Partnership FINANCIAL RIGHTS AND OBLIGATIONS Flashcards Preview

CALIFORNIA AGENCY AND PARTNERSHIP > Partnership FINANCIAL RIGHTS AND OBLIGATIONS > Flashcards

Flashcards in Partnership FINANCIAL RIGHTS AND OBLIGATIONS Deck (26)
Loading flashcards...
1

Unless otherwise agreed, how are profits shared?

Unless otherwise agreed, profits are shared equally among the partners (by number).

2

Unless otherwise agreed, how are losses shared? What if there is an agreement for sharing profits?

Unless otherwise agreed, losses are shared equally among the partners (by number). If there is an agreement for profits, losses are shared in the same manner as profits.

3

A, B, and C form a partnership. A contributes 60% of the capital, B contributes 30%, and C contributes 10%. Inexplicably, nothing is said about how profits and losses will be split. How will profits be shared?
How will losses be shared?

Equally.

4

A, B, and C form a partnership. A contributes 60% of the capital, B contributes 30%, and C contributes 10%.Assume that they agreed to split profits 60-30 10, but they have no agreement as to losses. How will profits be shared? How will losses be shared?

60-30-10 for losses and profits.

5

A, B, and C form a partnership. A contributes 60% of the capital, B contributes 30%, and C
contributes 10%. Assume that they agreed to split losses 60-30-10, but they have no agreement as to profits. How will losses be shared? How will profits be shared?

Losses will be shared 60-30-10 pursuant to agreement.
No agreement for profits so profits will be shared equally.
Losses follow profits, profits do not follow losses.

6

Partner A puts up all of the money. Partner B does all of the work. Partner C gives the partnership its fine name. Partner D does nothing. How are profits shared?

Assuming no agreement, Equally.

7

When is the partnership liable for tortuous conduct?

a partnership is liable for loss or injury caused to a person as a result of the tortious conduct of a partner (or an employee) acting in the ordinary course of business of the partnership or with authority of the partnership.

8

When is the partnership liable for contracts?

a partnership is liable for contracts entered into
on its behalf by partners with actual or
apparent authority.

9

How an actual authority be created in partnership?

Actual authority can be created by the partnership agreement or by the requisite vote of the partners (e.g., majority vote for ordinary business matters).

10

How an apparent authority be created in partnership?

The partnership statute states that a partner is an agent of the partnership, and that a partner has apparent authority to bind the partnership to transactions within the ordinary course of the partnership’s business (unless the third party is aware that the partner lacks actual authority).

11

A, B, and C form a partnership to run a cattle ranch. All agree that A shall have the exclusive authority to enter into grazing leases, B shall have the exclusive authority to purchase and sell livestock, and C shall have the exclusive authority to hire help. A enters into a transaction with T to purchase cattle (B’s authority) on behalf of the partnership. Is the partnership bound because of actual authority?

No, Only B has actual authority to purchase cattle.

12

A, B, and C form a partnership to run a cattle ranch. All agree that A shall have the exclusive authority to enter into grazing leases, B shall have the exclusive authority to purchase and sell livestock, and C shall have the exclusive authority to hire help. A enters into a transaction with T to purchase cattle (B’s authority) on behalf of the partnership. Is the partnership bound by apparent authority? Why or why not?

Likely Yes. From T’s perspective, this contract was in the ordinary course of the business of running a cattle ranch (unless T was somehow aware that A lacked actual authority).

13

What is the single biggest downside to a partnership?

each partner is jointly and severally liable for all of the obligations of the partnership (whether arising in tort or contract)

14

What does the plaintiff need to do before going after the partner's personal assets?

the plaintiff must first exhaust partnership resources before seeking to collect from an individual partner’s assets (so the partners are essentially guarantors).

15

You pass the bar exam and form a law firm as a general partnership. One of your partners commits malpractice representing a client. Can the client recover from you alone? Why? What must the P do first?

Yes. The malpractice by your partner created a partnership obligation. As a partner, you are jointly and severally liable for all partnership obligations. But the plaintiff must first exhaust partnership resources (i.e., the plaintiff must first try to recover from the partnership’s assets before seeking to recover from your personal assets).

16

Where one partner pays a partnership obligation what is he entitled to?

he is entitled to indemnification from the partnership. He may also require the other partners to contribute their pro rata shares of the payment if the partnership is unable to indemnify.

17

A forms a partnership with B and C. They all agree that C will not be responsible for any partnership losses. Is C shielded from liability to a third party?

No Partners cannot limit a third party’s rights without the third party's consent.

18

A forms a partnership with B and C. They all agree that C will not be responsible for any partnership losses.Who is the agreement effective on?

The agreement is effective among the partners themselves.

19

In the absence of an agreement what is needed to add a partner to a general partnership?

A unanimous vote

20

If the partnership admits a new partner is that partner liable for debts incurred by the partnership before his admission? (what can he lose)

A newly admitted partner is not personally liable for partnership obligations that arose before his admission. He can only lose the amount of his investment in the partnership.

21

Partners in general partnerships owe fiduciary duties to who?

The partnership and to each other.

22

What fiduciary duties do the partners owe to each other?

Duties of care, loyalty
And disclosure (by statute)

23

What does the duty of loyalty require in partnership?

This duty requires each partner (1) to account to the
partnership for any benefit derived by the partner in
conducting the partnership business, using the partnership’s property, or appropriating a partnership opportunity;
(2) to refrain from dealing with the partnership in the conduct of its business as (or on behalf of) a party having an interest adverse to the partnership; and (3) to refrain from competing with the partnership in the conduct of its business.

24

What does the duty of care require in partnership?

This duty requires each partner to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
Act with reasonable care

25

What does the duty of disclosure require in partnership?

The partnership statute states that each partner and the partnership shall furnish to a partner
(1) without demand, any information concerning the partnership’s business and affairs reasonably required for the proper exercise of the partner’s rights and duties; and
(2) on demand, any other information concerning the partnership’s business and affairs (except to the extent the demand or the information demanded is unreasonable or otherwise improper under the
circumstances).

26

What duties in partnership can't be eliminated? What duty in partnership can be eliminated by partnership agreement?

A partnership agreement may not eliminate the duties of loyalty or care. The duty of disclosure may be eliminated.