Principal (commercial law)

About: Principal (commercial law) is a research topic. Over the lifetime, 1579 publications have been published within this topic receiving 35379 citations. The topic is also known as: Principal (commercial law).

Tax Evasion in a Principal-Agent Model with Self-Protection

Abstract: Gatekeepers have an increasing role in taxation and regulation While burdening them with legal liability for misconducts that benefit those who resort to their services actually discourages wrongdoings A¢Â€Â” as will be clarified in the paper A¢Â€Â” an alienation eA¯Â¬Â€ect can also arise That is, the gatekeeper might become more interested in covering up the illegal behavior and in cooperating with the perpetrator Such perverse eA¯Â¬Â€ects are diA¯Â¬Âƒcult to detect and to measure This paper studies the problem with respect to tax evasion by firms, by building upon the classical Allingham and Sandmo (1972) model and by providing a more detailed description of the "concealment costs" than that available in the literature, which often simply makes assumptions about their existence and their functional form The relationship between a risk neutral firm owner aiming at evading taxes and a risk averse gatekeeper is described through a simple principal-agent framework The paper highlights the role of legal rules pertaining to liability for tax evasion in shaping the parties choices, since concealment costs vary according to whether the risk neutral principal or the risk averse agent are held responsible when tax evasion is detected The main result of the analysis is that there are simple conditions under which one can easily infer whether harnessing the agent is socially beneficial

Farewell to Fairness: Towards Retiring Delaware's Entire Fairness Review

Abstract: This Article entertains the idea that Delaware’s corporate law is set on a trajectory that would eventually lead to reforming its doctrine of entire fairness as we now know it by retiring the doctrine’s substantive fairness review prong and insisting on fully-informed consent as the only way for validating tainted transactions. A growing array of cases, in which the centerpiece is Kahn v. M&F Worldwide Corp. (MFW), creates a legal sphere within which traditional entire fairness analysis has no application. Within this sphere, things rise or fall depending solely on the existence or absence of an uncoerced fully-informed ratification, in line with fundamental principles of fiduciary law in Delaware and in other common law jurisdictions. The critical move, which may take time to materialize, will take place when the courts abolish substantive fairness review entirely. Treating this development as highly desirable in principle, this Article discusses practical and normative issues that call for attention in order to ensure its successful functionality. As this trend is premised on fully-informed consent, its principal challenge will be to ensure the integrity of shareholder voting by securing the supply of full information throughout the process and minimizing the impact of potential conflicts.

The Moral Hazard of Contract Drafting

Abstract: This Article identifies and examines the principal-agent problem as it arises in the context of contract preparation. Contracts exist in part to help constrain the opportunistic behavior of an economic agent (the promissor) by alleviating information and control asymmetries that manifest between the agent and the principal (the promissee) after promises have been made. The preliminary task of preparing the contract, however, is not viewed as part of the economic agency analysis. This Article suggests that the drafting party should be understood and examined as an economic agent of the non-drafting party with respect to the particular task of preparing the written contract. While preparing the contract on behalf or for the benefit of both parties, the drafting party faces the same moral hazard confronted by all agents, with potentially devastating results. “Repeat players” or parties with superior bargaining power may prepare contracts utilizing the same information and control asymmetries to take advantage of the non-drafting party. The economic agency relationship that exists with respect to contract drafting provides a superior framework for understanding not only the inability of the non-drafting party to control the drafting party but also the differing interests between the parties that motivate the drafting party to act opportunistically in the first place.

The Case for Cooperative Territoriality in International Bankruptcy

Abstract: This manuscript is part of an ongoing debate over the fundamental principles that govern the bankruptcies of multinational companies. Essentially three positions have emerged. Universalists assert that the bankruptcy of a multinational company should take place in the courts of the company's "home country" and the law of the home country should govern the distribution. Contractualist Robert K. Rasmussen asserts that the bankruptcy of each constituent entity of the company should take place in the courts of the country selected by that entity in its articles of incorporation and the law of the selected country should govern the distribution. This manuscript argues for a separate bankruptcy proceeding in each country where the multinational has assets. International cooperation should be achieved by agreement among the representatives of the bankruptcy estates, in the shadow of a default rule under which the law of the country where the asset is located would govern the distribution of that asset. Universalism must be rejected because it is not in fact a workable system. Universalist theory depends upon the assumption that each multinational company has an easily recognizable "home country." But universalists are unable to specify a rule or standard for identification of that home country when the debtor's place of incorporation, headquarters, principal operations, and principal assets are located in different countries, or to specify whether, in the case of a corporate group the home country would be that of the group, or of particular entities within the group. Absent such specification, forum shopping for favorable law would destabilize and destroy the system. Contractualism would be inefficient because (1) the costs of contracting would be huge, (2) debtors would externalize much of their costs by shopping for fora that would deny recovery to tort and other insufficiently adjusting creditors, and (3) the complexity of the system would make it vulnerable to fraud and mistake.

The Deepwater Horizon Oil Spill and the Limits of Civil Liability

Abstract: This Article uses the unprecedented disaster in the Gulf of Mexico as an opportunity to critically evaluate the law pertaining to civil liability for oil pollution before and after the enactment of the Oil Pollution Act. This topic is analyzed as a derivative of a more general concern, namely the internal harmony of civil liability regimes. The Article unveils a general incongruity in American land-based and maritime tort law that surfaced through the Exxon Valdez litigation, and examines whether subsequent statutory reform has eliminated the problem in the limited context of marine oil pollution, using the Deepwater Horizon incident as a test case. Part I systematically discusses pre-OPA law. It focuses mainly on two salient features of the Exxon Valdez litigation, namely exclusion of liability for purely economic losses, and punitive damages. Part II explains why pre-OPA maritime law gave rise to incongruity on the justificatory level, delineates the contours of the problem, and proposes a conceptual framework for resolution. Part III examines whether the enactment of the OPA has created a more defensible liability regime. Following the Deepwater Horizon oil spill, there have been calls for raising the OPA liability caps or an even more comprehensive legislative reform. While some of the initiatives seem to have waned, this catastrophic incident, like the earlier Exxon Valdez case, will surely leave its mark. This article, which highlights relevant policy concerns, will undoubtedly serve policymakers in reassessing the limits of civil liability for marine oil pollution. INTRODUCTION 2 I. LIABILITY IN THE PRE-OPA ERA 9 A. General Maritime Law 10 1. Purely Economic Losses 10 a. The Exclusionary Rule 10 b. The Commercial Fishermen's Exception ........ 21 c. The Exxon Valdez Litigation 22 2. Punitive Damages 24 a. The Punitive Damages Doctrine 24 b. TheExxon Valdez Litigation 31 B. Federal Legislation 33 C. State Law 35 II. THE GENERAL PROBLEM: SIMULTANEOUS APPLICATION OF THE EXCLUSIONARY RULE AND THE PUNITIVE DAMAGES DOCTRINE 37 A. The Adverse Consequences of Simultaneous Application ..... 38 B. The Scope of the Problem 43 C. Guidelines for Resolution 46 III. OIL POLLUTION LIABILITY IN THE OPA ERA 48 A. The Current Liability Scheme 49 1. The Oil Pollution Act 49 2. State Law 59 B. A Critical Appraisal of the Current Scheme 62 CONCLUSION 66 INTRODUCTION On April 20, 2010, while drilling at the Macondo Prospect, a seabed location about forty-one miles off the southeast coast of Louisiana, an explosion occurred on the Deepwater Horizon, a mobile offshore drilling rig.1 The rig was owned and operated by Transocean, the world's largest offshore drilling contractor, and leased to BP, one of the world's largest energy companies and the lessee and principal operator of the Macondo field. …