Relations between partners & to third parties

Question 1

Management participation

Answer 1

All partners have equal rights in the management of the pship business absent an agreement to the contrary.

Decisions involving matters within the ordinary course of business can be controlled by a majority vote, but matters outside the ordinary course of business require unanimous consent.

Question 2

Fiduciary duties

Answer 2

Each partner owes 2 fiduciary duties to the pship:

1. Duty of loyalty - requires that the partner (1) account for all profits or other benefits derived by the partner in connection with pship business; (2) not deal with the pship as one with an adverse interest; and (3) not compete with the pship.
2. Duty of care - requires the partner to refrain from engaging in negligent, reckless, or unlawful conduct or intentional conduct.

Question 3

Partners’ accounts

Answer 3

Each partner is deemed to have an account in an amount equal to the partner’s contribution plus the partner’s share of profits or minus her share of losses, less an pship liabilities.

Question 4

Remuneration

Answer 4

Absent an agreement to the contrary, there is no right to remuneration for services rendered to the pship except for services performed in winding up the business.

Where a partner has impliedly or expressly promised to denote time to the pship business and fails to do so, she may be charged in an accounting for damages caused to the pship.

Question 5

Indemnification

Answer 5

proper with regard to payments made and personal liabilities reasonably incurred in the ordinary and proper conduct of business, or for payments made beyond the partner’s contribution.

Where one partner has been required to pay or satisfy more than his share of a pship debt, he may require the other partners to contribute their pro rata shares.

Question 6

Books and information

Answer 6

Books and information must be kept at the chief execute office.

Each partner has a right to inspect and copy the pship books.

Upon demand, each partner must render true and full information of all things affecting the pship.

Question 7

How can a judgment reach a partner’s personal assets?

Answer 7

There must be a judgment against the partner. Actions may be brought against the pship and the partners in the same action.

Question 8

Can a pship sue a partner?

Answer 8

Yes for breach of the pship agreement or of a fiduciary duty.

Question 9

Can a partner sue a pship?

Answer 9

Yes or against other partners to enforce any right created by the pship agreement or the RUPA, or that otherwise belongs to the partner.

Question 10

Apparent authority

Answer 10

The RUPA provides that:

1. The act of any partner;
2. For apparently carrying on in the ordinary course the pship business or business of the kind carried out by the pship;
3. Binds the pship unless: the partner had no authority to act for the pship in the particular matter, and the person with whom the partner was dealing knew or had received notification that the partner lacked authority.

Question 11

Fraud on third party

Answer 11

Where one partner, acting within the scope of the pship business, defrauds a third party, the pship will be held liable.

If the fraudulent act involves a transaction outside the scope of the pship business, the pship will not be held liable.

Question 12

Fraud on pship

Answer 12

If a partner seeks to defraud the pship as part of a transaction with a third party and that party is aware of the fraud, the pship is not liable to the third party.

Question 13

Liability of outgoing (dissociated) partner

Answer 13

An outgoing or dissociated partner remains liable for obligations arising while he was a partner in the pship, unless there has been payment, release, or novation.

Liability generally continues until 90 days after he has filed a notice of dissociation with the DOS.

Question 14

Liability of incoming partner

Answer 14

An incoming partner is not personally liable for obligations incurred by the pship before the person became a partner.

Question 15

Extent of liability of a partner

Answer 15

Each partner is personally and individually liable for the entire amount of pship obligations, with rights of contribution and indemnification.

Question 16

Nature of liability

Answer 16

Liability is joint and several or all obligations of the pship, whether arising in K, tort, or for breach of trust. However, a judgment is not personally binding on a partner unless she has been served and the creditor has exhausted pship assets.

Question 17

Types of liability

Answer 17

Partners are liable for all Ks entered into by a partner in the scope of pship business or with authority of the pship.

Partners are liable for all torts committed by any partner or employee of the pship within the ordinary course of pship business or with authority from the pship.

Tort liability covers frauds committed by a copartner in the course of pship business, even though the other partners have no connection with, knowledge of, or participation in the fraud.

Question 18

Criminal liability

Answer 18

Not criminally liable unless the other partners participated in the commission of the crime as principals or accessories.