MEE Hot Topics

Question 1

Agency

Answer 1

Agency is a fiduciary relationship resulting from the mutual consent by two parties, where one party acts on behalf of and subject to the control of another. The parties involved are the principal, who consents for the other to act on their behalf, and the agent, who consents to act on behalf of the principal. An agent can be an employee, a partner, or a corporate officer, each involving different liability risks for the principal.

Question 2

Actual Authority

Answer 2

A principal is bound to the acts of an agent if the agent acts with actual or apparent authority. An agent has actual authority if a reasonable person in the agent’s position would believe that the principal had authorized him to so act. Actual authority may be expressed or implied from words (oral or written), customs, or relations between the parties.

Question 3

Apparent Authority

Answer 3

A principal is bound to the acts of an agent if the agent acts with actual or apparent authority. Apparent authority arises from a manifestation of a principal to a third party that another person is authorized to act as an agent for the principal. An agent has apparent authority in relation to a third party if the words or conduct of the principal would lead a reasonable person in the third party’s position to believe the principal had authorized the agent to act

Question 4

Agent’s Fiduciary Duties

Answer 4

An agent owes a duty of care to their principal to carry out their agency with reasonable care under the circumstances. Further, the agent owes a duty of undivided loyalty to the principal, which includes a duty of obedience.

Question 5

Vicarious Liability (respondeat superior) in Agency

Answer 5

A Principal can be held vicariously liable for torts committed by an agent if (1) there is a valid principal-agent relationship and (2) the tort was committed within the scope of that relationship. A detour is a brief departure from assigned tasks and is still within the scope of agency, while a frolic is an independent journey outside the scope of the agency.

Question 6

General Partnership

Answer 6

A general partnership is an association of two or more persons carrying on as co-owners of a business for profit. A person who receives a share of the profits from the business is presumed to be a partner.

Question 7

Actual Authority in a Partnership (or LLC)

Answer 7

A partnership can be bound on a contract entered into by a partner with actual or apparent authority. Actual authority is authority that a partner reasonably believes he has based on his communications with the partnership. It can take the form of express authority or implied authority through custom, necessity, or acquiescence.

Question 8

Apparent Authority in a Partnership (or LLC)

Answer 8

A partnership can be bound on a contract entered into by a partner with actual or apparent authority. Apparent authority is present through the act of any partner carrying on in the ordinary course of business or business of the kind carried out by the partnership. Apparent authority will bind the partnership unless the partner had no authority to act for the partnership and the third party with whom the partner dealt knew that the partner lacked authority.

Question 9

Dissolution

Answer 9

Dissolution is the termination of a partnership or LLC. If not specified in the agreement, then a partnership may dissolve when any partner dissociates. Any partner may dissolve pursuant to the agreement, due to an event that causes unresolved illegality, or by judicial order. Dissolution is followed by winding up.

Question 10

Dissociation

Answer 10

Dissociation is the voluntary or involuntary withdrawal of a partner. The express will of a member to withdraw will result in dissociation, but not dissolution of the Partnership or LLC. Members who dissociate lose the right to participate in the LLC and the right to distributions.

Question 11

Winding Up

Answer 11

The process of paying liquidating assets, paying creditors, and distributing the remainder to the partners or members–in that order. Any remaining partner may wind up.

Question 12

Shareholder Derivative Claims:

Answer 12

Unlike a shareholder’s direct action against a director, a derivative action is initiated by a shareholder on behalf of the corporation to enforce a corporate cause of action. Any recovery from a derivative action benefits the corporation, not the individual shareholder who brings the suit.

To have standing to bring a derivative action, the shareholder must:

(1) have owned at least when share of stock when the cause of action accrued, or
(2) have become a shareholder through operation of law.

The shareholder must fairly and adequately represent the interest of the corporation in enforcing the corporation’s rights. Under MBCA, the shareholder must make a written demand on the corporation (IE – the board of directors) to take suitable action. However, a derivative proceeding can be dismissed by a court if the majority of the directors determine in good faith, after conducting a reasonable inquiry, that the derivative action is not in the best interest of the corporation.

Question 13

Piercing the Corporate Veil

Answer 13

Generally, shareholders cannot be held liable for corporate debts. However, a shareholder may be personally liable for what the corporation did if the court “pierces the corporate veil.” The corporate veil is the legal distinction between the corporation and its shareholders and protects the shareholders from personal liability for the corporations’ acts. A court will pierce the corporate veil if the shareholders in a close corporation have abused the privilege of incorporating through some fraud and fairness requires holding them liable.

There are three common situations in which the veil is pierced:

(1) Alter Ego: A court may pierce the corporate veil where shareholders ignore corporate formalities by using the corporation as a “mere instrumentality,” either by treating corporate assets as their own or by commingling their money with corporate money, and some basic injustice results.

(2) Undercapitalization: The corporate veil may be pierced where the corporations is inadequately capitalized such that, at the time of formation, there is not enough unencumbered capital to reasonably cover prospective liabilities.

(3) Fraud: The corporate veil may be pierced where any deceptive activity or misconduct carried out by the corporation leads to an unfair advantage for the shareholder(s).

Question 14

Business Judgment Rule

Answer 14

The business judgement rule is a presumption that a director’s decision may not be challenged if the director acted in good faith, with the care that a person would exercise in a like position, and in a manner the director reasonably believed to be in the best interest of the corporation. Thus, Directors have a duty to inform themselves prior to making a business decision of all material information reasonably available to them and once informed, to act with reasonable care in the discharge of their duties. If a director cannot attribute their decision to a rational business rule or purpose, then they are not afforded the protections of BJR.

Because of this presumption, a shareholder claiming that directors breached this duty have the burden of proof.

BJR does not apply in duty of loyalty cases because it can never apply when the fiduciary has a conflict of interest.

Question 15

Dissenting shareholder’s right to appraisal

Answer 15

When a corporation is undergoing a fundamental change, dissenting shareholders have a right to appraisal, or a right to force the corporation to buy their stock for fair value. This right only exists in close corporation; there is no right if the corporation is publicly traded or if the company has 2000 or more shareholders.

To enforce this right, shareholders must file an objection to the transfer before or at the shareholders meeting at which the vote is taken, they must not vote for the change, and the must make a written demand to the corporation for the fair value of their shares.

Question 16

Sale of All or Substantially All the Corporation’s Assets

Answer 16

Sale of All or Substantially All the Corporation’s Assets occurs when the corporation decides to sell the majority of its assets. Agents like a president or director acting alone do not have authority to make such a sale because it is not in the ordinary course of business and, thus, outside the scope of their authority. Majority shareholder approval is needed to approve this fundamental change.

Question 17

Attachment

Answer 17

Attachment deals with those steps required to give a secured party a security interest in the collateral that is effective against the debtor. A security interest attaches when the parties agree to create a security interest, the creditor gives value, and the debtor’s has rights in the collateral.

Question 18

Perfection

Answer 18

Attachment establishes rights against the debtor, whereas perfection establishes rights against third parties. Perfection gives a creditor a right in the collateral against other creditors. Perfection may occur by filing, by possession, by control, or through PMSI.

Question 19

Priority Between competing perfected security interests

Answer 19

As between competing perfected security interests, the first secured party to file OR perfect has priority.

Question 20

Priority Between unperfected Secured Parties

Answer 20

When two unperfected security interests conflict, the first to attach has priority.

Question 21

Buyer In The Ordinary Course

Answer 21

A BIOC buys goods in the ordinary course of business from a seller engaged in the business of selling them. BIOCs can take goods free of nonpossessory security interests created by the buyer’s seller unless they know the sale violates a security agreement.

Question 22

Garage Sale Rule

Answer 22

Generally, a perfected security interest in consumer goods is good against subsequent buyers. However, if a buyer of consumer goods resells them to another consumer for value, that second consumer takes free of security interests of which he has no knowledge, provided he makes the purchase before any financing statement covering the goods has been filed.

Question 23

PMSI (& PMSI Superpriority)

Answer 23

A Purchase Money Security Interest is created when a creditor advances credit or provides the funds needed to make a purchase possible and takes a security interest in the goods purchased. A PMSI in consumer goods perfects automatically upon attachment.

PMSIs enjoy a Superpriority, meaning they are superior to prior perfected security interests in the same collateral if certain conditions are met.

A PMSI in goods other than inventory and livestock has priority over conflicting security interests in the same goods or their proceeds if the interest is perfected before or within 20 days after the debtor receives possession of the goods.

Question 24

Classify the Collateral

Answer 24

Collateral is the property subject to a security interest and repossession upon default to ensure that the debt is paid. Article 9 classifies goods into 4 categories of collateral:

(1) consumer goods,
(2) inventory,
(3) farm products, and
(4) equipment.

Consumer goods are primarily used for family, personal, or household purposes.

Inventories are goods for sale or lease in connection with business operations.

Farm products are goods used for farming operations.

Equipment is any good that does not fall into one of the other three categories.

Question 25

Scope of Article 9

Answer 25

Article 9 of the UCC governs security interests in personal property or fixtures by contract.

Question 26

Contract

Answer 26

A contract is a legally enforceable agreement. To form a contract, we need mutual asset, or one party must accept the other’s offer, plus consideration and no defenses.

Question 27

Offer

Answer 27

An offer is an expression of willingness to enter into a bargain and must be made in a way that creates a reasonable expectation in the offeree that the offeror is willing to enter into a bargain. An offer must show the offeror’s intent to enter into a bargain and must have definite terms.

Question 28

Acceptance

Answer 28

An acceptance is an assent to the terms of the offer. Generally, acceptance of an offer must be communicated to the offeror and must be unequivocal.

Question 29

Consideration

Answer 29

Consideration is a legal detriment or bargained-for exchange. A promise to make a gift does not constitute consideration.

Question 30

Statute of Frauds

Answer 30

Under the Statute of Frauds, certain agreements must be evidenced by a writing signed by the party to be charged to be enforceable. The signature requirement is liberally construed by the courts. It need not be handwritten; it can be printed or typed. Under the UCC, any mark made with the intent to authenticate the writing is a signature, including initials or letterhead.

o Marriage
o Year
o Land
o Executorship
o Goods: The UCC requires that a contract for the sale of goods for $500 or more be evidenced by a signed writing. The UCC only requires a signed writing indicating that a contract has been formed and specifying the quantity.
o Suretyship

Question 31

Expectation Damages (and UCC Rule)

Answer 31

The normal measure of damages for breach of contract is expectation damages, which aim to give the nonbreaching party the benefit of his bargain. Expectation damages must be foreseeable and proven with reasonable certainty.

This is similar to the UCC rule, which puts the aggrieved party “in as good a position as if the other party had fully performed.” A buyer may recover the difference between the cost to “cover” by purchasing in good faith substitute goods and the contract price.

Question 32

What terms are required in an offer? (CL vs. UCC)

Answer 32

Common law: parties / subject / quantity / price

UCC: parties / subject / quantity

Question 33

Consequential damages

Answer 33

Consequential damages consist of losses beyond those covered by the standard measure that a reasonable person would have foreseen would occur as a result of breach. Often the availability of consequential damages turns on the the breaching party’s awareness of the other party’s circumstances.

Question 34

Alimony (Spousal Support)

Answer 34

Alimony is the obligation of one party to provide financial support to the other if that person cannot provide for their own needs. The purpose of alimony is to ensure an adequate income stream for persons whose economic dependency has resulted, at least in part, from the marital relationship. In determining spousal support, a court will consider a variety of factors, such as financial resources of the parties, standard of living, length of marriage, time to reintegrate into the workforce, contributions to the marriage, age and health of the parties, marital fault, and needs.

Question 35

Common Law Marriage

Answer 35

The basic requirements to establishing a common law marriage are capacity to enter into a marriage, exchange of consent, cohabitation, and a holding out publicly of living together as spouses. If a common law marriage is valid in one state, it will be recognized in other states as well—even if common law marriage has been abolished in that state.

In determining whether there was sufficient “holding out” courts look to conduct such as using a common last name, opening joint bank accounts, and telling others in the community they are married.

Question 36

Child Custody

Answer 36

Generally, child custody is determined according to the best interest of the child. A court will consider the wishes of the child’s parents, the child’s primary caretaker, the mental and physical health of all individuals, the stability of the relationships between parents and child, and the presence of domestic violence.

Question 37

Child Support

Answer 37

Both parents are obligated to support their children until they reach the age of 18 or longer if the child is incapable of self-support. In determining child support, a court will consider, the needs and obligation of the parties, the assets of the parties, standard of living, and best interest of the child.

Question 38

Premarital Contracts

Answer 38

Premarital agreements are valid contracts that address the rights of the parties upon divorce or death. They must be in a signed writing, entered voluntarily, and a full and fair disclosure of parties’ assets.

Question 39

Marital Action Jurisdiction

Answer 39

A court must have personal jurisdiction over the parties to distribute assets. Generally, a court may not distribute marital property unless they were married or had a valid cohabitation agreement.

Question 40

Modification of Child Support

Answer 40

To obtain a modification of a future support obligation, the petitioner must show a substantial change in circumstances. Courts will generally find that a significant involuntary income reduction represents a substantial change warranting relief. But when the loss is voluntary, the invariably require a showing that the reduction was made in good faith and not for the purpose of depriving the child or punishing the custodial parent. Both married and divorced parents may terminate support to employable children who disobey reasonable parental commands.

Question 41

Venue

Answer 41

A plaintiff may lay venue in any district where all defendants reside or where a substantial part of the claim arose. In removed cases, venue is in the federal district court embracing the state court where the action was filed. Venue rules apply in cases initially filed in federal court.

Question 42

Minimum Contacts

Answer 42

Requires a showing of purposeful availment and foreseeability. A court must find that the defendant purposefully availed herself to the privileges of conducting activities in the forum state, invoking the benefits and protections of its laws. Further, the defendant must have foreseen that she would haled into court in the forum state.

Question 43

Personal Jurisdiction (General & Specific)

Answer 43

PJ refers to a courts ability to exercise power over a D. Personal jurisdiction can be general (obtained by consent, presence, or domicile) or specific. Federal district courts may exercise personal jurisdiction to the same extent as the courts of general jurisdiction of the state in which the district court sits. State courts of general jurisdiction may exercise personal jurisdiction over nonresident defendants to the extent authorized by both the state’s long-arm statute and the DPC.

DPC permits states to assert personal jurisdiction over nonresident defendants who have established minimum contacts with the state such that the exercise of personal jurisdiction would not offend traditional notions of fair play and substantial justice.

Question 44

Supplemental Jurisdiction

Answer 44

Supplemental jx helps gets claims into an already existing case, even if it does not have SMJ. A court has discretion to hear a new claim when the claim arises from a common nucleus of operative fact as the basis of the case already before the court such that the litigant would normally be expected to try those claims in one action.

Question 45

Removal

Answer 45

Removal transfers the case from a state trial court to a federal trial court. Generally, an action may be removed by a defendant when the case could have been filed in the federal court in the first place; subject matter jurisdiction is needed. Further, the defendant removes to the federal court embracing the state court in which the case was filed. A defendant cannot remove on diversity grounds if any defendant is domiciled in the forum state. If removal is improper, the federal court can remand the case back to state court.

Question 46

Diversity Jurisdiction

Answer 46

Cases may be brought under diversity jurisdiction only if two requirements are met: (1) there must be complete diversity of citizenship between the plaintiffs and defendants, and (2) the amount in controversy must be over $75,000.00.

Question 47

Subject Matter Jurisdiction

Answer 47

Subject-matter jurisdiction (SMJ) is the power of a court to hear a certain type of case. Federal courts are courts of limited jurisdiction—that is, they can only hear certain types of cases. These types are: federal question, diversity, and supplmental jx.

Question 48

Preexisting-duty rule:

Answer 48

Under common law, promising to perform a legal duty already owed to a promisor is not valid consideration. Exceptions include if the duty is changed (even slightly), unforeseen circumstances, etc.

Question 49

Promissory estoppel

Answer 49

A substitute for consideration. If there is (1) a promise, (2) reliance that is foreseeable and justifiable, and (3) enforcement is necessary to avoid injustice, the promise will be enforced.

Question 50

Insanity

Answer 50

The majority of states use the M’Naghten test. The defendant must prove he suffered a disease of the mind that caused a defect of reason, and as a result he lacked the ability to know the wrongfulness of the actions or understand the nature and quality of his actions.

Question 51

Fourth Amendment

Answer 51

The Fourth Amendment applies to searches or seizures conducted by government agents in areas where the complaining individual has a reasonable expectation of privacy. An agent usually needs a warrant. However, there are many exceptions, including exigent circumstances, search incident to arrest, consent, the automobile exception, plain view, inventory searches, special needs, and Terry stops/frisks.

Question 52

Plain View Doctrine

Answer 52

If officers are lawfully in a position from which they view an object, if its incriminating character is immediately apparent, and if the officers have a lawful right of access to it, they may seize it without a warrant.

Question 53

Miranda

Answer 53

The Fifth Amendment provides a right to counsel and a right to remain silent. Law enforcement officers are required to read Miranda warnings to a suspect when the suspect is subjected to a custodial
interrogation. A suspect is in custody if there is a formal arrest, or a restraint on freedom of movement to the degree associated with a formal arrest. Interrogation included questioning initiaTED BY LAW ENFORCEMENT OR ANY WORDS OR ACTIONS THAT POLICE SHOULD KNOW ARE reasonably likely to lead to an incriminating response. Statements made in violation of Miranda are excluded from the prosecutor’s case in chief.

Question 54

MIranda Invocation and Waiver

Answer 54

To waive Miranda rights, the suspect must make a knowing intelligent and voluntary waiver. This is a low bar. To invoke the right to remain silent or the right to counsel, the suspect must be explicit, unambiguous, and unequivocal in making the request.

Question 55

Excited utterance

Answer 55

A statement relating to a startling event or condition made while the declarant was under the stress of the event that it caused.

Question 56

Present Sense Impression

Answer 56

A statement describing or explaining an event or condition made while or immediately after the declarant perceived it.

Question 57

Confrontation Clause

Answer 57

if a statement is testimonial, the declarant is unavailable, anf the D did not have the opportunity to cross examine the declarant, the admission of the statement will violate the D’s right to confront. A statement is not testimonial if the primary purpose of the statement is to address an ongoing emergency.

Question 58

Assignment

Answer 58

if a lease is silent regarding an assignment or sublease, a tenant may assign ot sublease her interest in the lease. An assignment occurs when the tenant assign the whole of her remaining interest in the lease, whereas a sublease arises when a partial interest is assigned.

Question 59

Periodic Tenancy

Answer 59

A periodic tenancy has no fixed end date and repeats until one party gives adequate notice to the other. it can be created by an express agreement, implication, or operation of law (EG - an oral lease that violates SOF). Valid notice is required to terminate a periodic tenancy.

Question 60

Dormant Commerce Clause

Answer 60

States lack the power to discriminate against interstate commerce or unreasonably burden it.

If a state law discriminates, against IC, it is invalid unless the state can show the law was narrowly tailored to achieve a compelling state interest.

If the state law is nondiscriminatory on its face, but still burdens IC, it is valid only if it serves an important state interest and does not impose an unreasonable burden on interstate commerce.

Question 61

State Action

Answer 61

State Action is required to sue under the First, Fourteenth, or Fifteenth Amendments. A plaintiff suing under one of these amendments must find a government actor or action fairly attributable to the government. State action is present when a state passes a law, when it permits officials to take action, when a private actor is performing a traditional and exclusive government function (EG - company town, elections), or when private action is closely controlled by the state.

Question 62

Content-based and Viewpoint-Based Speech Regulations

Answer 62

The First Amendment applies to the states through the DPC of 14A. Regulations of content based or viewpoint based speech must meet strict scrutiny–or the government must show that the regulation is narrowly tailored to achieve a compelling state interest.

Question 63

Time Place or Manner Restrictions

Answer 63

A restriction in a public forum or a designated public forum must be content neutral, narrowly tailored to achieve an important government interest, and leave open alternate channels of communication. A restriction on a nonpublic forum must only be viewpoint neutral and reasonably related to a legitimate government interest.

Question 64

Negligence

Answer 64

In any negligence action, a plaintiff must show that the D owed the P a duty of care, the D breached that duty, the D’s conduct was both the actual and proximate cause of the plaintiff’s injuries, and the P suffered damages.