Section I, Professor Franks
Final Examination, Fall 2001
1. Carefully analyze the facts and grasp the issues in each question before beginning to write. Spend time reading the question slowly and carefully.
2. State the issues and answers to each question concisely. Lengthy answers are not necessary.
3. Do not repeat questions in your answers. Write neatly and legibly on only one side of each page.
4. Number your answers to correspond with the question, e.g., "II-B."
5. If you feel it necessary to assume additional facts in any of the questions, give the facts that must be added and state why.
6. Do not write in the margin of the book.
7. All major questions are equally weighted unless otherwise indicated. Subparts are approximately equal but may be weighted slightly differently according to the number of issues involved in that subpart.
8. Write your pin number and the name and section number of the course on which you are being examined on the cover of each examination book.
9. If you use more than one book, indicate "Book One," "Book Two" and so forth on the cover of each book and write your fictitious name and number and the name and section number of the course on the cover of each examination book.
10. A GOOD ANSWER IS NOT NECESSARILY A LONG ANSWER.
In 1999, Dewey, Billum and Howe decided to go into the car repair business, opening a shop appealing to the owners of small cars. Finding a suitable facility in the Broadmoor area that they could buy and remodel for about $200,000, they determined that they would take on an additional investor rather than take out a mortgage on the building. Howe's rich aunt, Sarah Commendam, agreed to be that investor.
Articles of Limited Partnership were drawn and filed with the Secretary of State, identifying the general partners as Dewey, Billum and Howe, and the limited partner as Commendam.
The agreement provided as follows:
The partnership shall be known as Cars R Us, a limited partnership. Dewey, Billum and Howe shall be the general partners. Commendam shall be the limited partner. The four partners will share profits equally, with twenty-five per cent of the profits going to each of the four partners.The partners shall make the following contributions to the capital of the partnership:
| Dewey | $100,000 |
| Billum | $100,000 |
| Howe | $100,000 |
| Commendam | $80,000 |
Following the execution and filing of the articles of limited partnership, Dewey paid into the partnership bank account the full $100,000 he had obligated himself to pay; Billum paid $60,000; Howe paid $70,000; Commendam paid $55,000. The partnership then purchased the building and remodeled it for a total of $200,000, which the partnership paid in full in cash from the partnership bank account. Billum, Howe and Commendam never paid in the remainder of their contributions as shown in the partnership agreement.
The partnership next purchased tools and equipment, all from Matco Tools, for a purchase price of $130,000, to be paid in installments, financing secured with a security interest in the tools and equipment purchased.
The partners proudly opened for business in late 1999. Business did not go well, despite the shop's massive advertising campaign. In February 2001 the cash-flow problem was so bad that Dewey made an unsecured loan of $15,000 to the partnership. Business has not improved.
At yesterday's meeting, the four partners unanimously voted to dissolve the partnership. As of yesterday, the partnership had the following debts:
| Matco Tools | Balance due on tools and equipment | $ 93,000 |
| The Advocate | Advertising | 12,000 |
| Channel 2 | Advertising | 21,345 |
| Real Yellow Pages | Advertising | 9,800 |
| Bell South | Telephone service and equipment | 2,300 |
| Entergy | Electric bills | 4,380 |
| Auto Zone | Wholesale parts | 18,580 |
| Napa Parts | Wholesale parts | 14,050 |
| Dewey | Unsecured loan | 15,000 |
| ________ | ||
|
TOTAL |
$ 190,455 |
As of yesterday, the partnership had the following assets:
| Market value of building | $ 140,000 |
| Value of tools and equipment | 54,000 |
| Cash on hand and in partnership checking account | 1,250 |
| ________ | |
| $ 195,250 |
The building, tools and equipment will be sold for the amounts shown above. Simply distribute the proceeds according to law, stating who gets how much and why. Discuss fully your reasoning.
You are invited to speak to a group of senior citizens that calls itself "Making Gold in the Golden Years." They are interested in learning a little about Agency and Partnership. Anxious to network among potential clients, you gladly accept their invitation. After you deliver your brilliant talk, you are asked the following questions from the audience. Please answer them, directly and to the point:
II-A. "You've told us all about agency. Tell me the ways in which an agency terminates."
II-B. "I heard once about a limited partner who was held by the court to have unlimited liability. How might that have happened?"
II-C. "What is a Limited Liability Partnership?"
II-D. "You talked about the three 'wicked sisters' that employers' liability statutes and workers' compensation statutes were intended to eliminate. What did you mean?"
II-E. "In workers' compensation in Louisiana, what is a 'statutory employer'?"II-F. "What things will a court consider in determining whether a person is an 'employee' or an independent contractor? Tell me the most important factor first, and then tell me the others."
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