Liabilities of General Partners to Third Parties Flashcards
What agency principles apply?
Each partner is an agent of the partnership for the purpose of its business
* Under agency law, a principal (here, the partnership) will be bound if the agent (each partner) has actual authority to act or apparent authority
Explaint the concept of apparent authority in a partnership
(1) The act of any partner (2) for apparently carrying on in the ordinary course the partnership business or business of the kind carried out by the partnership (3) binds the partnership unless
1. Partner had no authority to act for partnership in the matter AND
2. Person with whom partner was dealing knew or had received notification that the partner lacked authority
Partners have AA to bind partnership to any K apparently w/in scope
What is actual authority in a partnership?
The authority a partner reasonably believes they have based on the communications between the partnership and partner
* Can come from partnership agreement OR vote of partners
* Need majority vote for ordinary business and unanimous vote to authorize extraordinary acts
Partnership liability rule
Each general partner is personally liable for all debts and obligations of the partnership and for each co-partner’s torts (committed within the ordinary course of partnership business or with authority of partnership)
What is the nature of a partner’s liability?
Liability is joint and several for all obligations of the partnership, whether arising in tort or K
* Judgment not personally binding on a partner unless they have been served
* Each partner is personally and individually liable for the entire amount of the partnership obligations, but if partner paid more than fair share of obligation, can seek indemnification
What is the liability of an incoming partner?
Not personally liable for obligations incurred by the partnership before the person became a partner
* Cash they’ve contributed can be used for that purpose
What is the liability of outgoing (dissociated) partners?
Remain liable for obligations arising while they were a partner unless there’s been payment, release, or novation
* This is true until actual notice of dissociation given to creditors OR 90 days after filing notice of dissociation with the State
What is general partnership liability by estoppel?
A person who represents herself as a partner, or consents to being represented by another as a partner, is liable to third parties who extend credit to the apparent partnership in reliance on the representation
* Example–hold out as though partnership exists, get into a fight with “partner,” and partner commits a tort–can go after the one who held out as though partnership exists
