Chapter 31 Operation and Dissolution of General Partnerships 570

unlimited, personal liability

if the partnership is bound, each partner has joint and several unlimited personal liability

Joint and several liability

a creditor may sue the partners jointly as a group or separately as individuals

Authority to Bind Partnership

a partner who has actual authority (express or implied) or apparent authority may bind the partnership

actual express authority

authority set forth in the partnership agreement, in additional agreements among the partners, or in decisions made by a majority of the partners regarding the ordinary business of the partnership

Actual implied authority

authority that is reasonably deduced from the nature of the partnership, the terms of the partnership agreement, or the relations of the partners

Apparent authority

authority that a third person may reasonably assume to exist in light of the conduct of the partners, so long as that third person has no knowledge or notice of the lack of actual authority

Partnership by estoppel

imposes partnership duties and liabilities on a nonpartner who has either represented himself or consented to be represented as a partner

tort

the partnership is liable for loss or injury caused by any wrongful act or omission or other actionable conduct of any partner while acting within the ordinary course of the business or with the authority of her copartners

breach of trust

the partnership is liable if a partner in the course of the partnership’s business or while acting with authority of the partnership breaches a trust by misapplying money or property entrusted by a third person

crimes

a partner is not criminally liable for the crimes of her partners unless she authorized or participated in them

Notice to a Partner

a partnership is bound by a partner’s knowledge, notice, or receipt of a notification of a fact relating to the partnership

notice

a person has notice of a fact if the person (1) knows of it, (2) has received a notification of it, or (3) has reason to know it exists from all of the facts known to the person at the time in question

antecedent debts

the liability of an incoming partner for antecedent debts of the partnership is limited to his capital contribution

subsequent debts

the liability of an incoming partner for subsequent debts of the partnership is unlimited

Dissociation

occurs when a partner ceases to be associated in carrying on of the business

term partnership

a partnership for a specific term or particular undertaking

partnership at will

a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking

Effect of Dissociation

terminates dissociating partner’s right to participate in the management of the partnership business and duties to partnership

Dissolution

refers to those situations when the Revised Act requires a partnership to wind up and terminate

Effects of Dissolution

upon dissolution a partnership is not terminated but continues until the winding up is completed

Authority

a partner’s actual authority to act for the partnership terminates, except so far as may be appropriate to wind up partnership affairs; apparent authority continues unless notice of the dissolution is given to a third party

existing liability

dissolution does not in itself discharge the existing liability of any partner

winding up

completing unfinished business, collecting debts, and distributing assets to creditors and partners; also called liquidation

right to participate in winding up

any partner who has not wrongfully dissociated may participate in winding up the partnership’s business

Distribution of Assets

the assets of the partnership include all required contributions of partners; the liabilities of a partnership are to be paid out of partnership assets in the following order: (1) amounts owing to nonpartner and partner creditors and (2) amounts owing to partners on their partners’ accounts

partnership creditors

are entitled to be first satisfied out of partnership assets

partners’ creditors

share on equal footing with unsatisfied partnership creditors in the individually owned assets of their respective debtor-partners

Continuation After Dissociation

the remaining partners have the right to continue the partnership with a mandatory buyout of the dissociating partner; the creditors of the partnership have claims against the continued partnership

Dissociated Partner’s Power to Bind the Partnership

a dissociated partner’s actual authority to act for the partnership terminates; apparent authority continues for two years unless notice of the dissociation is given to a third party

Dissociated Partner’s Liability to Third Persons

a partner’s dissociation does not of itself discharge the partner’s liability for a partnership obligation incurred before dissociation; a dissociated partner is liable for a partnership obligation incurred within two years after a partner dissociates unless notice of the dissociation is given to a third party