Liability rules Practice Questions

Q: Using only the supplied file and legal resources, prepare an advisory client letter assessing whether Nia has a viable claim concerning the manager's payment to an affiliated company, whether the claim is direct or derivative, and whether the facts support personal liability against the LLC's controlling member. Recommend immediate preservation, investigation, and pre-suit steps.

A strong letter should identify a substantial conflict-transaction claim because Samir did not disclose his affiliate interest or obtain the approval required by the operating agreement. The disparity between the contract price and competing proposal strengthens the claim, although Samir can argue that he had general authority to make an ordinary-course contract below $100,000. Because the alleged overpayment depleted Oakline's assets, the principal claim is derivative and any recovery ordinarily belongs to Oakline. The separate-entity records make personal liability through disregard of the LLC form unlikely on the present facts. The letter should recommend preserving and obtaining transaction records, clarifying Samir's deposits, seeking internal corrective action, and determining the applicable demand procedure before litigation.

Q: Using only the supplied client file and legal resources, prepare an advisory letter to client Dana Holt evaluating her personal exposure for BrightPath Learning LLC’s unpaid supplier debt. Assess the supplier’s veil-piercing theory, distinguish weak from legally significant facts, address the personal-guaranty issue, and recommend concrete negotiation and corrective-governance steps.

A strong letter should distinguish Dana’s protected status as an LLC member-manager from liability based on a properly supported veil-piercing claim. BrightPath’s separate account and records support separateness, while its minimal initial capitalization, absence of insurance, and the overdue-debt distribution materially strengthen Core’s undercapitalization-based veil-piercing argument. The client did not sign an existing guaranty, so Core’s proposal would create new personal exposure that should be carefully limited if considered. The response should provide a balanced risk assessment, propose a negotiated resolution without conceding personal liability, and recommend immediate correction and documentation of capitalization and governance practices.

Q: Using only the supplied client file and legal resources, prepare an advisory negotiation plan for the supervising attorney before a meeting among the partners of Ridge Trail Outfitters. Evaluate the partnership's exposure under the disputed sponsorship agreement, the proposed expulsion of one partner, and the financial consequences if that partner leaves. Recommend a lawful negotiating position and identify documents or assurances the client should seek.

A strong plan should recognize that Malik violated the partnership's internal authority restriction while carefully evaluating whether the sponsorship counterparty may nevertheless rely on apparent ordinary-course authority. The five-year term and prior one-year sponsorship agreements support Ridge Trail, but Malik's public expansion role and the counterparty's claimed lack of notice support enforcement. Expulsion is plausible only if Dana and Erin can establish the agreement's willful-and-material-breach condition. Any buyout proposal must use fair value rather than automatically accepting book value, particularly because important intangible assets remain unappraised. The recommended negotiation should preserve defenses, address contingent contract exposure, obtain reliable valuation information, and secure releases and transition protections consistent with Dana's operational objectives.

Q: Using only the supplied file and legal resources, prepare a confidential negotiation plan for the separation of Elena Ortiz from Harbor Fabrication, a general partnership. Assess Elena’s and Marcus’s authority and fiduciary-duty positions, identify partnership and personal liabilities that must be addressed, propose settlement terms and information requests, and state a recommended opening position, acceptable resolution range, and walk-away conditions supported by the record.

A strong negotiation plan should recognize that Marcus violated the partnership agreement's approved vendor list restriction by purchasing steel from a supplier not on the list without Elena's required written consent, and that the supplier's prior receipt of the agreement supports Elena's position on notice. It should also account for the counterargument that purchasing steel is ordinary partnership business and therefore could bind the partnership absent effective notice. Marcus must account for the remaining $13,000 used for his personal benefit, and that amount should affect the partners’ settlement accounting. The plan must prioritize creditor claims and recognize that Elena remains exposed to existing obligations unless creditors consent to release her. Because Marcus’s proposal provides neither reliable valuation nor liability protection, the response should seek records, secured payment, indemnification, creditor releases where possible, and conditional rather than immediate mutual releases.

Q: Using only the supplied client file and legal resources, prepare an advisory negotiation memorandum for the supervising attorney before a meeting with Jordan and the lender. Evaluate whether a general partnership formed, the partners' management and fiduciary-duty positions, and potential liability on the equipment note. Recommend a prioritized settlement structure that protects Avery while permitting the bakery to continue if feasible.

A high-scoring memorandum should conclude that the parties' conduct created a general partnership and that Avery and Jordan held equal default management rights. It should recognize the lender's argument that oven acquisition appeared to be ordinary bakery business while giving substantial weight to the lender's receipt of Avery's express objection. The continued use of installed ovens presents negotiation risk but is not necessarily ratification under the supplied rule. Jordan's undisclosed related-party purchasing supports a partnership-level loyalty claim and a possible $14,000 credit. The recommended package should use these competing risks to seek affordable refinancing, protection from personal exposure, reimbursement, and clearer prospective governance terms.

Q: Using only the supplied file and legal resources, prepare a plain-language advisory letter to Elena that analyzes the disputed partnership decisions and includes a term-sheet section proposing a negotiated resolution that preserves BrightLine's operations.

A usable letter should distinguish the valid majority decision on an ordinary software renewal (Exhibit B, Item 1; Exhibit A §4.1; Legal Resource 1) from the more sensitive related-party lease (Exhibit B, Item 2). Marcus may propose leasing his building, but disclosure and authorization by the other partners are necessary because he would be dealing adversely with the partnership (Exhibit A §4.2; Legal Resource 2). The duration, price, and related-party character disclosed in Exhibit B, Item 2 also support obtaining unanimous consent before executing the lease. Elena has an enforceable right to material financial information (Exhibit B, Item 3; Exhibit A §6.1; Legal Resource 3), although the partners may adopt reasonable access procedures. The term sheet should translate these rules into practical safeguards, including independent pricing, abstention, shared records, and a market-supported rent.

Q: Using only the supplied file and legal resources, prepare an advisory settlement memorandum assessing MetroFleet's potential liability for the van collision and the repair order. Identify the strongest arguments for and against liability, explain which additional evidence should be obtained immediately, and recommend a settlement approach that accounts for uncertainty without making unsupported admissions.

A strong memorandum should identify substantial vicarious-liability exposure because Dana's brief pharmacy stop appears to be a minor detour during an assigned delivery rather than an abandonment of MetroFleet's business. The internal vehicle policy is helpful to MetroFleet but is not dispositive under Authority 1. For the repair invoice, the private revocation eliminated actual authority, while MetroFleet's history of paying similar invoices supports continuing apparent authority because QuickFix lacked notice. Investigation should begin with preserving the time-sensitive surveillance video and testing Riley's claimed damages through records. Settlement advice should acknowledge likely liability while reserving challenges to causation and unsupported damage amounts.

Q: Using only the supplied file and legal resources, prepare an objective memorandum analyzing whether Elena's proposed claim concerning Victor's acquisition of the warehouse property is direct or derivative, whether the board's subsequent waiver protects Victor from liability for usurping a corporate opportunity, and what Elena should do before filing suit.

A strong memorandum should classify Elena's claim as derivative because the diverted opportunity, if wrongfully taken, deprived MetroCycle of a business advantage and any resulting profit or property belongs to the corporation, not to Elena individually. The requested recovery should therefore be redirected to the corporation rather than paid to Elena. The waiver defense is vulnerable because Victor purchased and closed on the property before disclosing it to the board, so the board's after-the-fact vote may not satisfy the doctrine's requirement of full disclosure before the director exploits the opportunity. MetroCycle's documented interest in acquiring similar warehouse space supports finding the property within the company's line of business and financial reach, undermining any argument that the opportunity was not one MetroCycle could have pursued. Even if the board's waiver is later found effective, Victor bears the burden of showing the corporation was given a fair, informed opportunity to act first. Elena should send a written demand and allow a reasonable response period because the supplied rule does not permit demand excusal.

Q: Using only the supplied file and legal resources, prepare an advisory email assessing Harbor's exposure arising from Alex's acquisition of the Metro opportunity. Analyze the opportunity, the later ratification, Riley's demand and threatened timing, and recommend a fair and well-documented special-committee process.

A strong response should recognize substantial corporate-opportunity exposure because Metro approached Alex as Harbor's president and expressly offered the project to Harbor. Harbor can argue that regulatory contingencies and liquidity needs made the project unsuitable, but the existing record does not show that disinterested directors made that judgment before Alex invested. The later ratification is vulnerable because the directors received materially incomplete information and conducted little documented deliberation. Riley's claim is derivative, any recovery belongs to Harbor, and Riley's stated 30-day deadline does not replace the supplied statutory waiting rule. The recommended special-committee process should be independent, informed, carefully documented, and directed toward both the merits of the claim and Harbor's practical interests.

Question 1

Using only the supplied file and legal resources, prepare an advisory client letter assessing whether Nia has a viable claim concerning the manager's payment to an affiliated company, whether the claim is direct or derivative, and whether the facts support personal liability against the LLC's controlling member. Recommend immediate preservation, investigation, and pre-suit steps.

Question 2

Using only the supplied client file and legal resources, prepare an advisory letter to client Dana Holt evaluating her personal exposure for BrightPath Learning LLC’s unpaid supplier debt. Assess the supplier’s veil-piercing theory, distinguish weak from legally significant facts, address the personal-guaranty issue, and recommend concrete negotiation and corrective-governance steps.

Question 3

Using only the supplied client file and legal resources, prepare a negotiation memorandum that states Northstar's strongest position against imposing personal liability on its members, addresses the creditor's best counterarguments, evaluates the manager's authority to enter the loan, and proposes a supported resolution strategy.

Question 4

Using only the supplied client file and legal resources, prepare an advisory negotiation plan for the supervising attorney before a meeting among the partners of Ridge Trail Outfitters. Evaluate the partnership's exposure under the disputed sponsorship agreement, the proposed expulsion of one partner, and the financial consequences if that partner leaves. Recommend a lawful negotiating position and identify documents or assurances the client should seek.

Question 5

Using only the supplied file and legal resources, prepare a confidential negotiation plan for the separation of Elena Ortiz from Harbor Fabrication, a general partnership. Assess Elena’s and Marcus’s authority and fiduciary-duty positions, identify partnership and personal liabilities that must be addressed, propose settlement terms and information requests, and state a recommended opening position, acceptable resolution range, and walk-away conditions supported by the record.

Question 6

Using only the supplied client file and legal resources, prepare an advisory negotiation memorandum for the supervising attorney before a meeting with Jordan and the lender. Evaluate whether a general partnership formed, the partners' management and fiduciary-duty positions, and potential liability on the equipment note. Recommend a prioritized settlement structure that protects Avery while permitting the bakery to continue if feasible.

Question 7

Using only the supplied file and legal resources, prepare a plain-language advisory letter to Elena that analyzes the disputed partnership decisions and includes a term-sheet section proposing a negotiated resolution that preserves BrightLine's operations.

Question 8

Using only the supplied file and legal resources, prepare an advisory settlement memorandum assessing MetroFleet's potential liability for the van collision and the repair order. Identify the strongest arguments for and against liability, explain which additional evidence should be obtained immediately, and recommend a settlement approach that accounts for uncertainty without making unsupported admissions.

Question 9

Using only the supplied file and legal resources, prepare an objective memorandum analyzing whether Elena's proposed claim concerning Victor's acquisition of the warehouse property is direct or derivative, whether the board's subsequent waiver protects Victor from liability for usurping a corporate opportunity, and what Elena should do before filing suit.

Question 10

Using only the supplied file and legal resources, prepare an advisory email assessing Harbor's exposure arising from Alex's acquisition of the Metro opportunity. Analyze the opportunity, the later ratification, Riley's demand and threatened timing, and recommend a fair and well-documented special-committee process.

Liability rules — MCQs

Liability rules — MCQs

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