OR Bar Business Associations 2 — Questions and Answers
Question 1: An agent acting within the scope of apparent authority binds the principal when the third party's belief is based on:
- The agent's own representations about their authority
- Conduct of the principal that created a reasonable belief of authority (Correct answer)
- A written contract signed by the agent alone
- The agent's prior dealings with unrelated third parties
Correct answer: Conduct of the principal that created a reasonable belief of authority
Apparent authority arises from the principal's conduct that leads a third party to reasonably believe the agent is authorized, not from the agent's own claims.
Question 2: Under the Uniform Partnership Act as adopted in Oregon, when is a partnership formed?
- Only upon filing a statement of partnership with the Secretary of State
- When two or more persons agree in writing to carry on a business for profit
- When two or more persons associate as co-owners to carry on a business for profit (Correct answer)
- Upon issuance of a federal tax identification number
Correct answer: When two or more persons associate as co-owners to carry on a business for profit
A general partnership is formed by association as co-owners to carry on a business for profit — no filing or written agreement is required.
Question 3: A limited partner who participates in control of the partnership's business under the Revised Uniform Limited Partnership Act (RULPA) risks:
- Unlimited personal liability to all partnership creditors
- Personal liability only to creditors who reasonably believed the limited partner was a general partner (Correct answer)
- Loss of the limited partner's economic interest in the partnership
- Criminal penalties under Oregon securities law
Correct answer: Personal liability only to creditors who reasonably believed the limited partner was a general partner
Under RULPA, a limited partner who participates in control is liable only to those third parties who reasonably believed the limited partner was a general partner.
Question 4: An employee negligently injures a customer while making deliveries during work hours. Under respondeat superior, the employer is:
- Not liable because the employee, not the employer, acted negligently
- Liable only if the employer was also negligent in hiring or supervising
- Vicariously liable because the employee was acting within the scope of employment (Correct answer)
- Liable only if the employer expressly authorized the specific act causing harm
Correct answer: Vicariously liable because the employee was acting within the scope of employment
Respondeat superior makes an employer vicariously liable for an employee's torts committed within the scope of employment, regardless of the employer's own fault.
Question 5: A general partner who transfers her partnership interest to a third party without consent of the other partners:
- Causes the partnership to dissolve immediately
- Transfers full partner status including management rights to the transferee
- Transfers only the economic rights; the transferee does not become a partner (Correct answer)
- Loses her own status as a partner upon the transfer
Correct answer: Transfers only the economic rights; the transferee does not become a partner
A transfer of a partnership interest conveys only the transferor's economic rights (profits and distributions), not management or voting rights, unless the other partners consent.
Question 6: Which of the following best describes the fiduciary duties owed among general partners to each other?
- No fiduciary duties exist because partners are independent contractors
- Duties of loyalty and care analogous to those owed by corporate directors (Correct answer)
- A duty of loyalty only, but no duty of care
- Duties are defined entirely by contract with no default rules
Correct answer: Duties of loyalty and care analogous to those owed by corporate directors
General partners owe each other duties of loyalty and care similar to those applied in the corporate context, as codified in UPA (1997).
Question 7: When a partner's authority to act for a general partnership is disputed, a third party who dealt with that partner in an ordinary course transaction will generally be protected if:
- The third party obtained a written authorization from all other partners
- The act was within the usual authority of a partner in that type of business (Correct answer)
- The partnership had filed a statement of authority limiting that partner
- The third party checked the partnership agreement before contracting
Correct answer: The act was within the usual authority of a partner in that type of business
Each partner has actual authority to bind the partnership in ordinary business transactions, protecting third parties who deal with partners in the usual course of that business.
OR Bar Business Associations 2
An agent acting within the scope of apparent authority binds the principal when the third party's belief is based on: