Smar Bar Prep:  Smart_Review_and_Issue_Spotting_Feb_2020 (Organised By Subject 2004-2019) For The UBE/MEE

February 2019, Essay 3
AGENCY & PARTNERSHIPS [& LLC’S]* QUESTION
Five years ago, three radiologists—Carol, Jean, and Pat—opened a radiology practice together.
They agreed to call their business “Radiology Services,” to split the profits equally, and to run the
practice together in a manner that would be competitive. Toward that end, they purchased stateof-the-art radiology imaging equipment comparable to that of other radiology practices in the
community.
Shortly after opening the practice, Carol, Jean, and Pat retained an attorney to organize the practice
as a limited liability company. The attorney prepared all the necessary documents and forwarded
the documents to Carol, Jean, and Pat for signature. However, they were so involved in their
radiology practice that they forgot to sign the documents, and they have never done so.
Four months ago, Carol suggested to Jean and Pat that the practice replace some of the imaging
equipment. Jean was worried about overspending on imaging equipment, but she did not express
her concern to Carol and Pat.
Three months ago, Carol, without discussing the matter further with either Jean or Pat or obtaining
their consent, purchased for the practice a $400,000 state-of-the-art imaging machine like those
recently acquired by other radiology practices in the community.
After the purchase but prior to delivery, Jean learned what Carol had done and was furious. Jean
did not believe the practice could afford such an expensive machine. When Jean confronted Carol,
Carol said, “Too bad, it’s a done deal—get over it.” At that, Jean responded, “That’s it. I’ve had
enough. This machine was purchased without my consent. It’s a terrible idea. I’m out of here and
never coming back. Just give me my share of the value of the practice.” Carol responded, “Fine
with me.” Carol and Pat subsequently agreed to continue their participation in Radiology Services
without Jean.
Radiology Services is in a jurisdiction that has adopted both the Revised Uniform Partnership Act
(1997, as amended) and the Uniform Limited Liability Company Act (2006, as amended).
1. What type of business entity is Radiology Services? Explain.
2. Did Carol have the authority to purchase the imaging machine without the consent of Jean
and Pat? Explain.
3. Did Jean’s statements to Carol constitute a withdrawal from Radiology Services? Explain.
4. Were Jean’s statements sufficient to entitle her to receive a buyout payment from Radiology
Services for her interest in the practice? Explain.
*NOTE: In the Feb. 2019 MEE Questions & Analyses, the examiners titled this question “Agency &
Partnership”. However, Partnership & LLC principles of law were tested.
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SMART ANALYSIS
Legal Problems
Point One (20%) What type of business entity is Radiology Services? Radiology
Services is a general partnership. Despite their intentions, Carol,
Pat, and Jean never formed a limited liability company.
Point Two (30%) Did Carol have the authority to purchase the imaging machine
without the consent of Jean and Pat? Carol had the authority to
purchase the imaging machine without the consent of Jean and Pat
because it appears that Carol purchased the machine in the ordinary
course of business and was unaware of Jean’s concerns about
purchasing expensive imaging equipment.
Point Three (20%) Did Jean’s statements to Carol constitute a withdrawal from
Radiology Services? Jean’s oral statement to Carol, “I’m out of
here,” resulted in Jean’s dissociation from the partnership.
Point Four (30%) Were Jean’s statements sufficient to entitle her to receive a
buyout payment from Radiology Services for her interest in the
practice? Because Carol and Pat agreed to continue the
partnership, Jean’s dissociation did not result in the dissolution and
winding up of the partnership. Instead, Jean is entitled to receive a
buyout price for her partnership interest 120 days after she makes
written demand for payment. Because her demand was not in
writing, the partnership has no specified time in which to make
payment.
Summary
Radiology Services is an “at-will” general partnership because Carol, Jean, and Pat agreed to
share profits and operate the business together without specifying a specific term. They did not
form a limited liability company (LLC), as they intended, because no documentation to create
an LLC was signed or filed.
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As a partner of the general partnership, Carol had the authority to purchase the imaging machine
on behalf of the partnership without the consent of either Jean or Pat because each partner has
the authority to conduct partnership business. And while a partner may be liable to the other
partners for a purchase that exceeds her authority, here Jean likely has no claim against Carol
for purchasing the machine without the consent of Jean and Pat because the purchase of the
imaging machine was most likely in the ordinary course of the business of the partnership.
Jean’s oral statements to Carol stating her will to withdraw from Radiology Services resulted in
her dissociation from the partnership, and because the partnership was “at will,” her dissociation
was not wrongful.
Because Carol and Pat agreed to continue the partnership, Jean’s dissociation did not result in
the dissolution and winding up of the partnership. Instead, Jean is entitled to receive a buyout
payment from Radiology Services for her one-third partnership interest 120 days after making
a written demand for payment. Because Jean did not make a written demand, the partnership has
no specified time in which to pay her the buyout price.
[NOTE: General partnerships are governed by either the Revised Uniform Partnership Act
(RUPA) (1997, as amended), the Revised Uniform Partnership Act (1997), or the Uniform
Partnership Act (1914) (UPA). The 1997 act, which the Uniform Law Commission amended in
both 2011 and 2013 as part of its harmonization project, applies in all states (sometimes with
the amendments) except for Georgia, Indiana, Louisiana, Massachusetts, Michigan, Missouri,
New Hampshire, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina,
and Wisconsin, which continue to use versions of the UPA (1914). Because the facts state that
Radiology Services is in a jurisdiction that has adopted the RUPA (1997, as amended), citations
to the other acts are omitted, although the results under those acts are similar.
The Uniform Limited Liability Company Act (2006, as amended) contains principles that are
widely adopted in LLC law. In all states, articles of organization must be signed and filed to
create an LLC.]
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Feb 2018, Essay 6
PARTNERSHIPS [AGENCY*] QUESTION
A man and a woman were equal partners in a neighborhood natural-foods store. The store had been
at the same location for many years and had developed a loyal following. Under their informal
arrangement, the man had managed the business and the woman had supplied capital to the
business as needed.
They leased the building in which the store was located and had regularly sought to purchase the
building for the partnership, but the landlord had always refused. Six months ago, however, the
landlord called the man and said, “I thought you would want to know that I’m planning to sell the
building.” The next day, the man sent the woman an email: “I am leaving our partnership. I will
wind up the business and send you a check for your half share.” Without informing the woman,
the man then contacted the landlord and offered to buy the building. The landlord accepted, and
the two entered into a binding purchase agreement. One month later, the man took title to the
building.
Three months ago, the man sent the woman a check for half of the store’s inventory and other
business assets. Instead of cashing the check, the woman sent the man an email stating that she
regarded the partnership as still in existence and demanded that the man convey title to the building
to the partnership. The man replied that their partnership was dissolved and that he had moved on.
He then began to operate the store as a natural-foods store with a name different from that of the
original store, but with the same product offerings and the same employees.
The woman has sued the man for withdrawing from the partnership and for breaching his duties
by buying the building from the landlord.
1. Did the man properly withdraw from the partnership? Explain.
2. Assuming that the man’s withdrawal was not wrongful, what was the legal effect of the man’s
withdrawal from the partnership? Explain.
3. What duties, if any, did the man breach by purchasing the building? Explain.
*NOTE: In the Feb. 2018 MEE Questions & Analyses, the examiners titled this question “Agency”.
However, only Partnership principles of law were tested.
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SMART ANALYSIS
Legal Problems
Point One (25%) May a partner properly withdraw from a partnership that has
no definite term or specific undertaking? The man’s email to the
woman constituted a withdrawal from the partnership and did not
violate the partnership agreement.
Point Two (25%) What is the legal effect of a partner’s withdrawal from an atwill partnership— both on the partnership and on the
withdrawing partner’s duties? The man’s withdrawal from the
partnership caused the partnership to be dissolved, but did not
terminate the man’s duties to the woman during the winding-up
process.
Point Three (50%) What are the duties of a withdrawing partner during the
winding up of a dissolved partnership with respect to business
opportunities that came to the partner’s attention during the
partnership? During the winding-up process, the man owed the
woman a fiduciary duty to account to the partnership for any benefit
derived from the appropriation of a partnership opportunity, as well
as duties of good faith and fair dealing. The man’s purchase of the
building for himself, without telling the woman, breached these
duties.
Summary
The man had the right to withdraw from the partnership, and his email stating that he was “leaving”
expressed his will to withdraw. His withdrawal was not wrongful, given that the partnership had
no definite term or particular undertaking.
The man’s withdrawal from the partnership caused the partnership to be dissolved, but this
dissolution did not terminate the man’s duties to the woman during the winding up of the
partnership business. During the winding up of the partnership business, the man continued to owe
fiduciary duties to the partnership and the woman, as well as duties of good faith and fair dealing.
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The opportunity to purchase the building was a partnership opportunity because of the
partnership’s prior interest in owning the building and because the opportunity was presented to
the man while the partnership was still in existence and prior to its dissolution. The man’s purchase
of the building violated his duty of loyalty not to appropriate partnership opportunities during the
winding-up process, and the purchase was not in good faith because the man failed to inform the
woman of the opportunity when he learned of it before he withdrew from the partnership.
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February 2017, Essay 5
AGENCY QUESTION
An inventor retained a woman to act as his agent to purchase 25 computer chips, 25 blue lenses,
and 25 lawn mower shutoff switches. The inventor told her to purchase only:
• Series A computer chips,
• blue lenses that cost no more than $300 each, and
• shutoff switches that could shut down a lawn mower in less than one second after the
mower hits a foreign object.
The woman contacted a chip manufacturer to purchase the Series A computer chips. She told
the manufacturer that she was the inventor’s agent and that she wanted to purchase 25 Series A
computer chips on his behalf. The manufacturer told her that the Series A chips cost $800 each
but that she could buy Series B chips, with functionality similar to that of the Series A chips, for
only $90 each. Without discussing this with the inventor, the woman agreed to purchase 25
Series B chips, signing the contract with the chip manufacturer “as agent” of the inventor. The
Series B chips were shipped to her, but when she then took them to the inventor and explained
what a great deal she had gotten, the inventor refused to accept them. He has also refused to pay
the manufacturer for them.
The woman also contacted a lens manufacturer for the purchase of the blue lenses. She signed
a contract in her name alone for the purchase of 25 blue lenses at $295 per lens. She did not tell
the lens manufacturer that she was acting as anyone’s agent. The lenses were shipped to her, but
when she took them to the inventor, he refused to accept them because he had decided that it
would be better to use red lenses. The inventor has refused to pay for the blue lenses.
The woman also contacted a switch manufacturer to purchase shutoff switches. She signed a
contract in her name alone for switches that would shut down a lawn mower in less than five
seconds, a substantially slower reaction time than the inventor had specified to her. When she
signed the contract, she told the manufacturer that she was acting as someone’s agent but did
not disclose the identity of her principal. The switches were shipped to her. Although the
inventor recognized that the switches were not what the woman had been told to buy, he
nonetheless used them to build lawn mowers, but now refuses to pay the manufacturer for them.
All elements of contract formation and enforceability are satisfied with respect to each contract.
1. Who is liable to the chip manufacturer: the inventor, the woman, or both? Explain.
2. Who is liable to the blue-lens manufacturer: the inventor, the woman, or both? Explain.
3. Who is liable to the shutoff-switch manufacturer: the inventor, the woman, or both?
Explain.
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SMART ANALYSIS
Legal Problems
Point One (30%) When an agent enters into a contract with a third party on
behalf of a disclosed principal on terms that were not authorized
by the principal, who is liable to the third party: the agent, the
principal, or both? With respect to the chips, the woman (agent)
is liable on the contract, but the inventor (principal) is not because
the woman, notwithstanding her disclosure that she was acting as
his agent, lacked actual or apparent authority to enter into the
contract on behalf of the inventor with the chip manufacturer.
Point Two (30%) When an agent enters into a contract with a third party on
behalf of an undisclosed principal on terms authorized by the
principal, who is liable to the third party if the principal later
repudiates the contract: the agent, the principal, or both? Both
the inventor and the woman are liable to the blue-lens manufacturer
on the contract for blue lenses. The inventor is liable because the
woman acted with actual authority; the woman is liable as a party
to the contract because the principal was undisclosed.
Point Three (40%) When an agent enters into a contract with a third party on
behalf of a partially disclosed principal for goods different from
those authorized by the principal, who is liable to the third party
if the principal accepts the different goods: the agent, the
principal, or both? Both the inventor and the woman are liable on
the contract for the shutoff switches. The inventor is liable by
ratifying the contract; the woman is liable because she acted on
behalf of a partially disclosed principal, and there is no indication
that the third party agreed to look solely to the partially disclosed
principal for payment.
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Summary
As a general matter, an agent binds a principal to a contract, whether or not the principal is
disclosed to the third party, if the agent had either actual or apparent authority to enter into the
contract. Without that authority, the agent alone is liable on the contract unless the principal
becomes liable by subsequently ratifying the contract. An agent acting with authority is not
liable on the contract if the principal’s identity is disclosed to the third party, but is liable if the
principal’s identity is not disclosed or only partially disclosed, unless the contract provides
otherwise.
Applying these principles here, because the woman disclosed that she was acting for the inventor
on the chip contract, but purchased different chips from those specified by the inventor, the
inventor is not liable because the woman did not have authority to enter into the contract; the
woman is also liable on the chip contract because she impliedly warranted that she had authority.
Both the woman and the inventor are liable on the blue-lens contract. Although the woman did
not disclose that she was acting for the inventor on the blue-lens contract, the inventor is liable
on this contract because he had given the woman actual authority to buy the blue lenses on his
behalf; the woman is also liable because she signed the contract in her own name.
Finally, both the inventor and the woman are liable on the shutoff-switch contract that the woman
entered into on behalf of the partially disclosed inventor, even though the switches were different
from those authorized. The inventor became liable by ratifying the contract when he accepted the
different switches, and the woman became liable by signing a contract on behalf of a partially
disclosed principal.
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February 2016, Essay 3
AGENCY & PARTNERSHIP QUESTION
Four years ago, a man and a woman properly formed a partnership to own and manage a multimillion-dollar apartment complex. They qualified the partnership as a limited liability
partnership (LLP). The complex required a good deal of maintenance, and they anticipated
regular borrowings of up to $25,000 to cover maintenance expenses as is customary in this
industry.
While the partnership agreement contained no limitations on the authority of the partners to
act for LLP, two months after LLP was formed the man and the woman agreed that neither
partner would have authority to incur indebtedness on behalf of LLP in excess of $10,000
without the consent of the other partner. They then signed a statement of partnership authority
describing this limitation, but this statement was never filed.
Over the next two years, the man regularly borrowed amounts from LLP’s bank to cover
the complex’s ordinary maintenance expenses. The amounts borrowed ranged from $5,000
to $9,000, and the man did not ask for the woman’s consent when he entered into these loans
on behalf of LLP.
Earlier this year, the man, without the woman’s knowledge, asked the bank to loan $25,000
to LLP. The man told the bank’s loan officer that the funds would be used for ordinary
maintenance of the apartment complex. This amount, though greater than LLP’s previous
borrowings from the bank for maintenance, was in line with loans made by the bank for
maintenance to other similar apartment complexes.
When the loan officer asked the man if he had authority to borrow the money on behalf of LLP,
the man handed the loan officer a copy of the partnership agreement. The man, however, did
not give the officer a copy of the statement of partnership authority, nor did he tell the loan
officer that it existed. The bank had no actual knowledge of the limitation on the man’s
authority to obtain the loan on behalf of LLP.
Without contacting the woman, the bank loaned $25,000 to LLP. The loan agreement was signed
only by the man and the bank’s loan officer. The woman, though she had knowledge of the
earlier borrowings from the bank, had no knowledge of this loan.
The man then used the $25,000 to pay his personal gambling debts. LLP has not made any
payments to the bank on the loan.
1. Is LLP liable to the bank on the loan? Explain.
2. Is the woman personally liable to the bank on the loan? Explain.
3. Is the man liable for breaching his fiduciary duties and, if so, to whom is he
liable? Explain.
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SMART ANALYSIS
Legal Problems
Point One (30%)  | Is LLP liable to the bank on the loan undertaken by a partner
acting beyond his actual authority, but within thepartnership’s ordinary course of business?
LLP is liable to the bank on the loan because the man, as a
partner of LLP, had apparent authority.
Point Two (30%)  | Is the woman personally liable to the bank on the loan it made
to LLP?The woman is not personally liable to the bank on its claim under
the loan agreement.
Point Three(a) (20%) Did the man breach his fiduciary duties by entering into an
unauthorized transaction and appropriating partnership
assets for his own use?
By improperly obtaining the bank loan and then
misappropriating the loan proceeds, the man breached his
fiduciary duty of loyalty and his duty of care.
Point Three(b) (20%)  | If the man breached any fiduciary duties, does the woman
and/or LLP have a claim against the man?The woman (or the partnership) can bring a direct action against
the man for breaching his duties of loyalty and care. The woman
can also bring an accounting action seeking to have the man pay
damages to the partnership for his loyalty breach.
Summary
Although the man had no actual authority to enter into the loan with the bank, the man was
acting within the partnership’s ordinary course of business and thus had apparent authority to
bind LLP on the loan. Thus, LLP is liable on the loan.
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ship does not incur personal liability on partnership obligations solely by reason of being
a partner. The woman did not engage in any misconduct that would warrant an exception to
this rule of limited liability.
The man breached his fiduciary duties (duty of care and duty of loyalty) when he wrongfully
incurred LLP debt and misappropriated the $25,000 for his personal use. Either the woman
or the partnership can maintain an action against the man to recover damages for losses
resulting from the man’s breach. The woman can also bring an accounting action to have the
partnership recover damages for losses resulting from the man’s breach of his duty of loyalty.
[NOTE: Because this is a limited liability partnership, the question is analyzed under the Revised
Uniform Partnership Act, RUPA (1997, as revised 2013), not the prior act, Uniform Partnership
Act, UPA (1914). RUPA has been adopted in the following MEE jurisdictions: Alabama,
Arizona, Arkansas, Colorado, Connecticut, the District of Columbia, Hawaii, Idaho, Illinois,
Iowa, Kansas, Kentucky, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota,
Oregon, South Dakota, and West Virginia. The analysis would be substantially the same in states
that continue to use UPA (1914) and have adopted additional provisions for limited liability
partnerships.]
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February 2015, Essay 1
AGENCY/TORTS QUESTION
For many years, a furniture store employed drivers to deliver furniture to its customers in vans
it owned.
Several months ago, however, the store decided to terminate the employment of all its drivers.
At the same time, the store offered each driver the opportunity to enter into a contract to deliver
furniture for the store as an independent contractor. The proposed contract, labeled
“IndependentContractor Agreement,” provided that each driver would
(1) provide a van for making deliveries;
(2) use the van only to deliver furniture for the store during normal business hours
and according to the store’s delivery schedule; and
(3) receive a flat hourly payment based upon 40 work hours per week,
without employee benefits.
The proposed Independent-Contractor Agreement also specified that the store would not withhold income taxes or Social Security contributions from payments to the driver.
The store also offered each driver the opportunity to lease a delivery van from the store at
a below-market rate. The proposed lease required the driver to procure vehicle liability
insurance. It also specified that the store would reimburse the driver for fuel and liability
insurance and that the lease would terminate immediately upon termination of the driver’s
contract to deliver furniture for the store.
All the drivers who had been employed by the store agreed to continue their relationships with
the store and executed both an Independent-Contractor Agreement and a lease agreement for
a van.
Three months ago, a driver delivered furniture to a longtime customer of the store during normal
business hours. The customer asked the driver to take a television to her sister’s home, located
six blocks from the driver’s next delivery, and offered him a $10 tip to do so. The driver agreed,
anticipating that this delivery would add no more than half an hour to his workday.
In violation of a local traffic ordinance, the driver double-parked the delivery van in front of
the sister’s house to unload the television. A few minutes later, while the driver was in the
sister’s house, a car swerved to avoid the delivery van and skidded into oncoming traffic. The
car was struck by a garbage truck, and a passenger in the car was seriously injured.
The passenger has brought a tort action against the store to recover damages for injuries resulting
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from the driver’s conduct. Pretrial discovery has revealed that delivery vans routinely doublepark; survey evidence suggests that, in urban areas like this one, 80% of deliveries are made
while the delivery van is double-parked.
In this jurisdiction, there is no law that imposes liability on a vehicle owner for the tortious acts
of a driver of that vehicle solely on the basis of vehicle ownership.
The store argues that it is not liable for the passenger’s injuries because (a) the driver is an
independent contractor; (b) even if the driver is not an independent contractor, the driver was
not making a delivery for the store when the accident occurred; and (c) the driver himself could
not be found liable for the passenger’s injuries.
1. Evaluate each of the store’s three arguments against liability.
2. Assuming that the store is liable to the passenger for the passenger’s injuries, what rights,
if any, does the store have against the driver? Explain.
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SMART ANALYSIS
Legal Problems
Point One (30%)  | Is the driver an independent contractor or an employee of the
store? Although the store characterized the driver as anindependent contractor, the store had the right to control his
conduct and thus the driver was an employee of the store.
Point Two (30%) Did the driver’s violation of the store’s delivery rules place his
act outside the scope of his employment? The driver was acting
within the scope of his employment because his conduct was
substantially similar to authorized acts, and the driver did not
deviate substantially from his route or likely consume a substantial
amount of time by deviating.
Point Three (25%) May the driver be found liable to the passenger in the car for
personal injuries resulting from his violation of a doubleparking ordinance? The driver may be found negligent per se in
causing the passenger’s injuries because a purpose of the doubleparking prohibition was almost certainly to prevent traffic
accidents. The fact that the driver’s violation of the statute
conformed to custom does not alter this conclusion.
Point Four (15%) If the store pays damages to the passenger, is it entitled to
indemnification from the driver? If the driver’s negligence
subjects the store to liability and the store pays damages to the
passenger, under the common law the store is entitled to
indemnification from the driver because there is no evidence that
the store itself engaged in tortious conduct related to the passenger’s
injuries.
Summary
The driver is likely to be characterized as an employee, not as an independent contractor,
because his conduct was subject to the store’s control. Under the respondeat superior principle,
an employer is liable for the tortious acts of its employee if those acts were performed within the
scope of the employee’s employment. Here, the driver’s violation of the store’s delivery rules
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likely did not place his act outside the scope of his employment because the driver did not deviate substantially from his route and the risks caused by his deviation were not different from the
risks inherent in his authorized activities. In virtually all jurisdictions, the driver could be found
liable for the passenger’s injuries. The driver was negligent in violating a traffic ordinance and
the type of harm that occurred, a traffic accident, was among those that the ordinance was aimed
to avert. Finally, if the store is found liable for the driver’s negligence and pays damages to the
passenger, under common law principles the store is entitled to indemnification from the driver
because the store was not itself at fault in causing the accident.
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February 2014, Essay 6
AGENCY AND PARTNERSHIP QUESTION _____
Five years ago, Adam and Ben formed a general partnership, Empire Partnership (Empire), to buy
and sell antique automobiles at a showroom in State A. Adam contributed $800,000 to Empire,
and Ben contributed $200,000. Their written partnership agreement allocated 80% of profits,
losses, and control to Adam and 20% to Ben. No filings of any type were made in connection with
the formation of Empire.
Three years ago, a collector purchased one of Empire’s antique cars for $3,400,000. The collector
was willing to pay this price because of Ben’s false representation (repeated in the sales contract)
that a famous movie star had once owned the car. Without the movie-star connection, the car was
worth only $100,000. One month later, when the collector discovered the truth, he sued Adam,
Ben, and Empire for $3,300,000 in damages. The lawsuit is still pending.
Two years ago, Adam and Ben admitted a new partner, Diane, to Empire in return for her
contribution of $250,000. The three agreed to allocate profits, losses, and control 75% to Adam,
10% to Ben, and 15% to Diane. Before joining the partnership, Diane learned of the collector’s
claim and stated her concern to Adam and Ben that she might become liable if the claim were
reduced to a judgment.
Following Diane’s admission to Empire, the three partners sought to convert Empire into a limited
liability partnership (LLP). Adam’s lawyer proposed to file with State A a “statement of
qualification” making an LLP election and declaring the name of the partnership to be “Empire
LLP.” Ben’s lawyer stated that this would not work and that a new LLP had to be formed, with
the assets of the old partnership transferred to the new one. In the end, the conversion was done
the way Adam’s lawyer suggested with the approval of all three partners.
One year ago, a driver purchased a vintage car from Empire LLP, based on the representation that
the car was “fully roadworthy and capable of touring at 70 mph all day.” The driver took the car
on the highway at 50 mph, whereupon the front suspension collapsed, resulting in a crash in which
the car was destroyed and the driver killed. The driver’s estate sued Adam, Ben, Diane, and Empire
LLP for $10,000,000. The lawsuit is still pending.
Although profitable, Empire LLP does not have resources sufficient to pay the collector’s claim
or the claim of the driver’s estate.
Assume that the Uniform Partnership Act (1997) applies.
1. Before the filing of the statement of qualification,
(a)
(b)  | was Adam personally liable on the collector’s claim? Explain.
was Diane personally liable on the collector’s claim? Explain.
2.  | After the filing of the statement of qualification, was Adam, Ben, or Diane personally liable
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SMART ANALYSIS
Legal Problems
Point One (30%) Is a partner in a general partnership personally liable on a claim
arising from misrepresentations by another partner made in the
course of the partnership business? As a general partner of
Empire, a general partnership, Adam became personally liable on
the collector’s claim, a valid claim against the partnership that arose
because of Ben’s wrongful act in the ordinary course of the
partnership business.
Point Two (30%)  | Does a newly admitted partner in a general partnership become
personally liable on existing claims against the partnership?Because the collector’s claim arose before Diane joined Empire,
Diane did not become personally liable on the claim.
Point Three (40%) After the filing by a general partnership of a statement of
qualification as a limited liability partnership, are the partners
personally liable as partners on (a) an existing claim against the
general partnership and (b) a claim against the partnership that
arose after the filing? Filing the statement of qualification was
effective to elect limited liability partnership status. Despite this
new status, Adam and Ben remain personally liable on the
collector’s claim, which arose before the election. But as partners in
an LLP, neither Adam, Ben, nor Diane is personally liable as a
partner on the driver’s estate’s claim, which arose after the election.
Summary
Adam and Ben formed a general partnership, under which they were jointly and severally liable
for obligations of the partnership. Thus, Adam was personally liable for misrepresentations by Ben
made in the ordinary course of the partnership business.
Upon joining the general partnership, Diane became personally liable for the obligations
of the partnership arising after her admission, but not for obligations pre-existing her admission,
such as the collector’s claim.
By filing a statement of qualification, the three partners properly elected limited liability
partnership status. As partners in an LLP, none of the three partners is personally liable as a partner
for partnership obligations arising after the election, such as the claim by the driver’s estate. The
election, however, does not change their personal liability on pre-existing claims that arose before
the election, such as the collector’s claim.
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July 2013, Essay 2
AGENCY AND TORTS QUESTION _______________
After a dump truck unloaded gravel at a road construction job site, the trucker negligently drove
away with the truck bed still in a raised position. The raised truck bed hit an overhead cable,
causing it to fall across the highway.
The telephone company that owned the fallen cable sent one of its employees to the scene in a
company vehicle. The employee’s responsibilities were expressly limited to responding to cabledamage calls, assessing damage, and reporting back to the telephone company so that a repair unit
could be dispatched.
The foreman of the road construction job site asked the telephone company employee if the
foreman’s crew could lift the cable off the highway. Fearful that the cable might be damaged by
traffic, the telephone company employee said, “Go ahead, pick it up. Just don’t damage the cable.”
The foreman then directed his crew to stretch the cable over the highway so that traffic could pass
underneath.
Shortly thereafter, a bus passing under the telephone cable hit the cable and dislodged it, causing
the cable to strike an oncoming car. The driver lost control of the car and hit a truck carrying
asphalt to the road construction site. As a result of the collision, hot asphalt spilled and severely
burned the foreman.
The foreman is now threatening to sue the telephone company on the ground that it is responsible
for its employee’s negligence in authorizing the road construction crew to stretch the cable across
the highway. The telephone company argues that, even assuming that its employee was negligent,
the telephone company is not liable because:
1. the telephone company employee’s acts were outside the scope of his employment and thus
cannot be attributed to the telephone company;
2. there is no other agency theory under which the foreman could hold the telephone company
liable for its employee’s acts; and
3. the telephone company employee’s acts were not the proximate cause of the foreman’s
injuries.
Assess each of the telephone company’s responses.
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SMART ANALYSIS
Legal Problems
Point One (35%)  | Was the employee acting within the course and scope of his
employment when he authorized the foreman to lift the cable?The telephone company is liable for torts committed by its
employee while acting within the course and scope of his
employment with the telephone company. Because the employee
was motivated by a desire to serve the telephone company, he was
acting within the scope of his employment.
Point Two (30%)  | Did the telephone company cloak the employee with apparent
authority that was relied upon by the foreman, resulting in hisinjury? The telephone company could also be liable to the foreman
under an apparent authority theory.
Point Three (35%)  | Were the employee’s actions the proximate cause of the
foreman’s injuries? The employee’s acts were probably theproximate cause of the foreman’s injuries.
Summary
The telephone company is liable to the foreman for the telephone company employee’s negligence
if the employee was acting within the course and scope of his employment with the telephone
company when he authorized the foreman to direct the crew to stretch the cable over the highway.
Here the employee probably was. Even if the employee was acting outside the scope of his
employment with the telephone company, the telephone company would be liable to the foreman
if the foreman relied on statements or conduct by the employee that were within the employee’s
apparent authority. Although the type of harm the foreman suffered (burns) was different from the
harm risked by the employee’s actions (being stuck by the cable), the employee’s actions are
probably the proximate cause of the foreman’s injuries.
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February 2013, Essay 6
AGENCY QUESTION _____
Over 5,000 individuals in the United States operate hot-air balloon businesses. A hot-air balloon
has four key components: the balloon that holds the heated air, the basket that houses the riders,
the propane burner that heats the air in the balloon, and the propane storage tanks.
The owner of a hot-air balloon business recently notified several basket and burner manufacturers
that she or her agent might be contacting them to purchase baskets or burners. The owner did not
specifically name any person as her agent. Basket and burner manufacturers regularly receive such
notices from hot-air balloon operators. Such notices typically include no restrictions on the types
of baskets or burners agents might purchase for their principals.
The owner then retained an agent to acquire baskets, burners, and fuel tanks from various
manufacturers. The owner authorized the agent to buy only (a) baskets made of woven wicker (not
aluminum), (b) burners that use a unique “whisper technology” (so as not to scare livestock when
the balloon sails over farmland), and (c) propane fuel tanks.
The agent then entered into three transactions with manufacturers, all of whom had no prior
dealings with either the owner or the agent.
(1) The agent and a large manufacturer of both wicker and aluminum baskets signed a contract for
the purchase of four aluminum baskets for a total cost of $60,000. The agent never told the
manufacturer that he represented the owner or any other principal. The contract listed the agent as
the buyer and listed the owner’s address as the delivery address but did not indicate that the address
was that of the owner rather than the agent. When the baskets were delivered to the owner, she
learned for the first time that the agent had contracted to buy aluminum, not wicker, baskets. The
owner immediately rejected the baskets and returned them to the manufacturer. Neither the owner
nor the agent has paid the basket manufacturer for them.
(2) The agent contacted a burner manufacturer and told him that the agent represented a wellknown hot-air balloon operator who wanted to purchase burners. The agent did not disclose the
owner’s name. The agent and the burner manufacturer signed a contract for the purchase of four
burners that did not have “whisper technology” for a total price of $70,000. The burner contract,
like the basket contract, listed the owner’s address for delivery but did not disclose whose address
it was. The burners were delivered to the owner’s business, and the owner discovered that the agent
had ordered the wrong kind of burners. The owner rejected the burners and returned them to the
manufacturer. Neither the owner nor the agent has paid the burner manufacturer for the burners.
(3) The agent contracted with a solar cell manufacturer to make three cells advertised as “strong
enough to power all your ballooning needs.” The agent did not tell the manufacturer that he was
acting on behalf of any other person. One week after the cells were delivered to the agent, he took
them to the owner, who installed them and discovered that she could save a lot of money using
solar cells instead of propane to power her balloons. The owner decided to keep the solar cells, but
she has not p