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I.

INTRODUCTION
Tort is a wrongful act committed by an individual who causes injury to another and often times
does not arise from a contract or a statute. This kind of an offense often arises to the occurrence
of liability that obligates the tortfeasor to compensate or to negotiate with the victim. Although
crimes may be torts, the cause of legal action may not necessarily a crime as the harm may be
due to negligence and does not amount to criminal negligence. In a lawsuit filed for torts, a
victim may recover damages but the plaintiff must show and prove that the action or the lack of
action is the immediate cause of the harm that they suffered. The equivalent of tort in a civil law
is a delict.
In torts, legal injuries are not limited to physical injuries and may include emotional, economic
or reputational loss including the invasion of ones privacy or the violation of the constitutional
rights. While many torts are result of negligence the law also recognizes intentional torts in
which one intentionally causes injury to another and which arises to the right of recovery of
damage without a need to demonstrate that negligence indeed occur.

Torts may be different from criminal law in that: 1.) Torts may result to negligent acts but not
intentional or criminal actions; 2.) Torts lawsuits have a law burden of proof such as the
preponderance of evidence rather than proof beyond reasonable doubt. A plaintiff in a tort case
may prevail even if it was proven that a person who caused harm was acquitted after a criminal
trial.
Torts may come in different types but the focus of this research paper is to discuss what a
corporation torts in general is. It intends to lay down the different concepts that circumvent the
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corporation torts and how it is committed. It further discuss how a corporation is being liable
once it violates or invades the constitutional rights of an individual and how this liabilities can be
proven by those victims who suffered injury because of the negligence of another. And lastly it
tends to discover if a corporation is indeed liable for torts.

II. OBJECTIVES OF THE STUDY


The following are the goals of the conduct of this study:
1. To define what a corporation is and to understand where did the concept came from and how a
corporation operates within its sphere of coverage.
2. To determine if what are the duties and functions of the stockholders in running the
corporation and to know what are their significant role a in making the corporation works.
3. To determine the liabilities of the corporations towards an individual or its employees being it
as a legal person this causes harm and injury as a single entity in a form of torts.
4. Define what a tort is and what are the instances where in an act is considered as tort and to
determine the liability of the corporation in order to prevent or deter the rise of corporate torts.

III. DEFINITION OF TERMS


This term paper seeks to define the following terms for the purpose of understanding the essence
of this term research.
1. ACCIDENT-an unfortunate incident or event that happens unexpectedly or which is
unforeseen and usually causes harm or injury to individuals.
2. CRIMES- an act or commission that constitutes an offense and may be prosecuted through
trial and is punishable by the State or by the law.
3. CORPORATION- a company or group of people authorized to act as a single entity and is
often recognized by law; a company which is allowed to enter into a contract, transact business,
to borrow money and to sue and be sued.
4. CONTRACT- a legal agreement possessing a lawful object and entered into voluntarily by
two parties in which the meeting of the minds are present between them. It often creates legal
liabilities between them.
5. DELICTS- civil wrong which constitutes negligent or intentional breach of duty or care that
inflicts loss or harm and is a strong ground for a legal liability for the wrong doer.
6. ENTITY- an organization which possesses an existence separate from its members and can
possess the rights of a natural person in a corporation.
7. EVIDENCE- any matter or fact that a party to a lawsuit advances or presents in order to
prove or disprove the issue at hand. Its weight is often the basis of the decision in a case.

8. HARM- a physical or mental damage that causes injury to another and often includes the
perception of injury.
9. INJURIES- includes physical hurt as well as damage to reputation or dignity , loss of legal
right or breach of contract.
10. LIABILITY- all kinds of legal obligations or duty and is most of the time includes money
responsibilities.
11. NEGLIGENCE- the failure to use reasonable care; The doing of something that a prudent
person would not do in reality or the doing of something that a prudent person would do in like
circumstances.
12. PENALTY- the consequence of a wrongdoing and is usually set in accordance with the
provisions if the law; Comes in a form of imprisonment or monetary value.
13. PREPONDERANCE OF EVIDENCE- a type of evidence which is required in order to
prove that indeed one is negligent and is required to pay for damages due to commission of torts.
14. PRIVACY- the right of the people to make personal decisions regarding personal matters
without the intervention of anybody.
15. STOCKHOLDERS- the owner of one or more share of stocks in a corporation or entity and
is the one responsible for its growth and development.
16. TORFEASOR-the person who commits thought and the one who is liable in committing
torts and is held for trial to determine the liabilities it shoulders.

17. TORTS-an offense arising from the negligent acts of another that usually causes harm or
injury to another.
18. STOCKS- a security issued by a corporation that represents the existence of ownership
rights in the assets of the corporation and entails the proportionate shares in the profits of the said
corporation.

IV. REVIEW OF RELATED LITERATURE


A. TORTS IN GENERAL
Torts in Civil Law are said to be offenses that arise due to the negligent acts of a person which
cause injury or harm to another may it be intentional or unintentional. It may come in many
forms may it be in a form of an accident or in a form of a breach of contract that usually result to
the violation of the constitutional rights of the victim.
In common law, it is said to be acts done negligently and cause harm and damage to another that
results to the filing of a lawsuit that can be tried before the court of law.
One of the most common type of torts is the one that occurs in a corporation or also known as the
corporation torts.
Torts are civil wrongs recognized by law as a ground of lawsuits. This wrong causes injury or
harm which constitutes the basis for the recovery of damage of the injured party. While some
torts are also crimes punishable by imprisonment it was concluded that the primary aim of tort
law is to provide reliefs from the damage incurred and to deter others from committing the same
harms. In this kind of scenario, the injured party may sue for the induction of a tortuous act or
may demand for monetary damages.
There are many types of damages that an injured party may recover such as but not limited to the
loss of earnings and the capacity to earn, pain and sufferings, and reasonable medical expenses.
This loss can further include present or future losses.
There are also different types of torts law may come in different categories such as the
intentional torts, the negligent torts and the strict torts. Intentional torts are those wrongs that the

offender knew or should have known to occur through their actions or inactions. Negligent torts
on the other hand occurs when the defendants action were unreasonably unsafe. Strict liability
torts are those torts which do not depend on the carefulness of the defendant but arises when a
particular action causes harm or damages.
B. HISTORY OF TORTS
Roman law contained provisions for torts in the form of depicts which later influenced in the
Civil law jurisdictions in the Continental Europe but a distinctive body of law arose in the
common law world was traced in the English tort law. The word tort was first used in legal
concepts in the year 1580`s although different terms were used similar to this prior to this time.
C. CORPORATION
A corporation is a group of people is defined as the group of people authorized to act as a lot
single entity and is recognized as such by law. Most jurisdictions now allow the establishment of
a corporation through the registration of its name before the lawful body in order for them to be
recognized. It is because registered corporations are possessing legal personality and are owned
by shareholders whose liabilities are limited only as to their percentage or share in the company.
In a corporation, shareholders does not necessarily mange their corporation directly but instead
elects their board of directors as their counterpart in managing the whole corporation.
Corporation has a big difference with the word company. A corporation encompasses all types of
incorporated agencies whereas a company includes all types of entities including partnerships
that would not be referred to as companies.

Despite not being human beings, corporations as far as the law is concerned are legal persons
and possess the same rights and obligations as the natural person do. Corporations can exercise
real rights against the individuals and the state and can be considered responsible for human
rights violations. A corporation can also be dissolved either by statutory operations, orders of the
law or by the voluntary acts of the shareholders.
D. Torts exception to limited liability
Even if you operate as an LLC or corporation, you can be exposed to personal, unlimited
liability if you personally take, or do not take, an action that causes injury to another. You
also risk unlimited personal liability if you negligently hire or supervision your employees
and another person is injured.
Every business owner should strive to limit liability for contracts and torts. As with the contract
exceptions to limited liability, agency law is the key to understanding the exceptions to limited
liability with respect to torts committed in the business.
As a brief definition, tort law is really personal injury law. The best example of a tort, perhaps, is
negligence (i.e., carelessly causing injury to a person or damage to property.) When an individual
commits a tort, he is legally liable to the aggrieved party. The aggrieved party can bring a lawsuit
for monetary damages against the party who commits the tort. This is true even when the
individual committing the tort is acting as an agent for a principal at the time he commits the tort.
Simply put, the individual is always responsible for his or her actions, whether working or
not.

Unfortunately, many individuals mistakenly believe that if they commit a tort while acting as an
agent for a principal (e.g., while an employee is carrying out duties for the employer), they have
no liability. This mistaken belief may arise for two reasons: insurance and the fact that the
principal (the employer) also will be liable in this situation.
The employer, or more specifically the insurance policy carried by the employer, will pay off on
the liability. However, the employee or agent has personal liability in this situation. The fact that
the principal or employer has liability does not relieve the agent or employee from his or her
personal liability.
This is important to understand especially because there will not always be insurance that covers
every situation or has sufficient face value to cover all of the damages involved. This is when the
agent or employee is likely to be called on to pay the damages, discovering that the belief of no
liability was mistaken.
Warning:
The small business owner must remember that he will be acting as an agent or employee of
his business entity. Therefore, the owner is doubly exposed to liability when committing a
tort, because the entity and the owner personally are responsible. This is potentially a very
damaging exception to your efforts to limit liability inside and outside of your business.
Torts committed within scope of employment. If an agent commits a tort while carrying out the
principal's business (or "acting within the scope of the business" as some courts put it), the
principal is automatically also liable for the agent's torts under a doctrine called respondeat
superior, or the master-servant rule. This type of automatic liability, which is termed vicarious

liability, also applies in other areas of law. It means that no wrongdoing by the principal at all
needs to be proven.
The principal could have acted carefully and reasonably, but it makes no difference when it
comes to defending against a lawsuit. When an agent commits a tort, the only real defense that
may be offered by the principal is the argument that the agent was, in fact, not carrying out the
principal's business at the time he committed the tort.
Example:
John Jones, a purchasing agent for XYZ Materials, Inc., negligently hits a pedestrian while
picking up a load of supplies in XYZ's truck. Both Jones and XYZ are liable.
Jones is personally liable because he committed the tort. XYZ is liable because Jones was acting
as its agent at the time he committed the tort.
For the owner of the entity, three exceptions exist to limited liability for torts committed in the
business. The owner will have unlimited, personal liability for torts when he or she:

personally commits a tort, which is especially possible in a personal service business;

is guilty of negligent hiring or supervision of employees; or

hires agents or employees, or sells goods, in his personal capacity, rather than as an agent
of the LLC or corporation

Many times, all of these exceptions can be avoided. The last exception can be avoided in every
case.

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Work Smart
An employer also may be able to avoid liability for its agents or employees through the use of
independent contractors.
Personal Actions Can Void Limited Liability
Under tort or personal injury law, if an individual personally commits a tort, that person is liable
to the injured party. This is true regardless of whether the individual was acting as an agent for
another party at the time he or she committed a tort. Of course, if the individual was acting as an
agent, the principal (business) would automatically be liable as well.
Consistent with this general rule, if the small business owner commits a tort while acting as an
agent for his LLC or corporation, the owner is liable to the injured party. The fact that his LLC or
corporation also will be liable is not relevant to the owner's personal liability.
Many states codify this exception in their statutes governing professional corporations (PCs). All
states incorporate this exception into their statutes that govern professionals (doctors, lawyers,
architects, electricians, etc.) operating in the form of LLCs (or limited liability partnerships).
Even when the provision is not statutory, however, the rule is universally applied by the courts,
as a matter of common law.

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However, this exception can be encountered even in a business that sells goods and provides no
services, especially with a business that involves risk of injury to customers (e.g., operation of a
lumber yard). An owner who personally stacks the store shelves or loads a customer's car in a
careless manner will have personal liability for his negligence. An auto accident caused by the
owner of the business represents another commonly encountered example of this exception that
can occur in almost any business.
Warning:
Operation of the business in the form of an LLC or corporation will not save the owner from
unlimited, personal liability in this instance.
The exception to limited tort liability underscores why it is dangerous to rely on one asset
protection strategy (e.g., formation of an LLC or corporation). Here, the owner will have to rely
on other asset protection strategies, such as exemption planning, asset protection trusts,
insurance, etc
Negligent Hiring or Supervision Can Result in Personal Liability
A business owner may be personally liable when an agent of the business commits a tort, if the
owner committed a separate tort, such as a separate act of negligence. Here, three parties are
liable:

the agent or employee who commits the tort--because he or she committed it

the entity--under the doctrine of respondeat superior

the owner--for his or her own independent tort

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Although there was only one action, two separate torts are committed: one by the employee and
the second by the owner. Most likely, this independent tort will be in the form of negligent hiring
or supervision of an employee of the entity.
This exception is really just a specific example of the first exception--namely, personal
commission of a tort. Here, personal liability is predicated on the fact that the owner has
personally committed a tort (i.e., the improper hiring or supervision of the employee) that is
separate from, and in addition to, the tort committed by employee.
In addition, while this exception, too, is usually incorporated in state statutes governing
professional corporations, LLCs and limited liability partnerships (LLPs) operated by
professionals, it will apply in all states as a matter of common law and will apply to all
businesses, not simply to those businesses providing professional services.
You can minimize this risk by taking measures to ensure that you act reasonably in hiring and
supervising employees. Many strategies involve time, costs and philosophical questions related
to employee's privacy.
You must weigh these factors against the likelihood that the employee will commit a tort causing
personal injury or property damage. This, in turn, will depend on the nature of the business and
the employee's particular job.
In terms of hiring new employees, the small business owner may want to consider:

Background checks - including verification of prior employment, academic transcripts,


licenses, professional affiliations, credit history, and arrest history

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Drug testing - generally, state laws allow mandatory testing for all applicants, and then
periodic random testing of employees, where the business involves safety risks

For example, a criminal background check is especially important in hiring employees at a day
care center or in a business where the employees will handle large sums of cash. Drug testing
would be appropriate in hiring bus drivers or where employees will operate machinery, such as
construction equipment.
In terms of supervising employees, the small business owner may want to consider:

a mentoring process, whereby a new employee is instructed and supervised by a seniorlevel employee for a prescribed period

a system of checks and approvals before work is sent to clients, patients or customers

case/job tracking systems

regularly scheduled meetings where case/job status is discussed

training sessions (in-house or outside seminars) for employees.

EXAMPLE:
Smith & Jones, LLC, a law office, hires a new attorney, Stevens, as an employee. Smith does all
of the hiring for the firm. He interviews Stevens twice before hiring him. Smith makes sure that
the LLC hires Stevens, so that the LLC, rather than Smith or Jones personally, will be the
principal in any transactions initiated by Stevens.
Ten months later, Stevens commits an act of malpractice, costing a client $400,000 in losses. It is
discovered that Stevens actually had dropped out of law school in his first year. This fact was
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never discovered by the firm, as Smith found him knowledgeable concerning the law during the
two interviews and never conducted a background check.
It is likely that Smith will be sued personally for this loss due to negligent hiring. Had Smith
conducted a proper background check, he would have avoided this liability. However, if the firm
had instituted reasonable measures to conduct background checks and to train and supervise
employees and these procedures were followed, Smith might have avoided personal liability.

Be Wary of Hiring or Selling in a Personal Capacity


A small business owner acts as an agent or employee for the LLC or corporation when selling
goods or hiring agents or employees for the business. Acting in that capacity generally affords
the owner personal liability protection for torts committed in the business.
However, when the business owner forms a contract to sell goods in his own name or hires an
employee or agent in his own name, he will have unlimited, personal liability for any resulting
torts.
If you enter into contracts for the sale of goods in your own name, rather than as an agent of your
LLC or corporation, you may be personally liable for injuries caused by the goods sold. If a
consumer is injured by the product, the tort of strict liability may apply.
Strict liability basically means that if you sold the product that caused the injury, you are liable.
On the other hand, if the sales contract is in the name of the LLC or corporation only, then the
seller is the entity, and the owner has limited liability.

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Personally Signing Employment Contracts Creates Liability


Among the tort exceptions to limited liability for a small business owner is selling or hiring in a
personal capacity. Doing this could negate carefully constructed asset protection plans.
To avoid this outcome, you must ensure that all business contracts are formed in the name of
your LLC or corporation, and that you sign these contracts solely as an agent of the LLC or
corporation. This is necessary if the owner is to escape personal liability for the contracts.
However, there is another reason to make sure employment contracts are properly executed as
agent for the entity. If an employee is hired personally by the owner, then the owner and not the
LLC or corporation will be the principal. In this case, if the employee commits a tort, then his
principal (i.e., the owner personally) will have unlimited, personal liability, in accordance with
the doctrine of respondeat superior.
This could result when there is a written employment agreement that has been improperly
executed in the name of the individual owner, or where there is no written employment
agreement and the owner pays the employee from a checking account in the owner's personal
name. In both cases, the business owner will be the employer/principal.
TIP
The small business owner must avoid being deemed the personal employer/principal of
employees. The LLC or corporation must be the employer. A written employment agreement is
advisable in all cases. The agreement must clearly identify the employer as the LLC or
corporation, and the owner must properly sign solely as an agent of the LLC or corporation.

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The written agreement can be simple, specifying job description, rate of pay, and that the
relationship is employment at will, for example, if that is desired. In employment at will, the
employee may be terminated without providing a reason and without advance notice (and the
employee may quit without giving a reason or any advance notice).
A written agreement also can be used to specify that the worker has been hired as an independent
contractor.
An informal relationship with employees (i.e., where no written employment agreements exist)
can still be used, but this offers less protection. In this case, paychecks in the name of the LLC or
corporation only can be used to establish that the LLC or corporation is the employer.

Case Study Tort Liability in an LLC


Smith, Jones, and White are all physicians and operate a medical practice, which is organized as
a limited liability company (LLC).
Smith commits malpractice. Smith has unlimited, personal liability for this tort because he
committed it. The LLC also has unlimited, personal liability automatically because of the
respondeat superior doctrine.
The other two co-owners, Jones and White, have limited liability. The most they can lose is what
they have invested, at the time, in the LLC. They have no personal liability for this tort.
The practice (specifically the LLC) hires another physician who is not a partner in the business.
This doctor commits an act of malpractice. Assuming there has not been an independent act of
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negligence by one of the partners (such as negligent hiring or supervision), the employeephysician will have personal liability because he committed the tort and the LLC will have
personal liability under the respondeat superior doctrine. All three owners will have only limited
liability, and no personal liability, for this tort.
However, if it can be proven that the three co-owners were negligent in failing to properly train
and supervise this employee, the three co-owners will have unlimited, personally liability for
their tort and, effectively, for the employee's tort.
Technically, the three co-owners are not liable because of the act of malpractice committed by
this employee. Nor are they liable because of the doctrine of respondeat superior. They are liable
for their own independent act of negligence. This is consistent with the general rule that an
individual is liable when he personally commits a tort.
The same result would occur if the three co-owners were negligent in hiring the employee. This
could happen, for example, where the owners failed to conduct a background check to verify the
employee's credentials, arrest records, credit rating, work history, etc., and one or more of these
failings were a factor in the employee's malpractice.
E. CORPORATE GOVERNANCE
Corporate governance refers to the mechanism and processes through which the corporation are
governed and directed. Governance structures identify the rights and responsibilities that were
distributed among the participants in a corporations and includes all the rules and procedure in
making corporate decisions.

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Corporate governance includes the processes through which the objectives of the corporation are
set in a market, social and regulatory environment. Governance includes monitoring the actions
of its agents and participants especially the one pertaining to its participants.

Corporate

governance practices are being affected by the purpose to align the interest of the stakeholders
especially during the time of the establishment of the corporation and up to the time that a
corporation reaches its peak. Corporate scandals of various forms had maintained to continue
their standards and policies especially up to the social and political aspect of the decision making
of a corporation.

F. CORPORATION LIABLE FOR TORTS


Under US Corporate laws, a corporation is formed partly for the purpose of limiting liability and
maximizing its ability to profit its shareholders within the tax structure of the state in which it
does business so long as the corporation complies with state and federal laws.
When a corporation commits a tort, which is a provable harm done to a person or entity; it
should have procured before hand, sufficient insurance coverage to cover that potential liability.
However, if it commits a crime, no insurance under the sun will cover criminal activities. For
purposes of this discuss, we can assume that the incidence that took place off the Gulf of Mexico
was not committed by a crime syndicate, as BP and Transocean are NOT related to any Mafia
syndicate, furthermore, the incidence that happened was not attributable to an intentional act.
It was, at most, caused by "Negligence". Be it BP or Transocean (TO) or jointly, the Plaintiff (a
person, any legal entity suing for recovery of damages) in a lawsuit must prove that either BP,
TO or they jointly, had failed to conduct its exploration in accordance with the safety rules and
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procedures mandated by US Oil drilling standards. In order to ensure a favorable outcome, if the
Plaintiff could FURTHER prove that BP and TO's drilling activity leading up to the date of the
incidence was not in compliance with "industry standards". This is the key point Plaintiff must
prove. Sometimes, governmental rules and regulations concerning drilling safety may not be as
stringent as "Industry Standards in the off-shore drilling industry.
When an activity is "inherently dangerous" (there is no other safer alternative to lessen the
dangerous aspect of this commercial activity) as evident in off-shore oil drilling, then, under
most laws in US, it is judged by the Strict Liability in Tort" standard. The plaintiff does not have
to prove the negligence of the defendants (BP / TO) so long as injury is done to persons and or
environment the Defendants will be deemed liable. The facts of this case revealed that some
8000 Barrels of oil per day were initially leaked into the ocean and some 12-15 workers were
missing after the explosion. These facts alone are sufficient to prove the liability of BP and TO.
In summary, the legal liability can be established under "Negligence" & "Strict Liability in Tort"
as described in the foregoing analysis. As between BP and TO, TO is a sub-con of BP so it is
essentially an agent of BP, governed by principal and agency laws, BP is ultimately liable for
the actions of TO, UNLESS TO has exceeded the scope of its duty. If TO be sued by a third
party, it has a valid cross claim against BP for indemnification unless, TO had waived that
recourse in its contract with BP by charging BP a premium.
One final note, officers and directors' liability are generally covered by liability insurance unless
there is fraud or criminal act found. I sincerely doubt any element of fraud or crime can be
asserted in this case.

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Therefore, yes, a corporation is liable for all acts by its officers, employees, or other agents
acting within the scope of their authority. They can also be liable for actions that are outside of
actual authority, if a reasonable person would believe they were acting within their authority, and
acted in reliance on that belief.

V. CONCLUSIONS
This research paper therefore concludes the following points after a thorough study:
1. Corporations although not created within the provisions and standards of the Constitution can
still be considered to be liable in the commission of torts especially when it advances acts and
doings which are considered wrong and may violate the constitutional rights of its employees as
well as the invasion of the latter's privacy.

2. Corporation as a body though exists independently with the control of the State must still
abide with the rules and regulations of the Corporations Law in order to make sure that no
constitutional rights may be violated or no privacy will be invaded.

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3. Corporations Torts law dies not aims to punish those who commits negligent acts but instead
exist in order to deter or prevent the people from the commission of negligent acts that causes an
individual to suffer from loss, damages and injuries.
4. The Corporations law was created in order to guide corporations into the right path and in
order for them to be good and humanitarian entity that help its employees in their personal,
economic, social and holistic growth.

VI. RECOMMENDATIONS
This research paper therefore recommends the following points after a thorough study:
1. Corporations must see to it that they abide with the rules and regulations provided by the
Corporations Law in order to make sure that they will not commit negligent acts such as those
listed towards their employees or any other individuals within their circles.
2. The leaders of a corporation should stand in front of the crowd possessing in their selves the
responsibilities and duties of their offices by seeing to it that the corporation runs and operates as
an organization whose primary concern is the sake and welfare of their constituents and
employees rather than promoting their personal progress and development.

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3. The employees of the corporation should exert an extra mile effort in order for them to be a
deserving part of the organization by making sure that they act and move in accordance with the
rules and regulations laid down by the corporation and in order for them to live up their
company's vision and mission. In that they can be considered not just a member but a vital
ingredient toward the development and progress of the corporation.
4. The government being the instrumentality of the State in which the will of the people are
formulated expressed and realized through its leaders must work hand and hand in order to make
sure that a corporation abide with the rules and standards set forth by the law and in order to
make sure that none of their employees may suffer from violation of rights or invasion of
privacy.

VII. BIBLIOGRAPHY
BOOKS
The Philippine Corporate Law

INTERNET

www.google.com
https://Wikipedia.org.corporation tort.com
www. yahoo.com
http://en.m.wikipedia.org/wiki/Tort

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