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Note: the sample interrogatories do not appear in the same order as they do in the actual materials.

Q1. How is an agency relationship created?
A1. An agency relationship is created when both the principal and the agent manifest assent to the creation of the relationship. No consideration is needed to form an agency relationship! Assent can be manifested through either the words or the actions of the parties.
Q2. Articulate the difference between a frolic and a detour.

A detour is a minor deviation from a servant's designated duties. A frolic is a MAJOR deviation from a servant's designated duties.

I don't know why, but the overwhelming majority of people I work with get these terms confused; make sure that you have them straight. Whether something is a “frolic” or a “detour” requires a careful discussion of the facts of the question.

Q1. Articulate the definition of a general partnership.
A1. A general partnership is defined as “an association of two or more COMPETENT persons who agree to carry on as co-owners of a business for profit.” The agreement can be written or oral. The partners must have the intention of making a profit; but even if they never make a nickel they are still a partnership.

Each partner has unlimited personal liability for all the debts of the partnership. Keep in mind: that the partners do not have to be natural persons. For example, two corporations can form a partnership.
Q2. Is an incoming general partner liable for any debts of the partnership that he joins? If yes, to what extent is he liable?
A2. An incoming partner is personally liable for the debts of the partnership that arise after his admission. The incoming partner is also liable for debts that pre-date his admission to the partnership, but only up to the amount of his capital contribution.
Q1. A promoter is primarily and personally liable on the contracts he enters into on behalf of the Corporation that is being formed. When will the promoter cease to be liable on such contracts?
A1. The promoter will cease to be liable on these contracts only when there is a novation in which the Corporation substitutes itself for the promoter and the third party accepts this substitution. It is a good idea to study contracts before studying corporations.

The flip side of this rule is that the promoter will remain liable on all contracts he entered into on behalf of the corporation unless and until there has been a novation. This can seem unfair since the Corporation will receive the benefit of the contract and the promoter will have to pay for it. If this occurs, it is the promoter's own fault. Remember my favorite word - Insurance! The promoter will, in real life, have promoter's insurance. This will cover him for any damage he suffers as a result of being a promoter. You do not have to discuss this on the bar. I mention it here so that you may analyze a fact pattern and not be distracted in your analysis by any perceived injustice.


Q2. What is the procedure for receiving appraisal rights?
A2. To receive appraisal rights, the stockholder must take several steps. First, the stockholder must file an objection to the proposed matter before or at the shareholders meeting where voting on the fundamental change will take place. He then has twenty (20) days to file a written demand on the corporation for payment of his shares.
Q1. Hypo: if I give a promissory note to my friend Jack in return for $50 and say that it will be payable subject to his sister going on a date with me, is the note still negotiable?
A1. Trick question! Yes, the note is negotiable. If payment of a note is conditioned on the happening of a certain event, however, this makes it non-negotiable. But here I said to Jack that I would pay him only if his sister went out with me. This is a verbal statement! Thus, there is no written evidence that my obligation to pay the note is conditional. Thus, my oral statement to Jack did not make the note non-negotiable.
Q2. Articulate what is meant by a qualified indorsement. What is the legal effect of such an indorsement on the liability of the indorser?
A2. A transferor of a negotiable instrument gives a “qualified indorsement” when she signs her name and then writes “without recourse” below her signature. The effect of writing “without recourse” is that the indorser will not be liable to any future transferee should payment be refused on the negotiable instrument.

Example: if a note is signed by five indorsers, and the third indorser signs “without recourse” she will not be liable to indorsers 4 and 5 if the note is later dishonored i.e. if the maker or drawee refuses to pay. Indorsers 4 and 5 would have to seek payment from indorsers 1 and 2, assuming that they did not also sign the instrument “without recourse.”
Q1. What is the proper venue for filing an action for divorce in Maryland?
A1. The proper venue (i.e. county) to bring an action for divorce in Maryland is:
(1) where either the plaintiff or defendant resides;
(2) where the defendant carries on a regular business;
(3) where the defendant is employed; or
(4) where the defendant habitually engages in a vocation. This last kind of venue has been tested. The fact pattern stated that the defendant played guitar in a bar several times a week in a particular county. That activity was deemed to be “habitually engaging in a vocation.” Thus, venue was good in that county.
Q2. Articulate the “no fault” grounds on which an absolute divorce may be granted.
A2. A “no fault” absolute divorce can be granted in two instances. First, if the parties live apart for at least 12 months AND mutually agree (orally or in writing) to live apart with no intention of resuming the marriage.

Second, if the parties have lived apart for 24 months (i.e. 2 years) or more AND the marriage is hopelessly broken. No explicit agreement to live apart is needed in this instance.
Q1. When should a party file a Motion to Strike?
A1. A party should file a motion to strike prior to filing her response to the pleading to which a response is required. Such a motion is proper if the pleading for which a response is required contains any material which is improper, immaterial, impertinent, or scandalous. The party who wishes to file this kind of motion may do so within 15 days after she receives service of the pleading.
Q2. Articulate the meaning of res judicata.
A2. Res judicata is a concept to be feared! It is a way that one party can bar another party from re-litigating a matter between them. Once res judicata is established against a party, that party may never litigate that claim again in ANY court, ANYwhere! The reason it exists is to promote judicial efficiency. If a court issues a decision on the merits of a particular dispute, it would be a waste of time for that court (or any other court) to hear the matter again.

What is a little tricky is the issue of what constitutes a dismissal “on the merits.” “On the merits” does not necessarily mean that there was a full trial of the matter. For example, a matter that is dismissed because a party failed to state a claim on which relief can be granted is a decision and a dismissal “on the merits!” Any attempt to bring the action in Maryland or another jurisdiction would be barred on the grounds of res judicata.

Another example is where a party voluntarily dismisses her case. A party may do this in Maryland once and this will be considered to be a dismissal without prejudice. If a party voluntarily dismisses their claim twice, however, such a dismissal is deemed to be with prejudice. A dismissal with prejudice is considered to be a dismissal “on the merits” despite the fact that the matter never progressed beyond the initial pleadings, let alone to trial. Thus, a party who voluntarily dismisses her claim twice in Maryland may be barred from bringing the action ever again, either in Maryland or any other court in any other jurisdiction. Keep in mind that it is up to the defendant to assert res judicata as a way of barring plaintiff's claim.

Default judgments and summary judgment are also considered to be “on the merits” and thus can be used as the basis for asserting res judicata.
Q1. May a lawyer accept a settlement on behalf of the client without the client's approval?

The answer here obviously is no. I posed this question only to remind you that this is an affirmative obligation of all attorneys. Most importantly, this issue has appeared on the bar exam. Even though it seems very simplistic, you must point it out to the bar examiners. Note also that the lawyer must act with reasonable diligence and promptness in representing a client. If you have presented with facts in an essay that indicates that the lawyer has breached his duty, you must note so in your essay answer.

Q2. When may a lawyer accept compensation for representing a client from someone other than the client?
A2. This is a highly testable issue! The lawyer may accept compensation for representing a client from someone other than the client if:

(1) the client consents; AND
(2) there is no interference with the lawyer's independence of professional judgment or with the client-lawyer relationship; AND
(3) the lawyer keeps information relating to the representation confidential.
Q1. Hypo: a man walks into a piano store and says he wants to buy a baby grand piano. Without asking why he wants it, the clerk sells it to him on credit pursuant to a validly executed security agreement. How would the piano be classified under Article IX?
A1. The answer here depends on what use the buyer intends to make of the piano. If he is going to take it home and learn to play it for his own enjoyment, then it is a consumer good. If he is going to put it in the lounge of his bar/restaurant, then it would be equipment. The determinative factor here is the buyer's intent; look at the primary purpose for which the buyer intends to use the item - this determines how the good is classified.
Q2. Who wins: the holder of a purchase-money security interest (“PMSI”) in consumer goods who does not file that interest OR a person who buys the goods from the original consumer?
A2. Usually the person who buys the goods from the original consumer wins. Why? Well, a PMSI in consumer goods perfects automatically i.e. without filing. If the holder of the PMSI does not file, then there is no notice to someone who buys the goods from the original consumer. Thus, the subsequent purchaser usually wins.

There are three (3) ways that the subsequent purchaser will not win. First, the subsequent purchaser must give value. If he receives the goods as a gift, he is not protected.

Second, the subsequent purchaser will lose if he does not buy the goods primarily for his personal, family, or household purposes. Thus, if the subsequent purchaser buys the goods for his business, he will lose to the party with the unfiled PMSI.

Third, and last, if the subsequent purchaser has actual knowledge of the PMSI, he will lose priority to the party that has the PMSI.

Hypo: let's say I buy a brand new speed boat on credit from Honest Bob's Boats so that I can cruise around the Carribean. Honest Bob's has a PMSI in the boat since they sold it to me on credit - they fronted me the money that enabled me to buy the boat and I promised to pay them back at regular intervals. Five weeks later, I sell the boat to my neighbor, Fred, because I need the money. I then gamble away all the money and default on my payments to Honest Bob's. Who gets the boat: Honest Bob's or Fred? Fred gets the boat as long as he gave value for it, intends to use it primarily for personal or family purposes AND he did not have actual knowledge of Honest Bob's security interest in the boat.



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