11 Aug A brief restatement of the legal question posed; usually a sentence or two that focus on the specific legal issue in this case without reference to extraneous facts or information. A statem

This assignment should be between 2 and 4 pages, and should be the product of careful thought and more than one draft. Please remember that when providing an answer to the specific questions posed, it is not enough to give the correct answer unless you back up that answer with a legal argument that includes the following:

1. A brief restatement of the legal question posed—usually a sentence or two that focus on the specific legal issue in this case without reference to extraneous facts or information.

2. A statement of the applicable law or rule that should be applied to the facts in this case. This will be taken from the text and will not consist of a personal opinion or ethical reaction, but rather be a statement (usually only one or two sentences) that summarizes the rule of law that you will apply to come to a correct answer. You should not restate the law in its entirety, but instead summarize the appropriate law into a short explanation of the ruling principle in this case.

3. Finally, a clear statement that explains how you applied the applicable law to these facts to reach a specific conclusion. This will be usually be a few sentences culminating in an answer to the specific question posed in the text. This portion of your answer should demonstrate original thinking and reasoning, and result in a definite conclusion.

All three elements are really needed for a complete answer. Remember that a "gut" feeling or an answer that tells me what you think is "right" is not enough in a course that emphasizes the accuracy of application and the importance of making a persuasive argument that explains that application.

Witten Assignment

ch. 48: 5,14 ch. 49: 3, 10, 12 ch. 50: 7, 13 ch. 51: 3, 7, 8

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Chapter 48:

Chapter 49:

Chapter 50:

Chapter 51:

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Chapter 44:

Answer 6.

Facts to this case

· S owned a building which he later transferred to a corporation.

· E was injured in the building while performing work.

· E sued S for the injuries.

Case Issue

The issue is whether S is liable for E’s injuries in the building when S already transferred the property to a corporation.

Relevant Terms Laws, and Cases

Corporation — a company that limits liability (owners lose their investment only) of their owners. Corporations are treated as a separate person from their owners; debts owed by the corporations are not necessarily owed by the owners.

Analysis and Conclusion

The court held for S They argued that:

· The corporation is a separate entity from S which now owned the building.

· It doesn't matter if S and his family was the majority shareholder.

· S wasn't personally liable for the injuries in the building, the corporation should be.

Thus, E doesn't have a case against S.

Answer 8

Facts to this case

· Two sons, who were shareholder and employees, were tired by their parent's corporation.

· The parents were the majority shareholder and executive of the corporation.

· The parents gave themselves high salary exceeding the corporation's revenue.

· The sons claim this action was oppressive towards themselves as minority shareholders.

Case Issue

The issue is whether the owner of the corporation can give themselves a high salary.

Relevant Terms Laws, and Cases

Corporation — a company that limits liability (owners lose their investment only) of their owners. Corporations are treated as a separate person from their owners.

Analysis and Conclusion

The courts held for the sons. They argued that:

· To find tor oppressive conducts in a close corporation (corporations held by only a few people), courts considered whether the majority shareholders fiduciary duty and reasonable expectations of minority shareholders

· Sons had reasonable expectation to have some management control over the corporation, but their tiring resulted them being deprived of participation in the business.

· Furthermore, the parents wasted corporate assets by paying themselves high salaries, which the courts found would deplete corporate assets.

Thus, the parents' conducts were oppressive.

Answer 15

Facts to this case

· Naquin was an employee and shareholder of a corporation.

· He was fired and later founded a competing business.

Case Issue

The issue is whether has the right to inspect the books of his former corporation when he has a competing business.

Analysis and Conclusion

The court held for N. They argued that:

· As a shareholder N had the right to inspect the books, his reason was to assess the value of his stock.

· Being a competitor is insufficient reason to refuse inspection of the books.

· Not only was he refused but the owners try to bar him from doing so by issuing new shares.

· Thus, the court also found the corporation's owners acted in bad faith.

Naquin has a right to inspect the books.

Chapter 45:

Answer 7

Insider Trading happens when an insider, person working with the company, uses information of his company to achieve an unfair advantage in an investment.

The lawyer of the firm may be liable for insider trading because as the lawyer tor the company which hired him he has a responsibility to the company not to inform others of their potential rise in stock prices.

Furthermore, the secretary is liable for insider trading because she informed her stockbroker friend this information which he acted on.

Answer 9

Facts to this case

· An investor was sold a rental pool arrangement.

· Under the arrangement the investor was allowed access to the property for two weeks a year.

· The property was also owned by around 50 other people in the arrangement.

· The investor later sued the seller for securities fraud.

Case Issue

The issue is whether the rental pool arrangement is a security. Note, if it is not a security the investor cannot sue for damages under security regulations.

Relevant Terms Laws, and Cases

Use of fraudulent or omission of material information during a sale of security.

Analysis and Conclusion

The court held for the investor. They argued that the arrangement was a security known as an investment contract:

· The investment contract is determined by the Howey test, 1) an investment of money with 2) a common enterprise 3) and expectation of profits due to efforts of third parties.

· The first two factors were met because money was invested and the arrangement contained a group of people with investment in the same property.

· The third factor the court argued was harder to show, but the investor did not live in the property and had little access to it The investor also claims that he will sell his property tor a profit.

Thus, the arrangement can be a security.

Chapter 46:

Question1

Facts to this case

· An accountant certified an audit report which showed their clients to be solvent corporations

· The accountant was aware their reports would be used by a creditor to lend money to the corporations

· The creditor made loans to the corporations which were actually insolvent.

Case Issue

The issue is whether the accountant is liable to the creditor.

Relevant Terms Laws and Cases

Malpractice — is when a professional, such as doctor, lawyer, or accountants work which results in an injury to another.

Analysis and Conclusion

The court held for the creditor. They argued that:

· Third party can recover from injury due to misstatements of an accountant.

· The accountant knew that their report would be used by the creditor.

· The question of fact is then whether the accountant followed proper professional guidelines.

· There was evidence that the accountant may not have knowledge of such guidelines.

Thus, the accountant may be found liable if they did not follow the proper guidelines.

Question 7

An accountant can work for a firm full-time, as an independent contractor performing regular work for a client, or as an independent auditor. Auditors are important professionals as they are ultimately accountable for improving the dependability of financial accounts for all types of external consumers. They may risk legal and criminal responsibility when carrying out their obligations. Therefore, the CPA can be held liable for negligently relying on the records provided by the Company Happy Campers the liability of the CPA is contributory because the executive director of the Company provided the CPA with falsified records, which led to the inconsistency in the audit report. Hence, losses caused by comparative negligence might be recovered by the bank. This enables for a share of guilt to be assigned to both the customer and the CPA for their respective levels of negligence in the use and preparation of the financial statements.

Chapter 47:

Question 1

Facts to this case

· A financial company entered a merger with a banking company in which the finance company's stocks would be valued at $10 per share.

· The directors were told by their advisors that this was a fair exchange price.

· Shareholders disagreed with this price and sued.

Case Issue

The issue is what defences are available to the board of directors in this suit.

Relevant Terms, Laws, and Cases

Business Judgment Rule — is a defence when board of director's actions causes damage, but taken in a manner that was informed, in good faith, and in the interest of their company, then they may be precluded from a lawsuit for the damage.

Analysis and Conclusion

The board in this case may state the business judgment rule defence. In fact, the court stated that the plaintiffs (shareholders) have the burden to prove that the board breached their fiduciary duty to the company or acted in bad faith.

The court held for the board. They argued that:

· The board had no self interest in the merger and they were not affiliated with the acquiring banking company.

· There was no proof that they acted in bad faith.

· The lowered stock price level was due to the financial emergency the company faced and the board's decisions have prevented the firm from bankruptcy.

· Thus, the board showed that it acted reasonably in light of these dire circumstances.

Therefore, the board had a valid business judgment defence.

Answer 3

Facts to this case

· A majority shareholder sold his corporation's assets to a competitor.

· The majority shareholder, a president of the company, also received money for signing a non-compete covenant with the competitor.

· Minority shareholders claimed that this was a breach of the president's fiduciary duty to them.

Case Issue

The issue is whether the president breached his fiduciary duty to the shareholders.

Relevant Terms, Laws, and Cases

Non-compete agreement — is a contract signed by parties where one of the parties agrees not to compete in business with the other patty. Non-compete clauses may appear in employment contract and sale of business contract.

Analysis and Conclusion

The president had a conflict of interest when fie received money for a non-compete agreement. This was something which should have been disclosed to the corporation, which he did not do thus, there was insufficient disclosure of his self-interest. Therefore, it is a case of breach of fiduciary duty as the president received money for his dealings and gave money to himself with corporate funds.

Question 4

Facts to this case

· P was hired for two years period for a company.

· However, he was fired before the period ended due to interference of the company's employees.

· The employees claimed his tiring was tor the good of the company.

Case Issue

The issue is whether the company is liable for breach of contract and whether the employees are personally liable for firing of P.

Analysis and Conclusion

The company executives and directors are allowed to interfere to company policy including contracts as long as they act within a good faith manner However, the executives and directors are only liable when they act for their own Interest or with intent to harm. The actions of the company employees were without malice and thus they can't be held personally liable.

Thus,

· The corporation is liable for breach of contract of P’s employment.

· However, the employees of the company are not liable for the breach.