Partnerships: external affairs

Question 1

Contractual liability

Answer 1

The partnership may be liable to a third party at contract through:

(1) Express or actual authority;
(2) Apparent authority: e.g., when a partner acts in the ordinary course of partnership business, and the third party reasonably believes that the partner has authority to act.

Question 2

Tort liability

Answer 2

A partnership is liable for a partner’s tortious acts, including fraud, if:

(1) committed in the ordinary course of partnership business; or
(2) with partnership authority, whether actual or apparent.

Question 3

Partners’ liability: individual capacity

Answer 3

A judgment creditor of an individual partner may not attach and execute upon partnership real estate.

Question 4

Liability as an entity

Answer 4

A partnership is subject to lawsuit for its obligations, and partners are also jointly and severally liable for all partnership obligations:

A partnership creditor must exhaust all of a partnership’s assets before taking the partner’s individual assets.

Question 5

Partners’ liability: personal liability

Answer 5

To collect from a partner personally, a party must first obtain a judgment against the partner individually and against the partnership:

• These judgments can be sought in the same action;
• Unless there is a judgment against the partner, a judgment against a partnership cannot be satisfied from a partner’s assets, only the partnership’s assets;
• If a claimant first obtains a judgment against the partner individually and the partnership, the claimant generally must exhaust the partnership’s assets before levying on the partner’s personal assets.