Fiduciary Duties and Freedom of Contract

Question 1

Restrictions on Eliminating the Duty of Loyalty

Answer 1

The partnership agreement may not eliminate the duty of loyalty, but

(1) the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable, or
(2) all of the partners or a number or percentage specified in the partnership agreement may authorize or ratify after full disclosure of all material facts a specific act or transaction that otherwise would violate the duty of loyalty.

Question 2

Duty of Care

Answer 2

A partner is a fiduciary of his partners but not of his former partners, for the withdrawal of a partner terminates the partnership as to him.

Question 3

Duty of Care While Winding Up

Answer 3

A partner’s duty of care to the partnership and the other partner’s in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

Question 4

Duty of Good Faith and Fair Dealing

Answer 4

RUPA: The partnership agreement may not eliminate the obligation of good faith and fair dealing but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable.

Partnerships do not dissolve on a violation of good faith.