Partnerships Flashcards
Partnership in relation to agency
Partnership is agency - every partner is a partner and agent then thus a reciprocal agency
What is a Partnership?
- An association of 2 or more people to
- Carry on as co-owners
- Sharing of ownership
- Sharing of control
- Business for profit
Limits to Partner’s Contracting Power
- Lack of authority know by contracting party
- Not carrying on bus in usual way
Liability for Partner’s Debts
- Each partner is 100% liable for partnership debts (no limited liability)
- This includes contract debts
- Should look at books before joining, don’t want to assume debt
- If you pay more than you share, you have a right to sue reimbursement for excess share you paid
- If partner is broke you bear loss
Liability for Partner’s Torts
Within course and scope
Partnership Management
- Share = profits
- = rights in management
- Need consent of all partners to become a partner
- Voting
- Ordinary matter - majority
- Matters contrary to partnership agreement - No act in contravention of consent of all the partner - need unanimous agreement
- You can change the rules through agreement by majority
- Each partner has an equal right to the management of the business and any business performed under the scope of the partnership can only be contravened by a majority of the partners.
What DOESN’T create a partnership?
- The sharing of profits does not alone create a partnership, despite the parties’ intentions.
- An agreement that offers a degree of control by a first party to protect first party’s assets should not be considered a partnership if factors as a whole indicate that the other party still maintains day-to-day control of the business.
- Ability to veto ideas
What to look for to determine there wasn’t a partnership:
- Not able to initiate
- Upside limited
- Limited downside
What is needed to create a partnership?
Intent to enter into the relationship with ownership and control
What does it mean to be sharing in control?
- Have to have power to participate in control, doesn’t mean she has to have her ideas enacted (power to be heard) - formal vote before being overruled
- 1% is enough
Partnership by Estoppel
If you rep to someone you are a partner, and someone relies on that, you are liable for that reliance because you are responsible for their belief you are a partner of that entity
Partnership or Joint-Venture?
Partnership or Joint Venture: (1) A partnership did NOT exist.
Here, the parties were not co-owners of a business – they entered into the leases for a set period of time and their activity, rather than being a series of acts, was limited to that occurrence. Also, their intention was to try to sell the leases, and the parties were involved in other oil and gas related undertakings with various other parties.
(2) A joint venture DID exist: Here, the court held that because the leases were purchased out of the parties’ checking account funds in equal shares, they were titled in Empire Oil’s name rather than each of the parties’ names, and profits were going to be shared if the leases were sold, a joint venture did exist.
Fiduciary Obligation to Partners
- Partners have a fiduciary duty to each other to make a full and fair disclosure to other partners for all information which may be of value to the partnership. The basic fiduciary duties are:
- Partners must account each other for any profits acquired in a manner injurious to the partnership, and
- A partner may not acquire partnership property without the consent of the other partners nor divert to his own use a partnership opportunity, he must not compete with the partnership within the scope of the business.
- Each partner in a partnership owes the other partners a fiduciary duty to act in the best interests of the partnership over the interests of the individual in matters concerning the partnership.
- in such a relationship, loyalty must be undivided and unselfish, and that a breach of fiduciary duty can occur by something less than fraud or intentional bad-faith
- Full disclosure is required
- must define scope upfront
- Partnership rules of duty apply to Joint Ventures
Expulsion of Partners
- If she was an employee she couldn’t be fired, but bcuz shes a partner she can be fired for any reason as long as its in good faith better for the partnership
- Partner has lesser protection than an employee
- The remaining partners must act in good faith, which would prohibit the wrongful withholding of money or property, when expelling a partner
How to determine whether a partner can be reimbursed or not: When analyzing a problem in which one partner wants to be reimbursed by another partner ask
- Who’s changing the status quo? and
- Is it in the normal course of the business?
