Question 1

"Partnership Disruption." Bruce, Sandra, and Minnie want to form a partnership to assist students with resume preparation and employment searches. Bruce asks Sandra and Minnie if they should draw up some sort of agreement. Sandra replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Bruce and Minnie, however, Sandra agreed to a written document which they all signed setting up the partnership. It was a simple agreement listing the partners that did not specifically address the right to management or allocation of profits and losses. Sandra has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership. She keeps the funds she receives for herself. When Bruce and Minnie found out, Sandra replied that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, had two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership did not address the right to share in management, but Bruce and Minnie strongly disagreed with Sandra.
-Did Sandra commit any breach of duty to the partnership?

Accepted Answer

A)   Yes, she breached her fiduciary duty to the other partners.
B)   Yes, she breached her duty of integrity to the other parties.
C)   Yes, but only if the other partners can show that she made more income through doing the work on her own than she would have made if she had done the work through the partnership.
D)   No, but only because she held two-thirds of the voting rights and could approve the work herself.
E)   No, she did not breach any duty.F) A) and B)
G) A) and C)

Question 2

Which of the following is true if a partner commits a tort within the scope of his or her partnership duties?

Accepted Answer

A)   All partners have common liability.
B)   All partners have joint and several liability.
C)   All partners are liable in accordance with the percentages used for the allocation of profits.
D)   All partners are liable in accordance with the percentages used for the allocation of losses.
E)   All partners are liable in accordance with the percentage of their capital contributions.F) None of the above
G) A) and B)

Question 3

Which of the following was the result in Eric Johnson & Lori Johnson v. St. Therese Medical Center, the malpractice case in the text in which the plaintiffs sought to hold individual partners liable under state law for a judgment obtained only against the partnership?

Accepted Answer

A)   That the plaintiffs could recover from all partners individually based on a judgment against the partnership.
B)   That the plaintiffs could recover from all partners individually because, while the judgment was only against the partnership, all partners were sued individually and served with a copy of the complaint.
C)   That the plaintiffs could recover from all partners individually because, regardless of whether all partners were served, the managing partner was sued and served with a copy of the complaint.
D)   That the plaintiffs could not recover from all partners individually because under partnership law, partners are not individually liable for debts of the partnership.
E)   That the plaintiffs could not recover from the individual partners because based on the lack of suit and judgment against them, they lacked notice that they were to be held individually liable.F) None of the above
G) A) and E)

Question 4

Which of the following was the result in Colette Bohatch v. Butler & Binion, the case presenting the question of whether the fiduciary relationship between law partners gives rise to a duty not to expel a partner who reports suspected overbilling by another partner?

Accepted Answer

A)   That prohibiting expulsion of a partner who reports suspected overbilling is necessary to encourage compliance with rules of professional conduct.
B)   That expelling a partner who reports suspected overbilling by another partner is not a tort even if the reporting partner had an ethical duty to report the violation.
C)   That only if it is judicially determined that overbilling by a partner indeed occurred is a partnership prohibited from expelling a partner who reported the overbilling.
D)   That expelling a partner who reports suspected overbilling by another partner is not a tort even if the reporting partner had an ethical duty to report the violation but that the reporting partner must be given at least 30 days prior to the expulsion.
E)   That expelling a partner who reports suspected overbilling by another partner is not a tort even if the reporting partner had an ethical duty to report the violation but that the reporting partner must be given at least 6 months prior to the expulsion.F) B) and C)
G) B) and E)

Question 5

In relation to partnerships between local and multinational companies, what is meant by the term "keiretsu"?

Accepted Answer

A)   A type of offshore partnership in which the strengths of outside firms is combined with those of firms in developing countries.
B)   A type of industrial district in which an attempt is made to encourage foreign investment.
C)   A group of businesses in which each individual business has a stake in the others.
D)   A partnership with one local and one multinational company in an information and communication technology project.
E)   An agreement between a local and a multinational company to equally share in profits and losses.F) A) and D)
G) C) and D)

Question 6

No partnership is created based upon an employer sharing profits with an employee as payment for work.

Accepted Answer

A) True 
 B)False

Question 7

Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in profits?

Accepted Answer

A)   Distribution of profits is suspended until the partners amend the articles of partnership to address the distribution of profits.
B)   Partners share in profits in proportion to the amount of capital contributed to the partnership.
C)   Partners share in profits in proportion to the amount of work done for the partnership.
D)   Partners share in profits in proportion to their seniority with the partnership with partners of equal seniority sharing equally in profits.
E)   All partners have a right to share profits equally.F) None of the above
G) B) and E)

Question 8

Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in the management of a partnership?

Accepted Answer

A)   All partners have a right to participate equally in the management of the partnership.
B)   Partners share in management in proportion to the amount of capital contributed to the partnership.
C)   Partners share in management in proportion to the amount of work done for the partnership.
D)   Partners share in management in proportion to their seniority with the partnership with partners of equal seniority sharing equally in management.
E)   Rights to management are suspended until the partners amend the articles of partnership to address management rights.F) B) and C)
G) B) and D)

Question 9

Describe the liability, if any, of incoming partners.

Accepted Answer

When a partnership adds another partner,...

Question 10

"Grooming Losses." Wally, Beverly, and Matthew formed a partnership to groom dogs. Because they were good friends and anticipated making a profit sufficient to compensate all partners well, the articles of partnership did not allocate profit or losses. Beverly was appointed managing partner. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to review a listing of all partnership assets and profit statements listing distributions to partners. Beverly and Matthew denied that they had been hiding the books and claimed complete innocence of any wrongdoing.
-Which of the following is correct regarding how the partnership losses should be allocated?

Accepted Answer

A)   Losses would be allocated first based on a judicial determination as to whether losses should be allocated to a partner because of poor decisions, and, if not, then equally.
B)   Losses would be allocated in proportion to the amount of work done in the business, with a partner who contributed more work being allocated less in the way of losses.
C)   Losses would be allocated in proportion to the right to share in management.
D)   Losses would be allocated equally.
E)   Losses would be allocated in proportion to the capital contribution, with partners who contributed more capital being allocated less in the way of losses.F) C) and E)
G) All of the above

Question 11

When the articles of partnership are silent, which of the following property rights do partners have?

Accepted Answer

A)   The right to participate in the management of the business, the right to possess partnership property, and the right to an interest in the partnership.
B)   The right to participate in the management of the business, but not the right to possess partnership property or the right to an interest in the partnership.
C)   The right to participate in the management of the business and the right to possess partnership property, but not the right to an interest in the partnership.
D)   The right to participate in the management of the business and the right to an interest in the partnership, but not the right to possess partnership property.
E)   The right to possess partnership property and the right to an interest in the partnership; but not the right to participate in the management of the business because while the right to participate in management may exist, it is not a property right.F) B) and E)
G) A) and E)

Question 12

Which of the following is false regarding the rights and obligations of partners?

Accepted Answer

A)   Each partner can serve as an agent for the partnership.
B)   As long as the partner has authority to act, each partner's act in performing business duties is binding on the partnership.
C)   As long as the partner has authority to act, each partner's act in making agreements with third parties is binding on the partnership.
D)   As long as one partner has authority to act and the partnership is bound by the act, each partner has unlimited personal liability for the obligation.
E)   A partner cannot serve as an agent for other partners.F) B) and C)
G) A) and E)

Question 13

If a partner has authority to act and the partnership is bound by the act, each partner has unlimited personal liability for the obligation.

Accepted Answer

A) True 
 B)False

Question 14

"Mortuary Blues." Barry and Elaine had a partnership running a mortuary. Elaine died, and after her death Barry decided to shut down the mortuary. It was too depressing without Elaine who was a very vivacious person. Elaine also did great makeup on the deceased clients while Barry struggled with enhancing the appearance of the deceased. Barry incurred expenses in closing the business affairs of the mortuary. He sought compensation for that, but the executor of Elaine's estate objected. The executor also claimed that Barry had no rights in Elaine's share of the partnership property and that he, the executor, had the right to confiscate her share of the property and sell it at auction. Barry, however, took the position that all interests of Elaine passed to him and that he owed her estate nothing. The articles of partnership did not address death.
-Is Barry correct that he owed Elaine's estate nothing?

Accepted Answer

A)   Yes, because all rights passed to him at the time of her death.
B)   He is correct only if Elaine's will was silent on the matter.
C)   He is correct only if he, not Elaine, was the managing partner.
D)   He is incorrect because he had a duty to account to Elaine's estate for the value of Elaine's interest in specific property.
E)   He is incorrect because he had a duty to give the executor half the caskets, etc. on hand when Elaine died as well as half of all accounts due.F) None of the above
G) All of the above

Question 15

Which of the following is true regarding the duty of care, if any, that one partner owes to another?

Accepted Answer

A)   The duty of care is not involved in the law of partnership.
B)   The duty of care is owed by each partner to the partnership itself, but partners do not owe a duty of care among themselves.
C)   Partners owe a duty of care among themselves, but only in regard to transactions involving over $5,000.
D)   While partners owe a duty of care to each other, a partner who makes an honest mistake in fulfilling responsibilities to the partnership will not be held liable for the mistake.
E)   Partners owe a duty of care to each other, and a partner is liable to other partners on a strict liability basis for any mistakes or errors made.F) B) and D)
G) A) and E)

Question 16

Title to property may not be put in the name of a partnership.

Accepted Answer

A) True 
 B)False

Question 17

Partners own partnership property as ____, meaning that the partners own the property as a group.

Accepted Answer

A)   Tenants in property
B)   Joint tenants
C)   Tenants in the entirety
D)   Common tenants
E)   Partnership tenantsF) C) and D)
G) B) and E)

Question 18

Which of the following does the duty of obedience that one partner owes to another reference?

Accepted Answer

A)   The duty to obey instructions of any other partner.
B)   The duty to keep other partners informed of the finances of the partnership.
C)   The duty to keep other partners informed of partnership debts.
D)   The duty to obey the articles of partnership.
E)   The duty to reimburse the partnership for any personal expenditures.F) A) and D)
G) A) and E)

Question 19

Which of the following is true regarding the liability of a partner for a mistake?

Accepted Answer

A)   A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is not held personally liable for the mistake.
B)   A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is held personally liable for the mistake, but only to the extent of his or her capital contribution.
C)   A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is held personally liable for the mistake, but only to the extent that he or she shares in profits.
D)   A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is held personally liable for the mistake, but only to the extent that he or she shares in losses.
E)   A partner who makes an honest mistake in fulfilling his or her responsibilities to the partnership is held fully personally liable for the mistake.F) C) and D)
G) A) and B)

Question 20

"Grooming Losses." Wally, Beverly, and Matthew formed a partnership to groom dogs. Because they were good friends and anticipated making a profit sufficient to compensate all partners well, the articles of partnership did not allocate profit or losses. Beverly was appointed managing partner. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. Matthew claimed that he should not have to share in losses because he had groomed more dogs than anyone. Matthew also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his excessive work. Beverly claimed that she should not have to share in losses because she contributed more capital than did either of the others. Wally claimed that he should not have to cover the losses because both Beverly and Matthew had been hiding the books from him. He demanded to inspect the books and also to review a listing of all partnership assets and profit statements listing distributions to partners. Beverly and Matthew denied that they had been hiding the books and claimed complete innocence of any wrongdoing.
-Is Wally entitled to inspect the books?

Accepted Answer

A)   Only if he is the managing partner.
B)   Only if he can establish fraud on the part of another partner.
C)   Only if the articles of partnership specifically gave him that right.
D)   Only if the articles of partnership specifically gave him that right or the other partners agreed.
E)   Yes.F) B) and C)
G) All of the above

Exam 36: Partnerships: Nature, Formation, and Operation

Which of the following is false regarding the rights and obligations of partners?

Correct Answer
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Correct Answer
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Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in profits?

Correct Answer
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If a partner has authority to act and the partnership is bound by the act, each partner has unlimited personal liability for the obligation.

Correct Answer
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Correct Answer
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Which of the following is true regarding the duty of care, if any, that one partner owes to another?

Correct Answer
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Which of the following was the result in Eric Johnson & Lori Johnson v. St. Therese Medical Center, the malpractice case in the text in which the plaintiffs sought to hold individual partners liable under state law for a judgment obtained only against the partnership?

Correct Answer
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When the articles of partnership are silent, which of the following property rights do partners have?

Correct Answer
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Which of the following does the duty of obedience that one partner owes to another reference?

Correct Answer
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Correct Answer
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Which of the following is true if a partner commits a tort within the scope of his or her partnership duties?

Correct Answer
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Partners own partnership property as ____, meaning that the partners own the property as a group.

Correct Answer
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Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in the management of a partnership?

Correct Answer
verified

Which of the following was the result in Colette Bohatch v. Butler & Binion, the case presenting the question of whether the fiduciary relationship between law partners gives rise to a duty not to expel a partner who reports suspected overbilling by another partner?

Correct Answer
verified

Correct Answer
verified

Which of the following is true regarding the liability of a partner for a mistake?

Correct Answer
verified

No partnership is created based upon an employer sharing profits with an employee as payment for work.

Correct Answer
verified

Title to property may not be put in the name of a partnership.

Correct Answer
verified

Describe the liability, if any, of incoming partners.

Correct Answer
verified
When a partnership adds another partner,...
View Answer

In relation to partnerships between local and multinational companies, what is meant by the term "keiretsu"?

Correct Answer
verified

Exam 36: Partnerships: Nature, Formation, and Operation

Which of the following is false regarding the rights and obligations of partners?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in profits?

Correct AnswerverifiedShow Answer

If a partner has authority to act and the partnership is bound by the act, each partner has unlimited personal liability for the obligation.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding the duty of care, if any, that one partner owes to another?

Correct AnswerverifiedShow Answer

Which of the following was the result in Eric Johnson & Lori Johnson v. St. Therese Medical Center, the malpractice case in the text in which the plaintiffs sought to hold individual partners liable under state law for a judgment obtained only against the partnership?

Correct AnswerverifiedShow Answer

When the articles of partnership are silent, which of the following property rights do partners have?

Correct AnswerverifiedShow Answer

Which of the following does the duty of obedience that one partner owes to another reference?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true if a partner commits a tort within the scope of his or her partnership duties?

Correct AnswerverifiedShow Answer

Partners own partnership property as ____, meaning that the partners own the property as a group.

Correct AnswerverifiedShow Answer

Unless the articles of partnership states otherwise, which of the following is true regarding the rights of partners to share in the management of a partnership?

Correct AnswerverifiedShow Answer

Which of the following was the result in Colette Bohatch v. Butler & Binion, the case presenting the question of whether the fiduciary relationship between law partners gives rise to a duty not to expel a partner who reports suspected overbilling by another partner?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is true regarding the liability of a partner for a mistake?

Correct AnswerverifiedShow Answer

No partnership is created based upon an employer sharing profits with an employee as payment for work.

Correct AnswerverifiedShow Answer

Title to property may not be put in the name of a partnership.

Correct AnswerverifiedShow Answer

Describe the liability, if any, of incoming partners.

Correct AnswerverifiedWhen a partnership adds another partner,...View AnswerShow Answer

In relation to partnerships between local and multinational companies, what is meant by the term "keiretsu"?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
When a partnership adds another partner,...
View Answer

Correct Answer
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