California Bar Examination California Practice Subjects (Wills, Trusts, Community Property, Business & Professional Responsibility) Flashcards

24 sample cards from the California Practice Subjects (Wills, Trusts, Community Property, Business & Professional Responsibility) deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. What is the default rule for sharing profits and losses in a general partnership absent agreement?

   Profits are shared EQUALLY among partners regardless of capital contribution. Losses follow profits (also shared equally unless otherwise agreed).

2. What is the liability of general partners for partnership obligations?

   General partners are jointly and severally liable for all partnership obligations. A creditor must generally exhaust partnership assets first, but each partner is personally liable for the full amount of partnership debts.

3. What fiduciary duties do partners owe the partnership and one another?

   The duties of loyalty (account for profits, no competing/adverse dealings, no usurping partnership opportunities) and care (refrain from grossly negligent/reckless conduct, intentional misconduct, or knowing legal violations), plus the obligation of good faith and fair dealing.

4. Under the internal affairs doctrine, what law governs a corporation's internal governance?

   The law of the state of incorporation governs the corporation's internal affairs (relationships among directors, officers, and shareholders), regardless of where the corporation operates.

5. State the business judgment rule for corporate directors.

   Courts presume directors act on an informed basis, in good faith, and in the honest belief the action is in the corporation's best interest. Absent fraud, bad faith, self-dealing, or gross negligence, courts will not second-guess directors' business decisions.

6. What is the duty of loyalty for corporate directors, and how can an interested (self-dealing) transaction be upheld?

   Directors must act in the corporation's best interest without self-dealing. An interested transaction is upheld if: (1) disclosed and approved by disinterested directors, (2) disclosed and approved by disinterested shareholders, OR (3) the transaction was fair to the corporation at the time entered.

7. What grounds allow a court to 'pierce the corporate veil' and hold shareholders personally liable?

   (1) The alter ego doctrine (unity of interest/disregard of corporate formalities so the entity is a mere instrumentality) or (2) undercapitalization, plus (3) an element of fraud, injustice, or use of the corporate form to perpetrate wrong.

8. What is the key liability feature distinguishing an LLC from a general partnership?

   LLC members enjoy limited liability — they are generally not personally liable for the LLC's debts and obligations (only their investment is at risk), unlike general partners who have unlimited personal liability.

9. How is an LLC managed and taxed by default?

   By default an LLC is member-managed (all members have authority to bind it), though it may elect manager-management. By default it has pass-through taxation (treated like a partnership/sole proprietorship), avoiding the double taxation of a C-corporation, though it may elect corporate taxation.

10. Under SEC Rule 10b-5, what are the elements of a securities fraud claim?

    (1) A material misrepresentation or omission, (2) scienter (intent to deceive or recklessness), (3) in connection with the purchase or sale of a security, (4) reliance, (5) economic loss, and (6) loss causation.

11. What is illegal insider trading under Rule 10b-5, and who is a 'tippee' liable?

    Trading on material nonpublic information in breach of a fiduciary duty (classical theory) or in breach of a duty to the information's source (misappropriation theory). A tippee is liable if the tipper breached a duty for personal benefit and the tippee knew or should have known of that breach.

12. What is short-swing profit liability under Section 16(b) of the Securities Exchange Act?

    Directors, officers, and 10%+ shareholders of a reporting company must disgorge any profit from buying and selling (or selling and buying) the company's equity securities within a 6-month period — strict liability, no scienter or misuse of inside information required.

13. When is an attorney-client relationship formed under California law?

    It forms when a person reasonably believes and relies on the attorney to provide legal services, even absent a formal agreement or fee. The reasonable belief of the prospective client controls; duties (e.g., confidentiality) can attach even to prospective clients during consultation.

14. How does California's duty of confidentiality differ from the rule in most jurisdictions regarding disclosure to prevent harm?

    California's duty (Bus. & Prof. Code 6068(e)) is stricter: an attorney may reveal confidential information ONLY to the extent reasonably necessary to prevent a criminal act likely to result in DEATH or SUBSTANTIAL BODILY HARM, and must first try to dissuade the client. California does NOT permit disclosure to prevent financial crimes/fraud.

15. Distinguish the duty of confidentiality from the attorney-client privilege.

    The duty of confidentiality is an ethical duty covering ALL information relating to the representation from any source, applying in all situations. The attorney-client privilege is an evidentiary rule protecting confidential communications between attorney and client from compelled disclosure in legal proceedings only.

16. Under California rules, when may a lawyer represent a client despite a concurrent conflict of interest?

    When the lawyer reasonably believes they can competently and diligently represent each affected client, the representation is not prohibited by law, it does not involve assertion of one client's claim against another in the same proceeding, and each affected client gives INFORMED WRITTEN CONSENT (California requires written consent).

17. What is the duty of competence under California Rule 1.1, and how may a lawyer who lacks competence still take a matter?

    A lawyer must not intentionally, recklessly, with gross negligence, or repeatedly fail to perform legal services with the learning, skill, and diligence reasonably necessary. A lawyer lacking competence may proceed by associating/consulting a competent lawyer or by acquiring sufficient learning before performance (or in an emergency, limited to what is reasonably necessary).

18. What are the requirements for client trust accounts (IOLTA) in California?

    Client and third-party funds must be deposited in a trust account separate from the lawyer's own funds (no commingling). Nominal/short-term funds go in a pooled IOLTA account whose interest funds legal aid. Lawyers must keep complete records, render accountings, and promptly pay out funds the client is entitled to.

19. In California, when must attorney fee agreements be in writing, and what is the cap on contingency fees?

    Fee agreements must be in writing when reasonably foreseeable expenses/fees exceed $1,000, and contingency fee agreements must always be in writing. California has no fixed numerical cap for most contingency fees (they must be non-unconscionable), but statutory caps apply in medical malpractice (MICRA) cases.

20. What is a lawyer's duty of candor to the tribunal regarding client perjury or false evidence?

    A lawyer must not knowingly make a false statement of fact/law or offer evidence the lawyer knows is false. If a client/witness has offered material false evidence, the lawyer must take reasonable remedial measures, which may include disclosure to the tribunal; a lawyer may refuse to offer evidence reasonably believed to be false.

21. What duties does a lawyer owe to third parties and opposing parties under the rules?

    A lawyer must not use means with no substantial purpose other than to embarrass/burden a third person, must not communicate about the subject of representation with a person known to be represented by counsel (no-contact rule) without consent, and must not state or imply disinterestedness to an unrepresented person.

22. What is the general standard for lawyer advertising and communications in California?

    Communications about a lawyer's services must not be false or misleading (no untrue, deceptive, or unsubstantiated claims). Permitted communications must be truthful; certain presumptively-violating content (e.g., guarantees of outcome, untrue testimonials) is prohibited, and communications must be retained for a required period.

23. What constitutes prohibited solicitation under California rules?

    A 'solicitation' is a targeted communication initiated by the lawyer to a specific person, a significant motive of which is pecuniary gain, offering to provide legal services. A lawyer must not solicit in person/by live phone or real-time electronic contact unless the target is another lawyer, a family member, a close personal friend, or a prior/current client.

24. What constitutes the unauthorized practice of law (UPL), and what is a California lawyer's related duty?

    UPL is practicing law in a jurisdiction where not licensed or assisting a nonlawyer to do so. A California lawyer must not aid the unauthorized practice of law and must not form a partnership with, or share legal fees with, a nonlawyer if any activity consists of the practice of law (with limited exceptions).

What this deck covers

California Practice Subjects (Wills, Trusts, Community Property, Business & Professional Responsibility) flashcards FAQ