Exam Prep Qs

A Louisiana partnership has a debt of $500,000 to a single creditor and has assets valued at $25,000. The partnership has 4 partners. The creditor obtains a judgment against the partnership for the $500,000 debt. Assume that the assets are sold. How much of the debt is each partner bound to repay?

$118,750 each The partnership is primarily obligated for its debts and partners are secondarily obligated. Under Louisiana law, partners are bound for their virile share of partnership debts. The sale of the assets reduced the amount each partner was bound for. So instead of being bound for ¼ of $500,000, they are bound for ¼ of $475,000, making their virile share $118,750 each.

What are the elements for partnership by estoppel from Gravois v. New England Insurance Co.?

(1) A person holds themselves out as a partner, (2) To the justified detrimental reliance of a third party, and (3) an intent to share profits and losses. specifically the last paragraph on page 105 of the Supplement. The paragraph sets forth the 3 elements for partnership by estoppel.

What are the two elements of piercing the corporate veil in Sea-Land Services v. Pepper?

(1) Unity of interest and ownership and (2) failing to pierce the corporate veil would promote fraud or injustice.

A committee consists of 3 directors and 5 non-directors. What is the quorum requirement for the committee?

2 Non-director members are not considered "members" for the purpose of other sections. Quorum for committees is the majority of directors.

Board seats 1-5 expire every 2 years and are set to expire in the 2020 annual meeting. Seats 6-10 expire every 3 years and are set to expire in 2021. In 2019, Ellen Murphy filled a vacancy for board seat 3. When will her term expire?

2020 a director who takes office to fill a vacancy will have their term expire when their predecessor's term would have expired. Here, the predecessor's term will expire at the 2020 annual meeting so Ellen's term will expire in 2020.

A Louisiana corporation, Crawfish, Incorporated, has 250,000 authorized shares and 50,000 were issued. Crawfish, Inc. Is preparing to restructure its employee stock plans so it has reacquired 10,000 of its own shares. What is the breakdown of Crawfish's shares after it has reacquired the 10,000 shares?

250,000 authorized shares, 40,000 issued shares and; 210,000 unissued shares. Louisiana does not have the concept of treasury shares anymore. When a corporation reacquires its own shares, those shares become unissued shares.

How many classes of stock is Peloton, Inc. authorized to issue?

3 - see in articles of incorporation

A corporation has 1000 shares. 200 shares are owned by a subsidiary company and the remainder of shares are owned by individuals. What is the default minimum requirement for a quorum for this corporation?

401 shares. A quorum is a majority of shares entitled to vote on the matter and under 721(B), shares owned by a subsidiary are not entitled to vote. Here, only 800 shares are entitled to vote, and a majority is at least 401 shares represented.

To what extent may a committee exercise corporate power?

A committee may exercise the corporate powers of the Board but subject to statutory exceptions.

Which of the following is consistent with the definition of a partnership in commendam or limited partnership?

A partnership in commendam consists of at least one general partner and at least one limited partner. The limited partner has less extensive powers, rights, and obligations. A partnership in commendam consists of at least one general partner with all the rights, powers, and obligations that a general partner normally would have and at least one limited partner who has defined powers, rights, and obligations.

Acme, Inc. has 2 main products - specially manufactured industrial machines and valves for industrial plans. Acme is dissolving but selling the specially manufactured industrial machines portion of its business. The sale is going to close on Nov. 1. Acme filed its articles of dissolution on October 1. What is the effect on the specially manufactured industrial machines portion of Acme's business?

Acme may continue business related to the specially manufactured industrial machines. A corporation may continue operations in a part of its business that it plans to sell.

Assume that Adam, Brian, and Claire effectively terminated their partnership and the running store closed, the partnership was liquidated. One year later, Claire is approached by a running shoe representative that used to sell to the running store. The representative wants to start a direct-sales operation with Claire, and she accepts. Adam and Brian find out about this and feel upset that they are not brought into this new operation. They each sue Claire for 1/3 of her profits. What is the outcome?

Adam and Brian are not successful because the partnership terminated, and Claire no longer owed Adam and Brian or the partnership any fiduciary obligations. Partners owe each other a duty to act in the best interest of the partnership and to not take opportunities that could benefit the partnership while the partnership continues. Comment (b) to Art. 2809 specifically says the duty continues until the partnership is finally liquidated as it was. Here, Claire learned of this opportunity long after the partnership was terminated and there was no chance for the partnership to take advantage of this opportunity. She owed no duty to Adam and Brian because the partnership was terminated and liquidated.

Adam, Brian, and Claire have decided to start a running shoe store in Louisiana. They have all signed a written partnership agreement providing Adam will contribute certain items (such as a cash register and shelving) and furnishings, Brian will contribute his services to the business (he will not be paid separately as an employee), and Claire will contribute $150,000 cash to the business. Under the agreement, they all will share in profits. Adam and Brian will manage the day-to-day operations of the business, but Claire will have veto power over major financial decisions. Which of the following statements is most accurate regarding each person's contribution to the business?

Adam, Brian, and Claire each have made valid contributions. The contributions can be money, things, and services as long as the contribution is not a "sham" contribution. Answer choices A-D are underinclusive because each choice does not recognize the validity of one partner's contribution.

Aliyah is a director for ABC Corporation's Board of Directors. She lives with her husband and 2 children. Her mother also lives with her. Additionally, she is hosting a foreign exchange student for 6 months. Who are related persons?

Aliyah's husband, children, mother, and the foreign exchange student.

Each director of a corporation under the Model Business Corporations Act, adopted by Louisiana, must be:

An individual, meaning a natural person. the articles of incorporation may set forth the names and addresses of those individuals who are to serve as initial directors. The MBCA 1.40 and La. R.S. 12:1-140(13) also defines "individuals" as natural persons.

In Tedesco v. Gentry, what was the main reason in the Court's analysis that prevented Tedesco from succeeding on an agency by estoppel theory?

Tedesco had not paid money, expended labor, suffered loss, or had other legal liability. Tedesco failed to show a change of position. Agency by estoppel requires conduct by the principal, reliance, and a change in position.

Who is responsible for the corporation's liquidation?

The Board of Directors.

Andrew is Sylvia's full time assistant. Sylvia instructs Andrew to order three brand new computers from Dell. In January Andrew orders three refurbished computers in Sylvia's name from Dell for a total purchase price of $5,000. When he purchases them, he is told that all purchases of refurbished computers are nonrefundable, but Andrew is so excited to get them for half price he agrees to the deal without talking to Sylvia first. When Sylvia sees that the computers are refurbished, she is furious. She calls Dell and demands that she be allowed to return the refurbished computers, but Dell says, "A deal is a deal. We will not refund your money." Sylvia yells at Andrew and tells him to just unpack and set up the refurbished computers. When Andrew unpacks the refurbished computers, he is so mad that Sylvia has yelled at him that, instead of carefully unpacking the boxes, he negligently throws, what he believes to be, empty boxes across the office toward an empty corner. Andrew is so frustrated that he does not realize a window is open, and a few of the boxes, which unfortunately still have some equipment in them, sail across the office and out the 10th story window. One of those boxes lands on a man name Harry who is walking by the window. Harry needs seven stitches and misses a few days of work. Assuming that negligent behavior is prohibited under the terms of Andrew's employment and Andrew's actions (i.e. carelessly throwing the boxes toward the corner of the office) were not authorized by Sylvia, from whom can Harry likely recover in a suit for the tort?

Andrew directly and Sylvia vicariously through respondeat superior. Since Harry can recover from both Andrew and Sylvia since Andrew was acting as Sylvia's agent within the scope of his employment, and employers are vicariously liable for the torts of their employees committed within the scope of employment.

When forming a corporation, which corporate document(s) must be filed with the Secretary of State's office in the state that the corporation wishes to form?

Articles (or Certificate) of Incorporation, only. The MBCA 2.01 requires an incorporator or incorporators of a corporation to file the articles of incorporation. La. R.S. 12:1-201 also requires the incorporator(s) to file written consent of the registered agent.

When may a director vote by proxy?

At board or board committee meetings if the articles of incorporation permit director proxies. At board or board committee meetings, directors can only vote by proxy if the articles of incorporation permit director proxies.

Steve Werks and Bill Fence formed a partnership on January 1, 2020 to develop home technology products. The partnership agreement included the following provisions: Steve was to contribute services through product development; Bill was to contribute money annually over the course of the partnership's 10-year term. Bill was the sole source of the partnership's funding as home technology products are expensive to produce and they had few customers. Bill found himself in a personal financial crisis and all of his assets were seized. Bill decides that he is too busy with his personal woes to be consumed with the partnership and he gives his resignation to Steve. Steve objects to Bill's resignation and continues the business of the partnership, even contracting with vendors for new materials. Which statement best reflects Bill's status as a partner?

Bill remains a partner because Bill does not have just cause as Steve has not failed to perform an obligation. The partnership is for a term so Bill can only withdraw for just cause arising out of the failure of another partner to perform obligation. There are no facts to suggest Steve is failing to perform obligations, in fact Steve is continuing to perform his obligation to continue product development.

What is the effect of La. R.S. 12:1-832 on the business judgment rule?

By default, the directors are protected from liability for breaching the duty of care so a plaintiff must prove the directors breached the duty of loyalty to overcome the business judgement rule. exculpates directors from liability for breaches of the duty of care so breaching the duty of care is not enough for a director to be personally liable. A plaintiff must prove the director breached the duty of loyalty (or acted in one of the ways excluded from 12:1-832).

CorpA has three classes of shares. Class A has five votes per share and is only authorized to vote for board elections. Class B has one vote per share and is authorized to vote on all matters presented to the shareholders. The third class is preferred stock and has no voting rights. CorpA is considering dissolution. The Board of Directors is proposing dissolution to the shareholders at its upcoming annual meeting on December 1. Who must receive notice of the meeting?

Class A and B shareholders & preferred stockholders All shareholders, regardless of voting power, must receive notice of a meeting where dissolution will be proposed

John Foley is the co-founder and the former CEO of Peloton Interactive, Inc. What type of business entity is Peloton?

Corporation

Damien, Edward, and Francisco are general partners in a moving company. Damien's capital contribution was $4,800, Edward's was $15,000, and Francisco's was $10,200 (so total capital contributions were $30,000 and there were no other contributions). The company has a debt to Wall Street Bank with $10,000 outstanding. Additionally, the company has an outstanding unsecured debt to Francisco in the amount of $10,000. Damien, Edward, and Francisco saw that the company was underperforming and the market for movers was declining. They made the decision to terminate the partnership and liquidate all assets. The moving company had $60,000 in assets. How much, if any, money will each partner receive in total (to the nearest dollar)?

Damien: $6,400. Edward: $20,000. Francisco: $23,600. The Bank will be paid its $10,000 first so then $50,000 remains. Francisco will receive $10,000 because he was an unsecured partner creditor. So then $40,000 remained. Then, each partner will have their capital contributions restored. Then there would be $10,000 remaining. The $10,000 is "divided proportionately based on their respective interests in the partnership." So, this requires you to look at how much each partner initially contributed of the total $40,000 contributions to determine each partner's proportions based on their interests. Damien contributed $4,800 of $30,000 (or 16%); Edward contributed $15,000 of $30,000 (or 50%); and Francisco contributed $10,200 of $30,000 (or 34%). So, then you must multiply each of these percentages by the remaining amount of $10,000. After doing that math, Damien will receive $1,600 of the surplus; Edward will receive $5,000 of the surplus, and Francisco will receive $3,400 of the surplus. These amounts must be then added to the capital contributions which had been restored to each partner and to any debts repaid to the partners. In total, Damien will receive $6,400, Edward will receive $20,000, and Francisco will receive $23,600. See art. 2833 for instructions on the division of assets

What are three instances, in addition to causes of termination of contracts, that cause the mandate and authority of the mandatary to terminate? Select the best answer.

Death of the principal or mandatary, interdiction of the mandatary, or the qualification of the curator after the interdiction of the principal. This is a tricky question to encourage you to pay attention to detail. A lacks the possibility of death of the mandatary and interdiction of the mandatary. Note that interdiction of the principal alone, without qualification of a curator, is not enough to end the mandate and mandatary's authority. B fails to mention the death of the mandatary or the qualification of the curator after the interdiction of the principal and a medical coma does not terminate the mandate or mandatary's authority. D fails to mention the death of the principal, interdiction of the mandatary, or the qualification of the curator after the interdiction of the principal.

What is the holding of Stone v. Ritter?

Directors are liable if they fail to implement reporting or information systems or consciously or knowingly fail to monitor such reporting or information systems.

What is the holding of McQuade v. Stoneham?

Directors must exercise independent business judgment for the benefit of all shareholders and cannot agree to limit their judgment in advance.

The idea that profits in a corporation are taxed once at the corporate level and again if the corporation issues dividends is commonly known as:

Double Taxation

Patrick has a revocable mandate with Amelia. Patrick revokes the mandate by sending Amelia a text message on March 2 but Amelia forgot to pay her phone bill and her cell phone service shut off Amelia's phone on March 1. Amelia never received the text from Patrick. Amelia contracts with Duane on March 3. The contract is within the scope of Amelia's authority and she disclosed her status as a mandatary and disclosed Patrick's identity. Duane already knew all of that information because Duane is a long-time customer. In fact, Duane had even called Patrick on February 28 to ask that Amelia meet Duane to contract. Can Duane enforce the contract against Patrick?

Duane can enforce the contract against Patrick because Amelia did not know her authority terminated, Duane was in good faith when he contracted with Amelia, and Patrick had not notified Duane that he terminated Amelia's mandate. because Amelia did not know the mandate terminated and Duane was in good faith, the contract is enforceable. Additionally, Patrick failed to notify Duane that Amelia's authority terminated so Patrick is bound to perform the contract undertaken by Amelia and Duane can enforce the contract. See Articles 3010, 3025, 3028, and 3031. A is incorrect because Article 3010 and 3031 both state that the principal is bound when a mandatary enters into a contract after the mandatary's authority has ended and the mandatary is unaware that the mandate has ended. B is incorrect because Amelia never bound herself personally because she did not know that her mandate had terminated, and she contracted in good faith. Moreover, she was within the scope of her mandate (which she did not know had terminated), disclosed her mandatary status, and disclosed her principal. See Articles 3016 and 3031. C is a red herring.

Hector and Hans are co-promoters working together to form H&H Corp. Before H&H Corp. is formed, Hector and Hans sign a lease agreement with Linda Landlord. Hans and Hector sign the lease: "Hans and Hector, promoters for H&H Corp., a corporation to be formed." Once H&H is formed, it formally adopts the lease and begins making payments on the lease. Six months later, H&H suffers a financial reversal and cannot pay its lease obligations. From whom may Linda seek to recover under the lease?

Either from Hans and Hector or from H&H Corp. Hans and Hector are parties to the contract on behalf of the corporation so Linda may recover from them. Linda may also recover from H&H Corp. because once it adopted the contract, the corporation became a party to the contract. Although H&H Corp. adopted the contract, Hans and Hector remain parties to the contract because a novation has not been executed.

Filing the articles of dissolution puts third parties on constructive notice of the corporation's dissolution. True or False.

False

An office of President & CEO is required for every corporation. True or False.

False only need secretary

The board of directors owes fiduciary duties to debtholders. True or false.

False. Debtholders do not have an ownership interest in the corporation, so the Board does not owe them fiduciary duties. Instead, the debtholders' rights are embodied in contract (typically an indenture).

S-corps have double taxation, a tax on profits and shareholder taxation on distributions and dividends.

False. S-corps are taxed as partnerships, rather than the standard double taxation of c-corps.

The LLP structure protects individual partners from personal liability relating to contractual claims against other partners not arising from malpractice?

False. The LLP structure typically protects individual partners from being personally liable when another partner commits tortious acts. Remember that LA R.S. § 9:3431A specifically covers debts arising out a partner's "errors, omissions, negligence, incompetence, malfeasance, or willful or intentional misconduct."

Corporations are Subject to FlowThrough Taxation - T/F?

False. Corporations have double taxation, meaning the corporate entity is taxed when on the income it makes and the shareholders are taxed when they are paid dividends. Other entities have flow through taxation, meaning income flows to the owners/investors and those individuals are taxed.

The Board of Directors for a Louisiana corporation must adopt corporate bylaws.

False. In Louisiana, a corporation may choose to adopt bylaws. The MBCA requires a corporation to adopt bylaws.

Paul and Tess executed and filed the partnership agreement with the Secretary of State. Additionally, they executed subsequent acts to transfer the office building to the partnership. Paul and Tess have not filed a certified copy of the partnership agreement and the certificate of registry with the recorder of mortgages of the parish in which the partnership's principal place of business is located. Therefore, the title to the office building is not effectively vested in the partnership. True or False.

False. a failure to file those documents with the recorder of mortgages does not affect the title of the immovable property as being in the partnership.

If a balance sheet shows $500,000 in Accounts Receivable under Assets, there will be $500,000 in Accounts Payable under Liabilities

False. Accounts Receivable and Accounts Payable are not related. Accounts Receivable shows the amount owed to the company for services rendered or products delivered. Accounts Payable is the amount owed by the company (for example, the electric bill would be an Accounts Payable until it is paid).

Jared is on the Board of Directors for ABC Corporation. He has no other position or employment with ABC Corporation outside of being on the Board of Directors. Jared, as a Board member, has the authority to bind the corporation in contract.

False. An individual board member does not have authority to enter into contracts on behalf of the corporation simply by virtue of their board position. The Board must act as a whole unit, through resolution, to give an individual board member the authority to bind the corporation in contract.

Directors owe fiduciary duties only to the shareholders.

False. Directors owe fiduciary duties to the corporation itself and the shareholders.

The business judgment rule protected the board in Smith v. Van Gorkom. True or False.

False. The Delaware Supreme Court determined that the board had acted in a grossly negligent fashion and had breached its duty of care.

What business forms possess a legal personality?

GPs, LPs, Corporations, and LLCs -- Sole Proprietors do not have a distinct legal personality, but all other forms do have a separate legal personality

R & S have decided to sew and sell costumes and they immediately start doing business. Without additional information, what type of entity have they most likely formed?

General Partnership There are no facts to suggest that either R or S is a passive investor that lacks management control; therefore, they most likely formed a general partnership. In addition, there are no facts to indicate that R & S have filed any formation documentation with the Secretary of State (which is not required of general partnerships).

Which business forms have formal formation requirements?

General partnerships and sole proprietorships can be formed without formal requirements, but all others have formal formation requirements.

A corporation has a monthly subscription to Orange Music. Where would this bill appear on the corporation's balance sheet?

It is a liability and would be categorized under accounts payable. This is a good/service the company has received but has yet to pay for.

Lorenzo and Margo form a partnership to operate a food truck, Great Food Truck. They have a partnership contract, but they did not file it with the Secretary of State. The partnership agreement states that Lorenzo and Margo share in profits and losses equally. One year later, Margo decides to step back from daily operations of Great Food Truck but still be involved in business decisions. Lorenzo and Margo decide to amend their partnership contract so that Lorenzo and Margo share in profits and losses in a 70/30 split respectively. They also decide it would be a good idea to file with the Secretary of State. What documents must Lorenzo and Margo file?

Lorenzo and Margo must file the original partnership contract and the amendment. According to the fact pattern, the original partnership contract was never filed so Lorenzo and Margo must file the original partnership contract or a certified copy of the partnership contract and the amendment.

What is the default voting requirement necessary for shareholders to approve a proposal for dissolution?

Majority of the votes entitled to be cast unless a greater voting requirement is set in the articles of incorporation.

A Louisiana corporation, Toni Clayton's Glass, Inc., makes custom chandeliers and distributes other lighting fixtures to national construction stores. The corporation executed its articles of incorporation on April 1, filed the articles on April 2, and the articles were accepted for filing by the Secretary of State. The articles of incorporation state the articles become effective on May 1 and it has been using the name Toni Clayton's Glass d/b/a Glass Works. When did corporate existence begin?

May 1 The corporate existence begins when the articles of incorporation become effective. La. R.S. 12:1-123 contains default rules for when the articles become effective but 1-123(C) permits the articles of incorporation to override those default rules by specifying a delayed effective date. Here, the articles of incorporation included a delayed effective date of May 1, which is within 90 days from filing, so the corporate existence begins on May 1. D is incorrect because 12:1-401(I) states that assuming or using an improper name will "not affect or vitiate the corporate existence."

FB, Inc. has always been a private corporation since its inception. FB was incorporated July 29, 2004. As of August 1, 2004, FB approved a valid unanimous governance agreement with a term of 15 years. FB went public on May 12, 2012. When did or when does the agreement end?

May 12, 2012. A unanimous governance agreement ceases when a corporation goes public.

Michael Jordan decided to invest in a basketball manufacturing company, Basketballs4Life. He is a limited partner. After he becomes a limited partner, he takes a European vacation to relax. The general partner, Greedy McGreederson, knows he can double profits for the upcoming quarter if he can let his customers know that Michael Jordan is a part of Basketballs4Life. Greedy decides to send out new marketing materials with an attached order sheet. The cover of the materials shows Michael Jordan playing with a Basketballs4Life ball and says, "Basketballs4life: A Michael Jordan Company." How is Michael's limited liability impacted?

Michael Jordan remains a limited partner because the use was non-consensual, and he did not know or have reason to know of its use. Use of a limited liability partner's name would normally result in losing limited liability status. However, part (B) states that if the use is without the limited partner's consent, he only loses limited liability status if he knew or should have known of the use and did not take reasonable steps to prevent it. Here, Michael was on vacation and the facts do not indicate that he knew or should have known so Michael has not lost his limited liability status.

Carol Baskin and Jose Exotic are certified public accountants (CPAs) by day but together, they formed a general partnership, Bold Fashion, to design animal print clothing for wildlife enthusiasts. They want to know if Bold Fashion can file an application to become an LLP. What is your response?

No, Bold Fashion is not an accounting firm or other type of professionally licensed group. Bold Fashion is the entity that would be filing to become an LLP and fashion designers generally are not professionally licensed. Thus, Bold Fashion likely cannot become an LLP.

Sautter, Inc. intends to be a Louisiana corporation. Its promoters, Geoff and Riley, purchase land for the company's headquarters. Bob the Builder, a commercial contractor, contracts with Geoff and Riley on behalf of Sautter, Inc. to build an office building on the land. The contract provides that Bob must complete the project by May 1 and Sautter Inc. will pay the first half of the price before the project is started and the other half by May 1. Sautter, Inc. pays half of the contract price. May 1 comes around and Bob has not completed construction. Sautter, Inc. is now incorporated but is not profitable yet. It has brought a breach of contract claim against Bob. Bob counterclaims against Geoff and Riley because Sautter, Inc. was not incorporated at the time of contracting for breach for failing to pay the other half of the payment. Can Bob enforce the contract against Geoff and Riley?

No, Geoff and Riley will likely have limited liability due to corporation by estoppel. Bob dealt with Sautter, Inc. as a corporation so he is estopped from asserting liability against the corporation's promoters. Sautter, Inc. can enforce the contract against Bob and Geoff and Riley would have limited liability due to corporation by estoppel.

Gerald is Clare's mandatary for the purpose of acquiring gym equipment for Clare's personal training facility. Gerald reads a story in The Baton Rouge Gazette, a very reliable newspaper, that Clare's father has instituted a suit to interdict Clare and the proceedings are ongoing. Gerald remembered that Clare has been acting irrationally in recent weeks. Gerald fears the business will be negatively impacted so he tells Clare that he is resigning, and he no longer wishes to be her mandatary. Has Gerald effectively terminated the mandate?

No, Gerald believes Clare lacks capacity and has not taken other steps to terminate the mandate, so the mandate is still effective. Article 3029 governs termination of a mandate by the mandatary. 3029 is governing because Gerald, the mandatary, can terminate the mandate by telling the principal, Clare, that he is resigning but the news article and his recent experiences with Clare give him reason to believe Clare lacks capacity. He has not notified another mandatary, successor mandate, or a person with sufficient interest in Clare's welfare so Gerald has not effectively terminated the mandate.

Selena owns a vintage record store, Records, Inc., in Baton Rouge, Louisiana. Selena is the owner and sole employee of Records. Leo is a frequent customer of Records and knows Selena very well. Leo has a lot of friends and connections who are interested in vintage records. Selena thinks he would be a great resource to grow her business so she tells him that she will give him 5% of any sale if Leo comes into Records with a potential customer who purchases a record during their visit. Leo can come in on his own time, he can bring in any potential customer, and his only payment is the 5% commission. Selena gives Leo express written authority to engage with potential customers but not to make sales or act as an employee in any other way. Leo signs a written contract, agreeing to Selena's terms and he begins bringing in potential customers. Leo brings Cindi into Records and she purchases a vintage Bob Marley record for $750. While Leo and Cindi are leaving, Leo backs into Cindi's brand new Rivian truck. Cindi sues Leo and Selena in a Baton Rouge district court under a negligent tort theory and claims that Selena is vicariously liable for Leo's tortious damage to Cindi's vehicle. Is Selena vicariously liable?

No, Selena is not vicariously liable because Selena does not control Leo's hours, manner of acquiring or engaging potential customers, and he is only paid with a sale's commission. Selena is not vicariously liable because she lacks control and a close economic relationship with Leo. D is correct because Selena lacks control and a close economic relationship with Leo, thus they do not have a master-servant/employer-employee relationship. Louisiana courts require a principal-agent relationship and an employer-employee relationship in order for vicarious liability to attach. A is incorrect because Louisiana requires more than a principal-agent relationship. B is incorrect because a commission-based payment is a factor that weighs against an employer-employee relationship. C is incorrect because the fact pattern does not say that Selena and Leo agreed to relieve Selena of any vicarious liability.

ABC's Board of Directors properly presents the shareholders with a proposal to the articles of incorporation, including a recommendation to vote in favor of the proposal. The proposal is conditioned on receiving 25% of the votes in favor of the proposal. There are 5000 votes eligible to vote on the proposal. 2000 votes are cast in favor of the proposal. Assume ABC is a public corporation. Has the proposal passed?

No, the proposal did not receive a majority vote. The default vote required for a public corporation is majority vote. The Board or the Articles can require a greater vote but not a lesser vote.

Jim, Pam, Dwight, and Angela are partners in a chain of paper supply stores. Dwight is the assistant to the regional manager, but the regional manager is not a partner. Jim, Pam, and Angela are in sales. Jim and Dwight vote to change the stores' operational hours so the stores are closed on the weekends, but Pam and Angela oppose the vote. Jim and Dwight change the store hours. Is the decision valid?

No, the vote did not pass by a majority. Decisions affecting the management or operation of the partnership must be made by a majority of partners, unless otherwise indicated in the partnership agreement. Here, 2 of the 4 partners is not a majority so the decision is not valid. B is a red herring.

On April 1, Crawfish, Inc. approached 150 people with a subscription agreement containing the following information: "Crawfish, Inc. is in the process of incorporation and plans to be incorporated by August 1. We are seeking initial shareholders. There are 20,000 shares of Class A stock available for $5/share." On April 2, Breaux agreed to purchase 100 shares for a total of $500. He is so excited that he runs straight to L'Auberge to gamble but he is not so lucky. Breaux loses a lot of money and is seeking to return his shares and get his $500 back to pay his gambling debt. Can Breaux get out of the subscription agreement?

No. Subscription agreements are irrevocable for a default period of six months. The agreement can state a longer or shorter period of time but here, it doesn't appear that a time was stated so the default period applies.

Tigers Clothing has 4 partners. Mike, Joe, Ed, and Tom. Mike agreed to contribute services to Tigers Clothing and Joe, Ed, and Tom contributed money. However, Mike has not shown up to work in two months, so Ed has to cover for him daily. Ed seeks to expel Mike. A vote is taken. Mike and Tom vote against expulsion, Ed and Joe vote in favor of expulsion. Is Mike expelled from the partnership?

No. A majority vote was not reached so Mike remains a partner. Mike is entitled to vote on his own expulsion so his vote counts in determining if a majority vote was reached. Mike is not expelled because a majority vote was not reached.

Oliver and Victoria will be general partners in a food truck that travels around Baton Rouge. They both are going out of town from November 2020 to January 2021 but they want to file their partnership with the Secretary of State. They file all the required documents with the proper filing fees on November 1, 2020 and specify the effective date to be January 1, 2021. What is the outcome?

The Secretary of State will not certify the partnership because the documents were filed more than 30 days in advance. A is incorrect because documents may specify an effective date as long as it is within 30 days of delivery. If no effective date is specified, the effective date is deemed the date of filing. C is incorrect for two reasons. First, the documents will not be certified because they are delivered more than 30 days in advance. Second, annual reports are due on the yearly anniversary of the effective date, not the date of filing, although those are often the same dates. D is incorrect because advance filing is permitted. The 5-day period in choice D comes from R.S. 9:3408 where contracts are executed and then filed within 5 days of the date of execution.

What does "liquidity" refer to in the context of corporations?

The ability to quickly turn assets into cash. For the corporate entity itself, liquidity refers to how easily it is able to turn assets into cash. For example, a piece of land (immovable property) is less liquid than money owed to the corporation for products already sold or services already provided (i.e., accounts receivable). From a shareholder's perspective, liquidity refers to how easily you are able to turn your shares (i.e., an asset) into cash.

Marcus, Noelle, and Odell have a valid partnership agreement. Marcus, Noelle, and Odell run into each other at a New Orleans Saints game and talk business. Specifically, the decision to use a new vendor. Marcus and Odell are in favor of a new vendor and Noelle is opposed to the new vendor. Marcus and Odell tell her, "The majority is in favor, so we are using the new vendor." Noelle argues that the decision is ineffective because the Saints game is not a business meeting. Is she correct?

No. Partnership decisions can be made outside general meetings. Each partner voted on the matter and the majority was in favor of the new vendor, so the decision is effective. A general meeting is not required for decisions affecting the partnership, so Noelle is incorrect, the decision is effective.

A Louisiana corporation, Acme, Incorporated, has a provision in its articles of incorporation stating that the shareholders have the powers relating to the issuance of shares. The Board of Directors passes a resolution that prohibits the issuance of shares in exchange for intangible property. Is the Board's resolution valid and why?

No. The articles of incorporation is the governing document so the Board's resolution is ineffective. By default, the Board of Directors has the powers relating to the issuance of shares but that may be changed by the articles of incorporation, as was the case here. Thus, the Board did not possess the powers to change the accepted forms of consideration exchanged for shares.

Blackacre Farms, L.P. is a Louisiana partnership in commendam. Gary is a partner in commendam. Five years ago, when business was booming and the partnership was profiting, Gary received a capital distribution. Today, the partnership is insolvent. Can the other partners or its creditors force Gary to return that distribution at a legal rate?

No. The capital distribution did not render the partnership insolvent, so it does not have to be returned. At the time, the partnership was solvent. Gary's capital distribution did not render the partnership insolvent so the other partners and its creditors cannot force Gary to return it.

Sayid is a general partner in an orange distributing limited partnership. Keisha is a limited partner. The partnership agreement grants Keisha agency powers. Keisha transacts to provide oranges for ten new grocery stores. Has Keisha engaged in too much management and control?

No. The partnership agreement grants her agency powers and it is not too much management and control to exercise those powers. Generally, a limited partner does not have the power to bind the partnership, but this is a default rule that can be changed in the partnership agreement. Article 2844.B(1) says that it is not too much management and control to exercise agency powers. In practice, be weary of granting limited partners management and control rights because circumstances could give rise to losing limited liability status.

Jose and Sandra are partners in a registered limited liability partnership, J & S, L.L.P. Ryan, a former client of J & S, has a judgment against Sandra for malpractice. Ryan asks you if Jose's personal car can be used to satisfy the judgment. What is your response?

No. The personal assets of partners are shielded by the protections provided by the LLP statutes. The tortious partner and the partnership itself remain liable but other partners are not personally liable. Thus, their personal assets are protected.

If the FedEx board of directors makes a fully informed and well-reasoned decision to let its drivers get tickets for double parking, because it is cheaper than paying for late deliveries, then that decision is:

Not protected by the Business Judgment Rule. The Business Judgment Rule does not apply to decisions involving illegality; therefore, it would not protect a decision to violate parking laws

A corporation is preparing for its annual meeting which is to be held August 1. The Board of Directors set a record date of July 10. By July 15, the corporation prepared all the notice materials to be sent to shareholders of record. On July 20, the corporation pre-paid the postage and addressed the notices but took an extra week to ensure that the notices were properly addressed before placing the notices in the mail on July 27. When did notice become effective?

Notice is not effective. Notice must be given no fewer than 10 days and no more than 60 days before the meeting. Here, notice would have been effective on July 27 when placed in the mail with proper addresses and pre-paid postage, however, notice was sent less than 10 days before the annual meeting.

On August 1, ABC Inc.'s Chairman of the Board, Adam, heard a rumor that their main competitor, DEF Inc., is open to merger negotiations. Adam, wants to act fast to get an offer to DEF. Within hours of the news, Adam sent a text to the other board members that stated, "Meeting tomorrow night at 7:00 PM, Zoom link is already in your inbox." All the directors participated in the Zoom meeting. Was notice proper and why?

Notice was improper but all directors waived notice. Notice was improper but it was waived. By default, notice of special meetings requires 48 hours advance notice of the date, time, and place of the meeting and notice must describe the purpose of the meeting. Here, the advance notice and purpose requirements were not met. However, notice was waived under 823(B) because the facts say all directors participated in the meeting and the facts do not mention any objections.

NuCLEAR Inc., a Louisiana corporation that cleans up nuclear waste. NuCLEAR wants to become a B Corp. How can NuClear become a B Corp?

NuCLEAR must satisfy B Lab standards. This question points out one distinction between B Corps and benefit corporations. B Corps are certified by B Lab and that certification is independent of state regulation.

Annie is Paul's agent. Paul instructs Annie to enter into a contract with Toni on Paul's behalf. Annie identifies herself to Toni as Paul's agent and then enters into the contract requested by Paul, signing the contract as "Annie, agent for Paul." Who is bound to Toni?

P alone. Annie is acting with actual authority for a disclosed principal, so only Paul would be liable under the contract with Toni. See Articles 3010, 3020, and 3016. Because Annie is acting within the scope of her actual authority, A is not bound. Therefore, A and B are incorrect. D is incorrect because Annie is acting with actual authority. Therefore, Annie has the authority to enter into a contract on Paul's behalf, and only Paul would be liable under the contract with Toni.

Partner A and Partner B form a partnership in commendam, Partnership, L.P. In their partnership agreement, Partner A is a general partner and Partner B is limited partner. The contract of partnership in commendam has all of its required contents but it was not registered. The partnership is sued for negligence and a judgment for $100,000 is obtained in favor of the plaintiff. How much is each partner liable for?

Partner A and Partner B are liable for their virile shares, $50,000 each The last sentence says that until the contract of partnership in commendam is filed, limited partners are liable as general partners to third parties. Here, the contract was not registered thus, not filed. Partner A and Partner B are liable as general partners as to the plaintiff. So, Partner A & B are liable for their virile share.

Assume that a partnership agreement sets forth the following allocations for sharing in profits: Partner A: 5% Partner B: 15% Partner C: 80% However, the partnership agreement did not speak to losses. If the partnership loses money, how will the losses be shared?

Partner A would bear 5%, Partner B would bear 15%, and Partner C would bear 80%. If a partnership agreement sets forth an allocation of partnership participation in one category, partners participate in the same allocation in other categories unless the agreement or other facts indicate otherwise.

Paul and Tess want to form a business, but they do not have space in their home to conduct business. They purchase an office building on June 1 and sign the paperwork in the name of Partnership A. Later, Paul and Tess have a meeting with you, their corporate lawyer, and you draft a partnership contract. Paul and Tess then execute and file the agreement with the Secretary of State on August 1. Which choice best reflects the ownership of the building?

Paul and Tess own the office building because Partnership A did not have a written and filed partnership at the time of purchase. Subsequent filing of the partnership contract does automatically transfer ownership to the partnership, it must be done through subsequent act. B is incorrect because a partnership is a juridical entity and can own immovable property. D is incorrect for the same reason as choice A.

Phylicia, a famous actress, saw a beautiful ring in the window of a jewelry store. Since she forgot to bring her credit card with her, though, she couldn't buy it. Later that day, she told a friend, Al, about the ring. When she said she wouldn't have time the next day to go buy it, he said he could do it for her. Delighted, Phylicia said, "When you go, make it clear you are buying it for me. Since I am famous, the store will probably give you a discount if they know I'm the buyer. Also, don't pay immediately. Just tell them they will be paid by the end of the week." Al agreed. The next day, though, Al decided that he would buy the ring more cheaply if he said nothing about Phylicia. So, he went to the store and bought the ring for $10,000 without mentioning that he was acting for Phylicia. He got the ring after promising the store that they would be paid by the end of the week. Which of the following statements is most accurate?Phylicia is an undisclosed principal.

Phylicia is an undisclosed principal.Here you need to look at what the third party (the store) knew. The key term is Al purchased the ring "without mentioning that he was acting for Phylicia." Therefore, the store had no idea that Al was an agent. Therefore, B and C are incorrect. D is also incorrect. The store had no idea that Al was an agent so Al could not be acting with apparent authority (there was no manifestation by Phylicia to the store).

Jessie authorizes Luis to buy stereo equipment for Jessie's tech shop. Luis purchases computer parts from Rhonda with payment to be sent later from Jessie. Jessie told Luis, "I asked you to buy stereo parts, not computer parts." Jessie does not sell the computer parts in the store. Rhona comes to Luis seeking payment for the computer parts. What is the outcome?

Rhonda can obtain payment or damages from Luis because he exceeded his authority. Luis exceeded his authority and as such Article 3019 applies. Art. 3019 provides that the agent is "bound" to the third party if the agent exceeds his/her authority. Now this seems to state that the agent is bound to perform the contract. However, it really should be thought of in warranty terms in that the agent has breached his or her "warranty of authority" and should at least be liable for damages arising from that. A and B are incorrect because Rhonda was acting in good faith (there's no indication that she was not acting in good faith) when she sold the computer equipment to Luis and she was unaware that Luis did not have authority to purchase stereo parts. D is incorrect as his liability arises from 3019 and exceeding his authority.

S Corps (which of options was most accurate):

S corporation shareholders may not be corporations, partnerships, or LLCs. S corporations are corporations that elect to be taxed like a partnership.

In Holzman v. de Escamilla, what was the strongest fact that led the court to find that the limited partners had engaged in too much management and control?

The bank accounts could be controlled by the Russell and Andrews without knowledge or consent of the general partner and checks required the signature of a limited partner. The fact that the limited partners had the ability to control the finances of the partnership was a strong indication that they had too much management and control. Thus, they lost their limited liability status.

What are the three main accounts represented on a balance sheet?

The basic balance sheet equation is Assets = Liabilities + Equity (or, put another way, Equity = Assets - Liabilities).

What is the business judgement rule?

The business judgment rule protects directors from personal liability if the corporation incurred a loss unless the directors acted without authority, good faith, reasonable care, or a reasonable belief that the decision was in the best interest of the corporation. - Van Gorkom

Carole Baskin and Pasha Pashkov form a limited partnership, Tiger Dance Studio, L.P. The contract of partnership in commendam is filed and registered with the Secretary of State. The contract includes the name and taxpayer ID, the municipal address of its principal place of business, and Carole and Pasha's municipal address. What, if anything, else must be included in order for Carole to have limited liability status?

The contract must state Carole's contribution and value of the contribution. The contract must describe Carole's contribution and state its value or method of valuation. If it fails to include such description, Carole is liable as a general partner.

What must a company do in order to change into a benefit corporation?

The corporation must amend its articles of incorporation by a 2/3 vote. which states that an amendment must be passed by the "minimum vote," states the minimum vote is 2/3 of the shares present and voting of each class or series.

What was the holding in Green v. Champion?

The court found a single business enterprise because the entities had the same directors, financed through intercompany debt, operated out of a single office, the corporations had all the same controlling shareholders, and transactions by one company were entered to benefit another company. The court found a single business enterprise because the entities had the same directors, financed through intercompany debt, operated out of a single office, the corporations had all the same controlling shareholders, and transactions by one company were entered to benefit another company.

Crawfish, Inc. was incorporated on August 1 by filing all the necessary documents and fees. The articles of incorporation did not name initial members of the Board of Directors. Who will call the first organizational meeting and for what purpose?

The incorporators call the first organizational meeting to elect a board of directors. If initial directors are not named, then the incorporators shall call a meeting to elect a board of directors.

What information is required to be in a partnership contract to be filed in Louisiana?

The name and taxpayer identification number of the partnership, the municipal address of the partnership's principal place of business in Louisiana, and the name and address of each partner. A contract of partnership filed with the Secretary of State must include the name and taxpayer identification number of the partnership, the municipal address of the partnership's principal place of business in Louisiana, and the name and municipal address of each partner. Article 3403(A)(2) does state that failure to include the partnership's tax identification number will not invalidate the contract nor be grounds for rejection, it should still be included.

CHD, Inc. is a publicly traded company that is incorporated in Louisiana. CHD is a participant in the Direct Registration System of the Depository Trust & Clearing Corporation. CHD also issues stock certificates that only state, "This certificate represents the stock of CHD Incorporated, organized under the state law of Louisiana. The stock represented by this certificate are issued to (name)." What else, if anything, must be represented on the stock certificate?

The number and class of shares and the designation of the series that the certificate represents. Even though CHD participates in the Direct Registration System, it is permitted to issue certificates and the certificates must comply with 625(B). The certificate must state the name of the issuing corporation and that it is organized under the law of this state, the name of the person to whom it is issued, and the number and class of shares and the designation of the series that the certificate represents.

Acme, L.P. is a Louisiana limited partnership consisting of two general partners and two limited partners. The partnership agreement is silent as to continuation rights. One general partner passes away on March 1, leaving one general partner and two limited partners. On August 1, at the next partnership meeting, the remaining partners agree to continue the partnership. What is the status of the limited partnership?

The partnership was terminated. When the remaining general partners do not have a right under the partnership agreement to continue the partnership, a continuation of a limited partnership must be done within 90 days of the terminating event. Here, the continuation was not done within 90 days, so the partnership is terminated.

Agency by estoppel requires conduct by the principal. According to Hoddeson v. Koos Bros., what is the scope of conduct that would satisfy the conduct element of agency by estoppel?

The principal's conduct may be an action or an intentional or negligent omission that gives rise to an appearance of authority. Conduct is an act or omission by the principal that would lead a reasonable third-party to believe that a person is an agent of the principal.

In Louisiana, proxies are revocable unless:

The proxy is coupled with an interest and the appointment states that it is irrevocable.

A corporation has not held its annual meeting in 18 months. What steps must be taken for a shareholder to force an annual meeting?

The shareholder must make demand on the corporation's secretary. A shareholder must give notice of demand to the corporation's secretary.

Which of the following best characterizes privately held companies?

The shares of privately held companies are less-liquid than public companies and generally have fewer shareholders. Privately held companies generally have fewer shareholders and its shares are less-liquid because there is not typically a large market for shares of a private company. A is incorrect because generally, privately held companies do not file reports with the SEC and do not have shares listed on a national exchange. C is incorrect because not all private companies restrict the transfer of shares. D is incorrect because all corporations must file corporate documents with the Secretary of State.

What is the judicial focus of single business enterprise?

The substance of the corporate structure, rather than its form. The court must look to how the corporations are structured, using a long list of factors, rather than how the corporations are individually formed. See Green v. Champion.

Joe builds custom gazebos for residential & commercial customers. He does not have any associates and he has not filed any documentation with the Secretary of State. He uses his truck that Joe bought before he started building gazebos, his personal tools, and his workshop in his basement to construct pieces for the gazebos. While Joe was at his lake house a customer visits to see an example of Joe's gazebos. The customer was injured when a wood plank fell from the gazebo, hitting the customer's head, and Joe ultimately has a judgment entered against him. What, if any, of Joe's assets can be taken to satisfy the judgment?

The truck, the tools, the home with the workshop, his lake house, and any other assets Joe may own. Joe is a sole proprietor so any of his personal assets can be taken to satisfy a judgment against him.

Jorge is a majority shareholder of 2 corporations, Acme and Beta. Maya, a plaintiff, successfully reverse pierces the corporate veil of Acme. What impact does reverse piercing have on Beta?

There is no impact on Beta. When a creditor reverse pierces, the creditor gains access to the assets of the corporation that it reversed pierced (in this case, Acme). In order for this creditor to have access to Beta's assets, it would have to successfully reverse pierce Beta. Maya will own Jorge's shares of Beta.

What is the purpose of piercing the corporate veil?

To hold an individual shareholder personally liable. Piercing the corporate veil allows a shareholder to be personally liable when that shareholder has abused the corporate form in a fraudulent manner.

If a party successfully establishes the doctrine of de facto corporation, what type of claims do the promoters and shareholders have limited liability against?

Tort and contract claims. if established, gives promoters and shareholders limited liability in contract and tort claims.

Jose and Sandra form a general partnership but later, they register their partnership as an L.L.P., J & S, L.L.P. Jose and Sandra are general partners.

True Partners in LLPs remain general partners but have a limited liability shield. Registering as an LLP does not create a new entity.

Today is April 15, 2021. Sautter & Associates, L.L.P. filed to become a registered limited liability partnership on May 1, 2020 but a general partnership was formed on March 1, 2020. Sautter & Associates is protected by the limited liability shield.

True The partnership is protected by the LLP shield on the day it filed for registration (not on the day the general partnership was formed) and the protection remains for one year. See LA R.S. § 9:3432.

The general partner in a partnership, acting alone and in her capacity as a general partner, has the authority to enter into contracts on behalf of the partnership and thereby bind the partnership.

True. A general partner has the authority to bind the partnership in contracts with third persons in the ordinary course of the partnership's business.

Nadia is authorized by her boss, Jennifer, to enter into contracts on behalf of Jennifer. Nadia tells Ryan that Nadia is authorized to enter into contracts on behalf of her boss but Nadia does not tell Ryan who her boss is. Nadia is personally bound to perform the contract.

True. Nadia is personally bound because she disclosed her status as a mandatary but did not disclose her principal, Jennifer. Article 3018 speaks to disclosed mandate and undisclosed principal. Look at that code article to understand the correct answer. B is incorrect because, although Nadia disclosed that she was acting as an agent, she did not disclose the identity of her principal. Until the relationship is fully disclosed, Nadia is bound.

Brian proposed admitting a fourth partner (a friend named Evan). Brian and Claire voted for his admission; Adam voted against it. Evan was not admitted. T/F?

True. Unanimity is required for certain partnership decisions and one of those is admitting a new partner. Since Adam voted against admitting Evan, Evan cannot be admitted into the partnership.

What is the default term for a voting trust entered into after January 1, 2015?

Unlimited If a trust does not set forth a duration, the default term is unlimited.

What is Venture Capital Funding?

Venture capital funding comes from venture capital firms that use other people's money to invest in a business, usually a start-up, in exchange for equity or debt. Venture capital firms usually invest early in the company's development, although later than angel investors but before private equity firms.

What is the concept of empty voting?

When a share is sold in between the record date and the date of the meeting but voted by its previous owner.

Under which circumstances may a corporation's original articles of incorporation retroactively become effective?

When the articles of incorporations are filed within 5 days, excluding legal holidays, after signing and the articles are accepted by the Secretary of State for filing.

What is the holding of Interstate Electric Co. v. Frank Adam Electric Co.?

When the principal manifests to a good faith third party that an agent has actual authority & the third party reasonably believes the principal's manifestation, the principal is bound to the contract. If there is a change in authority, those changes must be communicated to third parties.

Corporation A only has one class of shares and each share is entitled to one vote. There are 5000 issued shares of a corporation. At a meeting to elect directors, 2000 shares are represented in person or proxy. The meeting is adjourned until the next day. The same 2000 shares are represented in person or by proxy at the meeting the next day. Is quorum satisfied and why?

Yes, quorum is satisfied because quorum for a meeting to which an earlier meeting is adjourned is determined by the number of shares represented at the second meeting. For a meeting to elect directors, if a quorum is not present, the meeting may be adjourned until the next day. At the second meeting, the quorum is the number of shareholders present at that second meeting, even if that would not satisfy the normal quorum requirement

Jerome Wood is the President of Blackacre Nursery, Inc. As President, all issued stock had certificates bearing his signature. Jerome has decided to resign and Marie Todd is taking over as President. Are the stock certificates invalid?

Yes, the certificates are valid. Certificates are still valid even if the person who signed the certificate no longer holds the office.

Corporate bylaws for TechSmart, Inc. states that its annual meeting must occur in the first week of August. TechSmart had its annual meeting in September of 2020 where shareholders approved a merger with another tech company. Is the shareholder vote valid?

Yes, the vote is valid. Failure to hold an annual meeting at its stated or fixed time does not affect the validity of any corporate action.

Corp-Inc, a Louisiana corporation, has 500 shares entitled to vote on a matter. 400 of the shares are represented at the annual shareholder meeting. The shareholders are presented with Proposal A and asked to vote on the matter. 225 shares are voted in favor of Proposal A; 200 shares are voted against Proposal A; and 75 shares abstains from voting. Does Proposal A pass?

Yes. There are more votes in favor of Proposal A than against it, so it passes.

Acme has 3 general partners and it was formed on January 1, 2010. The partnership agreement states that the partnership has a term of 10 years. On January 2, 2020, the 3 partners decided to continue the partnership and execute an act memorializing the continuation. Acme had an outstanding bank loan to First Bank of Baton Rouge. First Bank sends the monthly bill to Acme's principal place of business. The partners refuse to pay, arguing that the original partnership has terminated. Is First Bank entitled to payment?

Yes. A continued partnership is still obligated to its creditors. When a partnership is terminated, creditors are not prejudiced. In this case the partnership was expressly continued but it does not need to be expressly continued. The creditors are not prejudiced by a continuation.

A US Seltzer company (P) authorizes an employee (A) to purchase canning supplies from various suppliers. The employee (A) enters into contracts from an aluminum supplier (T) but the contracts are A's name without mention of P. Can P enforce the contract against T?

Yes. P can enforce the contract against T. B is the correct answer. See Article 3023 which provides guidance on obligations of third parties to an undisclosed principal. A is incorrect as supplying aluminum cans is not a strictly personal obligation.

What is the three-prong test from Darden v. Cox?

the test requires mutual consent to form a partnership, not specifically a limited partnership and the test requires each partner to have an interest in the partnership property, it does not require that the partnership itself have legal title to the partnership. C is incorrect because the second prong requires a sharing of profits and losses. Contract and tort liability may be a type of loss the partnership may incur; however, C fails to mention profits and losses generally.