Multistate Essay Examination (MEE) Business Associations Syllabus

Business Associations syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Business Associations in Multistate Essay Examination (MEE), not a summary of it.

1. 1

   Agency

   4 topics

   • Formation of the Agency Relationship
     • Consent, control, and fiduciary character
     • Capacity of principal and agent
   • Authority of Agents
     • Actual express and implied authority
     • Apparent authority and manifestations to third parties
     • Ratification and estoppel
   • Liability of Principal and Agent
     • Disclosed, partially disclosed, and undisclosed principals
     • Respondeat superior and scope of employment
     • Employee vs. independent contractor
   • Fiduciary Duties and Termination
2. 2

   Partnerships and LLCs

   5 topics

   • Formation of a General Partnership
     • Co-ownership for profit and partnership by estoppel
     • Profit-sharing as evidence
   • Relations Among Partners
     • Management, voting, and profit/loss sharing
     • Fiduciary duties of loyalty and care
   • Liability and Authority to Third Parties
   • Dissociation, Dissolution, and Winding Up
   • Limited Partnerships and LLCs
     • Limited liability and the operating agreement
     • Member vs. manager management
3. 3

   Corporations

   7 topics

   • Formation and Pre-Incorporation
     • Articles, bylaws, and promoter liability
     • Defective incorporation
   • Corporate Finance and Stock
   • Management and Control
     • Directors, officers, and shareholders
     • Voting, proxies, and meetings
   • Fiduciary Duties
     • Duty of care and the business judgment rule
     • Duty of loyalty and conflicting interests
     • Corporate opportunity doctrine
   • Shareholder Litigation and Inspection Rights
     • Derivative vs. direct suits and demand
   • Piercing the Corporate Veil
   • Fundamental Changes and Dissolution

Business Associations flashcards for Multistate Essay Examination (MEE)

24 of 61 cards from the Business Associations deck — real questions with worked answers.

1. What is an agency relationship, and what are its three essential elements?

   A fiduciary relationship arising when a principal manifests assent that an agent act on the principal's behalf and subject to the principal's control, and the agent consents. Elements: (1) assent, (2) the agent acts for the principal's benefit, and (3) the principal's right of control over the agent.

2. What capacity is required of the principal and the agent to form an agency relationship?

   The principal must have contractual capacity. The agent needs only minimal capacity—even a minor or mentally incompetent person can act as an agent. No consideration and no writing are required to create an agency.

3. Distinguish actual authority from apparent authority.

   Actual authority is power the agent reasonably believes she has based on the principal's manifestations to the agent (express or implied). Apparent authority is power a third party reasonably believes the agent has based on the principal's manifestations to that third party.

4. What is the difference between express and implied actual authority?

   Express actual authority comes from the principal's explicit words or instructions. Implied actual authority is what the agent reasonably believes is necessary to accomplish the assigned task, or arises from custom, prior dealings, or reasonable interpretation of the principal's instructions.

5. How can apparent authority persist even after an agent's actual authority has been terminated?

   Apparent authority lingers if the principal's prior manifestations led third parties to believe the agent was authorized. To cut it off, the principal must give actual notice to known third parties and constructive (e.g., published) notice to others; otherwise the principal remains bound.

6. What is ratification of an agent's act, and what are its requirements?

   Ratification is a principal's affirmance of a prior unauthorized act, binding the principal as if originally authorized. Requirements: the principal must (1) have knowledge of all material facts, (2) accept the entire transaction, and (3) have had capacity (and exist) at the time of the act. It cannot alter intervening third-party rights.

7. What is the difference between a disclosed, unidentified (partially disclosed), and undisclosed principal?

   Disclosed: the third party knows the principal's identity and existence. Unidentified/partially disclosed: the third party knows an agency exists but not the principal's identity. Undisclosed: the third party believes the agent is acting for himself, unaware any principal exists.

8. When is an agent personally liable on a contract made for a principal?

   For a disclosed principal, the agent is generally NOT personally liable. For an unidentified or undisclosed principal, the agent IS personally liable on the contract (and the third party may also hold the principal liable once discovered).

9. Under respondeat superior, when is a principal/employer vicariously liable for an agent's torts?

   An employer is liable for torts committed by an employee acting within the scope of employment. Vicarious liability requires an employer-employee relationship (right to control the manner of work) and conduct within the scope of employment.

10. What is the general rule on liability for torts of an independent contractor, and its key exceptions?

    A principal is generally NOT liable for an independent contractor's torts. Exceptions: (1) inherently dangerous activities, (2) non-delegable duties, and (3) negligent selection or supervision of the contractor (estoppel/apparent agency can also apply).

11. Does a 'frolic' or a 'detour' take an employee outside the scope of employment?

    A detour (a minor, foreseeable deviation) remains within the scope of employment, so the employer is liable. A frolic (a major, unforeseeable departure for the employee's own purposes) falls outside the scope, so the employer is not liable until the employee returns to employment.

12. What fiduciary duties does an agent owe the principal?

    The agent owes duties of (1) loyalty (no self-dealing, no usurping opportunities, no secret profits, no competing), (2) care (act with reasonable care and skill), and (3) obedience (obey reasonable lawful instructions). Breach can entitle the principal to disgorgement of profits.

13. What is the principal's primary duty to the agent, and what remedies does an agent have?

    The principal owes duties to compensate the agent as agreed, reimburse and indemnify for authorized expenses/losses, and deal fairly and in good faith. The agent may sue for breach of contract and assert a possessory lien on the principal's property for amounts owed.

14. List the ways an agency relationship can terminate.

    By (1) lapse of a stated or reasonable time, (2) occurrence of a specified event or accomplishment of the purpose, (3) change in circumstances/destruction of subject matter, (4) breach of fiduciary duty, (5) mutual agreement, (6) either party's unilateral revocation/renunciation, or (7) operation of law (death, incapacity, or bankruptcy).

15. What is an 'agency coupled with an interest,' and why is it special?

    An agency in which the agent holds a security or property interest in the subject matter (e.g., a creditor granted power to sell collateral). It is irrevocable by the principal and is not terminated by the principal's death or incapacity, because it exists to protect the agent's interest.

16. How is a general partnership formed, and is a written agreement required?

    A general partnership is formed automatically when two or more persons associate to carry on as co-owners a business for profit—regardless of intent to form a partnership. No writing, filing, or formal agreement is required; it can arise by conduct.

17. What is the key evidentiary rule about sharing of profits in proving a partnership exists?

    A person who receives a share of business profits is presumed to be a partner, UNLESS the profits were received as payment of a debt, wages/compensation, rent, an annuity, interest on a loan, or for the sale of business goodwill.

18. Under the RUPA default rules, how are profits and losses shared among partners?

    Absent an agreement, profits are shared equally among partners (regardless of capital contributions). Losses follow profits—they are shared in the same proportion as profits (so equally by default).

19. How are management rights and voting allocated among partners by default under RUPA?

    Each partner has equal rights in management. Ordinary business decisions are decided by a majority of the partners; matters outside the ordinary course of business and amendments to the partnership agreement require unanimous consent.

20. What fiduciary duties do partners owe the partnership and one another under RUPA?

    The duty of loyalty (account for profits/benefits, refrain from self-dealing and competing) and the duty of care (refrain from grossly negligent or reckless conduct, intentional misconduct, or knowing legal violations). Partners must also discharge duties consistent with the obligation of good faith and fair dealing.

21. Is a partner entitled to remuneration (a salary) for services to the partnership under RUPA's default rules?

    No. By default, a partner is not entitled to compensation for services, EXCEPT reasonable compensation for services rendered in winding up the partnership's business.

22. What is each general partner's liability for partnership obligations?

    General partners are jointly and severally liable for all partnership obligations (contracts and torts). A creditor must generally first exhaust partnership assets before reaching an individual partner's personal assets (the exhaustion rule under RUPA).

23. What is the liability of an incoming partner for obligations incurred before joining?

    A newly admitted partner is NOT personally liable for partnership obligations that arose before her admission; her risk is limited to her capital contribution as to those pre-existing debts. She is fully liable for obligations arising after she joins.

24. How does a partner bind the partnership to third parties under RUPA?

    A partner is an agent of the partnership. An act of a partner for apparently carrying on the partnership's business in the ordinary course binds the partnership, unless the partner lacked authority AND the third party knew or had received notice of that lack of authority.

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