Relations Among Ps

Question 1

The rights and obligations of Ps generally are controlled by what?

Answer 1

The PS agreement

Question 2

Partners do/don’t have flexibility in defining the contractual terms of their PS agreement.

Answer 2

Do

Question 3

What are three duties that a P cannot waive or alter through a PS agreement?

Answer 3

Duty of loyalty

Duty of Care

Fiduciary duty

Question 4

What right can a P not waive through a PS agreement?

Answer 4

Right to an accounting

Question 5

What liability can a P not waive through a PS agreement?

Answer 5

Indemnification for partnership obligations

Question 6

Absent an agreement to the contrary, what is assumed with respect to a P’s right to profits?

Answer 6

Equal share

Question 7

Absent an agreement to the contrary, what is assumed with respect to a P’s right to losses?

Answer 7

Right to share losses from the PS business in proportion to their share of profits.

Question 8

Unless they otherwise agree, every P has an equal right in ____ and ____ of the PS business?

Answer 8

Management

Control

Question 9

Unless they agree otherwise, any differences arising as to matters in the ordinary course of operation of the business are decided how?

Answer 9

Majority vote

Question 10

Unless they agree otherwise, no act in contravention of the PS agreement may be done rightfully w/o . . .

Answer 10

Unanimous consent

Question 11

Unless they agree otherwise, no person can be become a partner without . . .

Answer 11

Unanimous consent

Question 12

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

Answer 12

No Unanimous consent needed to admit a new partner.

Question 13

What is an accounting?

Answer 13

A legal proceeding to determine and resolve all transactions and financial matters in connection with the PS.

Question 14

Based upon a final accounting, one partner may have _____ against another.

Answer 14

A claim

Question 15

When will an accounting of a PS occur in due course?

Answer 15

When the PS is dissolved and is being wound up.

Question 16

Three ways in which a P can demand a formal accounting (not due to dissolution)?

Answer 16

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)

Question 17

A formal accounting may be used in resolving disputes over violations of what duty?

Answer 17

Fiduciary

Question 18

Every P has a ___ duty to the PS and to the other partners in connection with PS business.

Answer 18

Fiduciary

Question 19

A fiduciary duty to the PS and Ps includes which three sub duties?

Answer 19

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.

Question 20

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.

Answer 20

Yes. There is an obligation to inform partner of business opps as a result of the PS.

Question 21

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

Answer 21

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.

Question 22

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?

Answer 22

Yes. This is a conflict of interest and F has not consented.

F can seek an accounting.

Question 23

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?

Answer 23

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.

Question 24

T or F? The PS must indemnify EVERY partner for debts and liabilities reasonably incurred in connection with the business.

Answer 24

True

Question 25

Unless otherwise agreed, individual partners must contribute amounts necessary to meet partnership ___ and _____ in ______ to his/her ______ ______.

Answer 25

Debts and obligation

Proportion to his/her partnership interests.

Question 26

All partners have a right to ____ and ____ the PS books and to receive full and true information on all things affecting the PS.

Answer 26

Access AND inspect

Question 27

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.

Answer 27

no

Question 28

T or F? A P is automatically entitled to a distribution of the PS profits.

Answer 28

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.

Question 29

What is the distribution of cash to a partner called?

Answer 29

Draw

Question 30

What is required for one P to take a draw?

Answer 30

Majority vote of the Ps

Question 31

What is remuneration?

Answer 31

Payment for services

Question 32

Are partners generally entitled to remuneration for services?

Answer 32

No, unless otherwise agreed.

Question 33

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?

Answer 33

No. No remuneration unless otherwise agreed.