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Test Number One

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PostPosted: Thu Mar 09, 2017 9:56 pm    Post subject: Test Number One Reply with quote

To: Law 2 Students Spring 2017 From: S.Waterstone Re: Test Number One

Procedures to follow for turning in your answers.

1. Next Thursday, 3/16/17 is the absolute deadline for turning in your answers. You are to provide me with an answer sheet, whichever method you choose. Your answer sheet must contain the number of the question followed by these: (depending on the type of question asked) either the words: True or False; the correct letter representing your choice; and the word(s) needed to answer the fill in question.

You may use one of two methods to do so:

a. You may e-mail me your answer sheet using this, and only this e-mail address:

If you use this method you must provide me your e-mail by Wednesday, 9:00 A.M. There is a 5 point bonus for this early submission.

If you e-mail me you will receive an acknowledgement that I received your completed exam. If you don’t receive this you must assume that I DID NOT receive it.

b. You turn it in your answer sheet at the start of next class session.
(If you choose this method I will only read your "typed" answers and I will ignore any handwritten additions.)


The Test Itself:

Each T/F and multiple choice question is worth two (2) points. Each fill-in question is worth (3) points.

FOR T/F QUESTIONS: Provide the word True or False

1. T. F. A principal may be bound, after the fact, in a contract action if s/he ratifies the unauthorized acts of his/her agent.

2. T. F. Agent is engaged by Principal to sell land at a certain price. Due to discovery of oil, the land greatly increases in value. Agent can ignore the sell order, because of the unusual and unanticipated change in value of the land.

3. T. F. An agency coupled with an interest (one given as security for a debt or obligation) in the subject matter of the agency is irrevocable and the agency cannot be terminated unilaterally by the principal, nor by death, insanity, or bankruptcy.

4. T. F. The principal in a principal agent relationship can interfere with the agent’s ability to complete the job simply because s/he is the principal.

5. T. F. Third (party), in an undisclosed principal situation, upon discovery of the identity of the principal, may enforce a contract against either the agent or the principal, but may not collect a judgment against both.

6. T. F. In general a principal, or employer, is not liable for the torts and wrongful acts of an agent or employee that is committed within the scope of the agency or employment.

7. T. F. Slight deviations or departures by the agent or employee to take care of personal business or pleasure, where the main purpose of the activity is the principal's business, will not take agent outside the scope of his employment.

8. T. F. The doctrine of Respondeat Superior is a rule of vicarious civil liability for damages in tort; it does not apply in criminal law.

9. T. F. For certain purposes a partner is considered an agent of all his/her co-partners.

10. T. F. A Partnership may be defined as an association of two or more persons who all voluntarily agree to carry on as co-owners for profit.

11. T. F. For federal income tax purposes individual partners of a partnership all pay their proportional share of taxes as a single partnership entity.

12. T. F. In forming any type of partnership, the only item considered "capital" is cash.

13. T. F. If an asset is purchased with partnership funds it is considered conclusive that it belongs to the partnership unless the contrary intention is proved.

14. T. F. "Goodwill", a partnership asset, is defined as the feeling the partners get when they have donated significant funds to charitable purposes.

15. T. F. If a partner makes a loan to the partnership the loan then becomes part of the capital of the partnership.

16. T. F. An heir to a partner of a partnership does not gain a right to the property of the deceased, they merely inherit the right to receive the decedent's share of the partnership's profits each year.

17. T. F. If a partner fails to inform his co-partners of a pertinent fact regarding the partnership business, the other partners can claim, in an action with third parties, that they didn't have this knowledge.

18. T. F. A limited partnership is formed, Joseph Zzagor, a limited partner, permits it to be named: Zzagors. By so doing, Zzagor becomes liable as a general partner to any creditors who extend credit to the partnership without knowing Zzagor was a limited partner.

19. T. F. Limited Partners only have a limited ability to participate in the management of a limited partnership.

20. T. F. LLC's are only created pursuant to the laws passed by the United States Congress.

21. T. F. Flighty, LLC entered a contract with Solid. Haphazard signed the contract in this manner: Ian Haphazard, president of Flighty, LLC, and I personally guarantee any/all payments payable. LLC goes bankrupt. Flighty will be personally responsible for the debt.

22. T. F. Sole proprietors can obtain the benefit of the limited liability shield of an LLC.

23. T. F. An LLC is considered a Member Managed LLC unless designated as a manager-managed LLC in the papers filed with the State.


24. If third persons, because of words, actions. or lack of actions, of the agent/principal lead them to reasonably believe an agency has been created then an agency has been created by: a. estoppel b. forfeit c. consensus d. creative reasoning e. (a and b) (a, b and c) f. all of the above g. none of the above

25. Sole proprietorships are: A. the simplest form of business b. where a sole owner and his business aren’t legally distinct entities c. where many strict formalities are required before commencing business d. where an owner is personally liable for business debts e. (a and b) f. (a, b, and d) g. all of the above h. none of the above

26. Absent any agreements to the contrary, any partner: a. is entitled to compensation for services rendered to the partnership b. is entitled to receive a share of profits of the partnership c. may be required to return any compensation given to him by the partnership for services rendered d. (b and c) e. (a and d) g. all of the above f. none of the above

27. Regarding tort liability of a partnership: a. the partnership is liable for any wrongful act/omission committed by any partner in authorized conduct during the ordinary course of partnership business b. the partners are each joint and severally liable for any wrongful act or omission committed by any partner in an authorized conduct during the ordinary course of partnership business c. The partnership is liable for any wrongful act or omission committed by any partner in non-authorized conduct outside of the ordinary course of partnership business d. the partnership is never liable e. (a and b) f. (a, b, and d) g. all of the above h. none of the above

28. An LLP is a type of partnership: a. that has no general partners b. where all partners have limited liability c. where many state laws require it to carry a minimum one million dollars liability insurance covering negligence, wrongful acts, and misconduct by partners or employees of the LLP d. (a and b) e. (a and c) f. all of the above g. none of the above

29. LLC's have a choice as to how they will be taxed by the IRS due to the concept of: a. "Jack-In-The-Box" b."check-the-box" c."Circle-The-Box" d. "The-Video-Box." e. (a and b) f. (a, b, and d) g. all of the above h. none of the above

30. A "Term" LLC means: a. A president is elected who represents the LLC for a specific term. b. Any one owner can leave the LLC at any time without penalty. c. The purpose of the LLC is to create a business entity in the construction industry d. (a and b) e. (a, b, and d) f. all of the above g. none of the above

31. Pat is a non-manager member of a manager-managed LLC, WIDGET, LLC. The LLC sells widgets. Jackson comes to Pat and asks her to invest in a new company, Super Widgets. This is a "golden" opportunity for BOTH Pat and WIDGET,LLC. Pat invests. She has: a. breached the duty of loyalty b. breached the duty of care c. breached her duty of good faith and fair dealing d. did not breach any duty e. (a and b) f. (a and c) g. all of the above h. none of the above


32. In an agency relationship, what does the term disclosed principal mean?

33. The prima facie (in absence of proof to the contrary) evidence that a partnership exists is

when there is a sharing of ____________

and _____________________.

34. and 35. Paul Partner, in the presence of Third party states that Non Partner is his partner. Non does not contradict Paul. In any future dealings with Third, Non:

can be regarded by Third as a partner by reason of:

__________________________________ (Two Points)

Additionally Non becomes Paul's (the answer is not

partner) _____________________________(Two Points)
with the power to bind Paul as though Non were in fact his partner.

36. To reach the partnership interest of an individual partner, a creditor should get a

order appointing a receiver to collect the debtor-partner's share of the profits, or reach such partner's share upon dissolution. (3 points)

37. A partner cannot sue another partner on an obligation due from the partnership, such as an expense or loan reimbursement, without the consent of the other partners. The
appropriate remedy for an aggrieved partner is an equity suit for an:

38. In a limited partnership, a limited partner who does not participate in management, is not personally liable for limited partnership debts beyond their

39. Smart, is a limited partnership. A and B are each general partners;
E and F limited partners. A, B, E and F, each invest $10K. Partnership fails with a debt of $100K. Each partner pays their share of the liability. What is the liability of A and E on the debt:

A: E: (Two points each)

40. XYZ, Limited Partnership, was formed in Ohio, and is doing business in Utah. XYZ fails to register in Ohio

it cannot ______________________________________

the Ohio Courts.

41. Joan is a limited partner in Book, Limited Partnership. However, she is correctly held by a Court to be personally liable on Book's bank loan. Joan must have done what?

42. There are at least five industries/professions that cannot operate as LLCs. Please list three of them.

43. The creation of an LLC is accomplished when the papers are filed with the Secretary of State. The papers that are filed are called

44. What do Secretaries of State require for an existing non-LLC entity to convert to an LLC status?

BONUS X-TRA CREDIT HYPOTHETICALS. EACH OF THESE TWO HYPOTHETICALS ARE WORTH A 15 POINT BONUS. THAT’S A POTENTIAL OF 30 EXTRA CREDIT POINTS, IF ANSWERED COMPLETELY AND ACCURATELY. REMEMBER I AM LOOKING FOR THE “WHYS” IN EACH OF YOUR ANWERS. I'm looking for you to convince me that you understand the applicable law and principles in your analysis and response. For full credit you need to identify all the legal issues and then combine the law with the facts in your answer. You are free to use the Issue, Rule, Analysis, Conclusion format, or simply provide your answer. (i.e.: If you choose to just answer yes or no, or do not provide your legal reasoning to support your answer, you will not earn any points.)

Hypothetical Number One:

Bernie Sounders, Hillary Slinton, and Dawnel Tramp form a General Partnership, Egotistic. Egotistic enters a contract with the U.S. Government to provide election ballot boxes that are guaranteed to work. Egotistic hires Ted Craze as a driver for Egotistic. Craze’s job is to deliver the boxes to 12 states to be used during the 2020 general presidential election. Craze, while driving under the influence, crashes into a car whose occupant, Jeb Bushnick, is severely injured. During an investigation the police department, led by long time law enforcement officer, Marco Riveo, discovers that Egotistic has not bothered to look into Craze’s background. If they had they would have discovered that Craze had a suspended driver’s license due to at least 5 convictions for DUI’s. In a civil suit, Bushnick sues: Sounders, Slinton, Tramp, Egotistic, Craze, and the U.S. Government. What result as to each defendant?

Hypothetical Number Two:

Jack is a member of: We Take Care 4 U, LLC. The LLC maintains property and does tasks they are hired by the owner of each property to perform. Jack’s responsibility, at one piece of property serviced by the LLC, is to make sure that he turns the boiler off every night when leaving the premises. One night Jack leaves work and forgets to turn the boiler off. There is an explosion and Jill, a passerby, is severely injured. Jill sues We Take Care 4 U LLC, to recover damages for her injuries. Jill’s damages are in the amount of $1M.
First of all, is Jack liable?
Secondly, who will wind up paying the $1M, the LLC or Jack individually? Make sure that for your answer to this second part that you use two totally different theories when producing your answer.
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