Bar Exam Rule Statements

Non-Compete

Non-competes ancillary to a business sale are enforceable if reasonable in (1) duration, (2) geographic scope, and (3) scope of restricted activity; courts may blue-pencil/reform overbroad term

Parole Evidence Rule

PER bars extrinsic evidence that contradicts a fully integrated writing; a partially integrated writing may be supplemented by consistent additional terms and may allow for evidence to explain ambiguities.

Common Law Parol Evidence

The common-law parol evidence rule prevents parties to a written agreement from introducing extrinsic evidence of a prior agreement that contradicts the terms of the writing.  The parol evidence rule applies only to integrated agreements.  Whether an agreement is integrated depends on the intent of the parties.  Under the common-law four-corners rule, the court may look only within the writing itself for evidence of intent.

A warranty of fitness

A warranty of fitness or suitability is implied in almost all jurisdictions in a contract for the sale of a newly constructed residence.  Under this warranty, the seller asserts that he used adequate materials and workmanship for the residence and that it is suitable for living. The implied warranty generally covers latent construction defects or problems that do not manifest themselves until after the sale.  The buyer has a duty to reasonably inspect the residence for patent defects but is not required to employ an expert home inspector. Generally, a suit for breach of the implied warranty may be brought against builders, developers, and contractors within a reasonable time after discovery of the defect.

Surrendering a lease

When a tenant unjustifiably abandons the leasehold, the tenant is treated as having made an offer to surrender under the lease.  If the landlord accepts this offer, the lease is terminated, and the tenant is not liable for any future rent.  A landlord’s retaking possession of the premises along with the landlord’s re-renting to a third party for a longer term or higher rent, or making alterations to the premises, may be treated as acceptance of the tenant’s offer unless the landlord notifies the tenant otherwise.  If the landlord does not accept the tenant’s offer and notifies the tenant of such, then the landlord can continue to enforce the lease and is entitled to rent. 

LLC Derivative Actions

Members of an LLC have a right to maintain a derivative action against the manager of the LLC for mismanagement.  In order to bring a derivative action, the member must make a written demand that the manager bring the action unless the demand would be futile.  In their complaint, members must also state the efforts they have made to prompt the manager's action or provide reasons for not doing so.

Partnerships

In order to form a partnership, at least two persons must intend to carry on a business for profit as co-owners, but it is not necessary that such persons have the specific intent to form a partnership.  If there is a sharing of the profits, it is presumed to be a partnership, and persons who share in the profits are partners.  However, this presumption of partnership can be rebutted.  Further, sharing profits as a form of wages or compensation does not create a presumption that the arrangement is a partnership.