Agency

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.
A2. 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 an 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.

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: the partners do NOT have to be natural persons. For example, two corporations can form a partnership.

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.

Corporations

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 the 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 can analyze a fact pattern and not be distracted in your analysis by any perceived injustice.

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.

Family Law

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;
(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. The bar didn’t pay him, but he got tips from the customers. That activity was deemed to be “habitually engaging in a vocation.” Thus, venue was good in that county.

A2. As of October 1, 2011, the law regarding “no fault” divorce changed significantly in Maryland. A “no fault” absolute divorce can be granted if the following conditions are met.

First, the parties must live separate and apart for at least 12 months. The new law has eliminated the requirement that the parties expressly agree to terminate the marriage. The mutual agreement can be implied.

Second, there must be no sexual relations between the parties during the one year separation.

Third, there is no hope of reconciliation between the parties.

The only defense to such an action is to challenge its requirements, i.e., claim that the parties did co-habitate or have sexual relations within the 12 month period.

Note well: if a party is suing on a fault ground, e.g., cruelty of treatment, there is no requirement that the parties live separate and apart.

Civil Procedure

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.
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 could be granted is a decision and a dismissal “on the merits.” Any attempt to bring the action again in Maryland or any other 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 the same claim twice in Maryland will 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.

Both a default judgment and a summary judgment are considered to be “on the merits” and thus can be used as the basis for asserting res judicata.

Professional Conduct

A1. The answer here is obviously “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 the client. If you are presented with facts in an essay that indicate that the lawyer has breached his duty, you must note so in your essay answer.

Note well: This question was concerned with whether a lawyer could ethically accept a settlement on behalf of a client. There is a separate issue regarding whether an attorney has the power to bind the client to a settlement agreement. If you are confronted with this issue on the exam, note that the attorney is the agent of the client and is cloaked with actual and apparent authority. Thus, the attorney can bind the client! The client would then have recourse against the attorney for acting unethically.

A.2. 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.

Negotiable Instruments (Commercial Paper)

A1. A bearer instrument may be negotiated by transfer of possession alone. No signature(s) are needed. If the transfer is intentional, it will be valid.

An order instrument can be negotiated only by the intentional transfer of the instrument plus the signature of the transferring party (the transferor).

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 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.”

Secured Transactions

A1. The answer here depends on how the buyer intends to use 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 collateral will be classified.
A2. An “after-acquired property” clause in a security agreement operates to give the creditor rights in collateral acquired by the debtor after the formation of the security agreement.

Example: if I want to borrow ten thousand dollars from my bank, I may secure it with my delivery van. The van, of course, is depreciating. Thus, the bank may ask me to give them a security interest in equipment I acquire after our security agreement is formed. Thus, if the security agreement I sign has such a clause, they will have an interest in any equipment I obtain thereafter.