Partnerships Flashcards
Apparent authority: power to bind partnership
Partners have apparent authority to bind the partnership to any contract within the scope of the partnership. But if a K is outside the apparent scope of partnership business, the partnership generally will not be bound unless the partner has actual authority.
Liabilities of incoming vs. outgoing partners
An outgoing partner generally remains liable for all partnership obligations incurred while they were a partner, whereas an incoming partner generally has no liability for obligations incurred before they become a partner.
Partner’s rights to use partnership property
A partner has no right to use partnership property other than for the benefit of the partnership.
Rights of partners- distributions
Partners have whatever rights are granted in the partnership agreement as to distribution of profits. If the agreement is silent, partners share profits (and losses) equally.
What is the governing law of Partnerships
The Revised Uniform Partnership Act (RUPA) provides a default set of rules for general partnerships.
Requirements to form a partnership
-Association of 2 or more persons to carry on as a co-owners a business for profit
-No formal agreement or writing is required to form a partnership; the parties intent can be implied from their conduct
- Anyone who is capable of entering a binding K is capable of being partner
- The partnership may not have an illegal purpose
- No one may become a partner without the consent of all the partners.
* Sharing of profits raises a presumption of partnership
Duty of Loyalty
- Account for all profits or other benefits delivered by partner in connection with partnership business
- Don’t deal with partnership as one with an adverse interest
- Don’t compete with partnership
Duty of care
- Refrain from engaging in negligent reckless, or unlawful conduct
- Refrain from engaging in intentional misconduct
Contract liability of partners
Partners liable on Ks made by partner in scope of partnership business an don any other Ks expressly authorized by partners
Torts liability of partners
Partners liable for any torts committed by partner or by employee of partnership in ordinary course of partnership business
Nature and extent of liability
- Joint and several for all obligations of partnership
- Each partner personally and individually liable for entire amount of partnership obligations (but partner who overpays may be entitled to contributions)
Liability by estoppel in partnership la
One who represents to a third party that a partnership exists will be liable as if the partnership exists
Dissociation
Change in relationship of partners caused by partner ceasing to be associated in carrying on of business
Partner is dissociated from partnership upon:
- Notice of partner’s expression will to withdraw
- Happening of an agreed upon event
- Valid expulsion of partner
- Parter becoming bankrupt or appointment of a receiver
- Death or incapacity of individual partner
- Termination of partner that is a business entity; or
-Court decision that partner is capable of performing their duties
Partnership can be bound by act of dissociated partner, and dissociated partner can be liable for partnership obligations within 1 year after dissociation if:
- Act would have bound partnership before dissociation and
- Other party would have reasonably dissociated parter was still a partner and did not have notice of dissociation
Liability of limited partner
- No personal liability for obligations of partnership
- If participate in control of business, they are liable to persons who transact with partnership reasonably believing, based on limited partner’s conduct, that they are general partner
How long does a partnership have to bring an action for settlement of the partnership accounts after the partners cease their business dealing with each other
Five years
