Effects of a Partner's Relations with and liability to Third Parties

Question 1

Power of Partner to Bind Partnership

Answer 1

• Partner agent, bind when actual or apparent authority.
• Actual Authority: reasonably believes partnership authorized her to act either because of express words or conduct or by implied authority.
• Apparent Authority partner’s acts will bind the partnership when 3rd party reasonably believes partnership has authorized the partner to act.
  
  • 3rd party must have actual knowledge of an agent’s lack of authority in order for partnership to avoid liability under apparent authority.
  • If partnership has notified 3d party about lack of authority, and 3d party aware of the notification or the notification has been delivered to the 3d party’s place of business, sufficient.
• Partner has right to transfer property so long as the property is held in the partnership’s name or is held in one of the partner’s names.
• Partnership can also take actions to recover property transferred w/o authority.
• Partner’s knowledge is imported to the entire partnership except when the partner engages in fraud.
• Statement of authority may be filed with the state and aims to clarify a partner’s authority.
  
  • limits on partner’s authority contained will not serve as constructive notice to a 3d party for purposes of defeating apparent authority.
  • If partner purchases partnership property, may be used as conclusive evidence of partner’s authority even if the 3d party neither relied on nor was aware of the statement at time of the transaction.
  • Partner can file a statement of denial denying facts asserted in a statement or denying specific grants of authority.

Question 2

Liability to Third Parties

Answer 2

For tort liability, partnership goign to be liable for acts committed by partner in ordinary course of busines.

Parntership sued for its obligations.

partners jointly and severably liable for all partnership obligations.

Incoming partners only going to be liable for obligations incrred after becoming a partner.

Outgoing partners or disssociatd parnters only be liable for obligations incurred while actually a partner.

Judgment against partnership not the same as judgment against ht eparnter.
* must be separate action to hold partner accountable.

Must exhaust partnership’s assets before seeking to collect from individual partners’ personal assets. Except:

• partnership is a debor in bankruptcy
• partner has consented to the action
• partner is independently liable for action

Court can authorize execution directly against apartner even if the partnerhip’s assets have not been exhauseted if:

• partnership assets are cleary insufficient to satisfy a claim
• when trying to exhause partnership assets would be burdensome or
• court believes it is otherwise equitable to go after indiviudal partners.

Question 3

Crimes

Answer 3

Partnership can be convited of a crim and barred from engaging in certain activities upon conviction.

Partnership conviction doesn’t make indivdiual partners criminall liable, just the entity that has criminal liability.