Home › Certifications › UBE › Business Associations and Relationships
30 multiple-choice questions and 11 flashcards on Business Associations and Relationships, about 10% of the UBE bank. Every one carries a written rationale.
Business Associations and Relationships is one of 16 chapters in CoStudy's UBE — Uniform Bar Examination bank, and it holds 30 of the bank's 301 multiple-choice questions — roughly 10% of the total. That proportion is not arbitrary: chapters follow the certifying body's published exam outline, and the number of questions in each is set by that domain's published weight, so the share of your practice time this chapter takes matches the share of the real exam it accounts for.
Studying by chapter is worth doing once you have a diagnostic score. A single overall percentage tells you whether you are close; it does not tell you which domain is dragging. Working a weak chapter in isolation, and re-testing it in isolation, is the fastest way to move a score that has stalled — and it is why the mock exams in CoStudy report by domain rather than as one number.
10 questions drawn from this chapter, with the full rationale shown — the controlling principle behind the right answer, and why each wrong option tempts and fails.
An officer of a hotel corporation learned, while negotiating for the company, that an adjacent parcel was for sale. She bought it herself without telling the board and later resold it at a large gain. The corporation's STRONGEST theory is
Answer: A — usurpation of a corporate opportunity in the company's line of business
A) Correct — an opportunity in the corporation's line of business, learned in a corporate capacity, must be offered to the corporation first; the remedy is a constructive trust on the profit. B) Waste concerns corporate expenditures grossly disproportionate to value received. C) Care addresses the process of decisions made for the company, not personal appropriation. D) Ultra vires concerns acts beyond the corporation's stated purposes.
A homeowner hired an independent roofing company. A roofer dropped a bundle of shingles on a passerby. The homeowner had no control over the work methods. The passerby's claim against the homeowner will MOST likely
Answer: D — fail, because a hirer is generally not liable for an independent contractor's negligence
D) Correct — absent control, the general rule bars vicarious liability for an independent contractor's torts. A) There is no general strict liability for a landowner hiring outside help. B) Courts reserve the inherently dangerous exception for activities posing peculiar unavoidable risks, such as blasting; ordinary roofing does not qualify. C) Wrong on its own terms: the roofing company answers for its employee under respondeat superior.
The sole shareholder of a corporation paid her mortgage from the corporate account, kept no minutes, and started the business with almost no capital. A tort creditor seeks to reach her personally. The court is MOST likely to
Answer: B — pierce the veil, given the commingling, disregarded formalities, and thin capital
B) Correct — courts pierce where the shareholder treats the corporation as an alter ego and recognizing separateness would work injustice; these are the classic factors. A) Limited liability is the norm but is not absolute. C) Single-shareholder corporations are lawful and generally respected. D) The opposite tilt is truer: courts pierce more readily for involuntary tort creditors.
A partner used partnership funds to buy a lot, took title in her own name, and listed it as a firm asset on the books. She later tried to devise the lot to her nephew. The lot is BEST characterized as
Answer: B — partnership property, because it was acquired with partnership funds
B) Correct — property purchased with partnership assets is presumed partnership property, and the books entry confirms it, so it cannot pass by her will. A) Record title is only one indicium and is rebutted by the source of funds. C) Modern statutes treat the partnership as an entity owning the property; partners have no individual transferable interest in specific assets. D) A partnership may own real property in its own name.
A corporation with modest retained earnings declared a large cash dividend that left it unable to pay debts as they came due. A creditor challenges the distribution. The distribution is MOST likely
Answer: D — unlawful, because it rendered the corporation unable to pay its debts as they mature
D) Correct — modern statutes forbid a distribution that leaves the corporation unable to pay debts as they become due in the ordinary course, and directors may be personally liable. A) Board discretion is bounded by these solvency limits. B) The balance-sheet test is only one prong; the equity insolvency test independently bars the dividend. C) The current-earnings-only limit is not the general rule.
A close corporation's bylaws are silent on cumulative voting, and the articles do not authorize it. A minority holder of 25 percent wants to guarantee one seat on a five-member board. Her BEST route is to
Answer: B — seek an amendment to the articles authorizing cumulative voting
B) Correct — under the modern default cumulative voting exists only if the articles provide for it, so amendment is the path. A) States the older opt-out default; jurisdictions do split, but the modern majority requires an opt-in. C) Straight voting lets the majority elect the entire board; it is not proportional. D) Courts do not appoint directors absent deadlock or oppression proceedings.
Directors approved a new product line after reviewing management projections and an outside consultant's report at a properly noticed meeting. The line failed and the stock dropped sharply. In a shareholder suit against the directors, the court should
Answer: D — apply the business judgment rule and decline to second-guess the decision
D) Correct — an informed, disinterested, good-faith decision is protected from hindsight review by the business judgment rule. A) Hindsight is precisely what the rule excludes. B) Directors owe care, not a warranty of results. C) Entire fairness applies to conflicted transactions, not to disinterested decisions that turn out badly.
A partner in a three-partner landscaping firm bought a commercial mower on credit in the firm's name, though the partners had privately agreed that no partner could spend over a set amount alone. The seller knew nothing of the limit. The firm is
Answer: A — bound, because the purchase apparently carried on the firm's ordinary business
A) Correct — each partner is an agent of the partnership for apparently carrying on its ordinary business, and the firm is bound unless the third party knew of the restriction. B) Overstated; acts outside the ordinary course bind only with authorization. C) Internal limits govern between partners but do not defeat a third party without notice. D) Buying tools of the trade is squarely within a landscaping firm's ordinary course.
A shareholder derivative suit under FRCP 23.1 requires the plaintiff to:
Answer: A — Have owned stock at the time of the alleged wrong and continuously
A) Correct — the plaintiff must be a shareholder at the time of the wrongful act and remain one throughout the litigation (contemporaneous ownership); demand on the board (or futility) is separate. B) A majority stake is not required. C) Board consent is not required; futility can excuse demand. D) Service on all shareholders is not required.
A shareholder owning 200 shares for two years sent a written demand to inspect the shareholder list, stating she wanted it to solicit support for her slate of director candidates. The corporation refused. The corporation's refusal is
Answer: D — improper, because soliciting proxies is a proper purpose for inspection
D) Correct — a proper purpose is one reasonably related to the person's interest as a shareholder, and communicating with fellow shareholders about an election qualifies. A) Statutes condition inspection on notice and purpose, not on a five percent floor. B) Confidentiality does not defeat a statutory inspection right. C) Overstated; an improper purpose, such as building a mailing list to sell, defeats the demand.
4 cards from the 11 in this chapter.
What does the business judgment rule presume?
That directors acted on an informed basis, in good faith, and in the honest belief the action served the corporation. Plaintiff must rebut it.
Name the three fiduciary duties a corporate director owes.
Duty of care (informed, good-faith decisions), duty of loyalty (no self-dealing or usurping corporate opportunity), and duty of good faith.
Director duties?
Duty of care (reasonable person standard) + duty of loyalty (no self-dealing, no usurping corporate opportunities).
Limited partnership?
General partners (manage, liable) + limited partners (limited liability if don't manage).
These are a sample. The full Business Associations and Relationships chapter runs 41 items with per-chapter progress tracking, on the web and in the iOS app.