Miscellaneous / Scots Law Business Entities Cases

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Ratio
The case which sets forth the test of a director's duty of skill and care. This is at first objective, then subjective. It falls in two stages
An agent must account to P for any benefits received from third parties
A companies articles can give individuals personal rights against the company
This case defines a share as: a measure of your liability and interest in a company
An example of incorporation to circumvent a restrictive covenant
Courts will not pierce the veil of incorporation to effect an insurance contract
The issue where there is an undisclosed principal is whether the 3rd party wouldn't have taken the risk of contracting with anyone but the agent
The first fit period of a director's disqualification is to fit the gravity of his conduct, then allowing for any mitigating factors
Where there is mental incapacity/inability to perform partnership duties, when the partnership agreement provided the option not to participate in management, this meant the partne
Where a company has been wronged, then it is the only victim, and the company itself must initiate proceedings in derivative action
For Ratification, the agent must have purported to be an agent at the time of entering the transaction
If an agent consistently refuses to name a principal, he will become personally liable
A retiring partner can still be liable for negligent omissions that occurred while they were partners (although in practice this will be dealt with by a discharge by others in the
Shareholders who want to continue improving the business, even when it is running at a loss, are not acting with unfair prejudice in terms of minority shareholders. They are still
Receipt of a share of profits is a sign that you are a partner, but is not sufficient in and of itself to make you a partner
The courts have said that the best remedy for minority shareholder protection is just to seek a buy out of your shares
English case which now doubts the Scottish authority on compensation for agents.
Where a third party discovers the existence of the undisclosed principal they can elect either the principal or the agent to be liable under the contract
The election of suing either the principal or agent is final
In relation to altering the way a partnership is run, a majority may only win if all partners are present and able to present their view
A partner who had received a conviction for dishonesty was reason enough to dissolve the partnership, although the decision is probably a little harsh by modern standards
Apparent authority will personally bar a principal from denying the existence of a contract
This case controversially ruled that a person can hold multiple directorships, even in competing companies
The onus to rebut the presumption that an agent intended to incur personal liability by signing lies with the agent
An agent is bound to act with a duty of skill and care. The standard is that of a reasonable and competent, careful member of the profession
A contract to limit the exercise of a statutory power to amend articles is unenforceable
As a default rule, a company cannot buy back its own shares
A director's breach of fiduciary duty can be ratified by the shareholders, provided it was not ulra vires. The director in question is actually permitted to vote on ratifying his o
A director cannot enter into an ultra vires contract with himself - s39 applies only to protect vulnerable third parties
An agent must not enter any transaction that would put him in conflict with the interests of his principal
Ratio
An agent has a right to commission
For Ratification, you must consider any relevant time limits
A breach of fiduciary duty by a director will result in a voidable contract. It is not void from the outset, rather it is voidable at the company's instance
A director has a duty to avoid conflicts of interest. This is enshrined in statutory form, but this case provides us with an example of conflicted interests
Exercise of a written power to expel a partner must be in good faith and for the good of the whole partnership.
Courts will only pierce the corporate veil when the company is a facade, sham or device to conceal the true facts
A principal failing to prevent A collecting payment in cheques directed to the agent led to apparent authority
Directors who are under a duty not to act ultra vires are not authorised by the company to act beyond its restricted objects
A director is not an agent of the shareholder
The court will look at equitable principles to see if majority shareholders have acted in good faith
If an agent acts outside of his authority then P has a right to relief from any liabilities occured
A director's principle duty is to the company, not the shareholders
If the concealment of a principal is part of the intention to deceive, old case law says that this means the principal is not liable, but this hasn't been applied broadly
A signature on behalf of a principal should be indicative of their agency
In relation to variation of running the partnership, when there is a split vote, the status quo prevails
A director's powers should only be utilised for proper purposes
Current Scottish authority on compensation for commercial agents - now doubted
If shares are allotted, not issued, then you don't have any title to them, rather you have a personal right in contract to obtain them
A company has separate legal personality from its members
When a new partnership starts, if a new partner contributes no capital this is evidence that he was no assuming the old liabilities
The courts now take a purposive approach to commercial agents regulations regarding 'negotiation' to ensure that agents are protected
The definition of 'negotiate' in terms of commercial agents' regulations, is debated. In this case, agent did not apply to a petrol garage owner
Where there is a written partnership agreement, partners may not make an oral variation of it
This case allowed weighted votes; here a director-shareholder gave himself enough votes to outvote everyone and entrench his role in the company
Partners are not liable for one partner injuring another
A firm is entitled to disgorge any profit made by a partner who breaches their fiduciary duty
A principal must make an informed choice to ratify
An agent must not disclose any confidential information belonging to the principal
Partnership does not begin at the commencement of trading - the court may look at preparations made prior to beginning trading
In a substantial property transaction, this case held that the value of a non-cash asset is to be assessed according to the value to the director. It is not an objective test.

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