Agency and Partnership

Question 1

Nature of Agency Relationships

Answer 1

An agency relationship (AR) is a VOLUNTARY, FIDUCIARY relationship between two parties: a PRINCIPAL (P) and an AGENT (A).

• –> In an AR, the P has authorized the A to act on the P’s behalf, and the A (acting w/in the scope of authority granted by the P) has the ability to bind the P.
• –> The relationship can be based on a K but does not have to be.

Agency can lead to liability for a P based upon an A’s actions, or a P may be bound by a K made by an A.

Question 2

Types of Agency Relationships (2 Types)

Answer 2

Gratuitous agencies
—> The P does not compensate the A for the work the A does on the P’s behalf.

Contractual agencies

• –> Employer-employee (aka, master servant)
• –> Employer-independent contractor

Question 3

“Agency” as an Equitable Doctrine

Answer 3

The related concepts of “AGENCY BY ESTOPPEL” and “APPARENT AUTHORITY” are equitable doctrines invoked to protect a 3rd party from damage or loss.

• –> Parties are treated AS IF an agency had existed and as if an A had acted within the scope of authority granted by a P.
• –> By this fiction, the ostensible A is said to have “apparent authority” and the ostensible P will be deemed to be liable or bound to a 3rd party.

Question 4

Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: General Reqs

Answer 4

Generally
To create an agency relationship there must be both MANIFESTATION of the P’s INTENT and of the A’s CONSENT.
—> In other words, there must be mutual assent by both parties—P and A—to the relationship.

Reqs
To create an agency relationship, there must first be a P who manifests an intent to GRANT AUTHORITY to another to act (1) on the P’s BEHALF and (2) subject to the P’s CONTROL.
—-> Additionally, there must be an A who CONSENTS to the P’s grant of authority (that is, to act on the P’s behalf and subject to the P’s control).
—-> The P and A can manifest the requisite intent and consent in several ways: expressly (by means of a writing or spoken words) or impliedly (by conduct).

BC an agency relationship reqs the mutual assent of both the P and the A, each party must have the requisite CAPACITY to offer its assent.

Question 5

Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: General Reqs (Capacity)

Answer 5

Requirements
To enter into an agency relationship, the would-be A must have:
(1) (at least) minimum mental capacity.
(2) the contractual capacity to effect transactions.

Minors/Declared Incompetent as As/Ps
While a minor or declared incompetent might have the capacity to be an A, neither a minor nor a declared incompetent will have the capacity to be a P.
—> Exception of minors contracting for necessities.

Question 6

Creation of an Agency Relationship –> Requirements for Creating an Agency Relationship: Additional Req’ment for Creating Powers of Attorney

Answer 6

CA statute establishes additional re’ments for creating this type of agency relationship, including that there be a signed writing.
—> Note: rarely tested

Question 7

Creation of an Agency Relationship –> Distinguishing Employees from Independent Contractors

Answer 7

When a P is an employer of the A, the A is either an employee or independent contractor.

• –> Note: rarely tested (in CA)
• –> fact-based inquiry (weigh various factors and facts)

2 Relationships + Reqs

(1) An employer-employee relationship exists where the employer:
- —> controls or has the right to control the A’s performance “not only w/ respect to the results sought to be achieved but also the means and manner in which the results are to be achieved.”
(2) An employer-independent contractor relationship exists where the employer:
- —> determines what services the A is to perform but does not have the right to control HOW the A performs these services on the P’s behalf.

Key
The Degree to which the employer has the right to control the details of the A’s work activity.
—> Factors:
(1) the extent to which the A’s work is typically performed by specialists w/o supervision;
(2) who supplies the A with tools and a place for performing the work;
(3) the length and exclusivity of the employment relationship;
(4) whether the A is paid by the job or at regularly timed intervals; and
(5) whether the A’s work is part of the regular business of the employer.

Question 8

Creation of an Agency Relationship –> Agency by Ratification: Generally

Answer 8

The concept of “agency by ratification” refers to the post- hoc creation of an agency relationship.

• –> Only transactions entered into on behalf of another, or purportedly entered into on behalf by another, can be ratified.
• –> When a party, w/o authority, enters into a K on behalf of another, and this other party thereafter affirms or ratifies this transaction on its behalf, an actual P-A relationship is retroactively created.

Retroactive Ratification
To grant authority retroactively to a purported A who had entered into a K on its behalf, the would-be P must: have knowledge, at the time of ratification, of all material facts concerning the transaction entered into on its behalf.
—> To ratify the actions of an A or purported A, the P must manifest assent, by word or conduct, that: the purported A’s earlier unauthorized transaction entered, into on would-be P’s behalf, is now binding on the P so as to impact the P’s legal relationships.
—> Ratification reqs that a party have the requisite capacity to authorize the actions at the time they were performed.

Question 9

*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Commonly Tested

Answer 9

Commonly tested

• -> duties of A to their Ps tend to be more freq’ly tested than the duties of Ps to their As.
• -> Moreover, among the various duties owed by As to Ps, the duties of care and loyalty are the most important on the exam.

Question 10

*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Duty of Care

Answer 10

As owe their Ps a duty of care.

• –> Pursuant to this duty of care, an A must:
  (1) follow the P’s instructions;
  (2) perform any service/task w/in the scope of the agency w/ reasonable care; and
  (3) indemnify the P against loss caused by the A’s failure to act w/ reasonable care (when that failure occurs w/in the scope of the agency).

Question 11

*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Duty of Loyalty

Answer 11

As owe their Ps a duty of loyalty.

• –> Pursuant to this duty of loyalty, an A acting on the P’s behalf must:
  (1) prefer the interests of the P over those of the A or others;
  (2) avoid self-dealing; and
  (3) neither compete with the P nor usurp business opportunities belonging to the P.

Question 12

*Principals (Ps) and Agents (As) –> Duties Owed by As to Ps: Other Duties

Answer 12

(1) As have a duty to account for money or property received on behalf of a P;
(2) As have a duty to keep separate the P’s assets from their own assets; and
(3) As have a duty of candor, which reqs them to fully disclose to a P any facts relevant to a transaction that the P might reasonably want to know.

Question 13

*Principals (Ps) and Agents (As) –> Duties Owed by Ps to As: Duty of Compensation

Answer 13

Even if the agency agreement does not specifically provide for compensation for the A, the P has a quasi-K duty to pay the A the reasonable value of the services rendered, unless the parties have agreed otherwise.
—> A P’s failure to meet this obligation allows the A to seek restitutionary damages.

Question 14

*Principals (Ps) and Agents (As) –> Duties Owed by Ps to As: Duty of Reimbursement

Answer 14

The P is obligated to reimburse the A for all reasonable expenses incurred in the scope of the agency.

Question 15

*Principals (Ps) and Agents (As) –> *The Power and Authority of Agents: The Power to Bind

Answer 15

When an A acts w/i the scope of his authorized powers, he has the power to bind the P to Ks he enters into on the P’s behalf.

Question 16

*Principals (Ps) and Agents (As) –> *The Power and Authority of Agents: An Agent’s Actual Authority: Express or Implied

Answer 16

An A’s actual authority can be express or implied.
—> An A has no power to bind the P beyond the actual authority—express and implied—granted the A by the agency relationship.

Actual express authority is the authority of the A to:
—> do those things that the P has—in an express oral or written communication—directly authorized the A to do.

Actual implied authority includes the authority of the agent to:
—> conduct transactions that are reasonably nec to fulfilling the broader responsibilities given him by the P; including things incidental to the main business at hand.

Question 17

*Principals (Ps) and Agents (As) –> *A Principal’s Power to Ratify Unauthorized Acts of an Agent

Answer 17

By ratifying a transaction entered into on its behalf, a P retroactively grants the A the authority to act on the P’s behalf and effectively agrees to be bound to the K.

Provided that the P has knowledge of all material facts, a P ratifies the otherwise unauthorized transaction entered into by its agent by either:

(1) manifesting assent that the transaction shall affect the P’s legal relations; or
(2) performing some conduct that is justifiable only on the assumption that the P consents to be bound.

Question 18

*Principals (Ps) and Agents (As) –> *Employer-Employee Relationships and the “Scope of Employment”

Answer 18

Generally
–> Fact based inquiry

An employee acts w/i the scope of employment when: performing tasks assigned by the employer or engaging in a course of conduct subject to the employer’s control.

An employee’s act is not w/in the scope of employment when: it occurs w/in an independent course of conduct not intended by the employee to serve any purpose of the employer − if it is done for the employee’s purposes only.

Factors

(1) the extent to which the conduct is the kind of work the employee was hired to perform;
(2) the extent to which the conduct occurred substantially within the time and space authorized by the employer; and
(3) the extent to which the conduct was intended to serve the interests of the employer.

Question 19

***The Agency Relationship and Third Parties –> Agent’s Tort Liability to Third Parties

Answer 19

Agents will be liable to 3rd parties for harm caused by their neg or by their intentionally tortious conduct whether or not they are acting w/in the scope of the agency.

Question 20

***The Agency Relationship and Third Parties –> Agent’s Contractual Liability to Third Parties

Answer 20

Fully Disclosed P

• –> A fully disclosed P is a P whose existence and identity are known to the third party.
• –> In general, if an agent enters into a K on behalf of a P that is fully disclosed: the A will not be personally liable on the K.

Undisclosed/Partially Disclosed P
—> In general, if an A enters into a K on behalf of a P that is not fully disclosed, either partially disclosed (existence but not identity) or undisclosed the A will be personally liable on the K (along with the P).

Question 21

***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: Liability for the P’s Own Negligence

Answer 21

A P is liable to a 3rd party for harm caused by the P’s own neg in selecting, training, retaining, supervising, or otherwise controlling the A.

Question 22

***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: *Vicarious Liability for A’s Conduct - The General Rule

Answer 22

Under the doctrine of respondeat superior, vicarious liability generally attaches where the P has a right to control the A and the A’s actions are w/in the scope of the agency.
—> Respondeat superior is a SL doctrine; the P’s due diligence is no defense.

Question 23

***The Agency Relationship and Third Parties –> *Third Parties and a Principal’s Tort Liability: *Vicarious Liability for A’s Conduct - Employer-Employee Relationship Context

Answer 23

Employee’s negligence
—> The liability of an employer for its employee’s neg is limited to actions that occur w/in the employee’s scope of employment.

Employee’s intentional tort
In general, employers will not be held liable for the ITs of an employee.
—> Exception: Employers will be held liable for the IT of an employee if the employee’s IT is accomplished:
(1) in the course of doing the employer’s work; and
(2) for the purpose of accomplishing such work.
(3) It is generally no defense to the employer that it had previously instructed the employee not to use force in the performance of his duties.

Question 24

***The Agency Relationship and Third Parties –> Third Parties and a Principal’s Liability on a Contract: Contractual Liability from Agent’s Actual Authority

Answer 24

Ps will be liable on Ks with 3rd parties when their As, acting with actual authority (express or implied), enter into those Ks on their behalf.

Ps will also be liable on Ks entered into on their behalf even when the A’s authority to do so was only retroactively granted, that is, even when the agency is created by ratification.

Ps will also be liable on a K when an authorized A enters into a K on the P’s behalf w/o disclosing the P.
—> In this circumstance, the P’s liability comes into play if, subsequent to the transaction, the 3rd party discovers the identity of the undisclosed P.

Question 25

***The Agency Relationship and Third Parties –> Third Parties and a Principal’s Liability on a Contract: *Contractual Liability from Agent’s Apparent Authority

Answer 25

When no agency relationship has been created by the mutual consent of an A and P (or where an A acts beyond the scope of his actual authority), a ct may use the doctrine of “apparent authority” to hold a person liable to a 3rd party for the acts of another as if this person were a P to an A who acted w/ actual authority.

• –> Undisclosed Ps cannot grant apparent authority.
• –> Applicable to disputes involving contractual liability but not to disputes involving tort liability.

A party will be bound as if it were a P to an A who acted with actual authority, when that party’s words, actions, or failure to act causes a 3rd party to reasonably but mistakenly believe that another acts as its authorized A.
—> The “apparent authority” of an A is created by the supposed P’s conduct—not the conduct or representations of the supposed agent alone.

Question 26

Nature of Partnerships

Answer 26

A partnership is an association of people who have agreed to co-own an ongoing business for profit.

• –> A partnership is a distinct legal entity w/ a separate legal existence apart from the partners who comprise it.
• –> Partnerships can be “at will” or for a definite term or undertaking.

General v. Limited Partners

(1) General partners are As of the partnership, co-manage the partnership business, share in the profits and losses of the business, and are generally exposed to personal liability for partnership debts and obligations.
(2) Limited partners (who only have a role in limited partnerships) are passive investors in the partnership business; as such, they are not As of the partnership, do not participate in the management of the partnership business, and are not generally exposed to personal liability for the debts and obligations of the partnership.

Question 27

Types of CA Partnerships

Answer 27

1. General Partnerships:
   - –> Consist only of two or more general partners.
2. Limited Partnerships:
   - –> Consist of at least one general partner and one limited partner.
3. Limited Liability Partnerships
   - –> Only certain types of general partnerships are eligible to become a LLP.
   - –> In an LLP, general partners are not exposed to the personal liability risks that would ordinarily attach to their status as a partner in a business.

Question 28

Partnership Formation –> General Partnerships: Formation Requirements

Answer 28

A partnership is an association of two or more “persons” to carry on as co-owners of a business for profit.

• –> a “person” refers to individuals, associations, and corporations (in other words, a partnership can include among its partners another partnership or even a corporation).
• –> partnership formed regardless of what these persons intended.

A general partnership is formed by agreement among those who would co-own an on-going business for profit.

• –> This agreement can be made: expressly (by oral or written agreement) or implicitly (from the conduct of the parties).
• –> There are no other formal or statutory requirements to creating a general partnership.

Question 29

Partnership Formation –> General Partnerships: Proof of Association

Answer 29

In general, the sharing of profits is prima facie evidence that a partnership exists (in other words, a person who receives a share of the profits of a business is presumed to be a partner in the business).
—> Presumption could be rebutted if, for example, there were evidence that losses are not also shared or that the management of the business is not shared.

The following, even if paid “out of profits,” are not deemed to be a “sharing of profits”:

(1) receiving payment of a loan;
(2) collecting rent; and
(3) earning a salary.

Question 30

Partnership Formation –> Limited Partnerships: Certificates of Limited Partnerships (v. Partnership Agreements)

Answer 30

The formation of a LP reqs there be not only a partnership agreement, but also a filing of a certificate of limited partnership.
—> A failed attempt to form a limited partnership will in all likelihood mean that the parties have formed or continued as a general partnership.

Question 31

Partnership Formation –> Limited Partnerships: Certificates of Limited Partnerships (Filing Requirements)

Answer 31

To be effective, a certificate of LP not only must be completed on a form prescribed by the Secretary of State but also must be signed by all general partners listed in the certificate of LP.

• –> According to CA statute, the name of a LP must contain the phrase “limited partnership” or the abbreviation “L.P.” or “LP” at the end of its name.
• –> For other content requirements for a certificate of limited partnership, consult your outline.

Question 32

Partnership Formation –> Limited Partnerships: Certificates of Limited Partnerships (Effective Date of Formation)

Answer 32

A LP is effectively formed on either:

(1) the date the Secretary of State files the certificate; or
(2) if not more than 3 months after filing, any later date specified in the certificate.

Question 33

Partnership Formation –> *Limited Liability Partnerships: Eligibility to Become a Limited Liability Partnership

Answer 33

The only types of LLPs that CA will recognize are:
partnerships other than limited partnerships in which each partner is a licensed professional authorized to engage in the practice of law, accounting, or architecture.

Question 34

Partnership Formation –> *Limited Liability Partnerships: Domestic Partnerships Converting a LLPs

Answer 34

Unless a different vote is required by the partnership agreement, a CA (or domestic) partnership other than a LP may convert to a LLP by the vote of the partners holding a majority interest in the partnership.

Question 35

Partnership Formation –> *Limited Liability Partnerships: Registering to Become a Registered Liability Partnership

Answer 35

To become a registered LLP, a partnership must submit a completed registration (with the required fee) to the Secretary of State’s office.

Question 36

*Partners and the Partnership Business –> Partnership Agreements: The General Rule

Answer 36

In general, relations among the partners and between the partners and the partnership are governed by the partnership agreement or, when the partnership agreement does not otherwise provide, by CA’s version of the Uniform Partnership Act.

• –> The UPA is a series of default rules that apply when a partnership agreement is silent on a topic.
• –> For the most part, the partners can choose to opt out of these default rules by providing otherwise in their agreement.

Question 37

*Partners and the Partnership Business –> Partnership Agreements: Some Specific Exceptions

Answer 37

No partnership agreement may unreasonably restrict a partner’s access to the books and records of the partnership.
—> This is an exception to the general rule.

Partners cannot opt out of the UPA entirely.

• –> A few of its provisions are non-waivable.
• –> Besides the UPA provision securing a partner’s right to have reasonable access to the partnership’s books and records, UPA provisions concerning such things as a partner’s duty of loyalty, duty of care, and right to dissociate are also non-waivable.
• –> While these rights and duties can be limited, they cannot be eliminated entirely.

Question 38

*Partners and the Partnership Business –> Conducting Partnership Business

Answer 38

Absent a contrary provision in the partnership agreement, each general partner has an equal right to manage and conduct the partnership’s business.

• —> Each general partner is an A of the partnership in the conduct of its business.
• —> If taken outside the ordinary course of the partnership business, a partner’s action constitutes partnership business conducted on the partnership’s behalf ONLY IF all general partners consent to the action.

Question 39

*Partners and the Partnership Business –> Duties Within the Partnership

Answer 39

Each partner owes to the partnership and the other partners a duty of care in the conduct (and winding up) of the partnership business.
—-> Partners must not engage in: grossly neg or reckless conduct, intentional misconduct, or a knowing violation of the law.

Fiduciary Duty
Each partner owes to the partnership and the other partners a duty of loyalty.
—-> Partners must not compete w/ the partnership in the conduct of its business OR appropriate a partnership opportunity.
—-> Partners must not engage in dealings w/ the partnership IF their dealings are intended to serve an interest adverse to the partnership’s interest.
—-> Partners must account for any benefit, and hold as trustee any profit derived from any transaction connected with the partnership’s business OR the use of partnership property.

Question 40

*Partners and the Partnership Business –> Profits, Losses, and Contributions

Answer 40

Absent an agreement to the contrary each partner is entitled to share equally in the profits generated by the partnership business.

In the absence of a contrary agreement the partners share losses in proportion to their share of the profits.

Question 41

*Partners and the Partnership Business –> *Liability to Third Parties: General Partners

Answer 41

A partnership is liable for torts committed by a partner when the partner’s tortious act is committed in the ordinary course of business or w/ the authority of the partnership.

All general partners are liable jointly and severally for all obligations of the partnership, whether arising under tort, K, or otherwise.

An incoming partner is not personally liable for partnership obligations arising from activity that occurred before his admission as a partner.

Question 42

Partners*Partners and the Partnership Business –> *Liability to Third Parties: Limited Partners - Generally

Answer 42

In general, a limited partner is not personally liable for the obligations of the partnership; his liability will be limited to his capital contribution.

A limited partner will be personally liable for the obligations of the partnership, IF the limited partner exercises more than just his rights as a limited partner and participates in the management and control of the limited partnership.

• —> However, this liability is only incurred w/ respect to those persons who:
  (1) transact business with the limited partnership;
  (2) have actual knowledge of the limited partner’s participation in the control of the business; AND
  (3) have a reasonable belief that the partner was a general partner at the time of the transaction.

Question 43

Dissociation and Dissolution –> Partner Dissociation: Partner’s Power to Dissociate

Answer 43

Partnership is a voluntary relationship.

• —> Thus, a partner’s power to dissociate—or withdraw—from a partnership is exercisable at any time; it is a non- waivable right of every partner (general or limited).
• —> For a partner to exercise this power, the partnership must have notice of the partner’s express will to withdraw from the partnership.

While a partner always has the power to withdraw, a partner may not have the right to do so and may be liable for damages for breach.
—> Even in the absence of an express provision, a partner who withdraws by express will from a partnership that is for a definite term or undertaking is generally going to be considered to have dissociated wrongfully.

A partner who dissociates in violation of an express provision of partnership agreement does so wrongfully.
—-> A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation.

Question 44

Dissociation and Dissolution –> Partner Dissociation: Events Causing a Partner’s Dissociation

Answer 44

(1) partner’s death
(2) partner’s bankruptcy
- –> If the partnership is for a definite term or undertaking, dissociation by bankruptcy is deemed wrongful and a partner who becomes bankrupt is liable for damages caused by his subsequent dissociation.
(3) the appointment of a guardian for a partner
(4) a judicial determination that a partner is incapable of performing the duties of a partner
(5) the occurrence of an event specified in the partnership as triggering a partner’s dissociation

Dissociation can also occur upon a partner’s expulsion from the partnership.

• –> A partner may be expelled from a partnership pursuant to:
  (1) a provision in a partnership agreement,
  (2) a unanimous vote of the other partners, or
  (3) a judicial determination made upon application by another partner.

Question 45

Dissociation and Dissolution –> Partner Dissociation: Dissociation of a Partner in a Limited Partnership

Answer 45

Rules for dissociation of a general partner in a LP are similar to the rules for dissociation of a general partner in a general partnership.

• –> General partners of a LP do not have the same right to dissociate as general partners of a general partnership.
• –> In a general partnership, general partners can dissociate by express will prior to the termination of the general partnership.
• –> Specifically, they have a right to dissociate by express will when the general partnership is at will.

When a general partner withdraws from a LP by express will, the partner dissociates wrongfully if it occurs before the termination of the LP.
—> A limited partner has no right to dissociate before the termination of the LP.

Question 46

Dissociation and Dissolution –> Partner Dissociation: Consequences of Dissociation

Answer 46

If a partner dissociates from a general partnership and the remaining partners do not elect to wind up the partnership business w/in 90 days of the dissociation, the partnership must buy out the interest of the dissociated partner.

In general, dissociation terminates a partner’s right to co- manage and conduct partnership business.

Except w/ respect to events or matters occurring before dissociation, dissociation also terminates a partner’s duty of loyalty and duty of care.
—> A partner who has dissociated is permitted to compete with the partnership business.

A partner who dissociates does not thereby discharge liability for partnership obligations incurred before the dissociation.

Question 47

Dissociation and Dissolution –> Partnership Dissolution and Winding Up: Causes of a Partnership’s Dissolution - Causes Applicable to Partnerships Generally

Answer 47

Rules for dissolution of a general partnership are basically the same as the rules for dissolution of a limited liability partnership.
—> Remember, once formed, a limited liability partnership is a general partnership for all purposes except for liability.

An individual partner may file an application with a CA ct to have a partnership dissolved.

• –> An application to dissolve a partnership will be granted if a ct determines that:
  (1) the economic purpose of the partnership is likely to be unreasonably frustrated;
  (2) the carrying on of the business in conformity w/ the partnership agreement would not be reasonably practicable; or
  (3) the carrying on of the business in partnership w/ a particular partner is no longer reasonably practicable in light of that partner’s conduct relating to the partnership’s business.

In addition to a partnership dissolving upon judicial determination, a partnership also dissolves if it becomes unlawful to carry on the partnership’s business or upon the occurrence of an event agreed upon and specified in the partnership agreement.

Question 48

Dissociation and Dissolution –> Partnership Dissolution and Winding Up: Causes of a Partnership’s Dissolution - Causes Applicable Only to Partnerships at Will

Answer 48

Generally, partnerships dissolve if a judicial determination is made upon application by a partner, if it becomes unlawful to carry on the partnership’s business, or upon the occurrence of an event specified in the partnership agreement.

In a partnership at will, dissolution will also occur when the partnership has notice of the express will to dissolve from at least half of the general partners.
—> In determining the portion of the general partners who have expressed a will to dissolve the partnership, include any partner who, in the preceding 90 days, rightfully dissociated by express will.

Question 49

Dissociation and Dissolution –> Partnership Dissolution and Winding Up: Causes of a Partnership’s Dissolution - Causes Applicable Only to Partnerships for a Definite Term or Particular Undertaking

Answer 49

In a partnership for a definite term or particular undertaking, the partnership will dissolve 90 days after the wrongful dissociation of one of its partners UNLESS:
—> before that time a majority of the partners agree to continue the partnership.

In a partnership for a definite term or undertaking, if a partner dissociates by death or by bankruptcy, the analysis above would be unchanged.

• –> The partnership would dissolve after 90 days unless a majority of the remaining partners agree to continue the business.
• –> A partnership for a definite term or undertaking also dissolves upon the expiration of the term or the completion of the undertaking or upon the unanimous consent of all the partners.

Question 50

Dissociation and Dissolution –> Partnership Dissolution and Winding Up: Causes of a Partnership’s Dissolution - Dissolution of a Limited Partnership

Answer 50

Upon the withdrawal of its SOLE general partner, a LP dissolves unless:
—> before 90 days passes a majority of the limited partners consent to continue the business and admit one or more general partners to replace the dissociating general partner.

If one of MULTIPLE general partners dissociates, the LP will dissolve if, w/in 90 days of the dissociation, a majority of the remaining partners (general and limited) consent to its dissolution.

Limited partnerships can also be dissolved upon:

(1) the happening of an event specified in the partnership agreement,
(2) the consent from all general partners and a majority of limited partners, or
(3) ct order granting the application of a partner that it is not reasonably practicable to carry on the business in conformity with the partnership agreement.

Question 51

Dissociation and Dissolution –> Partnership Dissolution and Winding Up: Causes of a Partnership’s Dissolution - Consequences of a Partnership’s Dissolution

Answer 51

Once dissolved, a partnership continues its existence for the purpose only of winding up its business, that is, for the purpose of discharging its debts and distributing its assets.

• –> This may include preserving the partnership’s business and property as a going concern for a reasonable time.
• –> When the winding up of its business is complete, the partnership terminates.
• –> Only general partners who have not dissociated may participate in the winding up process of a dissolved partnership.

In the winding up process, the partnership’s assets will be used to pay:

(1) Creditors (including, to the extent permitted by law, partners who are creditors)
(2) Capital contributions to partners
(3) Allocate balance in accordance with profits

In the winding up process, to the extent further contributions are req’d from the partners in order for the partnership to meet all its obligations, each partner will be J/S liable for the entire amount of the outstanding debt.

• –> To the extent partners pay more than their share of the outstanding debt, they may seek contribution from those partners who have not paid their share of the debt.
• –> Unless provided otherwise in the partnership agreement, in winding up a partnership, partners share equally in the surplus, if any, or otherwise share the outstanding debt in the same proportion as they would share in the surplus.