ID Bar Business Associations 2 — Questions and Answers
Question 1: Under Idaho partnership law, the dissolution of a general partnership occurs upon:
- A partner leaving for any reason, regardless of the partnership agreement
- An event that makes it unlawful to carry on the partnership business, or judicial dissolution (Correct answer)
- The death of any partner, automatically and immediately
- A majority vote of the partners
Correct answer: An event that makes it unlawful to carry on the partnership business, or judicial dissolution
Under Idaho's UPA (2013), dissolution is triggered by specific events such as illegality, court order, or partner dissociation where the agreement does not require continuation — the partnership does not automatically dissolve on one partner's departure if the agreement provides otherwise.
Question 2: In an Idaho limited partnership, which of the following is true regarding a limited partner's liability?
- Limited partners are liable for all partnership debts like general partners
- Limited partners are liable only up to their capital contribution, provided they do not participate in control (Correct answer)
- Limited partners have no liability whatsoever regardless of control
- Limited partners are liable only for torts committed by the partnership
Correct answer: Limited partners are liable only up to their capital contribution, provided they do not participate in control
Under Idaho's LP Act, a limited partner's liability is generally capped at their capital contribution, though excessive participation in control may expose them to additional liability under older case law.
Question 3: Under agency law, an agent acting within the scope of authority binds the principal to a contract with a third party. If the agent exceeds their authority, the principal may still be bound under:
- Actual implied authority
- Apparent authority, if the third party reasonably believed the agent was authorized
- Ratification only if the principal knew all material facts
- Both apparent authority and ratification (Correct answer)
Correct answer: Both apparent authority and ratification
A principal can be bound despite an agent's lack of authority through apparent authority (reasonable third-party belief) or through ratification (principal later approves the act with knowledge of material facts).
Question 4: Under Idaho corporate law, which of the following transactions typically requires shareholder approval?
- A routine operating decision by the board
- Issuing new common shares within authorized limits
- A merger or sale of substantially all corporate assets (Correct answer)
- Appointing a new CEO
Correct answer: A merger or sale of substantially all corporate assets
Fundamental corporate transactions such as mergers, consolidations, and sales of substantially all assets generally require shareholder approval under Idaho's Business Corporation Act.
Question 5: A shareholder's derivative suit in Idaho allows a shareholder to:
- Sue other shareholders for breach of a shareholder agreement
- Bring a claim on behalf of the corporation for wrongs done to the corporation when the board refuses to act (Correct answer)
- Seek personal damages for harm to their individual shares
- Force the corporation to declare dividends
Correct answer: Bring a claim on behalf of the corporation for wrongs done to the corporation when the board refuses to act
A derivative suit is brought by a shareholder on behalf of the corporation to enforce a corporate cause of action when the board wrongfully refuses to do so — any recovery belongs to the corporation.
Question 6: Under Idaho's franchise laws related to the Franchise Investment Act, which of the following is required of a franchisor?
- Franchisors must obtain annual license renewals from the state
- Franchisors must provide a Franchise Disclosure Document (FDD) to prospective franchisees at least 14 days before signing (Correct answer)
- Franchisors may disclaim all implied warranties in the franchise agreement
- Franchisors are not required to disclose litigation history
Correct answer: Franchisors must provide a Franchise Disclosure Document (FDD) to prospective franchisees at least 14 days before signing
Idaho's Franchise Investment Act (Idaho Code § 29-110 et seq.) requires pre-sale disclosure including delivery of the FDD at least 14 days before execution of the franchise agreement.
ID Bar Business Associations 2
Under Idaho partnership law, the dissolution of a general partnership occurs upon: