Deck 31: Operation and Dissolution of General Partnerships

Question 1

Under the RUPA, a judgment creditor of a partnership may first attempt to enforce a judgment against either the separate assets of a partner or the partnership itself.

Answer 1

False

Question 2

Under the RUPA, dissolution occurs automatically upon the happening of an event specified in the partnership agreement as resulting in dissolution. The partners may not agree to continue the business.

Answer 2

False

Question 3

Much of the law of partnership is same as the law of agency.

Answer 3

True

Question 4

Under the UPA, a creditor of a partnership must name all the partners as defendants in a suit on a contract obligation of the partnership.

Question 5

"Dissolution" of a partnership and "termination" of a partnership are synonymous.

Question 6

Powell falsely tells Dunagan that she is a member of the partnership of Morgan and Stiles. Dunagan mentions this information to Trammell, who in reliance sells equipment on credit to Morgan and Stiles. Trammell can hold Powell liable for the misrepresentation.

Question 7

The UPA marshaling of assets doctrine is expanded by the RUPA.

Question 8

A person admitted into an existing partnership is personally liable for all of the obligations of the partnership arising before his admission.

Question 9

Upon dissolution of a partnership, all authority of a partner to act on behalf of the partnership terminates.

Question 10

Rose, Lily, and Thorne are partners in a florist shop. If Thorne engages in conduct that makes it not reasonably practicable to carry on the business, the partnership is dissolved by operation of law.

Question 11

Any partner has the power to dissolve a term partnership by giving notice to the other partners.

Question 12

The actual express authority of partners must be specifically set forth in the partnership agreement.

Question 13

If a partner has paid more than his share of partnership losses, he has a right of contribution against the partners who have not paid their share.

Question 14

Partners are required to participate in winding up the partnership.

Question 15

Upon dissolution, a partner still has authority to complete existing contracts.

Question 16

Takira leaves the Coastal Area Accounting Partnership. She may immediately compete with the partnership for new clients and may collect and keep the fees she earns from both new clients and from old clients on account of transactions she completes from her partnership with Coastal Area .

Question 17

Notification to one partner of any matter relating to partnership affairs is effective immediately as notice to the partnership.

Question 18

A partner has implied authority to hire and fire employees whose services are necessary to carry on the partnership business.

Question 19

The RUPA requires a central filing of a statement of partnership authority specifying the names of partners authorized to execute instruments transferring real property held in the name of the partnership.

Question 20

Respondeat superior has no application to situations where a partner commits a tort, because only the partner and not the partnership is liable.

Question 21

Under the RUPA, a partner in a term partnership who wrongfully dissociates before the end of a definite term cannot receive payment of a portion of the buyout price before the expiration of the term.

Question 22

Dissociation refers to those situations in which the RUPA requires a partnership to wind up and terminate.

Question 23

Under the UPA, neither a partner who causes dissolution by wrongfully withdrawing nor a partner expelled pursuant to the partnership agreement can force liquidation of the partnership.

Question 24

A partner is criminally liable for the crimes of her partners.

Question 25

Under the RUPA, it is possible to cure an illegality within 90 days after notice to the partnership of the event dissolving the partnership for illegality.

Question 26

If the general partnership is bound by a contract, then each individual general partner has unlimited personal liability for that obligation.

Question 27

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.

Question 28

Under the UPA, upon termination of a firm, each partner is entitled to the return of his capital after partnership creditors have been paid.

Question 29

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 or advances.
C) creditors other than partners.
D) partners for capital.

Question 30

In a three person partnership, one partner commits fraud which creates a liability to the partnership of $9,000. If the three partners share profits and losses equally, each partner's liability to the partnership for the fraudulent act is $3,000.

Question 31

A person has notice of a fact if the person has reason to know it exists from all of the facts known to the person at the time in question.

Question 32

The withdrawal of a partner in a partnership at will may be either a rightful or wrongful dissociation.

Question 33

Under the RUPA, in a term partnership, if within 90 days after any specified cause of dissolution occurs, fewer than half of the remaining partners express their will to wind up the partnership business, the partnership will not dissolve.

Question 34

The liability of partners for a tort or breach of trust committed by any partner is unlimited, personal liability.

Question 35

Winding up involves all but which one of the following?

A) Selling assets for cash.
B) Collecting debts owed to the partnership.
C) Taking orders for business.
D) Paying creditors.

Question 36

A partner has the power to dissociate at any time by expressing the intent to withdraw.

Question 37

Jane, Keegan, and Lois are partners in a state that has adopted the RUPA. Jane intends to retire and withdraw from the partnership at the end of the year. Jane is liable to the firm's creditors:

A) for a partnership obligation incurred within two years after dissociation if the partnership did not dissolve and if at the time of entering into the transaction the other party reasonably believed Jane was then a partner.
B) only for all debts incurred prior to her retirement.
C) for an amount not to exceed her initial capital contribution to the partnership.
D) for an amount not to exceed her partnership interest on the day of her retirement.

Question 38

A retiring partner has no way of being discharged from her existing liabilities other than by paying them off.

Question 39

Under the UPA, submission of a partnership claim to arbitration requires the consent of all the partners.

Question 40

Under the RUPA, a partner's dissociation in a term partnership is wrongful if before expiration of the term:

A) the partner voluntarily withdraws one month after another partner dies.
B) the partner dies.
C) a court determines the partner became incapable of performing her duties under the partnership agreement.
D) the partner becomes a debtor in bankruptcy.

Question 41

John, Samuel, and Jim are general partners in the development of an electric car. Jim pours all his money into the project, but it never seems to work out. Eventually the partnership and Jim cannot meet their daily obligations, and the partnership is dissolved. Jim files for bankruptcy. If the partnership assets are insufficient to pay all claims against the partnership:

A) the trustee in bankruptcy must seek recovery of the deficiency first from John and Samuel.
B) Jim is released from liability because of the bankruptcy proceedings.
C) Jim's personal assets are not available for the partnership debts because he has limited liability.
D) the bankruptcy court must follow the doctrine of marshaling of assets.

Question 42

Under the RUPA, the partners have what type of liability for all contract obligations of the partnership?

A) Joint.
B) Joint and several.
C) Several.
D) None.

Question 43

Smarth, King, and Finkel have been partners for years, but a court of equity is now segregating and considering separately the assets and liabilities of the partnership and the respective assets and liabilities of the individual partners. This process is called:

A) marshaling of assets.
B) liquidation.
C) dissolution of the partnership.
D) winding up.

Question 44

A partner has implied authority to:

A) hire and fire employees necessary for operation of the business.
B) purchase property necessary for the business.
C) bring legal actions to enforce claims of the partnership.
D) All of these.

Question 45

Chuck, Betty, and Bert form CB&B Partnership to run a specialty grocery store. Bert is the day-to-day manager of the store, Betty buys the groceries, and Chuck does all the administrative work. Betty decides she would like a new car to use when calling on prospective wholesalers. She makes a contract with Big Ben Motors in the name of CB&B without consulting Chuck and Bert. CB&B and the individual partners are:

A) bound by Betty's actual implied authority to buy a car.
B) bound by Betty's apparent authority to buy a car.
C) bound by estoppel.
D) not bound because buying a car is outside the scope of the partnership business.

Question 46

Under the UPA, absent an agreement otherwise, upon dissolution, a partner is entitled to which of the following after payment of partnership creditors?

A) A share of profits in proportion to his capital contribution.
B) Shares of profits dependent upon the capital and time he contributed to the partnership.
C) Repayment of his loans to the partnership, capital contribution, and a share of the profits.
D) The UPA requires that the partners have an agreement or else they must seek a court order distributing the remaining assets.

Question 47

Paul is driving a truck delivering goods for his partnership when he negligently backs into a customer's new car. The customer sues the partnership and recovers $11,000 in damages. What liability do the other partners have for Paul's actions?

A) No liability.
B) Liability based on their capital contributions.
C) Individual liability but not joint liability.
D) Joint and several liability.

Question 48

David, a partner in the Speedy Delivery partnership, negligently drove his delivery truck onto the curb during a rush-hour package delivery. Marlene was injured. Against whom can Marlene collect?

A) Only David.
B) Only the other partners.
C) Speedy Delivery Partnership.
D) Both  Speedy Delivery Partnership and any partner .

Question 49

David, Ed, and Fred are partners in the DEF partnership. The partnership is being dissolved, having $200,000 in assets and owing $410,000 to creditors. David contributed $100,000 in capital; Ed contributed $50,000 in capital; and Fred contributed $25,000 in capital. Profits are shared equally. Which of the following is correct with regard to the responsibility of each partner?

A) The partners will bear losses equally.
B) The partners will bear losses in the proportion of their relative capital contributions.
C) If Ed refuses to contribute to covering the loss and he is out of the jurisdiction, David and Fred must contribute the additional amount necessary to pay DEF's liabilities in the relative proportion of their capital contributions.
D) Any of these could be true, depending on the partnership agreement.

Question 50

ABC Partnership agrees to hire an "errand runner" 20 hours per week for the summer. Alan, a partner, interviews a college student and decides to offer her the job. But she says she needs a 40-hour-a-week job, so Alan agrees to make it 40 hours. What result?

A) ABC Partnership is not bound to hire her.
B) ABC Partnership is bound to pay her for 40 hours per week.
C) Alan is bound to pay her for 20 hours per week.
D) Alan has to pay her for 40 hours per week.

Question 51

Roberts, Smith, and Thomas have been partners for twenty years. The partners, however, are now collecting debts, converting assets to cash, paying creditors, and distributing remaining assets to each partner. Roberts, Smith, and Thomas are engaged in:

A) dissolution.
B) marshaling assets.
C) reformation.
D) winding up.

Question 52

Under the UPA, which of the following can be done only with the consent of all of the partners?

A) The firing of a partnership employee.
B) Confession of judgment.
C) The sale of a jointly owned office computer.
D) All of these actions require consent of all partners.

Question 53

Actual authority terminates upon:

A) dissolution of the partnership.
B) illness of one of the partners.
C) physical destruction of partnership papers.
D) All of these events terminate actual authority.

Question 54

Which of the following is NOT considered to be dissolution by operation of law under the UPA?

A) Bankruptcy of a partner.
B) Expulsion of a partner according to the partnership agreement.
C) Subsequent illegality of the partnership.
D) Death of a partner.

Question 55

Which of the following describes the imposing of partnership duties and liabilities upon a person who is not a partner in an existing partnership by reason of his consenting to representation that he is a partner?

A) Partnership by estoppel.
B) Delectus personae .
C) A fiduciary duty.
D) Torts of partnership.

Question 56

Authority that a third person, in view of the circumstances, the conduct of the parties, and a lack of notice or knowledge to the contrary, may reasonably consider to exist is known as:

A) actual implied.
B) apparent.
C) actual express.
D) authorized.

Question 57

General Widget's partnership assets amount to $34,000 after liquidation. Frank, Gene, and Hank, equal partners, each contributed $3,000 into the capital pool at the inception of the business. Gene later loaned the business $5,000. The partnership owes $23,000 to creditors for inventory. Under the UPA, what will Gene get in distribution, assuming there is no agreement on the distribution of profits?

A) $5,000.
B) $7,000.
C) $8,000.
D) $11,000.

Question 58

The UPA provides that partners are __________ liable on all debts and contract obligations of the partnership.

A) jointly
B) strictly
C) jointly and severally
D) partially

Question 59

__________ is available to a third person to whom a representation is made and who justifiably relies on the representation.

A) Delectus personae
B) Respondeat superior
C) Culpable negligence
D) Partnership by estoppel

Question 60

Under the UPA, after dissolution:

A) the partnership must be liquidated.
B) the remaining partners have the right to continue the partnership if the majority of them agree.
C) the remaining partners have the right to continue the partnership if the partnership was dissolved in contravention of the partnership agreement.
D) the partnership must be liquidated only if the dissolution was caused by the expulsion of a partner in accordance with the partnership agreement.

Question 61

Does a new partner in a firm have personal liability for debts existing when he joined the firm? What should a prospective partner do to avoid unreasonable liability?

Question 62

a. What is the liability of the partners for contracts regarding partnership business?
b. What is the liability of the partnership for torts committed by a partner while acting in the ordinary course of partnership business? How does this compare to the liability of a principal under respondeat superior ? Explain.

Question 63

Bernice is withdrawing from a partnership in a state that adopted the UPA. How can she protect herself against liability on contracts the firm enters after her withdrawal?

Question 64

Jacob dissociates from the Applegate Partnership, which continues to operate. Discuss Jacob's authority to act for the partnership after his dissociation and his possible liability under the RUPA to the partnership or third parties for transactions entered on behalf of the partnership.

Question 65

Define dissolution under the UPA and discuss its three causes.

Question 66

Austin withdraws from a partnership and the remaining three partners decide to continue in business. Discuss the effect of the withdrawal on the partnership and on creditors rights under the UPA.

Question 67

Carolee, Joanna, and Ellen form Capital City Partnership. Carolee contributes expertise; Joanna, $15,000; and Ellen, $20,000. After a year, Joanna adds $12,000 as a loan. Ten years later, Capital owes $44,000 to creditors, total assets are $112,000, and the partners decide to dissolve the business. How will the assets be distributed under the UPA, and what will each partner receive?

Question 68

Shannon has just become a partner in A & R Accounting Partnership. Her capital contribution is $10,000, which she paid from her savings. Shannon:

A) has no liability for partnership debts that existed at the time of her admission as a partner.
B) is liable only to the extent of her capital contribution for partnership debts that occur after her admission as a partner.
C) has unlimited personal liability for all partnership debts regardless of whether they were incurred before or after she became a partner.
D) has unlimited personal liability for all partnership obligations that occur after she became a partner; she has liability to the extent of her capital contribution for obligations that existed at the time she became a partner.