Business Associations - multiple choice questions

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Which of the following is NOT a reason an organization might consider using a staffing company to provide part of its workforce? (A) Avoiding all liability from the conduct of the staffing company's employees. (B) Avoiding recruiting and human resource expenditures. (C) Avoiding various employee rights that are provided by statute or other legal regulation. (D) Avoiding the need to engage in collective bargaining.

(A) Avoiding all liability from the conduct of the staffing company's employees. ** Even if the employees truly are the employees only of the staffing company, they could still expose the organization to liability in various ways.

Dena represents Wacky World, a family entertainment empire that operates several very popular amusement parks, w/ rides and attractions designed around characters from its signature animated films. Wacky World aims to build a new park in Florida, entering head to head competition w/ the well-known theme parks already established in Orlando. It instructs Dena to identify parcels near Orlando that might be stitched together into one block large enough for a new park. She is under orders not to disclose that she represents a principal, and not to make any purchases in excess of $100,000 w/o prior approval. Dena nevertheless jumps at the opportunity to buy two parcels, one from Mary and the other from Robert. She bought Mary's first, even though Mary demanded $125,000, because she was sure Wacky World would subsequently approve it. She then met w/ Robert, who had heard about Dena snooping around and the fairly miraculous price Mary got for her swampland. Robert asked Dena a number of probing questions, confident that she must represent a new park or some other major interest that would probably pay top dollar were its identity revealed. Dena flatly denied it, lying in fact, and insisting that the land was to be her own personal property. In the end, Dena purchased Robert's parcel too, this time paying $130,000. The contract w/ Robert is unenforceable against Wacky World because: (A) Dena lacked actual authority. (B) Dena lacked apparent authority. (C) Dena lied in response to Robert's questions. (D) The contract is enforceable.

(A) Dena lacked actual authority.

Dena represents Wacky World, a family entertainment empire that operates several very popular amusement parks, w/ rides and attractions designed around characters from its signature animated films. Wacky World aims to build a new park in Florida, entering head to head competition w/ the well-known theme parks already established in Orlando. It instructs Dena to identify parcels near Orlando that might be stitched together into one block large enough for a new park. She is under orders not to disclose that she represents a principal, and not to make any purchases in excess of $100,000 w/o prior approval. Dena nevertheless jumps at the opportunity to buy two parcels, one from Mary and the other from Robert. She bought Mary's first, even though Mary demanded $125,000, because she was sure Wacky World would subsequently approve it. She then met w/ Robert, who had heard about Dena snooping around and the fairly miraculous price Mary got for her swampland. Robert asked Dena a number of probing questions, confident that she must represent a new park or some other major interest that would probably pay top dollar were its identity revealed. Dena flatly denied it, lying in fact, and insisting that the land was to be her own personal property. In the end, Dena purchased Robert's parcel too, this time paying $130,000. Both contracts are enforceable against Dena. (A) True, because she made them on behalf of an undisclosed principal (B) True, because she had apparent authority. (C) False, because Dena made the contract on behalf of Wacky World. (D) False, because she lacked actual authority.

(A) True, because she made them on behalf of an undisclosed principal

When Larry joined the ABC partnership (4 partners), his only capital contribution was a pick-up truck with a fair market value of $5000. Some years later ABC agreed to sell the truck for $3000. ABC has four members, including Larry, and they have no written partnership agreement or any other explicit agreement between them, other than to act as co-owners of a business for profit. Assume that every year since the beginning of Larry's membership, ABC's revenues have precisely equaled its expenses. At the time of the sale of the truck, what amount should be reflected in Larry's capital account? (A) $5000. (B) $4500. (C) $3000. (D) None of the above.

(B) $4500.

Dena represents Wacky World, a family entertainment empire that operates several very popular amusement parks, w/ rides and attractions designed around characters from its signature animated films. Wacky World aims to build a new park in Florida, entering head to head competition w/ the well-known theme parks already established in Orlando. It instructs Dena to identify parcels near Orlando that might be stitched together into one block large enough for a new park. She is under orders not to disclose that she represents a principal, and not to make any purchases in excess of $100,000 w/o prior approval. Dena nevertheless jumps at the opportunity to buy two parcels, one from Mary and the other from Robert. She bought Mary's first, even though Mary demanded $125,000, because she was sure Wacky World would subsequently approve it. She then met w/ Robert, who had heard about Dena snooping around and the fairly miraculous price Mary got for her swampland. Robert asked Dena a number of probing questions, confident that she must represent a new park or some other major interest that would probably pay top dollar were its identity revealed. Dena flatly denied it, lying in fact, and insisting that the land was to be her own personal property. In the end, Dena purchased Robert's parcel too, this time paying $130,000. Now suppose that Dena was unable to keep the secret, and eventually disclosed to both Mary and Robert, before executing contracts w/ them, that she represented Wacky World, forgetting to mention her directions not to disclose and not to spend more than $100,000. If the contracts are enforceable, it is because: (A) Dena had actual authority. (B) Either custom in the market or some other evidence suggested that Dena could proceed this way. (C) Wacky World must have ratified them. (D) The contracts cannot be enforceable.

(B) Either custom in the market or some other evidence suggested that Dena could proceed this way.

Hank and his friend Biff have developed a new condiment, "Near-Death Experience Hot Sauce," for sale in local supermarkets. The idea and culinary talent mostly belong to Hank, but they agree they'll make the product using Biff's equipment, in Biff's garage. As to the costs and managerial decisions, the only thing to which they explicitly agree is that it will be "all for one and one for all." Unfortunately, Hank knows first-hand the secret heartbreak of addiction to Unyun® brand snack treats, an artificial onion-ring-shaped snack Hank eats so compulsively that his unpaid tab at Big Billy's Qwikie-Mart is now $5000. Much to his surprise, Biff was recently confronted by Big Billy himself at the garage/workplace where Hank and Biff make their sauce. Big Billy insisted that since he had been unable to find Hank, Biff is obliged to pay off the entire $5000 Unyun® debt. Now, Big Billy's demand was not backed up with a threat of physical violence; Big Billy is only 4' 9". Rather, Big Billy says that unless Biff pays up, he will sue. Assume that Big Billy secures a court order to collect on Hank's $5000 Unyun® debt as against Hank's interest in the hot sauce business. Such an order would: (A) Entitle Big Billy to insist on immediate payment by the partnership of $5000. (B) Entitle Big Billy to one half of the excess of all assets over liabilities, upon dissolution and winding up, to a maximum of $5000. (C) Entitle Big Billy to one half of the excess of all assets over liabilities, upon dissolution and winding up. (D) In fact, no such order would be available. Hank's debt is purely personal and could not be executed against the business.

(B) Entitle Big Billy to one half of the excess of all assets over liabilities, upon dissolution and winding up, to a maximum of $5000.

JJ&J, an at-will, default partnership among Jen, Janey, and Joe fell on some pretty tough times last year, and also experienced personal conflicts among the partners. Jen and Janey appeared to have gotten pretty sick of the whole thing, and appeared likely to seek the firm's dissolution. In fact, they were pretty much absent during a period of about a month, and during that time Joe really had to step in and do it all himself. He estimates he spent an additional twenty hours per week working in the business. He also personally put an additional $10,000 into the firm's coffers to keep it afloat (signing a written document to the effect, with the word "Loan" written at the top, and indicating that he would be repaid "with interest," but specifying no interest rate). The written document memorializing Joe's "loan" is: (A) A breach of his fiduciary duty. (B) Fine, and enforceable as written. (C) Not enforceable, because one partner acting alone cannot execute such an agreement on behalf of the firm. (D) Irrelevant, because his $10,000 will actually constitute a capital contribution.

(B) Fine, and enforceable as written. ** While it is a fact question whether accepting the loan is within the ordinary course of business, so long as it is, then Joe had authority to incur the obligation on the firm's behalf. The fact that no rate of interest is specified does not matter.

(B) Jenny had apparent authority.

A, B and C form the ABC Partnership. As part of their initial agreement, they each contribute $10,000 in capital. At the time of formation, C owned a building with some unused office space. A, B and C agree that the partnership will have the use of this office space on a month-to-month basis, in exchange for $500 per month paid from the partnership's funds. C is permitted to sell this office building at her election and to keep any profits earned thereupon. True or false? (A) True, even though the building is partnership property. (B) True. The building is not partnership property. (C) False. The building is partnership property. (D) False. She is permitted to sell the building, because she has sufficient authority to do so, but she may not retain the profits from the sale for herself.

(B) True. The building is not partnership property.

DotBomb, Inc. runs an online retail business through its website, DotBomb.com. In addition to its own sales of a wide range of retail products, DotBomb sells advertising space on its site. It does so through a team of in-house sales people, whom advertisers contact by calling a number on the "Contact Us" page of the website. (Often enough, though, DotBomb's sales people make cold calls to potential advertisers, which they can follow up w/ marketing materials including their business cards and correspondence on company letterhead.) A sales person, Dave, has started behaving erratically lately, and hasn't made any sales in a while, so DotBomb provides him written notice that his job will be terminated and that he is no longer entitled to act on DotBomb's behalf. However, DotBomb management fears that after receipt of notice Dave will go "rogue" and will try to retaliate by committing DotBomb to a string of unfavorable advertising contracts. It should be comparatively easy for DotBomb to avoid liability for unauthorized contracts entered into by Dave, because: (A) It should be obvious to advertisers that Dave is not authorized to bind DotBomb. (B) Under these facts, it should be comparatively easy for DotBomb to make effective notice of withdrawal of Dave's authority. (C) In fact, contracts made by Dave after his termination will not bind DotBomb. (D) Under these facts, notice of withdrawal of authority would be impractical.

(B) Under these facts, it should be comparatively easy for DotBomb to make effective notice of withdrawal of Dave's authority.

Shady Bros. Properties is a general partnership that invests in real estate properties for the purpose of re-selling them for profit. Late last year the only property in Shady Bros.' ownership was a downtown retail building. Scott, one of the three general partners at Shady Bros., meets a willing buyer for the downtown building, and unilaterally executes an agreement for immediate sale of the property. The sale agreement most likely is: (A) Unenforceable. Scott lacked authority for this kind of transaction. (B) Unenforceable because of the nature of Shady Bros.' business. (C) Enforceable because of the nature of Shady Bros.' business. (D) None of the above.

John is the owner and manager of an apartment building. Concerned about the safety of his tenants, John hires SafetyGuys, Inc., to provide security services in his building. SafetyGuys is a corporation formed for the purpose of providing security guards to private businesses. In making the arrangement, John deals directly w/ SafetyGuys' chief executive officer, a man named Richard, who explains to John that the security guards will be employees of SafetyGuys who will receive their instructions from their supervisor, another SafetyGuys employee. However, any agreement w/ SafetyGuys would be subject to John's specific requests concerning the conduct and duties of the guards, and John could make any further requests as he chose during the life of the agreement. During the first week that a SafetyGuys guard was on duty in John's building, the guard mistook Peter, a tenant, for an intruder. A scuffle ensued and the guard beat Peter severely, causing significant physical injuries. Peter sues John for money damages for his injuries. What is the relationship between Richard and the security guards? (A) Richard is their principal and they are his non-employee agents. (B) Richard is their principal and they are his employees. (C) Richard and the guards are co-agents. (D) Richard is their principal and they are his sub-agents.

(C) Richard and the guards are co-agents. ** Officers are agents of a corporation, and here Richard, as the CEO of SafetyGuys, is an officer and therefore an agent of SafetyGuys. Similarly, the security guards are employees of SafetyGuys and therefore agents of SafetyGuys.

Jim, an employee of Bill's Burger Hut ("BBH"), a corporation whose sole business is to own and operate a fast food restaurant, is entrusted w/ operation of the french fry cooker. One day Jim becomes incensed at a customer and savagely beats him w/ a spatula w/i the restaurant. If BBH escapes liability for the customer's injuries, it is most likely because of: (A) Lack of an agency relationship between BBH and Jim. (B) Lack of an employer-employee relationship between BBH and Jim. (C) The nature of Jim's work. (D) For reasons of public policy embodied in the concept of "respondeat superior," BBH likely cannot escape this liability.

(C) The nature of Jim's work. ** Given the nature of Jim's duties, it is possible that direct customer services is not w/i the scope of Jim's employment.

Hank and his friend Biff have developed a new condiment, "Near-Death Experience Hot Sauce," for sale in local supermarkets. The idea and culinary talent mostly belong to Hank, but they agree they'll make the product using Biff's equipment, in Biff's garage. As to the costs and managerial decisions, the only thing to which they explicitly agree is that it will be "all for one and one for all." Unfortunately, Hank knows first-hand the secret heartbreak of addiction to Unyun® brand snack treats, an artificial onion-ring-shaped snack Hank eats so compulsively that his unpaid tab at Big Billy's Qwikie-Mart is now $5000. Much to his surprise, Biff was recently confronted by Big Billy himself at the garage/workplace where Hank and Biff make their sauce. Big Billy insisted that since he had been unable to find Hank, Biff is obliged to pay off the entire $5000 Unyun® debt. Now, Big Billy's demand was not backed up with a threat of physical violence; Big Billy is only 4' 9". Rather, Big Billy says that unless Biff pays up, he will sue. Assuming Big Billy has not secured any sort of court order to enforce Hank's Unyun® debt, he should be able to collect: (A) $5000 from any of Hank, Biff or their business. (B) $5000 from Hank or the business. (C) $5000 from the business. (D) $5000 from Hank.

(D) $5000 from Hank. ** The debt is clearly personal

(D) All of the above.

Alice, Bo and Conchita file the necessary paperwork to create the ABC LLC under state law. They subsequently enter into an operating agreement containing a clause agreeing that all disputes relating to the LLC will be subject to arbitration in a state other than the one in which the LLC was formed. Alice, Bo and Conchita sign the agreement but there is no signature line for the LLC. Which of the following is most true? (A) ABC LLC will be subject to the arbitration clause described; (B) Alice, Bo and Conchita will be subject to the arbitration clause described; (C) Neither answer (a) nor answer (b)is true; (D) Both answers (a) and (b) are true.

(D) Both answers (a) and (b) are true.

Alex and Barb have begun a newsletter or "zine" for fans of their local music scene. Though they've kept their day jobs, they spend most of their free time together producing the 'zine, which they create each week in the garage of the house they rent together. They distribute it for free but earn revenue through sales of advertising, and more often than not break even or even turn a small profit. Their dreams are much bigger, though, and plan for it eventually to be their sole employment. The 'zine was initially Alex's idea, and he put the first several issues together by himself in his dorm room while still in college. When he told Barb about it, she asked if she could help, and said "Just tell me what to do . . . I don't know anything about this kind of stuff, so I'll just do whatever you tell me to do." They then bought some printing equipment to do a more professional job, deciding between themselves to "go half-sies" on the cost. They both worked on the actual production of each issue, made sales of advertising space, and made deliveries of the 'zine to newsstands, bars and coffee shops. Alex and Barb don't keep formal books (except for the checkbook of their joint checking account, in which Alex deposits checks from advertising clients, and from which he pays expenses), and they have never written down any sort of agreement between themselves. Barb's uncle Charlie, a well-heeled retiree, was sad to hear that money had been tight, and he made two offers to help the 'zine. First, Charlie offered to give Barb and Alex the use of $5000 in cash to cover expenses. When Barb insisted that the offer was too generous, Charlie said "hey, don't worry kid. Pay it back when you can. I'm proud of you." Second, he introduced them to a friend named Paul, who runs a local nightclub. Charlie gave Barb Paul's business card and, to make a long story short, Alex and Barb were able to use Charlie's name as their introduction and land a lucrative advertising contract for the club. As a down-payment, Paul sent them a check for $1500. For reasons that remain unclear, however, and just shortly after striking their deal w/ Paul, Barb and Alex closed down their business and absconded w/ Paul's $1500. Charlie being the only viable defendant left to sue, Paul sues him. Imagine that Paul manages to track down Alex and Barb, serves them w/ process, and joins them as defendants in his case against Charlie. Paul's claim against Charlie will most likely: (A) Win, because of Charlie's manifestations of intent. (B) Win, under either the doctrine of respondeat superior or some other rule of vicarious liability. (C) Fail, because while vicarious liability could be an appropriate theory, the relevant evidence is likely insufficient here. (D) Fail, because of his relationship w/ Alex and Barb.

(D) Fail, because of his relationship w/ Alex and Barb. ** Based on the facts available, Charlie was obviously not an employee of the 'zine, so (B) and (C) are wrong. The facts do not suggest that Charlie was a promoter of the business, or that he intended to be a surety for the 'zine, and there is no mention of any intent to share profits.

X, Y and Z are the members of the XYZ Partnership ("XYZ"). They are each skilled craftspeople who make handmade furniture for the partnership to sell, using tools and raw materials purchased by the partnership. Z has made a chair, in the same manner in which he's made all his other products for the partnership, but he is particularly fond of this chair and does not want to part with it. Z can unilaterally refuse to sell this item, despite X and Y's desire to sell it. True or false? (A) True. He made it and it is therefore his. (B) True. The chair is an item of "partnership property," and the partnership cannot assign any of the partners' interests in "specific partnership property" unless it assigns all of their interests. (C) True. See Revised Uniform Partnership Act§401(j). (D) False.

(D) False.

Traditionally, the "exhaustion rule" required: (A) For all claims, execution against partnership assets only. (B) For contract claims, execution against partnership assets only. (C) For contract claims, execution against partnership assets prior to execution against partners individually. (D) For all claims, execution against partnership assets prior to execution against partners individually.

(D) For all claims, execution against partnership assets prior to execution against partners individually.

John, an artist, asks his artist friend Tina to take some of his paintings to an art fair w/ her, and to sell them for him. The fact that John and Tina never discussed whether John would pay her for this service proves that: (A) Their relationship is not an agency. (B) Their relationship may be an agency, but if so it is "at will." 9 (C) Their relationship may be an agency, but it is an independent contractor relationship. (D) If anything, that artists are cheap.

(D) If anything, that artists are cheap. ** Compensation itself cannot determine whether two parties have formed an agency relationship. They can still form an agency relationship even if there is no payment involved.

John is the owner and manager of an apartment building. Concerned about the safety of his tenants, John hires SafetyGuys, Inc., to provide security services in his building. SafetyGuys is a corporation formed for the purpose of providing security guards to private businesses. In making the arrangement, John deals directly w/ SafetyGuys' chief executive officer, a man named Richard, who explains to John that the security guards will be employees of SafetyGuys who will receive their instructions from their supervisor, another SafetyGuys employee. However, any agreement w/ SafetyGuys would be subject to John's specific requests concerning the conduct and duties of the guards, and John could make any further requests as he chose during the life of the agreement. During the first week that a SafetyGuys guard was on duty in John's building, the guard mistook Peter, a tenant, for an intruder. A scuffle ensued and the guard beat Peter severely, causing significant physical injuries. Peter sues John for money damages for his injuries. What is the relationship between John and the security guards? (A) John is their principal and they are his agents. (B) John is their principal and they are his co-agents (C) John and the security guards are arm's-length contract parties. (D) John and the security guards have no legal relationship.

(D) John and the security guards have no legal relationship. ** Of these answers, (D) is the best because it is the only one that could be right. Whether (D) actually states the correct legal relationship is a close question, because it really depends on whether SafetyGuys, Inc. is John's agent. If so, then the guards are his sub-agents. If not, then John and the guards have no relationship. SafetyGuys, Inc. may well not be John's agent because, while he is contractually given some right to specify the guards' conduct, it is not clear that SafetyGuys, Inc. actually agrees to act subject to John's control or on his behalf. That really is a fact question for a trier of facts, but in any case (D) is the only answer here that could be right.

John is the owner and manager of an apartment building. Concerned about the safety of his tenants, John hires SafetyGuys, Inc., to provide security services in his building. SafetyGuys is a corporation formed for the purpose of providing security guards to private businesses. In making the arrangement, John deals directly w/ SafetyGuys' chief executive officer, a man named Richard, who explains to John that the security guards will be employees of SafetyGuys who will receive their instructions from their supervisor, another SafetyGuys employee. However, any agreement w/ SafetyGuys would be subject to John's specific requests concerning the conduct and duties of the guards, and John could make any further requests as he chose during the life of the agreement. During the first week that a SafetyGuys guard was on duty in John's building, the guard mistook Peter, a tenant, for an intruder. A scuffle ensued and the guard beat Peter severely, causing significant physical injuries. Peter sues John for money damages for his injuries. Which of the following facts, if true, would be most helpful to Peter in this action? (A) Richard, the SafteyGuys CEO, has encouraged all his guards "not to spare the rod" - that is, he has taught them that physical force is appropriate for self-defense and whenever the guards' orders are disobeyed. (B) Peter cannot win this action. (C) SafetyGuys is improperly incorporated and has committed federal securities fraud. (D) John failed to inquire of Richard concerning the caliber of SafetyGuys employees.

(D) John failed to inquire of Richard concerning the caliber of SafetyGuys employees.

Hank and his friend Biff have developed a new condiment, "Near-Death Experience Hot Sauce," for sale in local supermarkets. The idea and culinary talent mostly belong to Hank, but they agree they'll make the product using Biff's equipment, in Biff's garage. As to the costs and managerial decisions, the only thing to which they explicitly agree is that it will be "all for one and one for all." Unfortunately, Hank knows first-hand the secret heartbreak of addiction to Unyun® brand snack treats, an artificial onion-ring-shaped snack Hank eats so compulsively that his unpaid tab at Big Billy's Qwikie-Mart is now $5000. Much to his surprise, Biff was recently confronted by Big Billy himself at the garage/workplace where Hank and Biff make their sauce. Big Billy insisted that since he had been unable to find Hank, Biff is obliged to pay off the entire $5000 Unyun® debt. Now, Big Billy's demand was not backed up with a threat of physical violence; Big Billy is only 4' 9". Rather, Big Billy says that unless Biff pays up, he will sue. Hank could have tried to settle his debt with Big Billy by: (A) Assigning to Big Billy his interest in the business's inventory. (B) Assigning to Big Billy his interest in the joint checking account into which Hank and Biff have deposited all of their business's revenues. (C) Allowing Big Billy to take his place in the business completely. (D) None of the above.

(D) None of the above.

Bob runs an auto shop. State and federal law require him to dispose of used motor oil properly, which in Bob's case meant that he had to haul it himself to the dump and pay to have it recycled. Recently Bob was contacted by Phillip, who has begun a new business serving local auto shops by collecting and recycling used oil. Phillip convinces Bob that he can dispose of Bob's used oil more cheaply than he can do it himself, because Phillip can take advantage of volume discounts w/ recycling companies. Bob agrees to the service and agrees to pay Phillip on a monthly basis to pick up all the used oil he collects. The relationship between Bob and Phillip is most likely: (A) Principal and agent in which Bob is principal. (B) Contract in which fiduciary duties apply. (C) Principal and agent in which Phillip is employee. (D) None of the above.

(D) None of the above. ** Nothing in the contract itself imposed fiduciary duties on the parties, and in the absence of agency, mere contracting parties owe no fiduciary duties.

The distinction between "independent contractor agent" and "employee" is most relevant to: (A) Vicarious contract liability. (B) Agent's entitlement to compensation. (C) Both vicarious tort and vicarious contract liability. (D) Respondeat superior.

(D) Respondeat superior.

Dena represents Wacky World, a family entertainment empire that operates several very popular amusement parks, w/ rides and attractions designed around characters from its signature animated films. Wacky World aims to build a new park in Florida, entering head to head competition w/ the well-known theme parks already established in Orlando. It instructs Dena to identify parcels near Orlando that might be stitched together into one block large enough for a new park. She is under orders not to disclose that she represents a principal, and not to make any purchases in excess of $100,000 w/o prior approval. Dena nevertheless jumps at the opportunity to buy two parcels, one from Mary and the other from Robert. She bought Mary's first, even though Mary demanded $125,000, because she was sure Wacky World would subsequently approve it. She then met w/ Robert, who had heard about Dena snooping around and the fairly miraculous price Mary got for her swampland. Robert asked Dena a number of probing questions, confident that she must represent a new park or some other major interest that would probably pay top dollar were its identity revealed. Dena flatly denied it, lying in fact, and insisting that the land was to be her own personal property. In the end, Dena purchased Robert's parcel too, this time paying $130,000. The contract w/ Mary is enforceable against Wacky World because: (A) Dena had actual authority. (B) Dena had apparent authority. (C) Dena made the contract on Wacky World's behalf. (D) The contract is not enforceable.

(D) The contract is not enforceable.

Darya is a driver for Muber, a company that provides an app for on-demand moving services. Her agreement w/ Muber provides that she is an independent contractor and that she will provide her own moving truck and dolly, as well as her own insurance. Muber exercises no control over the way Darya operates her vehicle or the way she loads and unloads it and cannot dictate her routes. Muber does, however, require that Darya be available to accept jobs during the hours stipulated in their agreement and that she accept all requests for jobs that she receives. Which of the following is most true? (A) Darya is not an employee because she agreed to be an independent contractor. (B) Darya is not an employee because she provides her own truck, dolly, and insurance. (C) Darya is not an independent contractor because Muber controls her hours. (D) There is not enough information to answer this question w/ certainty.

(D) There is not enough information to answer this question w/ certainty.

DotBomb, Inc. runs an online retail business through its website, DotBomb.com. In addition to its own sales of a wide range of retail products, DotBomb sells advertising space on its site. It does so through a team of in-house sales people, whom advertisers contact by calling a number on the "Contact Us" page of the website. Often enough, though, DotBomb's sales people make cold calls to potential advertisers, which they can follow up w/ marketing materials including their business cards and correspondence on company letterhead. When DotBomb salespeople make cold calls that result in contracts for the sale of advertising space, the contracts are enforceable because: (A) The salespeople have actual authority, assuming the contracts are for less than 6 months. (B) The salespeople have apparent authority by virtue of the business cards and other materials they can distribute. (C) The salespeople have apparent authority if it is customary in the industry for contracts of this nature to be sold by salespeople w/o prior approval. (D) a and b are both correct. (E) a, b, and c are all correct.

(E) a, b, and c are all correct.

XYZ, Ltd., is a limited partnership with a corporate general partner and 275 limited partners, all of whom are individuals and none of whom have any other relation to the general partner, and all the limited partnership shares are currently traded on the New York Stock Exchange. Mark is one of those limited partners. Two years ago, XYZ had a very tough year, and it failed to distribute any profits at all to its limited partners. Incensed, Mark brings suit, asserting that he was entitled to a distribution of $5,000. What must be true in order for Mark's lawsuit to recover the unpaid distribution to succeed?

*There is no right to interim distributions absent a provision in the limited partnership agreement.* So, in order for Mark to succeed, there must either be such a provision or some other basis on which the refusal breached some enforceable duty.

Fill in the blanks: The _______________ has the power to affect the legal relations of the _______________.

The *agent* has the power to affect the legal relations of the *principal*.

What is the purpose of a drawing account? Does it represent an actual amount of money that the partnership has set aside? Why or why not?

A drawing account is to record the amount of withdrawals a partner makes. The value of a drawing account is always negative, but the absolute value of the drawing account reflects how much a partner has withdrawn rather than something he/she is entitled to receive

Fill in the blanks: An employer is liable for the _______________ of an employee, as well as for the employee's _______________ w/i the scope of employment. A principal is liable only for the _______________ of an independent contractor, and not for the independent contractor's _______________.

An employer is liable for the *contractual liabilities* of an employee, as well as for the employee's *tort liabilities* w/i the scope of employment. A principal is liable only for the *contractual liabilities* of an independent contractor, and not for the independent contractor's *torts*.

True or False: Co-agents represent co-principals.

False. They are two separate ideas. - Co-agents are two or more agents who represent the same principal. - Co-principals are two or more principals who each employ the same agent.

Fill in the blanks: Formation of an agency relationship requires _______________ manifestation of assent that the agent act on the principal's _______________ and subject to the principal's _______________.

Formation of an agency relationship requires *mutual* manifestation of assent that the agent act on the principal's *behalf* and subject to the principal's *control*.

XYZ, Ltd., is a limited partnership with a corporate general partner and 275 limited partners, all of whom are individuals and none of whom have any other relation to the general partner, and all the limited partnership shares are currently traded on the New York Stock Exchange. Mark is one of those limited partners. At the end of its last taxable year, XYZ distributed $10,000 of its profits to Mark. Will those profits be subject to two-tier taxation?

LPs enjoy pass-through taxation unless they are publicly traded - which XYZ is. BUT, exceptions for companies in the exploration, development, or distribution of minerals or natural resources. We do not know what XYZ's business is, so not enough information has been provided to determine whether there is two-tier taxation.

Jim and Joe created a two-member default LLC in an ULLCA state, called Happy Time Amusements, LLC (Happy Time). Happy Time manufactures large, arcade-style video game consoles that it distributes to arcades and other public venues. Happy Time has elected to be taxed as a partnership. After a successful first year of operations, Jim believes he and Joe both ought to receive payments from the substantial profits the firm earned. Joe is opposed, and Jim is prepared to sue. Given the facts stated, is Happy Time a manager-managed or member-managed firm?

Member-managed.

Does a partner's capital account represent an actual amount of money that the partnership has set aside? Why or why not?

No. A capital account is just a way to keep track of a partner's changing financial rights and obligations over time. Absent contrary agreement, the partnership has no obligations to distribute profits or return contributions until dissolution. Moreover, at any given time the amounts contributed to or earned by the partnership may well be invested in non-cash assets, not sitting around as cash.

The balance in a partner's capital account equals his or her initial contribution, plus __________, less __________, and less __________.

The balance in a partner's capital account equals his or her initial contribution, plus *share of any profits*, less *share of any losses*, and less *the amount that the partner has withdrawn*.

ABC, Ltd., a limited partnership formed under a relatively bare-bones partnership agreement that left most terms of the state limited partnership statute unmodified, manufactures gaskets for the automobile industry. Jane is ABC's sole general partner and Paula is its sole limited partner. On March 1, a car maker that is one of ABC's chief customers informs ABC of a defect affecting a large batch of gaskets. The customer demands repayment of their value, whereas ABC happens to be sufficiently low on cash at the moment that satisfying the obligation could make the firm insolvent. Alarmed at these events, on March 3 Paula engages a law firm to represent ABC in what seems to be shaping up to be litigation, and she also makes overtures to the car maker's executives to try to work out a compromise. If the car maker reduces its claim to judgment, and the value of it exceeds the net value of ABC, Ltd., for how much of the excess are Jane and Paula each liable?

They could both be personally liable for the entire amount. Jane has unlimited liability as the sole general partner. Paula, as a limited partner, would ordinarily enjoy limited liability, but here, by hiring an attorney and dealing with the customer on the firm's behalf, may have impermissibly engaged in management and may take on personal liability.

True or False: Sub-agency necessarily involves two agents and two principals.

True. A subagent has two principals - the agent who appoints the subagent and the appointing agent's principal. If A is B's principal and B appoints C as a sub-agent, A and B both are principals and B and C both are agents. Thus, the statement is true even though, in this scenario, there are only three people.

PQR, L.P., is a limited partnership. The agreement of limited partnership provides that the limited partners are entitled to receive annual distributions equal to no less than 20 percent of the amount of their capital contributions. At the end of year one, the distributions are made, leaving PQR, L.P., unable to pay its creditors. If the creditors sue the limited partners, must they return their distributions?

Yes. No distributions can be made if such distributions will make the LP insolvent, and creditors can sue the limited partners for their returns of capital contribution when the LP has insufficient assets

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