Bài giảng Business Law (13th edition) - Chapter 38: Operation of Partnership and Related Forms

Partnerships9McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Introduction to Forms of Business and Formation of PartnershipsOperation of PartnershipsDissolution & Winding UpLimited Liability Companies & Limited PartnershipsOperation of Partnership and Related FormsPAETRHC38“It is not the individual but the team that is the instrument of sustained and enduring success in management.”Anthony Jay, quoted in Management Teams – Why They Succeed (R. Meredith Belbin, 1984)Learning ObjectivesDuties of partners to the partnership and each otherCompensation of partnersManagement powers of partnersLiability for torts and crimesLawsuits by and against partnerships and partners38 - *Under RUPA, partners owe partnership and each other the highest degree of loyalty and the obligation of good faith and fair dealingA fiduciary relationshipGeneral duties: to serve, account for use or disposal of partnership funds, act within actual authority, avoid interests adverse to partnership, disclose material information, maintain confidentiality Duties of Partners38 - *Each partner owes a duty of care in doing partnership businessPartner isn’t liable to partnership for honest errors in judgment (negligence)Partner liable for losses resulting from gross negligence, reckless conduct, intentional misconduct, or a knowing violation of lawPartnership agreement may alter duty of care, but may not eliminate the dutyDuty of Care38 - *Partner not entitled to salary or wages, but compensation is share of business profits offset by shared lossesShared equally unless otherwise agreedGenerally, management decisions in the ordinary course of partnership business are by majority rule, one vote per partnerUnless otherwise expressed by agreementCompensation & Management38 - *Every partner in a partnership or LLP is a general manager of the businessThus, by implied authority, a partner binds partnership and partners for acts within ordinary course of business By unanimous agreement, partners may modify management rules to expand or limit authority, delegate powers, or alter voting rights Management Powers38 - *Individual partner may transfer real property owned by partnership and bind the firm if expressly, impliedly, apparently authorized, or ratified by partnershipPartner may not borrow money in name of partnership without express, implied, or apparent authorityPartner with authority to borrow has authority to issue negotiable instruments (e.g., promissory notes) for that purposePartner Authority38 - *Under RUPA, a general partnership may sue or be sued in its own name and partners also may be sued (jointly and severally) for contract or tort partnership obligationsPartnership, partners liable jointly, severallyLLP only is liable for contract obligationsLLP and tortfeasor partner liable for tortsInnocent LLP partner bears no tort liabilityLiability for Torts & Crimes38 - *If general partnership and individual partners sued, any judgment must first be satisfied from partnership assets, then from personal assets of the partners suedLLP partners have no personal liability for debts of the business, such as an invoice, leases, or loans38 - *Liability for Legal ClaimsTest Your KnowledgeTrue=A, False = BPartners owe to the partnership and each other an ordinary degree of loyaltyPartners may compete with the partnership as long as it does not harm the partnership. A partner is liable to the partnership for losses resulting from gross negligence or reckless conduct.A partnership may sue in its own name.38 - *Test Your KnowledgeTrue=A, False = BIn general, management decisions in a partnership are decided by majority rule. A general partnership is liable for a partner’s negligence.For contract obligations of an LLP, only the partners are liable.A partner with authority to borrow money has authority to issue negotiable instruments.38 - *Test Your KnowledgeMultiple ChoiceTwo accountants formed Caine & Able, LLP. The partnership and each partner were sued for Able’s alleged negligence. Who might be liable?(a) Only Able due to his negligence(b) Only the partnership, Caine & Able (c) The partnership and Able (d) The partnership and either partner, jointly or severally38 - *Test Your KnowledgeMultiple ChoiceA partner in a trading partnership (one with inventory) has what type(s) of authority for borrowing money? (a) Express authority(b) Implied and apparent authority(c) Actual authority(d) Implied authority(e) All of the above38 - *Thought QuestionsDo you think the result in the Moren v. JAX Restaurant case was correct? Would you have handled things differently?38 - *