Business Law - Chapter 38

Two relationships are important during the operation of a partnership or limited liability partnership (LLP) business:

1. the relation of the partners to each other and the partnership 2. the relation of the partners to third parties who are affected by the business of the partnership.

respondeat superior

A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.

Security interests are

a normal part of business loan transactions

The RUPA continues the UPA rule that

a partner is not entitled to a salary or wages, even if he spends a disproportionate amount of time conducting the business of the partnership

A partner has implied and apparent authority to sell real property if

a partnership sells real property in the usual course of the partnership business.

To bind the partnership,

an individual partner's conveyance of a partnership's real property must be expressly, impliedly, or apparently authorized or be ratified by the partnership.

A trading partnership has

an inventory. Its regular business is buying and selling merchandise, such as retailing, wholesale, importing, or exporting.

The standards and principles of agency law's respondeat superior are

applied in determining the liability of the partnership and of the other partners for the torts of a partner and other partnership employees.

LLP statutes grant partners

broad protection, eliminating an innocent partner's liability for errors, omissions, negligence, incompetence, or malfeasance of his partners or employees.

A partner may not compete against his partnership unless he obtains

consent from the other partners.

Loss sharing agreements between partners

do not bind partnership creditors unless the creditors agree to be bound.

In transacting partnership business

each partner owes a duty of care.

A partner has the duty not to

exceed the authority granted him by the partnership agreement or, if there is no agreement, the authority normally held by partners in his position.

A partnership will not be liable for a loan whose amount

exceeds the ordinary needs of the business, unless otherwise agreed by the partners.

It is common for partnership agreements to

excuse partners from liability if they act in good faith and with the honest belief that their actions are in the best interests of the partnership.

An agreement among the partners can

expand, restrict, or even completely eliminate the implied authority of the partner.

Partners may give everyone notice of a partner's authority or limitation on a partner's authority by

filing a Statement of Partnership Authority or Statement of Denial with the secretary of state or real estate recording office.

In a partnership or limited liability partnership, every partner is a

general manager of the business and may make contracts that bind the partnership.

The RUPA permits a partnership to be sued

in its own name.

Partners may be sued

jointly and severally for partnership obligations, whether based on contract or tort.

Each partner owes a duty to

keep a reasonable record of all business transacted by him for the partnership and to make such records available to the person keeping the partnership books.

An innocent partner of an LLP has no

liability for the professional malpractice of his partners.

Silent partners

merely contribute capital to partnerships. Silent partners do not have the duty to serve, but they have the same liability for partnership debts as any other partner.

Ratification

occurs when the partners accept an act of a partner who had no actual or apparent authority to do the act when it was done.

The duty to serve requires a

partner to undertake his share of responsibility for running the day to day operations of the partnership business.

A partnership is bound by admissions or representations made by a partner concerning

partnership affairs that are within her express, implied, or apparent authority.

The power to borrow money on the firm's credit will ordinarily carry with it the

power to grant the lender a lien or security interest in fimr assets to secure the repayment of the borrowed money.

When there is no agreement regarding how profits or losses are shared,

profits are shared equally, and because losses are shared like profits, losses are shared equally as well.

When a partner commits a crime in the course and scope of transacting partnership business,

rarely are his partners criminally liable. When partners have participated in the criminal act or authorized its commission, they are liable

Express authority may be

stated orally or in writing, or it may be obtained by acquiescence

A nontrading partnership has no

substantial inventory and is usually engaged in providing services - for example, accounting services or real estate brokerage.

To make clear that no single partner has implied or apparent authority to do certain acts, in the absence of a contrary agreement,

the UPA requires unanimity for several actions.

Partnership law restricts

the ability of a partner to borrow money in the name of a partnership.

Under the RUPA, partners owe to the partnership and each other

the highest degree of loyalty. Partners must act consistently with the obligation of good faith and fair dealing.

If a creditor sues the partnership and all of the partners,

the judgment may be satisfied from the assets of the partnership and, if partnership assets are exhausted, from the assets of the partners.

If the partnership and fewer than all the partners are sued severally,

the judgment may be satisfied only from the assets of the partnership and the assets of the partners sued. Partners cannot be required to pay until partnership assets have been exhausted.

A partner may not deal with the partnership when

the partner has an interest adverse to the partnership or acts on behalf of another person with any adverse interest.

Under the default RUPA rules, each partner has one vote, regardless of

the relative sizes of their partnership interests or their shares of the profits.

On matters in the ordinary course of business,

the vote of a majority of the partners controls ordinary business decisions and, thereby, limits the actual authority of the partners.

Partners have a duty to account for

their use or disposal of partnership funds and partnership property, as well as their receipt of any property, benefit, or profit, without the consent of the other partners.

While a partnership and its partners are usually liable for a partner's negligence,

they usually have no liability for a partner's intentional torts. The reason is because intentional torts are not usually within the ordinary scope of business or within the ordinary authority of a partner.

Joint ventures have considerable apparent authority if

third persons are unaware of the limited scope of the joint venture.