PART B

Questions 1.5-1.8 are based on the following facts:

Three radiologistsAmanda, Jack, and Matthewopened a radiology practice together six years ago. They agreed to call their business "X-Ray Mart," to divide the profits equally, and to run the practice together in a manner that would be competitive. Toward that end, they purchased state-of-the-art radiology imaging equipment comparable to that of other radiology offices in the community.

Shortly after opening the practice, Amanda, Jack, and Matthew retained an attorney to organize the practice as a limited liability company. The attorney prepared the appropriate articles of organization and the initial report and forwarded the documents to Amanda, Jack, and Matthew for signature. They each signed and dated the documents; however, they were so involved in their radiology practice that they did not send the documents to the attorney or anyone else.

A month ago, Amanda suggested to Jack and Matthew that the practice replace some of the imaging equipment. Jack was worried about overspending on imaging equipment, but he did not express his concern to Amanda and Matthew.

A week ago, Amanda, without discussing the matter further with either Jack or Matthew, purchased for the office a $400,000 state-of-the-art digital x-ray machine like those recently acquired by other radiology offices in the community.

Yesterday, after the purchase but prior to delivery, Jack learned what Amanda had done and was furious. Jack did not believe the practice could afford such an expensive machine. When Jack confronted Amanda, Amanda said, "Too bad, it's a done dealget over it." At that, Jack responded, "That's it. I've had enough. This machine was purchased without my consent. It's a terrible idea. I'm out of here and never coming back. Just give me my share of the value of the practice." Worried that Jack's withdrawal would jeopardize critical contract negotiations that the practice needed to finalize with certain insurance companies, Amanda asked Jack to reconsider. But Jack replied, "Nope. My mind is made up."

1.5 What type of business entity is X-Ray Mart? Explain fully.

1.6 Did Amanda have the authority to purchase the imaging machine; and if so, were there any actions that Jack and Matthew could have taken to revoke or limit her authority? Explain fully.

1.7 Did Jack's statements to Amanda constitute an effective withdrawal from X-Ray Mart? Explain fully.

1.8Assume for this question 1.8 that Jack's withdrawal from X-Ray Mart was effective. What, if anything, should he be entitled to from X-Ray Mart, and who would be obligated to pay it? Explain fully.