Business Law - Chapter 33

Dennis is a promoter for a proposed apparel corporation planning to

make t-shirts commemorating the Philadelphia Flyer’s 2019 playoff run. He signed a lease in the proposed corporation’s name for a warehouse. The Flyers failed to make the playoffs, and the corporation was never formed.

The warehouse owner sues Dennis for breach. Is Dennis liable?

• Yes

• No

Adam is a promoter for a proposed apparel corporation planning to make t-shirts commemorating the Pittsburgh Penguin’s 2019 playoff run. He signed a contract in the proposed corporation’s name to provide 1000 t-shirts to a local sports store. The corporation is later incorporated, but chooses not to fulfill the contract. The sports store sues Adam for breach. Is Adam liable?

• Yes

• No

Dave offered to buy a pre-incorporation subscription in a proposed mining company. The next day, the price of gold plummeted, and Dave decided that the company was a bad investment, and he decides to revoke his offer to buy.

In MOST states, can Dave revoke his offer to buy a pre-incorporation subscription?

• No. Most states make the pre-incorporation subscription irrevocable for six months.

• No. He has made a contract with other subscribers and can never revoke his offer.

• Yes. The corporation is not yet formed, so it cannot accept the offer, so no contract exists.

• Yes. In most states, subscriptions are always revocable.

Which of the following is true of Bylaws?

• They must be publicly filed

• They are no longer required in most states

• They require only board approval

• Many states now require bylaws instead of acts of incorporation

Which of the following is true of charters?

• They require only board approval

• They must be publicly filed

• They are the rules and regulations that govern a corporation's internal management

• They are no longer required in most states

Matt is the majority owner of a pet supply company that was incorporated with the state five years ago. The original charter accepted by the state misspelled the company’s name and listed the completely wrong address. Five years later, Matt’s company becomes insolvent, and creditors seek to hold Matt personally liable for the company’s debts, arguing that mistakes on the charter invalidate the corporation. According to the statutory approach to defective corporations, how will the state likely treat Matt’s company?

• Invalidate the corporation and make Matt personally liable.

• Hold the corporation as valid up to the date the mistake was

  discovered, but invalidate the corporation after that date.

• Apply the doctrine of Respondaet Superior to validate the

  corporation

• Determine that the Secretary

  of State’s previous acceptance of articles of incorporation is proof of

  incorporation, even though the articles contain mistakes

Which of the following is NOT a reason the state would pierce the corporate veil?

• The corporate entity is used to commit a wrongdoing

• The corporate entity is used to defeat public convenience

• The corporate entity is used to circumvent the law

• The corporate entity is used to conduct trade with foreign entities

Rick is the chairman of the board of Evil Corporation. As chairman of the board, he drafts and approves a deliberately misleading shareholder letter. Can the corporation be held criminally liable?

• No. Corporations can never

  be held liable, only individual members of the corporation can be liable.

• No. Corporations are not considered people for purposes of criminal

  law, and therefore cannot be held liable for criminal offences.

• Yes. According to the doctrine of respondeat superior, corporations

  may be held criminally liable for criminal acts by any of its employees.

• Yes. Corporations can be held criminally liable for an offence perpetrated by a high corporate officer or its board of directors.

Joey is incorporating a hardware company that will do the majority of its business in New Jersey. However, Joey has heard that Delaware is more business friendly and wants to incorporate there. Can Joey incorporate in Delaware?

• No. Corporations must incorporate in the state in which they conduct the majority of their business at the time of the initial incorporation.
  

• No. Corporations must file articles of incorporation in all states

  in which they operate.

• Yes. Corporations can incorporate in any state and operate throughout the United States, though they need a certificate of authority from each state in which they

• Yes. Corporations should incorporate in a state where they do not

  do business so they cannot be held liable for any tortious claims in

  other states.

Which of the following is NOT a corporate attribute?

• It owes its existence to the State, which also regulates it

• It provides limited liability to its shareholders

• It exists as long as its original founders are alive

• It is considered a person for some purposes