MBE

Question 1

Label the parties involved:

Seller lists a property with a broker and a Realtor shows the property to prospective buyers.

Answer 1

Seller: Principal

Broker: Agent

Realtor: Subagent

Question 2

What are common crimes that a principal could be vicariously liable for?

Answer 2

Negligence, misrepresentation, false imprisonment, battery

Question 3

What is it called when an employee’s personal errand involves a significant deviation from the path that otherwise would be taken for the purposes of performing work?

Answer 3

A frolic

Question 4

When should one apply tort law to an agency scenario?

Answer 4

Tort law applies when vicarious liability attaches to a principal for torts or crimes committed by an agent.

Question 5

What three situations provide the agent with power to bind the principal to a contract?

Answer 5

1. The agent has actual authority (express or implied)
2. The agent has apparent authority, or
3. The principal is estopped from denying the agent’s authority

Question 6

When is a principal not required to indemnify an agent’s losses?

Answer 6

A principal is not obligated to indemnify losses that result from an agent’s own negligence, illegal acts, or other wrongful conduct.

Question 7

Who may be a principal?

Answer 7

Any individual or entity that has the legal capacity to possess rights and incur obligations can be a principal.

Question 8

What five circumstances would each count as a change in circumstance, ending the agency relationship?

Answer 8

1. A change in a statute relating to the subject matter
2. Insolvency of either party
3. A dramatic change in business conditions
4. The destruction of the subject matter of the agency relationship
5. A disaster (natural or unnatural)

Question 9

What are three situations that would result in a principal being directly liable to a third party harmed by an agent’s conduct?

Answer 9

1. The principal authorizes or ratifies the agent’s conduct
2. The principal is negligent in selecting, supervising, or otherwise controlling the agent, or
3. The principal delegates to an agent performance of a non-delegable duty to use care to protect other persons or their property, and the agent breaches the duty

Question 10

What are the four elements required for creating an agency relationship?

Answer 10

1. A principal manifests assent to an agent.
2. The agent acts on the principal’s behalf.
3. The agent’s actions are subject to the principal’s control.
4. The agent manifests assent or otherwise consents.

Question 11

What are common crimes that a principal could be vicariously liable for?

Answer 11

Negligence, misrepresentation, false imprisonment, battery

Question 12

What is a special agent?

Answer 12

Special agents generally have limited authority regarding a specific transaction or a string of repetitive acts.
Examples: real-estate agents, subagents, insurance agents, commission merchants, bailees

Question 13

What makes a principal partially disclosed?

Answer 13

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity.

Question 14

When is a duty non-delegable?

Answer 14

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person.

Question 15

What are the subjective and objective standards of intent for actual authority?

Answer 15

Subjective standard: the agent must believe that he/she is doing what the principal wants

Objective standard: the agent’s belief must be reasonable

Question 16

What role, if any, may an incompetent play in the agency relationship?

Answer 16

A person who has a factual incapacity, such as incompetence, does not have the legal capacity to be a principal, but may be an agent.

Question 17

What is the two-factor rule for when a principal is vicariously liable to a third party harmed by the agent’s conduct?

Answer 17

A principal is vicariously liable when:

1. The agent is a servant / employee, and
2. The agent commits a tort while acting within the scope of employment.

Question 18

What are the seven types of agents?

Answer 18

1. Individual
2. Servant / Employee
3. Independent contractor
4. Gratuitous agent
5. General and special agents
6. Trustee
7. Subagent

Question 19

What is a special agent?

Answer 19

Special agents generally have limited authority regarding a specific transaction or a string of repetitive acts.

Examples: real-estate agents, subagents, insurance agents, commission merchants, bailees

Question 20

Must an agent consent to the agency relationship verbally, in writing, with actions, or by a combination thereof?

Answer 20

An agent does not have to verbally consent, but may manifest assent by performing acts on behalf of the principal.

Question 21

Who may terminate the agency relationship?

Answer 21

The termination may be unilateral- the principal or agent may terminate without the other’s consent.

Question 22

What may an agent with implied actual authority do?

Answer 22

Implied actual authority allows an agent to take whatever actions are properly necessary to achieve the principal’s objectives, based on the agent’s reasonable understanding of the manifestations and objectives of the principal.

Question 23

What makes a principal partially disclosed?

Answer 23

A principal is partially disclosed if the third party has notice of the principal’s existence but not the principal’s identity.

Question 24

What are the seven elements that identify someone as an independent contractor rather than an employee?

Answer 24

An independent contractor is one who:
1. Bears the risk and benefits from good management

2. Maintains a high level of independence
3. Is free to work for others
4. Agrees to be paid a fixed fee
5. Receives payment based on results
6. Is liable for work performed, and
7. Accepts responsibility to remedy defects at her own expense

Question 25

When may a person who has not represented that an individual is authorized to act as an agent be estopped from denying the existence of the agency relationship?

Answer 25

Estoppel applies when a third party is justifiably induced to make a detrimental change in position because that third party believed the transaction was entered into for the principal, and either the principal intentionally or recklessly caused the belief, or failed to take reasonable steps to correct such belief.

Question 26

Besides contract and tort law, when else should one be on the lookout for agency issues on the exam?

Answer 26

Partnership and corporations questions. Be prepared to

1. Identify the existence of agency relationships
2. Discuss whether the principal is subject to liability for the agent’s actions
3. Articulate an agent’s fiduciary duty to the principal and if there’s a breach
4. Determine if or when an agency relationship has terminated

Question 27

Under what two areas (or subjects) of law may an agent file a claim against a principal?

Answer 27

An agent might have a claim against the principal founded in contract or tort law.

Question 28

When is a duty non-delegable?

Answer 28

Generally, a duty is non-delegable when the responsibility is so important to the community that a person should not be permitted to transfer it to another person.

Question 29

What consideration is required to form an agency relationship?

Answer 29

None- an agent need not receive consideration (a gratuitous agent)

Question 30

What is the term for what happens when a principal affirms a prior act that was done or purported to be done on the principal’s behalf?

Answer 30

Ratification

Question 31

When does the election of remedies doctrine come into play?

Answer 31

When a principal is first undisclosed and the agent binds the principal to a contract with a third party, and then the third party learns of the principal’s existence, this doctrine comes into play and requires the third party to choose to hold either the agent or the principal liable and obtain a judgment against only one.

Question 32

What is the capacity required to serve as an agent?

Answer 32

Generally, anyone with minimal capacity can serve as agent, including minors, incompetents, and entities.

Question 33

Under what negligence theory can a principal be liable to a third party?

Answer 33

A principal who is negligent in selecting, supervising, or otherwise controlling an agent runs the risk of liability attaching to that negligence.

Question 34

What are the eight ways in which an agent’s actual authority may be terminated?

Answer 34

1. Principal’s revocation
2. Principal’s agreement with the agent
3. Change of circumstances
4. Passage of time
5. Principal’s death or suspension of powers
6. Agent’s death or suspension of powers
7. Principal’s loss of capacity
8. A statutorily mandated termination

Question 35

What is a subagent?

Answer 35

A person appointed by an agent to perform functions that the agent has agreed to perform on behalf of a principal. The agent is liable to the principal for the conduct of the subagent.

Question 36

When an agent is contracting on behalf of a disclosed principal, what three steps must the agent take to avoid becoming a party to the contract?

Answer 36

The agent must:
1. Enter into the contract on behalf of the disclosed principal

2. Affirmatively disclose to the third party both the existence and identity of the principal, and
3. Not agree to become a party to the contract

Question 37

What are an agent’s five general rights?

Answer 37

1. To be compensated (if so promised)
2. Allowed to work without interference
3. Reimbursed for losses
4. Provided a safe work environment
5. Indemnified for working on behalf of a principal

Question 38

Does an agent have a right to be compensated if not expressly written in a contract, and if so, how much?

Answer 38

Yes, an agent has a right to receive compensation if the principal impliedly promises such. When no amount has been specified, an agent has the right to be compensated in the customary manner of the business trade.

Question 39

What doctrine places liability on an innocent principal for acts of an agent?

Answer 39

Vicarious liability asserts that a principal is liable for acts of an agent, even though the principal is innocent of fault and not directly guilty of any tort or crime.

Question 40

What are the five types of principals?

Answer 40

1. Individual
2. Master / Employer
3. Entrepreneur
4. Corporation
5. Partnership

Question 41

Which type of authority results when the principal causes a third party to reasonably believe the agent has authority to act?

Answer 41

Apparent authority (also known as the doctrine of “ostensible agency”)

Question 42

What is the most common method of creating an agency relationship?

Answer 42

By appointment (either oral or written)

Question 43

What results when a principal’s manifestation intended for one agent is actually given to another agent in error?

Answer 43

This situation creates express authority to the agent who received the manifestation by mistake.

Note: The same result occurs when a principal’s manifestation concerning the subject matter is incorrect.

Question 44

Which type of authority results when the principal’s words or actions cause an agent to reasonably believe in the agent’s authority to act?

Answer 44

Implied authority

Question 45

Can a minor serve as a principal or agent?

Answer 45

A minor may serve as an agent, but lacks the capacity to serve as principal. This is because to become a principal and be bound by an agent’s actions, a person must have capacity both to consent to the agency relationship and to enter into the transaction to which the agent purports to bind the principal.

Question 46

What doctrine places liability on a principal for a tort committed by an agent acting within the scope of employment?

Answer 46

Respondeat superior, also known as derivative liability

Question 47

As between a principal and agent, who owes whom the duty of loyalty?

Answer 47

The agent owes the principal the duty of loyalty, the principal does not owe the agent the duty of loyalty. However, a principal does have a duty to refrain from conduct likely to injure an agent’s business reputation or reasonable self-respect.

Question 48

In a partnership, who is the principal and who is the agent?

Answer 48

The partnership can be considered the principal, while partners, employees, and others, such as attorneys, can serve as agents of the partnership.

Question 49

What three things must an agent have or do to create an agency relationship?

Answer 49

1. Have minimal capacity
2. Manifest assent and consent to act on the principal’s behalf
3. Manifest assent to be subject to the principal’s control

Question 50

When does fraudulent concealment apply?

Answer 50

For fraudulent concealment to apply, either the principal or the agent must have notice that the third party would not have dealt with the principal. Mere suspicions or doubts are not enough to give notice.

Question 51

What is the “well-pleaded complaint rule?”

Answer 51

This rule refers to the determination of federal question jurisdiction made by considering only the necessary elements of the plaintiff’s cause of action, not anticipated defenses, answers, or counterclaims.

This rule applies both to original jurisdiction of the federal court and to removal jurisdiction.

Question 52

What is a compulsory counterclaim?

Answer 52

A pleading is required to state as a counterclaim any claim that, at the time of service, the pleader has against an opposing party if:

(i) The claim arises out of the same transaction or occurrence that is the subject matter of the opposing party’s claim; and
(ii) The claim does not require adding another party over whom the court cannot acquire jurisdiction.

Note: A party who fails to assert a compulsory counterclaim waives the right to sue on the claim and is generally precluded from ever suing on the claim in federal court.

Question 53

When may a plaintiff join as a permissive joinder?

Answer 53

Pursuant to Rule 20(a)(1), a person may join in one action as plaintiff if:

(i) They assert any right to relief jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and
(ii) Any question of law or fact common to all plaintiffs will arise in the action.

Note: The same circumstances apply to permissive joinder of defendants under Rule 20.

Question 54

What is the purpose of a long-arm statute?

Answer 54

A long-arm statute authorizes personal jurisdiction over nonresidents who engage in some activity in the state or cause some action to occur within the state. A long-arm statute either directly authorizes or has been interpreted as authorizing jurisdiction to the extent permissible under the Due Process Clause.

Question 55

What are the four requirements for a class action?

Answer 55

(i) The class must be so numerous that joinder of all members is impracticable (numerosity);
(ii) There must be questions of law or fact that are common to the class (commonality);
(iii) The claims or defenses of the representatives must be typical of the class (typicality); and
(iv) The representatives must fairly and adequately protect the interests of the class (adequacy)

Question 56

When and how is the amount in controversy determined for diversity jurisdiction purposes?

Answer 56

The amount in controversy must exceed $75,000, exclusive of interest, costs, and collateral effects of a judgment. The amount in controversy is determined at the time the action is commenced in federal court, or, if the action has been removed to federal court, at the time of the removal.

Note: Attorney’s fees may be included in the calculation if recoverable by contract or statute, and punitive damages may possibly be included as well.

Question 57

What interlocutory orders are immediately appealable?

Answer 57

28 USC 1292(a) makes certain equitable orders reviewable immediately as a matter of right, including:

(i) An order granting, modifying, refusing, or dissolving an injunction;
(ii) An order appointing or refusing to appoint a receiver; and
(iii) A decree determining the rights and liabilities of the parties to admiralty cases in which appeals from final decrees are allowed.

Question 58

What are the required elements for a complaint?

Answer 58

Under Rule 8(a), a complaint must include:

(i) A short and plain statement of the grounds that establish the court’s subject matter jurisdiction;
(ii) A short and plain statement of the claim establishing entitlement to relief; and
(iii) A demand for judgment for the relief sought by the pleader.

Question 59

When is notice not required for a temporary restraining order?

Answer 59

A temporary restraining order may issue without notice to the adverse party if:

(i) The moving party can establish, under written oath, that immediate and irreparable injury will result prior to hearing the adverse party’s opposition; and
(ii) The movant’s attorney certifies in writing any efforts made to give notice and the reason why notice should not be required.

Question 60

What is federal question jurisdiction?

Answer 60

Under 28 U.S.C. 1331, the district courts have original jurisdiction over all actions arising under the Constitution, laws, or treaties of the United States.

Question 61

How does remand differ from removal?

Answer 61

Removal is from state to federal court, and by a defendant, usually within a specified time frame, and with the agreement of all defendants.

Remand happens from federal to state court. It does not require consent or timeliness.

Question 62

What are the three types of class actions?

Answer 62

(1) Risk of Prejudice: The class is maintainable if the prosecution of separate actions would create the risk that the class opponent would become subject to incompatible standards of conduct resulting from inconsistent adjudications, or if prosecution of the claims through separate actions would impair the interests of the class members.
(2) Final Equitable Relief: A class seeking final injunctive or declaratory relief may be certified if the class shares a general claim against the opposing party.
(3) Common Legal or Factual Questions: A class can be certified if questions of law or fact that are common to the class members predominate over any questions affecting only individual members, and a class action is the superior method for bringing about a fair and efficient adjudication of the controversy.

Question 63

When must a party be joined as a compulsory joinder under Rule 19?

Answer 63

Under Rule 19(a), a person who is subject to service of process and whose joinder will not deprive the court of subject matter jurisdiction or destroy venue must be joined as a party if:

(i) Complete relief cannot be provided to existing parties in the absence of that person;
(ii) Disposition in the absence of that person may impair the person’s ability to protect his interest; or
(iii) The absence of that person would leave existing parties subject to a substantial risk of multiple or inconsistent obligations.

Question 64

When does a court have diversity jurisdiction (two requirements)?

Answer 64

When:

(1) The parties to the action are (a) citizens of different states (b) citizens of a state and citizens or subjects of a foreign state (c) citizens of different states and citizens or subjects of a foreign state are additional parties, or (d) a foreign state as plaintiff and citizens of a state or different states; and
(2) The amount in controversy in the action exceeds $75,000

Question 65

Under Rule 20 permissive joinder, does the plaintiff to be joined have to meet the requirements of federal subject matter jurisdiction?

Answer 65

If multiple plaintiffs join together under Rule 20, then supplemental jurisdiction can exist for a claim that does not meet the statutory jurisdictional amount, provided the parties still meet the requirements of complete diversity.

Question 66

Where is an individual’s domicile and how is the domicile changed?

Answer 66

An individual’s domicile is the state where the individual is present and intends to reside for an indefinite period. This state remains the domicile until the individual:

1. Establishes presence in a new place; and
2. Manifests intent to remain there for an indefinite period.

Question 67

What is an injunction?

Answer 67

A form of equitable relief mandating that a defendant perform a specified act or prohibiting a defendant from performing a specified act

Question 68

Typically, if a defendant is voluntarily present in the forum state and served with process there, then the court has personal jurisdiction over the defendant.

What are two exceptions?

Answer 68

(1) If a plaintiff fraudulently brings a defendant into the state for the purpose of serving process on the defendant
(2) If a defendant is merely passing through the state to attend other judiciary proceedings

Question 69

Federal courts of appeals have jurisdiction over appeals of what types of judgments?

Answer 69

Under 28 USC 1291, the federal courts of appeals have jurisdiction over appeals of the final judgments of the district courts. A final judgment is a decision by the court on the merits that leaves nothing for the court to do but execute the judgment.

Question 70

How does a party make a demand for a trial by jury?

Answer 70

Any party may make a written demand for a trial by jury. The demand, which may be made separately or in a pleading, must be served within 14 days after service of the last pleading directed to the issue that is sought to be tried by a jury, and filed with the court within a reasonable time after service.

Question 71

What is an impleader?

Answer 71

An impleader (third-party claim) are claims that are made by a defending party against a nonparty for all or part of the defending party’s liability on an original claim.

Question 72

When is a default and default judgment entered against a party?

Answer 72

When:

(i) A party has failed to plead or otherwise defend an action, and that failure is show by affidavit; or
(ii) The court clerk must enter the party’s default. Once a default is entered against a party, the plaintiff may seek a default judgment.

Question 73

How may an individual within the U.S. be served?

Answer 73

Service may be made within the state in which the federal district court sits by:

(i) Personally serving the summons and complaint on the defendant;
(ii) Leaving the summons and complaint at the defendant’s usual place of abode with a person of suitable age and discretion who resides there; or
(iii) Delivering the summons and complaint to an agent appointed by the defendant or otherwise authorized by law to receive service.

Question 74

How many peremptory challenges and challenges for cause does a party have?

Answer 74

Each party in a civil case gets three peremptory challenges. Each party is entitled to an unlimited number of challenges for cause.

Question 75

What is the standard of review used by appellate courts for legal rulings?

Answer 75

In general, appellate review of legal rulings is de novo (i.e., without deference to the trial court’s legal rulings).

Question 76

When may a party file a renewed motion for judgment as a matter of law?

Answer 76

The movant may file a renewed motion for judgment as a matter of law no later than 28 days after the entry of judgment. If the motion addresses a jury issue not decided by a verdict, then the renewed motion must be filed no later than 28 days after the jury was discharged.

Question 77

What are the three types of mandatory disclosures?

Answer 77

Rule 26(a) requires the parties to make:  
(i) Initial disclosures;  

(ii) Disclosures of expert testimony 90 days before trial; and
(iii) Pretrial disclosures 30 days before trial.

Question 78

When can a defense of lack of subject matter jurisdiction be raised?

Answer 78

The defense of lack of subject matter jurisdiction may be raised at any time, even on appeal. Rule 12(h)(3).

Question 79

How much time does a party have to respond to interrogatories?

Answer 79

The responding party must serve its answers and any objections within 30 days after being served with the interrogatories.

Note: The court may order or the parties may stipulate to a shorter or longer time.

Question 80

What is the standard used in deciding a motion to dismiss for failure to state a claim upon which relief can be granted?

Answer 80

Under Rule 12(b)(6), a claim for relief can be dismissed if it either
(i) fails to assert a legal theory of recovery that is cognizable at law, or

(ii) fails to allege facts sufficient to support a cognizable claim. In deciding a motion under Rule 12(b)(6), courts treat all well-pleaded facts of the complaint as true, resolve all doubts and inferences in the plaintiff’s favor, and view the pleading in the light most favorable to the plaintiff.

Question 81

What is the due process requirement for in personam jurisdiction?

Answer 81

Due process requirements are satisfied if the nonresident defendant has sufficient minimum contacts with the forum state such that the maintenance of the action does not offend traditional notions of fair play and substantial justice.

Question 82

In assessing whether a case can be filed in federal court, when is diversity determined?

Answer 82

Diversity is determined at the time the case is filed. There is no requirement that diversity exist at the time the cause of action arose. A change in citizenship or amount in controversy after the filing of the case will not affect diversity jurisdiction that was in existence at the time of the filing. In addition, a change in the parties as a result of substitution or intervention will not affect diversity jurisdiction.

Question 83

If a case starts out as not removable, but later becomes removable, what is the timeframe for removing?

Answer 83

The defendant has 30 days to file a notice of removal once the defendant receives a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is now removable.

Question 84

What are the two ways in which a defendant can consent to in personam jurisdiction?

Answer 84

1. Express consent: defendant agrees in advance to submit to the jurisdiction of the court if a lawsuit is brought by the plaintiff, or stipulates to personal jurisdiction once an action is brought
2. Implied consent: through conduct, such as filing a counterclaim or driving a vehicle within a state

Question 85

How many interrogatories may a party serve on another party?

Answer 85

Pursuant to Rule 33(a), any party may serve no more than 25 written interrogatories on any other party.

Question 86

What is a judgment as a matter of law, and what is the standard used in deciding these motions?

Answer 86

Under Rule 50(a), once a party has been fully heard on an issue at a jury trial, the court may grant a motion for judgment as a matter of law resolving the issue against a party if the court finds that there is insufficient evidence for a jury reasonably to find for that party.

The court must view the evidence in the light most favorable to the opposing party and draw all reasonable inferences from the evidence in favor of the opposing party.

Question 87

Under Rule 20 permissive joinder, does the defendant to be joined have to meet the requirements of federal subject matter jurisdiction?

Answer 87

If the claims are made solely on the basis of diversity jurisdiction, there must be complete diversity between the plaintiffs and the defendants, and each claim must exceed the jurisdiction amount in controversy of $75,000.

Question 88

When must an objection to improper venue be raised?

Answer 88

An objection to improper venue must be raised in a pre-answer motion to dismiss under Rule 12(b)(3) or in the first responsive pleading, if a motion under Rule 12(b)(3) is not filed.

Question 89

Who has the burden of proof in a claim for summary judgment?

Answer 89

The movant has the burden of persuasion on a motion for summary judgment. Once the movant make a prima facie showing that summary judgment is appropriate, the burden shifts to the opposing party to set forth specific evidence showing the existence of a genuine issue of fact for trial.

Question 90

How long may a temporary restraining order remain in effect?

Answer 90

A temporary restraining order may remain in effect for only a limited number of days, but no longer than 14 days unless good cause exists or the adversary consents.

Question 91

For purposes of venue, where does a defendant business entity reside?

Answer 91

A business entity is deemed to reside in any judicial district in which the entity is subject to personal jurisdiction with respect to the civil action in question.

Note: If the entity is a plaintiff, then it is deemed to reside only in the judicial district in which it maintains its principal place of business.

Question 92

What are the requirements of claim preclusion?

Answer 92

Claim preclusion (res judicata) requires:  
(i) A valid final judgment on the merits;  

(ii) Sufficiently identical causes of action; and
(iii) Sufficiently identical parties.

Question 93

Under the Erie Doctrine, what law governs in a federal question claim?

Answer 93

If the action is a federal question claim, then federal substantive and procedural law will control, as well as federal common law.

Question 94

When can a party amend a pleading?

Answer 94

Under Rule 15(a), a party may amend a pleading:
(i) Once as of right within 21 days if no responsive pleading is required; or

(ii) If a responsive pleading is required, within 21 days of service of the responsive pleading or within 21 days of being served with a motion under Rule 12(b), whichever is earlier.

Additionally, the court should freely give leave to amend a pleading when justice so requires.

Question 95

What is removal jurisdiction and who generally has the right to remove?

Answer 95

Any civil action commenced in a state court that is within the original jurisdiction of a U.S. district court may generally be removed to the district court for the district and division in which the state court action is pending.

Generally, the right of removal is a right of the defendant.

Question 96

Generally, where is venue proper?

Answer 96

(i) A judicial district in which any defendant resides, if all defendants reside in the same state in which the district is located; or
(ii) A judicial district in which a “substantial part of the events or omissions” on which the claim is based occurred, or where a “substantial part of the property” that is the subject of the action is located.

Question 97

Who is responsible for serving the summons and complaint and when must it be served?

Answer 97

The plaintiff is responsible for serving the summons and complaint upon the defendant within 90 days after filing the complaint.

Question 98

What is the rule for removal when there are multiple defendants?

Answer 98

In general, all defendants who have been properly joined and served are required to join in or consent to the removal. If the defendants are served at different times and a later-served defendant files a notice of removal, then any earlier-served defendant may join in the removal even though that defendant did not previously initiate or consent to removal.

Note: In cases of removal based on federal question jurisdiction, only those defendants against whom the federal claim is asserted must join in or consent to the removal.

Question 99

How is a corporation’s “principal place of business” determined?

Answer 99

“Principal place of business” refers to the “nerve center” of the corporation. The nerve center is generally the location from which the high-level officers direct, control, and coordinate the activities of the corporation. Typically, the nerve center is the corporate headquarters.

Question 100

What three factors will a court consider when deciding to set aside a default judgment?

Answer 100

Three factors the courts generally consider are:
(i) Whether the defendant’s failure to act was willful;

(ii) Whether setting the default aside would prejudice the plaintiff; and
(iii) Whether the defendant has presented a meritorious claim.

Question 101

What are the three types of jury verdicts?

Answer 101

(1) Special verdict - A written finding made by the jury on each issue of ultimate fact. The court submits written questions to the jury correlating to each ultimate fact of the case and asks the jury to make a finding on each fact.
(2) General verdict - A decision by the jury as to the prevailing party and, if the plaintiff is the prevailing party, the amount of damages.
(3) General with special interrogatories - This couples a general verdict with a special verdict. It is used to ensure that the jury independently considered the material facts of the case in arriving at its verdict.

Question 102

When are two claims considered related for purposes of supplemental jurisdiction?

Answer 102

When the claims arise out of a common nucleus of operative fact

Question 103

May a single plaintiff aggregate claims against multiple defendants to satisfy the amount-in-controversy requirement?

Answer 103

When a single plaintiff sues multiple defendants, the value of the plaintiff’s claims against each defendant may not be aggregated if the claims are separate and distinct.

If the defendants are jointly liable to the plaintiff, then aggregation to meet the amount-in-controversy requirement is permissible.

Question 104

When may a party bring a motion for judgment as a matter of law?

Answer 104

A motion for judgment as a matter of law may be made at any time before the case is submitted to the jury.

Note: If a party moves for a judgment as a matter of law after the close of the plaintiff’s case and the motion is denied, then the party may be unable to pursue a renewed motion for judgment as a matter of law after entry of judgment unless the party also moves for judgment as a matter of law after the presentation of all evidence.

Question 105

For the purposes of diversity jurisdiction, how is a corporation’s citizenship determined?

Answer 105

A corporation is considered a citizen of the state(s) and/or foreign country of incorporation and also the state or foreign country where it has its principal place of business.

Note: There can be more than one state or foreign country of incorporation, but only one state or foreign country will qualify as the principal place of business.

Question 106

When a case is removable from the outset, how does a defendant begin the process for removal?

Answer 106

A defendant who wants to remove a state court action to federal district court generally must file a notice of removal with the district court within 30 days after receipt or service of the initial pleading or summons.

Question 107

What are six grounds for a court to grant a motion for a new trial?

Answer 107

(i) Error at trial that renders the judgment unfair;
(ii) Newly discovered evidence that existed at the time of the trial was excusably overlooked and would likely have altered the outcome of the trial;
(iii) Prejudicial misconduct of counsel, a party, the judge, or a juror;
(iv) A verdict that is against the clear weight of the evidence;
(v) A verdict that is based on false evidence; or
(vi) A verdict that is excessive or inadequate.

Note: Rule 59 does not specifically list the grounds that will justify a new trial, but in practice, the overarching theme is that the court may grant a new trial to prevent a miscarriage of justice.

Question 108

What seven defenses may be raised in a motion filed under Rule 12(b)?

Answer 108

(i) Lack of subject matter jurisdiction
(ii) Lack of personal jurisdiction;
(iii) Improper venue;
(iv) Insufficient process;
(v) Insufficient service of process;
(vi) Failure to state a claim upon which relief can be granted; and
(vii) Failure to join a necessary or indispensable party under Rule 19.

Question 109

Which defenses are waived unless raised in the pre-answer motion or answer?

Answer 109

Under Rule 12(h)(1), the defenses of lack of personal jurisdiction, improper venue, insufficient process, and insufficient service of process must be raised in a pre-answer motion or, if no pre-answer motion is made, in the answer, or the defenses will be waived.

Question 110

When a class action is brought under a common legal or factual question, what seven pieces of information must be stated in the notice provided to the members?

Answer 110

(i) The nature of the action;
(ii) The definition of the class;
(iii) The class claims, issues, or defenses;
(iv) That a class member may enter an appearance through an attorney if the member so desires;
(v) That the court will exclude from the class any member who requests exclusion;
(vi) The time and manner for requesting exclusion; and
(vii) The binding effect of a class judgment on members.

Question 111

What are the three types of personal jurisdiction?

Answer 111

(1) In personam jurisdiction
(2) In rem jurisdiction
(3) Quasi-in-rem jurisdiction

Question 112

When the relief sought is an injunction, how is the amount in controversy determined for jurisdiction purposes?

Answer 112

In the case of injunctive relief, when it is difficult to assess a dollar amount, the court determines both the value of the plaintiff’s harm if an injunction is not imposed and the defendant’s cost of complying with an injunction. If the amount of either exceeds $75,000, then the amount-in-controversy requirement is satisfied.

Question 113

What are the five bases for in personam jurisdiction?

Answer 113

(1) Voluntary Presence
(2) Domicile
(3) Consent
(4) Long-arm statutes
(5) Attachment

Question 114

Under the Erie Doctrine, what law governs in a diversity action?

Answer 114

In a diversity action, the district court is required to apply the substantive law of the state in which the district court is located, if there is no federal law on point. The district court will apply federal procedural law, even if a state rule or statute is in conflict.

Question 115

When establishing whether a federal question exists, how are answers and counterclaims assessed?

Answer 115

Answers and counterclaims are not considered in determining the existence of federal question jurisdiction.

Question 116

What are the requirements for a plaintiff seeking a preliminary injunction?

Answer 116

A plaintiff seeking a preliminary injunction must establish that:
(i) He is likely to succeed on the merits;

(ii) He is likely to suffer irreparable harm in the absence of relief;
(iii) The balance of equities is in his favor; and
(iv) The injunction is in the best interest of the public.

Question 117

How long does a defendant have to respond to a complaint?

Answer 117

Under Rule 12, within 21 days of service of process, a defendant must respond to a complaint either by an answer or by a pre-answer motion.

Question 118

What is are the four suspect classifications for whom strict scrutiny will apply in an Equal Protection claim?

Answer 118

(i) Race
(ii) Ethnicity
(iii) National origin
(iv) If the classification is by state law, citizenship status

Question 119

What powers does Congress use to encourage state action that it cannot directly compel?

Answer 119

The Taxing and Spending Power

Note: Congressional encouragement may not exceed the point at which pressure turns into compulsion.

Question 120

The federal government may not commandeer state legislators. What does this mean?

Answer 120

Congress cannot command state legislature to enact specific legislation or enforce a federal regulatory program, and it may not circumvent that restriction by conscripting a state executive officer directly.

Note: While Congress cannot directly command (either by compelling a state to enact legislation or prohibiting a state from enacting new laws), it can use its taxing and spending powers to encourage state action.

Question 121

What does it mean for a judgment to rest on “adequate and independent state grounds”?

Answer 121

The state law grounds fully resolve the matter (i.e., be adequate) and do not incorporate a federal standard by reference (i.e., be independent). The U.S. Supreme Court may not review a final state-court judgment that rests on adequate and independent state grounds.

Question 122

A political question not subject to judicial review arises when: [Name the two possibilities.]

Answer 122

(i) The Constitution has assigned decision making on this subject to a different branch of the government; or
(ii) The matter is inherently not one that the judiciary can decide.

Question 123

What does it mean for a claim to be ripe for litigation?

Answer 123

The plaintiff must have experienced a real injury (or imminent threat thereof). A federal court will not consider a claim before it has fully developed.

Question 124

How does injunctive relief operate as an exception to the application of the Eleventh Amendment?

Answer 124

When a state official, rather than the state itself, is named as the defendant, the state official may be enjoined from enforcing a state law that violates federal law, or may be compelled to act in accord with federal law despite state law to the contrary.

Question 125

What is required to trigger constitutional protections (with the exception of the Thirteenth Amendment)?

Answer 125

State action

Question 126

Name the five categories where the government is permitted to restrict speech on the basis of content.

Answer 126

1. Obscenity
2. Incitement to violence
3. Fighting words
4. Defamation
5. Commercial speech

Question 127

When is Congress able to regulate purely private conduct?

Answer 127

When it adopts legislation rationally related to eliminating racial discrimination (i.e., “badges or incidents” of slavery) pursuant to the Thirteenth Amendment.

Question 128

What clause of the US Constitution grants Congress the power to enact legislation to execute authority granted to a branch of the federal government?

Answer 128

The Necessary and Proper Clause grants Congress the power to enact any legislation necessary and proper to execute any authority granted to any branch of the federal government.

Note: The Necessary and Proper clause is not an independent source of power. It simply permits Congress to use otherwise designated authority to be exercised fully.

Question 129

What is required for a governmental affirmative action program based on race to be constitutional?

Answer 129

To pass strict scrutiny:
(i) The government must itself be guilty of specific past discrimination against the group it is seeking to favor; and

(ii) The remedy must be narrowly tailored to end that discrimination and eliminate its effects.

Question 130

What is the “nondelegation doctrine,” and in what circumstances is an exception to the doctrine made?

Answer 130

A principle that states Congress may not delegate legislative power to any other branch of government. However, Congress can delegate some of its authority to the executive branch, so long as Congress specifies an “intelligible principle.”

Note: The power of impeachment and the power to declare war are nondelegable.

Question 131

What must the plaintiff show in order to trigger strict or intermediate scrutiny under the Equal Protection Clause?

Answer 131

Discriminatory intent, which can be shown facially, as applied, or when there is a discriminatory motive

Question 132

What is an advisory opinion and why do federal courts not render them?

Answer 132

An advisory opinion is an opinion issued by a court or a commission (like an election commission) that does not have the effect of adjudicating a specific legal case, but merely advises on the constitutionality or interpretation of a law.

Federal courts do not render advisory opinions because federal courts only render decisions where an actual case or controversy exists.

Question 133

How does aggregation come into play when considering the “substantial economic effect” of an activity for purposes of the Commerce Clause?

Answer 133

Congress has the power to regulate any activity that in and of itself, or in combination with other activities, has a substantial economic effect upon interstate commerce. Aggregation deals with the “in combination with other activities” part of the rule. While one farmer growing wheat on his farm with no intent to sell to anyone seems to be an isolated event, that can change when combined with other farmers who share that same intent. These isolated events can “in the aggregate” have a substantial effect on interstate commerce (or lack thereof) and be regulated by Congress.

Question 134

What does it mean in terms of mootness when a case is capable of repetition, yet evading review?

Answer 134

A case will not be dismissed as moot if there is a reasonable expectation that the same complaining party will be subject to the same action again (capable of repetition) but that the action will not last long enough to work its way through the judicial system (yet evading review).

Note: Roe v. Wade provides the classic constitutional example. By the time the woman seeking to terminate her pregnancy finally came before the Supreme Court, she was no longer pregnant, therefore the argument was made that her claim was moot. However, she could once again find herself in a similar situation, and would again be without judicial recourse.

Question 135

Under the commerce power, what three areas can Congress regulate as interstate commerce?

Answer 135

(i) The channels of interstate commerce;
(ii) The instrumentalities of interstate commerce; and
(iii) Intrastate and interstate activity (economic or commercial) that has a substantial effect on interstate commerce.

Note: Remember that Congress may regulate intrastate activity that does not have a direct economic impact on interstate commerce as long as there is a rational basis for concluding that the “total incidence” of the activity in the aggregate substantially affects interstate commerce.

Question 136

What requirements must be met for a government to be permitted to regulate speech-related activities in nonpublic forums?

Answer 136

The regulation must be:
(i) Viewpoint-neutral; and

(ii) Reasonably related to a legitimate governmental interest.

Question 137

When does a taxpayer have standing to file a federal lawsuit?

Answer 137

A taxpayer has standing when the taxpayer challenges governmental expenditures as violating the Establishment Clause. A taxpayer also has standing to litigate whether, or how much, she owes on her tax bill.

Question 138

In what three circumstances is federal preemption implied?

Answer 138

(i) Congress intended for federal law to occupy the field;
(ii) The state law directly conflicts with federal law; or
(iii) The state law indirectly conflicts with federal law by creating an obstacle or frustrating the accomplishment of that law’s purpose.

Question 139

Over what types of cases does the Supreme Court have original jurisdiction?

Answer 139

The Supreme Court has original jurisdiction over:
(i) All cases affecting ambassadors

(ii) Other public ministers and consuls
(iii) Those in which a state is a party

Question 140

What standard is used to determine whether a tax by Congress should be upheld?

Answer 140

The tax only need be rationally related (or have a reasonable relationship) to revenue production.

Question 141

How is the President’s veto power exercised?

Answer 141

The President can, within 10 days of presentment, veto (or reject) a bill and send it back, with objections, to the house in which it originated. Once a bill is vetoed, Congress can override the President’s veto with a 2/3rds vote in each house.

Question 142

What is the scope of the President’s power to remove executive officials?

Answer 142

The Constitution says nothing about the President’s power to remove executive officers, but it is generally accepted that the President may remove any executive appointee without cause (and without Senate approval).

Note: federal judges are excepted and hold their offices during good behavior and until impeached.

Question 143

There is a general rule that states cannot enact legislation that discriminates against out-of-state commerce. What are the five exceptions to this rule?

Answer 143

(i) Necessary to important state interest and no other nondiscriminatory means are available
(ii) State as a Market Participant
(iii) Traditional government function exception
(iv) Subsidies
(v) Federal/Congressional Approval

Question 144

Who may impeach the president and who may convict the president?

Answer 144

The House of Representatives determines what constitutes “high crimes and misdemeanors” and may impeach by a majority vote. The Senate tries the impeached official, and a 2/3 vote is necessary for conviction.

Question 145

(1) When can the President invoke executive immunity; and

(2) When is the President not protected by executive immunity?

Answer 145

(1) The President may not be sued for civil damages with regard to any acts performed as part of the President’s official responsibilities.
(2) The President has no immunity for civil actions based on conduct that occurred before the President took office or completely unrelated to carrying out the job.

Question 146

When may a state tax instrumentalities of commerce?

Answer 146

Only when:
(i) The instrumentality has a taxable situs within (or sufficient contacts with) the taxing state; and

(ii) The tax is fairly apportioned to the amount of time the instrumentality is in the state.

Question 147

In what two scenarios does private conduct amount to state action?

Answer 147

(i) When a private person carries on activities that are traditionally performed exclusively by the state; and
(ii) When the government is significantly involved in private discrimination.

Question 148

For what types of offenses can the President exercise the Pardon Power?

Answer 148

The Constitution grants the President the power to “grant reprieves and pardons for offenses against the United States, except in cases of impeachment.” This power only applies to federal cases- the President may not pardon anyone for state offenses.

Question 149

Under Equal Protection, when is intermediate scrutiny applied?

Answer 149

When a classification is based on gender or status as a nonmarital child (legitimacy)

Note: In gender cases, there must be an “exceedingly persuasive justification” for the classification.

Question 150

The Supreme Court has sorted government property that is open for speech into three categories.

What are the three categories?

Answer 150

1. Traditional public forums
2. Designated public forums
3. Nonpublic/limited public forums

Question 151

Define intermediate scrutiny.

Answer 151

To be constitutional, the law must be substantially related to an important governmental interest.

Question 152

When discussing third-party standing, what are the two requirements for an organization to bring an action on behalf of its members?

Answer 152

In order for an organization to bring an action on behalf of its members, the organization needs to show:
(i) Its members would have standing to sue in their own right; and

(ii) The interests at stake are germane to the organization’s purpose.

Question 153

In the absence of federal regulation, state regulation of commerce is valid so long as: (Name the three rules)

Answer 153

(i) There is no discrimination against out-of-state interests;
(ii) The regulation does not unduly burden interstate commerce; and
(iii) The regulation does not apply to wholly extraterritorial activity.

Question 154

Define the Takings Clause of the Fifth Amendment.

Answer 154

Private property may not “be taken for public use, without just compensation.”

Question 155

Generally, a person who is intentionally being deprived of life, liberty or property, is entitled to what two procedural due process rights?

Answer 155

The rights to notice and a hearing

Question 156

What is the difference between the Privileges and Immunities Clause of Article IV and the Privileges or Immunities Clause of the Fourteenth Amendment?

Answer 156

Article IV applies to state citizenship and the Fourteenth Amendment applies to national citizenship.

Note: The Fourteenth Amendment’s Privileges or Immunities Clause applies, in practice, only to the right to travel.

Question 157

What level of scrutiny applies to laws interfering with fundamental rights?

Answer 157

Strict scrutiny

Question 158

What suits are barred by the 11th Amendment?

Answer 158

(i) Citizens of one state suing another state in federal court;
(ii) Suits in federal court against state officials for violating state law; and
(iii) Citizens suing their own state in federal court.

Note: These are subject to exceptions.

Question 159

What type of immunity does a judge have for judicial acts resulting in civil liability?

Answer 159

Absolute immunity

Question 160

What is provided under the Tenth Amendment?

Answer 160

The Tenth Amendment provides that all powers not assigned by the Constitution to the federal government are reserved to the states, or to the people.

Question 161

Name three actions not barred by the Eleventh Amendment.

Answer 161

The Eleventh Amendment does not bar:
(i) Actions against local governments

(ii) Actions by the United States government or other state governments
(iii) Bankruptcy proceedings that impact state finances

Question 162

What four requirements must be met in order for government regulation of expressive conduct to be upheld?

Answer 162

(i) The regulation is within the government’s power to enact;
(ii) The regulation furthers an important governmental interest;
(iii) The governmental interest is unrelated to the suppression of ideas; and
(iv) The burden on speech is no greater than necessary.

Question 163

When is there a legitimate property interest in continued public employment?

Answer 163

When there is an employment contract or a clear understanding that the employee may be fired only for cause

Note: Even those employees who lack any entitlement to continued employment cannot be discharged for reasons that in and of themselves violate the Constitution.

Question 164

What is the difference between the Due Process Clause of the Fifth Amendment and the Due Process Clause of the Fourteenth Amendment?

Answer 164

The Due Process Clause of the Fifth Amendment applies against the federal government, and the Due Process Clause of the Fourteenth Amendment applies against the states.

Question 165

What is a pocket veto?

Answer 165

If Congress has adjourned within the 10-day period after presenting a bill to the President, and the President had not yet acted on the bill, this is known as a “pocket veto” and the bill does not become law. This cannot be overridden.

Question 166

List three fundamental rights.

Answer 166

(i) The right to travel;
(ii) The right to vote; and
(iii) The right to privacy (including marriage, sexual relations, abortion, child rearing, and the right of related persons to live together).

Question 167

Define rational basis.

Answer 167

A law meets the rational basis standard of review if it is rationally related to a legitimate state interest.

Note: This test generally results in the law being upheld.

Question 168

Name the three requirements that must be met in order for a restriction on the time, place, or manner of speech to be permissible.

Answer 168

The restriction must:
(i) Be content-neutral as to both subject matter and viewpoint;

(ii) Be narrowly tailored serve a significant state interest; and
(iii) Leave open ample alternative channels for communication of the information.

Question 169

What are the two means for establishing appellate jurisdiction in the Supreme Court?

Answer 169

1. Certiorari (discretionary review)

2. Direct appeal (mandatory)

Question 170

What level of scrutiny applies in the following situations:
(1) State law intentionally targets religious conduct

(2) Neutral law that has an impact on religious conduct

Answer 170

(1) Strict scrutiny

(2) Rational basis

Question 171

What does the Federal Property Clause give Congress the power to do?

Answer 171

The Federal Property Clause gives Congress the power to dispose of and make all necessary rules and regulations respecting the territory or other property of the United States.

There is no express limit on Congress’s power to dispose of property owned by the US, but Congress may only take property for public use with just compensation.

Question 172

Name the four situations where a federal or state statute will be struck down as being ex post facto.

Answer 172

If the law:
(i) Creates a new crime and applies retroactively;

(ii) Increases the penalty for past conduct;
(iii) Deprives the defendant of a defense available at the time the act was committed; or
(iv) Decreases the prosecution’s burden of proof required for a conviction below what was required when the alleged offense was committed.

Question 173

(A) If the Constitution and a treaty conflict, which controls?

(B) If a treaty and an act of Congress conflict, which controls?

Answer 173

(A) The Constitution is superior to a treaty.

(B) The most recently adopted will control.

Question 174

To have standing, a plaintiff bears the burden of establishing three elements. Name the elements.

Answer 174

(i) Injury in fact;
(ii) Causation (the injury must be caused by the defendant’s violation of a constitutional or other federal right); and
(iii) Redressability (the relief requested must prevent or redress the injury).

Note: The federal judiciary has also established a “prudential standing” requirement, i.e., that a plaintiff is a proper party to invoke a judicial resolution of the dispute.

Question 175

When can the states tax the federal government?

Answer 175

When that tax is indirect and does not unreasonably burden the federal government (e.g., state income taxes on federal employees)

Question 176

What is a legislative veto, and is it constitutional?

Answer 176

Legislative vetoes arise when Congress passes a law reserving to itself the right to disapprove future executive actions by simple resolution. Such acts are unconstitutional.

Question 177

How does consent come into play as an exception to the application of the Eleventh Amendment?

Answer 177

A state may consent to suit by waiving its Eleventh Amendment protection.

Question 178

Define strict scrutiny.

Answer 178

The law must be the least restrictive means to achieve a compelling governmental interest.

Question 179

A state may impose a nondiscriminatory tax on interstate commerce, as long as the following three requirements are met:

Answer 179

(i) There is a substantial nexus between the taxing state and the property or activity to be taxed;
(ii) There must be fair apportionment of tax liability among states; and
(iii) The tax must be fairly related to the services provided by the taxing state.

Question 180

When may a state impose an ad valorem tax on personal property?

Answer 180

Once the goods are stopped for a business purpose (i.e., obtain a “taxable situs”)

Note: A state may not levy ad valorem taxes on goods in the course of transit.

Question 181

Under the Lemon v. Kurtzman test, what three requirements must be met for a governmental action that benefits religion to be found valid?

Answer 181

(i) It has a secular purpose;
(ii) Its principal or primary effect neither advances nor inhibits religion; and
(iii) It does not result in excessive government entanglement with religion.

Question 182

When does federal law expressly preempt state law?

Answer 182

When (i) the Constitution makes federal power exclusive (such as the powers to coin money or declare war), or (ii) when Congress has enacted legislation that explicitly prohibits state regulation in the same area

Question 183

What is a line item veto?

Answer 183

A line item veto is where the President refuses only part of a bill and approves the rest. Line item vetos violate the Presentment Clause and are therefore unconstitutional.

Question 184

Compare and contrast ripeness and mootness.

Answer 184

Ripeness and mootness both deal with the timeliness of an action for judicial review purposes. Ripeness is an action that is brought too soon, and mootness is an action that is brought too late, as there is no longer a case or controversy.

Question 185

Under Equal Protection, in what two instances does the court apply the strict scrutiny test?

Answer 185

When the state action in question involves a fundamental right or suspect classification.

Question 186

Who lacks the capacity to make a contract?

Answer 186

(i) Minors (under the age of 18);
(ii) People who are mentally ill;
(iii) People who are intoxicated; and
(iv) People whose property is under guardianship by reason of adjudication.

Question 187

What three factors does a court use to determine if restitutionary recovery is available in a quasi-contract situation?

Answer 187

A court may allow restitutionary recovery if:
1. The plaintiff has conferred a measurable benefit on the defendant;

2. The plaintiff acted without gratuitous intent; and
3. It would be unfair to let the defendant retain the benefit because either (i) the defendant had the opportunity to decline the benefit but knowingly accepted it, or (ii) the plaintiff had a reasonable excuse for not giving the defendant such opportunity.

Question 188

Define the material benefit rule.

Answer 188

Under the material benefit rule, when a party performs an unrequested service for another party that constitutes a material benefit, the modern trend permits the performing party to enforce a promise of payment made by the other party after the service is rendered, even though, at common law, such a promise would be unenforceable due to lack of consideration.

Question 189

Define consideration.

Answer 189

Consideration is evidenced by a bargained-for exchange in legal position between the parties. Most courts conclude that consideration exists if there is a detriment to the promisee, irrespective of the benefit to the promisor.

Question 190

What types of contracts are governed by the common law?

Answer 190

Contracts for services or real estate

Question 191

What is the formula for expectation damages?

Answer 191

Expectation Damages = loss in value + other loss - cost avoided - loss avoided

Question 192

Under the common law, why was something given in the past not considered adequate consideration for a new contract?

Answer 192

Under the common law, past consideration is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise.

Note: there is a modern trend toward enforcing such promises under the material benefit rule.

Question 193

What three conditions must be met for the defense of impracticability to be available?

Answer 193

(i) An unforeseeable event has occurred;
(ii) Nonoccurrence of the event was a basic assumption on which the contract was made; and
(iii) The party seeking discharge is not at fault.

Question 194

What types of contracts are governed by the UCC?

Answer 194

Any contract involving the sale of goods

Question 195

When are objective and subjective standards each used to determine whether a condition is satisfied?

Answer 195

The preferred method is an objective standard based upon whether a reasonable person would be satisfied. However, when the aesthetic taste of a party determines whether the other party’s performance is satisfactory, satisfaction is determined under a subjective standard.

Question 196

[Battle of the Forms] Under the UCC, when both parties are merchants, an additional term in the acceptance is automatically included in the contract, unless: (Name the 3 exceptions)

Answer 196

(i) The term materially alters the original contract;
(ii) The offer expressly limits acceptance to the terms of the offer; or
(iii) The offeror has already objected to the additional terms, or objects within a reasonable time after notice of them was received.

Note: If any one of these three exceptions is met, the term will not become part of the contract, and the offeror’s original terms control.

Question 197

If a shipment contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Answer 197

Once the goods are delivered to the carrier

Question 198

What requirements must be met to allow an adversely affected party to void a contract based on mutual mistake?

Answer 198

(i) Mistake of fact existing at the time the contract was formed;
(ii) The mistake relates to a basic assumption of the contract;
(iii) The mistake has a material impact on the transaction; and
(iv) The adversely affected party did not assume the risk of the mistake.

Question 199

When is the doctrine of anticipatory repudiation applicable, and in what manner must the repudiation be made?

Answer 199

The doctrine of anticipatory repudiation is applicable when a promisor repudiates a promise BEFORE the time for performance is due. The repudiation must be clear and unequivocal, may be by conduct or words, and, if a statement, must be made to the promisee or a third-party beneficiary or assignee of the promise.

Question 200

Define intended beneficiary.

Answer 200

One to whom the promisor will pay directly to relieve the promisee from a debt or whom the promisee intends to give the benefit of the promised performance

Question 201

If a party has substantially complied or performed with a constructive condition, what can the party recover?

Answer 201

In general, the party can recover the contract price minus any amount that it will cost the other party to obtain the promised full performance.

Note: A party who has not substantially performed generally cannot recover damages based on the contract, but she may be able to recover through restitution.

Question 202

What is the main difference between contract modification under the common law and contract modification under the UCC?

Answer 202

At common law, modifications require consideration; under the UCC, they require only good faith.

Question 203

Under the Second Restatement, can an extrinsic term that would “naturally be omitted” from a writing be introduced?

Answer 203

Yes, so long as it does not contradict the writing.

Question 204

When a preexisting duty is at issue, what two options does a promisor have to create valid consideration?

Answer 204

The promisor can:

1. Give something in addition to what is already owed
2. Vary the preexisting duty in some way

Question 205

What is an output contract?

Answer 205

An output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer. There is consideration in these agreements because the promisor suffers a legal detriment.

Question 206

Define accord and satisfaction.

Answer 206

Under an accord agreement, a party to a contract agrees to accept a performance from the other party that differs from the performance that was promised in the existing contract, in satisfaction of the other party’s existing duty.

A “satisfaction” is the performance of the accord agreement; it will discharge both the original contract and the accord contract.

Question 207

If a destination contract authorizes the seller to ship the goods by carrier, when does the risk of loss shift from the seller to the buyer?

Answer 207

Once the goods are delivered to a particular place (specified in the contract)

Question 208

Name the types of contracts that fall within the Statute of Frauds.

Answer 208

Marriage - a contract made upon the consideration of marriage;

Suretyship - a contract to answer for the debt or duty of another;

One year - a contract that cannot be performed within one year from its making;

UCC - under the UCC, a contract for the sale of goods for a price of $500 or more; and

Real Property contract - a contract for the sale of an interest in real property.

(Acronym: Mr. SOUR)

Question 209

Define fraud in the factum, and state its effect on a contract.

Answer 209

Fraud in the factum (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction.

Effect: No contract is formed, and the apparent contract is VOID.

Question 210

Under the common law, what terms must be covered in order for a contract to be formed?

Answer 210

All essential terms (i.e., the parties, subject matter, price, and quantity)

Question 211

Under the UCC, even if the terms of a written contract for the sale of goods appear to be unambiguous, what evidence can be presented to explain or supplement the contract?

Answer 211

Course of performance, course of dealing, and trade usage.

Note: If the express contract terms are inconsistent with the course of performance, or trade usage, priority is given to the express terms, followed by course of performance, course of dealing and trade usage.

Question 212

Define condition precedent.

Answer 212

A condition that precedes the obligation to perform

Question 213

How is a bilateral offer accepted?

Answer 213

An offer requiring a promise to accept can be accepted either with a return promise or by starting performance.

Question 214

State the common-law mirror-image rule.

Answer 214

The common-law mirror-image rule states that the acceptance must mirror the terms of the offer. Any change to the terms of the offer, or the addition of another term not found in the offer, acts as a rejection of the original offer and as a new counteroffer.

Question 215

What is the difference between an assignment and a delegation?

Answer 215

An assignment is the transfer of rights under a contract, and a delegation is the transfer of duties and obligations under the contract.

Question 216

What are the requirements of a writing for contracts that fall under the Statute of Frauds?

Answer 216

The writing must:
(i) Be signed by the party against whom enforcement is sought; and

(ii) Contain the essential elements of the deal.

Question 217

What is the basic concept of legal detriment?

Answer 217

There must be something of substance, either an act or a promise, which is given in exchange for the promise that is to be enforced.

Question 218

Under the mailbox rule, when is acceptance effective?

Answer 218

An acceptance that is mailed properly (i.e., correct postage and address) within the allotted response time is effective when sent as opposed to on receipt, unless the offer provides otherwise.

Question 219

Under the UCC, in what two circumstances does the seller have a right to cure a defective tender?

Answer 219

(i) The time for performance under the contract has not yet elapsed; or
(ii) The seller had reasonable grounds to believe that the buyer would accept despite the nonconformity.

Note: The seller must give notice of the intent to cure and make a new tender of conforming goods.

Question 220

Define condition subsequent.

Answer 220

A condition that excuses the duty to perform after a particular event occurs

Question 221

What doctrine comes into play when an unexpected event arises that destroys one party’s purpose in entering into the contract, but performance of the contract is not rendered impossible?

Answer 221

The doctrine of frustration of purpose.

The frustrated party is entitled to rescind the contract without paying damages.

Note: The event that arises must not be the fault of the frustrated party, and its nonoccurrence must have been a basic assumption of the contract.

Question 222

What is an implied-in-fact contract?

Answer 222

An implied-in-fact contract is a contract that results when a person’s assent to an offer is inferred solely from the person’s conduct. To be contractual bound, the person must not only intend the conduct but also know or have reason to know that the conduct may cause the offeror to believe the offer was accepted.

Question 223

Under the UCC, what essential term(s) are required for a contract to be formed?

Answer 223

Quantity

Note: The UCC “fills the gap” if other terms are missing.

Question 224

Under the common law, if the breach is material, what remedies can be sought by the nonbreaching party?

Answer 224

The nonbreaching party is able to withhold any promised performance and pursue remedies for breach, including damages.

Note: If the breach is minor, the nonbreaching party may be able to recover damages, but that party also still must perform under the contract.

Question 225

When is the implied warranty of merchantability implied, and how is it disclaimed?

Answer 225

The implied warranty of merchantability is implied whenever the seller is a merchant.

The disclaimer can be oral, but must use the term “merchantability” and must be conspicuous if in writing. Language that indicates there is no implied warranty is sufficient (e.g., “as is” or “with all faults”).

Question 226

Define fraud in the inducement, and state its effect on a contract.

Answer 226

Fraud in the inducement occurs when a fraudulent misrepresentation is used to induce another to enter into a contract.

Effect: Contract is VOIDABLE by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.

Question 227

What is an illusory promise?

Answer 227

An illusory promise is one that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it. Such a promise is not legally binding (i.e., void).

Question 228

What is the difference between a gift and valid consideration?

Answer 228

The test to distinguish a gift from valid consideration is whether the offeree could have reasonably believed that the intent of the offeror was to induce the action. If yes, there is consideration and the promise is enforceable.

Question 229

Define constructive condition of exchange.

Answer 229

When a party’s performance can be rendered at the same time as the other party’s performance, each party’s performance is conditioned on the other party’s performance; both parties’ performances are due simultaneously, unless the language or circumstances indicate otherwise.

Question 230

What are consequential damages?

Answer 230

Consequential damages arise out of special circumstances unique to the parties to the contract, rather than arising necessarily from the transaction itself.

Question 231

What is a requirements contract?

Answer 231

A requirements contract is a contract under which a buyer agrees to buy all that is required of a product from the other party. There is consideration in these agreements because the promisor suffers a legal detriment.

Question 232

Define offer.

Answer 232

An offer is an objective manifestation of a willingness by the offeror to enter into an agreement that creates the power of acceptance in the offeree.

Question 233

What is an output contract?

Answer 233

An output contract is a contract under which a seller agrees to sell all that she manufactures of a product to the buyer. There is consideration in these agreements because the promisor suffers a legal detriment.

Question 234

Define the parol evidence rule.

Answer 234

The parol evidence rule generally prevents a party to a written contract from presenting extrinsic evidence of a prior or contemporaneous agreement that contradicts the terms of the contract as written.

Question 235

When is a plaintiff entitled to restitutionary recovery, and how is it measured?

Answer 235

When a defendant is unjustly enriched by the plaintiff, restitution generally allows the plaintiff to recover on the benefit conferred by the plaintiff upon the defendant. Generally, the benefit is measured by either (i) the reasonable value of the defendant obtaining that benefit from another source, or (ii) the increase in the defendant’s wealth from having received that benefit.

Question 236

What are the rights of the assignee?

Answer 236

An assignee takes all of the rights of the assignor as the contract stands at the time of the assignment, but she takes subject to any defenses that could be raised against the assignor.

Question 237

Under the UCC, what is required by the “perfect tender rule”?

Answer 237

The perfect tender rule requires perfect goods and perfect delivery. “Perfect” means in accordance with the contract provisions or in accordance with the UCC if the contract is silent on tender.

Question 238

[UCC Firm Offer Rule] Under the UCC, what three requirements must be met for an offer to buy or sell goods to be an irrevocable firm offer?

Answer 238

(i) The offeror is a merchant;
(ii) There is an assurance that the offer is to remain open; and
(iii) The assurance is contained in a signed writing from the offeror.

Question 239

Define acceptance.

Answer 239

An acceptance is an objective manifestation by the offeree to be bound by the terms of the offer.

Question 240

What are the three requirements for a promise to be binding under promissory estoppel?

Answer 240

(i) The promisor should reasonably expect it to induce action or forbearance on the part of the promisee or a third person;
(ii) The promise does induce such action or forbearance; and
(iii) Injustice can be avoided only by enforcement of the promise.

Question 241

When may a nonbreaching party pursue specific performance as a remedy?

Answer 241

When damages are an inadequate remedy, the nonbreaching party can pursue specific performance.

Note: Legal remedies are often inadequate in contracts for land or other unique goods.

Question 242

What are four forms of consideration?

Answer 242

Consideration can take the form of:
1. A return promise to do something

2. A return promise to refrain from doing something legally permitted
3. The actual performance of some act
4. Refraining from doing some act

Question 243

When is the warranty of fitness for a particular purpose implied, and how is it disclaimed?

Answer 243

The warranty of fitness for a particular purpose is implied whenever the seller has reason to know that (i) the buyer has a particular use for the goods, and (ii) the buyer is relying upon the seller’s skill to select the goods.
A disclaimer must be in writing and be conspicuous.

Question 244

Define the common-law four-corners rule.

Answer 244

Under the common law, a court was permitted to look only to the writing itself (within the “four corners” of the document) for evidence of intent (regarding whether there is total, partial, or no integration).

Question 245

At what point can repudiation no longer be retracted?

Answer 245

Repudiation may be retracted until such time as the promisee (i) acts in reliance on the repudiation, (ii) signifies acceptance of the repudiation, or (iii) commences an action for breach of contract.

Question 246

Define incidental beneficiary.

Answer 246

One who benefits from a contract even though there is no contractual intent to benefit that person

Note: An incidental beneficiary has no rights to enforce the contract.

Question 247

How is a unilateral offer accepted?

Answer 247

Acceptance of an offer for a unilateral contract requires complete performance.

Note: Once performance has begun, the unilateral offer is irrevocable for a reasonable period of time to allow for complete performance unless there is a manifestation of a contrary intent.

Question 248

What is the difference between a void and voidable contract?

Answer 248

A void contract results in the entire transaction being regarded as a nullity, as if no contract existed between the parties; the contract is unenforceable.

A voidable contract operates as a valid contract unless and until one of the parties takes steps to avoid it.

Question 249

What are the three events that would cause the rights of an intended beneficiary to vest?

Answer 249

The rights of an intended beneficiary vest when the beneficiary:
i) Materially changes position in justifiable reliance on the rights created;

ii) Manifests assent to the contract at one party’s request; or
iii) Files a lawsuit to enforce the contract.

Question 250

When is a revocation of an offer, sent by mail, effective?

Answer 250

Upon receipt. (Example: On day 1, A mails an offer to B. On day 2, A mails a revocation to B. If B receives the offer and accepts before receiving the revocation, a contract is formed.)