A human-resources representative and a job-placement director came together to own and operate a temporary-work agency as a general partnership. Each partner contributed $50,000 in cash to the partnership, for total capital contributions of $100,000. Using these capital contributions, the partnership purchased a small office building out of which to operate. The building’s price was $70,000, and the building was titled in the partnership's name. Sometime later, the human-resources representative purchased a car with her own money and had the car titled in her own name, without any reference to the partnership. The representative occasionally used the car to run errands for the partnership. Otherwise, the representative used the car solely for her own personal and household needs. These events occurred in a jurisdiction that follows the Uniform Partnership Act. Which item is the partnership’s property, if either?

C Both the office building and the car.

D Neither the office building nor the car.

Several dentists worked together in a partnership. When one of the dentists decided to retire, he told the other partners that he was going to transfer his partnership interests to his son, another dentist who had sometimes done independent contractor work for the partnership. Which of the dentist’s partnership interests, if any, is transferable to his son?

B Only the right to share in the partnership’s profits and losses and to receive distributions from the partnership.

A Only the right to participate in the partnership’s management.

C Both the right to participate in the partnership’s management and the right to share in the partnership’s profits and losses and to receive distributions from the partnership.

D None of the dentist’s partnership rights are transferable to his son.

An executive engaged her personal assistant to sell the executive’s personal car, which was a collectible model. The personal assistant placed ads in various collector publications, listing the assistant’s name and contact information. The assistant met with various prospective buyers and told them all that he was selling the car for his boss; however, he did not inform any of the sellers of the boss’s identity. The assistant signed a sales contract for the car while the executive was out of town on vacation. Unbeknownst to the assistant, the executive had passed away suddenly while on vacation several days before the sales contract was signed. The governing jurisdiction used the Restatement’s approach to agency law. Did the personal assistant have actual authority to enter into the sales contract?

A Yes, because the personal assistant had no notice of the executive’s death when he entered the sales contract.

B Yes, because the prospective buyer had no notice of the executive’s death when he entered the sales contract.

C No, because the personal assistant’s authority to bind the executive ended at the executive’s death.

D No, because the identity of the executive was undisclosed.

The board of directors of a dry-cleaning chain was considering whether to open a new location. Not all of the directors on the board agreed on whether the business should expand to the new location. The controlling jurisdiction had adopted the Model Business Corporation Act (MBCA), and the dry-cleaning chain’s articles of incorporation and bylaws did not alter the MBCA’s default rules about meeting and voting. Which of the following accurately states how the board decides whether to open the new location? All directors must meet and vote in favor of the expansion. B. A majority of directors must meet and a majority of those present must vote in favor of the expansion. C. A quorum of directors must meet and all of those present must vote in favor of the expansion. D. At least one-third of directors must meet and a majority of those present must vote in favor of the expansion.

B. A majority of directors must meet and a majority of those present must vote in favor of the expansion.

A. All directors must meet and vote in favor of the expansion.

C. A quorum of directors must meet and all of those present must vote in favor of the expansion.

D. At least one-third of directors must meet and a majority of those present must vote in favor of the expansion.

The board of directors for a bakery corporation created two committees: one to authorize distributions and another to standardize recipes used at all bakery locations nationwide. The bakery was incorporated in a state that had adopted the Model Business Corporation Act (MBCA). Which of the following committees has a valid delegation of authority from the board of directors?

B. Only the committee tasked with standardizing recipes.

A. Only the committee tasked with authorizing distributions.

C. Both the committee tasked with authorizing distributions and the committee tasked with standardizing recipes.

D. Neither the committee tasked with authorizing distributions nor the committee tasked with standardizing recipes.

A dog-food corporation’s articles of incorporation listed its purpose as the development and sale of nutritious dog food. The corporation’s new chief executive officer (CEO) wanted to expand the business into new areas, including dog toys and dog-hygiene products. The CEO consulted its general counsel for advice on the corporation’s authority to expand into these new areas. The corporation was organized in a state that had adopted the Model Business Corporation Act (MBCA). Which of the following pieces of advice from the general counsel is most accurate? The corporation has authority to act only within the explicit specifications of its articles of incorporation. B. The corporation must obtain shareholder permission to act outside the purpose stated in its articles of incorporation. C. The corporation has authority to act only in furtherance of its stated business purpose. D. The corporation has authority to act in any lawful business activity.

D. The corporation has authority to act in any lawful business activity.

A. The corporation has authority to act only within the explicit specifications of its articles of incorporation.

B. The corporation must obtain shareholder permission to act outside the purpose stated in its articles of incorporation.

C. The corporation has authority to act only in furtherance of its stated business purpose.

A punk band agreed to form a partnership between its four members in order to collect royalties and sell merchandise. After going on tour for two weeks, the bass player complained that he was not being paid according to the partnership agreement. The band told the bass player that he was not a partner. The bass player was the 11-year-old brother of the guitarist. When the partnership agreement was being discussed, the bass player was at the meeting but never stated his consent to join the partnership, and there was no written agreement for him to sign. Finally, the bass player did not put any money into the partnership because he did not have any. The bass player sued the band, arguing that he was a partner entitled to payment. If the court finds that the bass player is not a partner in the partnership, what is its LEAST likely reason for doing so? The bass player did not consent to be a partner. B. There is no written partnership agreement between the band members. C. The bass player is a minor. D. The bass player did not make a capital contribution to the partnership.

B. There is no written partnership agreement between the band members.

A. The bass player did not consent to be a partner.

D. The bass player did not make a capital contribution to the partnership.

On January 1, Larry, Moe, and Bearle sign a written “partnership agreement” according to which they shall form, own, and operate a book store. The agreement provides that each of the three shall receive one-third of the profits. The agreement also contains the following provisions: “This partnership shall last ten years. However, any partner can be expelled at any time if the other partners unanimously agree that he or she should be expelled.” In the following months, Larry complains regularly about the state of the firm’s business. Moe and Bearle are more optimistic, and they grow tired of Larry’s constant complaints. Therefore, on December 31, when Larry, Moe, and Bearle meet, Moe and Bearle vote to expel Larry. Which, if any, of the following statements is correct?

D. Larry has been dissociated from the partnership, and the other partners did not violate their fiduciary duties.

A. Larry has been dissociated from the partnership, but the other two partners violated their fiduciary duties when they expelled Larry.

B. Larry has not been dissociated from the partnership, but only because the other two partners violated their fiduciary duties when they expelled Larry.

C. Larry has not been dissociated from the partnership because partners cannot be expelled without good cause, and this rule is mandatory.

Giles and Anya own and operate a magic shop together. The statement of partnership authority that they have filed makes it clear that under the partnership agreement neither Anya nor Giles is allowed to enter into contracts for more than $400. One day, Giles, claiming to act for the partnership, enters into a contract with Willow according to which the partnership will pay Willow $450 for two secondhand spellbooks. Assume that Willow did not know and was not notified of the restriction on Giles’ authority to act for the partnership. Furthermore, assume that the case is governed by the RUPA. Has the purchase created a partnership liability? AYes, because the partnership agreement cannot limit a partner’s authority to enter into transactions in the ordinary course of business. BYes, because the statement of partnership authority cannot be invoked to Willow’s detriment. CNo, because the partnership agreement limited the authority of the partners. This would be true even if no statement of partnership authority had been filed. DNo, but only because of the statement of partnership authority.

B. Yes, because the statement of partnership authority cannot be invoked to Willow’s detriment.

A. Yes, because the partnership agreement cannot limit a partner’s authority to enter into transactions in the ordinary course of business.

CNo, because the partnership agreement limited the authority of the partners. This would be true even if no statement of partnership authority had been filed..

D. No, but only because of the statement of partnership authority.

On January 1, Bruce, Arnold, Denzel, Jackie, and Sylvester start a restaurant together. They have agreed to keep the firm running until December 31. However, on January 11, Bruce dies in a high-speed car chase. At a meeting on January 12, Denzel and Jackie want to keep going, but Arnold and Sylvester express their wish to wind up the firm’s business. On January 20, Jackie buys twenty new restaurant tables from Tom. Tom has been familiar with the restaurant since it was formed. Moreover, at the moment of the purchase, Tom does not know that Bruce has died, or that Arnold and Sylvester have expressed their wish to wind up the firm’s business. As no news of the events at the restaurant was mentioned in any newspaper, Tom could not have been expected to know more than he does about the matter. Does the contract with Tom still bind the partnership? Assume that the RUPA is the applicable law. AThe contract with Tom does not bind the partnership because the partnership has been dissolved and therefore no longer exists. BThe contract with Tom does not bind the partnership. Even though the partnership did exist at the moment of the transaction, Jackie did not have the authority to bind the partnership. CThe contract with Tom binds the partnership but only because Tom did not know, and did not have reason to know, of the partnership’s dissolution. DThe contract with Tom binds the partnership, and the partnership has not been dissolved.

C The contract with Tom binds the partnership but only because Tom did not know, and did not have reason to know, of the partnership’s dissolution.

A The contract with Tom does not bind the partnership because the partnership has been dissolved and therefore no longer exists.

B The contract with Tom does not bind the partnership. Even though the partnership did exist at the moment of the transaction, Jackie did not have the authority to bind the partnership.

D The contract with Tom binds the partnership, and the partnership has not been dissolved.

Business Orgs Review Quiz

1.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A wealthy family employed a family butler. The sixteen-year-old son instructed the butler to put a deposit on a car and sign a purchase agreement on the son’s behalf. The butler did so. A week later, the car dealership sent a text for the son to pick up the car, but the son had changed his mind and refused to perform on the contract.
Can the car dealership enforce the purchase agreement signed by the butler on the son’s behalf?

A

No, because the son is a minor.

B

No, because the butler acted outside his scope of agency by providing agency services for the son beyond the household.

C. Yes, because the butler properly acted as an authorized agent of the son.

D. Yes, because the butler properly acted as an authorized agent of the couple, who are authorized agents of the son like any other parents.

Answer explanation

Answer option A is correct. The general rule is that a minor may disaffirm an agency agreement and any contract that an agent enters into with a third party on behalf of the minor. Here, the son may disclaim the purchase agreement and may also disclaim his agency relationship with the butler.

2.

FILL IN THE BLANK QUESTION

1 min • 1 pt

_________ is a fiduciary relationship between an agent and his/her/its principal.

3.

OPEN ENDED QUESTION

1 min • 1 pt

Type your definition of agency

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4.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Property acquired by the partnership is the property of

Each individual partner

The partnership

The partner who invested the most capital

The bank

Answer explanation

Property is partnership property if acquired in the partnership's name.
Property is presumed to be partnership property if purchased using partnership assets (even if it is not purchased in the partnership's name)

5.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

A partnership may add a partner by

A. means provided for in the partnership agreement

B. Unanimous consent of other partners

C. Majority consent of other partners

D. Both A and B are Correct

6.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A woman made novelty tote bags at home and sold the bags over the Internet. The woman obtained all required licenses and permits for the tote-bag business. Otherwise, the woman took no formal steps and filed no documents with any government agency concerning the business. Also, the woman hired a friend to help her make the bags. As compensation for her work making the bags, the friend received a fixed hourly wage, plus a percentage of profits. At all times, the woman owned, operated, and exclusively controlled all aspects of the business.
Is the friend a partner in the tote-bag business?

A. No, because the tote-bag business is a sole proprietorship, and the woman is the owner.

B. No, because the friend was never named as a partner in any express written or oral partnership agreement.

C. Yes, because the friend received a percentage of profits.

D. Yes, because the friend contributed services to the business.

Answer explanation

The friend is not a partner, because the tote-bag business is a sole proprietorship owned by the woman. In a partnership, multiple people, called partners, carry on a for-profit business as co-owners. By contrast, in a sole proprietorship, just one person owns, operates, and exclusively controls all aspects of the business. No formal steps are necessary to form a sole proprietorship, like filing documents with a government agency.

7.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A law firm was organized as a general partnership and had five partners. The firm's written partnership agreement did not address the admission of a new partner. Among the firm's employees was one associate who did varying work for all the partners. One day, the partners held a meeting to decide whether to admit the associate as a partner of the firm. Four partners wanted to make the associate a partner by allowing the associate to buy an equity stake the firm at a very favorable price, which the associate was ready, willing, and able to pay. However, one partner opposed making the associate a partner.
May the associate be made a partner of the firm?

A. Yes, because a majority of the existing partners wanted to make the associate a partner.

B. Yes, because the associate has made a capital contribution to the firm.

C. No, because one existing partner opposed making the associate a partner.

D. No, because the associate has not made a capital contribution to the firm.

Answer explanation

Answer option C is correct. In a general partnership, the default rule is that no one may be admitted as a new partner without the consent of all existing partners. However, this rule may be changed by the governing partnership agreement.

8.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

An uncle and his nephew jointly owned a parcel of downtown storefront property. The uncle owned and operated a hardware store out of the property. In exchange for the exclusive use of the property, the uncle paid the nephew 10 percent of the hardware store's profits. The nephew also worked part-time as a cashier for the hardware store, receiving an hourly wage. In addition, the uncle's will provided that, upon the uncle's death, the nephew would take the hardware store's business in its entirety. One day, a customer was injured by a defective tool that she purchased at the hardware store. The customer sued the uncle for her injuries, and joined the nephew as a defendant. The customer contended that the nephew was liable for her injuries because the nephew and the uncle were partners in the hardware store’s business.
Which of the following facts best supports the customer's position that the nephew was the uncle's partner in the hardware store?

A. The nephew owned the storefront property jointly with the uncle.

B. The nephew received 10 percent of the hardware store's profits.

C. The nephew was a part-time cashier for the hardware store.

D. The uncle's will left the hardware store's entire business to the nephew.

Answer explanation

Answer option B is correct. Although it would not make a strong case for finding that the nephew was the uncle's partner in the hardware store, the fact that the nephew receives a percentage of the store's profits would best support the customer's argument that the nephew is a general partner in the hardware store. In general, a partnership forms if at least two people agree to carry on a for-profit business together as co-owners.

9.

MULTIPLE CHOICE QUESTION

3 mins • 1 pt

A brother and sister formed a general partnership with each other to own and operate a duck farm. The partner’s total capital contributions were $100,000, of which the brother contributed $70,000, and the sister contributed $30,000. The partnership agreement between the brother and sister provided that each partner's share of the profits would correspond to his or her percentage of the total capital contributions. The agreement did not address the allocation of any partnership losses. During the first year of operations, the duck farm sustained a loss of $10,000. The bother contended that he and the sister should each bear $5,000 of the loss. However, the sister felt that she should bear only $3,000 of the loss, and the brother should bear the remaining $7,000. The duck farm was located in a jurisdiction that followed the Uniform Partnership Act.
Whose position on allocation of the $10,000 loss is correct?

A. The brother's position is correct, because the partnership agreement does not address allocation of losses.

B. The brother's position is correct, because the law allocates losses equally among partners despite the terms of any partnership agreement.

C. The sister's position is correct, because the partnership agreement allocates profits according to the partners' capital contributions.

D. The sister's position is correct, because the law allocates partnership losses according to the partners' capital contributions despite the terms of any partnership agreement.

Answer explanation

Answer option C is correct. The sister is right that her share of the $10,000 loss is $3,000, and the brother's share is $7,000. In a general partnership, the allocation of the partnership’s profits and losses is governed first by the terms of any applicable partnership agreement. If the partnership agreement does not address the allocation of profits, then the law apportions profits equally among the partners regardless of capital contribution. If the partnership agreement does not allocate losses, then the law apportions losses among the partners in the same manner as profits.

10.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A software engineer and a writer formed a general partnership with each other to develop, market, and sell video games. The software engineer oversaw the technical aspects of the games. The writer was in charge of the creative aspects, like developing the games' stories, characters, and settings. The partnership's first release was an action role-playing game. The game proved very successful, and the engineer and writer decided that the partnership should focus solely on action role-playing games. Later, while still a partner with the software engineer, the writer went to work as creative director for a corporation. The corporation's business was to develop, market, and sell video games, with emphasis on action role-playing games.
Which fiduciary duty or duties to the partnership has the writer most likely violated?

A. The duty of care.

B The duty of loyalty.

C Both the duty of care and the duty of loyalty.

D Neither the duty of care nor the duty of loyalty.

Answer explanation

Answer option B is correct. The writer has most likely breached the fiduciary duty of loyalty to the partnership. Every partner in a general partnership owes a fiduciary duty of loyalty to the partnership itself and to the other partners. In general, the duty of loyalty means that each partner must: (1) support the partnership and (2) act for its benefit and in its best interests. Among other things, the duty of loyalty forbids a partner from competing with the partnership.

Business Orgs Review

28 questions

Answer option A is correct. The general rule is that a minor may disaffirm an agency agreement and any contract that an agent enters into with a third party on behalf of the minor. Here, the son may disclaim the purchase agreement and may also disclaim his agency relationship with the butler.

_________ is a fiduciary relationship between an agent and his/her/its principal.

Type your definition of agency

Property acquired by the partnership is the property of

Property is partnership property if acquired in the partnership's name.
Property is presumed to be partnership property if purchased using partnership assets (even if it is not purchased in the partnership's name)

A partnership may add a partner by

Answer option C is correct. In a general partnership, the default rule is that no one may be admitted as a new partner without the consent of all existing partners. However, this rule may be changed by the governing partnership agreement.

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Business Orgs Review

28 questions

Answer option A is correct. The general rule is that a minor may disaffirm an agency agreement and any contract that an agent enters into with a third party on behalf of the minor. Here, the son may disclaim the purchase agreement and may also disclaim his agency relationship with the butler.

_________ is a fiduciary relationship between an agent and his/her/its principal.​

Type your definition of agency

Property acquired by the partnership is the property of

Property is partnership property if acquired in the partnership's name.Property is presumed to be partnership property if purchased using partnership assets (even if it is not purchased in the partnership's name)​

A partnership may add a partner by

Answer option C is correct. In a general partnership, the default rule is that no one may be admitted as a new partner without the consent of all existing partners. However, this rule may be changed by the governing partnership agreement. ​

Create a free account and access millions of resources

Similar Resources on Wayground

Popular Resources on Wayground

_________ is a fiduciary relationship between an agent and his/her/its principal.

Property is partnership property if acquired in the partnership's name.
Property is presumed to be partnership property if purchased using partnership assets (even if it is not purchased in the partnership's name)

Answer option C is correct. In a general partnership, the default rule is that no one may be admitted as a new partner without the consent of all existing partners. However, this rule may be changed by the governing partnership agreement.