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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, August 25, 2008

Business Associations Limerick of the Week: Barlow

Princeton If you are wondering why you are reading a Business Associations Limerick on the Contracts Profs Blog, there are a few answers:

1. I ran out of Contracts Limericks
2. I couldn't find any other place to post my Business Associations Limericks
3. Some Business Associations cases involve contracts

If none of these explanations satisfy you, there is good news, because I switched casebooks and so I am teaching new cases and new Contracts Limericks are thus on their way. The first is posted here. But I warn you, today's Business Associations Limerick doesn't really relate to contracts law much, unless you are one of those nexus of contracts types who think that contracts are really at the heart of all business associations. If so, you are my kind of reader.

In A.P. Smith Mfg. v. Barlow, a shareholder objected to A.P. Smith's decision to donate money to Princeton University. After all, corporations exist for the benefit of their shareholders; they are not eleemosynary institutions. They are not even semi-eleemosynary institutions. The court's rejection of Barlow's claim is not surprising. Corporations may engage in charitable donations, so long as the donations are not excessive or suggestive of some sort of conflict of interest (like if the money goes to a relative's charity). Beyond that, the business judgment rule governs.

But a more interesting aspect of the case was the court's treatment of the question of why Princeton in particular was a worthy recipient. As the picture of Princeton's Chapel (above, left) suggests, it would have been hard to argue that Princeton desperately needed the money. The court pointed out many advantages the corporation might derive from a good relationship with Princeton University and its alumni. The court also suggested that it was important to support private universities because if we only had public universities, well, that way lies communism.

A.P. Smith Mfg. v. Barlow

If your business supports democracy,
Don't give in to hypocrisy!
Send your donations
To the private locations
That train the future plutocracy!!

[Jeremy Telman]

http://lawprofessors.typepad.com/contractsprof_blog/2008/08/business-associ.html

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