CT Bar Business Associations: Formation/Liability 2

Question 1

A promoter enters a contract on behalf of a corporation not yet formed. After incorporation, the board expressly adopts the contract. Who remains liable?

Accepted Answer

Both the promoter and the corporation

Answer

Unless the contract expressly releases the promoter, both the promoter and the corporation are liable after adoption; novation requires agreement of all three parties.

Question 2

Under the Connecticut LLC Act, which of the following statements about member liability is correct?

Accepted Answer

Members are generally not personally liable for LLC obligations

Answer

Connecticut LLC members enjoy limited liability and are generally not personally liable for LLC debts simply by virtue of membership.

Question 3

A corporation's articles of incorporation contain an ultra vires provision. A third party seeks to enforce a contract the corporation lacked authority to make. What is the modern majority rule?

Accepted Answer

The state may sue to enjoin the act, but third parties may generally enforce the contract

Answer

Modern statutes, including Connecticut's, largely abolish ultra vires as a defense against third parties; the state may challenge the act but third parties may enforce it.

Question 4

Two partners operate a general partnership without a written agreement. One partner makes an unauthorized contract binding the partnership for $50,000. Which rule applies?

Accepted Answer

Each partner has apparent authority to bind the partnership in the ordinary course of business

Answer

Under the Uniform Partnership Act, each partner is an agent of the partnership and has apparent authority to act in the ordinary course of business.

Question 5

A sole proprietor converts her business to a corporation but continues to operate without observing corporate formalities. A creditor seeks to pierce the corporate veil. Which factor is LEAST relevant?

Accepted Answer

The corporation's profitability

Answer

Profitability is generally not a veil-piercing factor; courts focus on lack of formalities, commingling, and alter ego use.

(CT Bar) Connecticut Bar Exam Practice Test

(CT Bar) Connecticut Bar Exam Practice Test

CT Bar Business Associations: Formation/Liability 2