Liabilities of general partners to 3ps Flashcards
Principles applying to liabilities of GPs to 3ps
(first need to determine if the partnership has been formed)
A. Agency principles apply
a. Partners are agents of the partnership for apparently carrying on usual partnership business
b. Therefore the general partnership is liable for each partner’s torts in the scope of business and for each partners authorized ks
c. general partnership is nothing more than the sum of the parts.
Inter-partner liability
B. Each general partner is personally liable for all debts of the partnership and for EACH co-partners’ torts.
2 special circumstances
a. Incoming partner’s liability for preexisting debts. Generally NOT LIABLE for prior debts.
i. But any capital paid in to the partnership by an incoming partner can be used by the partnership to satisfy those prior debts.
b. Dissociating (withdrawing) partner’s liability for subsequent debts
i. Leaving partners RETAIN LIABILITY even on future debts until actual notice of their dissociation is given to creditors OR UNTIL 90 days after filing with the state a notice of dissociation.
GP liability by estoppel
one who represents to a 3rd party that a general partnership exists will be liable as if a general partnership exists.
a. Hypo: A convinces B to start a sailing schoo, agrees to lend B money. At a party, A tells wealthy friend that “my partner B and I are starting a sailing school and we need a boat” Wealthy friend offers to sell them a boat, and allow them to take it for a test ride. A and B drop the sailing school. Nexxt day B takes boat for a test ride still and destroys boat in a tort. Wealthy friend may sue BOTH A and B for loss of boat.
i. As a rule, general partners are liable personally for all partnership obligations including co-partners torts.
ii. In this case, however, A and B never formed a partnership because theirs was a lending arrangement. NOT based on sharing profits.
iii. Nonetheless, under estoppel, A will be liable because she did represent to a 3rd party tort victim that she was a partner of B.
iv. Therefore, she will be liable to him as if she were a partner.
