Biz Org-Partnerships

Dissolution under RUPA

Dissociation does not necessarily cause dissolution (again); dissolution and wind up happen only for the causes stated in RUPA 801. Causes of dissolution 1. By act of the partners -dissociations in at will partnerships trigger dissolution; dissociations in term partnerships do not 2. By operation of law 3. By court order Partnership agreement may change or eliminate the dissolution trigger as to (1) RUPA 103 - (2) and (3) cannot be tinkered with (as we discussed)

3 ways profits and losses can be decided and allocated

1. The partnership agreement controls. If the partnership agreement specifies how profits and/or losses will be shared, the provisions in the partnership agreement apply, overriding the default rules of the UPA. 2. Default Rule for Profits: Equal Sharing. If the partnership agreement does not specify how profits will be shared, section 401(b) says that the partners will share profits equally. 3. Default Rule for Losses: Same Division as Profits. If the partnership agreement does not specify how losses will be shared, section 401(b) says that the partners will share them in the same proportion as they share profits. If the agreement provides for the division of profits, but not losses, those same contractual percentages apply to losses. If the agreement says nothing about either profits or losses, this means that, under the two default rules, both profits and losses will be shared equally.

EXPULSION? 1. The partnership agreement provides that a majority of the partners may expel a partner without cause at any time. A majority of the partners voted to expel Partner Smith. 2. The partnership agreement says nothing about expulsion of a partner. The partnership is a casino. State law provides that a convicted felon may not be involved in the operation of a casino. Partner Smith was recently convicted of bribery, a felony. After the conviction, all of the other partners voted to expel Partner Smith. 3. The partnership agreement says nothing about expulsion of a partner. In a lawsuit filed by the partnership, a court issues an order expelling Partner Smith from the partnership because Smith willfully and materially breached the partnership agreement. 4. The partnership agreement says nothing about expulsion of a partner. Partner Smith recently transferred all of his transferable interest in the partnership to Jones. After the transfer, the other partners unanimously voted to expel Partner Smith.

1. This is covered by section 601(3), which says that dissociation occurs upon "the partner's expulsion pursuant to the partnership agreement." If the partnership agreement allows expulsion of a partner, the expelled partner is dissociated from the partnership. 2. This falls within section 601(4)(i). Section 601(4) says a partner is dissociated if he is expelled by a unanimous vote of the other partners after one of the four events specified. Subsection (i) allows expulsion if "it is unlawful to carry on the partnership business with that partner." As a result of Smith's felony conviction, it is now unlawful for the partnership to carry on its casino business with Smith. He was expelled by a unanimous vote of the other partners. Therefore, he is dissociated under section 601(4)(i). 3. Section 601(5) deals with judicial expulsion. It says a partner is dissociated if a court expels the partner for one of the three reasons listed. One of those is "(ii) the partner willfully or persistently committed a material breach of the partnership agreement or of a duty owed to the partnership or the other partners under Section 404." Here, the reason for the court's expulsion order was a willful, material breach of the partnership agreement. Smith is dissociated 4. This falls within section 601(4). Section 601(4), as we saw above, allows the other partners to expel a partner by unanimous vote after one of four specified events occurs. Here, subsection (ii) applies. Smith has transferred all of his transferable interest in the partnership. After that, he was expelled by a unanimous vote of the other partners. Section 601(4)(ii) says he is dissociated from the partnership

RUPA Rule for settling partnership credits and payments

Each partner is entitled to a settlement of all partnership accounts upon winding up the partnership business. In settling accounts among the partners, the profits and losses that result from the liquidation of the partnership assets must be credited and charged to the partners' accounts. The partnership shall make a distribution to a partner in an amount equal to any excess of the credits over the charges in the partner's account. A partner shall contribute to the partnership an amount equal to any excess of the charges over the credits in the partner's account but excluding from the calculation charges attributable to an obligation for which the partner is not personally liable under Section 306.

Winding Up under UPA and RUPA

If the partners decide not to continue the business upon dissolution, they are obliged to wind up the business. The partnership continues after dissolution only for the purpose of winding up its business, after which it is terminated. 802(a). Winding up entails concluding all unfinished business pending at the date of dissolution and payment of all debts. The partners must then settle accounts among themselves in order to distribute the remaining assets. At any time after dissolution and before winding up is completed, the partners (except a wrongfully dissociated one) can stop the process and carry on the business.

Smith contributes to the partnership a factory he owns personally.

Section 401(a)(1) says that Smith's partnership account is credited with "an amount equal to . . . the value of any other property . . . the PARTNER CONTRIBUTES to the partnership." Smith is contributing the factory to the partnership. Therefore, the value of the property, the factory, is credited to (added to) his partnership account.

Smith withdraws $50,000 cash from the partnership so he can buy a new sports car. Addition or Reduction in his account?

Section 401(a)(2) says that Smith's partnership account is CHARGED with an amount equal to "the money . . . DISTRIBUTED by the partnership TO THE PARTNER." Smith's withdrawal of $50,000 for his personal use is a distribution by the partnership to the partner, Smith. Thus, $50,000 needs to be charged to (subtracted from) his account.

RUPAUPA two important stipulations for governing profits and losses

Section 401(b): (b) Each partner is entitled to an equal share of the partnership profits and is chargeable with a share of the partnership losses in proportion to the partner's share of the profits. Section 103(a) (a) Except as otherwise provided in subsection (b), relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this [Act] governs relations among the partners and between the partners and the partnership. [Subsection (b), to which the exception refers, says nothing about sharing profits and losses.]

Rightful dissociation v wrongful dissociation

Wrongful : breaches express agreement in term partnership agreement, in term before undertaking or expiration of term OR Partner withdraws by express will (breaches agreement in pship agree) Judicially expelled for misconduct Becomes a debtor in bankruptcy P is entity and is expelled because it willfully terminated B. Rightful dissociation: all other dissociation are rightful including Death of a partner Withdrawal of a partner IN AT WILL

Partners are entitled to the profits of the business, but who must be paid first, before partners receive their share of the business?

First, creditors who are NOT of the partnership Then, creditors who are of the partnership .Section 807(a) says that, in winding up, the assets of the partnership "must be applied to discharge its obligations to creditors, including to the extent permitted by law, partners who are creditors." Thus, before partners get their partnership share, all creditors must be paid, including creditors who are also partners

Who Can Participate in Winding Up (UPA AND RUPA)

The partners who have not wrongfully dissociated may participate in winding up the partnership business. On application of any partner, a court may for good cause judicially supervise the winding up. RUPA 803(a). Priority for settling accounts (807(1)): 1. To creditors other than partners ("outside creditors) 2. To partners for liabilities other than for capital and profits 3. To partners for capital contributions 4. To partners for their share of the profits.

When can a term partnership dissolve?

UNDERTAKING: exists solely to carry out a discreet project. WHEN THE UNDERTAKING CEASES UNDER RUPA--can expressly agree to continue the partnership even after the undertaking ceases or is completed and also if: 1. Partner wrongfully dissociates or dissociates through bankruptcy, death, incapacity, appointment of guardian or conservator and w/t 90 days partners agree to wind up partnership 2. All partners expressly agree to wind up business 3. Definite term expires or undertaking is complete

Review of Default UPA/RUPA Distinctions

UPA: "Dissolution" of partnership (change in relations of partnership) always leads to: Wind up Termination RUPA: Dissociation of partner (RUPA 601) leads to either: Buy Out (RUPA 701) Dissolution (RUPA (801) Wind up Termination

RUPA AND UPA DISSOCIATION AND DISSOLUTION

UPA: DISSOCIATION (CHANGE IN RELATIONS OF THE PARTNERSHIP) ALWAYS LEADS: WIND UP---TERMINATION Or NEW PARTNERSHIP IF UNANIMOUS VOTE RUPA--dissociations leads to buy out OR dissolution and winding up

Differences between UPA and RUPA for liability

Under UPA, partners are jointly (but not severally) liable in contract and jointly and severally liable in tort. UPA, Section15. Under RUPA, partners are jointly and severally liable for all of the obligations of the partnership. RUPA, Sections 305, 306,and 307. severally liable-liable for his own part jointly-partnership is liable for the debts as whole, each individually shares responsibiltiy equally

Authority (UPA)

When a dissolution occurs (MEANING ONE PARTY CEASES TO BE PARTNER), it eliminates the authority of ALL the partners to act for the partnership. Exceptions Acts necessary to wind up partnership affairs or to complete transactions begun but not finished at the time of dissolution . After dissolution: Partners can elect to (1) carry on a business as a new partnership or; (2) Wind up the business and cease operations

3. Winding Up and Distribution

When a partnership is dissolved and its business wound up, its assets must first be applied to pay its creditors, including partners who are also creditors. IF PARTNERSHIP HAS INSUFFICIENT ASSETS TO PAY OFF CREDITORS, PARTNERSHIP (VIA PARTNERS) MUST CONTRIBUTE ADDITIONAL ASSETS TO MAKE UP THE LOSS. UPA § 807(a). After creditors are paid, the partnership accounts must be settled. Each partner with a negative balance in his or her account must pay that amount to the partnership. Each partner with a positive balance in his or her account will receive that amount from the partnership. RUPA § 807(b). If one or more partners don't make the required payments, the OTHER PARTNERS MUST MAKE THE REQUIRED PAYMENT, IN PROPORTION TO THEIR SHARE OF PARTNERSHIP LOSSES. Partners who have to make these extra payments can recover from the partner or partners who didn't pay the proper amount UNDER JOINT AND SEVERAL LIABILITY DOCTRINE.

Dissociation and Liability (RUPA)

RUPA 702 - the dissociated partner is still liable for damages to the partnership if THIRD PARTIES REASONABLY BELIEVE SHE IS S TILL PARTNER nd the partnership became liable because of that; she would be liable to the firm as an unauthorized agent. Estoppel argument, a la apparent authority/agency. RUPA 703(a) - a partner's dissociation does nothing to change that partner's liability for predissociation obligations. It only absolves the dissociated partner for post-dissociation obligations.

RUPA Section 801. Events Causing Dissolution and Winding up of Partnership Business

Under RUPA, a PARTNERSHIP IS DISSOLVED AND BUSINESS MUST BE WOUND UP, only upon the occurrence of any of the following events: In a partnership at will, partner gives express withdrawal notice to other partners. Or see 601(6)-10, or wrongful dissociation under 602(b)

Dissociation and Authority (RUPA 603)

- Dissociated partner loses any actual authority upon dissolution. Apparent authority lingers for up to 2 years if the dissociated partner acts in a way that would have bound the partnership for dissolution (RUPA 703) if: - Other party reasonably believed the dissociated partner to be a partner - Other party did not have notice of the dissolution - And is not deemed to have constructive notice from a filed statement of dissociation

Dissociation (RUPA)

. Dissociation - occurs when any partner ceases to be involved in the business of the firm. Under RUPA, dissociation does not always cause dissolution. It may lead to a buy out (of dissociating partner) instead. RUPA 601 (Comment 1) - RUPA dramatically changes the law governing partnership breakups. "Dissociation" is used--in lieu of UPA term "dissolution"--to denote the change in the relationship caused by a partner's ceasing to be associated in the carrying on of the business. WHY? Real entity theory instead of aggregate theory means there is no conceptual reason for the partnership to dissolve upon a member's withdrawal

The partner is an individual. She just died. The partner is dissociated.

. Section 601(7)(i) says that dissociation occurs upon "(7) in the case of a partner who is an individual:(i) the partner's death; . . .

Types of dissociations under UPA

1. In accordance with partnership agreement: something in partnership agreement says dissolve 2. In violation: partnership dissociates partner in violation of partnership agreement or quits in violation of 3. By operation of law (law makes it unlawful to carry on) 4. By court order: incapable of operating due to mental illness

on application by the partnership or another partner, the partner's expulsion by judicial determination because:

i) the partner engaged in wrongful conduct that adversely and materially affected the partnership business; (ii) the partner willfully or persistently committed a material breach of the partnership agreement or of a duty owed to the partnership or the other partners under Section 404; or (iii) the partner engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner;

Respondeat superior analysis

1. Form of liability only employees to employee-employer relationship 2. To hold employee liable, must have a. The right to control the act of the employeeWht b. Arise within the scope of employment Courts consider facts such as: 1. The degree of control employer exercises over the details of the employers (less control favors employee) 2. Paid in lump sum vs installments (lump sum independent contractor) 3. Whether the employee is engaged in a trade separate from the employer (if so, more independent contractor) 4. Amount of supervision the employer exercises over employee (less supervision independent contractor) 5.Employer provides employees supplies (supplies own supplies independent contractor) 6.How long they have worked for employer 7. Amount of skill required for the job (more specialized=independent contractor)

What kind of transaction would result in an addition to each respective parters account?

1. Money partner contributes to the partnership 2. Value of any property partner contributes to the partnership 3. Partners share of the partnership profits [and credited with his partnership profits) (partner is deemed to have an account credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner CONTRIBUTES to the partnership, and [credited with] his partnership profits) Addition means partner contributed something of value to the partnership

ALTERNATIVES TO DISSOLUTION UNDER UPA:

1. Partners can elect to carry on the business as NEW PARTNERSHIP TO FORM A NEW PARTNERSHIP Need unanimous agreement among the remaining partners OR Dissolution needs to be found in violation of partnership agreement OR Partner was expelled according to a provision in partnership (DEFAULT NEW PARTNERSHIP)

Reason partner expelled from the partnership

1. Section 601(3): Expulsion of a partner as specified in the partnership agreement. 2. Section 601(4): Expulsion by a unanimous vote of the other partners after certain specified events. 3. Section 601(5): A court's expulsion of a partner under certain specified circumstances.

Analyzing a RUPA/.UPA problem

1. State that no formal certification needs to be filed and two people form a partnership when they agree to carry on a business for profit 2. Attorney should advise individuals creating a general partnership to draft a partnership agreement, which can split management responsibilities, and determine the liability of each partner in any way they choose. 3.Regardless if there is an agreement, the partners still owe each other a duty of care, duty of good faith and fair dealing, and duty of loyalty. These cannot be contracted out. 4.RUPA and UPA--UPA partnership jointly liable but not severally, RUPA jointly and severally liable. Thus can go after each partner individually and partnership as a whole. NO PARTNERSHIP AGREEMENT, EACH LIABLE FOR THEIR DEBTS, SHARE PROFITS EQUALLY UNDER RUPA AND SPLIT DEBTS ACCORING WITH HOW THEY SPLIT PROFITS.

The partner is an individual. He sells his entire interest in the partnership to someone else.

601(4)(ii). Subsection (ii) applies here because "there has been a transfer of all or substantially all of that partner's transferable interest in the partnership." However, section 601(4)(ii) does not say that dissociation occurs automatically upon such a transfer. Dissociation occurs only upon "the partner's expulsion by the unanimous vote of the other partners" after such a transfer. The question does not mention any vote of the other partners to expel the individual after the transfer.

In partnership agreement., Jason agrees to get 70% and Amy agrees 30%, now how are the profits shared?

70/30, UPA and RUPA are GAP FILLERS!

Dissociation of partnership

A change in the relation of the partners by any partner ceasing to be associated in the carrying on as distinguished from the winding up the business

Effect of Dissolution-RUPA

A partnership continues after dissolution only for the purpose of winding up its business. The partnership is terminated when the winding up of its business is completed. RUPA 802. However, before winding up is completed, the partners—except any wrongfully dissociating—may agree to carry on the partnership, in which it resumes business as if dissolution never happened.

Term partnership dissolution under RUPA

A term partnership may be dissolved in one of 3 ways: If a partner is dissociated by death, declaring bankruptcy, becoming incapacitated, or wrongfully dissociates, the partnership will dissolve if within ninety days of that trigger if at least half the remaining partners express their will to wind it up. If the term expires. If all the partners agree to amend the partnership agreement by expressly agreeing to dissolve it.

Stroud Food Center Stroud Food Center is a partnership consisting of two partners -- Stroud and Freeman. The partnership runs a grocery store, but the two partners are not getting along. One of the regular suppliers to the grocery store is National Biscuit Company (Nabisco), which supplies, among other things, bread. Stroud tells Nabisco that he does not intend to pay for any more bread, Freeman then orders more bread, which Nabisco delivers. Stroud and Freeman go their separate ways with Stroud continuing the business. Did Freeman's request bind the partnership to pay for the bread shipped over Stroud's objection?

Both partners have actual authority to bind the partnership Even though Stroud said no more bread, Friedman had authority to bind the partnership and buy more bread, in order for Friedman to be stripped of his partnership power to bind the partnership, the partners must unanimously vote to do so

Violation of fiduciary duties corporations

Directors manage the corporation, and have fiduciary duties as such. Directors are expected to use their own independent judgment when making decisions. The duty of care imposed on directors of corporations includes the duty to disclose. Directors also have the duty to make informed decisions. The duty of good faith requires that fiduciaries act in good faith when conducting business on behalf of the corporation and its shareholders. Acting in bad faith is a violation of that duty. Additionally, acting "not in good faith" also raises concern. The business judgment rule is the presumption that directors and officers of a corporation making decisions are presumed to be reasonable if made in good faith, even mistakes. An act, or failure to act, can constitute a violation of fiduciary duty. For failures to act, causation must be shown under the MBCA but Delaware law does not require it. D was told by a scientist employed at Thanatos that L was lying about the accuracy of the results of the technology. At the board meeting, D voted no. Based on the circumstances, D made an informed decision based on facts available at the time. However, D did not disclose this information to anyone else at Phar-Less. Although he was not certain if it was true, he should have made a reasonable effort to conduct further investigation to determine the potential risk posed to the company if they entered the deal. Additionally, he should have disclosed the information that he had to the rest of the directors and officers at the meeting regardless of his anxieties, because he clearly had concern enough about the information to be the one dissenting voter on the board. D violated the duty of care in not disclosing the information and allowing the board to come to a decision without all of the relevant, material information. In withholding the information, D did not act with any malevolent intent or intent to violate a law. He was not self-interested. Although his silence was intentional, it was for a purpose other than causing harm. However, D's failure to disclose this pertinent information could be seen as grossly negligent.

SIMILARITIES B/T GILES AND BOTACH:

Dissociation is based on impracticability--conduct that makes it not reasonably necessary practicable to carry on the business in partnership with the partner THREATS MAKE IT IMPRACTICABLE TO CARRY ON AS PARTNER, AND SUBJECT TO DISSOCIATION BASED ON WRONGFUL CONDUCT ROUTE

PRESUMPTION UNDER UPA:

Dissolution triggers termination of partnership CREDITORS REMAIN CREDITORS OF THE NEW PARTNERSHIP, must elect to form a new partnership

1. Partners' Shares of Profits and Losses--summed up rules

If the partnership agreement specifies how to share profits and/or losses, that governs. RUPA § 103(a). If the partnership agreement doesn't specify how to share profits and/or losses, RUPA § 401(b) says to use the following default rules: Profits: Equal Losses : Same as Profits

RBG Partners is a general partnership consisting of Ralph, Bertha, and Gary. The partnership runs a grocery store under the name "Ralph's Pretty Good Grocery," reflecting the fact that Ralph knows the grocery store business very well and also reflecting that fact that Ralph has invested 70% of the money in the business, while between them Bertha and Gary put up the other 30%. At a heated meeting of the partners, Bertha and Gary voted that Ralph shall no longer have authority to buy bread; Ralph dissented. Nevertheless, Ralph contacts the store's regular bread supplier and orders bread, which the supplier delivers to the store. Has Ralph bound the partnership?

In this case, the partnership has resolved to take away Ralph's ACTUAL authority by virtue Bertha and Gary's 2-1 vote against Ralph. Even though Ralph has more invested in the business and has his name over the door, ISSUE of partnership management are RESOLVED BY MAJORITY VOTE (unless there is a partnership agreement to the contrary). Therefore, Ralph did not have actual authority to bind the partnership. The ultimate outcome of this case, however, will depend on whether Ralph had apparent authority.

he partner is an estate. It distributes its entire interest in the partnership to settle the estate.

It applies "in the case of a partner that is an ESTATE" It says that DISSOCIATION occurs, upon "DISTIRBUTION of the ESTATES entire transferable interest in the partnership, but not merely by reason of the substitution of a successor personal representative." Here, the estate has distributed its entire interest in partnership. That transfer has not occurred just to substitute another personal representative, but to settle the estate. The estate is therefore dissociated.

Apparent Authority - Notification

It is not enough, however, for a person to appear to be authorized. The third person must also be in a situation where he did not know that the person lacked authority. In order for the partnership to be bound by a partner's apparent authority, therefore, the third party asserting the apparent authority theory must not have known or received a notification that the partner lacked actual authority. Sec. 102 (c) A person notifies or gives a notification to another by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person learns of it.

Clam Shack Associates is a partnership owned by Deirdre and Stefani that runs a snack bar in a summer tourist area during the summer tourist season. Under new section 303 the partnership has filed a Statement of partnership Authority stating that the partnership shall only conduct business between May 15 and September 15 in any given year. Rollo, a rich guy with a hankering for fried clams, approached Deirdre and made a deal with her to open the Clam Shack on Thanksgiving Day, so he could gorge himself on his favorite food. It was an easy deal for Deirdre to agree to because she was going to be out of the country on vacation on Thanksgiving, so she assumed Stefani would take care of opening the snack bar. Stefani refused to spend her holiday satisfying a rich guy's junk food jones. Was the partnership bound by Deirdre's agreement with Rollo?

Manifestation of consent on behalf of principal to third party (PARTNERSHIP TO ROLLO) Third party reasonable believed that agent had authority to act Selling clams was in the ordinary course of Clam Shack's business, Deirdre held herself out as partner (need more facts, if she worked day in and out at Clam Shack Associates it would be reasonable to think she had authority, especially if no one else worked there)

Car Guys Car Guys is a partnership consisting of Tom and Ray. It operates an auto garage that inspects cars, changes tires, and provides routine maintenance, like oil changes. As a hobby, Tom likes to restore old cars. On the weekends he uses the Car Guys' garage to do restoration work on his car collection. Tom hires Mary to help on the weekend car restoration projects. If Tom doesn't pay Mary, can Mary recover from the Car Guys partnership? Is there apparent authority here?

Mary is still out of luck, because this situation does not appear to be the "carrying on in the ordinary course the partnership business," nor does it appear to be business of the kind carried on by the partnership. Even though the partnership is arguably engaged in the car repair business, the restoration activity is not what this business ordinarily engages in nor is it the kind of activity that businesses like Car Guys ordinarily engage in. Therefore, Tom's act does not bind the partnership under apparent authority principles. Manifestation of consent on behalf of principal to third party Third party must reasonably believe agent has authority to act on behalf of third party (NOT REASONABLE TO THINK THAT AGENT COULD ACT ON BEHALF OF THIRD PARTY)

Clam Shack Associates is a partnership owned by Deirdre and Stefani that runs a snack bar in a summer tourist area during the summer tourist season. They always close after Labor Day Weekend. Rollo, a rich guy with a hankering for fried clams, approached Deirdre and made a deal with her to open the Clam Shack on Thanksgiving Day, so he could gorge himself on his favorite food. It was an easy deal for Deirdre to agree to because she was going to be out of the country on vacation on Thanksgiving, so she assumed Stefani would take care of opening the snack bar. Stefani refused to spend her holiday satisfying a rich guy's junk food jones. Was the partnership bound by Deirdre's agreement with Rollo?

Partner Agent of Partnership. Subject to the effect of a statement of partnership authority under Section 303: (1) Each partner is an agent of the partnership for the purpose of its business. An act of the partner binds the partnership, if the act is in the ordinary course of business of the partnership, unless the partner had no authority to act in the matter and the person with whom the partner was dealing knew or received notification that the partner lacked authority (2) An act of a partner which is not apparently for carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership only if the act was authorized by the other partners. Even though Deirdre's agreement with Rollo was not in the usual course of business, it is arguably within the partnership's business. As a matter of actual authority, Rollo has a good argument that Deirdre bound the partnership. The outcome of this scenario may be complicated a bit by the way § 301 deals with apparent authority, but as a matter of the general authority of partners, serving food in the snack bar is part of the business of the partnership and the partners should have actual authority in that area.

Of course, in addition to being generally authorized to carry out the partnership's business by virtue of the statutory provision, individual partners may be authorized as a matter of agency law to act on behalf of the partnership when the partnership adopts a partnership resolution creating authority. Consider the following hypothetical: Cafe Boeuf is a fancy French restaurant owned by Henri, Maurice, and Jeanette as equal partners. At the meeting of the three owners, Henri mentioned that the dry cleaning store adjacent to the restaurant was for sale. The three partners unanimously voted to purchase and operate the dry cleaners and appointed Henri to act on the partnership's behalf. In light of this action, which of the following statements is true?

Right. As a matter of agency law, Henri has authority to act on behalf of the principal (i.e., the partnership) by virtue of the manifestation of consent made by the principal (i.e. the partnership resolution) that he as agent can reasonably interpret as giving him the power to act on the principal's behalf.

Car Guys Car Guys is a partnership consisting of Tom and Ray. It operates an auto garage that inspects cars, changes tires, and provides routine maintenance, like oil changes. As a hobby, Tom likes to restore old cars. On the weekends he uses the Car Guys' garage to do restoration work on his car collection. Tom hires Mary to help on the weekend car restoration projects. If Tom doesn't pay Mary, can Mary recover from the Car Guys partnership?

Sorry, I don't agree. Mary is out of luck, because even though the partnership is arguably engaged in the car repair business, the restoration activity is clearly for Tom's personal benefit, not for partnership business, so Tom's act does not bind the partnership.

ORDINARY COURSE OF BUSINESS, PARTNERSHIPS

The effect of Section 301(1) is to characterize a partner as a general managerial agent having both actual and apparent authority co-extensive in scope with the firm's ordinary business, at least in the absence of a contrary partnership agreement question of what is in the "ordinary course" of a partnership's business has plagued the courts -- should it be specific to the partnership in question, or should "ordinary" be by reference to the kinds of activities that businesses of the type engage in generally? Section 301(1) made a change from UPA Section 9(1) in thinking about what kinds of acts bind the partnership by apparent authority. It clarified that a partner's apparent authority includes acts for carrying on in the ordinary course "business of the kind carried on by the partnership," not just the business of the particular partnership in question.

Corporate Fiduciary Duties

The fiduciary duties held by the directors of a corporation are the duty of loyalty, care, and good faith . There does not appear to be any evidence of self-dealing, usurping a corporate opportunity, or intentional bad conduct, so the duties of loyalty and good faith are not at issue. The applicable duty is the duty of care. That is, whether F and the other directors did not do their due diligence in looking onto Thanatos Inc. We had a case [Van Gorkom] where a board of directors in considering a sale of the corporation relied heavily on the reputation of those giving the presentation. The court rules that by not looking into the sale before the meeting, the directors breached their duty of care. This seems to mirror that case. The difference in this case, though, is that the directors may not have been able to find any evidence that Thanatos was faking their accuracy in terms of test results even if they did look. In the case from class [Van Gorkum] there was this assumption, that had the directors done their research they would have found people willing to pay more. Here, I don't think we can assume they would have found the information.

After partner dissociates, partner's right to participate in the management terminates.

Unless winding up (and no wrongful discharge) Duties of good faith terminate Former partner can compete with the firm except from matters arising before the dissociation

Stroud Food Center Stroud Food Center is a partnership consisting of two partners -- Stroud and Freeman. The partnership runs a grocery store, but the two partners are not getting along. One of the regular suppliers to the grocery store is National Biscuit Company (Nabisco), which supplies, among other things, bread. Stroud calls Nabisco on the phone and says that Freeman has no authority to order bread. Freeman then orders more bread, which Nabisco delivers. Stroud and Freeman go their separate ways with Stroud continuing the business. Did Freeman's request bind the partnership to pay for the bread shipped over Stroud's objection?

Yes Manifestation of consent on behalf of principal to third party (Freeman on behalf of the partnership orders bread) Third party reasonably beliefs agent has authority to act on the partnership (Nabisco regular supplier, received no notice that contract ended, most likely knew Freeman was partner and had authority to bind partnership) Ordering bread was the carrying on of the ordinary course of the partnership business and therefore binds the partnership unless the partner had no authority and the third party had received a notification to that effect. In this case, both partners had actual authority in any event. Stroud's "notification" was ineffectual because it was legally incorrect. He could not unilaterally strip Freeman of the authority to conduct partnership business, so even though Nabisco arguably received notice, Freeman still had authority in any event

apparent authority partnership context

You will recall from basic agency law that even without the existence of actual authority, it is possible for a person who appears to be authorized to possess the power to affect the legal rights of the principal. This is the concept of apparent authority, and it applies in the partnership context as well. apparent authority exists when the principal does something (or, in the language of the Restatement, "manifests consent") that, from the point of view of a third party, can be reasonably interpreted as giving a particular person the authority to act on the principal's behalf n the partnership context, the partnership is the principal and the partners are the agents. One might say that the partnership manifests consent to the world when it says "X is a partner in the partnership." Under the concept of apparent authority, one must determine what a reasonable third person dealing with the partnership would understand that manifestation of consent to mean. Again, the partnership agency problem is addressed by a statute.

On July 4, 2004, the other partners expel Paul from the partnership, pursuant to a provision in the partnership agreement allowing expulsion without cause by majority vote. Two weeks after Paul's expulsion, Ringo announces he is withdrawing from the partnership.

dissociation is wrongful if it occurs by express will before the expiration of the term of the partnership. Ringo withdrew by express will before the partnership's term ended, so his dissociation is wrongful unless the exception applies. Note that the exception does not protect every withdrawal in reaction to another partner's dissociation. It protects a withdrawal only in reaction to certain kinds of dissociation. The exception applies if Ringo's dissociation "follows within 90 days after another partner's dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection." Ringo's withdrawal is within 90 days after Paul's expulsion, so the timing is not an issue. But Paul's expulsion does not fall within any of the categories of dissociation listed in the 602(b)(2)(i) exception. Paul was expelled pursuant to the partnership agreement--which, as we saw in the last answer, results in Paul's dissociation pursuant to section 601(3). Paul has not died. Paul's dissociation is not under sections 601(6) through (10). And, as we saw in the last answer, a section 601(3) expulsion is not wrongful. Therefore, the section 602(b)(2)(i) exception does not apply; Ringo's dissociation is wrongful.

Apparent agency analysis

f an apparent agency relationship was created. That is, if it appears to a reasonable third party that B was an agent of Z and Y, and there was reliance on that apparent agency relationship by the third party, Z and Y may be held liable. However, it does not appear that an apparent agency relationship manifested given that social media users did not seem to realize that the Instagram post was even an advertisement for Z and Y's partnership/LLC due to the lack of B using "#ad."

RBG Partners is a general partnership consisting of Ralph, Bertha, and Gary. The partnership runs a grocery store under the name "Ralph's Pretty Good Grocery" reflecting the fact that Ralph knows the grocery store business very well and also reflecting that fact that Ralph has invested 70% of the money in the business, while between them Bertha and Gary put up the other 30%. At a heated meeting of the partners, Bertha and Gary voted that Ralph shall no longer have authority to buy bread; Ralph dissented. Bertha and Gary sign a letter noting Ralph's lack of actual authority and send it to the partnership's regular bread supplier. The letter is sent to the supplier's principal place of business by registered mail, return receipt requested. The letter is delivered promptly to the supplier. Nevertheless, Ralph contacts the bread supplier and orders bread, which the supplier delivers to the store, even though it has received the letter from Bertha and Gary. Has Ralph bound the partnership?

n this case, Ralph has been stripped of his ACTUAL authority by virtue of the 2-1 vote, and even though ordering of bread is still an act within the ordinary course of the partnership's business, the bread supplier is on notice that Ralph lacks authority. Section 301(1) says acts in the ordinary course of the partnership's business will bind the partnership unless the partner in fact had no authority and the third person had received a notification to that effect. In the fact pattern presented, Ralph clearly lacked actual authority, and the bread supplier had received a notification.

RUPA--division of profits and losses upon dissolution

"Each partner is entitled to a settlement of all partnership accounts upon winding up the partnership business. In settling accounts among the partners, profits and losses that result from the liquidation of the partnership assets MUST BE CREDITED AND CHARGED TO THE PARTNERS ACCOUNTS A partner shall contribute to the partnership an amount equal to any excess of the charges over the credits in the partner's account. (IF IN THE HOLE IN HIS ACCOUNT, MUST CONTRIBUTE CAPITAL TO GET HIM MOUT This sections' requirement that a partner contribute to the partnership an amount equal to any excess of charges over credits appears to confirm the rejection of Kovacik. 807(d) - "After the settlement of accounts, each partner shall contribute, in the proportion in which the partner shares partnership losses, the amount necessary to satisfy partnership obligations that were not known at the time of the settlement..."

Kovacik and Reed entered into a general partnership to operate a kitchen remodeling business. Kovacik made an initial contribution of $10,0000. Reed made no capital contribution but did contribute a promise of future services by agreeing to superintend the partnership's work and to estimate the jobs on which the partnership bid. Kovacik and Reed agreed to share profits equally but made no provision for allocating losses. Reed apparently took no salary. Unfortunately, things did not go as planned and Kovacik dissolved the partnership, after only ten months, on the grounds that it was unprofitable. Kovacik claimed the partnership had lost $8,680 and brought a proceeding for an accounting in which he sought to recover one-half of the partnership's capital loss from Reed.

"Where, however, as in the present case, one partner or joint adventurer contributes the money capital as against the other's skill and labor, all the cases cited, and which our research has discovered, hold that NEITHER PARTY IS LIABLE TO THE OTHER FOR CONTRIBUTION OF LOSS SUSTAINED the parties have, by their agreement to share equally in profits, agreed that the value of their contributions—the money on the one hand and the labor on the other—were likewise equal; it would follow that upon the loss, as here, of both money and labor, the parties have shared equally in the losses.

RUPA stipulation for dissolution

(a) In winding up a partnership's business, the assets of the partnership, including the contributions of the partners required by this section, must be applied to discharge its obligations to creditors, including, to the extent permitted by law, PARTNERS WHO ARE CREDITORS . Any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their right to distributions under subsection (b). (PARTNERS CAN GET PROFITS AFTER THIS)

Section 602(b) defines wrongful dissociation:

(b) A partner's dissociation is wrongful only if: (1) it is in breach of an express provision of the partnership agreement; or (2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking; (i) the partner withdraws by express will, unless the withdrawal follows within 90 days after another person's dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection; (ii) the partner is expelled by judicial determination under Section 601(5); (iii) the partner is dissociated by becoming a debtor in bankruptcy; or (iv) in the case of a partner who is not an individual, trust other than a business trust, or estate, the partner is expelled or otherwise dissociated because it willfully dissolved or terminated.

So far, we've been assuming that each of the partners can and will pay the amount he or she is supposed to contribute under section 807. But what do we do if one of the partner's accounts has a negative balance but that partner fails to contribute the required amount? The partner may be bankrupt or the partner may be unavailable, or the partner may just be a jerk who is refusing to pay. Whatever the reason, we can't make the required payments to everyone else without that money. What do we do?

(c) If a partner fails to contribute the full amount required under subsection (b), all of the other partners shall contribute, in the proportions in which those partners share partnership losses, the additional amount necessary to satisfy the partnership obligations for which they are personally liable under Section 306. A partner or partner's legal representative may recover from the other partners any contributions the partner makes to the extent the amount contributed exceeds that partner's share of the partnership obligations for which the partner is personally liable under Section 306.

How a partner is dissociated by unanimous vote of partnership

(i) it is unlawful to carry on the partnership business with that partner; (ii) there has been a transfer of all or substantially all of that partner's transferable interest in the partnership, other than a transfer for security purposes, or a court order charging the partner's interest, which has not been foreclosed; (iii) within 90 days after the partnership notifies a corporate partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, [and] there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business; or (iv) a partnership that is a partner has been dissolved and its business is being wound up;

RUPA § 601. Events Causing Partner's Dissociation

A partner is dissociated from a partnership upon the occurrence of any of the following events: (1) the partnership's having notice of the partner's express will to withdraw as a partner [upon the date of notice] or on a later date specified by the partner; (2) an event agreed to in the partnership agreement as causing the partner's dissociation; (3) the partner's expulsion pursuant to the partnership agreement; (4) the partner's expulsion by the unanimous vote of the other partners if: (5) on application by the partnership or another partner, the partner's expulsion by judicial determination because: (2 reasons) (6) the partner's: (i) becoming a debtor in bankruptcy; (ii) executing an assignment for the benefit of creditors; (iii) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of that partner or of all or substantially all of that partner's property; or (iv) failing, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or substantially all of the partner's property obtained without the partner's consent or acquiescence, or failing within 90 days after the expiration of a stay to have the appointment vacated; (7) in the case of a partner who is an individual: (i) the partner's death; (ii) the appointment of a guardian or general conservator for the partner; or (iii) a judicial determination that the partner has otherwise become incapable of performing the partner's duties under the partnership agreement; (8) in the case of a partner that is a trust or is acting as a partner by virtue of being a trustee of a trust, distribution of the trust's entire transferable interest in the partnership, but not merely by reason of the substitution of a successor trustee; (9) in the case of a partner that is an estate or is acting as a partner by virtue of being a personal representative of an estate, distribution of the estate's entire transferable interest in the partnership, but not merely by reason of the substitution of a successor personal representative; or (10) termination of a partner who is not an individual, partnership, corporation, trust, or estate.

Curly is a partner in the Stooge General Partnership. He contributes some land he owns to the partnership. The land has a value of $75,000, but it is encumbered by a mortgage with a balance of $25,000 due. As part of the transfer, the partnership agrees to be liable for payment of the mortgage loan. What should we do to Curly's account? Here's the text of section 401(a) again:

Add $50,000 (75-25) Section 401(a)(1) says that a partner's account should be "CREDITED with an amount equal to . . . the value of any other property, NET THE AMOUNT OF LIABILTIES the partner contributes to the partnership." We credit an amount to an account by adding to it. The amount we add is not the total value of the property ($75,000), but the value of the property "net of the amount of any liabilities." Here, the value of the property, net of the amount of the $25,000 mortgage, (the liability) is only $50,000. We should add $50,000 to Curly's account.

The partnership has a net profit of $24,000 this year. Under the terms of the partnership agreement, Smith is entitled to 1/3 of the partnership's profits.

Addition That's right. Section 401(a)(1) says that Smith's account is credited with "an amount equal to (amount contributed PLUS . . . the partner's share of the partnership profits." ) Smith's share of the profits would be credited to (added to) his account. Thus, Smith's account would increase by $8,000, his 1/3 share of the partnership's $24,000 profit for the year.

Effect of Dissociation (RUPA)

After a partner dissociates, the partner's rights to participate in management terminate. But if the dissociation causes dissolution and winding up, partners who have not wrongfully caused the dissociation may participate in winding up activities. RUPA 603(b) / 804(a) The dissociated partner's duties of loyalty, care, and good faith terminate The former partner may compete with the firm, EXCEPT IN MATTERS ARISING BEFORE THE DISSOCIATION

What happens if we've already settled the balances in the accounts of the partners (in other words, if we're done with the process described in this lesson), and we find out later that there's another partnership debt we weren't aware of? How do we handle that late-appearing obligation?

After settlement of accounts, each partner shall contribute, in the proportion in which the partner shares partnership losses, the amount necessary to satisfy the partnership obligations that were not known at the time of the settlement and for which the partner is personally liable under Section 306. (RUPA)

Page v. Page Page v. Page, 55 Cal. 2d 192, 359 P.2d 41 (1961), is a famous California Supreme Court partnership case. The plaintiff and the defendant, who were brothers, created a partnership in 1949 to operate a linen supply business. The business was unprofitable from 1949 to 1957, but the partnership made a $3800 profit in 1958 and a $2300 profit in the first three months of 1959. The change in fortune was due primarily to the establishment of an air force base in the vicinity. In 1959, the defendant, who had the expertise and whose corporation owned the equipment used by the partnership, withdrew. The California Supreme Court found that the partnership was at will--that there was no agreement to continue for a definite term or undertaking. However, the court indicated that the defendant's withdrawal just as the business was becoming profitable may have been in bad faith--an attempt to avoid sharing the good fortune with his brother. The court held that, if bad faith was found, the dissociation would be wrongful. Page v. Page was decided long before the RUPA was adopted. Would the defendant's dissociation be wrongful today under section 602(b)?

Correct. Did not breach implied duty of good faith because did not act solely to snub him of profit The drafters appear to have rejected the Page v. Page result. Section 602(b) says a partner's dissociation is wrongful "only if" it falls within (b)(1) or (b)(2). Section 602(b)(2) does not apply here because the partnership is at will and (b)(2) only applies "in the case of a partnership for a definite term or particular undertaking." Section 602(b)(1) says a dissociation is wrongful if "it is in breach of an express provision of the partnership agreement." The defendant has not breached any express provision of the agreement. Partners owe each other an obligation of good faith and fair dealing. RUPA § 404(d). The defendant might have breached that obligation, or some other fiduciary duty, but his dissociation has not breached any express provision of the partnership agreement. Since the dissociation does not fall within either (b)(1) or (b)(2), it is not wrongful.

The partners orally agreed that the partnership would continue until they completed construction of the partnership's new office building. The partner dissociated by express will when the building was only half-completed.

Correct. Section 602(b)(2) indicates that a dissociation is wrongful if (2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking; (i) the partner withdraws by express will, unless the withdrawal follows within 90 days after another person's dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection; . . . This is a partnership for a particular undertaking. The partners orally agreed that the partnership would continue until they completed construction of the partnership's new office building. (It doesn't matter that the agreement is oral, at least as far as the RUPA is concerned, because nothing in the RUPA requires a partnership agreement to be in writing.) The partner withdrew by express will before the undertaking was completed.

The partnership agreement specifies that the partnership shall continue until February 9, 2013. On April 10, 2005, the partner became a debtor in bankruptcy.

Correct. This is a partnership for a definite term. The partnership agreement specifies that the partnership shall continue until February 9, 2013. The partner's dissociation by becoming a debtor in bankruptcy comes before the expiration of the term, on April 10, 2005. Section 602(b)(2)(iii) specifically provides that, in term partnerships such as this, the partner dissociating by becoming a debtor in bankruptcy is wrongfu

On March 15, 2004, John dies. Ten days later, Ringo informs George and Paul he is withdrawing from the partnership.

Correct. Ringo's dissociation is not wrongful. Ringo is withdrawing before the term of the partnership expires. Ordinarily, a withdrawal by express will before the expiration of the term would be wrongful, under the first part of section 602(b)(2)(i): (b) A partner's dissociation is wrongful only if:* * *(2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking;(i) the partner withdraws by express will, . . . However, Ringo's withdrawal falls within the exception: unless the withdrawal follows within 90 days after another person's dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection;" When John died, his death resulted in a dissociation pursuant to section 601(7)(i). Ringo's withdrawal followed within 90 days after John's dissociation by death, and therefore falls within the exception. The exception in section 602(b)(2)(i) allows a reactive withdrawal after someone important to the business departs. If Ringo doesn't want to continue now that John is dead, section 602(b)(2)(i) allows him to dissociate without it being wrongful.

On January 1, 2006, John informs the other partners he is withdrawing from the partnership. On March 1, 2006, Ringo informs the other partners he is also withdrawing.

Correct. Ringo's withdrawal here also falls within the exception. If one partner withdraws wrongfully, the other party can withdraw wrongfully as well if AFTER 90 days To fall within the exception and not be a wrongful dissociation, Ringo's dissociation must "[follow] within 90 days after another partner's dissociation by death or OTHERWISE under Section 601(6) through (10) or WRONGFUL DISSOCIATION under this subsection." No one has died and John's voluntary dissociation does not fall within sections 601(6) through (10). However, John's voluntary dissociation IS a "wrongful dissociation under this subsection." This is a partnership for a term and the term has not expired. John, therefore, falls within the general rule of section 602(b)(2)(i): John's withdrawal by express will is wrongful. Ringo's withdrawal follows within 90 days after John's wrongful dissociation under this subsection, so Ringo falls within the exception and Ringo's dissociation is not wrongful. This is another valid reactive dissociation.

The partnership is a partnership at will. Nothing in the partnership agreement limits the right of partners to dissociate.

Correct. Section 602(b)(1) does not apply because the dissociation is not "in breach of an express provision of the partnership agreement." Nothing in the partnership agreement limits the right to dissociate. Section 602(b)(2) does not apply because it applies only "in the case of a partnership for a definite term or particular undertaking." This is a partnership at will.

The partner sues another partner for breach of fiduciary duty, alleging that the other partner embezzled money from the partnership.

Correct. This partnership clearly has problems, but the suing partner has not indicated in any way that he wishes to withdraw. Partners sometimes sue each other without dissociating. The question is not whether the partners hate each other or can't get along or even sue each other. The question is whether a partner has indicated that he wants to withdraw from the partnership.

Rule for liability in partnership

Creditors get paid first. And, since the partners in a general partnership have unlimited liability for the obligations of the partnership, they have to contribute additional amounts if there aren't enough partnership assets to pay the creditors. ONLY AFTER CREDITOR SHARES GET PAID DO THE PARTNERS GET THEIR SHARE OF THE BUSINESS (30 percent/70 percent)

Jason and Allison are the only partners in a general partnership, Mayhem Partnership. They have a written partnership agreement. Jason contributed $99,000 cash to the partnership and Allison contributed $1,000, as required by the partnership agreement. The agreement requires Jason to work 20 hours a week for the partnership and Allison to work 40 hours a week. Unfortunately, Jason and Allison forgot to put anything in the partnership agreement about how they will share profits and losses. What will Jason and Allison's share of the profits of Mayhem Partnership be? A. Jason will receive 99% of the profits because he contributed 99% of the money. B. Jason will receive 20/60, or 1/3, of the profits and Allison will receive 40/60, or 2/3, of the profits because Jason works 20 hours a week and Allison works 40 hours a week. C. Neither Jason or Allison will receive any profits from the business because they forgot to specify their shares of profits in the partnership agreement D. Jason and Allison will each receive 50% of the profits. E. The amount of profits Jason and Allison will receive must be determined by a court because they forgot to specify their shares of profits in the partnership agreement.

Each will get an EQUAL share of the profits. RUPA SECTION 401(B) 1. Each partner is entitled to an EQUAL share of profits and is chargeable with a share of the partnership losses in proportion to the partner's share of the profits. An equal share when there are two couple operating the partnership is 50%, DOES NOT MATTER HOW MUCH THEY CONTRIBUTED OR WORK

If the partnership agreement says nothing about how profits and losses are shared, section 401(b) says profits are shared equally. But what if the partnership loses money? Remember that the agreement says nothing about profits or losses. How will Jason and Allison share the losses if Mayhem Partnership loses money? Briefly describe how losses will be allocated and explain how you derived this result from the statute. Jason and Allison are the only partners in a general partnership, Mayhem Partnership. They have a written partnership agreement. Jason contributed $99,000 cash to the partnership and Allison contributed $1,000, as required by the partnership agreement. The agreement requires Jason to work 20 hours a week for the partnership and Allison to work 40 hours a week. Unfortunately, Jason and Allison forgot to put anything in the partnership agreement about how they will share profits and losses.

Here, profits are shared equally, so losses are also shared equally. Section 401(b) says that, when the agreement doesn't otherwise specify, profits are shared equally. In other words, the default rule for profits is equal sharing. We already determined that, since the partnership agreement says nothing about profits, Jason and Allison will share them equally. Section 401(b) also contains a default rule for losses. In the absence of a provision in the agreement specifying how losses are shared, section 401(b) says that each partner "is chargeable with a share of the partnership losses in proportion to the partner's share of the profits." In other words, the default rule for losses is however profits are shared. Warning: The default rule for losses is NOT that losses are shared equally. The default rule for losses is that losses are shared the same as profits. These two statements of the rule might seem identical for this problem, but, as we will see later, they're not always the same.

After another partner dies, the partner says, "I just don't know how we can do business without Martha. She was the heart and soul of our business. Without her, we ought to just pack up and go home."

I think you're right. This comes close to an express will to withdraw, but I don't think it crosses the line. The partner is not saying she is withdrawing because of Martha's death. She is saying the partners ought to quit because of Martha's death. In other words, she's suggesting a course of action to the other partners, but she hasn't actually taken that action yet. She's merely exploring the possibility with the other partners. It's a fine line, but I don't think a court would hold that the language used, by itself, constitutes an express will to withdraw.

Buy out under RUPA

If firm continues to do business after partner dissociate, WITHOUT WINDING UP, then partnership must purchase the dissociated partner's interest BUY OUT PRICE: amount that would have been distributed to the dissociated partner, if on the date of the dissociation, the firm's assets were sold at price equal to the greater of 1. The liquidation value 2. Sale of the business as a going concern MINUS THE DAMAGES FOR WRONGFUL DISSOCIATION

What happens if one of the partners dies?

If one of the partners is deceased, her estate is liable for any contribution the partner is supposed to make. RUPA § 807(e)

RUPA dissociation term partnership

In a partnership for a definite term or particular undertaking Within 90 days after a partner's dissociation by death, at least half of the remaining partners want to wind up the partnership. Any member of an at will partnership can dissociate at any time, triggering dissolution and liquidation The partners who wish to continue the business of a term partnership, though, can't be forced to liquidate the business by a partner who withdraws prematurely in violation of partnership agreement MUST GIVE SHARE IN AT WILL

Assume, as before, that the partnership agreement between Jason and Allison provides that Jason will receive 70% of the profits and Allison will receive 30% of the profits. But the agreement says nothing at all about losses because Jason and Allison just assumed they would make money. If Mayhem Partnership loses money, how will Jason and Allison share the losses?

Jason will be responsible for 70% of the losses and Allison will be responsible for 30% of the losses. Section 401(b) specifies that a partner "is chargeable with a share of the partnership losses in proportion to the partner's share of the profits." We have already established that, because of what the agreement says, the profits will be shared 70/30. Section 401(b) says to share losses in the same proportion, 70/30. Thus, Jason is chargeable with 70% of the losses and Allison is chargeable with 30% of the losses. Section 103(a), as we saw earlier, indicates that the partnership agreement governs on this issue and that the Act applies only "to the extent the partnership agreement does not otherwise provide." The partnership agreement provides that Jason will receive 70% of the profits and Allison will receive 30%. Under section 103(a), their agreement governs on the issue of profits. However, the agreement says nothing about losses, so we have to see what the Act says about losses because section 103(b) says the Act's provisions apply to the extent the agreement does not otherwise provide.

Consider the following problem: Larry, Moe, and Curly are the only partners in the Stooge Partnership. The partnership agreement provides for the following sharing of profits and losses: Larry 10%, Moe 30%, and Curly 60%. Stooge is dissolved and Stooge has insufficient assets to pay all its creditors. Including the amounts necessary to pay the creditors, the partners' accounts have the following negative balances: Larry -$4,000, Moe -$ 2,000, and Curly -$8,000. Larry and Moe have paid the amounts they owe, but Curly has skipped town and no one can find him. The partnership still owes its creditors $8,000. What happens?

Larry and Moe aren't going to be able to avoid paying this debt just because Curly has skipped out. Section 306(a) of the RUPA says that partners are "jointly and severally liable for all obligations of the partnership," not just for their percentage share of those obligations. Even though Curly is supposed to pay his fair share, Larry and Moe are still jointly and severally liable to the creditors until they are paid. So Larry and Moe are clearly going to have to come up with the $8,000. The only question is how much. The key to answering that question is the first sentence of section 807(c), which says all of the other partners must contribute the $8,000 "in the proportions in which those partners share partnership losses." The partnership agreement says that Larry is responsible for 10% of the partnership losses and Moe is responsible for 30% of the partnership losses. Ignoring the deadbeat Curly, Larry is responsible for 10% out of 40%, or 1/4, and Moe is responsible for 30% out of 40%, or 3/4. Thus, Larry has to pay 1/4 of the $8,000 still owed ($2,000) and Moe has to pay 3/4 of the $8,000 still owed ($6,000).

What constitutes a loss from a partner's account?

Money distributed to him by the partnership (if he gets a salary) Property distributed from the partnership to the partner Partner's share of the partnership losses

The partner is a limited partnership. It just dissolved and its business is being wound up..

Partner is not dissociated, dissolution of a partner that is a corp or partnership , dissociation not automatic, needs unanimous vote of partner's for expulsion AND 2. within 90 days after part or corp filed certificate of dissolution/charter revoked/right to conduct business revoked and no reinstatement or revoking of right to conduct biz or dissolution certificate OR 3. a partnership that is a partner has been dissolved and its business is being wound up. ****The other partners may by UNANIMOUS VOTE EXPEL A CORP from the partnership a corporation or partnership that has been dissolved, but that dissociation is NOT AUTOMATIC. Until that vote occurs, the corporation or partnership continues as a partner.

The partnership agreement provides for a term of five years. The partner dies only two years later.

Not Wrongful Right. The partner's death clearly results in a dissociation. Section 601(7)(i). However, the dissociation is not wrongful under section 602(b). Section 602(b)(1) does not apply because it was not in breach of an express provision of the partnership agreement for the partner to die. Section 602(b)(2) applies to this partnership because it is a partnership for a definite term (5 years) and the partner died before the end of that term. However, this is not one of the events listed in the rest of subsection (b)(2): (i) The partner did not withdraw by express will. (ii) The partner was not expelled by judicial determination. (iii) The partner did not become a debtor in bankruptcy. (iv) The partner is an individual, so (b)(2)(iv) does not apply. Since this dissociation does not fall within section 602(b), it is not wrongful.

Larry, Curly, and Mo form a partnership. They agree that the partnership shall continue until they complete the pilot for a new television show. The partnership agreement contains the following sentence: "Wrongful Dissociation. A partner's dissociation by becoming a debtor in bankruptcy shall not be wrongful." On October 31 of this year, before the three partners had completed the pilot, Larry became a debtor in bankruptcy. Which of the following sentences is most correct?

Ordinarily, this would constitute a wrongful dissociation. Section 602(b)(2) says a dissociation is wrongful "(2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or completion of the undertaking;* * *(iii) the partner is dissociated by becoming a debtor in bankruptcy; . . ." All of these conditions apply. This is a partnership for a particular undertaking. The partners agreed to stay together until they finished the television pilot. That undertaking has not been completed. And Larry has become a debtor in bankruptcy. The partnership agreement overrides section 602. The partnership agreement indicates that a dissociation of this sort is not wrongful. But can the agreement override what the statute says? To answer that question, we must look at section 103. Section 103(a) says: "(a) Except as otherwise provided in subsection (b), relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this [Act] governs relations among the partners and between the partners and the partnership." In other words, except as provided in subsection (b), the partnership agreement governs and the Act only applies when the partnership agreement is silent. Subsection (b) then lists the provisions of the Act the partnership agreement may not change. (duty of good faith, care, etc). (Section 602(b) is not on that list. Therefore, the provision in the partnership agreement is enforceable: Larry's becoming a debtor in bankruptcy is not a wrongful dissociation.

The partner is a limited liability company. It has dissolved and wound up its affairs, terminating its existence..

Other entities are treated differently from corporations and partnerships. Section 601(10) says that dissociation occurs upon "termination of a partner who is not an individual, partnership, corporation, trust, or estate." A limited liability company is not an individual, partnership, corporation, trust, or estate, so its termination dissociates it from the partnership.

Causes of Dissociation (RUPA 601)

Partner says he/she wants out; 2. Any event that triggers dissociation as written into partnership agreement; 3. A partner is expelled as per the partnership agreement; 4. A partner is expelled by unanimous vote of the partnership; 5. By a court order (because of misbehavior); 6. The partner has declared bankruptcy; 7. The partner has died or been declared legally incompetent 8. The partner is a trust whose assets are exhausted; 9. Partner is an estate whose assets are exhausted 10. Partner dies (person) or partner is another partnership or corporation whose existence is terminate

How would Kovacik be decided under RUPA? See 401(a), 401(b), 807(b), and 807(d)

RUPA 401(a) provides that each partner is deemed to have a capital account that is credited with "the money plus the value of any other property" the partner contributes to the partnership. This provision was intended to LIMIT CAPITAL CONTRIOBUTIONS TO CASH AND PROPERTY and thereby to exclude the value of either past or future services from capital. RUPA 401(b) reaffirms the loss-sharing rule of UPA: "Each partner is ENTITLED TO AN EQUAL SHARE OF THE PROFITS AND THUS SHARES IN THE LOSSES IN PROPORTION TO HIS PROFITS This establishes the default rules for the sharing of partnership profits and losses. The default rule states that the profits are shared equally and that LOSSES--WHETHER CAPITAL OR OPERATING--are shared in proportion to each partner's share of the profits. The DEFAULT RULES apply where one or more of the partners contribute NO CAPITAL (although there is some case law to the contrary) This appears to reject the holding of Kovacik.

Buy Out - RUPA 701

RUPA 701 provides that if the firm continues in business after a partner dissociates, without winding up, then the partnership must purchase the dissociated partner's interest. 701(b) - explains how to determine the buyout price. The amount that would have been distributed to the dissociated partner if, on the date of dissociation, the firm's assets were sold "at a price equal to the greater of (1) the liquidation value or (2) the value based on a sale of the entire business as a going concern," minus the damages for wrongful dissociation

What happens when a partner dies to his share?

RUPA--other partners can buy out share UPA--partnership dissolves

The partner contributed to the partnership the machine that it uses to manufacture its only product. Upset with the other partners, she puts the machine on her truck and moves it to her garage

Removing the machinery necessary to produce the partnership's only product appears inconsistent with anything other than withdrawal from the partnership, absent other extenuating facts. So you might argue that this is an expression of the partner's will to withdraw. Does this require a stated expression of withdrawal or do mere actions suffice, as long as they indicate the partner's intention to withdraw? Comment 2 to RUPA § 601 says RUPA is meant to preserve the existing case law, and some earlier cases indicated that actions like this could constitute an express will to withdraw. See Staines Associates v. Adler, 698 N.Y.S.2d 639 (N.Y. App. Div. 1999) (defendant's transfer of title to residential property owned by the partnership to himself individually)

Rightful and Wrongful Dissociation

Rightful vs. Wrongful Dissociation Wrongful dissociation - a dissociation that breaches an express provision of the partnership agreement, or in a term partnership, if before the expiration of the term or the completion of the undertaking: 1. the partner voluntarily withdraws by express will; 2. the partner is judicially expelled for misconduct; 3. the partner becomes a debtor in bankruptcy, or 4. the partner is an entity (other than trust or estate) and is expelled or otherwise dissociated because its dissolution or termination was willful. Rightful dissociation - all other dissociations are rightful including the death of a partner in any partnership and the withdrawal of a partner in a partnership at will

On January 1, 2006, John informs the other partners he is withdrawing from the partnership. On June 1, 2006, Ringo also withdraws from the partnership.

Ringo's withdrawal must follow within 90 days after the other partner's dissociation. Here, John's wrongful dissociation occurred on January 1. Ringo did not withdraw until June 1, much more than 90 days later.

Sale of business for going concern (buyout under RUPA)

Sale of business for going concern: One way is the sale of a business as a going concern. This involves the sale of a business that includes everything required to continue operating the business. This differs to a business which is not sold as a going concern where, For example, the purchaser may: only receive the plant, equipment and client lists; and run the business under a different name and from different premises.

RUPA rules for accounting

Section 401(a) of the Revised Uniform Partnership Act provides: (a) Each partner is deemed to have an account that is: (1) credited with an amount equal to the money plus the value of any other property, (net of the amount of any liabilities,) that the partner contributes to the partnership and the partner's share of the partnership profits; and (Money from amount he contributed (ex $50,000 to get started and per his agreement 30% of the weekly income from the property) (2) charged with an amount equal to the money plus the value of any other property, net of the amount of the liabilities, distributed by the partnership to the partner and the partner's share of the partnership losses. When section 401(a) says each partner has an account, it doesn't mean anything like a bank account where money is deposited. It's just using the term account in the accounting sense to mean a paper record. When section 401(a)(1) says an account is credited with an amount, it just means the amount is added to the total in that account. When section 401(a)(2) says an account is charged with an amount, it just means the amount is subtracted from the total in that account. Credited = Added Charged=Subtracted

Smith invests an additional $2,500 cash in the partnership.

Section 401(a)(1) says Smith's partnership account is credited with "an amount equal to the money . . . the PARTNER CONTRIBUTES to the partnership." Smith is contributing $2,500 cash to the partnership. The amount of this money must be credited to (added to) Smith's account.

Adam, Barbara, and Cindy, three recent law school graduates, create a law partnership. The partnership agreement contains the following paragraph: This partnership shall continue until July 4, 2010. However, if Cindy is elected president of the state bar association, Cindy shall be dissociated from the partnership. Surprisingly, Cindy is elected president of the state bar association. Cindy decides that she doesn't want to leave the firm, so she does not express her will to withdraw after she is elected. Is Cindy dissociated from the partnership?

Section 601(2) says a partner is dissociated upon the occurrence of "an event agreed to in the partnership agreement as causing the partner's dissociation." Here, the partnership agreement clearly specifies that Cindy will be dissociated if she is elected president of the state bar association. That event has occurred, so Cindy is dissociated. Section 601(2) gives the partners the power to add any additional events of dissociation they want. They're not limited to those specified in the statute. If, for whatever reason, they want Cindy's election to result in her dissociation, they can do so.

On December 26, 2005, George becomes a debtor in a bankruptcy proceeding. Twenty days later, Ringo notifies the other partners he is withdrawing from the partnership. Wrongful

Section 601(6)(i) says that a partner dissociates when he becomes a debtor in bankruptcy. Therefore, George has dissociated. George dissociated b/c debtor, 20 days within the 90 day limit (b) A partner's dissociation is wrongful only if: * * * (2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking;(i) the partner withdraws by express will, UNLESS the withdrawal follows within 90 days AFTER another person's dissociation by death or otherwise under Section 601(6) through (10) or WRONGFUL DISSOCIATEN Ringo's withdrawal follows within 90 days after George's dissociation under Section 601(6), so Ringo's dissociation fits within the exception and is not wrongful.

Individual v corporation dissociation rules

Section 601(7)(i) says that, if the partner is an individual, the partner is dissociated when he dies. If the partner is an entity, it can be dissociated if it ceases to lawfully exist. Use sections 601(4), 601(7), and 601(10) to indicate whether the following events result in a dissociation

The partner is a trust. It distributes its entire interest in the partnership to the beneficiaries of the trust.

Section 601(8) applies here. It applies "in the case of a partner that is a trust. " It says that dissociation occurs upon "distribution of the trust's entire transferable interest in the partnership." Here, the trust has distributed its entire interest in the partnership to the beneficiaries, so the trust is dissociated.

The partner is an estate. It distributes its entire interest in the partnership to settle the estate.

Section 601(9) applies here. It applies "in the case of a partner that is an estate." It says that dissociation occurs, upon "distribution of the estate's entire transferable interest in the partnership, but not merely by reason of the substitution of a successor personal representative." Here, the estate has distributed its entire interest in partnership. That transfer has not occurred JUST TO SUB ANOTHER PERSONAL REP, BUT TO SETTLE THE ESTATE but to settle the estate. The estate is therefore dissociated.

The partnership agreement specifies that the partnership shall continue until January 15, 2008. The partner dissociated by express will on December 15, 2006.

Section 602(b)(2) indicates that a dissociation is wrongful if (2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking; (i) the partner withdraws by express will, unless the withdrawal follows within 90 days after another person's dissociation by death or otherwise under Section 601(6) through (10) or wrongful dissociation under this subsection; . . . This is a partnership for a definite term; the partnership agreement provides that the partnership "shall continue until January 15, 2008." The partnership expressed his will to dissociate in 2006, before the expiration of the term. The "unless" clause, which we will look at later, does not apply here.

John and Anne are the only general partners in the Bradford General Partnership. The partnership agreement provides that John will receive 30% of the partnership's profits and Anne will receive the remaining 70%. This year, Bradford lost $1,000. How should John's and Anne's partnership accounts be changed?

Subtract $300 from John's account; Subtract $700 from Anne's account. As with most issues, the partnership agreement governs. The problem here is that the partnership agreement says nothing about how John and Anne are to share losses; it only covers profits. Thus, we must follow RUPA 401(b) contains the default provisions in the UPA concerning profits and losses. It tells us that each partner "is chargeable with a share of the partnership losses in proportion to the partner's share of the profits." The agreement tells us that John gets 30% of the profits and Anne gets 70% of the profits. Section 401(b) says that losses should be shared in the same proportions. Thus, John is charged with 30% of the losses and Anne is charged with 70%. Therefore, we must subtract $300 (30% of the total loss) from John's account and subtract $700 (70% of the total loss) from Anne's account.

Forming a new partnership (UPA)

TO FORM A NEW PARTNERSHIP FOLLOWING DISSOLUTION OF A PARTNER: Need a unanimous agreement among the remaining partners; or The dissolution NEEDS TO BE FOUND IN VIOLATION OF THE PARTNERSHIP AGREEMENT The partner was expelled according to a provision in the partnership agreement SO THE OTHER PARTNERS CAN CARRY ON Presumption under UPA: dissolution of any partner will trigger wind up and termination of partnership. NOTE: Creditors of the old partnership remain creditors of the new partnership, unless the new partners agree to discharge the old partner from liability (by novation).

Larry and Moe had to pay Curly's share and they're mad. Larry's out an extra $2,000 and Moe has $6,000 less in his wallet. Now that all the creditors are paid, Curly shows up and says, "Nyuk, nyuk. You guys had to pay my $8,000 share. Serves you right. " Look at section 807(c) again. Anything Larry and Moe can do to shut up Curly?

That's correct. The second sentence says that a partner can recover from other partners "any contributions the partner makes to the EXTENT THE AMOUNT CONTRIBUTED EXCEEDS THAT PARTNERS SHARE OF PARTNERSHIP OBLIGTIONS . . ." Larry can recover from Curly the $2,000 Larry overpaid and Mo can recover his $6,000 overpayment.

Billie Jo is one of three partners in Junction Partnership. The partnership agreement contains the following paragraph: "The partners, Billie Jo, Bettie Jo, and Bobbie Jo, agree to remain in the partnership until January 1, 2006. No partner shall leave the partnership prior to that time." On Feb. 14, 2003, two days after the partnership was created, Billie Jo told the other partners that she was withdrawing from the partnership. Is Billie Jo dissociated from the partnership?

That's right. Section 602(a) says Billie Jo has "the power to dissociate at any time, rightfully or wrongfully, by express will." Section 103(b)(6) says that the partnership agreement may not take away this right to dissociate; the most the agreement can do is to require a written rather than an oral dissociation. Therefore, PARTNERSHIP AGREEMENT PREVENTING DISSOCIATION IS INVALID. Billie Jo dissociated when she expressed her will to withdraw. That dissociation may be WRONGFUL, but it's a dissociation nonetheless.

Consider the following problem: Abe, Bertha, Connie, and Dan are partners in the Omega General Partnership. The partnership provides for the following sharing of profits and losses: Abe 10%, Bertha 25%, Connie, 20%, and Dan 45%. Omega was recently dissolved and, after paying all known creditors, the appropriate payments were made to settle the partnership accounts. Two months later, the partners discovered that Omega owed $5,000 to the Fourteenth National Bank. The debt is undisputed, but all of Omega's assets have been distributed. How much does each partner have to contribute to pay this $5,000 debt?

Therefore, Abe is responsible for 10% of the debt and must contribute $500; Bertha is responsible for 25% of the debt and must contribute $1,250; Connie is responsible for 20% of the debt and must contribute $1,000; and Dan is responsible for 45% of the debt and must contribute $2,250.

Assume that the Johnston Partnership has four partners: Tim, Paul, Kathy, and Kaye. After including the profits and losses that result from the liquidation of the partnership assets, their accounts have the following amounts in them. Tim + $5,000 Paul-$4,200 Kathy+ $100 Kaye- $900 Please match each partner with the appropriate amount he or she must pay or will receive.

Tim will receive 5000 and Kathy will receive 100 Reasoning: The partnership shall MAKE A DISTRIBUTION to a partner in an amount EQUAL TO ANY EXCESS OF THE CREDITS OVER THE CHARGES in the partner's account, this applies if there is applies if there is an excess of credits (+) over charges (-) in the partner's account--a positive balance. Paul will have to pay 4200 and Kay will have to pay 900 A partner SHALL CONTRIBUTE to the partnership an amount equal to any EXCESS OF THE CHARGES OVER THE CREDITS in the partner's account, this applies if applies if there is an excess of charges (-) over credits (+) in the partner's account--a negative balance. I

The partner is a corporation. It just filed a certificate of dissolution dissolving itself.

Under section 601, the dissolution of a partner that is a corporation or a partnership does not automatically dissociate that partner. Section 601(4) says dissociation occurs upon 4) the partner's EXPLUSION BY UNANIMOUS vote of the other partners if:* * * (iii) within 90 days AFTER the partnership NOTIFIES a corporate partner that IT WILL BE EXPELLED because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, [and] there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business; or (iv) a partnership that is a partner has been dissolved and its business is being wound up. The other partners may by UNANIMOUS VOTE EXPEL A CORP from the partnership a corporation or partnership that has been dissolved, but that dissociation is NOT AUTOMATIC. Until that vote occurs, the corporation or partnership continues as a partner.

Mr. Creel entered a partnership with Lilly and Altizer. The business, "Joe's Racing," sold NASCAR memorabilia. Mr. Creel died just nine months after the business was formed. Mrs Creel wants the partnership dissolved and liquidated, from which she would take her late husband's share. Instead, the other partners want to continue the business but to cash out Mrs. Creel by valuing the business and giving her the proportional share.

Under the UPA, death of a partner did dissolve the partnership, because it was seen as an aggregate of individuals, which now no longer exists. Under the RUPA, the partnership is an entity that can continue after the death of a partner, with the deceased partner's estate being cashed out. UPA has the unfortunate result of causing liquidation of a going concern unless the parties crafted an agreement that allowed the business to continue after the death of a partner.

On July 4, 2004, the other partners expel Ringo from the partnership, pursuant to a provision in the partnership agreement allowing expulsion without cause by majority vote.

Very good. Ringo's dissociation is not wrongful. I tried to trick you by throwing in a non-reactive dissociation, but you're too smart for me. (Don't gloat too much; according to some people, everyone I have ever met is too smart for me.) Ringo is dissociated from the partnership as a result of his expulsion. Section 601(3) says that a partner is dissociated upon "the partner's expulsion pursuant to the partnership agreement." But Ringo's dissociation is not wrongful. Section 602(b)(1) says that a wrongful dissociation can be wrongful if the dissociation "is in breach of an express provision of the partnership agreement." Ringo's expulsion is not in breach of an express provision of the partnership agreement. In fact, it is perfectly consistent with the partnership agreement. (i) Ringo has not withdrawn by express will; he was involuntarily expelled. (ii) Ringo was not expelled by judicial determination under Section 601(5); he was expelled by a vote of the partners. (iii) Ringo has not become a debtor in bankruptcy. (iv) Ringo is an individual, so this section does not apply. On July 4, 2004, the other partners expel Paul from the partnership, pursuant to a provision in the partnership agreement allowing expulsion without cause by majority vote. Two weeks after Paul's expulsion, Ringo announces he is withdrawing from the partnership. Wrongful Not Wrongful Next All Contents © CALI, The Center for Computer-Assisted Legal Instruction. All Rights Reserved.

2. Partners' Accounts--summed up rules

We set up a record for each partner, known as an account. We record the following in that account: AddING TO THEIR ACCOUNT [RUPA § 401(a)(1)] :(1) The amount of any money the partner contributes to the partnership (2) The value of any property, net of the amount of any liabilities, the partner contributes to the partnership (3) The partner's share of partnership profits. SUBTRACT Subtract [RUPA § 401(a)(2)] :(1) The amount of any money the partnership distributes to the partner. (2) The value of any property, net of the amount of any liabilities, the partnership distributes to the partner. (3) The partner's share of partnership losses.

The partner complains that he is not receiving the amount of income from the partnership that he is supposed to.

You're right. Although the partner is unhappy with the amount he is receiving, he has not indicated that he wants to withdraw from the partnership. Mere grousing about the business or expressions of unhappiness do not constitute an express will to withdraw.

A partner can also be dissociated if he transfers all

substantially all of his transferable interest in the partnership to someone else.

When can one partner discharge another?

partner engaged in wrongful conduct that adversely and materially affected the partnership business; The partner engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership. (on application from partnership or one partner in the partnership)