Disassociation/Dissolution in Partnerships

Question 1

disassociation

Answer 1

change in the relationship of the partners caused by any partner ceasing to be associated in the carrying on of the business

think: withdrawal

unlike other events of disassociation, notice of a partner’s EXPRESS will to withdraw from a partnership will AUTOMATICALLY TRIGGER dissolution.

Question 2

wrongful disassociation

Answer 2

partner will be deemed to have wrongfully disassociated if it’s in breach of an express term of the partnership agreement.

other wrongful scenarios:
if it’s a term partnership + partner withdraws, is expelled, or becomes bankrupt before end of term.

in event of wrongful disassociation - partner liable for damages caused.

Question 3

at-will partnership

Answer 3

one where partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking

at-will partnership = default form

Question 4

term partnership

Answer 4

partnership where partners have agreed, explicitly or implicitly, to remain partners for a definite term or until the completion of an undertaking

Question 5

consequences of disassociation for a partnership

Answer 5

one of two statutory avenues can be implicated:
1. liquidation - partnership can dissolve and business will be wound up
2. buyout - partnership may continue and will give disassociated partner a buyout of their interest

which avenue will be applied depends on how partner disassociated

Question 6

consequences of dissociation for partner

Answer 6

• right to participate in management ceases
• partnership should buy out their interest + indemnify against past or future liabilities

however, if dissociation is wrongful - partner will NOT be entitled to a buy out until term expires or undertaking is completed

Question 7

Liability of Disassociated Partner

Answer 7

Pre-disassociation: liable
Post-disassociation: may be liable for 2 years if third party reasonably believed partner was still apart of business and did not have notice of partner’s disassociation
- partner can protect themselves by notifying creditors directly or filing a notice of disassocation (effective after 90 days from filing)

Question 8

disassociated partner’s power to bind partnership

Answer 8

a partnership can be bound by an act of a disassociated partner undertaken within two years after disassociation if (1) act would have bound partnership before disassociation; and (2) other party to transaction reasonably believed disassociated partner was still a partner and did not have notice of the disassociation.

partnership can protect itself by notifying creditors or filling a public statement of disassociation

Question 9

finish problem set on p. 23 starting with dissolution