Business Law - Chapter 32
What are the requirements for partnership by estoppel to apply?
A third party relies on the assertion that the participants are partners The participants tell other they are partners The third party suffers harm
How may a partnership ratify an unauthorized partner transaction?
Accepting the benefit of the transaction Failing to repudiate it
________ partners have __________ liability for the partnership obligations. This means that __________ and the partners are all individually liable for the full amount of debt. However, a creditor cannot recover from __________ until __________ are exhausted.
All joint and several the partnership a partner's assets the partnership's assets
Which of the following must a partner turn over to the partnership?
Any profit earned from use of partnership property without the consent of the partners Earnings from any activity related to the partnership's business
Andrew, Betty, and Charles form a partnership to produce five independent films. After they complete their third film, Charles decides that he would like to go back to school full-time, and tells Andrew and Betty that he will not produce the remaining two films with them. What will happen to the partnership?
Charles will be wrongfully dissociated and Andrew and Betty must decide whether or not to continue the partnership without Charles.
Which of the following are types of conduct for which a partner is liable to the partnership?
Gross negligence Recklessness Knowing violation of the law
Which of the following are factors that a court will consider in determining a partnership exists?
How losses and profits are divided Whether the parties are involved in the management of the business Whether there is a partnership agreement Whether the parties intend to make a profit
Sports Destination is a sporting goods store owned by four partners: Jerry, Kevin, Lisa, and Marcy. They have a partnership agreement, but it does not state anything about voting rights. Gear Head, a competing sporting goods store, has made an offer to merge with Sports Destination. Jerry, Lisa, and Marcy vote in favor of accepting Gear Head's offer, but Kevin does not. Has the merger been approved by Sports Destination?
No, because a merger requires unanimous approval from the partners.
Ramon and Martin sign a written agreement stating that they will co-manage a hardware store together. Martin agrees to provide 75 percent of the start-up capital for the store and cover 75 percent of any losses suffered during the first year. Ramon is entitled to all of the profits. Ramon manages and operates the store while Martin handles the book-keeping and other administrative functions. Will a court find that Ramon and Martin formed a partnership?
No, because they do not share profits.
Jasmine and Joanna run a bakery as partners. Joanna's sister asks her to provide all of the desserts for her company's annual New Year's party, and Joanna agrees. Joanna's desserts are such a hit with the partygoers that the company sends Joanna a check for $500. Joanna would have provided the food for free, but happily accepts the check. When Joanna tells Jasmine about the party and the check, Jasmine insists that Joanna must give Jasmine half of the money. Is Jasmine correct?
No, but Joanna must turn the earnings over to the bakery.
Apparent authority
Partner appears to be carrying on the business of the partnership (or business of the same type)
__________ applies when the parties ___________, in fact, __________ but are _________ as if they were.
Partnership by estoppel are not partners held liable
A partner has a conflict of interest whenever the partnership does business with which of the following?
The partner's family A company the partner has an ownership interest in The partner
Under which of the following circumstances is a partnership not created?
The partners do not share profits The partners operate a charitable organization and do not intend to make a profit
The Uniform Partnership Act (UPA) rules governing the relationship among partners are default rules that may be modified by partners if they expressly agree.
True
The court in Marsh v. Gentry found that transactions between two partners require a higher degree of good faith than transactions between a partnership and a third party.
True
A dissociated partner is liable to outsiders for the debts incurred by the partnership
only for two years after leaving the partnership and only if the creditor reasonably believe he is still a partner.
A partner may sell her share in a partnership
only with the unanimous approval of the other partners
Implied authority
partner's act is reasonably necessary for partner to carry out an authorized transaction
In a _________, the partners are free to leave the partnership at any time, whereas in a _________, the partnership lasts for a specified period of time set by the partners.
partnership at will; term partnership
Actual authority
partnership authorized the partner's act
The Uniform Partnership Act (UPA)
provides many default rules that apply to a partnership unless the partners agree otherwise.
If the partnership ratifies an unauthorized partner action,
the partner's action is valid as if it had been authorized from the beginning.
Partnership property is owned by
the partnership itself
According to the UPA, the association of _______ persons to carry on as _______ a business ________ forms a partnership ________ the persons intend to form a partnership.
two or more co-owners for profit whether or not
Xavier and William are both architects. They have formed a partnership, but have not signed a partnership agreement. Xavier landed a big contract with a major real estate developer and did all the work for the project, which generated $50,000 in profits. Under the Uniform Partnership Act (UPA), how will the profits from this project be divided?
William and Xavier will each receive $25,000.
Which of the following are steps in the termination of a partnership?
Winding Up Dissociation Termination
Herman rightfully dissociated from Oak Tavern, a partnership, 18 months ago. Neither Herman nor the remaining Oak Tavern partners notified anyone with whom Oak Tavern does business that Herman had left the partnership. Oak Tavern has not paid one of its suppliers, Great Grains, for its purchases over the past 10 months. Can Great Grains recover the money it is owed by Oak Tavern from Herman?
Yes, but Herman can recover whatever he pays to Great Grains from Oak Tavern.
Percy and Yolanda are partners in a business that provides financial advisory services. Percy steals $50,000 from a client's account and immediately disappears with the money. Is Yolanda liable to the client for the $50,000?
Yes, if the theft occurred through the ordinary course of business.
Joel owns a construction business. His brother-in-law, Barry, works for Joel on several of his large projects. At the grand opening of one of Joel's buildings, a client introduces Joel and Barry to Marie, referring to the pair as partners. Neither Joel nor Barry corrects the client. Impressed with the building, Marie asks Joel and Barry to manage her real estate development firm's next project. Joel does not want to take the job, but Barry wants to try to run his own project, so he accepts. The project is a disaster, and Marie loses $2 million due to Barry's mismanagement. May Marie hold Joel liable?
Yes, under a theory of partnership by estoppel.
Voting rights are divided among partners based on their initial contributions to the partnership.
False
When a partner dissociates, the partnership terminates.
False
If a partner ________ from the partnership, the partners ___________ to continue the business. The ex-partner may take part only if _________.
is dissociated must vote on whether her dissociation was rightful
Which of the following are duties that partners owe the partnership?
Duty to inform Duty of faith and fair dealing Duty of loyalty
__________ has/have a right to _______ the partnership's books and records ___________ purpose or motive.
Each partner copy and inspect regardless of the partner's
A partner's liability for the partnership's obligations includes full liability for any debts incurred by the partnership prior to the partner joining the partnership.
False
A partner's rights is to profits is protected from the reach of creditors, and may only be used to pay a partner's personal debt if she chooses to transfer the right to creditors.
False
A partnership can be held liable for the negligence of a partner in the ordinary course of the partnership's business, but not for any intentional torts of a partner.
False
A partnership is liable for the ordinary negligence of a partner that occurs in the ordinary course of business only if the partner assumes liability to the partnership for such conduct in the partnership agreement.
False
A partnership must make a formal filing with the Secretary of State containing basic information about the entity.
False
The Uniform Partnership Act (UPA) provides default rules regarding the liability of partnerships to outsiders.
False
A partnership is responsible for the intentional and negligent torts of a partner that occur under what circumstances?
In the ordinary course of the partnership's business With the actual authority of the partners
FAB has three partners, Ramon, Janna, and Jackie, and $20,000 in assets when it begins its winding-up process. FAB owes $20,000 to a supplier, $25,000 on a bank note, and $5,000 to Jackie for a loan she gave to the partnership. FAB does not have a partnership agreement. What financial rights and obligations does Jackie have?
Jackie must pay a net amount of $5,000.
Sarah and Mark formed MCS as partners years ago, which they have now dissolved and are in the process of winding up. Without Mark's knowledge, Sarah cancels MCS's insurance policy covering the MCS van. Two months later, while making a delivery for MCS, Mark runs a stop light and hits a pedestrian. Who will be liable for the damages caused by the accident?
Mark, Sarah, and MCS
The court in Moren v. Jax Restaurant reached which of the following conclusions?
Moren's conduct was in the ordinary course of business, so the partnership is bound by it The partnership must indemnify Moren for the damages caused by her negligence
A partner must receive permission from the partnership to seize a business opportunity that the partnership could take itself.
True
A partnership must indemnify a dissociated partner for any obligations to outsiders incurred during her term.
True
Although a partner cannot transfer his share in a partnership without approval of the other partners, a partner may freely transfer his right to receive the partnership's profits and losses.
True
Every partner is an agent of the partnership for the purpose of its business.
True
Historically, partnerships were the only form of organization available to professionals, such as accountants, lawyers, and doctors, but that is no longer the case today.
True
As a(n) _______, a partner has a ___________ to pass all ________ to the partnership. The partnership is treated as if it had been notified __________ the partner fulfills this obligation. Under the Uniform Partnership Act (UPA), the partnership is ________ to know whatever ___________ knows.
agent duty relevant information whether or not deemed one partner
The rules governing liability of the partnership under the Uniform Partnership Act (UPA)
are mandatory, as opposed to the rules governing the relationship among partners, which are default rules.
Termination occurs
automatically upon completion of winding-up.
If a partnership _____________ after a partner is dissociated, it must pay the ex-partner ______________________ of the partnership, which is equal to the ___________ of her share of the proceeds if (1) the partnership were sold as _________________ or (2) ______________________________________. If the partner's dissociation was wrongful, the partnership may deduct _________________________ from this mount.
continues the value of her share greater an ongoing business the partnership's assets were liquidated any damages she caused
Each partner has ________ in the management of the partnership's business ___________ the partners agree otherwise. Large partnerships often designate __________ to run the business operations.
equal rights unless managing partners