VT Bar Business Organizations 3

Question 1

An agent has actual authority when:

Accepted Answer

The principal expressly or impliedly communicates authority to the agent, giving the agent reasonable grounds to believe they may act

Answer

A third party reasonably believes the agent has authority based on the principal's conduct toward that third party

Answer

The agent acts in an emergency to protect the principal's interests

Answer

A court retroactively approves the agent's unauthorized act

Question 2

Apparent authority arises when:

Accepted Answer

The principal's conduct or manifestations cause a third party to reasonably believe the agent has authority to act

Answer

The principal directly tells the agent they have authority to act

Answer

The agent acts in an emergency on the principal's behalf

Answer

The agent acts consistently with their customary role without any principal communication

Question 3

For ratification of an agent's unauthorized act to be effective, the principal must:

Accepted Answer

Ratify before the third party withdraws from the transaction

Answer

Obtain the third party's consent to allow ratification to occur

Answer

Obtain a court order approving the prior unauthorized act

Answer

Have the agent disclose the unauthorized nature of the act at the time it occurred

Question 4

A shareholder derivative suit is brought:

Accepted Answer

By a shareholder on behalf of the corporation to enforce the corporation's own rights when the board wrongfully refuses to act

Answer

By the corporation against one of its officers or directors for breach of duty

Answer

By shareholders collectively against a rival corporation in a hostile takeover dispute

Answer

By a minority shareholder to challenge a supermajority shareholder vote

Question 5

Under respondeat superior, an employer is vicariously liable when:

Accepted Answer

An employee commits a tort while acting within the scope of their employment

Answer

An independent contractor causes harm while performing work for the employer

Answer

An employee commits an intentional tort at the workplace

Answer

A former employee causes harm using skills learned during employment

Question 6

In a closely held corporation, which of the following arrangements is MOST likely to be enforceable?

Accepted Answer

A shareholder agreement restricting the transfer of shares to maintain control within a defined group

Answer

A shareholder agreement to elect a specific person as director in perpetuity without a vote

Answer

An oral agreement among shareholders to pay annual dividends regardless of financial condition

Answer

A promise by shareholders to indemnify directors for all wrongful or illegal conduct

Question 7

A partner's duty of loyalty in a partnership requires the partner to:

Accepted Answer

Account for and hold as trustee any profits derived from conducting partnership business or from using partnership property

Answer

Achieve a minimum profit target for the partnership each year

Answer

Attend all required partnership meetings and votes

Answer

Disclose all personal financial information to every partner annually