Multistate Essay Examination
(MEE) – Advanced Practice
Questions a well detailed exam
2025/2026 graded A+
upgraded !!! Comprehensive
150-Question Multiple-Choice
Bank
BUSINESS ASSOCIATIONS (Agency, Partnerships, Corporations, LLCs) – Questions 1–25
Question 1
An agency relationship exists when a principal manifests assent to an agent that the agent shall
act on the principal's behalf and subject to the principal's control, and the agent manifests
assent or otherwise consents to so act. Which of the following elements is NOT required for the
formation of an agency relationship?
A) The principal manifests assent to the agent
B) The agent manifests assent to the principal
C) The agent acts on the principal's behalf
D) The agent receives consideration for acting
,Correct Answer: D
Rationale: Consideration is not required to form an agency relationship. The three essential
elements are: (1) the principal manifests assent to the agent, (2) the agent manifests assent or
otherwise consents, and (3) the agent acts on the principal's behalf and subject to the
principal's control. An agency relationship can be gratuitous.
Question 2
A corporation's board of directors approved a merger without obtaining shareholder approval,
believing the merger was in the corporation's best interest. The corporation's articles of
incorporation require shareholder approval for all mergers. Which of the following best
describes the directors' liability?
A) No liability because the business judgment rule protects all board decisions
B) Liability for breach of the duty of care for failing to comply with the articles
C) Liability for breach of the duty of loyalty for self-dealing
D) No liability because mergers are within the board's ordinary business authority
Correct Answer: B
Rationale: Directors have a duty to act within the scope of their authority as defined by the
articles of incorporation and applicable law. The business judgment rule protects decisions
made on an informed basis, in good faith, and in the honest belief that the action was in the
corporation's best interest—but it does not protect ultra vires acts or violations of the articles.
Directors are entitled to rely on information from officers and professionals, but they cannot
ignore clear corporate requirements.
Question 3
A member of a member-managed LLC entered into a contract on behalf of the LLC to purchase
equipment costing $150,000. The LLC's operating agreement requires unanimous member
consent for any transaction exceeding $100,000. The other members did not consent. Is the LLC
bound by the contract?
A) Yes, because members in a member-managed LLC have equal rights to manage the company
B) Yes, because the member had apparent authority to bind the LLC
C) No, because the transaction exceeded the member's actual authority under the operating
agreement
D) No, because LLC members cannot bind the LLC in any transaction
Correct Answer: C
Rationale: Under RULLCA, in a member-managed LLC, each member has equal rights in
management and conduct, but the operating agreement may limit authority. A member lacks
actual authority to act beyond the scope of the operating agreement. The contract exceeds the
member's actual authority because it requires unanimous consent. The member may have
,apparent authority if the third party lacked knowledge of the limitation, but the question asks
whether the LLC is bound—it would not be if the third party knew or should have known of the
limitation.
Question 4
A director of a corporation owns a competing business. The director learns of a lucrative
business opportunity that would benefit both the corporation and the director's competing
business. The director pursues the opportunity for the competing business without disclosing it
to the corporation. Which duty has the director most likely breached?
A) Duty of care
B) Duty of loyalty
C) Duty of obedience
D) Duty of good faith
Correct Answer: B
Rationale: Directors breach the duty of loyalty when they compete with the corporation, usurp
corporate opportunities, or are on both sides of a transaction. The duty of loyalty requires
directors to place the corporation's interests above their own. Pursuing a corporate opportunity
for a competing business without disclosure constitutes a breach. The duty of care relates to the
manner in which decisions are made. The duty of obedience requires compliance with the
corporation's governing documents.
Question 5
A principal orally authorized an agent to purchase real estate on the principal's behalf. The
agent signed a contract to purchase property for $300,000. The principal now refuses to be
bound. Under the Statute of Frauds, is the principal bound?
A) Yes, because the agent had actual authority to bind the principal
B) Yes, because the agent signed the contract on the principal's behalf
C) No, because the agent's authority to sign a real estate contract must be in writing
D) No, because the principal did not sign the contract
Correct Answer: C
Rationale: The Equal Dignities Rule requires that an agent's authority to execute a contract
subject to the Statute of Frauds must itself be in writing. A contract for the sale of land is within
the Statute of Frauds. Therefore, the agent's authority to sign the real estate contract must be in
writing. Oral authorization is insufficient.
Question 6
A shareholder filed a derivative lawsuit against the directors of a corporation, alleging that the
directors wasted corporate assets by approving an excessive compensation package for the CEO.
, The directors move to dismiss for failure to make a demand on the board. Which of the
following is correct?
A) Demand is always required before filing a derivative suit
B) Demand is excused if the shareholder alleges that a majority of the directors are interested in
the transaction
C) Demand is excused if the shareholder owns less than 5% of the corporation's stock
D) Demand is never required for waste claims
Correct Answer: B
Rationale: A shareholder bringing a derivative action must first make a demand on the board to
take corrective action, unless demand would be futile. Demand is excused when the
shareholder alleges with particularity that a majority of the directors are interested in the
challenged transaction, did not receive material information, or otherwise lacked
independence. Ownership percentage does not excuse demand. Waste claims still require
demand unless futility is established.
Question 7
Which of the following is a present covenant in a warranty deed?
A) Covenant of further assurances
B) Covenant of quiet enjoyment
C) Covenant of warranty
D) Covenant of seisin
Correct Answer: D
Rationale: Present covenants include the covenant of right to convey, the covenant of seisin,
and the covenant against encumbrances. Future covenants include the covenant of further
assurances, the covenant of quiet enjoyment, and the covenant of warranty. The distinction
matters because present covenants are breached, if at all, at the time of conveyance, while
future covenants are breached only when the grantee is disturbed in possession.
Question 8
A partnership agreement provides that decisions are made by majority vote of the partners.
Two of three partners vote to admit a new partner. The third partner objects. Is the admission
valid?
A) Yes, because majority vote governs all partnership decisions
B) No, because unanimous consent is required to admit a new partner
C) Yes, because the partnership agreement controls
D) No, because the objecting partner's consent is required
(MEE) – Advanced Practice
Questions a well detailed exam
2025/2026 graded A+
upgraded !!! Comprehensive
150-Question Multiple-Choice
Bank
BUSINESS ASSOCIATIONS (Agency, Partnerships, Corporations, LLCs) – Questions 1–25
Question 1
An agency relationship exists when a principal manifests assent to an agent that the agent shall
act on the principal's behalf and subject to the principal's control, and the agent manifests
assent or otherwise consents to so act. Which of the following elements is NOT required for the
formation of an agency relationship?
A) The principal manifests assent to the agent
B) The agent manifests assent to the principal
C) The agent acts on the principal's behalf
D) The agent receives consideration for acting
,Correct Answer: D
Rationale: Consideration is not required to form an agency relationship. The three essential
elements are: (1) the principal manifests assent to the agent, (2) the agent manifests assent or
otherwise consents, and (3) the agent acts on the principal's behalf and subject to the
principal's control. An agency relationship can be gratuitous.
Question 2
A corporation's board of directors approved a merger without obtaining shareholder approval,
believing the merger was in the corporation's best interest. The corporation's articles of
incorporation require shareholder approval for all mergers. Which of the following best
describes the directors' liability?
A) No liability because the business judgment rule protects all board decisions
B) Liability for breach of the duty of care for failing to comply with the articles
C) Liability for breach of the duty of loyalty for self-dealing
D) No liability because mergers are within the board's ordinary business authority
Correct Answer: B
Rationale: Directors have a duty to act within the scope of their authority as defined by the
articles of incorporation and applicable law. The business judgment rule protects decisions
made on an informed basis, in good faith, and in the honest belief that the action was in the
corporation's best interest—but it does not protect ultra vires acts or violations of the articles.
Directors are entitled to rely on information from officers and professionals, but they cannot
ignore clear corporate requirements.
Question 3
A member of a member-managed LLC entered into a contract on behalf of the LLC to purchase
equipment costing $150,000. The LLC's operating agreement requires unanimous member
consent for any transaction exceeding $100,000. The other members did not consent. Is the LLC
bound by the contract?
A) Yes, because members in a member-managed LLC have equal rights to manage the company
B) Yes, because the member had apparent authority to bind the LLC
C) No, because the transaction exceeded the member's actual authority under the operating
agreement
D) No, because LLC members cannot bind the LLC in any transaction
Correct Answer: C
Rationale: Under RULLCA, in a member-managed LLC, each member has equal rights in
management and conduct, but the operating agreement may limit authority. A member lacks
actual authority to act beyond the scope of the operating agreement. The contract exceeds the
member's actual authority because it requires unanimous consent. The member may have
,apparent authority if the third party lacked knowledge of the limitation, but the question asks
whether the LLC is bound—it would not be if the third party knew or should have known of the
limitation.
Question 4
A director of a corporation owns a competing business. The director learns of a lucrative
business opportunity that would benefit both the corporation and the director's competing
business. The director pursues the opportunity for the competing business without disclosing it
to the corporation. Which duty has the director most likely breached?
A) Duty of care
B) Duty of loyalty
C) Duty of obedience
D) Duty of good faith
Correct Answer: B
Rationale: Directors breach the duty of loyalty when they compete with the corporation, usurp
corporate opportunities, or are on both sides of a transaction. The duty of loyalty requires
directors to place the corporation's interests above their own. Pursuing a corporate opportunity
for a competing business without disclosure constitutes a breach. The duty of care relates to the
manner in which decisions are made. The duty of obedience requires compliance with the
corporation's governing documents.
Question 5
A principal orally authorized an agent to purchase real estate on the principal's behalf. The
agent signed a contract to purchase property for $300,000. The principal now refuses to be
bound. Under the Statute of Frauds, is the principal bound?
A) Yes, because the agent had actual authority to bind the principal
B) Yes, because the agent signed the contract on the principal's behalf
C) No, because the agent's authority to sign a real estate contract must be in writing
D) No, because the principal did not sign the contract
Correct Answer: C
Rationale: The Equal Dignities Rule requires that an agent's authority to execute a contract
subject to the Statute of Frauds must itself be in writing. A contract for the sale of land is within
the Statute of Frauds. Therefore, the agent's authority to sign the real estate contract must be in
writing. Oral authorization is insufficient.
Question 6
A shareholder filed a derivative lawsuit against the directors of a corporation, alleging that the
directors wasted corporate assets by approving an excessive compensation package for the CEO.
, The directors move to dismiss for failure to make a demand on the board. Which of the
following is correct?
A) Demand is always required before filing a derivative suit
B) Demand is excused if the shareholder alleges that a majority of the directors are interested in
the transaction
C) Demand is excused if the shareholder owns less than 5% of the corporation's stock
D) Demand is never required for waste claims
Correct Answer: B
Rationale: A shareholder bringing a derivative action must first make a demand on the board to
take corrective action, unless demand would be futile. Demand is excused when the
shareholder alleges with particularity that a majority of the directors are interested in the
challenged transaction, did not receive material information, or otherwise lacked
independence. Ownership percentage does not excuse demand. Waste claims still require
demand unless futility is established.
Question 7
Which of the following is a present covenant in a warranty deed?
A) Covenant of further assurances
B) Covenant of quiet enjoyment
C) Covenant of warranty
D) Covenant of seisin
Correct Answer: D
Rationale: Present covenants include the covenant of right to convey, the covenant of seisin,
and the covenant against encumbrances. Future covenants include the covenant of further
assurances, the covenant of quiet enjoyment, and the covenant of warranty. The distinction
matters because present covenants are breached, if at all, at the time of conveyance, while
future covenants are breached only when the grantee is disturbed in possession.
Question 8
A partnership agreement provides that decisions are made by majority vote of the partners.
Two of three partners vote to admit a new partner. The third partner objects. Is the admission
valid?
A) Yes, because majority vote governs all partnership decisions
B) No, because unanimous consent is required to admit a new partner
C) Yes, because the partnership agreement controls
D) No, because the objecting partner's consent is required
