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Bar Q& A

Bar examination questions are copyrighted by the State Bar of California.


Reprinted with permission.
Editors note:
The Bar Q&A answers are printed as submitted without editing.

question #1
Contracts

On April 1, Pat, a computer software


consultant, entered into a written services
contract with Danco, Inc. to write four
computer programs for use by Danco in
controlling its automated manufacturing
machines. The contract provided that Danco would pay Pat $25,000 on completion
of the work and that the programs were to
be delivered to Danco no later than May 1.
The contract stated, This is the complete
and entire contract between the parties,
and no modification of this contract shall
be valid unless it is in writing and signed
by both parties.
Pat entered into the contract in anticipation that it would lead to significant work
from Danco in the future, and he consequently turned away opportunities to take
on more lucrative work.
On April 15, Pat called Chelsea, the
President of Danco, who had executed the
contract on behalf of Danco, and told her,
Im having some problems with program
number 3, and I wont have it ready to deliver to you until at least May 8 maybe
closer to May 15. Also, I have some doubt
about whether I can even write program
number 4 at all because your computer
hardware is nearly obsolete. But Ill get
programs numbers 1 and 2 to you by May
1.
Chelsea said in response, Im sorry
to hear that. We really need all four programs. If you cant deliver until May 15, I
guess Ill have to live with that.
On April 28, Pat called Chelsea and
said, Ive worked out the problems with
programs numbers 3 and 4. Ill deliver
them to you on May 12.
Chelsea responded, Ive been meaning to call you. Im going to start looking around for another consultant to do
the work because I consider what you said
in our April 15 telephone discussion to be
a repudiation of our contract. My lawyer
tells me that, because of the language in
the contract, nothing I said to you in that
conversation matters. You repudiated the
contract, so we dont owe you anything.
Can Pat prevail in a suit against Danco
for breach of contract, and, if so, what is
the measure of his damages? Discuss.

answer 1
This answer was provided by Paul
Pfau of Cal Bar Tutorial Review,
800-783-6168, www.cbtronline.com.

Bar review experts answer the six essay


questions on the February 2010 Bar Exam

Danco for breach of contract will initially


depend on the validity of their contract as
well as its terms. The measure of any damages Pat may receive will also depend on
these initial issues.
VALIDITY OF CONTRACT
Presuming a valid written services
contract between Pat and Danco reflecting their mutual assent for Pat to supply
four computer programs for use by Danco
by May 1st for valuable consideration of
$25,000 and which satisfies the defense
of the Statute of Frauds at issue are the
terms the parties agreed upon and whether
they were breached as discussed below.
TERMS OF THE CONTRACT
Express Condition Precedent
An express condition precedent is one
that must occur before an absolute duty of
performance arises in the other party.
Thus, payment to Pat of the $25,000 is
based on Pats duty to perform by completing and delivering the four computer
programs to Danco by May 1st. Absent an
excuse, Danco may argue that Pats failure
to meet this time of the essence express
condition precedent would relieve the company of its obligation to perform its duty to
pay Pat the $25,000.
PERFORMANCE
APRIL 15TH COMMUNICATION
BY PAT/CHELSEA
Pats call to Chelsea, Dancos President,
on April 15th that he was having problems with computer programs three and
four and that he may not be able to deliver them before May 8th or 15th constituted the basis of relieving Danco of its
duty to perform to Pat. Danco would make
the following arguments:
Excuse
Breach

of

Condition

by

Actual

Although Pats statement did not signal


his failure to cooperate, Danco might argue
that it was an actual and material breach of
the express time of the essence condition.
Pat would make the argument that the potential delay while not meeting the May
1st condition was at best incidental and
minor given the need for a one to two week
delay. This would only suspend Dancos
duty to perform but not excuse it.
Excuse of Condition by Anticipatory
Repudiation

PAT v. DANCO
Whether Pat will prevail in a suit against

Anticipatory repudiation must be unequivocal, not just an expression of doubt

or the prospective inability or unwillingness to perform.

MEASURE OF DAMAGES
Compensatory

It seems clear Pats expression of doubt


having some problems would fall short
of the unequivocality standard in which
event Dancos duty to perform would remain.
Excuse of Condition by Waiver or Estoppel

Pat would argue that the standard measure of compensatory damages will be expectation damages that will permit him to
fully benefit under the terms of the May 1st
contract. In this event, Pat would be justified in arguing for the full $25,000.
Consequential

A party may waive a condition by indicating that he will not insist upon it. Such
a waiver, however, may be retracted unless
the other party relies on the waiver and
changes his position to his detriment. Upon
such detrimental reliance, the waiving party is estopped from non-performance.
In this regard, Chelseas response to Pats
communication that (Danco) would have
to live with the May 15th (date) in the
event Pat could not resolve the programming problems would seem to constitute a
sufficient waiver of the time of the essence
condition. On the other hand, Chelsea
might argue that she retracted the waiver
with her April 28th communication that she
would treat Pats April 15th statement as a
repudiation of his duty to perform. Pat,
however, could successfully argue that the
nearly two week delay in informing him
caused him to change his position to his
detriment and especially given the fact at
the time of the making of the contract that
he turned away opportunities to take on
more lucrative work. In this event, subject
to a valid modification, as discussed below,
Chelseas waiver would also be valid.
APRIL 28TH COMMUNICATION
BY PAT/CHELSEA
Anticipatory Repudiation by Danco
Pat would argue that Chelseas representation, as described above, that Danco
would treat Pats April 15th communication as an actual breach and not pay Pat
because of the language in their contract
itself is an unequivocal repudiation of the
terms of the April 1st contract supporting
a successful cause of action by Pat against
Danco for material breach.
Modification of the May 1st Contract
Pat would also contend that Dancos
waiver as discussed through Chelseas
April 15th communication to him was
valid even though it was not supported by
consideration. Pat would argue that his
detrimental reliance was a valid substitute
and that the modified time for performance
was extended to May 15th. As such, his assertion on April 28th that full performance
would be satisfied by May 12th was within
the terms of the modified contract.

These damages are awarded in addition


to compensatory damages in the event a
reasonable person would have foreseen at
the time of entering the contract that such
damages would result from the breach.
Here, Pat would argue that his contract
with Danco in anticipation that it would
lead to significant work in the future with
Danco foreseeably resulted in his turning down more lucrative work. Here, Pat
would argue that he should also be compensated for the loss of work that at least
would cover the nearly one month of time
from the start of the contract to Dancos
April 28th repudiation.
Punitive
It is unlikely Pat would be successful in
arguing for punitive damages in view of
the commercial nature of his contract with
Danco.
Duty to Mitigate
Pat should cease work on behalf of
Danco in his attempt to find alternative
employment that would lead to mitigating
any compensatory or consequential damages owed to him by Danco for their repudiation of their duty to perform under the
terms of the April 1st contract.

question #2

Business Associations &


Professional Responsibility
Able, Baker, and Charlie are successful
attorneys who set up a law firm under the
name ABC Legal Services LLP (ABC
LLP). They agreed to share profits and
losses equally. Able prepared the documents
required to register the firm as a limited liability partnership and instructed his assistant
to file them with the Secretary of State. Inadvertently and unbeknownst to Able, Baker,
and Charlie, Ables assistant never filed the
appropriate documents.
Able, Baker, and Charlie leased office
space for four attorneys in the name of ABC
LLP. They rented the extra office to David, an
attorney who had a small solo law practice,

2010 Bar Exam Questions & Answers


for a monthly rent of the greater of $1100 or
10% of his billings. David committed malpractice arising from a case that he undertook
soon after he moved into the ABC LLP office
space.
Able, Baker, and Charlie hired Jack as head
of computer services. Jack had just graduated
from college with a degree in computer science. Jack, in an effort to save ABC LLP the
cost of Internet access budgeted at $500 a
month, accessed and used the wireless network of an adjacent law firm for free. Able,
Baker, and Charlie were surprised at the savings, but did not inquire how it came about.
Their use of the network resulted in the disclosure to a third party of confidential client
information for one of Ables clients, which
caused the client economic loss.
1. May Able, Baker, and Charlie each be
held personally liable for the economic loss
to Ables client caused by the disclosure of
confidential client information? Discuss.
2. May Able, Baker, and Charlie each be
held personally liable for Davids malpractice? Discuss.
3. Have Able, Baker, and Charlie breached
any rules of professional conduct? Discuss.
Answer this question according to California
and ABA authorities.

answer 2

This answer is provided by Belia Bennett


of Raise the Bar, LLC,
www.raisethebarwriting.com, 888-644-3287.
1. Personal Liability of Able (A), Baker
(B) and Charlie (C) for economic loss of
Ables Client.
In order to determine whether A, B and C
will be held personally liable for the economic loss to Ables client, it is first necessary to
determine the type of entity formed by A, B
and C.
Partnership:
A partnership is an association of two or
more persons to carry on as co-owners a business for profit. A sharing of profits raises a
presumption of a partnership. Here, A, B and
C are successful attorneys who set up a law
firm which is a form of business. The three
attorneys agreed to share profits and losses
equally. Therefore A, B and C formed ABC
Legal Services LLP as a business for profit.
Partnership Formalities:
No formal agreements or writings are required to initially form a partnership. However, in order to comply with the statute of
frauds, a partnership in existence for more
than one year must execute a writing to reflect the partnership agreement. Given what
appears to be A, B and Cs recent creation of
ABC Legal Services, the attorneys are not
required to have a formal agreement or writing. The existence of their partnership may
be implied from their conduct to engage in
business and share profits. A general partnership was formed.
Limited Liability Partnership (LLP):
The Revised Uniform Partnership Act
(RUPA) allows for the creation of a limited
liability partnership whereby partners are not
personally liable for the LLPs obligations.
An LLP is established by filing a statement of
qualification with the secretary of state which
must be signed by two partners and contain
the name and address of the partnership and
a statement that the partnership elects to become an LLP. The LLP is established at the
time of filing the statement.
Here, A prepared the statement of qualification to establish ABC Legal Services as
an LLP. While he instructed his assistant to
file the statement with the Secretary of State,
as required by the RUPA to form an LLP,
the statement was never filed. Accordingly,

ABC Legal Services did not become a legally formed LLP; only a general partnership
arose.
Partner Liability:
Partners are liable for all contracts entered
into by a partner and all torts committed by
any partner or employee of the partnership
within the ordinary course of the partnership.
Liability is joint and several for all obligations of the partnership.
Given ABC Legal Services lack of limited
liability partnership status, A, B and C are
joint and severally liable for the torts committed by any one partner or employee.
Malpractice Action by Client against ABC
Legal Services:
A client may institute a malpractice action
against her attorney, based in tort, for the unauthorized disclosure of confidential client
information to a third party. The malprac-

tice action will be based upon a negligence


theory. The applicable rules of professional
responsibility will establish the standard of
care. The client may recover economic damages in a malpractice action.
Duties of Care and Confidentiality:
In California, competent representation
requires the lawyer to supervise the work
of subordinate attorneys and non-attorney
employees. Under the Rules of Professional
Conduct (RPC), a lawyer generally must not
reveal information relating to the representation of a client.
Here, ABC budgeted $500 for internet access. ABC hired Jack as head of computer
services. Instead of purchasing its own internet access, Jack used the wireless network
of an adjacent law firm. ABC did not pay for
the use of the wireless network. Although
surprised by the savings, A, B and C did not
inquire how Jack was acquiring internet ac-

13

cess. The free use of the wireless network


resulted in a disclosure of confidential client
information to a third party. A, B and C failed
to supervise the work of Jack by not inquiring
into the source of free internet services and
failed to ensure that client confidences were
preserved in using the free wireless network.
The breaches of professional conduct will establish the standard of care in a malpractice
action against ABC Legal Services.
Provided that As client is able to establish
a malpractice action against Able she may
recover economic losses caused by the unauthorized disclosure of confidential client
information. Given the lack of creation of an
LLP, A, B and C will be joint and severally
liable for a successful malpractice action by
As client.
2. Personal Liability of Able (A), Baker
(B) and Charlie (C) for Davids malpractice.

2010 Bar Exam Questions & Answers


for a monthly rent of the greater of $1100 or
10% of his billings. David committed malpractice arising from a case that he undertook
soon after he moved into the ABC LLP office
space.
Able, Baker, and Charlie hired Jack as head
of computer services. Jack had just graduated
from college with a degree in computer science. Jack, in an effort to save ABC LLP the
cost of Internet access budgeted at $500 a
month, accessed and used the wireless network of an adjacent law firm for free. Able,
Baker, and Charlie were surprised at the savings, but did not inquire how it came about.
Their use of the network resulted in the disclosure to a third party of confidential client
information for one of Ables clients, which
caused the client economic loss.
1. May Able, Baker, and Charlie each be
held personally liable for the economic loss
to Ables client caused by the disclosure of
confidential client information? Discuss.
2. May Able, Baker, and Charlie each be
held personally liable for Davids malpractice? Discuss.
3. Have Able, Baker, and Charlie breached
any rules of professional conduct? Discuss.
Answer this question according to California
and ABA authorities.

answer 2

This answer is provided by Belia Bennett


of Raise the Bar, LLC,
www.raisethebarwriting.com, 888-644-3287.
1. Personal Liability of Able (A), Baker
(B) and Charlie (C) for economic loss of
Ables Client.
In order to determine whether A, B and C
will be held personally liable for the economic loss to Ables client, it is first necessary to
determine the type of entity formed by A, B
and C.
Partnership:
A partnership is an association of two or
more persons to carry on as co-owners a business for profit. A sharing of profits raises a
presumption of a partnership. Here, A, B and
C are successful attorneys who set up a law
firm which is a form of business. The three
attorneys agreed to share profits and losses
equally. Therefore A, B and C formed ABC
Legal Services LLP as a business for profit.
Partnership Formalities:
No formal agreements or writings are required to initially form a partnership. However, in order to comply with the statute of
frauds, a partnership in existence for more
than one year must execute a writing to reflect the partnership agreement. Given what
appears to be A, B and Cs recent creation of
ABC Legal Services, the attorneys are not
required to have a formal agreement or writing. The existence of their partnership may
be implied from their conduct to engage in
business and share profits. A general partnership was formed.
Limited Liability Partnership (LLP):
The Revised Uniform Partnership Act
(RUPA) allows for the creation of a limited
liability partnership whereby partners are not
personally liable for the LLPs obligations.
An LLP is established by filing a statement of
qualification with the secretary of state which
must be signed by two partners and contain
the name and address of the partnership and
a statement that the partnership elects to become an LLP. The LLP is established at the
time of filing the statement.
Here, A prepared the statement of qualification to establish ABC Legal Services as
an LLP. While he instructed his assistant to
file the statement with the Secretary of State,
as required by the RUPA to form an LLP,
the statement was never filed. Accordingly,

ABC Legal Services did not become a legally formed LLP; only a general partnership
arose.
Partner Liability:
Partners are liable for all contracts entered
into by a partner and all torts committed by
any partner or employee of the partnership
within the ordinary course of the partnership.
Liability is joint and several for all obligations of the partnership.
Given ABC Legal Services lack of limited
liability partnership status, A, B and C are
joint and severally liable for the torts committed by any one partner or employee.
Malpractice Action by Client against ABC
Legal Services:
A client may institute a malpractice action
against her attorney, based in tort, for the unauthorized disclosure of confidential client
information to a third party. The malprac-

tice action will be based upon a negligence


theory. The applicable rules of professional
responsibility will establish the standard of
care. The client may recover economic damages in a malpractice action.
Duties of Care and Confidentiality:
In California, competent representation
requires the lawyer to supervise the work
of subordinate attorneys and non-attorney
employees. Under the Rules of Professional
Conduct (RPC), a lawyer generally must not
reveal information relating to the representation of a client.
Here, ABC budgeted $500 for internet access. ABC hired Jack as head of computer
services. Instead of purchasing its own internet access, Jack used the wireless network
of an adjacent law firm. ABC did not pay for
the use of the wireless network. Although
surprised by the savings, A, B and C did not
inquire how Jack was acquiring internet ac-

13

cess. The free use of the wireless network


resulted in a disclosure of confidential client
information to a third party. A, B and C failed
to supervise the work of Jack by not inquiring
into the source of free internet services and
failed to ensure that client confidences were
preserved in using the free wireless network.
The breaches of professional conduct will establish the standard of care in a malpractice
action against ABC Legal Services.
Provided that As client is able to establish
a malpractice action against Able she may
recover economic losses caused by the unauthorized disclosure of confidential client
information. Given the lack of creation of an
LLP, A, B and C will be joint and severally
liable for a successful malpractice action by
As client.
2. Personal Liability of Able (A), Baker
(B) and Charlie (C) for Davids malpractice.

2010 Bar Exam Questions & Answers


Part performance?
The Statute of Frauds is satisfied if any
provision of the contract is performed,
regardless of whether the performance
is by the plaintiff or the defendant. Here,
Firm paid Chris his law school expenses
of $120,000, as promised by the contract.
Therefore, part performance satisfies the
statute.

said he supported Chriss decision. Since a


waiver only excuses later performance and
here Chris breached before the waiver, it is
not effective.

difference in pay between a paralegal and


a lawyer is greater than $30,000 a year. It
almost certainly is greater. That means that
Chris is paying significantly more than he
is receiving.

Conclusion: waiver does not excuse


Chriss breach.

It could be argued that Provision 3 also


provides consideration to Chris for his sacrifice in pay, in that Chris might make partner after four years. On the one hand it is
possible that being made partner after only
four years faster than normal and is a benefit to Chris. On the other hand Firm has
within its control whether it gives Chris
superior performance reviews, and even
in defining what superior reviews means.
Firm is not promises any actual consideration in Provision 3. Therefore provision 3
of the contract does not provide Chris any
additional consideration for his four years
of low paid labor.

Equitable defenses
Conclusion: the Statute of Frauds is satisfied and the contract is not voidable.
Chris can defeat Firms claim for legal
damages if he is not in breach.
Doctrine of Divisibility.
When the terms of a contract are broken into separate units of performance and
payment, defendant is not in breach if he
completes performance of some units but
not others. Here, there are three provisions
in the contract.
In Provision 1 Firm promises to pay
Chriss law school expenses when he completes law school and is admitted to the bar.
In Provision 2 Chris promises to work at
Firm for four years as a lawyer but at the
salary of a paralegal. In Provision 3 Firm
promises to consider Chris for partnership
after four years if his performance reviews
are superior.
Arguably, the contract is divisible and
Provision 1 is a single unit whereby Chriss
performance is completing law school and
being licensed and Firms performance
is reimbursing the costs of his education.
However, there are problems with this interpretation. First, Chris does not make a
promise to Firm to complete law school.
Second, if Provision 1 is divisible, there
is no separate consideration for Provisions
2 and 3.
In Provision 2, Chris promises to work at
a greatly reduced salary for four years. This
does not stand alone as a unit of performance and payment. Arguably, Provision
2 and 3 are divisible from Provision 1. In
that case, Chris promises to work for four
years at a greatly reduced salary and Firm
promises to consider him for partnership if
his work is superior. Provision 3 does not
really contain any consideration for Chriss
reduced salary. Firm only promises to consider Chris for partnership. Furthermore,
whether Chriss performance reviews are
superior is within the control and judgment
of Firm. Therefore, Provision 3 does not
provide Chris consideration for his four
years at low pay.
Conclusion: the contract is not divisible.
Chris can defeat Firms claim for legal damages if his performance was excused.
Waiver?
Defendants performance is excused if
plaintiff tells defendant he no longer has a
duty to perform a contract provision. Here,
Firm paid Chris $120,000 fulfilling Provision 1 of the contract. Then Chris told Lou
that he did not plan to work for Firm. Lou
said Firm would support his choice of employment and said nothing about returning
the $120,000.
However, a waiver serves as an excuse
only if plaintiff excuses defendants performance before it is due. Here, once Chris
graduated and was admitted to the bar and
received Firms reimbursement his duty to
work exclusively for Firm for four years
was absolute. Chris accepted other employment and then told Lou. Therefore,
Chris had already breached before Lou

Chris can defeat Firms claim for specific performance by showing that the
elements of specific performance are
not met.
Specific performance requires: inadequate remedy at law, definite and certain
contract, and feasibility of enforcement.
Inadequate legal remedy
If money makes plaintiff whole, a court
will not order specific performance. Here,
Firm paid Chris $120,000. If Chris pays
Firm $120,000, then Firm has received all
that it lost. Therefore legal remedies are
adequate.
Definite and certain contract
If the terms of the contract are not clear,
a court will refuse to order specific performance. Here, the meaning of superior
performance reviews is not certain. Therefore, a court will refuse to order specific
performance.
Feasibility of performance
A court must be confident that it can
enforce compliance with its order. A court
does not favor orders which require continued monitoring. Here, the order would be to
force Chris to work for Firm for four years.
Enforcing defendants labor is not feasible.
A court cannot order an employee to work
for an employer. Further, the court would
have to monitor compliance for four years.
Therefore, the remedy is not feasible.
Conclusion: The elements of specific
performance are not met, and a court will
refuse to grant specific performance.
Chris can defeat Firms claim for specific performance by proving equitable
defenses.
Unclean hands
A court will not order equitable relief
if the plaintiff has acted inequitably concerning the contract. Here, Lou knew that
before Chris attended law school, his understanding of the contract was naive. The
question is whether the contract took unfair advantage of Chris based on his naivete. Stated another way, is Chris working as
an attorney for four years at paralegal pay
adequate consideration for what the Firm
is providing.
First it should be noted that the costs
were reimbursed only after the fact, so that
the Firm did not make it possible for Chris
to go the law school. The analysis might
be different if the firm provided Chris the
money for law school expense before he
began law school. Making law school possible where it might not have been otherwise is another form of consideration. And
the interest on the money over four years is
an additional consideration. But, as it was,
Chris had to find his own financing. So the
payment of the $120,000 after the fact is
just a cash trade for the contracts other
two provisions.
Provision 2 requires Chris to work as
an attorney for paralegal wages for four
years.
This represents Chriss repayment at
$30,000 a year. The question is whether the

Therefore the bargain boils down to paying Chris $120,000 in advance in exchange
for his working as a lawyer at only $30,000
a year above the paralegal wage rate.

15

species. On that basis, County denied the development application.


Paula brought an action claiming that
Countys denial of the development application constituted a regulatory taking in violation of the U.S. Constitution. It was stipulated that the 10 acres are worth $4,000,000
if development is permitted and $200,000 if
it is not.
The trial court ruled that Countys denial
of Paulas development application did not
constitute either (1) a total or (2) a partial
taking.
Did the trial court correctly rule that Countys denial of Paulas development application did not constitute:
1. A total taking? Discuss.
2. A partial taking? Discuss.

answer 5
This answer provided by Robyn
Sembenini of BarGraders Inc.,
www.bargraders.com, 866-517-3926.
1. Total Taking

While a court will not inquire into the


adequacy of consideration to determine
the validity of a contract, it will examine
whether unfair advantage was taken of the
defendant when weighing equitable relief.
The contract terms heavily favor the
Firm and Lou apparently took advantage
of Chris naivete in making the contract.
Therefore, a court will refuse to order specific enforcement because of the Firms
unclean hands.
Laches
Equity will be denied when the plaintiff
has waited an inequitable length of time to
sue. It is inequitable when the delay prejudices the defendant by loss of evidence
needed to defend the suit. Here, the Firm
waited to bring suit against Chris until after Chriss father died. Chriss father was a
witness to the original offer and also to the
dinner in which Chris breached and Lou
did not insist on the Firms rights.
The question is what evidence could
Chriss father provide that would be instrumental to Chriss defense. The original
contract is in writing, so it does not seem
as if the fathers evidence is necessary.
As to the dinner after law school, Chris
might need his fathers parol evidence to
prove that Lou forgave Chriss obligations to work for Firm. However, if there is
evidence that Chris had already accepted
another job, he is already in breach and
no matter what Lou said it will be ineffective to excuse Chriss breach. Therefore, a
court will not refuse equitable relief based
on laches.
Conclusion: A court will refuse to issue
equitable relief because Lou has unclean
hands.

question #5
Constitutional Law

Paula has owned and farmed a parcel consisting of 100 acres for many years. Last
year, in compliance with County regulations,
she expended a substantial amount of money
in determining the economic feasibility of
developing 10 acres of the parcel that border
the shore of a small lake. She recently submitted a development application to County
seeking to construct 30 homes on those 10
acres. County then determined that the 10
acres constitute protected wetlands that, under a state law enacted recently, had to be
left undeveloped to protect certain dangered

Standing:
A plaintiff must have an actual stake in the
controversy, which is measured by whether
the plaintiff has suffered a consequence as a
result of the challenged action. Here, Paula
has the right to use, exclude, lease, sell, or
otherwise transfer her interests in the property. However, as a result of the Countys decision, she is unable to construct 30 homes
on the 10 acres of land bordering the shore
of the lake. Although Paula retains possession of this parcel of land, her right to use
the land for this specific desired purpose has
been eliminated. Thus, Paula has suffered
an injury and has standing to challenge the
Countys action.
State Action:
The 14th and 15th Amendments to the
U.S. Constitution are applicable only to the
actions of the State. Moreover, the States
action must be the proximate cause of the
injury suffered. Here the restriction limiting development in order to protect certain
endangered species was passed by the State.
Moreover, the decision to deny Paulas development application was made by the county.
As such, there was State action for purposes
of this analysis.
Ripeness:
In order for a plaintiff to challenge a state
action, it must be final. Courts measure ripeness by considering whether administrative
remedies have been exhausted. Generally,
denial of a single application will not satisfy
this requirement; often the courts require a
minimum of two denials of applications. The
courts look for a final decision by the government agency as to what level of development
will be permitted on the property. See MacDonald, Sommer & Frates v. Yolo County,
477 U.S. 340, 353 (1986). Here, Paula has
submitted only one application. The denial,
however, indicated the entire 10-acre parcel
must be left undeveloped. In light of this determination, it appears submitting another
application would be futile. See Palazzolo v.
Rhode Island, 533 U.S. 606, 625-6 (2001).
As such, the controversy is ripe.
Total Taking:
The 5th Amendment to the U.S. Constitution, applicable to states through the 14th
Amendment, prohibits the taking of private
property absent just compensation. Takings
generally fall within three categories: permanent physical occupation of the property;
unconstitutional exactions; or diminution in
value. A total or per se taking occurs where
a regulation destroys all value of the prop-

16

erty. Courts look at the severity of the burden


the government actor places on the private
partys property rights.
Permanent Physical Occupation
Where there is a permanent physical occupation of private land, regardless of the
reason for the occupation, there is a taking
requiring compensation. See Loretto v. TelePrompTer Manhattan CATV, 458 U.S. 419
(1982). Courts have held that when a regulation is aimed at protecting wildlife, the inhabitation of a private landowners property
by the protected wildlife will not support a
claim of physical occupation by a state actor; regulatory protection of wildlife does not
convert them into state actors. See Christy v.
Hodel, 857 F.2d 1324 (9th Cir. 1988). There
are no facts suggesting physical occupation
by the State. As such there is no total taking
predicated on permanent physical occupation by the State.
Unlawful Extractions
Where the State exercises eminent domain
or exacts onerous restrictions on development that lack nexus and proportionality to
the proposed project, there is a per se taking
requiring just compensation. Here, there are
no facts indicating that Paula has suffered an
unlawful extraction.
Diminution of Value
Where the States action deprives a property owner of all economically beneficial use
or renders void the reasonable investment
backed expectation and economic value of the
property, there is a per se taking regardless of
the public purpose of the states action. Lucas
v. South Carolina Coastal Council, 505 U.S.
1003 (1992). This standard is reserved for
instances where there is a permanent deprivation of all value to the property as a whole.
See Tahoe-Sierra Preservation Council v.
Tahoe Regional Planning Agency, 535 U.S.
302 (2002). A mere decrease in value is not
sufficient to underlie a per se taking. Here,
the 10 acres of lake shore property were valued at $4,000,000 if they could be developed
as proposed in Paulas application. If the 10
acres must remain undeveloped, the property
is worth $200,000. Although the difference
in value is great, the property retained value
after the denial of the application. Additionally, the restriction applies to the 10 acres
adjacent to the lake. This portion is a mere
10 percent of Paulas property. The fact that
Paula expended a substantial amount of money to determine the feasibility of developing
the 10-acre parcel will not sway the court in
its determination. As such, the total diminution of value test cannot be met and there is
no per se taking.

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impair the value of private property that it is
considered a taking. Penn Central Transp.
Co. v. New York City, 438 U.S. 108 (1978).
Partial takings may occur where there is an
economic, spatial or temporal limitation.
To determine when impairment rises to the
level of a taking, courts must conduct ad hoc
examinations. The factors considered are
1) the economic impact on the claimant; 2)
the extent the regulation impairs reasonable
investment-backed expectations; and 3) the
character of the governments action.
Economic Impact
While some courts have found an impact
as great as 95 percent insufficient to result
in a partial taking, other courts have found
a diminution of 70 percent of the propertys
value enough to constitute a taking requiring
compensation. In making this determination,
courts consider the impact to the property as
a whole. See Palazzolo v. Rhode Island, 533
U.S. 606 (2001). Here the denial of the application has had an economic effect on Paula.
The value of the 10-acre parcel as proposed
in the application was $4,000,000. If the parcel is left in its current undeveloped state, the
value is only $200,000. In these facts, the denied application involved only 10 percent of
Paulas property. Although the facts are silent
as to the impact the state law has on Paulas
property as a whole, to the extent Paulas application was denied because the 10-acre lake
short parcel was a protected wetland, it does
not appear the remaining 90 acres would be
subject to the same limitation. Moreover,
the facts state that Paula farms her land. As
her ability to continue this economic activity
has not been impaired, she appears unable to
meet the threshold economic impact requirement.
Reasonable Investment-Backed Expectations
Courts generally apply a fairness test when
evaluating reasonable investment-backed expectation, and consider four factors: What
the property owner expected at the time the
property was purchased; whether the regulation at issue is typical for the type of property affected; whether the existing use of the
property may be continued; and the character
of the regulation.
Here, the facts indicate Paula has owned
the property for many years and has used it
for farming. Only in the last year did Paula
consider developing the 10 acres alongside
the lake. The facts do not suggest that she
purchased the property with intent to develop
it as proposed in the application. The fact that
Paula expended a substantial amount of money to determine the feasibility of developing
the 10-acre parcel will not sway the court in
its determination.

Conclusion:
Because the denial of Paulas application
did not result in permanent physical occupation, unlawful extraction, or deprivation of all
economically beneficial use of the property, a
total taking did not occur. Thus the trial court
ruled correctly.
2. Partial Taking
Standing:
See above.

The regulation described in the facts provided aims to protect endangered species by
designating certain shoreline areas as protected wetlands. This regulation appears appropriate to land adjacent to a lake, and there
are no additional facts suggesting otherwise.
The denial of Paulas application as a result of the recently enacted state law does not
appear to affect the existing use of the property as farm land. The only restriction is that
the property not be developed. As such, Paula
may continue to use her land, including the
10 acres next to the lake, for farming.

considering the first two factors. See Lingle


v. Chevron U.S.A., 544 U.S. 528 (2005); City
of Monterey v. Del Monte Dunes at Monterey,
Ltd., 526 U.S. 687 (1999). Taken as a whole,
the burden Paula must bear does not appear
disproportionate to the public good resulting
from the states regulation or the countys denial of the permit.
Conclusion:
In total, the facts do not indicate the economic impact suffered by Paula rises to the
level of a partial taking requiring just compensation. As such, the lower courts ruling
was correct.

question #6
Community Property

Herb and Wendy, residents of California,


married in 2001. Herb worked as an accountant. Wendy was an avid coin collector who
hoped someday to turn her hobby into a profitable business. Prior to marriage, they had
entered into a prenuptial agreement providing that each spouses wages would be his or
her separate property. On Wendys birthday
in 2002, Herb gave Wendy a drawing by a
famous artist. Herb paid for the drawing with
$15,000 that his parents had given him. Wendy hung the drawing in their bedroom.
In 2003, Wendy opened CoinCo, a shop
specializing in rare coins. She capitalized
the business with a $10,000 inheritance that
she had received when her grandfather died.
Wendy worked at the shop alone every day.
Customers appreciated her enthusiasm about
coin collecting and her ability to obtain special coins at reasonable prices. Over time,
Wendy learned that she had acquired a number of highly valuable coins. There was also
a renewed interest in coin collecting due to
the discovery of several boxes of old coins
found buried in the area.
Although Wendys services at the shop
were worth $40,000 per year, she took an annual salary of $25,000. She also paid $5,000
in household expenses from the business
earnings each year.
In 2008, Herb and Wendy separated, and
Wendy filed for dissolution of marriage. At
that time, CoinCo was worth $150,000, and
the drawing was worth $30,000.
In 2009, before trial of the dissolution
proceeding, Wendy was disabled by a serious illness and had to be hospitalized. She
closed CoinCo while she was in the hospital,
and the value of the business fell to $100,000
by the time of trial. Her hospital bill was not
covered by health insurance.
In the dissolution proceeding, Wendy
claims that the prenuptial agreement is valid
and Herb claims that it is not.
What are Herbs and Wendys respective
rights and liabilities in:
1. The drawing? Discuss.
2. CoinCo? Discuss.
3. The hospital bill? Discuss.
Answer according to California law.

answer 6

This answer provided by Carla Vasques


dos Santos-Moore, adjunct faculty at
Emersons Tutorial Bar Review,
415-864-4122,
www.emersonstutorialbarreview.com

State Action:
See above.
Ripeness:
See above.
Partial Taking:
A states regulation of a property may so

The regulation that led to the denial of


Paulas application appears to adjust the benefits and burdens of economic life to promote
common good. The common good of protecting endangered species is recognized as
supporting the loss of some economic value
of private property. This third prong is typically not determinative as to whether or not
there has been a taking; it does, however, provide courts with a degree of subjectivity in

1 Herbs and Wendys rights and liability in the drawing:


Community property and separate
property
California law characterizes all property acquired or earned during marriage as
community property, including the fruits of
the labor of either spouse during marriage.
Separate property is property obtained by

a spouse, while married, through gift, bequest, devise, or descent, and any rents, issues, and profits of separate property. Any
property acquired before marriage or after
permanent separation also qualifies as separate property. A change in the physical form
of property will not result in a change of
its separate/community character. Property
characterization is commonly determined
by the propertys source, time and manner of acquisition thereof, applicable legal
presumptions and valid interspousal agreements concerning it.
At divorce, community property is divided equally between the spouses while
separate property is unaffected by a change
in marital status.
Here, Herb and Wendy were in a 7-year
marriage (2001 through 2008) and acquired/earned property during their marital economic community in the form of a
$15,000 cash gift from Herbs parents, a
$15,000 painting, a rare coin shop capitalized by Wendys $10,000 inheritance, and
income from both spouses wages. Whether
these property items are subject to community property laws or not will depend on the
determining factors listed above.
Gift to spouses separate property
A gift to a spouses separate property during marriage is separate property.
Herb received a gift from his parents in
the amount of $15,000. The gift was to Herb
only, not to the couple. Hence, the $15,000
belongs to Herb as his separate property.
Change in form/Change in character
Since a change in form will not give rise
to a change in character, Herbs purchase of
the $15,000 drawing with his parents cash
gift to himself can only result in the characterization of the drawing as part of his own
separate property as well.
Transmutation
Spouses may choose to voluntarily
change the character of property by agreement. Such interspousal agreements are
known as transmutations. If occurring on or
after January 1, 1985, transmutations must
be evidenced by a writing containing express language unambiguously stating that
a change in the characterization of property
has been agreed upon. In addition, the writing must be signed by the spouse adversely
affected by the transmutation.
Here, Herb gave Wendy a drawing, which
he purchased with his $15,000 cash gift.
The gift to Wendy may arguably operate as
a transmutation from Herbs separate property to Wendys separate property. However,
the transmutation, even though apparently
intended by Herb, suffers from a defect in
that it was never memorialized in writing
and a signature of Herb attesting to the validity of the agreement does not exist.
Consequently, the transmutation is unenforceable and the drawing would remain
Herbs separate property with the increased
value of $30,000.
Personal gift exception
The personal gift exception may apply to
validate an otherwise unenforceable transmutation between spouses when the item
intended to be subject to transmutation
is of a personal nature, is insubstantial in
value given the parties financial station in
life during marriage, and used principally
by the spouse receiving the gift.
The drawing was hung in the bedroom
Herb and Wendy shared and, as a result of

2010 Bar Exam Questions & Answers


its placement, can hardly be considered of
personal use only by Wendy. Both spouses
arguably benefitted from Herbs acquisition. Moreover, the painting is by a famous artist and cost a substantial amount
$15,000. According to the facts, Wendy
was not working in 2002 and Herb was relying on his accountants wages to provide
for both of them. There is no mention of
any other assets owed by the couple at the
time when the gift was made. Wendy and
Herbs net worth in 2002 was likely not
very significant or large enough to warrant
the assumption that $15,000 was insubstantial to the couple at that time. At trial, their
assets totaled a little more than $100,000
and the drawing was then worth $30,000,
which tends to show that the drawings value represented quite a significant percentage of their total assets, given the facts.
On the other hand, Herb purchased the
drawing as a birthday gift to Wendy. A
birthday gift usually is meant to represent
something meaningful and personal to the
birthday celebrant. The drawing is probably not of a personal nature because Wendy cannot wear or use the gift in the same
manner as she would a piece of jewelry or
clothing. However, hanging the drawing
in her bedroom may indicate that it was a
personal gift as the drawing was placed in
a very private area of their home to which,
very likely, only Wendy and Herb had access. Wendy may have been an art lover or a
big fan of this famous artists works to hang
the piece in a room where she would see it
constantly, every day.
Therefore, it is possible that the court
may recognize the exception in the context
of Herbs intended transmutation, although
it is more likely that it wouldnt apply the
exception due to the very substantial value
of the drawing.
Transmutation back to marital economic community?
In the unlikely event that transmutation
occurred due to the application of the personal gift exception, it would be possible
to argue that Wendy may have intended to
change the drawings characterization from
her separate property to community property because she hung the drawing in the
couples bedroom and may have intended
thereby to gift the drawing to the community by allowing Herb to equally share in
the use of the art piece. However, use alone
will not affect a change in the characterization of property, and the value of the piece
is quite substantial for the exception to be
applied. Also, she had just received the
painting as a gift. It seems unlikely that she
would gift it back to the community right
afterwards.
The personal gift exception is just as inapplicable here as it probably was in the
context of Herbs attempted transmutation
from his separate property to Wendys separate property.
Hence, the painting remains as Herbs
separate property unless the personal gift
exception applies to transfer it to Wandas
separate property.
2. CoinCo:
Prenuptial agreement
A prenuptial agreement stating that each
spouses wages are to remain his or her
separate property during marriage is valid
in California as long as the agreement is
in writing (Statute of Frauds), was not executed involuntarily by the party against
whom enforcement is being sought, and
is not unconscionable or fraught with nondisclosures of wealth of the party seeking
its enforcement.

The facts do not state that Herb and


Wendy had a written prenuptial agreement. If they did not have it in writing, the
agreement is invalid for non-compliance
with the Statute of Frauds unless an exception applies.
Estoppel
An exception may apply to the Statute
of Frauds requirement. A promisor is estopped to assert the Statute of Frauds when
the promisee relies to her detriment on the
oral premarital agreement.
Wendy could argue that she invested so
much of her time, personal efforts, skills,
and labor in the management of her rare
coin shop because she was working under the assumption that the prenuptial was
valid and her earnings from the business
were her separate property. She can further
contend that she would not have used her
$10,000 inheritance to invest in a business
that would not be solely hers.
Herb can defend against this claim by
asserting that Wendy will not suffer detriment as the $10,000 still belongs to her
separate property and that her working in
the coin shop was simply an extension of
a hobby in which she had already been engaged for years.
Given the facts, it is likely that the court
find in favor of Herb because it does not
seem that Wendy relied to her detriment on
the prenuptial agreements terms.
Involuntary execution?
Involuntary execution prevents enforcement of a premarital agreement.
Herb may argue that he entered into the
agreement involuntarily.
An agreement is involuntarily executed
unless the court finds that the party against
whom enforcement is being sought was
represented by counsel or expressly waived
such representation after being counseled
to seek independent legal representation;
the agreement was presented to the same
party at least seven days before it was
signed along with an advisement to seek independent legal counsel; in the absence of
legal counsel, the party was fully informed
on the terms of the agreement in writing
and prior to the signing of the same; the
agreement was not executed under fraud,
duress, or undue influence.
A premarital agreement is also rendered
invalid if it was unconscionable towards
the party against whom enforcement is
sought and the party did not and could not
have had adequate knowledge of the wealth
of his future spouse, and did not waive his
right to disclosure of such wealth.
Herb cannot claim fraud, duress, or undue influence, as the facts do not support
any of these assertions. There is no mention
of either party having engaged legal counsel to be advised on the premarital agreement. In addition, it is not known whether
Herb was fully informed on the terms of
this contract and its legal ramifications.
Herb can contend that at the time he did not
consider the potential business opportunity
of his wifes hobby. He may further argue
that he had no knowledge of Wendys intentions of turning her passion for coin collection into a profitable business and was
unaware of the profit potential of such an
enterprise. Based on these circumstances,
Herb may assert unconscionability coupled
with nondisclosure and successfully claim
the agreement is unenforceable.
Wendy could counter Herbs claims by

stating that she did not misrepresent her


wealth at the time the contract was formed
and that wealth potential should not be
equated to actual wealth for purposes of
unconscionability.
Wendy will likely succeed in defending
against the unconscionability and nondisclosure claims as she did not even have a
job at the time and coin collection was only
a hobby (although she hoped to turn it into
a profitable business operation one day).
Hence, it appears that the lack of a writing ultimately determines the invalidity
of the agreement since Wendys estoppel
defense is a weak argument, as explained
above.
The premarital agreement is unenforceable and Herb and Wendys wages and
earnings accumulated during marriage are
community property.
Business interests valuation at divorce
A business established with separate
property funds belonging to a spouse who
manages the business during marriage
earns the non-contributing, non-managing
spouse a community property share in the
business due to the managing spouses investment of community property labor into
the operation. At divorce, the business may
have appreciated in value, at which point a
determination of separate and community
property shares is to be made for purposes
of distribution upon dissolution.
Here, Wendy started a coin shop business
with a $10,000 inheritance. The inheritance
is separate property, thus the business was
originally capitalized with Wendys separate property only. Wendy worked in the
business during marriage and her labor,
therefore, is community property.
Van Camp/Pereira accounting methods
Van Camp values the managers services
at the current market rate for such services.
It then subtracts salaries actually received
by the working spouse and the amount of
family expenses paid from business income
on a yearly basis. The resulting sum, multiplied by the number of years of operation
during marriage, represents the community property interest in the business. The
total value of the business minus the community property share equals the managing spouses separate property share. Van
Camp applies when the character of the
separate business is the main factor for
its growth and productivity and that the
managing spouses contribution of labor is
deemed ordinary.
Pereira requires payment of a legal rate
of return on the separate property start-up
capital, with the sum of the initial capital
plus interest equaling the working spouses
separate property share. The remainder, that
is, the total value of the business subtracted
from the separate property, is the total community property share. In Pereira, the managing spouses labor and skills were the
primary reason for growth and profitability
of the business.
First, Wendys role in the business should
be assessed. She worked tirelessly at the
shop every day; customers appreciated her
business savvy and excitement about coin
collecting, her good prices and distinct inventory of highly valuable coins. These are
all characteristics that probably rendered
the business unique among other operations dealing in the sale of rare coins.
However, it can also be contended that
the business flourished as a result of the
very favorable timing of the discovery of

17

boxes of old coins buried in the area, which


sparked consumer interest in coin collecting.
After weighing these factors, the court
would more likely find that Wendys unique
managerial style, determination, and enthusiasm were the more important factors
contributing to her businesss success. The
finding of the buried coins was but one
isolated event that could not have possibly
been responsible for her shops profitable
five-year run.
Hence, valuation of separate and community property shares will be determined
according to Pereira.
The business is valued at the time of marriage and the date of trial.
The start-up capital of $10,000 plus interest at 10 percent per annum for five years
would result in a total separate property interest of $15,000. The remainder, $85,000
($100,000 minus $15,000) is the community property interest.
Hence, Wendy is entitled to $15,000 plus
$42,500 ($57,500) and Herb will receive
$42,500 for his share in the coin business.
In the unlikely event that Wendys managerial capacity were qualified as average
and ordinary, using Van Camp, the court
would value Wendys services at $40,000
per year (going market rate), for a total of
$200,000, and deduct from $200,000 the
amount received as actual compensation for
five years ($125,000), which would amount
to $75,000. The sum contributed towards
household expenses ($5,000 per year for 5
years = $25,000) would also be deducted
from the $75,000, resulting in $50,000 of
community property interest. The facts
have stated that at the time of trial the business was valued at $100,000. Hence, the
business is 50 percent community property
and Herb and Wendy will split the community property share equally, receiving each
$25,000 at dissolution. Wendy will receive
the other $50,000 as her separate property
interest in the business. Therefore, under
Van Camp, Wendy will receive a total of
$75,000 from the business.
3. Hospital bill:
Debt incurred by one spouse during marriage
All the community property and the
debtor spouses separate property are liable for a debt incurred during marriage.
The separate property of the other spouse
is not liable.
One exception to this general rule is that
the non-debtor spouse may be personally
liable for necessaries on account of which
the debtor spouse incurred the debt. In
this case, the non-debtor spouses separate
property is liable for the debt. If community property funds are available and the
non-debtor spouses separate property happens to pay for the debt, the latter will be
reimbursed by the community.
Necessaries are expenses incurred to preserve a persons station in life so that she
or he does not lack basic necessities of life.
Even after permanent separation spouses
must still support each other with regard to
the necessaries of life.
In this case, Wendys hospital bill clearly qualifies as a necessary of life because
without proper medical care Wendys life
could be in danger. The hospital bill may be
paid for with community property funds,
Wendys separate property, or Herbs separate property.