Partnership Liability

Question 1

Liability to Third Parties

Answer 1

RUPA generally provides that each partner is an agent of the partnership for the purpose of its business. The authority of a partner to bind the partnership when dealing with third parties roughly follows agency law.

Question 2

Liability of Partnership in Contract vs. Tort

Answer 2

Tort: partnership liable for loss/injury caused to person as result of tortious conduct from partner acting in ordinary course of business or with authority of partnership

Contract: partnership liable for all contracts entered into by partners in the scope of the business or partner with actual or apparent authority

Question 3

Actual Authority

Answer 3

actual authority is the authority a partner reasonably believes they have based on the communications between the partnership and the partner.

it can come from the partnership agreement, statement of partnership authority, or a vote of the partners. a majority vote is required to authorize ordinary business; a unanimous vote is required for extraordinary acts.

Question 4

statement of partnership authority

Answer 4

grants or limits a partner’s authority to enter into transactions on behalf of the partnership. there’s different effects dependign on whether the action involves a transfer of real property or not.

real property transactions: statement binding on third parties if (1) recorded in county where property located; and (2) filed with SoS

**transactions not involving real property: **grants of authority are binding on partnership (unless third party had knowledge of lack of authority) BUT restrictions on authority are NOT BINDING on third parties. (in other words, third parties are deemed to only have constructive knowledge of filed grants of authority, not filed restrictions)

Question 5

Apparent Authority

Answer 5

RUPA provides that a partner is an agent of the parnership, and that a partner has apparent authority to bind partnership to transactions within the ordinary course of the partnership’s business OR business of the kind carried out by the partnership

it’s VITAL to remember: partners = AGENTS of the partnership so they always have APPARENT authority to bind the partnership to ANY contract within the scope of the partnership business. If a contract is OUTSIDE the scope, partnership will not be bound unless partner had actual authority.

Question 6

when will a partner’s action not be binding on the partnership?

Answer 6

a transaction will not be binding if third party KNEW that he lacked authority or received notification.

Knowledge requirement is limited to what the person actually knew (not what he should have known)

Notification requirement: notice effective when it comes to the person’s attention or duly delivered

Question 7

transfer of partnership property

Answer 7

any partner may transfer property held in the name of the partnership.
if property held in the name of one or more partners, transfer by titleholders effective

if partner lacked authority - pship can recover from the intial transferee but NOT from a BFP

Question 8

liability of the partners

Answer 8

each partner = jointly and severally liable for all obligations of the partnership (whether tort or K).

if P1 commits a crime within ordinary course of business, P2 not liable unless he aided as a principal or accessory.

plaintiff should first exhausted partnership property before seeking to collect from individual partner assets.

Question 9

liabilities of newly admitted partners

Answer 9

not liable for obligations arising before admission

Question 10

liabilities of disassociating partners

Answer 10

liable for obligations arising while they were partner UNLESS there has been payment, release, or novation.

an outgoing partner may also be liable for acts transpiring after disassociation.