CAS Bar Business Associations 1 — Questions and Answers
Question 1: Under the California Uniform Partnership Act, what is the default rule for sharing profits among partners when no agreement exists?
- Profits are shared equally regardless of capital contribution (Correct answer)
- Profits are shared in proportion to capital contributions
- Profits are shared according to time each partner devotes to the business
- Profits are allocated by a court-determined fair distribution
Correct answer: Profits are shared equally regardless of capital contribution
Under California's Uniform Partnership Act, absent an agreement to the contrary, partners share profits equally regardless of their respective capital contributions.
Question 2: Which type of agency authority arises from a principal's conduct that leads a third party to reasonably believe the agent is authorized to act?
- Express authority
- Implied authority
- Apparent authority (Correct answer)
- Emergency authority
Correct answer: Apparent authority
Apparent authority arises when the principal's words or conduct reasonably lead a third party to believe the agent has authority, even if actual authority is absent.
Question 3: Under California law, a general partner in a limited partnership is:
- Liable only up to the amount of their capital contribution
- Personally liable for all partnership debts and obligations (Correct answer)
- Liable only for debts incurred during their active tenure
- Shielded from personal liability by a charging order
Correct answer: Personally liable for all partnership debts and obligations
General partners in a limited partnership bear unlimited personal liability for all debts and obligations of the partnership, distinguishing them from limited partners.
Question 4: Under the undisclosed principal doctrine in agency law, once the principal's identity is revealed, the third party may:
- Only sue the agent since the contract was with the agent
- Only sue the principal since the agent was merely acting on behalf of another
- Elect to hold either the agent or the principal liable (Correct answer)
- Void the contract due to lack of full disclosure
Correct answer: Elect to hold either the agent or the principal liable
When a principal is undisclosed, the third party may elect to pursue either the agent or the principal upon discovering the principal's identity, but cannot recover from both.
Question 5: Under the California Uniform Partnership Act, a general partnership is formed when:
- Formation documents are filed with the California Secretary of State
- Two or more persons carry on a business for profit as co-owners (Correct answer)
- A written partnership agreement is signed by all partners
- A Statement of Partnership Authority is recorded with the county
Correct answer: Two or more persons carry on a business for profit as co-owners
A general partnership is automatically formed when two or more persons carry on a business for profit as co-owners, without requiring any formal filing or written agreement.
Question 6: When an agent commits a tort while acting within the scope of employment, who is liable to the injured third party?
- Only the agent personally as the actual tortfeasor
- Only the principal under respondeat superior
- Both the agent and the principal (Correct answer)
- Neither, if the agent acted in good faith
Correct answer: Both the agent and the principal
Under respondeat superior, both the agent (as the direct tortfeasor) and the principal are jointly and severally liable for torts committed within the scope of employment.
Question 7: Under California's Uniform Partnership Act, which of the following actions requires the unanimous consent of all partners absent a contrary agreement?
- Hiring an employee for ordinary business operations
- Admitting a new partner to the partnership (Correct answer)
- Opening a bank account in the partnership name
- Entering a routine supply contract in the ordinary course of business
Correct answer: Admitting a new partner to the partnership
Admitting a new partner requires the unanimous consent of all existing partners under California's Uniform Partnership Act, as it fundamentally alters the partnership composition.
CAS Bar Business Associations 1
Under the California Uniform Partnership Act, what is the default rule for sharing profits among partners when no agreement exists?