Business Associations Lecture Two: Partnerships (Part Two)

This lecture provides a detailed overview of partnership law, beginning with the definition and essential elements of a partnership according to the Uniform Partnership Act. It explores the legal significance of profit sharing as evidence of a partnership's existence and discusses different types of partnerships, including general partnerships, limited partnerships, and limited liability partnerships. The text explains how partnerships are formed based on conduct and outlines the importance of partnership agreements and default legal rules. Crucially, it covers the fiduciary duties partners owe each other, the authority of partners to bind the partnership, and the concept of joint and several liability for general partners. The lecture also addresses partnership property, the distinction between dissociation and dissolution, and examines several influential court cases that have shaped this area of law, concluding with a look at policy considerations, debates, and criticisms within partnership law.The four essential elements are: an association of two or more persons; who carry on a business; as co-owners; for profit.The sharing of profits is considered prima facie evidence of the existence of a partnership, creating a presumption that the parties are partners unless the profits were received under a different specific arrangement (like wages or debt payment).A general partner is personally liable for all partnership obligations, while a limited partner's liability is generally limited to the amount of their capital investment, provided they do not participate in the management of the business.A general partnership forms based on the conduct and intentions of the parties, not requiring a formal agreement or state filing. A written partnership agreement is optional but recommended, as it allows partners to customize terms and avoid the default rules.The duty of loyalty requires a partner to account for partnership benefits, refrain from dealing with the partnership adversely, and avoid competing with the partnership. OR The duty of care requires a partner to avoid grossly negligent, reckless, intentional misconduct, or illegal actions. OR The duty of good faith and fair dealing requires partners to be honest, candid, and fair in their dealings with each other and the partnership.Joint and several liability means that each partner is individually liable for the entire amount of the partnership's debts or obligations. A creditor can sue and collect from any one partner for the full amount, regardless of that partner's proportion of fault or investment.Yes, this action likely binds the partnership. Each partner is an agent of the partnership, and signing a contract for necessary office furniture is typically considered an action within the ordinary course of a law firm's business.Partnership property is owned by the partnership entity itself (e.g., a building owned by the firm), not by individual partners. A partner's personal property interest is in the profits and distributions of the partnership, not a specific claim on the physical assets.Dissociation occurs when a partner leaves the partnership, either voluntarily or involuntarily, such as through withdrawal, death, or bankruptcy. It does not automatically dissolve the partnership under RUPA.Meinhard vs Salmon established that partners owe each other a very high standard of fiduciary duty, described as "the punctilio of an honor the most sensitive," requiring utmost loyalty and full disclosure in partnership dealings.