To give you a temporary break from essays that require open-ended analysis, I have created two slightly more targeted essay prompts that are disguised as multiple-choice questions. It is very important that you explain your answer fully, but also that you keep it short: No longer than a single page for
each essay prompt, with single-spacing and a font no smaller than 10 points. You are free to reference cases and materials that we have read, but you are not required to do so. In preparing your analysis, there are no
restrictions on what information you can review. But all of the work that you submit must be entirely your own, and you may not receive assistance from any other humans, including other humans enrolled in this class. To
assure that your analysis is complete, it might be wise to refresh your memory of the example that was provided in connection with Essay 1. You can find that example here.
Lucy Verity and Adie (her younger sister) spend most of their waking hours in a virtual world known as AvaTerra, where anyone is able to create a permanent online avatar that can do, in the virtual world, just about
anything that humans can do in the real world.
Over the course of several years–in constant collaboration with one another–Lucy and Adie have built a virtual
store in Ava-Terra that has become extremely popular: Thousands of avatars purchase digital goods and
equipment that can be used and enjoyed in the virtual world. For each sale, Lucy and Adie receive payment in
Terra-Libras, the virtual world’s currency, which they have always converted to U.S. dollars and stockpiled in a
joint bank account that they think of as their store’s rainy day fund. Neither of them have ever made a
withdrawal from the fund.
Lucy and Adie have never formally talked about how long they will keep running the store, or placed any labels
on exactly what their venture is. But Adie was shocked, at the end of last summer, when she returned from a
two-week “unplugged” summer camp, to learn that Lucy had entered into a contract to sell the store to another
avatar in exchange for digital currency that is equivalent to about $1.5 million real-world dollars.
Which of the following statements are true about the relationship between Lucy and Adie, and which are false?
Fully explain your reasoning, being sure to include a summary of the applicable law.
(A) Lucy and Adie cannot possibly have a partnership based on the facts described.
(B) If a partnership exists, and Adie objects to the sale, the contract will definitely not be binding on the partnership.
(C) If a partnership exists, and the sale occurs, Adie has a right to be paid a fair value for the countless hours that she spent building the business.
(D) If a partnership exists, then Adie was not required, in previous years, to include any portion of the rainy-day fund on her individual tax return, because the partnership never distributed any of the money to Adie but
instead retained all of it for use with the store.
(E) If a partnership exists, and the sale occurs over Adie’s objection, Lucy may be liable to Adie for breaching the partnership agreement (or for breach of fiduciary duty) by selling the store without consulting Adie.
Alex, Bailey, Cora, Duke, and Ernest were the original partners in Lexington Building Supply (LBS). Ernest
notified the others in November 2017 that he was withdrawing from the partnership. Duke (who had recently been expressing serious concerns about a drop in the quality of building materials that LBS was receiving from its vendors) was hospitalized briefly the same month and decided to take a brief hiatus from work. He had no communication whatsoever with the other partners between that point and when he died while attempting to scale Mt. Everest in June 2018.
Last month, Ernest was summoned to a partner’s meeting, where he learned that LBS had recently been sued
by a builder whose mostly finished construction project suffered a spectacular collapse because of defective
materials that the builder had purchased from LBS in January 2018. The lawsuit ended last month, when the
court awarded damages against LBS in the amount of $3 million dollars.
At the meeting, Ernest was introduced to Fran, who (he was told) became a partner in LBS in March 2018 at
the invitation of Alex, Bailey, and Cora, largely because Fran (who is flush with cash) was willing to make an
immediate capital contribution of $1.5 million dollars.
At the conclusion of the meeting, Ernest (and the executor of Duke’s estate, who was also in attendance) were
given buyout checks for their share of the partnership interest, based on the current value of the partnership.
The remaining partners were sincerely apologetic that the partnership’s value had declined so much as a result
of the lawsuit.
If the partnership has no written partnership agreement, and if the applicable state law follows the majority
rules, determine which of the following statements are true and which are false. Fully explain your reasoning,
being sure to include a summary of the applicable law
(A) It is unlikely, based on the facts described, that Fran became a partner in March 2018. It is still possible,
though, that Fran’s contractual agreement (entered into the same month) committing LBS to purchase several
commercial delivery trucks from a local dealership, will be binding on LBS.
(B) Assuming that Ernest’s decision to leave the partnership was not wrongful in some way, the buyout check
offered to Ernest clearly has not been calculated correctly and is probably less than he deserves.
(C) It is improper for LBS to reduce Duke’s interest in the partnership with any losses associated with the
lawsuit, because he was not actively involved in the management at the time, and he had previously been
warning about the quality of LBS’s materials.
(D) If Fran did become a partner in LBS either in March 2018 or sometime thereafter, she has no liability for the collapse of the structure, because it occurred before she entered the partnership. For this reason, the $1.5 million capital contribution is beyond the reach of the builder.