Relationships of parner with Partnership and Partners

Question 1

Can the a partner bind the partnership in contracts and to third parties?

Answer 1

yes

Question 2

What fiduciary duties does a partner owe?

Answer 2

loyalty, care, good faith and fair dealing

Question 3

What is the rule for the duty of loyalty?

Answer 3

no competing with P business, advancing an interest adverse to the partnership or usurping a P oppurtunity

Question 4

What is the exception to the duty of loyalty?

Answer 4

A Partnership agreement can designate certain activities as not violating the duty (but cannot eliminate the duty altogether) and may provide a safe harbor allowing the other partners to authorize or ratify a transaction between a partner and the P after full disclosure of material facts

Question 5

What is the duty of care?

Answer 5

duty to refrain from engaging in grossly negligent or reckless conduct, intentional conduct, or a knowing violation of the law

Question 6

May a partnership agreement reduce the duty of care?

Answer 6

if may not unreasonably reduce the duty of care

Question 7

If a partner dissociates or the P’s is dissolved, do duties apply?

Answer 7

do not apply unless the aprtner is engaged in winding up the P’s business

Question 8

Can the PA eliminate the good faith and fair dealing obligation?

Answer 8

No, but can prescribe reasonable standards

Question 9

If there is no PA or PA is silent, how much of the profits and losses does each Parent have?

Answer 9

entitled to an equal share of profits and losses

if PA specifies profits but not losses - losses allocated same as profit

Question 10

Can a partner demand a profit distribution?

Answer 10

No, but is entitled to have her account credited with her share of profits

Question 11

What is the rule for transfer of partnership interest to a 3rd party?

Answer 11

• can transfer all or part of P interest (absent restriction in PA)
• transferor retains all rights and duties of a partner
• transfer does not cause dissolution or dissociation

Question 12

What rights does the transferee have and not have?

Answer 12

Has:
- right to receive distributions
- seek judicial order for dissolution
- an accounting upon dissolution

Does not have:
- right to participate in the management or conduct of business
- access the P’s records
- demand other information

Question 13

Who does property acquired for the P belong too?

Answer 13

to the partnership even if in the name of one partner

Question 14

When is ownership by P presumed?

Answer 14

• purchased with P assets
• P credit is used to get financing

Question 15

If ownership of property is unclear, what factors are used?

Answer 15

• property’s use
• tax treatment of the property
• source of funds to maintain or improve property
• P’s credit used to get financing
• P’s assets used to purchase property

Question 16

T/F: Majority of Partners needed to make ordinary P business decisions

Answer 16

True

Question 17

Consent of what percent of partners is required for matters outside the ordinary course of business and for amendments to PA?

Answer 17

100%

Question 18

If a partner makes a loan to the P in furtherance of P business what is required?

Answer 18

• reimbursement
• indemnification

Question 19

Can partner derive a personal benefit from the use or possession of P property?

Answer 19

No, unless the partner compensates the P for such use or possession

Question 20

Must a partnership permit its partners and agents to access all P records?

Answer 20

Yes

Question 21

Can a P sue a partner?

Answer 21

Yes, for breach of the PA or violation of suty

Question 22

Can a partner sue a P or another partner?

Answer 22

Yes, to enforce partner’s rights under the PA or RUPA

Question 23

What events cause a dissociation?

Answer 23

• partners notice of withdrawal
• partners expulsion due to PA
• unanimous vote of the other partners
• the partner’s bankruptcy
• partners death
• appointment of a guardian for the partner or a judicial determination of the partner’s incapacity to perform duties under the PA
• termiantion of an entity partner

Question 24

Is a partner liable to the P and the other partners for damages cause by wrongful dissociation?

Answer 24

Yes

Question 25

A partnerships dissociation is only wrongful when

Answer 25

it is in breach of of express provision of PA

Question 26

True of False:

A dissociate partner is not permitted to participate in the management or conduct of P business.

Answer 26

True

Question 27

True of False:

A partners duty to compete terminates upon dissociation

Answer 27

False

Question 28

True of False:

An ongoing P must buy out the dissociated partner’s P interest

Answer 28

True

Question 29

True of False:

P is not required to indemnify a dissociated partner against P liabilites whether incurred before or after dissociation

Answer 29

False, P must indemnify partner

Question 30

True of False:

A dissociated party is not generally liable for P obligations before dissociation

Answer 30

False, they are liable for obligations prior to dissociation

Question 31

When can a dissociated partner bind themselves and the P

Answer 31

Other party
1) reasonably believes the dissociated partner is a partner
2) does not have notice of the dissociation, and
3) is not deemed to have knowledg of the dissociated partner’s lack of authority

Noted: liability is limited to transactions within two year of partners dissociation