Liabilities of Partners to Third Parties Flashcards
UPA Section 36(2)
releases the departing partner of partnership debts if the court can infer an agreement between the continuing partners and the creditor to release the withdrawing partner.
UPA Section 36(3)
usually applied to release the departing partner from personal liability when a creditor renegotiates his debt with the continuing partners after receiving notice of the departing partner’s exit.
UPA § 13. Partnership Bound by Partner’s Wrongful Act
Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the partnership or with the authority of his co-partners, loss or injury is caused to any person, not being a partner in the partnership, or any penalty is incurred, the partnership is liable therefor to the same extent as the partner so acting or omitting to act.
UPA § 14. Partnership Bound by Partner’s Breach of Trust
The partnership is bound to make good the loss: (a) Where one partner acting within the scope of his apparent authority receives money or property of a third person and misapplies it; and (b) Where the partnership in the course of its business receives money or property of a third person and the money or property so received is misapplied by any partner while it is in the custody of the partnership.
UPA § 15. Nature of Partner’s Liability
All partners are liable (a) Jointly and severally for everything chargeable to the partnership under sections 13 and 14. (b) Jointly for all other debts and obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract.
UPA § 21. Partner Accountable as a Fiduciary
(1) Every partner must account to the partnership for any benefit, and hold as trustee for it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. (2) This section applies also to the representatives of a deceased partner engaged in the liquidation of the affairs of the partnership as the personal representatives of the last surviving partner.
UPA § 25. Nature of a Partner’s Right in Specific Partnership Property
(1) A partner is co-owner with his partners of specific partnership property holding as a tenant in partnership. (2) The incidents of this tenancy are such that: (a) A partner, subject to the provisions of this act and to any agreement between the partners, has an equal right with his partners to possess specific partnership property for partnership purposes; but he has no right to possess such property for any other purpose without the consent of his partners. (b) A partner’s right in specific partnership property is not assignable except in connection with the assignment of rights of all the partners in the same property. (c) A partner’s right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. When partnership property is attached for a partnership debt the partners, or any of them, or the representatives of a deceased partner, cannot claim any right under the homestead or exemption laws. (d) On the death of a partner his right in specific partnership property vests in the surviving partner or partners, except where the deceased was the last surviving partner, when his right in such property vests in his legal representative. Such surviving partner or partners, or the legal representative of the last surviving partner, has no right to possess the partnership property for any but a partnership purpose. (e) A partner’s right in specific partnership property is not subject to dower, curtesy, or allowances to widows, heirs, or next of kin.
UPA § 26. Nature of Partner’s Interest in the Partnership
A partner’s interest in the partnership is his share of the profits and surplus, and the same is personal property.
UPA § 27. Assignment of Partner’s Interest
(1) A conveyance by a partner of his interest in the partnership does not of itself dissolve the partnership, nor, as against the other partners in the absence of agreement, entitle the assignee, during the continuance of the partnership, to interfere in the management or administration of the partnership business or affairs, or to require any information or account of partnership transactions, or to inspect the partnership books; but it merely entitles the assignee to receive in accordance with his contract the profits to which the assigning partner would otherwise be entitled. (2) In case of a dissolution of the partnership, the assignee is entitled to receive his assignor’s interest and may require an account from the date only of the last account agreed to by all the partners.
UPA § 40. Rules for Distribution
In settling accounts between the partners after dissolution, the following rules shall be observed, subject to any agreement to the contrary: (a) The assets of the partnership are: I. The partnership property, II. The contributions of the partners necessary for the payment of all the liabilities specified in clause (b) of this paragraph. (b) The liabilities of the partnership shall rank in order of payment, as follows: I. Those owing to creditors other than partners, II. Those owing to partners other than for capital and profits, III. Those owing to partners in respect of capital, IV. Those owing to partners in respect of profits. (c) The assets shall be applied in the order of their declaration in clause (a) of this paragraph to the satisfaction of the liabilities. (d) The partners shall contribute, as provided by section 18 (a) the amount necessary to satisfy the liabilities; but if any, but not all, of the partners are insolvent, or, not being subject to process, refuse to contribute, the other partners shall contribute their share of the liabilities, and, in the relative proportions in which they share the profits, the additional amount necessary to pay the liabilities. (e) An assignee for the benefit of creditors or any person appointed by the court shall have the right to enforce the contributions specified in clause (d) of this paragraph. (f) Any partner or his legal representative shall have the right to enforce the contributions specified in clause (d) of this paragraph, to the extent of the amount which he has paid in excess of his share of the liability. (g) The individual property of a deceased partner shall be liable for the contributions specified in clause (d) of this paragraph. (h) When partnership property and the individual properties of the partners are in possession of a court for distribution, partnership creditors shall have priority on partnership property and separate creditors on individual property, saving the rights of lien or secured creditors as heretofore. (i) Where a partner has become bankrupt or his estate insolvent the claims against his separate property shall rank in the following order: I. Those owing to separate creditors, II. Those owing to partnership creditors, III. Those owing to partners by way of contribution.
Jingle Rule (NY) UPA § 40(h) & 40(i):
p-ship creditors have first dibs on p-ship assets & personal creditors on personal assets (and only after that can they recover from other group of assets)
Modern Rule (New Bankruptcy Rule) §723
p-ship creditors have first dibs on
p-ship & personal assets, personal creditors only on personal assets (then, personal
creditors recover from p-ship assets).
RUPA § 807(a)
follows modern rule for distribution of insolvent p/ns assets
