Operating General Partnership: External Operations

Question 1

Power of a Partner to Bind the Partnership

Answer 1

Any partner can bind the partnership in a contract as long as that agent
has actual or apparent authority

Question 2

Actual Express Authority

Answer 2

Explicit grant from partnership agreement or an authorization of the partners

Question 3

Grants of Authority that Require Approval from ALL Partners

Answer 3

Assigning partnership property in trust for creditors

Disposing of goodwill

Confessing to a judgment

Submitting claim to arbitration

Taking any other act that would make it impossible to carry on the partnership’s ordinary business

Question 4

Actual Implied Authority

Answer 4

Based on partner’s reasonable belief that an action is necessary to carry out their express authority

Question 5

Apparent Authority

Answer 5

Partner’s authority to bind the partnership is derived from the third party’s reasonable understanding of the authority granted to the partner by the partnership.

Question 6

Transfer of Titled Partnership Property

Answer 6

Partner has authority to transfer titled to partnership property when:

(1) Partnership property in partnership’s name
(2) Partnership property titled in all partners’ names
(3) Partnership property titled in fewer than all partners’ names

Question 7

Imputation of Knowledge to the Partnership

Answer 7

If a third party provides notice to a partner of anything related to the partnership business, that notice is imputed to the entire partnership

An individual partner’s knowledge of a fact related to the partnership is generally imputed to the entire partnership

Exception: Fraud

Question 8

The Effect of a Partner’s Tort

Answer 8

A partnership is liable for torts committed by a partner in the ordinary scope of business

If punitive damages are imposed for intentional torts committed for personal
motives, the partnership WILL NOT be liable

Question 9

Partnership’s Duty to Restore for Breach of Trust Against Third Parties

Answer 9

Partnership has a duty to restore any loss resulting when a partner, acting within scope of authority, receives money or other property from a third party and breaches trust by misapplying it

Question 10

Partner’s Liability to Third Parties

Answer 10

In general, a partner does not enjoy limited liability protection and will be personally liable for
partnership obligations

Question 11

Does a money judgment against the partnership bind an unnamed, individual partner?

Answer 11

No, they need to be a named party for the judgment to bind them

Question 12

Tort Obligations

Torts by the Partnership

Answer 12

Each partner is jointly and severally liable

A tort victim can therefore sue one partner to recover the full amount of damages

The partner can then seek a right of indemnification from the partnership and/or a right of contribution from other partners

Question 13

Contract Obligations

Answer 13

For other partnership liability, each partner is jointly liable

The plaintiff can sue one or more partners for the full amount of damages and force any partner to pay the judgment

But if they leave off a partner in the initial lawsuit, they may not recover from that partner

Question 14

Liability of New Partners

Answer 14

Not personally liable for prior partnership obligations

However, any capital contribution will remain at risk

Question 15

Liability of Former Partners

Answer 15

Generally remains liable for partnership obligations incurred before the dissolution, and will sometimes be liable for post- dissolution obligations

Exceptions:
(1) Agreement with credit and partnership to discharge from existing liability; and

(2) Person agrees to assume existing obligations of a dissolved partnership

Question 16

Can a partnership be convicted of a crime?

Answer 16

Yes

Question 17

Will one partner be criminally liable for the acts of another partner based solely on their
partnership status?

Answer 17

No