ORGANIZATION: 2 meanings

We need to pose a little bit and see in connection with 5 common legal characteristics to check the
types of companies.

Legal person are person who can survive to their founders, they need to have some processes
whereby the organization can survive itself either by same organization or by changing over time
(merging maybe?? Converting to another legal animal?).

We now take a look to the contract.

CONTRACT: how do we call this special contract? Artcles of association and corporation (statute,
charter, same things to say foundational contract/act/deed whereby the company is formed).

To these articles we can find BY-LAWS  “today, Mr Bianchini and other ppl, is creating a company
named “xxcorp”, the company wil have HQ in Fiera di Padova, how many shares are contributed and
divided by ….”

BYLAWS are still aprt of foundational deed/act but it will contain necessary rules necessary t survive,
how and when shareholders will vote, where and when and how. How board meets, vote and when
they meet. How the collegio sindacale is formed. ALL THIS INFORMATION are also included in this
very complex contract. It is just that it belongs to a different part of the contract.

BYLAWS are those rules which are necessary to organize the business activity and be organized as a
business organization.

Foundational doc are legal instruments are prescribed by law, law says “if you want to create an org.
you need to respect these rules and so on”. It is the law that mandates the ways you need to respect.

Is this really a contract or is this just similar to a contract like a hybrid thing? There seems to be
nothing mandatory about this..

In reality you cannot mix and match all the forms you want, you actually need to follow a strict track.
Once you choose you need to stick to the rules.

Is it a contract or a quasi-contract? A lot of questions of both side of the Atlantic ocean (common
lawyers and civil lawyers). Are we applying normal contract rules or not?

THE ANSWER IS MIXED => NO CLEAR CUT ANSWER THE ISSUE IS COMPLEX

Starting from 1970’s law and economic perspective.

Legal rules are approached and studied not just for their legal meaning, but they are also looked at
using economic methods, especially when talking about business, because it can have really big
economic impact. Economic analysis is also considered. LAW AND ECONOMICS “this is a contract, so
we are pretty much sure this is a contract, but we need to say that it is a nexus/network contract, a
relationship”. CONTRACTERIAN THEORY but they add up a further level of complexity, it is a nexus
contract, you need to partial out the components of this contract. These part and intertwined
interrelated, they’re all aimed to the same objective and goal. You have contract among
shareholders, between management and labour force, with suppliers, customers and so on.

If you ask an economic prof. or a lawyer they will say “ corporation is created by contract and it gives
birth to a nexus contract” Contracts are really used from them as a modular unit but they connect
intertwined interests, all concerned with same interests and goals.
Other scholars HAVE A DIFFERENT OPINION: one fact remains: without the law (enacted by the state)
you cannot have corporation, you cannot have partnership, so it is really the law that allows you to
form the corporations. Ultimately the firm is a creature of the law. CONTRACTUAL NATURE OF THE
COMPANY = ENTITY THEORY.

Mandatory rules =/= default rules (you can change them to meet your personal needs)

If I have to form a company with another person, we cannot agree on mandatory provisions but we
can deal a negotiate on default rules, with regard of the jurisdiction I am in.

CONTRACTARIAN LAWYERS: MANDATORY RULES VERY FEW; ALL THE REST IS DEFAULT  EVIDENCE
THAT WE ARE TALKING ABOUT A CONTRACT, THERE’S NEGOTIATION, WE TALK ABOUT A CONTRACT,
NOT HYBRID!! HOWEVER this is not always true, when you provide a legal person with a set of assets
just like a person, I can dispose of my assets but if I have a creditor, does not really work like that, a
creditor can sell my jacket or my pc in order to get the money I owe them”. When I create a legal
person and make it enter real contracts with people or legal person, because we can get in trouble,
we can affect the whole economy, so its not just about private interest”. The State does not look at
my company in a “nice way” if I affect the economy. The system of companies is a public interest
issue, so whenever I see a mandatory provision is because legislative power thought that that issue
could only be treated that way otherwise the system goes upside down. RIGHT OF THIRD PARTIES
AND CREDITORS. 80% of the time we will find mandatory rule, that is to protect creditors, 20% to
protect minority shareholders. PEOPLE WHO NEED PROTECTION.

Legal personality is something you cannot acquire, you need the law in order to have this legal
status, same thing with limited liability privilege (this needs to be stated in a legal provision, I cannot
make it up by my own, so time consuming that it is factually unpracticable).

Once you chose your type of organization, you cannot go back and change or adapt, it really depends
on the type you chose.

INTRODUCTION TO AGENCY PROBLEM

Really important to understand how companies work. Agency is a legal concept, part of contract law,
the LAW AND ECONOMIC SCHOOL, say “nice, I love agency law, it allows me to reframe the system of
company relationship, nature complement to contractarian theory, many of those contractual
relationships are agency relationships, totally consistent.”

It all started 1937 Nobel price Ronald Coase, UK  US, “the nature of the firm”, 1960s other scholars
sais wow this is really inspiring method of analysing economies through the lenses of law and
economic  one of the lenses is AGENCY

AGENCY= intermediate between contract and firm, principal and agent, something we will find in
intermediate level between contract law (law of parties, money other parties tender me) and firm.
Another quote “the most basic business organizational form is the principal-agent relationship.

When a principle consents to another person to act on her behalf and the agent consents to this
relationship, with the object of bringing the “principal” into legal relations with third parties. “My
brother is just my LONGA MANUS”. This very specific task can be transformed to a more general task
– like for example if I get sick, I can give my son power of attorney and so on”- general agency (to a
person I trust). TRUST IN AGENCY BECOMES VERY VERY IMPORTANT.
 Partnership = società personali = person is important = personal characteristic is very important, it
makes the difference

Intermediate between the firm and the contract you have these agency relationships  the simplest
form of joint economic undertaking.

AGENCY for example is employer and employee relationship (I am delegating something I would like
to myself but cannot, I need somebody to work for me, I need to delegate some functions, some
activities, so the employee, if I go to a shop, the bartender is the employee of the bar, so basically
he’s an agent).

4 MAIN PROBLEMS:

1- Formation and termination of an agency relationship.

2- The scope of the agent’s power to act on behalf of the principle.
3- Principle’s relationship to third parties with whom the agent did have acted.
4- What are the duties owed by the agent to the principal and vice versa.

FROM A LEGAL POINT OF VIEW: AGENCY

Express appointment // implied appointment // Agency EX LEGE

AGENCY EX LEGE  directly provided by law

Director of a company are ex lege agent of the company, AGENCY CREATED BY LAW WHEN THE
DIRECTOR CONFIRMS HIS APPOINTMENT AS DIRECTOR. Agency power in connection within the firm,
if I am local manager of a company, my HQ in Padova but my office is in Treviso, I do not need to
enter agency contract, I can directly represent my company in Treviso as well. Legal person is
fictional, but there are people behind them. Third parties are anybody, they need to identify ppl able
to answer their questions or to pay. If you are a director, it is included in the role, that you represent
your company. The manager of Treviso bank can take some decisions on behalf of the bank in
connection with his role. The agency power is proportionate to the role of the agent. How do I check
how much authority?

You cannot put the burden on third parties, they do not know the rule of my organization.  the
contract/unfaithful agent needs to be confirmed and if something is wrong the bad manager needs to pay
the damages.

EXPRESS AUTHORITY (written or orally)

 Specific transaction (I have to sell the specific car)

 Specific types of transaction (If I have to sell car, I cannot sell trucks)
 General authority (to act on behalf of the principal under every legal aspect: agent is entrusted with
the general authority to deal with all the transactions concerning the principal’s assets

IMPLIED AUTHORITY  usually comes with express authority: it is the agent’s additional power to do
whatever is necessary for the prudent execution of the “express authority” in the proper manner.

DEFINING THE PERIMETER IS ALWAYS DIFFICULT

 Scope of the agent authority CAN NEVER exceed the limits of her principal’s authority