Professor Franks

Final Examination, Fall 1994

1. Carefully analyze the facts and grasp the issues in each question before beginning to write. Spend time reading the question slowly and carefully.

2. State the issues and answers to each question concisely. Lengthy answers are not necessary.

3. Do not repeat questions in your answers. Write neatly and legibly on only one side of each page.

4. Number your answers to correspond with the question, e.g., "II-B."

5. If you feel it necessary to assume additional facts in any of the questions, give the facts that must be added and state why.

6. Do not write in the margin of the book.

7. All major questions are equally weighted unless otherwise indicated. Subparts are approximately equal but may be weighted slightly differently according to the number of issues involved in that subpart.

8. Write your fictitious name and number and the name and section number of the course on which you are being examined on the cover of each examination book.

9. If you use more than one book, indicate "Book One," "Book Two" and so forth on the cover of each book and write your fictitious name and number and the name and section number of the course on the cover of each examination book.

10. A GOOD ANSWER IS NOT NECESSARILY A LONG ANSWER.

Smith, Brown and Jones were each working as sales reps for Mary Kay Cosmetics. All three had been employed for several years selling the company's products door to door. All three sales reps had written contracts. Only Janice Jones's contract contained any prohibition against competition after termination. Her contract provides: "After termination, the sales representative shall not engage in the cosmetics business for a period of ten years at any location in the continental United States."

One day following a sales meeting, Sue Smith proposed: "We can go into business ourselves, manufacture our own products, and make double what we're making now. Cosmetics is a ripoff. A can of hair spray that sells for $7.00 costs just $1.00 to make. We'll have a 700 per cent markup, which is sure better than the 20 per cent commission Mary Kay pays us." The other two thought the idea excellent.

Sue Smith has come to your law office, seeking your advice. Please explain to your client in detail the formation and operation of each of the following three types of business organization and the relative advantages and disadvantages to her of each:

Despite your good advice, the trio goes to another lawyer, where they form a general partnership. Sue Smith, Belinda Brown and Janice Jones are the partners. While still working for Mary Kay Cosmetics, articles for Cajun Classic Cosmetics were drafted by the other lawyer and signed by the partners, but not filed or recorded.

The three then contacted a cosmetics manufacturer in Mexico and arranged to buy a quantity of products, bearing however a Cajun Classic Cosmetics label. The three partners sought and quickly obtained FDA approval for their relatively low-tech products.

Only when the first shipment of cosmetics arrived from Monterrey did the three submit their resignations to Mary Kay and turn in their pink Cadillacs. They then hired a sales staff: Ursula Urquhart, Velma Vickery and Wilma Wilson. Each salesperson was given a written "dealer's contract" as an independent contractor and was required to attend weekly sales meetings and to memorize and use the company sales pitch word for word. The sales pitch was copied verbatim from the Mary Kay handbook.

III-A. Three months after the articles of partnership that the other lawyer drafted were signed, the partners decided to change lawyers. Sue Smith convinced them to come to your law office. Assuming they still wish a general partnership, are there any steps you should take on their behalf to prepare or file any existing or additional documents? Discuss.

III-B. You learn that Belinda Brown is being sued by her former boyfriend for $50,000 she borrowed from him but never repaid. You also learn that two months ago, a full month after the articles of partnership were written and signed, the partnership bought a small office building in Zachary, Louisiana. What steps, if any, should you take to protect the office building? Discuss.

III-C. What difference, if any, would it make and and what steps, if any, would you take if the partners had purchased the office building in the partnership name four months ago, one month before they signed their articles of partnership? Discuss.

III-D. Two days after the three partners visit your law office, Sue Smith calls you and tells you to proceed with your proposed legal work. You and Ms. Smith agree on a fee, but after your work is completed the other two partners protest when your bill arrives. "We never authorized all this work, and it takes a majority of the partners to bind the partnership," says Belinda Brown. Is the partnership bound? Discuss.

When applying a sample of Cajun Classic's "Louisiana Hot Lips" brand lipstick to her own lips as she was getting ready to go to church one Sunday morning, salesperson Ursula Urquhart felt a stinging sensation. The burning became so severe that she had to be rushed to the emergency room of Baton Rouge General Hospital. Ursula now has permanent scarring of her lips. The injury, it turns out, is due to the Mexican manufacturer's accidental addition of sodium hydroxide into the lipstick. Sodium hydroxide in very small quantities is normally an ingredient in depilatory cream, and in larger quantities an ingredient in Drano; lye is never a proper ingredient in lipstick.

Discuss Ursula Urquhart's remedies. Cover all theories of liability, all theories of damages, all who might be potential defendants and the extent of liability of each, and all anticipated defenses.

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Copyright © 1994 by M. R. Franks - ALL RIGHTS RESERVED