Summary
Summary UBE - General Partnerships (Notes)
- Module
- New York Bar Exam
- Institution
- New York Bar Exam
Formation Management Liability to Partnerships Liability to Third Parties Dissociation Dissolution
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GENERAL PARTNERSHIPS1) Formation (RUPA)
Under the Revised Uniform Partnership Act (RUPA), a general partnership generally does not require
a written agreement, unless it is to be run for at least one year under the Statute of Frauds. Generally,
a general partnership must consist of at least two individuals or entities with capacity and consent.
The partners must co-own the partnership and run for profit, rather than to pay off debts or rents.
2) Management
Partners are entitled to equal votes in the partnership. In terms of decisions, those in the ordinary
course of business must be approved with a majority vote of the partners. However, those outside of
the ordinary course of business must be approved with a unanimous vote, so the threshold is higher.
Partners are generally entitled to equal profits, unless an agreement made between the parties does
state otherwise. Partners are also liable for losses, which are generally proportional to their
entitlement to profits, unless an existing agreement states otherwise. However, partners are not
entitled to any compensation for the value of their services, unless the partnership is being wound up.
3) Liability to Partnerships
Partners owe fiduciary duties to the partnership in the same manner as agents do to principals. These
include the duty of care where the partner should not act with malfeasance nor negligence and must
act in the best interests of the partnership. It also includes the duty of obedience in which the partners
must carry out the partnership’s instructions appropriately. It includes the duty of loyalty whereby
the partners must avoid engaging in competing ventures, conflicting interests and should account for
any profits derived from such activities. It lastly includes the duty of disclosure, in which the partners
should disclose any material facts of transactions to the partnership before entering into them. If the
partner breaches his fiduciary duty or the partnership agreement, the partnership can sue the partner
only by obtaining a judgment from the court to target his assets.
4) Liability to TPs
As seen in agency law, a partnership may be liable to third parties for the partners’ actions concerning
the third party. A third party must initially attempt to sue the partnership and target its assets. This
requires that the partner entered into a transaction with the third party with either actual authority or
apparent authority. Like agencies, a partner has actual authority if expressly given by the partnership
according to the partnership agreement or statement of authority filed with the secretary of state or
the partnership approved any decisions by the necessary votes given by the partners, or impliedly
given based on the partnership’s communication to the partner and the partner had reasonable belief
that he had such power in his position. Alternatively, apparent authority may exist where the partner’s
authority was held out by the partnership and it falls within the ordinary course of the partnership’s
business, or if the third party had reasonable belief that the agent had authority to enter the transaction.
However, the third party may not sue the partnership if he had knowledge or at least received notice
of the agent’s lack of authority in the first place (even without reading the notice).
The third party must initially obtain a judgment against the partnership and all the partners. If the
third party cannot sue the partnership, they can then target the partners’ assets, who will be jointly
and severally liable to one another. They may be liable either by contract authority or in tort (where
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