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321 midterm review questions 07

321 midterm review questions 07 - Business Law II Spring...

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Business Law II Spring, 2007 Midterm Review Questions Partnerships 1. Bob, and Barb [who are brother and sister] and Dave were partners in a retail liquor business. The partnership leased all tangible assets and maintained minimal inventory. The only valuable asset in the business was the liquor license. Dave died in June, 1997. Craig has an outstanding judgment against Bob and Barb [not the partnership] and he wants to have his judgment satisfied from their partnership interests. When Bob and Barb do not agree to have this judgement satisfied from their partnership interests, the court orders their partnership interests sold at public auction. Their partnership interests are purchased by Paul in December. Craig is paid off with this cash settlement. The liquor license is about to expire. Claiming he owns 2/3 of the partnership, Paul has filed an application to renew the license. Bob has filed an application to renew on behalf of himself, Barb and Dave’s estate [with their consent]. Who has the right to the liquor license? Who has a right to operate the business? Please explain why you reach the conclusions that you do. 2. On June 1, 1994, Olson invested $30,000 and became a limited partner in a partnership in which Smith and Jones were the general partners. The partnership was formed to develop and market a computer game based on Olson's CAD program. Olson became frustrated with the way Smith and Jones were running the business and he wanted to take an active part in management. As a result, in January, 1995, he agreed to be a general partner. At this point, an agreement was signed identifying Olson as a general partner. The agreement was backdated to June 1, 1994. In November, 1994, Smith signed an agreement on behalf of the partnership obligating the business to purchase $60,000 worth of custom-made packaging for the computer game. Unfortunately, a dispute arose between the package supplier and the partnership and the partnership breached the contract. The supplier has obtained a judgment against the partnership and the individual partners. Since Olson is the only party with any assets, the supplier is attempting to collect the entire $60,000 from Olson.
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Please advise Olson as to whether he is liable for the full amount of the judgement. Please explain briefly why you reach the conclusion that you do. 3. Reid and Jones form a partnership to acquire and lease certain parcel of real property located in Ithaca, New York. Reid contributed $100,000 to acquire the real property and it was understood that Jones, who contributed no funds, was to manage the property and perform all the necessary physical labor to maintain the property in good condition. Six months have now passed and Reid comes to you with the following questions which are not addressed in the agreement: a. Is Jones correct in his contention that the net rental income (i.e after expenses and taxes etc.) is to be shared equally or can Reid claim some extra compensation because he contributed the $100,000 with which the partnership acquired the property?
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321 midterm review questions 07 - Business Law II Spring...

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