Hello, and welcome to the 9th weekly recap of the Yada Yada Law School, a lecture series on the law, taught through the lens of Seinfeld! This week, we are led by Associate Professor of Washington and Lee University School of Law, Charliss Chatman on the topic of business law. According to Professor Chatman, business law consists of applying an incredibly wide range of legal principles such as contracts, property, securities, legal ethics, bankruptcy, and much much more. With this in mind, this week’s lecture aimed to provide us with a birds-eye view of some of the more notable issues in business law. To accomplish this, we are going to take a look at three crucial questions in business law and see how they can be answered through Kramer, George, Jerry, and Elaine. Let’s get into it!
What is considered part of a business entity?
Different types of entities include different members but the term “business” generally refers to the management, lenders, suppliers, owners, and the employees. To illustrate what a business is or is not, Professor Chatman references an episode covered on last week’s recap, the stock tip. To review, George hears of a sure-fire stock return from an insider in the company. Both George and Jerry decide to invest in the company using their illegally obtained information yet only George makes any money. The questioned Professor Chatman raises in this scenario would be whether George and Jerry are “in business?”
Professor Chatman argues that because they are only shareholders of a corporation, meaning that they are not directly involved in the profit-generating activity for the business, they would not be considered part of the business. This highlights our first rule…
- Investors are owners of a business, but they are not the business. This is important in deciphering whether or not certain individuals can be liable for the actions of the business.
Who can act on behalf of the business?
Not that we have a general idea of what a business is, it is important to understand who has the authority to act on the company’s behalf. These people are known as agents. Whether that is a barista of a coffee shop, a waiter at a restaurant, or the CFO of a law firm, these are the people that help entities get things done. Now, large companies are forced to rely on lots of agents to do all sorts of tasks, so what happens to the business when an agent takes advantage of their duties? To this, we look no further than Mr. George Kastanza in season 8 and his “nap desk.”
While George is known throughout the series to be the stereotypical office slacker, this episode focuses on George’s quest in perfecting his otherwise faulty “nap desk.” Professor Chatman offers two questions in response to George’s nap patterns. Number one being whether or not George is an agent of his employer, and number two being if he is an agent, whether George is breaching his duties to the company by napping on company time? Let’s figure it out…
An agency relationship arises when:
- A principle “manifests assent” to the agent that
- “The agent shall act on the principal’s behalf and subject to the principal’s control,” and
- “The agent manifests assent or otherwise consents to so act.”
In George’s case with the Yankees (his employer), we know that he is an employee which means the Yankee’s manifested assent when he was hired. He also consented to act when he took the job and he assented to act under the authority of his bosses. As these elements are fulfilled, we can be sure that George is in fact an agent and should be held to fulfill his fiduciary duties. These fiduciary duties imposed on employees generally consist of both a…
Duty of Loyalty
- No material benefit from a third party
- No conflict of interest transactions
- No competing
- No misuse of principal property
And a Duty of Care
- Act with care, competence, and diligence
So from this, we can tell that while George may not have violated his loyalty duties, he is certainly not acting with care, competence, or diligence! Lesson learned, don’t nap under your desk… or at least have a better desk than George!
Do you owe any duties in a contract?
When you contract with someone, you don’t necessarily use the same duties that an employee owes their employer. Instead, you will be held to what’s called a good faith standard! This means that you are both…
- Honest when you negotiate
- Acting to uphold the terms of the agreement
If you have seen any Seinfeld at all, it should jump out to you that the characters essentially never act in good faith, but we will just pick one example. In the seventh season, when Jerry chooses to return a jacket in spite of the salesman that sold it to him, he is repeatedly told that items cannot be returned simply for spite. Eventually, Jerry “changes his mind” and claims that he just doesn’t want the jacket. Making this claim, Jerry has violated his duty to negotiate in good faith!
In conclusion, as good faith doctrines generally seek to protect reasonable expectations, it shouldn’t come to a real surprise that good faith isn’t common in a show where the characters are loveably unreasonable.
Thanks for tuning in to this week’s Yada Law School recap. Be sure to come check out the recap of the school’s final lecture next week!