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These rules extend to tort liability, as well. If Jean were to wrongfully induce a potential client to
breach its consulting contract with a competitor, the partnership would be liable for interference with
contractual relations, even if the other two partners were not aware of Jean‟s actions. Such might not
be the case, however, if Jean decided to dynamite the competition‟s offices, because such an act could
be judged to be outside the normal scope of her duties as a partner.
These obligations to third parties can even extend past the dissolution of the partnership if
individual partners have not given adequate notice that they are no longer associated with the others.
Thus, ex-partners can be held liable for legal fees incurred by former partners if they have not notified
the partnership‟s counsel about leaving the firm.
It should also be noted that agency law reaches into the internal relationships of partners. The law
imposes upon partners the same obligations of fiduciary loyalty, non-competition, and accountability
as it does upon agents with respect to their principals.
Corporations
It is in the corporate form that the opportunities for flexibility and complexity probably reach their
height. Many aspects of the corporate form have been designed specifically for the purpose of splitting
off individual aspects of control and allocating them differently.
Stockholders
At its simplest, a corporation is controlled by its stockholders. Yet, except in those states that have
specific (but rarely used) close corporation statutes governing corporations with very few
stockholders, the decision-making function of stockholders is exercised only derivatively. Under most
corporate statutes, a stockholder vote is required only with respect to four basic types of decisions: an
amendment to the charter, a sale of the company, dissolution of the company, and election of the
board of directors.
Charter amendments may sound significant, until one remembers what information is normally
included in the charter. A name change, a change in purpose (given the broad purpose clauses now
generally employed), and an increase in authorized shares (given the large amounts of stock normally
left on the shelf) are neither frequent nor usually significant decisions. Certainly, a sale of the
company is significant, but it normally can occur only after the recommendation of the board and will
happen only once, if at all. The same can be said of the decision to dissolve. It is the board of directors
that makes all the long-term policy decisions for the corporation. Thus the right to elect the board is
significant, but indirectly so. Day-to-day operation of the corporation‟s business is accomplished by
its officers, who are normally elected by the board, not the stockholders.
Even given the relative unimportance of voting power for stockholders, the corporation provides
many opportunities to differentiate voting power from other aspects of control and allocate it
differently. Assume Bruce and Erika (our hotel developers) were willing to give Michael a larger