving corporation, 715 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it INDEX Survivorship, right of, 1004 Sword Technology, Inc., 36–39 T Taghipour v Jerez, 627–628 Takings Clause, 78 Tangible property, 969 Tariff, 953 TARP See Troubled Asset Relief Program (TARP) Tax Court, U.S., 48 Taxation of business associations, 571 federal fiscal powers, 78 state regulation of commerce, 77 Television Test, 17 Tenancy at sufferance, 999 Tenancy at will, 999 Tenancy by the entireties, 1006 Tenancy in common, 1004 Tenants, 998 obligations, 1000–1001 abandonment, 1001 destruction of premises, 1000 eviction, 1000–1001 transfer of interests by, 999 Tender, 373 defined, 354 place of, 354 destination contracts, 355 goods held by bailee, 355 shipment contracts, 355 time of, 354 Tender offers, 714, 812–813 defensive tactics, 813 defined, 812 disclosure requirements, 812 fraudulent, 821 required practices, 812–813 state regulation, 813 Term partnership, 603 Tertiary-line injury, 888 Testament See Wills Testamentary trust, 1031 Texaco, Inc v Pennzoil, Co., 133–134 Third parties, 222, 284–298 agency’s rights against, 562 assignment of rights, 284–290 assignable rights, 286 express warranties of assignor, 290 implied warranties of assignor, 290 nonassignable rights, 286 prohibited by law, 288 requirements of, 285–286 rights of assignee, 288 successive assignments of same right, 290 contract liability of agent, 559–561 contract liability of principal, 545–554 criminal liability of principal, 558–559 delegation of duties, 290–293 dissociated partner’s liability to, 609–610 relationship with agents, 559–561 relationship with partners, 595–599 relationship with principals, 544–559 rights of, 369 rights of agent against, 562 satisfaction of, 303 third-party beneficiary contracts, 293–296 creditor beneficiary, 295 defenses against beneficiary, 296 donee beneficiary, 294 incidental beneficiary, 294, 296 intended beneficiary, 293–296 rights of intended beneficiary, 296 vesting of rights, 296 tort liability of agent, 562 tort liability of principal, 554–558 Third Restatement, 146–147 Third-party beneficiary contracts, 293–296 creditor beneficiary, 295 defenses against beneficiary, 296 defined, 293 donee beneficiary, 294 incidental beneficiary, 294, 296 intended beneficiary, 293–296 rights of intended beneficiary, 296 vesting of rights, 296 Thomas v Lloyd, 582–583 TILA See Truth-in-Lending Act (TILA) Time draft, 437, 485 Time note, 438, 485 Time paper, 444 Title passage of, 373 power to transfer, 373–376 void, 374 voidable, 374 warranty of, 388, 392 Title insurance, 1015 Tort liability of agents, 562 corporations, 655 of principals, 554–558 Tortious conduct, 241 Torts See also Intentional torts defined, 122 of independent contractors, 558 of partnership, 599–600 I-29 strict liability in, 395–401 defective condition, 397–398 merchant sellers, 397 unreasonably dangerous product, 399 Totten trusts, 1031 Toxic Substances Control Act (TSCA), 938–939 Toyota Motor Manufacturing, Kentucky, Inc v Williams, 860–861 Trade dress, 832 Trade names, 836 Trade secrets, 829–832 criminal penalties, 831–832 definition of, 830 misappropriation, 830 remedies, 830 Trade symbols, 832–836 infringement, 835 registration, 833–834 remedies, 835–836 types of, 832–833 Trademark Cyberpiracy Prevention Act of 1999, 835 Trademarks, 832 international, 959 Transfer of title, 372–376 entrusting goods to merchants, 376 identification, 372–373 insurable interest, 373 security interest, 373 passage of title, 373 no movement of goods, 373 physical movement of goods, 373 power to transfer, 373–376 entrusting goods to merchants, 376 void and voidable title to goods, 374–376 power to transfer title, 373–376 Travelers Indemnity Co v Stedman, 493–494 Treasure trove, 974 Treasury stock, 668 Treaties, 9–10 Treble damages, 876 Trespass personal property, 133 real property, 132 Trespass to land, 928 Trespasser, 146 Trespassing animals, 156 Trial, 58 conduct of, 59–60 enforcement, 61 jury selection, 60 Trial courts, 49 Trial sales, 378–379 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-30 INDEX Triffin v Cigna Insurance Co., 468 Troubled Asset Relief Program (TARP), 914 Trustees, 1033–1035 allocation of principal and income, 1035 bankruptcy, 767–768 defined, 1030 duties of, 1033 as lien creditor, 772 powers of, 1034 Trusts, 1030–1036 beneficiary, 1035 business, 574 creation of, 1033–1035 settlor, 1033 subject matter, 1033 trustee, 1033–1035 defined, 1030 express, 1031 charitable trusts, 1031 express trusts, 1031 inter vivos trust, 1031 spendthrift trusts, 1031 testamentary trust, 1031 totten trusts, 1031 implied, 1032–1033 implied trusts, 1032–1033 resulting trusts, 1033 indorsements in, 457–458 termination of, 1035–1036 types of, 1030–1033 Truth in Savings Act, 508 Truth-in-Lending Act (TILA), 914 TSCA See Toxic Substances Control Act (TSCA) Tucker v Hayford, 1002–1003 Tying arrangements, 880–881 U UAA See Uniform Arbitration Act (UAA) UCC See Uniform Commercial Code (UCC) UCCC See Uniform Consumer Credit Code (UCCC) UETA See Uniform Electronic Transactions Act (UETA) ULC See Uniform Law Commission (ULC) ULLCA See Uniform Limited Liability Company Act (ULLCA) ULPA See United Limited Partnership Act (ULPA) Ultra vires acts, 655 Unaccepted draft, 485 Unaffiliated directors, 694 Unauthorized contracts, 559–560 Unauthorized criminal acts, 559 Unauthorized signature, 470 Unauthorized signatures, 483 Uncertificated security, 733 UNCITRAL See Unite Nations Commission on International Trade Law (UNCITRAL); United Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on Electronic Commerce, 955 UNCITRAL Model Law on Electronic Signatures, 955 UNCLOS See United Nations Convention on the Law of the Sea (UNCLOS) Unconscionability, 338–339 Unconscionable contracts, 239–241 Undisclosed principals, 545, 561 Undisputed debt, settlement of, 221 Undue influence, 199 Unemployment insurance, 867–868 Unenforceable contracts, 171 Unenforceable obligations, 223 Unfair employment practices, 850 Unfair labor practices, 850 Unfairness, 20, 906 UNFCCC See United Nations Framework Convention on Climate Change (UNFCCC) Unidentified principals, 545, 560 Uniform Arbitration Act (UAA), 63 Uniform Commercial Code (UCC), 9, 165 Uniform Consumer Credit Code (UCCC), 913 Uniform Durable Power of Attorney Act, 529 Uniform Electronic Transactions Act (UETA), 261–262, 346, 641, 955 Uniform Law Commission (ULC), 9, 913 Uniform Limited Liability Company Act (ULLCA), 625 Uniform Partnership Act, 575, 596, 619 Uniform Power of Attorney Act, 529 Uniform Securities Act of 1956, 796 Uniform Statutory Form Power of Attorney Act, 529 Uniform Unincorporated Nonprofit Association Act (UUNAA), 578 Unilateral contract, 171 Unilateral contracts, 178, 215 irrevocable offers of, 185 Unilateral mistake, 207 Union Planters Bank, National Association v Rogers, 509–510 Union shop contract, 851 Unite Nations Commission on International Trade Law (UNCITRAL), 955 United Limited Partnership Act (ULPA), 618 United Nations, 949 United Nations Commission on International Trade Law (UNCITRAL), 65, 262 United Nations Convention on the Law of the Sea (UNCLOS), 950–951 United Nations Framework Convention on Climate Change (UNFCCC), 942–943 United States v Bestfoods, 941–942 United States v E.I du Pont de Nemours & Co., 883 United States v O’Hagan, 817, 819 Unlimited personal liability, 596 Unqualified indorsements, 458 Unreasonably dangerous product, 399 Unregistered sales, 806 Unseasoned issuers, 798 Unsecured bonds, 664–665 Unsecured claim, 768 Unsecured creditors, 742 U.S Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 765 Usage of trade, 276, 340 Usury statutes, 234 Utilitarianism, 15 Utility patents, 840–841 UUNAA See Revised Uniform Unincorporated Nonprofit Association Act (UUNAA); Uniform Unincorporated Nonprofit Association Act (UUNAA) V Valid contracts, 171 Value, 461, 734–735 Valued policy, 977 Vance v Ball State University, 853–854 Vanegas v American Energy Services, 217 Variance, zoning, 1020 Variant acceptances, 181, 342–344 Venue, 55 Verdict, 60 directed, 59 judgment notwithstanding, 60 motions challenging, 60 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it INDEX Vertical mergers, 884 Vertical privity, 395, 400 Vertical restraint, 877 Vested remainder, 997 Vicarious liability, 106, 556 Vietnam Veterans Readjustment Act, 860 Void contracts, 171 Void obligations, 469 Void title, 374 Voidable contracts, 326 Voidable promises, 223 Voidable title, 374 Voluntary dissolution, 721 Voluntary petitions, 766–767 VonHoldt v Barba & Barba Construction, Inc., 1016 Voting power, 687–688 Voting rights, of shareholders, 685–689 approval of fundamental changes, 687 concentrations of voting power, 687–688 election of directors, 686–687 meetings, 685 quorum and voting, 686 removal of directors, 687 restrictions on transfer of shares, 689 Voting trust, 688 Vulcan, Inc., 39–43 W Waddell v L.V.R.V Inc., 361–362 Wage assignment, 920 Wagner Act, 850 Waiver, 979 Wal-Mart Stores, Inc v Samara Brothers, Inc., 834 Warehouse receipts, 985 Warehousing, 983 WARN See Worker Adjustment and Retraining Notification Act (WARN) Warnick v Warnick, 608–609 Warranties, 388–395 See also Strict liability breach of, 978 collecting banks, 503–504 defined, 911 disclaimers of, 392–394, 400 buyer’s examination or refusal to examine, 394 express exclusions, 392–393 federal legislation relating to warranties of consumer goods, 394 documents of title, 987 express, 389–390 express exclusions, 392 federal warranty protection, 911–912 full, 911 implied, 390–391, 1015 labeling requirements, 911 limitation or modification of, 394 notice of breach, 395 obstacles to actions, 392–395 obstacles to recovery, 400–401 disclaimers and notice, 400 limitations on damages, 401 plaintiff’s conduct, 400–401 privity, 400 statute of repose, 401 subsequent alteration, 401 plaintiff’s conduct, 395, 400 on presentment, 492–495 all other payors, 495 drawees of unaccepted drafts, 493 no alteration, 493 privity of contract, 394 on transfer, 490–492 authentic and authorized signatures, 491 entitlement to enforce, 490–491 no alteration, 491 no defenses, 491 no knowledge of insolvency, 491 types of, 388–391 warranty of title, 388, 392 written, 911 Warranty deed, 1016 Warranty liability, defined, 480 Watson Coatings, Inc v American Express Travel Related Services, Inc., 467 Wealth of Nations, The (Smith), 18 Well-known seasoned issuers, 799 White v Samsung Electronics, 130–131 White-collar crime, 108–110 Wholesale electronic funds transfer, 512 Wholesale funds transfer, 514–517 acceptance, 516 erroneous execution of payment orders, 516 excluded transactions, 516 parties, 515 payment order, 515 scope of Article 4A, 514–515 unauthorized payment orders, 516 Wholly owned subsidiaries, 961 Wild animas, 156 Williamson v Mazda Motor of America, Inc., 72–73 Wills, 1036–1041 defined, 1036 formal requirements, 1038 attestation, 1038 I-31 signature, 1038 writing, 1038 mental capacity, 1036 conduct invalidating a will, 1036–1037 testamentary capacity, 1036 revocation of, 1038–1040 codicils, 1040 destruction or alteration, 1039 operation of law, 1040 subsequent will, 1039 special types, 1040–1041 holographic wills, 1040 living wills, 1041 nuncupative wills, 1040 soldiers’ and sailors’ wills, 1041 transfer of personal property by, 973 Winding up, 606–607, 610–611, 633 limited partnerships, 624–625 Windows, Inc v Jordan Panel Systems Corp., 379–380 WIPO See World Intellectual Property Organization (WIPO) Wire fraud, 111 Without reserve, auction sale, 182 Womco, Inc v Navistar International Corporation, 393–394 Worker Adjustment and Retraining Notification Act (WARN), 868 Worker’s compensation, 867 World Intellectual Property Organization (WIPO), 836 World Trade Organization (WTO), 950 World-Wide Volkswagen Corp v Woodson, 54 Writ of certiorari, 48 Writ of execution, 61 Written contracts, material alteration of, 307 Written interrogatories, 55 Written warranties, 911 Wrongful civil proceedings, 131 Wrongful dissociation, 602 WTO See World Trade Organization (WTO) Wyler v Feuer, 623 Z Zelnick v Adams, 252–253 Zoning, 1020–1021 defined, 1020 enabling acts, 1020 judicial review of, 1020–1021 nonconforming uses, 1020 ordinances, 1020 subdivision master plans, 1021 variance, 1020 Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2016 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... associations Partnership is founded on the agency of the partners Each partner is an agent of the partnership and as such has the authority to represent and bind the partnership in all usual transactions... control the manner and means of the employee’s performance of work Independent contractor person who contracts with another to a particular job and is not subject to the other’s control over the manner... Chapter 29 Termination may take place by the acts of the parties or by operation of law Acts of the Parties [2 8-5 a] Termination by the acts of the parties may occur by the provisions of the original