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SUMMARY OF CONTENTS
Contents
Preface
Acknowledgments
Introduction

1. ACTING THROUGH OTHERS: THE LAW OF AGENCY

2. JOINT OWNERSHIP OF A BUSINESS: THE LAW OF PARTNERSHIPS AND LIMITED LIABILITY
COMPANIES
3. THE CORPORATE FORM
4. THE PROTECTION OF CREDITORS
5. DEBT, EQUITY, AND ECONOMIC VALUE
6. NORMAL GOVERNANCE: THE VOTING SYSTEM
7. NORMAL GOVERNANCE: THE DUTY OF CARE
8. THE DUTY OF LOYALTY: CONFLICT TRANSACTIONS
9. EXECUTIVE COMPENSATION
10. SHAREHOLDER LAWSUITS
11. TRANSACTIONS IN CONTROL
12. FUNDAMENTAL TRANSACTIONS: MERGERS AND ACQUISITIONS
13. PUBLIC CONTESTS FOR CORPORATE CONTROL
14. TRADING IN THE CORPORATION’S SECURITIES

Table of Cases
Index
CONTENTS

Preface
Acknowledgments

INTRODUCTION

ACTING THROUGH OTHERS: THE LAW

OF AGENCY

1.1 INTRODUCTION TO AGENCY

1.2 AGENCY FORMATION, AGENCY TERMINATION, AND PRINCIPAL’S LIABILITY
1.2.1 Formation
1.2.2 Termination
1.2.3 Parties’ Conception Does Not Control
Jenson Farms Co. v. Cargill, Inc.
1.2.4 Liability in Contract
1.2.4.1 Actual and Apparent Authority
White v. Thomas
1.2.4.2 Inherent Authority
Gallant Ins. Co. v. Isaac
1.2.5 Liability in Tort
Humble Oil & Refining Co. v. Martin
Hoover v. Sun Oil Co.
1.2.6 Liability in Tort Under the Apparent Authority Doctrine
1.3 THE GOVERNANCE OF AGENCY (THE AGENT’S DUTIES)
1.3.1 The Nature of the Agent’s Fiduciary Relationship
1.3.2 The Agent’s Duty of Loyalty to the Principal
Tarnowski v. Resop
1.3.3 The Trustee’s Duty to Trust Beneficiaries
In re Gleeson

JOINT OWNERSHIP OF A BUSINESS:

THE LAW OF PARTNERSHIPS AND LIMITED
LIABILITY COMPANIES

2.1 INTRODUCTION TO PARTNERSHIP : WHY JOINT OWNERSHIP ?

William Klein & John C. Coffee, The Need
To Assemble At-Risk Capital
2.2 PARTNERSHIP FORMATION
Vohland v. Sweet
2.3 RELATIONS WITH THIRD PARTIES
2.3.1 Partnership Creditors’ Claims Against Departing Partners
2.3.2 Third-Party Claims Against Partnership Property
 2.3.3 Claims of Partnership Creditors to Partner’s Individual Property
2.4 PARTNERSHIP GOVERNANCE AND ISSUES OF AUTHORITY
National Biscuit Co. v. Stroud
2.5 TERMINATION (DISSOLUTION AND DISSOCIATION)
2.5.1 Accounting for Partnership’s Financial Status and Performance
Sample Partnership Balance Sheet
Sample Partnership Income Statement
Accounting for Partners’ Capital
Adams v. Jarvis
2.5.2 Statutory Dissolution of a Partnership at Will
2.5.3 Opportunistic Dissolution and the Partner’s Duty of Loyalty
Page v. Page
2.6 AGENCY CONFLICTS AMONG CO-OWNERS: FIDUCIARY DUTIES
Meinhard v. Salmon
2.7 LIMITED LIABILITY SUCCESSORS OF THE GENERAL PARTNERSHIP
2.7.1 The Limited Partnership
2.7.2 The Limited Liability Partnership
2.7.3 The Limited Liability Company
2.7.3.1 Taxation of LLCs
2.7.3.2 Contractual Flexibility
Pappas et al. v. Tzolis

THE CORPORATE FORM

3.1 INTRODUCTION TO THE CORPORATE FORM

3.2 CREATION OF A FICTIONAL LEGAL ENTITY
3.2.1 A Note on the History of Corporate Formation
3.2.2 The Process of Incorporating Today
3.2.3 The Articles of Incorporation, or “Charter”
3.2.4 The Corporate Bylaws
3.2.5 Shareholders’ Agreements
3.3 LIMITED LIABILITY
Frank Easterbrook & Daniel Fischel,
Limited Liability and the Corporation
3.4 TRANSFERABLE SHARES
3.5 CENTRALIZED MANAGEMENT
3.5.1 Legal Construction of the Board
3.5.1.1 The Holder of Primary Management Power
Automatic Self-Cleansing Filter Syndicate Co.,
Ltd. v. Cunninghame
3.5.1.2 Structure and Function of the Board
3.5.1.3 Formality in Board Operation
3.5.1.4 A Critique of Boards
3.5.2 Corporate Officers: Agents of the Corporation
Jennings v. Pittsburgh Mercantile Co.
THE PROTECTION OF CREDITORS

4.1 MANDATORY DISCLOSURE

4.2 CAPITAL REGULATION
4.2.1 Financial Statements
4.2.2 Distribution Constraints
4.2.3 Minimum Capital and Capital Maintenance Requirements
4.3 STANDARD-BASED DUTIES
4.3.1 Director Liability
4.3.2 Creditor Protection: Fraudulent Transfers
4.3.3 Shareholder Liability
4.3.3.1 Equitable Subordination
Costello v. Fazio
4.3.3.2 Piercing the Corporate Veil
Sea-Land Services, Inc. v. The Pepper Source
Kinney Shoe Corp. v. Polan
4.4 VEIL PIERCING ON BEHALF OF INVOLUNTARY CREDITORS
Walkovszky v. Carlton

DEBT, EQUITY, AND ECONOMIC VALUE

5.1 CAPITAL STRUCTURE

5.1.1 Legal Character of Debt
5.1.2 Legal Character of Equity
5.2 BASIC CONCEPTS OF VALUATION
5.2.1 The Time Value of Money
5.2.2 Risk and Return
5.2.3 Diversification and Systematic Risk
5.3 VALUING ASSETS
5.3.1 The Discount Cash Flow (DCF) Approach
5.3.2 The Relevance of Prices in the Securities Market
In re Emerging Communications Inc.,
Shareholder Litigation

NORMAL GOVERNANCE: THE VOTING SYSTEM

6.1 INTRODUCTION: SHAREHOLDER VOTING IN THE NEW

CORPORATE GOVERNANCE
6.2 ELECTING AND REMOVING DIRECTORS
6.2.1 Electing Directors
6.2.2 Removing Directors
6.3 SHAREHOLDER MEETINGS AND ALTERNATIVES
6.4 PROXY VOTING AND ITS COSTS
Rosenfeld v. Fairchild Engine & Airplane Corp.
6.5 CLASS VOTING
6.6 SHAREHOLDER INFORMATION RIGHTS
6.7 TECHNIQUES FOR SEPARATING CONTROL FROM CASH FLOW RIGHTS
6.7.1 Circular Control Structures
Speiser v. Baker
6.7.2 Vote Buying
Frank Easterbrook & Daniel Fischel, Voting in Corporate Law
Schreiber v. Carney
6.7.3 Controlling Minority Structures
Lucian A. Bebchuk, Reinier Kraakman &
George G. Triantis, Stock Pyramids,
Cross-Ownership, and Dual Class Equity
6.8 MITIGATING A COLLECTIVE PROBLEM TODAY: ACTIVIST INVESTORS
Marcel Kahan & Edward B. Rock, Hedge
Funds in Corporate Governance and
Corporate Control
6.9 THE FEDERAL PROXY RULES
6.9.1 Rules 14a-1 Through 14a-7: Disclosure and Shareholder Communication
6.9.2 Activist Investors and the Short Slate Proxy Contest
6.9.3 Access to the Company’s Proxy Statement: Rule 14a-8:
Shareholder Proposals
6.9.4 Rule 14a-9: The Antifraud Rule
Virginia Bankshares, Inc. v. Sandberg
6.10 FIDUCIARY SUPERINTENDENCE OF SHAREHOLDER VOTING
Schnell v. Chris-Craft Industries, Inc.

NORMAL GOVERNANCE: THE DUTY OF CARE

7.1 INTRODUCTION TO THE DUTY OF CARE

7.2 THE DUTY OF CARE AND THE NEED TO MITIGATE DIRECTOR RISK AVERSION
Gagliardi v. TriFoods International, Inc.
7.3 STATUTORY TECHNIQUES FOR LIMITING DIRECTOR AND OFFICER RISK
EXPOSURE
7.3.1 Indemnification
Waltuch v. Conticommodity Services, Inc.
7.3.2 Directors and Officers Insurance
7.4 JUDICIAL PROTECTION: THE BUSINESS JUDGMENT RULE
Kamin v. American Express Co.
7.4.1 Understanding the Business Judgment Rule
7.4.2 The Duty of Care in Takeover Cases: A Note
on Smith v. Van Gorkom 244
7.4.3 Additional Statutory Protection: Authorization for Charter
Provisions Waiving Liability for Due Care Violations
7.5 THE BOARD’S DUTY TO MONITOR: LOSSES “CAUSED” BY BOARD PASSIVITY
Francis v. United Jersey Bank
Graham v. Allis-Chalmers Manufacturing Co.
 In the Matter of Michael Marchese
In re Caremark International Inc. Derivative
Litigation
In re Citigroup Inc. Shareholder Derivative
Litigation
7.6 “KNOWING” VIOLATIONS OF LAW
Miller v. AT&T

THE DUTY OF LOYALTY: CONFLICT TRANSACTIONS

8.1 DUTY TO WHOM?

8.1.1 The Shareholder Primacy Norm
A.P. Smith Manufacturing Co. v. Barlow
8.1.2 Constituency Statutes
8.1.3 Defining Corporate Purpose in the Charter: Benefit
Corporations
8.2 SELF-DEALING TRANSACTIONS
8.2.1 The Disclosure Requirement
State ex rel. Hayes Oyster Co. v. Keypoint
Oyster Co.
Melvin Eisenberg, Self-Interested Transactions
in Corporate Law
8.3 THE EFFECT OF APPROVAL BY A DISINTERESTED PARTY
8.3.1 Early Regulation of Fiduciary Self-Dealing
8.3.2 Judicial Review of Self-Dealing Today: The Limited Role
of Safe Harbor Statutes
Cookies Food Products v. Lakes Warehouse
8.3.3 Judicial Review When Transaction Has Been Approved by a Disinterested Majority
of the Board
Melvin Eisenberg, Self-Interested Transactions in
Corporate Law
Cooke v. Oolie
8.3.4 Approval by a Minority of Directors: Special Board
Committees
8.3.5 Shareholder Ratification of Conflict Transactions
Lewis v. Vogelstein
8.4 CORPORATE DIRECTORS AND THE DUTY OF GOOD FAITH
8.5 CONTROLLING SHAREHOLDERS AND THE FAIRNESS STANDARD
8.5.1 Different Treatment for Controlling Shareholders?
Sinclair Oil Corp. v. Levien
Weinberger v. UOP, Inc.
8.5.2 Approval by a Board Minority of “Independent” Directors:
Special Committees
8.6 CORPORATE OPPORTUNITY DOCTRINE
8.6.1 Determining Which Opportunities “Belong” to the
 Corporation
8.6.2 When May a Fiduciary Take a Corporate Opportunity?
8.7 THE DUTY OF LOYALTY IN CLOSE CORPORATIONS
Donahue v. Rodd Electrotype Co.
Frank Easterbrook & Daniel Fischel, Close
Corporations and Agency Costs
Smith v. Atlantic Properties, Inc.

EXECUTIVE COMPENSATION

9.1 INTRODUCTION
9.2 THE CHALLENGE OF EXECUTIVE PAY
9.2.1 Creating Incentives That Align Managers With Investors
9.2.2 Political and Regulatory Responses to Executive Pay
9.3 ARE U.S. CEOs PAID TOO MUCH?
Lucian Bebchuk & Jesse Fried, Pay Without Performance: Overview of
the Issues
Bengt Holmstrom, Pay Without Performance
and the Managerial Power Hypothesis:
A Comment
9.4 JUDICIAL REVIEW OF COMPENSATION
9.4.1 The Law of Executive Officer Compensation
In re The Goldman Sachs Group, Inc.
Shareholder Litigation
9.5 JUDICIAL REVIEW OF DIRECTOR COMPENSATION
Calma v. Templeton

SHAREHOLDER LAWSUITS

10.1 DISTINGUISHING BETWEEN DIRECT AND DERIVATIVE CLAIMS

10.2 SOLVING A COLLECTIVE ACTION PROBLEM: ATTORNEYS’ FEES AND THE
INCENTIVE TO SUE
Fletcher v. A.J. Industries, Inc.
10.3 STANDING REQUIREMENTS
10.4 BALANCING THE RIGHTS OF BOARDS TO MANAGE THE CORPORATION AND SHAREHOLDERS’
RIGHTS TO OBTAIN JUDICIAL REVIEW
10.4.1 The Demand Requirement of Rule 23
Levine v. Smith
Rales v. Blasband
10.4.2 Special Litigation Committees
Zapata Corp. v. Maldonado
In re Oracle Corp. Derivative Litigation
Joy v. North
10.5 DEALING WITH AN ABUNDANCE OF SHAREHOLDER SUITS: EXCLUSIVE
FORUM BYLAWS
10.6 SETTLEMENT AND INDEMNIFICATION
 10.6.1 Settlement by Class Representatives
10.6.2 Settlement by Special Committee
Carlton Investments v. TLC Beatrice
International Holdings, Inc.
10.7 WHEN ARE DERIVATIVE SUITS IN SHAREHOLDERS’ INTERESTS?

TRANSACTIONS IN CONTROL

11.1 SALES OF CONTROL BLOCKS: THE SELLER’S DUTIES

11.1.1 The Regulation of Control Premia
Zetlin v. Hanson Holdings, Inc.
Perlman v. Feldmann
11.1.2 A Defense of the Market Rule in Sales of Control
Frank H. Easterbrook & Daniel R. Fischel,
Corporate Control Transactions
In re Delphi Financial Group Shareholder
Litigation
11.2 SALE OF CORPORATE OFFICE
11.3 LOOTING
11.4 TENDER OFFERS: THE BUYER’S DUTIES
Brascan Ltd. v. Edper Equities Ltd.
11.5 THE HART-SCOTT-RODINO ACT WAITING PERIOD

FUNDAMENTAL TRANSACTIONS:
MERGERS AND ACQUISITIONS

12.1 INTRODUCTION
12.2 ECONOMIC MOTIVES FOR MERGERS
12.2.1 Integration as a Source of Value
12.2.2 Other Sources of Value in Acquisitions: Tax, Agency Costs,
and Diversification
12.2.3 Suspect Motives for Mergers
12.2.4 Do Mergers Create Value?
12.3 THE EVOLUTION OF THE U.S. CORPORATE LAW OF MERGERS
12.3.1 When Mergers Were Rare
12.3.2 The Modern Era
12.4 THE ALLOCATION OF POWER IN FUNDAMENTAL TRANSACTIONS
12.5 OVERVIEW OF TRANSACTIONAL FORM
12.5.1 Asset Acquisition
Katz v. Bregman
12.5.2 Stock Acquisition
12.5.3 Mergers
12.5.4 Triangular Mergers
12.6 STRUCTURING THE M&A TRANSACTION
12.6.1 Timing
 12.6.2 Regulatory Approvals, Consents, and Title Transfers
12.6.3 Planning Around Voting and Appraisal Rights
12.6.4 Due Diligence, Representations and Warranties, Covenants,
and Indemnification
12.6.5 Deal Protections and Termination Fees
12.6.6 Accounting Treatment
12.6.7 A Case Study: Excerpt from Timberjack Agreement and
Plan of Merger
12.7 THE APPRAISAL REMEDY
12.7.1 History and Theory
12.7.2 The Appraisal Alternative in Interested Mergers
12.7.3 The Market-Out Rule
12.7.4 The Nature of “Fair Value”
12.7.5 Discounted Cash Flow Analysis
12.7.6 Current Developments in Appraisal
12.8 THE DE FACTO MERGER DOCTRINE
Hariton v. Arco Electronics, Inc.
12.9 THE DUTY OF LOYALTY IN CONTROLLED MERGERS
12.9.1 Cash Mergers or Freeze-Outs
Kahn v. Lynch Communications Systems, Inc.
Kahn v. M&F Worldwide Corp et al.
11.9.2 Do Controlling Shareholders Have a Duty to Offer Only a
Fair Price on the First, Tender Offer Step of a Two Step
Freeze-Out? 520
In re CNX Gas Corporation Shareholders
Litigation

PUBLIC CONTESTS FOR CORPORATE CONTROL

13.1 INTRODUCTION
13.2 DEFENDING AGAINST HOSTILE TENDER OFFERS
Unocal Corp. v. Mesa Petroleum Co.
13.3 PRIVATE LAW INNOVATION: THE POISON PILL
13.4 CHOOSING A MERGER OR BUYOUT PARTNER: REVLON, ITS SEQUELS,
AND ITS PREQUELS
Smith v. Van Gorkom
Revlon, Inc. v. MacAndrews and Forbes
Holdings, Inc.
13.5 PULLING TOGETHER UNOCAL AND REVLON
Paramount Communications, Inc. v. Time, Inc.
Paramount Communications, Inc. v. QVC
Network, Inc.
13.6 REGULATION OF TAKEOVERS IN OTHER LEGAL SYSTEMS
13.7 BRINGING TAKEOVERS LAW DOWN TO DATE
Lyondell Chemical Co. v. Ryan
 C&J Energy Services, Inc. v. City of Miami
General Employees and Sanitation
Employees Retirement Trust
13.8 PROTECTING THE DEAL
13.8.1 “No Shops/No Talks” and “Fiduciary Outs”
13.8.2 Shareholder Lock-ups
Omnicare, Inc. v. NCS Healthcare, Inc.
13.9 STATE ANTITAKEOVER STATUTES
13.9.1 First- and Second-Generation Antitakeover Statutes
(1968-1987)
13.9.2 Third-Generation Antitakeover Statutes
13.10 PROXY CONTESTS FOR CORPORATE CONTROL
Blasius Industries, Inc. v. Atlas Corp.

TRADING IN THE CORPORATION’S SECURITIES

14.1 COMMON LAW OF DIRECTORS’ DUTIES WHEN TRADING IN THE

CORPORATION’S STOCK
Goodwin v. Agassiz
14.2 THE CORPORATE LAW OF INSIDER TRADING POST-GOODWIN
Freeman v. Decio
14.3 §16(b) AND RULE 16-b UNDER THE 1934 ACT
14.4 EXCHANGE ACT §10(b) AND RULE 10b-5
14.4.1 Evolution of Private Right of Action Under §10
14.4.2 Elements of a 10b-5 Claim
14.4.3 Early Rule 10b-5 Insider Trading Liability: The Equal
Access Theory
SEC v. Texas Gulf Sulphur Co.
Santa Fe Industries, Inc. v. Green
14.4.4 The Equal Access Theory of Rule 10b-5 Liability
14.4.5 Elements of 10b-5 Liability: The Fiduciary Duty Theory
Chiarella v. United States
14.4.6 The Problem of Tippees after Chiarella
Dirks v. SEC
United States v. Newman
14.4.7 Note on Regulation FD
14.4.8 The Introduction of the Misappropriation Theory
United States v. O’Hagan
14.4.9 Civil Liability, Civil Fines, and Criminal Penalties for
Security Fraud Violations
Elkind v. Liggett & Myers, Inc.
14.5 THE OTHER SIDE OF 10B-5: FRAUD-ON-THE-MARKET CLASS ACTIONS
14.5.1 Materiality and Reliance in FOM Class Actions
Basic Inc. v. Levinson
14.5.2 Loss Causation in 10b-5 Class Actions
 14.5.3 The Role of Class Certification in Recent Challenges to
FOM Actions
14.6 INSIDER TRADING AND FOM CLASS ACTIONS: THE ACADEMIC POLICY DEBATES
14.6.1 The Insider-Trading Debate
14.6.2 The Academic Policy Debate over FOM Class Actions

Table of Cases
Index
PREFACE TO THE FIFTH EDITION

This book represents our effort to assist students and non-specialist lawyers to achieve an
understanding of the basic principles of law that undergird the legal structures within which
business is conducted in the United States. Our approach in this effort is premised upon a
functional perspective of law. Thus, we attempt to ask how these legal structures function to
produce desired benefits to parties who enter into agreements and relationships, or how legal
structures (or rules) add costs and can impede sensible business organization. In this second
aspect, the analytical or critical perspective, our point of view is informed through our
understanding of basic principles of economics. The book, however, requires of its readers no
formal training or understanding of economics. The concepts are for the most part quite intuitive
and easily grasped.
We have organized the book into two segments. The first (and shorter) of these segments — the
Introduction and Chapters 1-3 — deals with the fundamentals of organizational law in a business
setting. Chapter 1 focuses on agency law, which is no less a predicate for modern enterprises
functioning in a market economy than contract or property law. Chapter 2 addresses the partnership
form and its modern variants: the limited partnership, limited liability company, and limited
liability partnership. Chapter 3 introduces the corporate form, explicitly contrasted against the
partnership and its variants, such as the LLC.
The larger segment of the book, Chapters 4-14, addresses the legal regulation of a variety of
actions, decisions, and transactions that involve or concern the modern public corporation.
Chapter 4 explores relationships among shareholders, corporations, and corporate creditors.
Chapters 5 provides a basic primer on applicable finance concepts useful in understanding issues
respecting estimating costs of funding a business and estimating asset values. Chapters 6 and 7
explore what we term “normal governance” — that is, the legal framework that regulates the vast
majority of the corporation’s ordinary business activities. Chapter 6 addresses the routine
functioning of the voting system, including the proxy rules and some current issues in corporate
governance. Chapter 7 explores the duty of care, together with the multiple legal devices that
insulate corporate officers and directors from shareholder liability, including, most notably, the
business judgment rule.
Chapters 8 and 13 are devoted to particular classes of corporate actions and related
shareholder transactions that are subject to more specialized regulation by corporate law. Chapter
8 addresses self-dealing and other potential duty of loyalty issues arising from the conduct of
corporate officers, directors, and controlling shareholders. Chapter 9 focuses on the particular
challenges of executive compensation. Chapter 10 reviews the law and practice of shareholder
derivative suits. Chapter 11 examines transactions in corporate control, including sales of control
blocks of shares and tender offers. Chapter 12 addresses the specialized legal treatment of so-
called fundamental corporate actions, with special attention to merger and acquisition transactions.
Chapter 13 turns to the dramatic topic of conflicts for corporate control, including hostile tender
offers and proxy contexts. And finally, Chapter 14 examines the regulation of transactions in shares
on the public markets, including such topics as insider trading and fraud on the market.
Throughout, the fifth edition contains substantial updating from the fourth edition, especially
respecting the topics of corporate finance, corporate governance, mergers & acquisitions and
securities regulations. The basic structure and insights of the book remain unchanged, however.
These materials continue to be structured in a way that conforms to the simple insight that much of
corporate law can be divided into general governance, on the one hand, and discrete areas of
specialized governance on the other. We expect some teachers will present the materials in a
different sequence. We have taken care to facilitate alternative approaches by recapping in later
chapters points more exhaustively made in earlier ones and by supplying cross-references for
further review.
The book contains a number of notes that are perhaps a bit longer and more openly explanatory
than other authors prefer. In this we have been motivated by our experience as teachers to want to
provide a rather full textual basis for a general understanding of each subject. Our aim is to
provide for those happy occasions when class gets deeply involved in an interesting discussion. In
this event we are comforted by the knowledge that we can move on to the next class knowing that
all of the basic information and insights have been made available to the class in the reading
assignment.
In the end, what makes this branch of law so interesting (and frustrating) to students,
practitioners, and scholars alike is the vital role played in it by the open-textured concept of
fiduciary duty. From the early study of agency, to its conclusion with corporate mergers and
acquisitions, the field and these materials offer myriad puzzles arising from the admixture of
morality and efficiency that is often encountered when courts are required to fill in the specifics of
a fiduciary’s obligations. In approaching this subject, the book places primary emphasis on the
Delaware statute and decisions, as that law grows in its dominant importance for publicly financed
corporations in the United States. Opinions by the Delaware Court of Chancery and the Delaware
Supreme Court tend to outnumber cases from other jurisdictions.
We must offer very real thanks and appreciation to colleagues and friends who have taught
from these materials for some years and who have been generous in their comments, contributions,
and suggestions. First among these is Guhan Subramanian, our talented coauthor on several prior
editions of this Book. Needless to say, we are grateful for his numerous contributions in the past
and, like loyal continuing partners, we are fully prepared to hold him intellectually harmless for
the novel content of the 5th Edition. Next among those to whom we owe deep gratitude are Victor
Brudney, whose teaching materials provided the starting point for this book, and Henry Hansmann,
who has commented so richly and so long that it would be difficult to exaggerate our gratitude.
Other colleagues have made useful comments and supplied detailed guidance. Among these are
Jennifer Arlen, Ryan Bubb, Lucian Bebchuk, Bernard Black, John Coates, Rob Daines, Jill Fisch,
Jesse Fried, Jon Hanson, Hon. Jack B. Jacobs, Marcel Kahan, Ehud Kamar, Vic Khanna, Stephen
J. Lubben, Mark Roe, and Hon. Leo Strine. We acknowledge gladly our debt to them. In addition,
numerous anonymous reviewers made very helpful comments, and we hope that they will find the
book improved because of their efforts. Finally, we each owe a debt of gratitude to student
researchers and secretarial associates. Among students, some especially stand out for their glad
assistance: Alison Gooley, NYU, 1999, of the Bar of New South Wales; Ronnie Deutch, NYU,
2002, of the New York bar; Melissa Anderson, HLS, 2009; Jeffrey Young, HLS, 2010; Maria
Parra-Orlandoni, HLS, 2015 and Divya Suwasin, NYU 2016. Susannah Atkins, Carol Bateson,
Cara R. Conlin, Linell Hanover, Annie Hard, Barbara Karasinski, Kimberly Peterson, and Paula
Prather offered cheerful and highly competent assistance. Our gratitude extends to them all.

William T. Allen
Reinier Kraakman
February 2016
ACKNOWLEDGMENTS

We thank the authors and copyright holders of the following works for permitting their inclusion in
this book:

Bebchuk and Fried, Pay Without Performance: Overview of the Issues, 30 J. Corp. L. 647
(2005).
Bebchuk, Kraakman, and Triantis, Stock Pyramids, Cross-Ownership, and Dual Class
Equity, 295ff. in Randall K. Morck, ed., Concentrated Corporate Ownership (2000).
Easterbrook and Fischel, Close Corporations and Agency Costs, 38 Stan. L. Rev. 271 (1986).
Stanford Law Review by School of Law, Stanford University, Copyright © 1986. Reproduced
with permission of Stanford Law Review via Copyright Clearance Center.
Easterbrook and Fischel, Corporate Control Transactions, 91 Yale L. J. 698, 715-719
(1982). The Yale Law Journal by Yale Law School, Copyright © 1982. Reproduced with
permission of Yale Law Journal Company, Inc. via Copyright Clearance Center.
Easterbrook and Fischel, Limited Liability and the Corporation, 52 U. Chi. L. Rev. 89, 94-97
(1985).
Easterbrook and Fischel, Voting in Corporate Law, 26 J.L. & Econ. 395, 409-411 (1983).
Eisenberg, Self-Interested Transactions in Corporate Law, 13 J. Corp. L. 997, 997-1008
(1988). The Journal of Corporation Law, published by University of Iowa, College of Law,
Copyright © 1988. Reproduced with permission of The Journal of Corporation Law via Copyright
Clearance Center.
Eisinger, Jesse, Long & Short: Icahu Cries Foul at Perry’s No-Risk Play in Takeover Fight,
Wall Street Journal, Eastern Edition, Dec. 15, 2004. Copyright © 2004 by Dow Jones &
Company, Inc. Reproduced with permission of Dow Jones & Company, Inc. via Copyright
Clearance Center.
Hansmann, Kraakman, and Squire, Law and the Rise of the Firm, 119 Harv. L. Rev. 1333
(2006). Harvard Law Review by Harvard Law Review Publishing Association, Copyright ©
2006. Reproduced with permission of Harvard Law Review Publishing Association via Copyright
Clearance Center.
Holmstrom, Bengt, Pay Without Performance and the Managerial Power Hypothesis: A
Comment, 30 J. Corp. L. 503 (2005).
Holzer, Jessica, A “Yes” in Say on Pay , Wall Street Journal, July 8, 2011, Copyright © 2011
by Dow Jones & Company, Inc. Reproduced with permission of Dow Jones & Company, Inc. via
Copyright Clearance Center.
Kahan and Rock, Hedge Funds in Corporate Governance and Corporate Control, 155 U. Pa.
L. Rev. 1021 (2007). University of Pennsylvania Law Review by University of Pennsylvania Law
School, Copyright © 2007. Reproduced with permission of University of Pennsylvania Law
School via Copyright Clearance Center.
Markon, Jerry, and Robert Frank, Five Adelphia Officials Arrested on Fraud Charges, Wall
Street Journal, Eastern Edition, Jul. 25, 2002. Copyright © 2002 by Dow Jones & Company, Inc.
Reproduced with permission of Dow Jones & Company, Inc. via Copyright Clearance Center.
Roe, Mark J., Corporate Strategic Reaction to Mass Tort , 72 Va. L. Rev. 1, 32 (1986).
Virginia Law Review Association by Virginia Law Review, Copyright © 1986. Reproduced with
permission of Virginia Law Review via Copyright Clearance Center.
Staff Writer, Doing Good and Doing Well at Timberland, Wall Street Journal, Eastern
Edition, Sept. 9, 2003. Copyright © 2003 by Dow Jones & Company, Inc. Reproduced with
permission of Dow Jones & Company, Inc. via Copyright Clearance Center.
Thompson and Thomas, The New Look of Shareholder Litigation: Acquisition-Oriented
Class Actions, 57 Vand. L. Rev. 133, 166-69 (2004).
INTRODUCTION

Like much of civil law, the law of business enterprises is concerned with facilitating voluntary
economic relationships. Property law and contract law are the legal bedrock of market economies,
but other bodies of law are also important. Among these are the laws of security interests, money
and credit, bankruptcy, intellectual property, agency, and enterprise organization. This book deals
primarily with the last, but hardly the least, of these fields: the law of enterprise organization. In
particular, we address the laws of agency, partnership (and related limited liability entities), and
corporations.
Because cooperative economic relationships frequently raise the same recurring problems, the
law provides a useful menu of standard forms to address these problems. Thus, the laws of agency,
partnership, noncorporate limited liability entities, and corporations can be seen as offering
parties a set of standard legal forms from which to choose the form most suited to their needs. The
choice of a standard form is implicitly a contractual choice. Moreover, these forms themselves are
more or less contractual insofar as they may be customized or fine-tuned by the parties by express
agreement — and, of course, with the assistance of expert lawyering. As we shall also see, the
laws of agency, partnership, and corporations are not entirely malleable because fiduciary duties
grounded in equity — a principal focus of this course — limit the opportunistic use of contractual
and even statutory rights. Finally, agency law as well as the law of all business entities have a
“property” dimension in addition to a contractual dimension, insofar as they may alter the legal
rights of third parties as well as the rights of the parties who enter into these enterprise
relationships.
We begin by examining the law of agency. The agency relationship can be imagined as the
simplest form of business organization. Alternatively it may be seen as the legal glue that contours
the boundaries of a legal enterprise: Which persons have the power to bind the entity contractually
and in tort or criminal law, and which persons act outside the entity? Agency law also prefigures
many of the most basic and difficult problems of corporation law, most particularly those arising
from the so-called fiduciary duty of loyalty. From agency, we move to the general partnership —
which we may think of as the simplest form of a jointly owned business firm. (For our purposes, a
“firm” is a form of business relation that has a temporal dimension, a social identity, and a
separate pool of dedicated business assets.) And from partnership and
other noncorporate forms, we move to our principal subject — the corporate form — which is the
most stable, complex, and socially important form in the menu of business forms that the law
provides.
Before beginning, we will address here two very general themes that run throughout this book.
The first is a policy theme: How does one evaluate and critique enterprise law, and what are the
goals of enterprise law? The second theme concerns the role that the morally charged language of
enterprise law (it is law, after all) plays in its legitimation and enforcement.
We begin with the policy theme. It goes without saying that the fundamental objective of
enterprise law — indeed of all law — is to increase social welfare. Yet, this abstract formulation
tells us little about how enterprise law should contribute to social welfare or how it might be
tweaked to do a better job. Like many other modern commentators on enterprise law, we
sometimes assert that good law is “efficient” law, meaning that it maximizes the size of the
economic pie (even if the pie’s pieces are allocated quite differently according to whether one is,
say, an investor or an employee). 1 At other times we assert that the goal of the business
corporation is to maximize long-term shareholder wealth. Needless to say, there is a gap of some
distance between innocuously stating that enterprise law should increase social welfare and
asserting that this means furthering the interests of shareholders or other investors of risk capital.
Some commentators argue that large enterprises such as public corporations should not
privilege shareholder interests over those of other constituencies such as creditors, employees,
suppliers, customers, or even the interests of society as a whole. We explore these alternative
goals in Chapter 4 (The Protection of Creditors), Chapter 7 (Conflict Transactions: The Duty of
Loyalty), and Chapter 12 (Public Contests for Corporate Control). Elsewhere, we take the primacy
of shareholder interests for granted. This is not because we believe that shareholder ownership of
corporations is an indisputable and sacred property right, or that it is an obvious principle of
natural law. Rather, it is partly because we believe that shareholder/investor welfare is a
workable if imperfect proxy for social welfare in most situations, and partly because the primacy
of shareholder/investor welfare dominates American enterprise law as a matter of pure empirics.
The objective of maximizing shareholder welfare runs so deeply through the relevant statutory and
case law that it is rarely questioned or even stated, except when the conflict between the interests
of shareholders and those of other corporate constituencies grows too acute to ignore.
Once shareholder/investor welfare is identified as the principal objective of enterprise law, it
follows easily that economic efficiency is the logical criterion for evaluating enterprise law.
Shareholders/investors are the “equity
holders” or “residual claimants” of business entities — a fancy way of saying that they don’t get
paid until everyone else is paid first, including business creditors, employees, and suppliers. Any
factor that increases residual value of the enterprise to its shareholders (or other equity investors)
is “efficient” by this criterion — at least if it does not impose uncompensated costs on third parties
such as tort victims. And any factor that reduces the costs of capital, labor, supplies, and the like
adds to the residual value of the enterprise. Put differently, efficient law adds to the value of the
firm just as any other factor might do, by reducing the costs of the firm’s inputs and increasing the
value of its outputs.
There are at least three specific ways in which enterprise law can enhance the efficiency of
enterprises. The first is by providing standard platforms for business entities as well as agency
contracts and creditor protections. Where negotiating parties are involved, these platforms are
often an integrated set of default terms open to contractual modification. Where third-party rights
are at stake, the analogous standard terms are often mandatory. In both cases, however, standard
platforms save time and effort by allowing parties to do business in shorthand, without reinventing
the legal wheel. Second, enterprise law adds value by permitting business actors to modify third-
party property rights in circumstances when contract alone cannot do the job. We address this
function in Chapters 2 and 3, where we demonstrate how legal entities permit investors to divide
their assets among different buckets that serve as collateral for different groups of creditors. This
power to assign specific assets to support business creditors is enormously useful and yet, as we
will argue, cannot be achieved by contract alone.
Finally, enterprise law provides a variety of rules and standards — collectively termed
“fiduciary duties” — that are intended to either prevent or remedy self-interested opportunism by
parties within enterprises. The simplest example is that of an agent who agrees to act loyally on
behalf of his principal, but is economically motivated to act against his principal’s interests in
numerous ways, from colluding with third parties in negotiating contracts on the principal’s behalf
to expropriating the principal’s property or private information for his own benefit. This genre of
opportunism is a chronic problem in every sort of enterprise, from simple agency relationships to
publicly traded corporations. In the academic literature, it is referred to generically as the “agency
problem” and the costs that inevitably arise from the fact that agents rather than owners themselves
are at work in the enterprise are referred to as “agency costs.” This problem and the costs that it
produces are not specific to the law of agency at all. Indeed, these are not legal terms of art. But
addressing them lies at the core of the understanding and critical analysis of much of enterprise
law.
As the problem of mitigating agency costs implies, evaluating the efficiency of a particular
legal rule or a particular reform in enterprise law requires a good deal of knowledge about
institutional context and enforcement. Research in the social sciences can be helpful here. But at
the very least, clarity is essential about one’s empirical assumptions about the institutional context
as well as the weights assigned to particular costs and benefits. In the end, and over time, the
balance of costs and benefits generally determines the survivorability of legal doctrine here, as in
so many other areas of the law.
However, policy-oriented analysis is certainly not the only aim of the study of organization
law by lawyers. If it were, enterprise law would be nothing but a pastiche of applied social
sciences — mostly economics and finance perhaps, but with a dash of psychology and organization
theory tossed in. The meaning of this imaginary law would be wholly captured in phrases such as
“efficiency,” “transaction costs,” “collective action problems,” and the “prisoner’s dilemma.” Its
rules and standards would be understood as more or less well-supported hypotheses. Individual
plaintiffs and defendants would occupy roughly the same status as laboratory animals behaving in
accordance with the vector of their self-interest and the law’s calibration of incentives. Judges
would be the investigators-in-chief.
Needless to say, this Orwellian account of enterprise law is not the real thing by a long shot,
even if traces of applied social science occur in the case law and large deposits of it may be found
in the academic literature. The principal statutes of enterprise law, including the statute that will
play the most important role in this book — the Delaware General Corporation Law (DGCL) —
read like an integrated set of self-contained rules that erect a legal entity, and describe its
governance mechanisms. In the aggregate, they seem to rest on social science no more than the
blueprints for large buildings do. Similarly, if one reads an opinion handed down by the Delaware
Court of Chancery or the Delaware Supreme Court concerning an issue in corporate law, the
number of references to “efficiency” or “transaction costs” is vanishingly small in comparison to
that of legal terms of art such as “entire fairness” and the “business judgment rule.” Moreover, the
language of these opinions is often morally charged and didactic. The authorities cited are statutory
provisions and prior case law. This is, in short, law as we know it. The attention to policy
concerns is often here, but it resides in the melody rather than in the words. The only remotely
“scientific” piece of the typical opinion is the careful attention paid to the facts and institutional
context at the outset of the decision. And this resembles anthropology or history more than
economics.
Phrased more directly, judges and lawyers occupy a different role than social scientists do.
Judges and lawyers are understood to be believers in the language of law. Indeed, they are the high
priests and the deacons of the faith. For them, the articulated reason for some judicial act is not
simply a concurrence with good policy, but a legally derived cause in itself. In this faith, law is all
about the meaning of legal doctrines: statutes, court rules, administrative procedures, judicial
precedents, and the rich body of professional learning that allows experienced lawyers to perform
their professional functions. These meanings may be unclear at times, but the internal processes of
law — canons of construction, rules of authority and judicial processes of discovery, trial and
appeal, and even much scholarship — are about clarifying legal meanings as well as their
application. This is the “interior” perspective on law.
How, then, can faith and science freely coexist in the study of enterprise law — and perhaps
even in its creation?2 Our long answer to this question lies in the discussion of the materials in this
book. The short answer comes in several pieces.
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 BLACK CURRANT JAM AND MARMALADE.

No fruit jellies so easily as black currants when they are ripe; and
their juice is so rich and thick that it will bear the addition of a very
small quantity of water sometimes, without causing the preserve to
mould. When the currants have been very dusty, we have
occasionally had them washed and drained before they were used,
without any injurious effects. Jam boiled down in the usual manner
with this fruit is often very dry. It may be greatly improved by taking
out nearly half the currants when it is ready to be potted, pressing
them well against the side of the preserving-pan to extract the juice:
this leaves the remainder far more liquid and refreshing than when
the skins are all retained. Another mode of making fine black currant
jam—as well as that of any other fruit—is to add one pound at least
of juice, extracted as for jelly, to two pounds of the berries, and to
allow sugar for it in the same proportion as directed for each pound
of them.
For marmalade or paste, which is most useful in affections of the
throat and chest, the currants must be stewed tender in their own
juice, and then rubbed through a sieve. After ten minutes’ boiling,
sugar in fine powder must be stirred gradually to the pulp, off the fire,
until it is dissolved: a few minutes more of boiling will then suffice to
render the preserve thick, and it will become quite firm when cold.
More or less sugar can be added to the taste, but it is not generally
liked very sweet.
Best black currant jam.—Currants, 4 lbs.; juice of currants, 2 lbs.:
15 to 20 minutes’ gentle boiling. Sugar, 3 to 4 lbs.: 10 minutes.
Marmalade, or paste of black currants.—Fruit, 4 lbs.: stewed in its
own juice 15 minutes, or until quite soft. Pulp boiled 10 minutes.
Sugar, from 7 to 9 oz. to the lb.: 10 to 14 minutes.
Obs.—The following are the receipts originally inserted in this
work, and which we leave unaltered.
To six pounds of the fruit, stripped carefully from the stalks, add
four pounds and a half of sugar. Let them heat gently, but as soon as
the sugar is dissolved boil the preserve rapidly for fifteen minutes. A
more common kind of jam may be made by boiling the fruit by itself
from ten to fifteen minutes, and for ten minutes after half its weight of
sugar has been added to it.
Black currants, 6 lbs.; sugar, 4-1/2 lbs.: 15 minutes. Or: fruit, 6 lbs.:
10 to 15 minutes. Sugar, 3 lbs.: 10 minutes.
Obs.—There are few preparations of fruit so refreshing and so
useful in illness as those of black currants, and it is therefore
advisable always to have a store of them, and to have them well and
carefully made.
 NURSERY PRESERVE.

Take the stones from a couple of pounds of Kentish cherries, and

boil them twenty minutes; then add to them a pound and a half of
raspberries, and an equal quantity of red and of white currants, all
weighed after they have been cleared from their stems. Boil these
together quickly for twenty minutes; mix with them three pounds and
a quarter of common sugar, and give the preserve fifteen minutes
more of quick boiling. A pound and a half of gooseberries may be
substituted for the cherries; but they will not require any stewing
before they are added to the other fruits. The jam must be well
stirred from the beginning, or it will burn to the pan.
Kentish cherries, 2 lbs.: 20 minutes. Raspberries, red currants,
and white currants, of each 1-1/2 lb.: 20 minutes. Sugar, 3-1/4 lbs.:
15 minutes.
 ANOTHER GOOD COMMON PRESERVE.

Boil together, in equal or unequal portions (for this is immaterial),

any kinds of early fruit, until they can be pressed through a sieve;
weigh, and then boil the pulp over a brisk fire for half an hour; add
half a pound of sugar for each pound of fruit, and again boil the
preserve quickly, keeping it well stirred and skimmed, from fifteen to
twenty minutes. Cherries, unless they be morellas, must first be
stewed tender apart, as they will require a much longer time to make
them so than any other of the first summer fruits.
 A GOOD MÉLANGE, OR MIXED PRESERVE.

Boil for three-quarters of an hour in two pounds of clear red

gooseberry juice, one pound of very ripe greengages, weighed after
they have been pared and stoned; then stir to them one pound and a
half of good sugar, and boil them quickly again for twenty minutes. If
the quantity of preserve be much increased, the time of boiling it
must be so likewise: this is always better done before the sugar is
added.
Juice of ripe gooseberries, 2 lbs.; greengages, pared and stoned,
1 lb.: 3/4 hour. Sugar, 1-1/2 lb.: 20 minutes.
 GROSEILLÉE.

(Another good preserve.)

Cut the tops and stalks from a gallon or more of well-flavoured ripe
gooseberries, throw them into a large preserving-pan, boil them for
ten minutes, and stir them often with a wooden spoon; then pass
both the juice and pulp through a fine sieve, and to every three
pounds’ weight of these add half a pint of raspberry-juice, and boil
the whole briskly for three-quarters of an hour; draw the pan aside,
stir in for the above portion of fruit, two pounds of sugar, and when it
is dissolved renew the boiling for fifteen minutes longer. Ripe
gooseberries, boiled 10 minutes. Pulp and juice of gooseberries, 6
lbs.; raspberry-juice, 1 pint: 3/4 hour. Sugar, 4 lbs.: 15 minutes.
Obs.—When more convenient, a portion of raspberries can be
boiled with the gooseberries at first.
 SUPERIOR PINE-APPLE MARMALADE.

(A New Receipt.)
The market-price of our English pines is generally too high to
permit their being very commonly used for preserve; and though
some of those imported from the West Indies are sufficiently well-
flavoured to make excellent jam, they must be selected with
judgment for the purpose, or they will possibly not answer for it. They
should be fully ripe, but perfectly sound: should the stalk end appear
mouldy or discoloured, the fruit should be rejected. The degree of
flavour which it possesses may be ascertained with tolerable
accuracy by its odour; for if of good quality, and fit for use, it will be
very fragrant. After the rinds have been pared off, and every dark
speck taken from the flesh, the pines may be rasped on a fine and
delicately clean grater, or sliced thin, cut up quickly into dice, and
pounded in a stone or marble mortar; or a portion may be grated,
and the remainder reduced to pulp in the mortar. Weigh, and then
heat and boil it gently for ten minutes; draw it from the fire, and stir to
it by degrees fourteen ounces of sugar to the pound of fruit; boil it
until it thickens and becomes very transparent, which it will be in
about fifteen minutes, should the quantity be small: it will require a
rather longer time if it be large. The sugar ought to be of the best
quality and beaten quite to powder; and for this, as well as for every
other kind of preserve, it should be dry. A remarkably fine
marmalade may be compounded of English pines only, or even with
one English pine of superior growth, and two or three of the West
Indian mixed with it; but all when used should be fully ripe, without at
all verging on decay; for in no other state will their delicious flavour
be in its perfection.
In making the jam always avoid placing the preserving-pan flat
upon the fire, as this of itself will often convert what would otherwise
be excellent preserve, into a strange sort of compound, for which it is
difficult to find a name, and which results from the sugar being
subjected—when in combination with the acid of the fruit—to a
degree of heat which converts it into caramel or highly-boiled barley-
sugar. When there is no regular preserving-stove, a flat trivet should
be securely placed across the fire of the kitchen-range to raise the
pan from immediate contact with the burning coals, or charcoal. It is
better to grate down, than to pound the fruit for the present receipt
should any parts of it be ever so slightly tough; and it should then be
slowly stewed until quite tender before any sugar is added to it; or
with only a very small quantity stirred in should it become too dry. A
superior marmalade even to this, might probably be made by adding
to the rasped pines a little juice drawn by a gentle heat, or expressed
cold, from inferior portions of the fruit; but this is only supposition.
 A FINE PRESERVE OF THE GREEN ORANGE PLUM.

(Sometimes called the Stonewood plum.)

This fruit, which is very insipid when ripe, makes an excellent
preserve if used when at its full growth, but while it is still quite hard
and green. Take off the stalks, weigh the plums, then gash them well
(with a silver knife, if convenient) as they are thrown into the
preserving-pan, and keep them gently stirred without ceasing over a
moderate fire, until they have yielded sufficient juice to prevent their
burning; after this, boil them quickly until the stones are entirely
detached from the flesh of the fruit. Take them out as they appear on
the surface, and when the preserve looks quite smooth and is well
reduced, stir in three-quarters of a pound of sugar beaten to a
powder, for each pound of the plums, and boil the whole very quickly
for half an hour or more. Put it, when done, into small moulds or
pans, and it will be sufficiently firm when cold to turn out well: it will
also be transparent, of a fine green colour, and very agreeable in
flavour.
Orange plums, when green, 6 lbs.: 40 to 60 minutes. Sugar, 4-1/2
lbs.: 30 to 50 minutes.
Obs.—The blanched kernels of part of the fruit should be added to
this preserve a few minutes before it is poured out: if too long boiled
in it they will become tough. They should always be wiped very dry
after they are blanched.
 GREENGAGE JAM, OR MARMALADE.

When the plums are thoroughly ripe, take off the skins, stone,
weigh, and boil them quickly without sugar for fifty minutes, keeping
them well stirred; then to every four pounds add three of good sugar
reduced quite to powder, boil the preserve from five to eight minutes
longer, and clear off the scum perfectly before it is poured into the
jars. When the flesh of the fruit will not separate easily from the
stones, weigh and throw the plums whole into the preserving-pan,
boil them to a pulp, pass them through a sieve, and deduct the
weight of the stones from them when apportioning the sugar to the
jam. The Orleans plum may be substituted for greengages in this
receipt.
Greengages, stoned and skinned, 6 lbs.: 50 minutes. Sugar, 4-1/2
lbs.: 5 to 8 minutes.
 PRESERVE OF THE MAGNUM BONUM, OR MOGUL PLUM.

Prepare, weigh, and boil the plums for forty minutes; stir to them
half their weight of good sugar beaten fine, and when it is dissolved
continue the boiling for ten additional minutes, and skim the preserve
carefully during the time. This is an excellent marmalade, but it may
be rendered richer by increasing the proportion of sugar. The
blanched kernels of a portion of the fruit stones will much improve its
flavour, but they should be mixed with it only two or three minutes
before it is taken from the fire. When the plums are not entirely ripe,
it is difficult to free them from the stones and skins: they should then
be boiled down and pressed through a sieve, as directed for
greengages, in the receipt above.
Mogul plums, skinned and stoned, 6 lbs.: 40 minutes. Sugar, 3
lbs.: 5 to 8 minutes.
 TO DRY OR PRESERVE MOGUL PLUMS IN SYRUP.

Pare the plums, but do not remove the stalks or stones; take their
weight of dry sifted sugar, lay them into a deep dish or bowl, and
strew it over them; let them remain thus for a night, then pour them
gently into a preserving-pan with all the sugar, heat them slowly, and
let them just simmer for five minutes; in two days repeat the process,
and do so again and again at an interval of two or three days, until
the fruit is tender and very clear; put it then into jars, and keep it in
the syrup, or drain and dry the plums very gradually, as directed for
other fruit. When they are not sufficiently ripe for the skin to part from
them readily, they must be covered with spring water, placed over a
slow fire, and just scalded until it can be stripped from them easily.
They may also be entirely prepared by the receipt for dried apricots
which follows, a page or two from this.
 MUSSEL PLUM CHEESE AND JELLY.

Fill large stone jars with the fruit, which should be ripe, dry, and
sound; set them into an oven from which the bread has been drawn
several hours, and let them remain all night; or, if this cannot
conveniently be done, place them in pans of water, and boil them
gently until the plums are tender, and have yielded their juice to the
utmost. Pour this from them, strain it through a jelly bag, weigh, and
then boil it rapidly for twenty-five minutes. Have ready, broken small,
three pounds of sugar for four of the juice, stir them together until it is
dissolved, and then continue the boiling quickly for ten minutes
longer, and be careful to remove all the scum. Pour the preserve into
small moulds or pans, and turn it out when it is wanted for table: it
will be very fine, both in colour and in flavour.
Juice of plums, 4 lbs.: 25 minutes. Sugar, 3 lbs.: 10 minutes.
The cheese.—Skin and stone the plums from which the juice has
been poured, and after having weighed, boil them an hour and a
quarter over a brisk fire, and stir them constantly; then to three
pounds of fruit add one of sugar, beaten to powder; boil the preserve
for another half hour, and press it into shallow pans or moulds.
Plums, 3 lbs.: 1-1/4 hour. Sugar, 1 lb.: 30 minutes.
 APRICOT MARMALADE.

This may be made either by the receipt for greengage, or Mogul

plum marmalade; or the fruit may first be boiled quite tender, then
rubbed through a sieve, and mixed with three-quarters of a pound of
sugar to the pound of apricots: from twenty to thirty minutes will boil
it in this case. A richer preserve still is produced by taking off the
skins, and dividing the plums in halves or quarters, and leaving them
for some hours with their weight of fine sugar strewed over them
before they are placed on the fire; they are then heated slowly and
gently simmered for about half an hour.
 TO DRY APRICOTS.

(A quick and easy method.)

Wipe gently, split, and stone some fine apricots which are not
over-ripe; weigh, and arrange them evenly in a deep dish or bowl,
and strew in fourteen ounces of sugar in fine powder, to each pound
of fruit; on the following day turn the whole carefully into a
preserving-pan, let the apricots heat slowly, and simmer them very
softly for six minutes, or for an instant longer, should they not in that
time be quite tender. Let them remain in the syrup for a day or two,
then drain and spread them singly on dishes to dry.
To each pound of apricots, 14 oz. of sugar; to stand 1 night, to be
simmered from 6 to 8 minutes, and left in syrup 2 or 3 days.
 DRIED APRICOTS.

(French Receipt.)
Take apricots which have attained their full growth and colour, but
before they begin to soften; weigh, and wipe them lightly; make a
small incision across the top of each plum, pass the point of a knife
through the stalk end, and gently push out the stones without
breaking the fruit; next, put the apricots into a preserving-pan, with
sufficient cold water to float them easily; place it over a moderate
fire, and when it begins to boil, should the apricots be quite tender,
lift them out and throw them into more cold water, but simmer them,
otherwise, until they are so. Take the same weight of sugar that there
was of the fruit before it was stoned, and boil it for ten minutes with a
quart of water to the four pounds; skim the syrup carefully, throw in
the apricots (which should previously be well drained on a soft cloth,
or on a sieve), simmer them for one minute, and set them by in it
until the following day, then drain it from them, boil it for ten minutes,
and pour it on them the instant it is taken from the fire; in forty-eight
hours repeat the process, and when the syrup has boiled ten
minutes, put in the apricots, and simmer them from two to four
minutes, or until they look quite clear. They may be stored in the
syrup until wanted for drying, or drained from it, laid separately on
slates or dishes, and dried very gradually: the blanched kernels may
be put inside the fruit, or added to the syrup.
Apricots, 4 lbs., scalded until tender; sugar 4 lbs.; water, 1 quart:
10 minutes. Apricots, in syrup, 1 minute; left 24 hours. Syrup, boiled
again, 10 minutes, and poured on fruit: stand 2 days. Syrup, boiled
again, 10 minutes, and apricots 2 to 4 minutes, or until clear.
Obs.—The syrup should be quite thick when the apricots are put in
for the last time; but both fruit and sugar vary so much in quality and
in the degree of boiling which they require, that no invariable rule can
be given for the latter. The apricot syrup strained very clear, and
mixed with twice its measure of pale French brandy, makes an
agreeable liqueur, which is much improved by infusing in it for a few
days half an ounce of the fruit-kernels, blanched and bruised, to the
quart of liquor.
We have found that cherries prepared by either of the receipts
which we have given for preserving them with sugar, if thrown into
the apricot syrup when partially dried, just scalded in it, and left for a
fortnight, then drained and dried as usual, become a delicious
sweetmeat. Mussel, imperatrice, or any other plums, when quite ripe,
if simmered in it very gently until they are tender, and left for a few
days to imbibe its flavour, then drained and finished as usual, are
likewise excellent.
 PEACH JAM, OR MARMALADE.

The fruit for this preserve, which is a very delicious one, should be
finely flavoured, and quite ripe, though perfectly sound. Pare, stone,
weigh, and boil it quickly for three-quarters of an hour, and do not fail
to stir it often during the time; draw it from the fire, and mix with it ten
ounces of well-refined sugar, rolled or beaten to powder, for each
pound of the peaches; clear it carefully from scum, and boil it briskly
for five minutes; throw in the strained juice of one or two good
lemons; continue the boiling for three minutes only, and pour out the
marmalade. Two minutes after the sugar is stirred to the fruit, add
the blanched kernels of part of the peaches.
Peaches, stoned and pared, 4 lbs.; 3/4 hour. Sugar, 2-1/2 lbs.: 2
minutes. Blanched peach-kernels: 3 minutes. Juice of 2 small
lemons: 3 minutes.
Obs.—This jam, like most others, is improved by pressing the fruit
through a sieve after it has been partially boiled. Nothing can be finer
than its flavour, which would be injured by adding the sugar at first;
and a larger proportion renders it cloyingly sweet. Nectarines and
peaches mixed, make an admirable preserve.
 TO PRESERVE, OR TO DRY PEACHES OR NECTARINES.

(An easy and excellent Receipt.)

The fruit should be fine, freshly gathered, and fully ripe, but still in
its perfection. Pare, halve, and weigh it after the stones are removed;
lay it into a deep dish, and strew over it an equal weight of highly
refined pounded sugar; let it remain until this is nearly dissolved,
then lift the fruit gently into a preserving-pan, pour the juice and
sugar to it, and heat the whole over a very slow fire; let it just simmer
for ten minutes, then turn it softly into a bowl, and let it remain for two
days; repeat the slow heating and simmering at intervals of two or
three days, until the fruit is quite clear, when it may be potted in the
syrup, or drained from it, and dried upon large clean slates or dishes,
or upon wire-sieves. The flavour will be excellent. The strained juice
of a lemon may be added to the syrup, with good effect, towards the
end of the process, and an additional ounce or two of sugar allowed
for it.
 DAMSON JAM. (VERY GOOD.)

The fruit for this jam should be freshly gathered and quite ripe.
Split, stone, weigh, and boil it quickly for forty minutes; then stir in
half its weight of good sugar roughly powdered, and when it is
dissolved, give the preserve fifteen minutes additional boiling,
keeping it stirred, and thoroughly skimmed.
Damsons, stoned, 6 lbs.: 40 minutes. Sugar, 3 lbs.: 15 minutes.
Obs.—A more refined preserve is made by pressing the fruit
through a sieve after it is boiled tender; but the jam is excellent
without.