A Florida shareholder agreement is one of the most important documents your corporation will ever create—yet it’s also one of the most commonly overlooked. While your articles of incorporation and bylaws establish the public-facing structure of your business, a shareholder agreement governs the private relationships between owners and protects everyone’s interests when conflicts arise.
If you’re forming a Florida corporation with multiple owners, a properly drafted shareholder agreement can prevent costly disputes, protect minority shareholders, ensure smooth ownership transitions, and provide clear procedures for resolving deadlocks. Without one, you’re leaving critical business decisions to Florida’s default corporate laws—which may not align with your intentions.
What Is a Shareholder Agreement?
A shareholder agreement is a private contract between a corporation’s shareholders that outlines their rights, responsibilities, and obligations. Unlike articles of incorporation (which are filed with the Florida Division of Corporations) or corporate bylaws (which govern internal procedures), shareholder agreements are confidential documents that don’t require public filing.
This agreement typically addresses situations that articles and bylaws don’t cover in detail: what happens when a shareholder wants to sell their shares, how profits will be distributed, how voting disputes will be resolved, and what occurs if a shareholder dies, becomes disabled, or wants to exit the business.
Why Every Florida Corporation Needs One
Even if you’re starting a business with trusted friends or family members, relationships and circumstances change. A shareholder agreement provides:
Clarity and predictability: Everyone understands their rights and obligations from day one, reducing misunderstandings that can damage both business and personal relationships.
Protection for minority shareholders: Without an agreement, majority shareholders can make unilateral decisions that disadvantage minority owners. A well-drafted agreement ensures all shareholders have certain guaranteed rights.
Control over ownership changes: You can prevent unwanted third parties from becoming shareholders and maintain control over who owns your business.
Business continuity: The agreement establishes procedures for handling transitions when shareholders die, divorce, retire, or become incapacitated.
Dispute resolution mechanisms: Rather than expensive litigation, your agreement can provide mediation or arbitration procedures that resolve conflicts efficiently.
Key Provisions in a Florida Shareholder Agreement
1. Voting Rights and Control
While Florida’s corporate statutes provide default voting rights (typically one vote per share), your shareholder agreement can modify these arrangements to reflect your business’s unique needs.
Supermajority voting requirements: You might require 75% or unanimous approval for major decisions like:
- Selling the company or substantially all assets
- Merging with another business
- Taking on significant debt
- Amending articles of incorporation or bylaws
- Issuing additional shares
- Changing the nature of the business
Weighted voting: In some cases, different classes of shares carry different voting rights, giving certain shareholders more control despite not owning a proportionate equity stake.
Voting trusts or pooling agreements: Shareholders can agree to vote together as a block on certain issues, which can be particularly useful when minority shareholders want to combine their voting power.
Example provision: “Any decision to incur debt exceeding $100,000 or to sell assets representing more than 25% of company value shall require approval by shareholders holding at least 75% of voting shares.”
2. Transfer Restrictions and Right of First Refusal
One of the most critical components of any shareholder agreement is controlling who can become a shareholder. Transfer restrictions prevent shareholders from freely selling their shares to outsiders without giving existing shareholders the opportunity to purchase them first.
Right of first refusal (ROFR): When a shareholder receives a bona fide offer from a third party, they must first offer the shares to existing shareholders (and sometimes the corporation itself) at the same price and terms. This allows current owners to maintain control of the company and prevent unwanted partners from entering the business.
Right of first offer (ROFO): Before seeking outside buyers, a selling shareholder must first offer shares to existing shareholders at a price determined by a valuation formula in the agreement.
Co-sale rights (tag-along rights): These protect minority shareholders by allowing them to join in if a majority shareholder sells their stake, ensuring they’re not left as a minority owner with new majority partners.
Drag-along rights: These provisions allow majority shareholders to force minority shareholders to join in a sale of the company, preventing a small minority from blocking an otherwise beneficial transaction.
Example provision: “Any shareholder wishing to transfer shares shall first provide written notice to all other shareholders, who shall have 30 days to exercise their right to purchase the offered shares on a pro rata basis at the offered price and terms.”
3. Buy-Sell Provisions
Buy-sell provisions (also called buyout provisions) establish mechanisms for shareholders to exit the business or for the corporation to remove a shareholder under specific circumstances. These provisions are essential for maintaining business continuity and preventing disputes.
Triggering events commonly include:
- Death of a shareholder
- Permanent disability or incapacity
- Retirement (often at a specified age)
- Divorce (preventing an ex-spouse from becoming a shareholder)
- Bankruptcy or insolvency
- Termination of employment (for shareholder-employees)
- Criminal conviction
- Breach of agreement terms
- Voluntary desire to exit
Valuation methods: The agreement should specify how shares will be valued when bought or sold:
- Fixed price (updated annually)
- Formula-based (multiple of earnings, book value, etc.)
- Independent appraisal
- Average of multiple methods
Payment terms: Will the purchase price be paid in a lump sum, or over time with interest? What happens if the buyer can’t secure financing?
Example provision: “Upon the death of any shareholder, the corporation shall purchase, and the deceased shareholder’s estate shall sell, all shares owned by the deceased at a price equal to the average annual EBITDA for the previous three fiscal years, multiplied by 2.5, payable in 60 equal monthly installments with interest at prime plus 2%.”
4. Drag-Along and Tag-Along Rights
These provisions balance the interests of majority and minority shareholders when it comes to selling the entire company.
Drag-along rights allow majority shareholders (typically those owning more than 50% or a specified threshold) to force minority shareholders to join in a sale of the company to a third party. This prevents a minority shareholder from blocking a sale that the majority believes is in the company’s best interest.
Key elements include:
- The threshold ownership required to trigger drag-along rights
- Notice requirements and timeframes
- Requirement that all shareholders receive the same price and terms
- Protection for minority shareholders regarding representations and warranties
Tag-along rights (also called co-sale rights) protect minority shareholders by giving them the right to join when a majority shareholder sells their stake. This prevents a minority shareholder from being left with a new majority partner they didn’t choose.
Example provision: “If shareholders holding at least 60% of shares receive a bona fide offer to sell all of their shares to a third party, they may require all other shareholders to sell their shares on the same terms and conditions, provided all shareholders receive the same per-share price and the minority shareholders’ aggregate liability for representations and warranties does not exceed their aggregate sale proceeds.”
5. Non-Compete and Non-Solicitation Clauses
To protect the corporation’s interests, shareholder agreements often include restrictive covenants that limit what departing shareholders can do after they leave the business.
Non-compete clauses: These prevent former shareholders from starting or working for a competing business within a specific geographic area for a defined time period. In Florida, non-compete agreements are governed by Florida Statute §542.335, which requires that such restrictions be reasonable in time, area, and line of business.
Florida courts generally enforce non-compete provisions in shareholder agreements more readily than employment non-competes, viewing shareholders as sophisticated parties with greater bargaining power. Reasonable time periods typically range from 1-3 years, and geographic restrictions should align with where your business actually operates.
Non-solicitation clauses: These prevent departing shareholders from soliciting the corporation’s customers, clients, or employees. These are often easier to enforce than non-competes because they’re more narrowly tailored to protecting legitimate business interests.
Example provision: “For a period of two years following the transfer of all shares, the selling shareholder shall not, directly or indirectly, engage in any business competing with the corporation within the State of Florida, nor solicit any customer or client of the corporation with whom the shareholder had contact during the two years prior to the sale.”
6. Dividend and Distribution Policy
While Florida law gives a corporation’s board of directors discretion over dividend declarations, shareholder agreements can establish policies regarding profit distributions, particularly important in closely held corporations where shareholders also work in the business.
Mandatory distributions: The agreement might require minimum annual distributions to ensure shareholders receive returns on their investment, particularly minority shareholders who might otherwise be at the mercy of majority-controlled directors.
Distribution triggers: Some agreements tie distributions to achieving specific financial metrics or maintaining certain cash reserves.
Preferential distributions: If there are different classes of shareholders, the agreement can establish priority for distributions.
Example provision: “The corporation shall distribute to shareholders as dividends at least 40% of annual net profits within 90 days of fiscal year-end, unless shareholders holding at least 75% of shares vote to retain earnings for specified business purposes.”
7. Deadlock Resolution Mechanisms
In corporations with equal ownership or closely divided shareholders, deadlocks can paralyze business operations. Your shareholder agreement should include mechanisms to break deadlocks when shareholders can’t agree on major decisions.
Mediation: Requiring parties to attempt mediation before litigation can resolve many disputes without destroying business relationships.
Arbitration: Binding arbitration provides a faster, less expensive alternative to court litigation. Your agreement should specify whether arbitration will be binding and how arbitrators will be selected.
Buy-sell provisions: Deadlock can trigger buy-sell mechanisms:
- Russian Roulette: One shareholder names a price; the other must either buy at that price or sell at that price
- Texas Shootout: Both shareholders submit sealed bids; the higher bidder purchases the other’s shares
- Forced sale: If deadlock persists, the company must be sold to a third party
Example provision: “If shareholders cannot reach agreement on a matter requiring unanimous consent after good faith negotiation, either shareholder may trigger the following process: the initiating shareholder shall name a per-share price at which they will either buy all shares of the other shareholder or sell all their shares to the other shareholder, with the responding shareholder having 30 days to elect to buy or sell at the stated price.”
How Shareholder Agreements Differ from Bylaws and Articles
Many new corporation owners confuse shareholder agreements with other corporate documents. Understanding the distinctions is important:
Articles of Incorporation
- Public document filed with Florida Division of Corporations
- Establishes the corporation’s legal existence
- Contains basic information: name, registered agent, share structure
- Amended only by filing with the state
- Governs relationship between corporation and outside world
Corporate Bylaws
- Internal document (not filed with the state, but not confidential)
- Establishes procedures for corporate governance
- Covers board meetings, officer duties, share certificates, fiscal year
- Can typically be amended by the board or shareholders per the bylaws’ own terms
- Governs internal corporate mechanics
Shareholder Agreement
- Private contract between shareholders (completely confidential)
- Governs relationships between shareholders themselves
- Covers transfer restrictions, buy-sell provisions, voting agreements
- Can only be amended according to the amendment provisions in the agreement itself
- Addresses situations bylaws and articles don’t cover in detail
Hierarchy and conflicts: If provisions in these documents conflict, Florida courts generally apply this hierarchy:
- Articles of incorporation (as filed with the state)
- Shareholder agreements (as private contracts between parties)
- Bylaws (as internal governance rules)
However, shareholder agreements cannot violate mandatory provisions of Florida corporate law or the articles of incorporation. They can, however, add restrictions beyond what the articles or bylaws require.
When to Create Your Shareholder Agreement
At Formation: The Ideal Time
The best time to create a shareholder agreement is when you form your corporation, before conflicts arise and while everyone’s interests are aligned. At formation:
- All parties are motivated to be fair and reasonable
- No one knows who will be a future majority or minority shareholder
- Everyone has equal bargaining power
- The relationship is optimistic and collaborative
- There are no existing disputes to complicate negotiations
Negotiating a shareholder agreement at formation also sends a positive signal that all parties are thinking seriously about the business’s long-term success and want to protect everyone’s interests.
Adding an Agreement Later
If you didn’t create a shareholder agreement at formation, it’s never too late—but it becomes progressively more difficult as time passes and interests diverge. Reasons to create or update an agreement after formation include:
- Adding new shareholders
- Significant changes in ownership percentages
- Major business transitions (new locations, product lines, etc.)
- Changes in shareholder circumstances (retirement planning, estate planning)
- After experiencing conflicts that highlighted gaps in existing arrangements
When adding an agreement after formation, be aware that:
- Negotiations may be more contentious as parties now have established positions
- Majority shareholders may resist restrictions they don’t currently face
- Minority shareholders may demand protections they don’t currently have
- The process may reveal disagreements that threaten the relationship
Updating Your Agreement
Shareholder agreements shouldn’t be static documents. Review and update your agreement:
- Periodically: Every 3-5 years at minimum
- When ownership changes: New shareholders, transfers, buyouts
- Major business changes: Significant growth, new business lines, geographic expansion
- Law changes: When relevant Florida statutes are amended
- Triggering events: Marriage, divorce, estate planning needs
Enforcement Under Florida Law
Florida recognizes shareholder agreements as enforceable contracts subject to general contract law principles. Key enforcement considerations include:
Requirements for Valid Agreements
For a Florida shareholder agreement to be enforceable:
Written agreement: While oral agreements may theoretically be enforceable, the Florida Statute of Frauds and practical considerations make written agreements essential.
Consideration: All parties must receive some benefit from the agreement. The mutual promises within the agreement typically satisfy this requirement.
Voluntary consent: All shareholders must enter the agreement voluntarily, without duress, fraud, or undue influence.
Lawful purpose: The agreement cannot violate Florida law or public policy. For example, provisions that completely eliminate all shareholder voting rights would likely be unenforceable.
Definite terms: Key provisions (especially valuation formulas and triggering events) must be clear enough to enforce.
Florida Statute §607.0731: Statutory Authorization
Florida Business Corporation Act §607.0731 specifically authorizes shareholder agreements, providing:
- Shareholders may enter agreements regarding almost any aspect of corporate affairs
- Such agreements may restrict board discretion on any matter
- The agreement need not be referenced in articles of incorporation (though it may be)
- The agreement is enforceable among shareholders even if the corporation is not a party
However, the statute requires that such agreements not violate any provision in the articles of incorporation unless all shareholders (including non-parties to the agreement) consent.
Common Enforcement Issues
Ambiguous valuation formulas: Courts won’t rewrite your agreement if the valuation method is unclear. Specify exactly how shares will be valued.
Unreasonable restrictions: While Florida allows significant freedom in contracting, provisions must still be reasonable. An indefinite non-compete covering the entire United States would likely fail.
Changed circumstances: Courts rarely excuse performance because circumstances have changed. The agreement should include mechanisms to address changed circumstances rather than relying on judicial modification.
Statute of limitations: Contract claims in Florida generally have a five-year statute of limitations under Florida Statute §95.11(2)(b).
Specific performance: Courts will often order specific performance of shareholder agreements (forcing a party to buy or sell shares as agreed) rather than just awarding monetary damages, particularly for unique agreements involving closely held corporations.
Common Mistakes to Avoid
1. Using Generic Templates Without Customization
Every business is unique. A template from the internet might be a starting point, but it must be tailored to your specific:
- Ownership structure
- Industry
- Business model
- Shareholder relationships
- Long-term goals
Particularly important: ensure any valuation formulas make sense for your type of business and financial situation.
2. Failing to Address All Shareholders
For the agreement to be fully effective, all shareholders should be parties. If some shareholders aren’t bound by the agreement, you’ve created a two-tier ownership structure that may lead to confusion and disputes.
When new shareholders join, ensure they sign onto the existing agreement or execute an amendment accepting its terms.
3. Vague or Incomplete Valuation Methods
“Fair market value” or “reasonable price” aren’t sufficient. Your agreement should specify:
- The exact valuation method or formula
- Who performs the valuation (named appraiser, agreed-upon method)
- What financial information will be used
- Who pays for the valuation
- Procedures if parties dispute the valuation
4. Ignoring Tax Consequences
Buy-sell provisions can create significant tax consequences. For example:
- Corporate redemptions vs. cross-purchases have different tax treatments
- Life insurance funding may create taxable events
- Installment sales have different tax implications than lump-sum payments
Work with a tax advisor to structure provisions tax-efficiently.
5. Creating Unenforceable Non-Compete Provisions
Under Florida Statute §542.335, non-compete provisions must be reasonable in time, area, and line of business. Common mistakes:
- Geographic restrictions that are too broad (worldwide when you only operate in Florida)
- Time periods that are too long (10 years is almost certainly unreasonable)
- Restrictions that aren’t tied to legitimate business interests
6. No Amendment Procedures
Your agreement should specify how it can be amended:
- What vote is required (unanimous, supermajority, etc.)
- Whether amendments must be in writing
- Notice requirements for proposed amendments
Without clear amendment procedures, modifying the agreement may require unanimous consent, making it difficult to adapt to changed circumstances.
7. Forgetting About Spouses and Estate Planning
If shareholders are married, consider whether spouses should also sign the agreement, particularly in community property or marital rights contexts. Also consider:
- What happens upon divorce?
- Can shares be transferred to a trust?
- What are the estate’s obligations upon a shareholder’s death?
8. No Dispute Resolution Mechanism
Lawsuits are expensive and time-consuming. Your agreement should require:
- Good faith negotiation first
- Mediation before litigation
- Arbitration for certain disputes
- Attorney’s fees provisions (who pays if someone breaches?)
Sample Clause Examples
Transfer Restriction Clause
ARTICLE III – TRANSFER RESTRICTIONS
3.1 General Restriction. No shareholder shall sell, transfer, assign, pledge, or otherwise dispose of any shares without first complying with the provisions of this Article III.
3.2 Right of First Refusal. If any shareholder (the "Offering Shareholder") receives a bona fide written offer from a third party (the "Offeror") to purchase any or all of the Offering Shareholder's shares, which offer the Offering Shareholder desires to accept, the Offering Shareholder shall promptly deliver written notice (the "Offer Notice") to the Corporation and all other shareholders. The Offer Notice shall include:
(a) The name and address of the Offeror;
(b) The number of shares proposed to be sold;
(c) The price per share and total purchase price;
(d) All other material terms and conditions of the offer;
(e) A copy of the written offer from the Offeror.
3.3 Corporation's Right to Purchase. The Corporation shall have 15 days from receipt of the Offer Notice to elect to purchase all (but not less than all) of the offered shares at the price and terms stated in the Offer Notice.
3.4 Shareholders' Right to Purchase. If the Corporation does not exercise its right to purchase within the 15-day period, the other shareholders shall have an additional 20 days to elect to purchase all (but not less than all) of the offered shares, pro rata based on their respective shareholdings, at the price and terms stated in the Offer Notice.
3.5 Sale to Third Party. If neither the Corporation nor the other shareholders exercise their rights to purchase, the Offering Shareholder may sell the offered shares to the Offeror at the price and terms stated in the Offer Notice, provided such sale closes within 90 days of the Offer Notice date. Any material change in price or terms shall require a new Offer Notice.
Valuation Clause
ARTICLE VI – VALUATION OF SHARES
6.1 Valuation Method. For purposes of any purchase or sale of shares under this Agreement, the per-share value shall be determined as follows:
(a) The Corporation's Adjusted EBITDA shall be calculated as the average of annual earnings before interest, taxes, depreciation, and amortization for the three completed fiscal years immediately preceding the valuation date, adjusted to exclude:
(i) Non-recurring items;
(ii) Compensation paid to shareholder-employees in excess of reasonable market compensation for comparable services;
(iii) Personal expenses paid by the Corporation on behalf of shareholders.
(b) The Enterprise Value shall be calculated by multiplying the Adjusted EBITDA by 2.5.
(c) The Equity Value shall be calculated by subtracting all interest-bearing debt from the Enterprise Value.
(d) The per-share value shall be calculated by dividing the Equity Value by the total number of issued and outstanding shares.
6.2 Financial Statements. The Adjusted EBITDA calculation shall be based on financial statements prepared in accordance with generally accepted accounting principles, consistently applied.
6.3 Dispute Resolution. If any party disputes the valuation calculation, the matter shall be submitted to an independent certified public accountant mutually agreeable to the parties (or, if they cannot agree, appointed by the American Arbitration Association). The accountant's determination shall be final and binding. The parties shall share equally the cost of such accountant.
Deadlock Resolution Clause
ARTICLE VIII – DEADLOCK RESOLUTION
8.1 Definition of Deadlock. A Deadlock shall be deemed to exist if the shareholders, after good faith negotiation for at least 30 days, are unable to reach agreement on any matter requiring shareholder approval and the disagreement materially affects the Corporation's ability to conduct its business.
8.2 Mediation. Within 15 days after either shareholder provides written notice of a Deadlock, the shareholders shall submit the dispute to mediation before a mediator mutually acceptable to both parties in Miami-Dade County, Florida. The parties shall share equally the cost of mediation.
8.3 Buy-Sell Procedure. If mediation does not resolve the Deadlock within 30 days, either shareholder may initiate the following buy-sell procedure:
(a) The initiating shareholder (the "Initiator") shall deliver written notice to the other shareholder (the "Respondent") stating a per-share price at which the Initiator proposes to either purchase all of the Respondent's shares or sell all of the Initiator's shares to the Respondent.
(b) Within 30 days of receiving such notice, the Respondent shall deliver written notice to the Initiator electing either:
(i) To purchase all of the Initiator's shares at the stated per-share price; or
(ii) To sell all of the Respondent's shares to the Initiator at the stated per-share price.
(c) The closing of such purchase shall occur within 60 days of the Respondent's election, with payment as follows: 30% at closing, with the balance payable in 36 equal monthly installments with interest at the prime rate plus 2%, secured by the purchased shares.
(d) If the Respondent fails to make a timely election, the Respondent shall be deemed to have elected to sell all of the Respondent's shares to the Initiator.
Frequently Asked Questions
Do I need a shareholder agreement if I’m forming an S corporation?
Yes. S corporations benefit from shareholder agreements just as much as C corporations. In fact, because S corporations have restrictions on who can be shareholders (no more than 100 shareholders, all must be U.S. citizens or residents, no corporate shareholders), transfer restrictions in a shareholder agreement are particularly important to maintain S corporation status.
Can a shareholder agreement override the bylaws?
Generally yes, as to matters involving relationships between shareholders. Florida Statute §607.0731 specifically allows shareholder agreements to govern matters that would otherwise be addressed in bylaws. However, if the agreement conflicts with mandatory provisions in the articles of incorporation, those provisions control unless all shareholders consent to the conflict.
What happens if a shareholder violates the agreement?
The non-breaching parties can sue for breach of contract and seek remedies including:
- Specific performance (court order forcing compliance)
- Monetary damages for losses caused by the breach
- Injunctive relief (court order preventing further violations)
- Attorney’s fees (if the agreement includes a prevailing party attorney’s fees provision)
Many agreements also include provisions automatically voiding unauthorized transfers or triggering buy-sell provisions upon breach.
Do new shareholders have to sign the agreement?
For the agreement to bind new shareholders, they should either sign onto the existing agreement or execute a joinder or amendment agreeing to its terms. Some agreements include provisions automatically binding any transferee, but explicit consent is preferable.
The agreement should include provisions requiring any selling shareholder to obtain the buyer’s agreement to be bound by the shareholder agreement as a condition of the transfer.
Can we amend our shareholder agreement?
Yes, but only according to the amendment provisions in the agreement itself. Most agreements require unanimous consent or supermajority approval for amendments. Any amendment should be in writing and signed by all parties to be bound.
Is a shareholder agreement required by Florida law?
No. Florida law does not require shareholder agreements. However, they are strongly recommended for any corporation with multiple shareholders, particularly closely held corporations where shareholders are also involved in management.
How is a shareholder agreement different from an operating agreement?
Operating agreements govern limited liability companies (LLCs), while shareholder agreements govern corporations. They serve similar functions—governing relationships between owners and establishing procedures for ownership transitions—but the specific provisions differ to account for the different structures of LLCs versus corporations.
What if shareholders have different ownership percentages?
Shareholder agreements are especially important when ownership is unequal. Minority shareholders need protections against majority shareholder overreach, while majority shareholders want to prevent minority shareholders from blocking reasonable business decisions. The agreement should balance these interests with provisions like:
- Supermajority voting requirements for major decisions
- Board representation for minority shareholders
- Tag-along rights for minority shareholders
- Drag-along rights for majority shareholders
Should our attorney draft the shareholder agreement?
Yes. While you can find templates online, a properly drafted shareholder agreement requires customization to your specific situation, business model, and Florida law. An experienced business attorney can:
- Identify issues specific to your industry and situation
- Draft provisions that are enforceable under Florida law
- Coordinate the agreement with your articles, bylaws, and other corporate documents
- Structure buy-sell provisions to minimize tax consequences
- Include protective provisions you might not have considered
The cost of having an attorney draft the agreement properly is almost always less than the cost of litigating disputes later because of a poorly drafted or missing agreement.
Can we have different classes of shareholders with different rights?
Yes. Florida law allows corporations to issue different classes of stock with different rights regarding voting, dividends, liquidation preferences, and other matters. Your articles of incorporation must authorize the different classes, and your shareholder agreement can further define how those different classes interact.
This can be useful when you want to bring in investors who receive preferential dividend treatment but don’t participate in day-to-day voting decisions, for example.
A well-drafted Florida shareholder agreement is an investment in your corporation’s future. It won’t prevent all disputes, but it provides a roadmap for resolving conflicts, protects all shareholders’ interests, and ensures business continuity during transitions. Whether you’re forming a new corporation or updating an existing one, working with an experienced business attorney to create a comprehensive shareholder agreement tailored to your specific needs is one of the most important steps you can take to protect your business and your fellow owners.
The time to create your shareholder agreement is before you need it—when all parties are optimistic about the business’s future and motivated to be fair to each other. Don’t wait until conflicts arise to establish the rules of the road.