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in whole or in part.
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 2.1—QUESTION (PAGE 22)
CASE 2.2—QUESTIONS (PAGE 27)
THE ETHICAL DIMENSION
Does the judicial power to dissolve partnerships encourage partners to be more
THE LEGAL ENVIRONMENT DIMENSION
Eddie petitioned for the dissolution of Russell Realty rather than dissociating from the
firm because the partnership agreement prohibited the withdrawal of any partner. How
might Eddie have divested himself of his interest in the firm without petitioning for its
dissolution? There may have been other options set out in the Russell Realty partnership
in whole or in part.
in whole or in part.
prompted Webster’s estate to file a complaint against the other partners and the firm to liquidate
This is a general partnership, and the facts in the problem indicate that it is a partnership at will.
A partnership agreement can limit the duration of a partnership to a certain date or a particular
project, in which case it would be considered to be a partnership for a term. If no fixed duration
is specified, as in this problem, a partnership is a partnership at will.
and he acted on it. Unanimous consent of all of the partners is required in some circumstances,
but none of those circumstances appear to exist here.
3A. Liability of an existing partner
Al’s Feed Barn can bring action against Jason or Cowboy Palace. A partner is jointly and
succeed.
4A. Liability of a dissociated partner
A dissociated partner may be liable for partnership obligations entered into during a two-year
period following dissociation. In other words, the partner may be liable to a third party with whom
4 UNIT ONE: BUSINESS ORGANIZATIONS
in whole or in part.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
A partnership should automatically end when one partner disassociates from the
firm. Prior to a change in the UPA, when a partner left the partnership, it had to be
dissolved. That makes sense, given that any partnership is an association of named
partners. A new partnership can be created without the partner who left. After all, one of the
major distinctions between a corporation and a partnership used to be that the corporation was
not dependent on people who owe shares in it. Now, it seems as if a partnership can live
forever, too, even if partners come and go.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
1A. Darnell and Eliana are partners in D&E Designs, an architectural firm. When Darnell
2A. Finian and Gloria are partners in F&G Delivery Service. When business is slow,
without Gloria’s knowledge, Finian leases the delivery vehicles as moving vans. Because
the vehicles would otherwise be sitting idle in a parking lot, can Finian keep the income
resulting from the leasing of the delivery vehicles? Explain your answer. No. Under the
CHAPTER 2: PARTNERSHIPS AND LIMITED LIABILITY PARTNERSHIPS 5
in whole or in part.
Daniel liable under a theory of partnership by estoppel. A partnership is defined as an
association of two or more persons to conduct, as co-owners, a business for profit [UPA 101(6)].
To determine that a partnership was created, the court must look for a sharing of profits and a
joint ownership of the business, with each party having an equal right to manage the business.
When specific evidence that this situation existed is lacking, some guidelines are applied. First,
himself as a partner. Because Daniel did not even know of Rubya’s assertions and did nothing
to lead Classen to believe he was Rubya’s partner, Classen can look only to Rubya for payment
of the debt. No partnership by estoppel was created.
2-2A. Dissolution of a limited partnership
the firm.
(c) The retirement, death, or insanity of a general partner dissolves the partnership
unless the business can be continued by the remaining general partners. Because Dorinda was
the only general partner, her death dissolves the limited partnership.
agreement or, in the absence of an agreement, equally [UPA 40(b)].
In this case, the partnership’s creditors and Shawna would be paid $18,000 first, leaving a
balance of $32,000 from the $50,000. From this amount, Shawna would receive $10,000 and
6 UNIT ONE: BUSINESS ORGANIZATIONS
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
David’s estate $15,000 as payment for their capital contributions, and $7,000 would be split as
profits, with 40 percent going to Shawna ($2,800) and 60 percent to David’s estate ($4,200).
2–4A. Limited partnership
(Chapter 2—Page 30)
General partners owe their partnership a duty of loyalty and a duty of care, as well as an
obligation to discharge their duties in good faith and in a reasonable belief that they are acting in
the best interest of the partnership. General partners owe their co-partners, including any limited
the property that was the stated purpose of the partnership. The court in the case on which this
problem is based determined that Carpenter breached his fiduciary duty to McBeth and awarded
her damages plus interest. The U.S. Court of Appeals for the Fifth Circuit affirmed the award.
2–5A. Partnership dissolution
ought to be done. And what ought to have been done, years ago, was that Thompson should
have dissolved the partnership and distributed the land in question to the partners, or their heirs,
as tenants in common.” Evidence supported the conclusion that Bowen’s Mill partnership’s
plans to develop the property were far from certain. The Lynches were interested in proceeding
with development of land; Thompson was not interested, so dissolving the partnership and
partner to account to the partnership for any property, profit, or benefit derived by the partner in
the conduct of the partnership’s business or from the use of its property. The duty of loyalty can
be breached by dealing with the firm as an adverse party. Each partner must act in good faith
for the benefit of the partnership. Of course, a partner may pursue his or her own interests
without automatically violating these duties.
in whole or in part.
8 UNIT ONE: BUSINESS ORGANIZATIONS
in whole or in part.
failed to communicate with Moran for long periods of time, even when she requested that she be
kept apprised of certain matters; and refused to take suggestions from advisers who were
experienced in renovating houses. These actions certainly reflected poor management of the
project and a general carelessness with partnership funds—but they did not necessarily breach
the partnership agreement. Although the court concluded that his conduct both before and after
he did not fulfill his promise to provide his labor in completing the renovation.
2–10A. LEGAL REASONING GROUP ACTIVITY—Liability of partners
(a) Partnership agreements can be oral, written, or implied by contract. The elements
of a partnership are (1) a sharing of profits and losses, (2) a joint ownership of the business, and
Fontenot entered into the act of sale on behalf of the partnership.
(b) The partnership and all of the partners jointly or severally are liable on the notes.
In other words, each partner can be held individually and personally liable on the notes, but
could obtain reimbursement for the liability from the partnership and the other partners. Of
course, the partnership assets must be exhausted before a judgment could be enforced against
in whole or in part.
in whole or in part.
prompted Webster’s estate to file a complaint against the other partners and the firm to liquidate
This is a general partnership, and the facts in the problem indicate that it is a partnership at will.
A partnership agreement can limit the duration of a partnership to a certain date or a particular
project, in which case it would be considered to be a partnership for a term. If no fixed duration
is specified, as in this problem, a partnership is a partnership at will.
and he acted on it. Unanimous consent of all of the partners is required in some circumstances,
but none of those circumstances appear to exist here.
3A. Liability of an existing partner
Al’s Feed Barn can bring action against Jason or Cowboy Palace. A partner is jointly and
succeed.
4A. Liability of a dissociated partner
A dissociated partner may be liable for partnership obligations entered into during a two-year
period following dissociation. In other words, the partner may be liable to a third party with whom
4 UNIT ONE: BUSINESS ORGANIZATIONS
in whole or in part.
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
A partnership should automatically end when one partner disassociates from the
firm. Prior to a change in the UPA, when a partner left the partnership, it had to be
dissolved. That makes sense, given that any partnership is an association of named
partners. A new partnership can be created without the partner who left. After all, one of the
major distinctions between a corporation and a partnership used to be that the corporation was
not dependent on people who owe shares in it. Now, it seems as if a partnership can live
forever, too, even if partners come and go.
ANSWERS TO ISSUE SPOTTERS IN THE EXAMPREP FEATURE
AT THE END OF THE CHAPTER
1A. Darnell and Eliana are partners in D&E Designs, an architectural firm. When Darnell
2A. Finian and Gloria are partners in F&G Delivery Service. When business is slow,
without Gloria’s knowledge, Finian leases the delivery vehicles as moving vans. Because
the vehicles would otherwise be sitting idle in a parking lot, can Finian keep the income
resulting from the leasing of the delivery vehicles? Explain your answer. No. Under the
CHAPTER 2: PARTNERSHIPS AND LIMITED LIABILITY PARTNERSHIPS 5
in whole or in part.
Daniel liable under a theory of partnership by estoppel. A partnership is defined as an
association of two or more persons to conduct, as co-owners, a business for profit [UPA 101(6)].
To determine that a partnership was created, the court must look for a sharing of profits and a
joint ownership of the business, with each party having an equal right to manage the business.
When specific evidence that this situation existed is lacking, some guidelines are applied. First,
himself as a partner. Because Daniel did not even know of Rubya’s assertions and did nothing
to lead Classen to believe he was Rubya’s partner, Classen can look only to Rubya for payment
of the debt. No partnership by estoppel was created.
2-2A. Dissolution of a limited partnership
the firm.
(c) The retirement, death, or insanity of a general partner dissolves the partnership
unless the business can be continued by the remaining general partners. Because Dorinda was
the only general partner, her death dissolves the limited partnership.
agreement or, in the absence of an agreement, equally [UPA 40(b)].
In this case, the partnership’s creditors and Shawna would be paid $18,000 first, leaving a
balance of $32,000 from the $50,000. From this amount, Shawna would receive $10,000 and
6 UNIT ONE: BUSINESS ORGANIZATIONS
© 2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website,
in whole or in part.
David’s estate $15,000 as payment for their capital contributions, and $7,000 would be split as
profits, with 40 percent going to Shawna ($2,800) and 60 percent to David’s estate ($4,200).
2–4A. Limited partnership
(Chapter 2—Page 30)
General partners owe their partnership a duty of loyalty and a duty of care, as well as an
obligation to discharge their duties in good faith and in a reasonable belief that they are acting in
the best interest of the partnership. General partners owe their co-partners, including any limited
the property that was the stated purpose of the partnership. The court in the case on which this
problem is based determined that Carpenter breached his fiduciary duty to McBeth and awarded
her damages plus interest. The U.S. Court of Appeals for the Fifth Circuit affirmed the award.
2–5A. Partnership dissolution
ought to be done. And what ought to have been done, years ago, was that Thompson should
have dissolved the partnership and distributed the land in question to the partners, or their heirs,
as tenants in common.” Evidence supported the conclusion that Bowen’s Mill partnership’s
plans to develop the property were far from certain. The Lynches were interested in proceeding
with development of land; Thompson was not interested, so dissolving the partnership and
partner to account to the partnership for any property, profit, or benefit derived by the partner in
the conduct of the partnership’s business or from the use of its property. The duty of loyalty can
be breached by dealing with the firm as an adverse party. Each partner must act in good faith
for the benefit of the partnership. Of course, a partner may pursue his or her own interests
without automatically violating these duties.
in whole or in part.
8 UNIT ONE: BUSINESS ORGANIZATIONS
in whole or in part.
failed to communicate with Moran for long periods of time, even when she requested that she be
kept apprised of certain matters; and refused to take suggestions from advisers who were
experienced in renovating houses. These actions certainly reflected poor management of the
project and a general carelessness with partnership funds—but they did not necessarily breach
the partnership agreement. Although the court concluded that his conduct both before and after
he did not fulfill his promise to provide his labor in completing the renovation.
2–10A. LEGAL REASONING GROUP ACTIVITY—Liability of partners
(a) Partnership agreements can be oral, written, or implied by contract. The elements
of a partnership are (1) a sharing of profits and losses, (2) a joint ownership of the business, and
Fontenot entered into the act of sale on behalf of the partnership.
(b) The partnership and all of the partners jointly or severally are liable on the notes.
In other words, each partner can be held individually and personally liable on the notes, but
could obtain reimbursement for the liability from the partnership and the other partners. Of
course, the partnership assets must be exhausted before a judgment could be enforced against
