Question: The Sisters of Charity was an order of nuns in New Jersey. Faced with growing...
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Question: The Sisters of Charity was an order of nuns in New Jersey. Faced with growing health care and retirement costs, they decided to sell off a piece of property. The nuns soon found, however, that the world is not always a charitable place. They agreed to sell the land to Linpro for nearly $10 million. But before the deal closed, Linpro signed a contract to resell the property to Sammis for $34 million. So, you say, the sisters made a bad deal. There is no law against that. But it turned out that the nuns' law firm also represented Linpro. Their lawyer at the firm, Peter Berkley, never told the sisters about the deal between Linpro and Sammis. Was that the charitable-or legal-thing to do? Strategy: Always begin by asking if there is an agency relationship. Was there consent, control, and a fiduciary relationship? Consent: Berkley had agreed to work for the nuns. Control: they told him what he was to do-sell the land. The purpose of a fiduciary relationship is for one person to benefit another. The point of the nuns' relationship with Berkley is for him to help them. Once you know there is an agency relationship, then ask if the agent has violated his duty of loyalty. Result: You know that an agent is not permitted to act for two principals whose interests conflict. Here, Berkley is working for the nuns, who want the highest possible price for their land, and Linpro, who wants the lowest price. Berkley has violated his duty of loyalty.
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