Multistate Essay Examination (MEE) –
Advanced Practice Questions v2.0
Comprehensive 150-Question Multiple-Choice
Bank a well detailed exam 2025/2026 graded
A+ upgraded !!!
BUSINESS ASSOCIATIONS (Agency, Partnerships, Corporations, LLCs) – Questions 1–25
Question 1
A principal instructed his agent to purchase inventory from Supplier A only. The agent
purchased inventory from Supplier B, believing it was a better deal. The principal now refuses to
pay Supplier B. Which of the following best describes the agent's liability to Supplier B?
A) The agent is not personally liable because the agent acted on behalf of the principal
B) The agent is personally liable to Supplier B because the agent lacked actual authority
C) The agent is liable only if Supplier B relied on the agent's apparent authority
D) The agent is liable only if the principal ratifies the contract
Correct Answer: B
Rationale: When an agent acts without actual authority, the agent may be personally liable to
the third party on the contract. The agent had no actual authority to purchase from Supplier B,
and unless the principal ratifies the contract or the agent had apparent authority (based on the
principal's manifestations to Supplier B), the agent is personally liable. Apparent authority
requires the principal's manifestations to the third party, not just the agent's belief.
Question 2
A corporation's board of directors approved a transaction that benefited the CEO at the expense
of the corporation. The CEO is also a director. The disinterested directors approved the
transaction after full disclosure. Shareholders challenge the transaction. Under the duty of
loyalty, which of the following is the best defense?
,A) The business judgment rule protects the transaction
B) The transaction was approved by disinterested directors
C) The CEO was acting in good faith
D) The corporation was not harmed
Correct Answer: B
Rationale: Under the duty of loyalty, a transaction involving an interested director may be
upheld if it is approved by disinterested directors after full disclosure. The business judgment
rule does not protect self-dealing transactions. Good faith is insufficient if the transaction is not
fair and approved by disinterested directors. Even if the corporation was not harmed, the
transaction may still violate the duty of loyalty if it constitutes a conflict of interest.
Question 3
A partnership has three partners. Two partners want to sell the partnership's primary asset, but
the third partner objects. The partnership agreement is silent on the sale of partnership assets.
Under RUPA, can the partnership sell the asset?
A) Yes, because decisions are made by majority vote
B) No, because unanimous consent is required for the sale of partnership assets outside the
ordinary course of business
C) Yes, because the sale is within the ordinary course of business
D) No, because the third partner's consent is required
Correct Answer: B
Rationale: Under RUPA, decisions to sell partnership assets outside the ordinary course of
business require unanimous consent of all partners. The sale of the partnership's primary asset
is likely outside the ordinary course of business. The partnership agreement is silent, so the
default unanimous consent rule applies. A mere majority vote is insufficient for major
transactions.
Question 4
A director of a corporation failed to attend board meetings and did not review financial reports
before voting on major transactions. The corporation suffered significant losses. Which duty has
the director most likely breached?
A) Duty of loyalty
B) Duty of care
C) Duty of obedience
D) Duty of good faith
Correct Answer: B
Rationale: The duty of care requires directors to act with the care that a person in a like position
,would reasonably believe appropriate under similar circumstances. This includes attending
meetings, reviewing materials, and making informed decisions. Failing to attend meetings and
review financial reports before voting on major transactions constitutes a breach of the duty of
care. The business judgment rule requires informed decision-making as a prerequisite for
protection.
Question 5
A principal gave an agent a power of attorney to sell the principal's real estate. The power of
attorney was not recorded. The agent sold the property to a buyer who had no knowledge of
the power of attorney. Which of the following is correct?
A) The sale is valid because the agent had actual authority
B) The sale is invalid because the power of attorney was not recorded
C) The sale is valid because the buyer is a bona fide purchaser
D) The sale is invalid because the buyer had no notice of the agent's authority
Correct Answer: C
Rationale: A power of attorney need not be recorded to be effective between the principal and
agent. However, recording may be required to give notice to third parties. Here, the buyer had
no knowledge of the power of attorney, but that does not invalidate the sale if the agent had
actual authority. The buyer is a bona fide purchaser and may rely on the agent's actual
authority. The sale is valid.
Question 6
A corporation was incorporated in State A but conducts most of its business in State B. Which
state has jurisdiction to regulate the corporation's internal affairs?
A) State A only
B) State B only
C) Both State A and State B
D) Neither state
Correct Answer: A
Rationale: The internal affairs doctrine provides that a corporation's internal affairs are
governed by the law of the state of incorporation. This includes matters such as director and
officer duties, shareholder rights, and corporate governance. State B may regulate the
corporation's business activities but not its internal affairs. State A has exclusive jurisdiction
over the corporation's internal affairs.
Question 7
A limited liability company has two members. The operating agreement provides for equal
management rights. One member dies. Which of the following is correct?
, A) The deceased member's estate becomes a member
B) The LLC is dissolved by the death of a member
C) The remaining member continues to manage the LLC
D) The LLC is automatically terminated
Correct Answer: C
Rationale: Under RULLCA, the death of a member does not cause dissolution or termination of
an LLC unless the operating agreement provides otherwise. The deceased member's estate does
not automatically become a member; it has rights to the deceased member's economic interest
only. The remaining member continues to manage the LLC unless the operating agreement
requires otherwise.
Question 8
A shareholder of a corporation files a derivative lawsuit against the directors. The shareholder
owns 1% of the corporation's stock and purchased the stock six months ago. The shareholder
made a demand on the board, which was refused. The shareholder sues. Which of the following
is correct?
A) The shareholder has standing to sue because the shareholder owns stock
B) The shareholder has standing only if the shareholder owned stock at the time of the
wrongdoing
C) The shareholder has standing only if the shareholder owns more than 5% of the stock
D) The shareholder has standing only if the board's refusal was wrongful
Correct Answer: B
Rationale: A shareholder bringing a derivative action must own stock at the time of the
wrongdoing (the contemporaneous ownership rule) and must make a demand on the board
unless demand would be futile. The shareholder purchased the stock six months ago, so the
shareholder must have owned stock at the time of the wrongdoing to have standing. The
shareholder's percentage of ownership is not a factor for standing.
Question 9
A partnership is formed without a written partnership agreement. Which of the following is the
default rule for sharing profits and losses?
A) Profits and losses are shared equally
B) Profits are shared based on capital contributions; losses are shared equally
C) Profits and losses are shared based on capital contributions
D) Profits are shared equally; losses are shared based on capital contributions
Correct Answer: A
Rationale: Under RUPA, if the partnership agreement is silent, profits and losses are shared
Advanced Practice Questions v2.0
Comprehensive 150-Question Multiple-Choice
Bank a well detailed exam 2025/2026 graded
A+ upgraded !!!
BUSINESS ASSOCIATIONS (Agency, Partnerships, Corporations, LLCs) – Questions 1–25
Question 1
A principal instructed his agent to purchase inventory from Supplier A only. The agent
purchased inventory from Supplier B, believing it was a better deal. The principal now refuses to
pay Supplier B. Which of the following best describes the agent's liability to Supplier B?
A) The agent is not personally liable because the agent acted on behalf of the principal
B) The agent is personally liable to Supplier B because the agent lacked actual authority
C) The agent is liable only if Supplier B relied on the agent's apparent authority
D) The agent is liable only if the principal ratifies the contract
Correct Answer: B
Rationale: When an agent acts without actual authority, the agent may be personally liable to
the third party on the contract. The agent had no actual authority to purchase from Supplier B,
and unless the principal ratifies the contract or the agent had apparent authority (based on the
principal's manifestations to Supplier B), the agent is personally liable. Apparent authority
requires the principal's manifestations to the third party, not just the agent's belief.
Question 2
A corporation's board of directors approved a transaction that benefited the CEO at the expense
of the corporation. The CEO is also a director. The disinterested directors approved the
transaction after full disclosure. Shareholders challenge the transaction. Under the duty of
loyalty, which of the following is the best defense?
,A) The business judgment rule protects the transaction
B) The transaction was approved by disinterested directors
C) The CEO was acting in good faith
D) The corporation was not harmed
Correct Answer: B
Rationale: Under the duty of loyalty, a transaction involving an interested director may be
upheld if it is approved by disinterested directors after full disclosure. The business judgment
rule does not protect self-dealing transactions. Good faith is insufficient if the transaction is not
fair and approved by disinterested directors. Even if the corporation was not harmed, the
transaction may still violate the duty of loyalty if it constitutes a conflict of interest.
Question 3
A partnership has three partners. Two partners want to sell the partnership's primary asset, but
the third partner objects. The partnership agreement is silent on the sale of partnership assets.
Under RUPA, can the partnership sell the asset?
A) Yes, because decisions are made by majority vote
B) No, because unanimous consent is required for the sale of partnership assets outside the
ordinary course of business
C) Yes, because the sale is within the ordinary course of business
D) No, because the third partner's consent is required
Correct Answer: B
Rationale: Under RUPA, decisions to sell partnership assets outside the ordinary course of
business require unanimous consent of all partners. The sale of the partnership's primary asset
is likely outside the ordinary course of business. The partnership agreement is silent, so the
default unanimous consent rule applies. A mere majority vote is insufficient for major
transactions.
Question 4
A director of a corporation failed to attend board meetings and did not review financial reports
before voting on major transactions. The corporation suffered significant losses. Which duty has
the director most likely breached?
A) Duty of loyalty
B) Duty of care
C) Duty of obedience
D) Duty of good faith
Correct Answer: B
Rationale: The duty of care requires directors to act with the care that a person in a like position
,would reasonably believe appropriate under similar circumstances. This includes attending
meetings, reviewing materials, and making informed decisions. Failing to attend meetings and
review financial reports before voting on major transactions constitutes a breach of the duty of
care. The business judgment rule requires informed decision-making as a prerequisite for
protection.
Question 5
A principal gave an agent a power of attorney to sell the principal's real estate. The power of
attorney was not recorded. The agent sold the property to a buyer who had no knowledge of
the power of attorney. Which of the following is correct?
A) The sale is valid because the agent had actual authority
B) The sale is invalid because the power of attorney was not recorded
C) The sale is valid because the buyer is a bona fide purchaser
D) The sale is invalid because the buyer had no notice of the agent's authority
Correct Answer: C
Rationale: A power of attorney need not be recorded to be effective between the principal and
agent. However, recording may be required to give notice to third parties. Here, the buyer had
no knowledge of the power of attorney, but that does not invalidate the sale if the agent had
actual authority. The buyer is a bona fide purchaser and may rely on the agent's actual
authority. The sale is valid.
Question 6
A corporation was incorporated in State A but conducts most of its business in State B. Which
state has jurisdiction to regulate the corporation's internal affairs?
A) State A only
B) State B only
C) Both State A and State B
D) Neither state
Correct Answer: A
Rationale: The internal affairs doctrine provides that a corporation's internal affairs are
governed by the law of the state of incorporation. This includes matters such as director and
officer duties, shareholder rights, and corporate governance. State B may regulate the
corporation's business activities but not its internal affairs. State A has exclusive jurisdiction
over the corporation's internal affairs.
Question 7
A limited liability company has two members. The operating agreement provides for equal
management rights. One member dies. Which of the following is correct?
, A) The deceased member's estate becomes a member
B) The LLC is dissolved by the death of a member
C) The remaining member continues to manage the LLC
D) The LLC is automatically terminated
Correct Answer: C
Rationale: Under RULLCA, the death of a member does not cause dissolution or termination of
an LLC unless the operating agreement provides otherwise. The deceased member's estate does
not automatically become a member; it has rights to the deceased member's economic interest
only. The remaining member continues to manage the LLC unless the operating agreement
requires otherwise.
Question 8
A shareholder of a corporation files a derivative lawsuit against the directors. The shareholder
owns 1% of the corporation's stock and purchased the stock six months ago. The shareholder
made a demand on the board, which was refused. The shareholder sues. Which of the following
is correct?
A) The shareholder has standing to sue because the shareholder owns stock
B) The shareholder has standing only if the shareholder owned stock at the time of the
wrongdoing
C) The shareholder has standing only if the shareholder owns more than 5% of the stock
D) The shareholder has standing only if the board's refusal was wrongful
Correct Answer: B
Rationale: A shareholder bringing a derivative action must own stock at the time of the
wrongdoing (the contemporaneous ownership rule) and must make a demand on the board
unless demand would be futile. The shareholder purchased the stock six months ago, so the
shareholder must have owned stock at the time of the wrongdoing to have standing. The
shareholder's percentage of ownership is not a factor for standing.
Question 9
A partnership is formed without a written partnership agreement. Which of the following is the
default rule for sharing profits and losses?
A) Profits and losses are shared equally
B) Profits are shared based on capital contributions; losses are shared equally
C) Profits and losses are shared based on capital contributions
D) Profits are shared equally; losses are shared based on capital contributions
Correct Answer: A
Rationale: Under RUPA, if the partnership agreement is silent, profits and losses are shared
