DE Bar: Business Organizations - Delaware Corporate Law

What this essay tests

The Delaware essay on business organizations asks you to apply the Delaware General Corporation Law (DGCL) and the fiduciary doctrine developed by the Court of Chancery to a fact pattern involving directors, officers, controlling stockholders, or a merger. Expect to identify the applicable standard of review first, then allocate the burden of proof, then apply the elements to the facts.

Core rules

• Internal affairs. The law of the state of incorporation governs the corporation's internal relations, so Delaware law applies to a Delaware corporation even if it operates elsewhere.
• Board authority. DGCL § 141(a) vests management in the board. Stockholders do not manage; they vote on charter amendments, mergers, asset sales, dissolution, and director elections.
• Business judgment rule. Courts presume directors acted on an informed basis, in good faith, and in the honest belief the action served the corporation. The plaintiff must rebut the presumption with facts showing a conflict, bad faith, or grossly negligent process.
• Duty of loyalty and care. Self-dealing, entrenchment, and bad faith trigger loyalty analysis; process failures trigger care analysis.
• Exculpation. DGCL § 102(b)(7) can eliminate monetary liability for care breaches, but never for loyalty breaches, bad faith, or improper distributions.
• Standards of review. Entire fairness for conflicted controllers and interested directors; enhanced scrutiny under Unocal (defensive measures) and Revlon (change of control); business judgment for disinterested board action.
• Cleansing. Corwin restores business judgment review after a fully informed, uncoerced vote of disinterested stockholders. Kahn v. M&F Worldwide (MFW) applies business judgment review to a controller merger conditioned ab initio on both an independent special committee and a majority-of-the-minority vote.
• Standing and access. Derivative standing requires contemporaneous ownership (§ 327) and demand futile under the three-part Zuckerberg test. Section 220 books-and-records demands require a credible basis to infer wrongdoing.

Worked example

Parent owns 55% of Target and proposes a cash-out merger at $30 per share. The board forms a special committee of independent directors and, before any price discussion, conditions the deal on both committee approval and an uncoerced majority-of-the-minority vote. The committee hires independent advisors, negotiates to $36, and the minority approves. Because both MFW conditions were in place ab initio and the committee was independent, empowered, and informed, business judgment review applies and the merger is likely upheld. If the majority-of-the-minority condition had been added after price negotiations, entire fairness would apply with the burden on the defendants.

Traps that cost marks

Using Revlon for every merger; invoking Corwin for a controller transaction; forgetting that § 102(b)(7) cannot exculpate a controller or bad faith; analyzing demand futility collectively rather than director by director as of the filing of the complaint.

Civil Procedure

What this essay tests

The civil procedure essay tests jurisdiction, pleading, motions practice, discovery, dispositive motions, and preclusion in Delaware's courts. Know the court structure: the Supreme Court sits at the top with no intermediate appellate court, the Superior Court is the general-jurisdiction law court with jury trials and felony jurisdiction, the Court of Chancery is the equity court, and the Family Court and Court of Common Pleas have specialized jurisdiction.

Core rules

• Rules track the Federal Rules. The Superior Court Civil Rules are modeled on the Federal Rules of Civil Procedure, so federal doctrine on pleading, joinder, discovery, and summary judgment generally transfers.
• Delaware dismissal standard. Delaware does not use federal plausibility pleading. A complaint survives a Rule 12(b)(6) motion if the plaintiff could recover under any reasonably conceivable set of circumstances susceptible of proof.
• Chancery jurisdiction. Chancery hears equitable claims, including fiduciary duty actions, and may hear legal claims under the clean-up doctrine. There is no jury in Chancery.
• Derivative actions. The plaintiff must have owned stock at the time of the challenged transaction (§ 327) and must plead demand futility with particularity under Court of Chancery Rule 23.1.
• Personal jurisdiction and service. Analyze the long-arm statute and constitutional minimum contacts, then confirm service under Rule 4.
• Summary judgment. Granted when no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law; the court views facts in the light most favorable to the nonmovant.
• Preclusion. Claim preclusion requires a final judgment on the merits, the same parties or privies, and the same claim; issue preclusion requires actual litigation and a necessary determination.

Worked example

A stockholder sues directors in Superior Court for breach of fiduciary duty and seeks rescission of a merger. The claim is equitable, so the Court of Chancery has jurisdiction, and the defendants move to dismiss. The court applies the reasonable-conceivability standard, not Iqbal. Because the complaint pleads that a majority of the board lacked independence from the controller, demand is excused under the three-part test and the motion to dismiss for failure to make demand is denied. A separate 12(b)(6) challenge to the loyalty count also fails because those facts state a claim.

Traps that cost marks

Importing federal plausibility pleading into Delaware; forgetting that Chancery has no jury; treating the clean-up doctrine as a general grant of legal jurisdiction; and ignoring the contemporaneous-ownership requirement in derivative suits.

Constitutional Law

What this essay tests

The constitutional law essay tests judicial review, justiciability, individual rights, and structural limits on government. Delaware courts apply federal constitutional doctrine and may also interpret the Delaware Constitution independently, but the essay usually calls for federal doctrine applied to a state or local actor.

Core rules

• Judicial review. Courts may review legislative and executive action but avoid political questions.
• Justiciability. Standing requires injury in fact, causation, and redressability; ripeness and mootness limit timing; taxpayer standing is narrow.
• State action. Constitutional rights restrain government, not private conduct, unless a public function or significant state entanglement is present.
• Due process. Procedural due process balances the private interest, risk of error, and government interest; substantive due process protects fundamental rights against arbitrary interference.
• Equal protection. Strict scrutiny for suspect classifications and fundamental rights; intermediate scrutiny for sex; rational basis for everything else.
• First Amendment. Content-based regulation of speech gets strict scrutiny; content-neutral time, place, and manner rules must serve a significant interest and leave open alternatives. Commercial speech gets intermediate scrutiny.
• Fourth Amendment. Reasonableness governs searches and seizures; warrants require probable cause; exceptions include consent, search incident to arrest, exigency, and automobile.
• Structural limits. Congress may regulate interstate commerce; state laws discriminating against interstate commerce face the dormant Commerce Clause; federal law preempts conflicting state law; takings require public use and just compensation.

Worked example

A city ordinance gives residents a hiring preference for municipal jobs and excludes nonresidents. A nonresident challenges it under equal protection and the Privileges and Immunities Clause. Because the classification is not suspect, rational basis applies, but the Privileges and Immunities Clause protects the right to pursue a livelihood. The city must show a substantial reason and a substantial relationship; a blanket exclusion of nonresidents likely fails, while a narrow preference tied to a legitimate local interest in a specific program may survive.

Traps that cost marks

Forgetting the state-action requirement in § 1983 suits; confusing substantive due process with equal protection; asserting overbreadth standing for a plaintiff whose own conduct is unprotected; and treating a content-neutral regulation as content based merely because it burdens speech.

Contracts and UCC Article 2

What this essay tests

The contracts essay tests formation, defenses, interpretation, performance, breach, and remedies at common law, with Article 2 governing transactions in goods. Delaware courts enforce negotiated contracts strictly, so the analysis usually turns on the precise language and the parties' objective manifestations.

Core rules

• Formation. Offer, acceptance, and consideration; mutual assent is objective; indefiniteness can defeat enforcement unless the missing terms are reasonably ascertainable.
• Consideration. Bargained-for exchange; past consideration and illusory promises fail; promissory estoppel can substitute for reliance.
• Statute of Frauds. Writing required for land, one-year contracts, suretyship, executorship, marriage, and goods over $500 under UCC § 2-201; merchant confirmations can satisfy the goods requirement.
• Parol evidence. Integrated writings bar prior or contemporaneous agreements that contradict or supplement the terms; ambiguity, course of dealing, and usage of trade remain available.
• UCC formation. § 2-204 allows formation in any manner showing agreement; § 2-206 permits acceptance by prompt shipment; § 2-205 makes merchant firm offers irrevocable.
• Battle of the forms. § 2-207 adds different terms to the contract unless they are expressly conditional; between merchants, additional terms become part of the deal unless they materially alter it or the offer limits acceptance.
• Performance and breach. Article 2 uses perfect tender with a right to cure under § 2-508; common law requires substantial performance.
• Remedies. Expectation damages, consequential damages under § 2-715, mitigation, specific performance for unique goods, and limits on liquidated damages that are penalties.

Worked example

Buyer sends a purchase order for 1,000 widgets at $10 each, requiring acceptance within ten days. Seller ships 800 widgets with a note promising the rest next month and adds a clause disclaiming all warranties. Under § 2-206 the shipment is an acceptance, but under § 2-601 the nonconforming delivery gives Buyer a right to reject unless Seller cures within the contract time. The warranty disclaimer is a material alteration under § 2-207 and does not become part of the contract. Buyer may reject the 800, cover, and recover the difference between cover price and contract price.

Traps that cost marks

Applying the mirror-image rule to a goods sale; forgetting the merchant exception for firm offers; treating a material alteration as automatically included; and awarding consequential damages without proving foreseeability.

Criminal Law and Procedure

What this essay tests

The criminal essay tests offense elements, mental states, defenses, and constitutional procedure. Delaware's Criminal Code (Title 11) defines culpable mental states and supplies the elements for homicide, assault, theft, robbery, and burglary; the Fourth, Fifth, and Sixth Amendments govern police conduct.

Core rules

• Mental states. Delaware uses intentionally, knowingly, recklessly, and negligently; the mental state applies to each material element unless the statute says otherwise.
• Homicide. Murder requires intentional or reckless killing with malice; manslaughter covers recklessness or extreme emotional disturbance; negligent homicide covers criminal negligence.
• Theft and robbery. Theft is taking property with intent to deprive; robbery adds force or fear; burglary requires unauthorized entry into a building with intent to commit a crime.
• Defenses. Self-defense requires reasonable belief in imminent unlawful force and proportionality; duress requires a threat of imminent death or serious injury; entrapment requires government inducement plus lack of predisposition.
• Insanity. Delaware recognizes an insanity defense and provides a guilty-but-mentally-ill verdict; the defendant bears the burden of proving insanity.
• Fourth Amendment. Searches require reasonableness; warrantless searches need an exception such as consent, search incident to arrest, automobile, plain view, or exigency.
• Fifth Amendment. Miranda applies to custodial interrogation; ambiguous requests for counsel do not require police to stop; the public-safety exception applies.
• Sixth Amendment. Right to counsel attaches at critical stages after formal charges; speedy trial and confrontation rights apply at trial.
• Delaware structure. The Superior Court has exclusive felony jurisdiction; the death penalty has been abolished in Delaware.

Worked example

Officers stop a car for a broken taillight, smell marijuana, and see a locked glove box. After arresting the driver, they search the passenger compartment and the glove box without a warrant. Under the automobile exception, the search is valid only if probable cause extends to the area searched; the smell plus visible evidence may supply probable cause for the passenger compartment. A locked glove box may require a separate justification. Statements the driver makes before being advised are admissible only if not the product of custodial interrogation.

Traps that cost marks

Treating Miranda as triggered by arrest alone; conflating voluntary consent with mere acquiescence to authority; forgetting that the prosecution bears the burden on voluntariness; and ignoring the mens rea element in statutory offenses.

Evidence

What this essay tests

The evidence essay tests relevance, character evidence, impeachment, hearsay and its exceptions, expert testimony, privilege, authentication, and the best-evidence rule. Delaware Rules of Evidence generally track the Federal Rules, so federal doctrine transfers, but always cite the Delaware rule number when the fact pattern is in Delaware court.

Core rules

• Relevance. Evidence must make a fact more or less probable and be of consequence; Rule 403 excludes relevant evidence whose probative value is substantially outweighed by unfair prejudice, confusion, or delay.
• Character evidence. Rule 404 bars propensity evidence in civil cases and in the prosecution's case-in-chief, but permits character when it is an essential element and permits other-acts evidence for motive, intent, identity, plan, or absence of mistake.
• Impeachment. Prior inconsistent statements, bias, conviction of a crime, and reputation for truthfulness are available; prior consistent statements rebut charges of fabrication.
• Hearsay. An out-of-court statement offered for its truth is inadmissible unless an exception applies; nonhearsay uses include effect on the listener and impeachment.
• Exceptions. Present sense impression, excited utterance, then-existing condition, business records, public records, learned treatises, and judgments; Rule 804 adds dying declarations and statements against interest when the declarant is unavailable.
• Confrontation. Testimonial hearsay requires the declarant's unavailability plus a prior opportunity to cross-examine.
• Expert testimony. Rule 702 requires specialized knowledge, reliable methods, and a fit to the facts; the trial court acts as gatekeeper.
• Authentication and best evidence. Proponents must show the item is what it purports to be; original writings are required to prove content unless an exception applies.

Worked example

A bystander calls 911 and says, "A man in a red jacket just shot someone at the corner." At trial, the defense objects that the recording is hearsay. The statement is admissible as an excited utterance because it was made while the declarant was under the stress of the event, and the 911 call is nontestimonial because the primary purpose was to obtain emergency aid, so the Confrontation Clause does not bar it. If the caller had identified the shooter hours later to a detective, the statement would be testimonial and inadmissible without cross-examination.

Traps that cost marks

Labeling evidence hearsay when it is offered for effect on the listener; admitting 404(b) evidence without identifying a permissible purpose; treating all business records as self-authenticating; and forgetting that the Confrontation Clause applies only to testimonial statements.

Real Property

What this essay tests

The real property essay tests estates and future interests, landlord-tenant law, easements, covenants, adverse possession, recording, and mortgage priorities. Delaware follows the common law of property with statutory recording and landlord-tenant overlays, so identify the jurisdiction's recording rule before ranking competing claims.

Core rules

• Estates. Fee simple absolute, fee tail, life estate, and defeasible fees; remainders are vested or contingent; executory interests follow the Rule Against Perpetuities.
• Rule Against Perpetuities. No interest is good unless it must vest, if at all, within lives in being plus twenty-one years; options and rights of first refusal are subject to the rule.
• Landlord-tenant. Leasehold estates include term of years, periodic tenancy, tenancy at will, and tenancy at sufferance; the implied warranty of habitability and constructive eviction limit the landlord's remedies.
• Easements. Express, implied, and prescriptive; easements by necessity arise from prior common ownership and strict necessity; easements in gross are not appurtenant.
• Covenants and servitudes. Real covenants run with the land if there is writing, intent, touch and concern, and privity; equitable servitudes require notice.
• Recording. Race, notice, and race-notice statutes determine priority among successive purchasers; shelter rule protects a grantee from a prior grantee who recorded first.
• Adverse possession. Actual, open, notorious, exclusive, hostile, and continuous possession for the statutory period.
• Mortgages. Title theory versus lien theory; priority follows recording; purchase-money mortgages may have special priority.

Worked example

Owner conveys Blackacre to A, who does not record. Owner then conveys to B for value. B searches the record and finds no prior deed, so B is a bona fide purchaser without notice. Under a notice statute, B prevails because B lacked notice at the time of purchase. Under a race-notice statute, B prevails only if B records before A. Under a pure race statute, the first to record wins regardless of notice. The correct answer depends on identifying the statute before applying the facts.

Traps that cost marks

Applying the Rule Against Perpetuities to vested remainders; confusing easement by necessity with prescription; ignoring the shelter rule; and failing to check whether the jurisdiction is race, notice, or race-notice before ranking interests.

Torts

What this essay tests

The torts essay tests negligence, intentional torts, strict liability, products liability, defamation, and damages. Delaware applies modified comparative negligence, so the plaintiff's own fault can reduce or bar recovery; identify the comparative-fault rule before computing damages.

Core rules

• Negligence. Duty, breach, actual cause, proximate cause, and damages; the duty is ordinary care measured against a reasonably prudent person.
• Standard of care. Professionals, children, and landowners have specialized standards; trespassers, licensees, and invitees receive different warnings and protections.
• Comparative negligence. Delaware reduces damages in proportion to the plaintiff's fault and bars recovery when the plaintiff's negligence exceeds the defendant's under 10 Del. C. § 8132.
• Joint and several liability. Where multiple defendants cause a single indivisible injury, each may be liable, subject to contribution and statutory limits.
• Intentional torts. Battery, assault, false imprisonment, trespass, conversion, and intentional infliction of emotional distress require intent and causation; privilege and consent are defenses.
• Strict liability. Abnormally dangerous activities and defective products; products claims require a defect, causation, and foreseeable harm.
• Defamation. Defamatory statement, publication, identification, fault, and harm; public figures must prove actual malice.
• Damages. Compensatory, consequential, and punitive damages; mitigation applies to avoidable consequences.

Worked example

Driver runs a red light and hits Pedestrian, causing $100,000 in medical bills. Pedestrian was texting and stepped into the crosswalk against the signal; the jury finds Pedestrian 30% at fault. Under Delaware's modified comparative negligence rule, Pedestrian's recovery is reduced to $70,000. If the jury found Pedestrian 55% at fault, recovery would be barred because the plaintiff's fault exceeds the defendant's. Punitive damages would require a showing of malice or reckless indifference.

Traps that cost marks

Treating contributory negligence as a complete bar in Delaware; confusing actual cause with proximate cause; applying strict liability to ordinary products without a defect; and overlooking the actual-malice requirement in public-figure defamation.

Trusts and Estates

What this essay tests

The trusts and estates essay tests will formalities, testamentary capacity, intestacy, elective share, trust creation, fiduciary duties, powers of appointment, and the Rule Against Perpetuities. Delaware's probate statutes and its trust-friendly code supply the governing rules.

Core rules

• Will execution. A valid will requires testamentary intent, capacity, signature by the testator, and attestation by two witnesses; holographic wills are not recognized in Delaware, and nuncupative wills are limited.
• Capacity and undue influence. The testator must know the nature of the estate, the natural objects of bounty, and the disposition; undue influence requires a confidential relationship, susceptibility, and improper pressure.
• Intestacy. The spouse and descendants take in the statutory order; collateral relatives take when there is no spouse or issue; half-blood and adoption rules determine kinship.
• Elective share. A surviving spouse may elect against the will; the share is computed from the net estate and may be offset by lifetime transfers.
• Trust creation. Requires intent, property, beneficiaries, and a lawful purpose; spendthrift and discretionary trusts limit creditor access.
• Fiduciary duties. Loyalty, impartiality, prudent investment, and accounting; self-dealing is voidable unless authorized.
• Powers of appointment. General powers are taxable and creditor-accessible; limited powers restrict appointees.
• Rule Against Perpetuities. Applies to contingent interests and options unless a statutory exception applies.

Worked example

Testator executes a will leaving everything to a friend, omitting the spouse he married after execution. At death, the spouse elects against the will. Because the will was executed before the marriage and the spouse was omitted, the spouse may claim an intestate share unless the will shows an intentional omission. The friend takes the residue subject to the elective share. If the will had been executed after the marriage with the spouse named, the analysis would instead turn on the elective share computation.

Traps that cost marks

Using a holographic will in Delaware; confusing per stirpes with per capita; overlooking the anti-lapse statute when a beneficiary predeceases; and forgetting that ademption applies to specifically devised property that is no longer in the estate.

Family Law

What this essay tests

The family law essay tests marriage, divorce, property division, alimony, custody, child support, adoption, and jurisdiction. Delaware practice is governed by Title 13 and Family Court rules, and child support is computed under the Melson Formula, a Delaware-specific guideline.

Core rules

• Marriage. Delaware requires both parties to be at least eighteen; parental consent and judicial approval cannot substitute for the age requirement. A license and solemnization are required.
• Divorce. Delaware recognizes fault and no-fault grounds; the no-fault route generally requires the statutory separation period, so check Title 13 before drafting a petition.
• Equitable distribution. Marital property is divided equitably, not equally; separate property includes premarital assets, gifts, inheritances, and property acquired in exchange, but commingling can convert it.
• Alimony. The court considers the parties' finances, duration of marriage, health, earning capacity, and standard of living; fault is relevant only in limited circumstances.
• Custody. The best interests of the child govern, considering the child's needs, each parent's capacity, stability, and the child's preference when mature.
• Child support. Delaware uses the Melson Formula, which sets a self-support reserve, then a primary support obligation, then a standard-of-living adjustment; the result is shared by income proportion.
• Jurisdiction. The UCCJEA governs custody jurisdiction, prioritizing the child's home state; the UIFSA governs support orders.
• Premarital agreements. Enforceable if in writing, voluntarily executed, and free of fraud or duress, with fair disclosure.

Worked example

H and W divorce after ten years. W receives a $50,000 inheritance during the marriage and deposits it in a joint account used for household expenses. H argues the funds are marital. Because the inheritance was commingled and used for family purposes, the court may treat the remaining balance as marital, but the traceable portion remains W's separate property. Child support is then calculated under the Melson Formula separately from the property division.

Traps that cost marks

Assuming equal division rather than equitable division; overlooking commingling; using the wrong state's support guideline; and filing a custody action in a state that is not the child's home state.