Business and Corporate Law Flashcards

A shareholder who believes corporate directors have acted fraudulently may bring a lawsuit on behalf of the corporation under which type of action?

Answer: Derivative action

A derivative action allows a shareholder to sue on behalf of the corporation when the board fails to act against wrongdoers.

Which of the following best describes 'piercing the corporate veil'?

Answer: Holding shareholders personally liable for corporate debts

Courts pierce the corporate veil to hold shareholders liable when the corporate form is used fraudulently or to evade obligations.

Under the Uniform Commercial Code, a 'firm offer' made by a merchant to buy or sell goods is irrevocable for up to how long without consideration?

Answer: 3 months

UCC § 2-205 provides that a merchant's signed written firm offer is irrevocable for the stated period, not to exceed three months.

Which type of agency relationship is created when a principal leads a third party to believe an agent has authority, even though none was actually granted?

Answer: Apparent authority

Apparent authority arises from the principal's conduct that causes a third party to reasonably believe the agent is authorized.

A corporation's articles of incorporation are filed with which entity?

Answer: The state where the corporation is incorporated

Articles of incorporation are a state filing, typically with the Secretary of State of the incorporating state.

In partnership law, what is the default rule regarding a partner's liability for partnership debts?

Answer: Joint and several liability for all partnership obligations

General partners face joint and several liability, meaning creditors can pursue any one partner for the full debt.

A contract clause that predetermines the amount of damages payable upon breach is called a:

Answer: Liquidated damages clause

A liquidated damages clause is enforceable when actual damages are difficult to estimate and the amount is a reasonable forecast of harm.