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When the corporation is liable for an individual’s actions

Although a corporation is a separate legal entity, a corporation can be held liable for the actions of its directors/officers in some circumstances.

  1. IMPLIED AUTHORIZATION TO BIND THE COMPANY. A corporation will be held liable for the actions of an individual when those actions are taken by the individual on behalf of the corporation. For example, in Rockwell Developments Ltd. v. Newtonbrook Plaza Ltd [1972] 3 O.R. 199, Newtonbrook entered into a contract with Kelner, an employee of Rockwell who signed as Rockwell’s secretary. Money paid did not go through the corporation bank account, but through Kelner’s.

    Newtonbrook attempted to claim directly against Kelner. The court stated that Mr. Kelner was not the “actual contracting party” because the transaction was made in the name of the corporation; therefore, the corporation was held liable. In its reasoning, the court relied on the fact that Mr. Kelner could not have sued on the contract; therefore, nor could he himself have been sued. (see also R. v. Waterloo Mercury Sales Ltd.[1974] 4 WWR 516, where the manager at a used car dealership authorized odometers to be turned backwards. The company was held liable because the manager acted as the directing mind of the company. See also, Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd, [1964] 1 All E.R. 630, where Mr. Freeman and Mr. Lockyer sued Buckhurst Park Ltd and its director, Shiv Kumar Kapoor, for unpaid fees for their architecture performed in the development of the ‘Buckhurst Park Estate’. The company argued it was not bound by the agreement because Mr. Kapoor had acted alone (as if he were a managing director) in engaging the architects, without proper authority from the other three directors.

    The court held that the company was bound by the agreement. The court stated that although Mr. Kapoor was not officially appointed managing director, he had been acting as such to the knowledge of the other three directors.)

  2. A CORPORATION WILL BE LIABLE IF THE CORPORATION RECEIVES A BENEFIT. For example, in Canadian Dredge & Dock Co. v. The Queen, 19 DLR (4th) 314, the court outlined that if the directing mind is acting solely in their personal interests and the corporation gets no benefit, then the corporation is not criminally responsible. However, if the corporation gets any benefit it will be found criminally responsible for the actions of the directing mind. In this case, four directing minds of corporations appealed their convictions of conspiracy and defraud. These convictions were based on collusive tendering bids for a government contract. The court held that the directing minds were acting in the course of their duties to the corporation and as such the company itself could be held criminally responsible.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Follow Your NDA Procedures or Risk Losing Confidentiality

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The NDA stated that to trigger either party’s obligations, the disclosed information must be either marked as confidential at the time of disclosure, or be unmarked and treated as confidential at the time of disclosure and designated later as confidential by written memorandum identifying the confidential information. Years later, information which was not marked but was considered confidential was shared in a presentation. The written memorandum was never sent. The deal collapsed and one party used the other party’s “confidential” information. The (California) court held that the NDA did not apply to protect the information if the procedure set out in the agreement was not followed.

The authors conclude: “If an NDA has a marking requirement…a procedure to discuss and fix procedural errors should be instituted to prevent accidental disclosure of confidential information.”

Read the article here.

 

Take away:

  • If the NDA has a marking requirement, it is most important to understand the procedures for marking, and to implement them. If the procedures are not followed, the NDA may not protect those pieces of confidential information since the mark is what determines if that document was confidential.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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Consultants are Advised to Read the Consulting Agreement Very Very Carefully

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Consulting agreements between academics and industry provide opportunities for enrichment in every sense of the word – both academically and financially. It is important however that the academic consultant take the time to carefully read and understand the agreement they are being asked to sign, and to ensure that it is consistent with their institution’s policies.

Beware of agreements which transfer all rights to all your future IP to the company. Negotiate to remove the clause. Beware of overly restrictive non-compete clauses, which prevent the academic from consulting for anyone else, even after the consulting contract has been terminated. Be aware of the terms of any stock option plan: make sure they are clear and reflect your understanding of the plan. Clarify any ambiguities, and ask for changes. For example, negotiate for registration rights and acceleration rights, and ensure that all plans are structured to minimize tax consequences (and that the proper elections are made).

Finally, academics should make sure the contract correctly reflects the relationship.

Ask questions and negotiate for what is important to you. Be aware of your institution’s policies and do not violate them. Protect your academic rights. Limit the transfer of IP to that developed during the term of the consulting agreement, and obtain good professional advice if any areas of difficulty remain.

Read the article here.

Take away:

  • Academics entering into consulting agreements should get good legal advice, and make sure that their agreements are consistent with the policies of their institution.

 

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This article is provided for informational purposes only and does not create a lawyer-client relationship with the reader. It is not legal advice and should not be regarded as such. Any reliance on the information is solely at the reader’s own risk. Clausehound.com is a legal tool geared towards entrepreneurs, early-stage businesses and small businesses alike to help draft legal documents to make businesses more productive. Clausehound offers a $10 per month DIY Legal Library which hosts tens of thousands of legal clauses, contracts, articles, lawyer commentaries and instructional videos. Find Clausehound.com where you see this logo.

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