Chapter 31. Operation and Dissolution of General Partnerships
1. The law of partnership differs greatly from the law of agency.
a. True
b. False
2. Under the UPA, any suit in contract against the partners must name all of them as defendants.
a. True
b. False
3. Under the RUPA, during winding up, the partnership must apply its assets first to discharge the obligations of
partners who are creditors on parity with other creditors, subject to any other laws.
a. True
b. False
4. Maria is admitted as a partner to the existing Greene Ridge Partnership in June of 2010. Unless she signs an
agreement to the contrary, she will be personally liable on all partnership obligations, including one incurred in
December of 2009.
a. True
b. False
5. A partner’s receipt of notification of a fact relating to the partnership is not effective against the other partners until
the receiving partner enters the relevant fact on the minutes at the next business meeting of the partnership.
a. True
b. False
6. Under the RUPA, dissociation of a partner results in dissolution only in limited circumstances.
a. True
b. False
7. Under the UPA, if a partner makes a loan to the partnership, he will be in the same position as other creditors who
are not partners in requesting repayment upon dissolution.
a. True
b. False
8. A partner’s liability for partnership debts is limited to his capital contribution.
a. True
b. False
9. The RUPA abolishes the marshaling of assets doctrine and the dual priority rule.
a. True
b. False
10. Under the RUPA, if a partner is dissociated from a partnership without resulting in dissolution, the business may
choose whether to purchase the dissociated partner’s interest in the partnership.
a. True
b. False
11. Under the RUPA, a dissociated partner is not liable for a partnership obligation incurred more than two years after
dissociation.
a. True
b. False
12. Respondeat superior has no application to situations where a partner commits a tort, because only the partner, and
not the partnership, is liable.
a. True
b. False
13. The UPA codified all of the common law causes of dissolution of a partnership.
a. True
b. False
14. The RUPA authorizes the optional, central filing of a statement of partnership authority specifying the names of
partners authorized to execute instruments transferring the partnership’s real property. A filed statement is effective
for six-year, renewable terms.
a. True
b. False
15. The process of liquidation of a partnership is also known as “winding up.”
a. True
b. False
16. Under the UPA, in order to avoid liability, only constructive notice of a dissolution is required to be given to third
parties who had no knowledge of the partnership before its dissolution.
a. True
b. False
17. Under the UPA, upon dissolution of a partnership, apparent authority terminates although actual authority generally
continues.
a. True
b. False
18. Under the RUPA, dissolution is the equivalent of termination of a partnership.
a. True
b. False
19. Where the UPA is controlling, Lynette, expelled from the YLC Partnership pursuant to a provision in the partnership
agreement, can now force liquidation of the partnership.
a. True
b. False
20. Dale falsely tells Glenna that he is a partner in Huntsman Appraisers. Glenna casually repeats this information to
Kash, who sells office equipment on credit to Huntsman in reliance on the statement. Kash cannot hold Dale liable
because he was not justified in relying on the representation made privately by Dale to Glenna, which Dale did not
consent to have repeated.
a. True
b. False
21. The doctrine of marshaling of assets is an equitable doctrine.
a. True
b. False
22. If a partnership is a debtor under the Bankruptcy Code and partnership property is insufficient to pay all the claims
against the partnership, the trustee in bankruptcy must first seek recovery of the deficiency from the estates of the
bankrupt partners, and then may seek recovery from general partners who are not bankrupt.
a. True
b. False
23. Under the RUPA, a partner’s duty not to compete terminates upon dissociation, and the dissociated partner may
immediately engage in a competitive business without further consent.
a. True
b. False
24. Under the RUPA, upon dissolution, the partnership must be liquidated.
a. True
b. False
25. The best and most reliable tool for preserving a partnership business after dissolution is through a continuation
agreement.
a. True
b. False
26. A partner who does not have actual authority to order a fax machine for the partnership office probably has
apparent authority to do so.
a. True
b. False
27. The liability of partners for a tort or breach of trust committed by any partner is unlimited, personal liability.
a. True
b. False
28. In a partnership of A, B, and C, A commits fraud which creates a $9,000 liability to the partnership. If the three
partners share profits and losses equally, A’s liability to the partnership for his fraudulent act is $3,000.
a. True
b. False
29. A person, who represents himself to third persons as being a partner, when in fact he is not, may have the liability of
a partner.
a. True
b. False
30. If the partnership is bound by a contract, then each general partner has unlimited personal liability for that obligation.
a. True
b. False
31. Under the UPA, after all the partnership‘s creditors have been paid, each partner is entitled to repayment of his
capital contribution upon termination of the firm.
a. True
b. False
32. A retiring partner cannot be discharged from existing liabilities of the partnership except by payment.
a. True
b. False
33. Roberts, Smith, and Tomas have been partners for ten years. The partners, however, are now collecting debts,
converting assets to cash, paying creditors, and distributing remaining assets to each partner. Roberts, Smith, and
Tomas are engaged in:
a. dissolution.
b. marshaling assets.
c. reformation.
d. winding up.
34. Kline, Finkel, and Martinez have been partners for years, but a court is now dividing the assets and liabilities of the
partnership separate from the assets and liabilities of the individual partners. This process is called:
a. marshaling assets.
b. liquidation.
c. dissolution of the partnership.
d. winding up.
35. Actual authority terminates upon:
a. illness of one of the partners.
b. dissolution of the partnership.
c. physical destruction of partnership papers.
d. All of these.
36. Under the RUPA, a partner who does not have actual authority from all of the partners may still bind the partnership
by:
a. executing a contract of suretyship in the partnership name.
b. selling partnership property which is not held for sale in the usual course of business.
c. paying an individual partner’s debts out of partnership assets.
d. None of these.
37. Colleen is admitted to the partnership of Elmore & Monticello and makes an initial capital contribution of $10,000.
Two years later, when liabilities of the partnership exceed its assets by $20,000, the firm is dissolved. Paul had
loaned the firm $5,000 six months before Colleen was admitted; Scott had loaned the firm $8,000 three months after
Colleen was admitted. Colleen has:
a. no liability to Paul.
b. liability to Paul to the extent of her capital contribution and is personally liable to Scott.
c. no liability to Scott.
d. liability to Paul and Scott only to the extent of her capital contribution.
38. Under the UPA, which of the following liabilities of a partnership has the highest priority for payment out of
partnership assets? Amounts owing to:
a. partners for profits
b. partners for loans and advances
c. nonpartner creditors
d. partners for capital