RI Bar Business Associations 3

Question 1

A promoter who enters into a contract on behalf of a corporation not yet formed is personally liable on that contract unless:

Accepted Answer

The third party agrees to a novation substituting the corporation for the promoter after formation

Answer

A promoter remains personally liable on pre-incorporation contracts until the third party agrees to a novation — substituting the corporation as the liable party — after the corporation is formed.

Question 2

Under agency law, the doctrine of ratification allows a principal to become bound by an unauthorized act of an agent if the principal:

Accepted Answer

Affirms the act with full knowledge of the material facts, and the act was done on the principal's behalf

Answer

Ratification requires that the principal affirm the agent's unauthorized act with full knowledge of the material facts, and the agent must have acted (or purported to act) on the principal's behalf.

Question 3

A shareholder's inspection right under most state corporation statutes requires the shareholder to:

Accepted Answer

Have a proper purpose related to their interest as a shareholder

Answer

Most state statutes allow shareholders to inspect books and records if they have a proper purpose — one reasonably related to their interest as a shareholder.

Question 4

In a closely held corporation, a shareholder agreement that restricts share transfers is enforceable against a prospective transferee if:

Accepted Answer

The restriction is noted conspicuously on the share certificate or the transferee has actual knowledge of it

Answer

Transfer restrictions are enforceable against a transferee if they are noted conspicuously on the share certificate or if the transferee had actual knowledge of the restriction.

Question 5

Which of the following statements best describes the duty of care owed by corporate directors under the Model Business Corporation Act?

Accepted Answer

Directors must act with the care a person in a like position would reasonably exercise under similar circumstances

Answer

The MBCA requires directors to act with the care that a person in a like position would reasonably exercise under similar circumstances, allowing reliance on expert reports and management.

(RI Bar) Rhode Island Bar Exam Practice Test

(RI Bar) Rhode Island Bar Exam Practice Test

RI Bar Business Associations 3