Practice question
A director secretly purchases a minority shareholder's stock while withholding the special material facts that the director is bound to disclose under circumstances comparable to Strong. The director argues that proving the seller's agent had authority to sell conclusively defeats any deceit challenge. Which is correct?
- Agent authority makes fraud legally impossible
- An authorized agent's power to sell does not itself cure a purchase procured by the buyer's actionable deceit
- Every authorized agent guarantees the buyer's honesty
- The director may convert confidential facts into public facts by silence
- Only physical theft can affect a share sale
Legal references
- Strong v Repide,213US419,May3 1909,main opinion: https://www.govinfo.gov/content/pkg/USREPORTS-213/pdf/USREPORTS-213-419.pdf ; full opinion transcription: https://supreme.justia.com/cases/federal/us/213/419/
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