Agency & PartnershipAgency & PartnershipProfessor Donald J. KochanProfessor Donald J. Kochan

Class 1Class 1

Today’s Materials and IssuesToday’s Materials and Issues

Course IntroductionCourse Introduction

Please download and read the following:Please download and read the following:

Michael C. Jensen & William Meckling, Michael C. Jensen & William Meckling, Theory of the Firm: Managerial Behavior, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership StructureAgency Costs, and Ownership Structure, 3 J. Fin. Econ. 305 (1976): , 3 J. Fin. Econ. 305 (1976):

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=94043

1. Restatement (Third) Of Agency Intro. (2006) Restatement of the Law — Agency Restatement (Third) of Agency Current Restatement of the Law — Agency Restatement (Third) of Agency Current

through August 2008 Introductionthrough August 2008 Introduction

Agency TheoryAgency Theory

Principal/AgentPrincipal/Agent

Fiduciary DutiesFiduciary Duties

Delegations of AuthorityDelegations of Authority

Ownership/ControlOwnership/Control

Preliminary Exam InstructionsPreliminary Exam Instructions

Spring final exam is 3 hours essay and short answer and Spring final exam is 3 hours essay and short answer and multiple choice. The exam will cover all materials assigned multiple choice. The exam will cover all materials assigned in your required text, all materials covered in lectures, and in your required text, all materials covered in lectures, and any assigned supplemental material including handouts.  any assigned supplemental material including handouts.  The examination is a modified open book examination – The examination is a modified open book examination –

each student may use his/her text, any assigned each student may use his/her text, any assigned supplemental materials, any notes or outlines which that supplemental materials, any notes or outlines which that

student prepared, and any group notes or outlines to which student prepared, and any group notes or outlines to which he/she made a he/she made a significantsignificant contribution in preparation.  A contribution in preparation.  A

common usage English language dictionary is also common usage English language dictionary is also permitted. No commercial outlines, treatises, or similar permitted. No commercial outlines, treatises, or similar

materials will be permitted for use during the examination.materials will be permitted for use during the examination.

Required TextRequired Text

Agency, Partnership and the LLC: The Law of Agency, Partnership and the LLC: The Law of Unincorporated Business Associations Unincorporated Business Associations

(LexisNexis/Bender 7th ed. 2007)(LexisNexis/Bender 7th ed. 2007)ISBN1-4224-0787-XISBN1-4224-0787-X

Course MaterialsCourse MaterialsRequired Course Materials and Required Course Materials and

Suggested Supplemental Materials will be available at:Suggested Supplemental Materials will be available at:

TWEN Page: TWEN Page: http://lawschool.westlaw.com

and/orand/or

www.donaldjkochan.com

All students must register on the TWEN page for this courseAll students must register on the TWEN page for this course (Please note that TWEN has instructional materials that are (Please note that TWEN has instructional materials that are

recommended), recommended),

and must make themselves familiar with the Social Science Research and must make themselves familiar with the Social Science Research Network, Network, www.ssrn.com (“SSRN”), (“SSRN”),

andand

JSTOR, JSTOR, http://www.jstor.org

Suggested Supplemental MaterialsSuggested Supplemental Materials

Gregory's Hornbook on the Law of Agency and Partnership, 3dBy William A Gregory

http://west.thomson.com/productdetail/12975/22022012/productdetail.aspx

AND alsoAND also

Restatement of the Law Third, Restatement of the Law Third, Agency - Volumes 1 & 2Agency - Volumes 1 & 2

http://ali.org/index.cfm?http://ali.org/index.cfm?fuseaction=publications.fpage&prodfuseaction=publications.fpage&prod

uct_code=1R3AGNOTKuct_code=1R3AGNOTK

For some history, seehttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=968477

Restatement of the Law Third, Restatement of the Law Third, Agency – Introductory DefinitionAgency – Introductory Definition

Ҥ 1.01 Agency Defined

Agency is 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.”

Restatement of the Law Third, Restatement of the Law Third, Agency - IntroductionAgency - Introduction

““The subject matter of this Restatement, the common law of agency, encompasses the The subject matter of this Restatement, the common law of agency, encompasses the legal consequences of consensual relationships in which one person (the “principal”) legal consequences of consensual relationships in which one person (the “principal”) manifests assent that another person (the “agent”) shall, subject to the principal's manifests assent that another person (the “agent”) shall, subject to the principal's

right of control, have power to affect the principal's legal relations through the right of control, have power to affect the principal's legal relations through the agent's acts and on the principal's behalf. Relationships of agency usually agent's acts and on the principal's behalf. Relationships of agency usually

contemplate three parties—the agent, the principal, and third parties with whom the contemplate three parties—the agent, the principal, and third parties with whom the agent interacts in some manner. Agents of the same principal may also interact, with agent interacts in some manner. Agents of the same principal may also interact, with legal consequences for their mutual principal. This Restatement also embraces the legal consequences for their mutual principal. This Restatement also embraces the situation in which the legal consequences of agency apply to a relationship in which situation in which the legal consequences of agency apply to a relationship in which

an actor appears to third parties to be acting as a person's agent but the relationship an actor appears to third parties to be acting as a person's agent but the relationship between the putative principal and the actor lacks elements of the common-law between the putative principal and the actor lacks elements of the common-law

definition of agency.”definition of agency.”

““Many questions governed by common-law agency doctrines involve the legal Many questions governed by common-law agency doctrines involve the legal consequences of an agent's interactions with third persons. Such interactions may consequences of an agent's interactions with third persons. Such interactions may

create legal rights and duties as between the principal and the third party, the agent create legal rights and duties as between the principal and the third party, the agent and the third party, and the principal and the agent. The common law of agency also and the third party, and the principal and the agent. The common law of agency also

governs the legal consequences of the relationship of the agent and the principal governs the legal consequences of the relationship of the agent and the principal with each other, which is in many respects defined and governed by any agreement with each other, which is in many respects defined and governed by any agreement between them. Agency doctrine also imputes the agent's knowledge to the principal between them. Agency doctrine also imputes the agent's knowledge to the principal

in many circumstances.”in many circumstances.”

Revised Uniform Partnership Act Revised Uniform Partnership Act (“RUPA”)(“RUPA”)

From the National Conference of Commissioners From the National Conference of Commissioners on Uniform State Laws: on Uniform State Laws:

http://www.nccusl.org/Update/http://www.nccusl.org/Update/ActSearchResults.aspxActSearchResults.aspx

From Westlaw:From Westlaw:http://lawschool.westlaw.com/shared/http://lawschool.westlaw.com/shared/

marketinfodisplay.asp?marketinfodisplay.asp?code=RE&id=216&rtcode=re&rtid=203&subpacode=RE&id=216&rtcode=re&rtid=203&subpa

ge=2ge=2

A Useful Start for A Useful Start for Your Outline and Bar PrepYour Outline and Bar Prep

From the National ConferenceFrom the National Conferenceof Bar Examiners:of Bar Examiners:

http://www.ncbex.org/multistate-http://www.ncbex.org/multistate-tests/mee/subject-matter-outlines/tests/mee/subject-matter-outlines/

agency-and-partnership/agency-and-partnership/

Further Non-Required ReadingsFurther Non-Required Readings(Not Specifically Recommended, (Not Specifically Recommended,

But Interesting)But Interesting) Gow, Niel. 2000. Gow, Niel. 2000. A Practical Treatise on the Law of Partnership.A Practical Treatise on the Law of Partnership. Buffalo, N.Y.: W.S. Buffalo, N.Y.: W.S.

Hein.Hein.

Hamilton, Robert W., and Jonathan R. Macey. 2003. Hamilton, Robert W., and Jonathan R. Macey. 2003. Cases and Materials on Cases and Materials on Corporations, Including Partnerships and Limited Liability Companies.Corporations, Including Partnerships and Limited Liability Companies. 8th ed. St. 8th ed. St. Paul, Minn.: West Group.Paul, Minn.: West Group.

Hynes, J. Dennis. 2001. Hynes, J. Dennis. 2001. Agency, Partnership, and the LLC in a Nutshell.Agency, Partnership, and the LLC in a Nutshell. 2d ed. St. 2d ed. St. Paul, Minn.: West Group.Paul, Minn.: West Group.

Moye, John E., ed. 1999. Moye, John E., ed. 1999. The Law of Business Organizations.The Law of Business Organizations. 5th ed. Albany, N.Y.: 5th ed. Albany, N.Y.: West Legal Studies.West Legal Studies.

Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Partnerships, LLCs, and LLPs: Uniform Acts, Taxation, Drafting, Securities, and Bankruptcy.Bankruptcy. 12th ed. Vol. 1. 1996. Philadelphia: American Law Institute–American Bar 12th ed. Vol. 1. 1996. Philadelphia: American Law Institute–American Bar Association Committee on Continuing Professional Education.Association Committee on Continuing Professional Education.

Suggested Readings from Suggested Readings from the Vault of the Vault of

Chapman Professor Tom W. BellChapman Professor Tom W. Bell

Agency, Partnerships, and Unincorporated Business Organizations Agency, Partnerships, and Unincorporated Business Organizations Final Exam, Spring 1999Final Exam, Spring 1999

Agency and Partnership Final Exam, Fall 1996 Agency and Partnership Final Exam, Fall 1996

NOTE: My exams will be different, but as NOTE: My exams will be different, but as practice material I am still suggesting these practice material I am still suggesting these exams for review of the kind of issues that exams for review of the kind of issues that may be tested. You WILL receive a Practice may be tested. You WILL receive a Practice Exam that I drafted later in the semester.Exam that I drafted later in the semester.

Concluding RemarksConcluding Remarks This course will mix black letter and theory, and This course will mix black letter and theory, and

the relationships with boththe relationships with both

Try to focus on why it complements Corporations Try to focus on why it complements Corporations or the Business Association courses – that is, or the Business Association courses – that is, always ask yourself when and why things are always ask yourself when and why things are

different (as well as what are the same)different (as well as what are the same)

Always draw paralels to other coursesAlways draw paralels to other courses

Always think about your own life – when you are Always think about your own life – when you are or have been, formally or informally, in an agency or have been, formally or informally, in an agency

or partnership relationship, because you surely or partnership relationship, because you surely have beenhave been