Relations Among Ps Flashcards
The rights and obligations of Ps generally are controlled by what?
The PS agreement
Partners do/don’t have flexibility in defining the contractual terms of their PS agreement.
Do
What are three duties that a P cannot waive or alter through a PS agreement?
Duty of loyalty
Duty of Care
Fiduciary duty
What right can a P not waive through a PS agreement?
Right to an accounting
What liability can a P not waive through a PS agreement?
Indemnification for partnership obligations
Absent an agreement to the contrary, what is assumed with respect to a P’s right to profits?
Equal share
Absent an agreement to the contrary, what is assumed with respect to a P’s right to losses?
Right to share losses from the PS business in proportion to their share of profits.
Unless they otherwise agree, every P has an equal right in ____ and ____ of the PS business?
Management
Control
Unless they agree otherwise, any differences arising as to matters in the ordinary course of operation of the business are decided how?
Majority vote
Unless they agree otherwise, no act in contravention of the PS agreement may be done rightfully w/o . . .
Unanimous consent
Unless they agree otherwise, no person can be become a partner without . . .
Unanimous consent
XYA FIrm management committee recently held a meeting a voted to invite Mr. Smart to join the firm as a new partner. Ps who were not at the meeting object. Can Mr. Smart be admitted as a partner? Explain
No Unanimous consent needed to admit a new partner.
What is an accounting?
A legal proceeding to determine and resolve all transactions and financial matters in connection with the PS.
Based upon a final accounting, one partner may have _____ against another.
A claim
When will an accounting of a PS occur in due course?
When the PS is dissolved and is being wound up.
Three ways in which a P can demand a formal accounting (not due to dissolution)?
If he/she is wrongfully excluded from PS business or possession of PS property;
If the PS agreement provides for such an action;
WHENEVER other circumstances make it just and reasonable to do so (catch-all)
A formal accounting may be used in resolving disputes over violations of what duty?
Fiduciary
Every P has a ___ duty to the PS and to the other partners in connection with PS business.
Fiduciary
A fiduciary duty to the PS and Ps includes which three sub duties?
Duty of honest, good faith, and fair dealing
Duty of trust and confidence
Duty to indemnify for losses incurred as a result of PS business.
B and F enter into a PS solely in connection with a 20-year lease on prime downtown property. F lived far away and B provided all of the management services. In connection with her management of the activities in the 29th year of the lease, B became aware of an opportunity to lease an adjacent property. Since their agreement was almost at an end and given Fred’s complete lack of interest in the business, B went ahead with the second lease without saying anything to F. Has B breached her fiduciary duty to F? Explain.
Yes. There is an obligation to inform partner of business opps as a result of the PS.
B and F enter into a PS solely in connection with a 20-year lease on prime downtown property. F lived far away and B provided all of the management services. In connection with her management of the activities in the 29th year of the lease, B became aware of an opportunity to lease an adjacent property. Since their agreement was almost at an end and given Fred’s complete lack of interest in the business, B went ahead with the second lease without saying anything to F. Does F have any remedy against B? Explain
Yes, breach of fiduciary duty. There is an obligation to inform partner of business opps as a result of the PS.
Thus, F can seek an accounting.
B and F enter into a PS solely in connection with a 20-year lease on prime downtown property. F lived far away and B provided all of the management services. Without telling F, B hired her sister to work for the PS at a substantial salary. As it turns out, the sister did nothing for most of the day. Has B breached her fiduciary duty to F? If no, why not? If yes, what remedies?
Yes. This is a conflict of interest and F has not consented.
F can seek an accounting.
C is a P in a business that provides auto-mechanic services to customers. Unbeknownst to his Ps, C has been letting existing and potential customers know that he is available after hours for work on the side. He uses the PS garage and equipment for this independent work. Has C breached his fiduciary duty to his partners? If no, why not? If yes, why and what remedy?
Yes. He is using PS property without consent and he should hold all profits from side work in trust for the P.
The Ps can seek an accounting.
T or F? The PS must indemnify EVERY partner for debts and liabilities reasonably incurred in connection with the business.
True
Unless otherwise agreed, individual partners must contribute amounts necessary to meet partnership ___ and _____ in ______ to his/her ______ ______.
Debts and obligation
Proportion to his/her partnership interests.
All partners have a right to ____ and ____ the PS books and to receive full and true information on all things affecting the PS.
Access AND inspect
Can a P waive his right to access and inspect the PS books and to receive full and true information on all things affecting the PS.
no
T or F? A P is automatically entitled to a distribution of the PS profits.
False. Unless otherwise provided in the PS agreement, the amount of cash distribution to a partner, known as a draw, is determined by a majority vote of the partners.
What is the distribution of cash to a partner called?
Draw
What is required for one P to take a draw?
Majority vote of the Ps
What is remuneration?
Payment for services
Are partners generally entitled to remuneration for services?
No, unless otherwise agreed.
J and J have a PS. J1 complaints that J2 is lazy and that she has to do the lion’s share. Is J2 entitled to compensation for that work?
No. No remuneration unless otherwise agreed.
