NYLE Business Relationships 4

Question 1

In New York, a promoter signs a contract on behalf of a corporation not yet formed. After incorporation, the corporation expressly adopts the contract. Which statement is correct regarding the promoter's liability?

Accepted Answer

The promoter remains liable unless the other party agrees to release the promoter as part of a novation.

Answer

Corporate adoption of a pre-incorporation contract does not release the promoter from personal liability unless there is an express novation releasing the promoter with the third party's consent.

Question 2

A New York LLC member who is dissatisfied with management seeks to compel the LLC's dissolution. Under NY LLC Law § 702, dissolution may be judicially ordered when:

Accepted Answer

It is not reasonably practicable to carry on the LLC's business in conformance with the operating agreement.

Answer

NY LLC Law § 702 authorizes judicial dissolution when it is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement.

Question 3

Under the New York BCL, a director who votes for an unlawful dividend is jointly and severally liable to the corporation for the amount of the dividend. Which defense is available to a dissenting director?

Accepted Answer

The director relied in good faith on financial statements prepared by the corporation's auditor.

Answer

BCL § 719(b) provides a safe harbor to directors who rely in good faith on financial statements or reports prepared by a qualified officer or independent accountant.

Question 4

In a New York partnership, Partner A commits a tort while acting within the ordinary course of the partnership's business. Partner B had no knowledge of and did not participate in the tort. Under NY Partnership Law, Partner B is:

Accepted Answer

Jointly and severally liable for the full amount of the tort judgment.

Answer

Under NY Partnership Law § 24, each partner is jointly and severally liable for all loss or injury caused by any partner's wrongful act in the ordinary course of partnership business, regardless of personal knowledge.

Question 5

A 90% shareholder of a New York corporation freezes out the 10% minority shareholder by eliminating her dividend, refusing her employment, and diluting her interest. Under New York law, the minority shareholder's most appropriate remedy is:

Accepted Answer

A direct action for breach of the majority's fiduciary duty to the minority, possibly seeking dissolution or buyout.

Answer

In a close corporation, majority shareholders owe fiduciary duties to the minority; a freeze-out supports a direct action for dissolution under BCL § 1104-a or a forced buyout.

NYLE - New York Law Exam Practice Test

NYLE - New York Law Exam Practice Test

NYLE Business Relationships 4