LAW 7304-00: AGENCY, PARTNERSHIPS, AND UNINCORPORATED ORGANIZATIONS
FINAL EXAMINATION -- SPRING 1999

This exam consists of 4 questions and several sub-questions. You have three hours in which to outline and write your answers. The questions count for various percentages of your final grade for this exam, so I advise you to allocate your time accordingly.

I strongly suggest that before you begin writing an answer you: 1) read the question carefully; 2) think about exactly which issues you need to address; and 3) outline your answer. Good organization and good analysis almost always go hand-in-hand.

Please write your exam number above and turn in this exam with your answers. Use as many exam booklets as you need. Start your answer to each question in a new booklet and number the booklets so that I can easily follow their intended sequence. Write on one side only of each page, on every other line. Please write legibly. I cannot grade what I cannot read.

This is an open book exam. You may use your casebook, statutory supplement, any material that I handed out in class, and any notes that you or your study group prepared. You may not use other materials, such as nutshells or commercial outlines.

Unless otherwise indicated, all events described below take place in a common law jurisdiction where the legislature has enacted statutes as indicated below. If you think it necessary to assume a fact in order to answer a question you may do so, but you should clearly indicate that you are making an assumption and briefly explain why you consider it reasonable to do so. If you have any procedural questions about taking this exam, please contact me in my office.

I've got a successful friend to whom people often say, "Gosh, you're lucky." She replies, "The harder I work, the luckier I get." May you, too, enjoy the success that your hard work merits.

Briefly characterize each of the following relationships in terms of agency law.

A. Wholesale Housewares, Inc. (WHI) entered into a dealership agreement with Retail Merchandise, Inc. (RMI) under which WHI sold goods to RMI, which RMI then resold to the public. The agreement carefully detailed how RMI was to advertise and display the goods.

B. Carrying an armload of books, 2L approached the doors of the law school. Exiting the building, 3L smiled and held open a door so that 2L could pass through. "Thanks!" called out 2L.

C. Olive Oyl went sleepwalking high on a skyscraper under construction. Popeye frantically chased after her, protecting Olive from peril by swinging steel beams under her feet and exchanging blows with his rival, Bruno.

D. Patient has been seeing Therapist for six years. Therapist has, at various times, directed Patient to forego alcohol, take a vacation, and walk Therapist's dog--all of which Patient, searching for inner peace, has done eagerly.

Tyrone owned and operated Y2-OK! as a sole proprietor. Through Y2-OK!, Tyrone debugged computer systems plagued with "year 2000" problems. Some of his customers needed help with computer programs written in COBOL, a language that Tyrone did not know well. Tyrone thus hired Maude, a COBOL expert, to serve those customers.

Tyrone paid Maude a modest base salary plus a generous commission based on payments received from the customers that Maude served. Tyrone also paid Maude a double commission on customers that she found and brought into the business. Tyrone outfitted Maude with a Y2-OK! tee-shirt and business cards describing her as a "COBOL Expert."

After some months working with Y2-OK!, Maude discovered that CompCon, Inc., a computer consulting firm, had COBOL programs in need of debugging. (Though knowledgeable about year 2000 problems in general, CompCon, like Tyrone, knew little about COBOL.) Maude represented to CompCon that she alone owned and operated Y2-OK!, described her services, and landed the job.

Maude directed CompCon to make all checks payable to her personally, starting with a deposit of $50,000. She received and cashed that deposit check. After some months of promising to begin debugging CompCon's computers "just a few days from now," Maude disappeared. CompCon lost not only the deposit but--given that New Year's Day approached, COBOL experts had tripled their rates, and CompCon now lacked cash--any hope of preventing its computers from crashing on 1/1/00.

While pursuing legal remedies against Maude, CompCon discovered that Tyrone owned Y2-OK! and confronted him. Tyrone professed ignorance of Maude's dealings with CompCon and denied all responsibility. CompCon brought suit against Maude and Tyrone. Tyrone brought a claim against Maude.

January 1, 2000 came and went while the parties awaited trial. CompCon's computers crashed, forcing it to close up shop for several weeks. Tyrone, having learned a great deal about CompCon's business through pre-trial discovery, seized the opportunity to expand into general computer consulting and to win several clients from CompCon.

Analyze the rights and remedies of Tyrone, Maude, and CompCon under agency law.

NOTE: In all responses to this question, apply UPA ('14) and, to the extent that it differs, RUPA ('94) (as amended '96).

In 1996, Abe and Bess formed by oral agreement a real estate investment partnership. Their agreement was so informal that it amounted to little more than a mutual promise to carry on the business as co-owners for five years.

Abe was by his own account "independent minded and strong willed." Bess styled herself "sensitive and refined." Because the partners shared a small office, they became acutely aware of these character differences. Matters came to a head in 1999 when Bess demanded that Abe stop listening to talk-radio shows at the office. "That inane drivel drives me to distraction!" she complained. Abe tossed her ear-plugs. "How about some nose plugs, too?" said Bess sarcastically, "Your cologne makes me sick." Abe offered Bess another set of earplugs. "I think you know where you can put these," he grinned.

Bess snapped. "I cannot work with such a pig-headed pile of, of . . . hot air!" she shrieked, and stormed out of the office. She left for an extended vacation. A month passed, and still Bess had not informed Abe where she had gone or when she would return.

A. Characterize the relationship between Abe and Bess at this point.

Another month passed. Abe, overwhelmed by a double workload and worried about Bess, suffered a fatal heart attack. Bess returned the next day.

B. Building on your response to sub-question A, above, characterize the relationship between Abe's estate and Bess at this point.

To help get their business started, Abe had contributed 1,000 shares of Yowza, Inc. to the partnership and Bess had contributed 1,000 shares of Zydex, Inc. These contributions had had roughly equal value in 1996. Abe and Bess had placed these contributions in the partnership's name to serve as collateral for loans taken out to start the business. None of the shares were sold. By 1999, the Yowza shares had tripled in value whereas the Zydex shares had declined 30% in value. Abe's estate wants his stock back, whereas Bess wants all the stock sold and the proceeds divided equally.

C. Who should prevail and why?

Lisa was a limited partner in Sailaway, LP, a small travel agency. Gary was a general partner in Sailaway. Although quite capable in most business matters, Gary was a slob when it came to paperwork. His messy habits frustrated Lisa, who would on visiting Sailaway often complain, "Gary, you're going to lose track of something important." Gary always replied, "It's OK; I know where everything is."

Gary's claim failed to reassure Lisa. While he was on a business trip, she rifled through the paper scattered about his office and found several bills past due. She paid these out of Sailaway's account and instructed Gary's secretary on how to set up a system that would preclude further such mishaps.

Soon after Gary returned (and got a browbeating from Lisa), he asked Creditco to make a loan to Sailaway. Creditco questioned Gary about Sailaway's past failure to pay bills on time. "We simply made some administrative errors," Gary explained. "But my partner Lisa has devised a fool-proof system to ensure that we never make such mistakes again." Gary had his secretary describe the system to Creditco. Satisfied with this account, Creditco made a loan to Sailaway. No one at Sailaway had mentioned that Lisa was a limited partner.

Sailaway defaulted on the loan. Applying RULPA ('76) (as amended '85), discuss whether Creditco will be able to hold Lisa personally liable for Sailaway's debt.

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