Question 1

[Fishing Kings] Kyle and Felix have a business called Fishing Kings, which escorts tourists on fishing expeditions in Florida. Fishing Kings is doing poorly. Ernesto, a contractor, wants $10,000 for the work he did on Kyle's house. Colin, a tech consultant, wants $7,000 owed to him for setup and purchase of computers in Fishing Kings' office. Kyle sells one of Fishing Kings' boats in order to pay some of the debts. When Felix finds out about the sale, he is furious and yells that Kyle had no right to sell the boat without his permission. Kyle responds that he was acting as an agent of the partnership in selling the boat.
-Which creditor, if any, has priority in Fishing Kings' assets?

Accepted Answer

A)   Ernesto and Colin have equal priority in the assets of Fishing Kings.
B)   Ernesto, if he filed his claim first.
C)   Colin, because creditors of the partnership have first priority in partnership assets.
D)   Ernesto, because he is a creditor of land.
E)   Kyle and Felix.F) A) and D)
G) A) and C)

Question 2

A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

Accepted Answer

A) True 
 B)False

Question 3

[Mortuary Blues] Jack and Bianca had a partnership running a mortuary. Bianca died, and after her death, Jack decided to shut down the mortuary. Jack incurred some expenses in closing the business affairs of the mortuary. He sought compensation for those expenses but Gus, the executor of Bianca's estate, objected. Gus also claimed that Jack had no rights in Bianca's share of the partnership property and that Gus, the executor, had the right to confiscate her share of the property and sell it at auction. Jack, however, took the position that all interests of Bianca passed to Jack and that Jack owed her estate nothing. The articles of partnership did not address death.
-Phillian and Millian enter into a partnership agreement and agree to bring in Millian's minor daughter Jillian to also serve as a partner in their partnership. Is this legal?

Accepted Answer

A)   Yes, but the partnership agreement is voidable.
B)   Yes, and the partnership agreement is valid.
C)   No, this is not allowed by the UPA.
D)   No, individuals serving as partners must have legal capacity to be partners and must be at least 18 years of age.
E)   No, child labor laws do not allow minors to serve as partners.F) B) and D)
G) A) and C)

Question 4

[Partnership Problems] Jamar, Kenya, and Tamika want to form a partnership to sell students resume preparation and employment search services. Jamar asks Kenya and Tamika if they should draw up some sort of agreement. Kenya replies that a written agreement is not legally required and that an oral agreement will set up a partnership. Upon the urging of Jamar and Tamika, however, Kenya agreed to a written document setting up the partnership, which they all signed. It was a simple agreement listing the partners and did not specifically address the right to management or allocation of profits and losses. Kenya has an opportunity to assist some students with resumes and does so without revealing her employment to the partnership; she keeps the payment she receives for herself. When Jamar and Tamika find out, Kenya replies that she was doing two-thirds of the partnership work, particularly in regard to management; that she, therefore, has two-thirds of the voting rights; and that she voted that her actions were appropriate. The articles of partnership does not address the right to share in management, but Jamar and Tamika strongly disagree with Kenya.
-The written agreement creating the partnership entered into by Jamar, Kenya, and Tamika is referred to as the ________.

Accepted Answer

A)   Contract of partnership
B)   Contract of agreement
C)   Partnership articles
D)   Articles of partnership
E)   Clauses of the articles of partnershipF) A) and B)
G) B) and D)

Question 5

Which of the following is true regarding decisions requiring unanimous agreement among the partners, when the articles of partnership do not address the matter?

Accepted Answer

A)   A decision to change some element of the partnership agreement, a decision to admit a new partner, and a decision to alter the nature of the firm's business all require unanimous agreement among the partners.
B)   A decision to change some element of the partnership agreement requires unanimous agreement, but a decision to admit a new partner and a decision to alter the nature of the firm's business may be made by majority vote.
C)   A decision to change some element of the partnership agreement and a decision to admit a new partner require unanimous agreement among the partners, but a decision to alter the nature of the firm's business may be made by majority vote.
D)   A decision to admit a new partner and a decision to alter the nature of the firm's business require unanimous agreement among the partners, but a decision to change some element of the partnership agreement may be made by majority vote.
E)   All decisions are made by majority vote and none require unanimous agreement.F) B) and E)
G) A) and C)

Question 6

Each partner has unlimited personal liability for all acts of the partnership's partners.

Accepted Answer

A) True 
 B)False

Question 7

[Grooming Grievances] Andrew, Marie, and Cruz 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. Marie was appointed managing partner. Unfortunately, the business did not go as well as expected and the partnership incurred some losses. Cruz claimed that he should not have to share in losses because he had groomed more dogs than anyone. Cruz also claimed that although the partnership did not reference compensation for additional duties, he was entitled to compensation because of his extensive work. Marie claimed that she should not have to share in losses because she contributed more capital than did either of the others. Andrew claimed that he should not have to cover the losses because both Marie and Cruz 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. Marie and Cruz denied that they had been hiding the books and claimed complete innocence of any wrongdoing.
-Is Andrew 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 D)
G) A) and C)

Question 8

Which of the following was the result in Floyd Finch v. Bruce Wayne Campbell, the case concerning whether the fiduciary relationship between law partners gives rise to a duty to bill clients expeditiously, the court held that

Accepted Answer

A)   by not billing clients in a timely manner, Finch was purposefully trying to undermine Campbell's reputation and therefore expulsion from the firm was proper.
B)   expelling a partner who did not bill clients expeditiously, even after requests by the partners and clients, because the partner did not want to show 'income' for purposes of his dissolution of marriage was in fact a breach of fiduciary.
C)   the jury errored in finding that Finch breached his fiduciary duty because there was conflicting evidence presented at trial.
D)   Finch and Campbell were partners and as such each had the right to expel the other for practice that hurt the law firm and neither breached their fiduciary duty to each other.
E)   expelling a partner by another partner is question of law that is governed by the Uniform Partnership Act and that the trial court incorrectly gave a summary judgment to Finch.F) A) and B)
G) All of the above

Question 9

Which of the following statements is not true regarding offshore partnerships, in regard to developing countries?

Accepted Answer

A)   They combine the strengths of firms that operate in developing countries and firms that operate in countries that are foreign to the developing countries.
B)   Firms in developing countries use offshore partnerships to gain international exposure.
C)   Firms in developing countries use offshore partnerships to gain technological competence.
D)   Foreign firms use offshore partnerships to gain the opportunity to enter developing markets.
E)   Offshore partnerships are rarely used for workers because workers from offshore partnerships tend to be highly priced.F) B) and E)
G) A) and B)

Question 10

[Mortuary Blues] Jack and Bianca had a partnership running a mortuary. Bianca died, and after her death, Jack decided to shut down the mortuary. Jack incurred some expenses in closing the business affairs of the mortuary. He sought compensation for those expenses but Gus, the executor of Bianca's estate, objected. Gus also claimed that Jack had no rights in Bianca's share of the partnership property and that Gus, the executor, had the right to confiscate her share of the property and sell it at auction. Jack, however, took the position that all interests of Bianca passed to Jack and that Jack owed her estate nothing. The articles of partnership did not address death.
-Did the executor have any rights in Bianca's share of the property to sell at auction?

Accepted Answer

A)   Yes, the executor was entitled to one-half of the partnership assets including half the partnership property.
B)   No, the executor was not entitled to partnership property because rights in specific partnership property passed to Jack according to the right of survivorship.
C)   Yes, the executor was entitled to one-half the partnership property, but only if Bianca was the managing partner pursuant to the articles of partnership.
D)   Yes, the executor was only entitled to half of the partnership property not in use at the mortuary at the time of her death.
E)   Yes, the executor was entitled to partnership property, but only if Bianca's will stated that the executor was so entitled.F) C) and E)
G) A) and D)

Question 11

As explained in the text, the United States explains a fiduciary duty as including a duty of obedience, the ________ application of obedience and loyalty far exceeds the United States.

Accepted Answer

A)   German
B)   Japanese
C)   Chinese
D)   European
E)   NorwegianF) A) and C)
G) B) and D)

Question 12

Which of the following was the result in Robert Law, on Behalf of the Robert M. Law Profit Sharing Plan v. Ronald Zemp, the case in the text which considers how the partnership can be adversely affected by the negligence of one partner?

Accepted Answer

A)   A court may require a partnership to which a defendant belongs to provide financial information and can restrict the partners from encumbering or transferring their interest, but a court cannot restrict the partnership from making loans.
B)   A court may require a partnership to which a defendant belongs to provide financial information and can restrict the partnership from making loans; but a court cannot restrict the partners from encumbering or transferring their interests.
C)   A court may not require a partnership to which a defendant belongs to provide financial information, nor restrict the partnership from making loans or from encumbering or transferring their interests.
D)   A court may require a partnership to which a defendant belongs to provide financial information, and can restrict the partnership from making loans or from encumbering or transferring their interests.
E)   A court may require a partnership to which a defendant belongs to provide financial information but cannot restrict the partnership from making loans or from encumbering or transferring their interests.F) A) and B)
G) A) and E)

Question 13

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Dixon CPA, an accounting partnership, makes an offer to Nessa to become one of their partners. Dixon recently took out a loan for $2 million. Nessa is concerned that, if she became a partner, she could be held personally liable for the existing loan. Which of the following statements best describes the liability Nessa could face if she becomes partner?

Accepted Answer

A)   Nessa can be held personally liable, up to the amount of her percentage of voting rights.
B)   Nessa can be held personally liable, and the capital she adds to the partnership can be used to pay off the loan.
C)   Nessa cannot be held personally liable, but the capital she adds to the partnership can be used to pay off the loan and her salary can be used to pay off the loan.
D)   Nessa cannot be held personally liable, and the capital she adds to the partnership cannot be used to pay off the loan.
E)   Nessa cannot be held personally liable, but the capital she adds to the partnership can be used to pay off the loan.F) A) and C)
G) A) and B)

Question 14

[Fishing Kings] Kyle and Felix have a business called Fishing Kings, which escorts tourists on fishing expeditions in Florida. Fishing Kings is doing poorly. Ernesto, a contractor, wants $10,000 for the work he did on Kyle's house. Colin, a tech consultant, wants $7,000 owed to him for setup and purchase of computers in Fishing Kings' office. Kyle sells one of Fishing Kings' boats in order to pay some of the debts. When Felix finds out about the sale, he is furious and yells that Kyle had no right to sell the boat without his permission. Kyle responds that he was acting as an agent of the partnership in selling the boat.
-Did Kyle have a right to sell the boat without Felix's agreement?

Accepted Answer

A)   No, because all partners must participate in the transaction.
B)   Yes, because he was acting as an agent of the partnership.
C)   Yes, but only if Kyle identified himself in writing as an agent of the partnership in the transaction.
D)   Yes, because there is no evidence of fraud.
E)   No, because he sold the boat for his own personal gain.F) None of the above
G) C) and E)

Question 15

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-List the five items of information that articles of partnership usually include, as set forth in the text.

Accepted Answer

Articles of partnership usually include ...

Question 16

Which of the following statements 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) A) and D)
G) None of the above

Question 17

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Sonali sues Reta, a partner in B&R Partners, for negligence. The court rules that Reta is liable for negligence, but that the partnership is not liable in any way. Can Sonali sue Reta's partner if Reta does not pay the judgment?

Accepted Answer

A)   Yes, although the partnership is not liable, the issue of the second partner's liability has not been determined.
B)   No, since the partnership is not liable, Sonali cannot bring a successful claim against a second partner on the issue of the partner's liability.
C)   Yes, unless the partnership agreement dictates otherwise.
D)   No, unless Sonali can prove that Reta does not have the funds to pay the judgment.
E)   Yes, because of estoppel.F) A) and B)
G) C) and E)

Question 18

[Car Repair] Gordon and Leo are partners in SafeT Car, a full service automotive repair company. Leo does nearly all of the day-to-day work as Gordon is thinking about retiring. When Leo was moving a customer's car last week, he accidentally collided with the garage door, and the door had to be replaced at a cost of $6,000. Leo recently met with BigBox stores about a potential deal by which BigBox would set up a SafeT Car shop in every BigBox store nationwide. Leo signed an agreement to open a "test" store in one BigBox store. Leo hasn't told Gordon yet, because Gordon hasn't been in the office in a month. Gordon opens The Oil Place, an express oil change company, which he plans to have his sons operate in his retirement. When Leo learns about The Oil Place, he threatens to sue Gordon for breach of duty because Leo is sick of doing all the work at SafeT Car while Gordon was apparently opening a competing business. Gordon tells Leo that he hasn't breached any duty and they don't have a written agreement that restricts Gordon from opening his own store with his sons. Gordon also tells Leo that the $6,000 for the damaged door is coming out of Leo's pocket. Leo, who's thinking about the potential deal about BigBox, tells Gordon he wants to split up the partnership.
-Did Gordon breach any duty by opening his own oil change store?

Accepted Answer

A)   Yes, Gordon breached his fiduciary duty by engaging in a business that competes with the partnership.
B)   Yes, but only if the oil change store is also a partnership.
C)   No, because there was no written agreement that sets forth the duties of the partners.
D)   No, because, even though there was no written agreement, partners are permitted to form their own businesses so long as they remain loyal to the partnership.
E)   No, but only if Gordon also continues to work at SafeT Car.F) A) and C)
G) B) and E)

Question 19

Only the partnership agreement determines the implied authority of partners.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the main statute governing partnership law?

Accepted Answer

A)   The Partnership Act of America
B)   The General Partnership Act
C)   Partnerships and Joint-Venture's Act
D)   The Uniform Partnership Act
E)   The Partnership Governance ActF) B) and C)
G) D) and E)

Exam 36: Partnerships: Nature, Formation, and Operation

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Which of the following statements is not true regarding offshore partnerships, in regard to developing countries?

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Only the partnership agreement determines the implied authority of partners.

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Which of the following was the result in Floyd Finch v. Bruce Wayne Campbell, the case concerning whether the fiduciary relationship between law partners gives rise to a duty to bill clients expeditiously, the court held that

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Each partner has unlimited personal liability for all acts of the partnership's partners.

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Articles of partnership usually include ...
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As explained in the text, the United States explains a fiduciary duty as including a duty of obedience, the ________ application of obedience and loyalty far exceeds the United States.

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

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Which of the following is the main statute governing partnership law?

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Which of the following is true regarding decisions requiring unanimous agreement among the partners, when the articles of partnership do not address the matter?

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Which of the following was the result in Robert Law, on Behalf of the Robert M. Law Profit Sharing Plan v. Ronald Zemp, the case in the text which considers how the partnership can be adversely affected by the negligence of one partner?

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A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

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Exam 36: Partnerships: Nature, Formation, and Operation

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Which of the following statements is not true regarding offshore partnerships, in regard to developing countries?

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Only the partnership agreement determines the implied authority of partners.

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Which of the following was the result in Floyd Finch v. Bruce Wayne Campbell, the case concerning whether the fiduciary relationship between law partners gives rise to a duty to bill clients expeditiously, the court held that

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Each partner has unlimited personal liability for all acts of the partnership's partners.

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Correct AnswerverifiedArticles of partnership usually include ...View AnswerShow Answer

As explained in the text, the United States explains a fiduciary duty as including a duty of obedience, the ________ application of obedience and loyalty far exceeds the United States.

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

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Correct AnswerverifiedShow Answer

Which of the following is the main statute governing partnership law?

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Which of the following is true regarding decisions requiring unanimous agreement among the partners, when the articles of partnership do not address the matter?

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Which of the following was the result in Robert Law, on Behalf of the Robert M. Law Profit Sharing Plan v. Ronald Zemp, the case in the text which considers how the partnership can be adversely affected by the negligence of one partner?

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A partner who refuses to obey the articles of partnership may be held liable for any losses that the partnership incurs.

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Articles of partnership usually include ...
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