Liability to third parties

Question 1

Tort liabilities

Answer 1

partnership is liable in tort for tortious conduct of a partner or an employee acting in the ordinary course of business of the partnership or with authority of the partnership
i. agency law, a partner is an agent of the partnership

Question 2

Contract liability

Answer 2

partnership is liable for contracts entered into by partners (or agents) with actual or apparent authority

i. actual authority created by:
a. partnership agreement
b. requisite vote of partners (majority for ordinary business matters)
c. partnership’s filing of a statement of partnership authority with secretary of state (filing can grant or restrict a partner’s ability to do things).
IF INVOLVING A TXFER OF REAL ESTATE
- a grant of authority in a statement of authority is conclusive in favor of a BFP for value.
- a limitation of authority to txfer real property gives constructive notice of a lack of authority.
IF NOT INVOLVING A TXFER OF REAL ESTATE
- filing a statement of limitation does not give constructive knowledge of the limitation wrt any other tx.
v) summary: can only stop real estate transactions with a statement limiting partnership authority.

a) a partnership can file a document with secretary of state to limit a partner’s apparent authority
b) to limit it for real estate, just have to file and record in the county where the real estate is located
c) for all other transactions, filings can only grant but cannot limit partners’ authority

ii. apparent authority:
a. partners are agents of the partnership
b. partner have apparent authority can bind the partnership in transactions in the ordinary course of business, unless 3P is aware the partner lacks actual authority

Question 3

Liability of partners

Answer 3

1. in general partnerships, each partner is jointly and severally liable for all obligations of the partnership, whether arising in tort or contract
   i. the plaintiff must first exhaust partnership resources before collecting from an individual partner’s assets
   ii. i.e. partners indemnify each other, even for torts of partners
   iii. bar: very important
2. partners who pays a partnership obligations are entitled to
   i. indemnification from the partnership, or
   ii. require other partners to contribute pro rata if the partnership is unable to indemnify
3. in today’s world, only idiots form general partnerships

Question 4

Limitations of Liability

Answer 4

1. third parties
   i. partners cannot limit liability to third parties without third party consent
   a. all partners are jointly and severally liable
   b. parties cannot agree amongst themselves that one partner will not be liable
   ii. i.e. partners A, B, and C cannot agree that C will not be liable for partnership obligations
2. between partners
   i. partners can limit liability amongst themselves
   ii. agreements cannot be enforced against third-parties, but can be be enforced between partners
3. newly admitted partners
   i. new partners are not personally liable for partnership obligations arising before their admission
   ii. new partners can only lose the amount of their investment in the partnership
   iii. note: partnerships can admit new partners by unanimous consent (unless modified)

outgoing partner– remains liable for obligations arising while he was a partner, unless there has been payment, release or novation. also liable for acts done after dissociation.