IN Bar Multistate Essay 2 — Questions and Answers
Question 1: In an MEE business associations essay, a member of a member-managed LLC signs a supply contract in the LLC's name without other members' approval. When is the LLC bound?
- When the contract is within the ordinary course of the LLC's business (Correct answer)
- Only if all members unanimously ratify the contract
- Never, because LLC members lack agency authority
- Only if the operating agreement expressly names that member as agent
Correct answer: When the contract is within the ordinary course of the LLC's business
In a member-managed LLC, each member has apparent authority to bind the LLC for acts in the ordinary course of its business.
Question 2: A testator's will leaves 'my car' to a nephew, but the testator sold that car and bought a new one before dying. Under the ademption doctrine tested on the MEE, what does the nephew most likely receive?
- Nothing, if the jurisdiction applies traditional ademption by extinction to the specific gift (Correct answer)
- The cash value of the original car
- The replacement car automatically in all jurisdictions
- A share of the residuary estate equal to the car's value
Correct answer: Nothing, if the jurisdiction applies traditional ademption by extinction to the specific gift
Under traditional ademption by extinction, a specific bequest fails if the item is not in the estate at death, though some UPC states create replacement-property exceptions.
Question 3: In a secured transactions essay, a bank perfects a security interest in a debtor's equipment by filing. The debtor then sells the equipment to a buyer who knows nothing of the lien. Who prevails?
- The bank, because a perfected security interest generally continues in collateral after sale (Correct answer)
- The buyer, because good-faith purchasers always take free of security interests
- The buyer, because filing gives no notice to individuals
- The bank, but only if it repossesses within 10 days of the sale
Correct answer: The bank, because a perfected security interest generally continues in collateral after sale
Under UCC Article 9, a security interest continues in collateral notwithstanding sale unless the secured party authorized the disposition free of the interest, and the buyer-in-ordinary-course exception does not apply to equipment sold outside inventory sales.
Question 4: A conflict-of-laws MEE question asks which law governs a contract dispute where the contract has no choice-of-law clause. Under the Second Restatement approach, courts apply the law of the state with:
- The most significant relationship to the transaction and the parties (Correct answer)
- The place where the lawsuit was filed, always
- The domicile of the defendant, always
- The place of contract performance, without exception
Correct answer: The most significant relationship to the transaction and the parties
The Second Restatement directs courts to apply the law of the state with the most significant relationship, weighing contacts like place of contracting, negotiation, performance, and the parties' domiciles.
Question 5: In a family law essay, a premarital agreement waiving spousal maintenance is challenged. Under the Uniform Premarital Agreement Act, the agreement is unenforceable if the challenging spouse proves:
- Involuntary execution, or unconscionability at signing plus inadequate financial disclosure (Correct answer)
- Only that the terms now seem unfair after changed circumstances
- That the agreement was signed less than 30 days before the wedding
- That no attorney reviewed the agreement, which alone voids it
Correct answer: Involuntary execution, or unconscionability at signing plus inadequate financial disclosure
Under the UPAA, a premarital agreement fails only if executed involuntarily or if it was unconscionable when signed and the challenger lacked fair disclosure, waiver, or knowledge of the other's finances.
Question 6: A trustee invests the entire trust corpus in a single speculative stock, which loses value. Under the Uniform Prudent Investor Act frequently tested on the MEE, the trustee most likely breached the duty of:
- Prudent investing, by failing to diversify trust assets (Correct answer)
- Loyalty, by engaging in self-dealing
- Impartiality, by favoring the remaindermen
- Disclosure, by failing to publish annual reports
Correct answer: Prudent investing, by failing to diversify trust assets
The UPIA requires trustees to diversify investments and evaluate risk as part of an overall portfolio strategy unless special circumstances justify concentration.
Question 7: In an agency essay, a principal secretly instructs its purchasing agent not to buy goods over $5,000, but the agent has routinely made larger purchases for the principal from a longtime vendor. The agent buys $8,000 of goods. Is the principal bound?
- Yes, because the agent had apparent authority based on prior dealings the principal permitted (Correct answer)
- No, because express instructions always destroy all authority
- No, because contracts over $5,000 require written authority
- Yes, but only if the agent personally guarantees the purchase
Correct answer: Yes, because the agent had apparent authority based on prior dealings the principal permitted
Secret limitations do not defeat apparent authority when the principal's prior conduct led the third party reasonably to believe the agent was authorized.
IN Bar Multistate Essay 2
In an MEE business associations essay, a member of a member-managed LLC signs a supply contract in the LLC's name without other members' approval.
When is the LLC bound?