Black Letter Law Flashcards
When is a partnership formed?
When two or more people agree to engage in a business for profit as co-owners.
How can a partnership be bound to a contract?
When a partner of the partnership acts with actual or apparent authority.
What is actual authority?
Actual authority is the authority that a partner believes he has based on his communications with the other partners.
Express and implied authority are both examples of ______ authority.
Actual.
Implied authority can be inferred from ________.
custom, necessity, or prior acquiescence.
When is a partner acting with apparent authority?
A partner is acting with apparent authority when they carry on in the course of business of the partnership but do so without actual authority. Their partner is binding on the partnership as long as third parties had a reasonable belief the partner had actual authority.
When a partner enters into transactions regarding matters within the ordinary course of business, what kind of consent is required from the other partners?
Majority consent.
When a partner enters into transactions regarding matters that are outside the ordinary course of a partnership’s business, what kind of consent is required from the other partners?
Unanimous consent.
In a general partnership, what kind of liability do the partners face for the partnership’s liabilities?
Joint and several liability.
When does a person’s reception of a share of a business’s profits not amount to a presumption that the person is a partner?
When the profits are issued in order to repay a debt, as compensation, or for some other purpose alternative to collaborating in the profit-making of the business.
When can a transferee receiving a partner’s entitlement to a distribution of the partnership’s profits become a partner?
Upon the existent partners’ consent.
When can a partner dissociate and what are the consequences of dissociation?
A partner is dissociated from a partnership upon notice of the partner’s express will to withdraw as a partner.
In a partnership at will, dissociation by one partner also causes a dissolution of the partnership.
Upon dissociation, the dissociated partner cannot act as an agent for the partnership except for the purposes of winding up.
Can partners that do not want to end the at will partnership prevent the partnership from dissolution upon a single partner’s dissociation?
Yes. If the dissociating partner and the remaining partners unanimously vote to continue the partnership business, then the dissolution is retroactively nullified.
This can be thought of as an agreement by the dissociating partner with the other partners to allow them to purchase his interest in the partnership.
What must be done if a partner dissociates from an at will partnership but the partners unanimously vote that the partnership will continue?
The remaining partners must buy out the dissociated partner’s interest.
When is a partnership a partnership at will?
When there is no agreement as to the term for the partnership.
