Hello Professor, I had a quick question regarding agency law, or more specifically the ratification portion.
Principal will be liable to a third party for an unauthorized contract entered on its behalf, if the principal accepts benefits of the contract. The principal must have knowledge of the contract, the terms and nevertheless accept the benefits.
Does this mean that the principal, after giving either actual (implied or express) or apparent authority, and having knowledge of the contract its terms and its acceptance be ratified or must it be that he must have knowledge of the contract and terms and be required to accept the benefits?
Response: Continue reading
This is a brief (case summary) I wrote in 2013. Bankruptcy case.
Utnehmer v. Crull (In re Utnehmer), 499 B.R. 705 (9th Cir. B.A.P. 2013)
Issue: Was a partnership actually formed here such that the debtor owed fiduciary duties to the creditor which may be non-dischargeable under Section 523(a)(4)?
Judge Alan Jaroslovsky, Northern District California
Pappas, Dunn, Jury
Opinion by Pappas
The debtors decided, in 2005, to build a large “spec home” in Venice Ca which would be sold then for a profit. They borrowed $100,000 from Crull giving Crull a promissory note which was due on sale of the property but no longer than 12 months. “The Parties agreed that $50,000 of the initial $100,000 loan was intended to be super[s]eded by execution of a formal operating agreement which would recharacterize this $50,000 of the lenders’ interest as an investors’ equity interest in a limited liability company to be formed, with a 10% annual preferred return, and 35% participation in profits on a prorated basis. The documents for formation of the limited liability company, and the operating agreement, were supposedly being drafted.” The lender received interest payments for about two years. The property was finally finished and sold but the loan was not repaid since there were insufficient funds available. The debtors filed chapter 7 and the lenders filed a non-dischargeability complaint alleging fraud and willful and malicious injury. The court commented that there was no fraud or willful injury but there appeared to be defalcation by a fiduciary “if a partnership arrangement is shown.” After trial, the court stated, “If your client was a fiduciary in relation to the venture and cannot account for the proceeds, I think that that’s enough to establish defalcation.” He entered judgment against the debtor. Continue reading
I am going to refer to the Supplemental Materials a lot in class next week. Please be sure to bring those with with. They are available at Legal Books Distributing.
I will not be using the Statutory Supplement previously assigned. Don’t confuse that with my Supplement. My Supplement has cases that we will review but are not in the Hamilton text. It also has forms we will look at, a Glossary, an article on fiduciary duties, and some other things. It is here.
Also, I would not bother with older versions of my Summary of Law of Business Orgs. Get the 2019 verion ($6 bucks). I made changes in a few areas, primarily about agency and close corps.