I. GENERAL PARTNERSHIPS
A. What is a Partnership? UPA AND RUPA (EMANUEL – p. 3)
Ø Statutory Definition of Partnership
1) RUPA§ 202(a). (p. 32 in H/O)
Ø A partnership is an association
1) Voluntary agency, not contract,
2) to associate 2 or more persons ( at least 2 persons) to carry on
3) as co-owners (ESSENTIAL FOR PARTNERSHIP)
i. profit sharing
ii. joint control
4) a business – must be a business, not just investment
5) for profit – anticipation of profit (not necessary guaranteed profit)
Ø Conjuctive – NOTE: (ELEMENTS must be ANDED)
Ø PARTNERS ARE PERSONALLY LIABLE FOR ALL DEBTS OF THE PARTNERSHIP
Ø UPA and RUPA provide Default Rules – But can be modified/amended by contract. Except for the Following: (RUPA§ 103(a). p. 34)
1) exemption of Personal Liability
2) dissolution at will
3) waiver of Fiduciary Duty of loyalty
Ø Non-conclusive factors courts consider:
1) Intent – However, if people agree to do share profits/control, they are partners even if they haven’t intended a partnership
2) Right to share in profits (This does not by itself establish a partnership. RUPA§ 202(c)(2))
3) Rights of parties on dissolution
4) Ownership and control of partnership property
5) Language of any agreement
6) Conduct toward third parties
B. Partners Compared with Employees
1. Fenwick v. Unemployment Compensation Commission (NJ 1945) p,92
1) Element 1 – Voluntary Association – Yes
2) Element 2 – Is there at least Two People – Yes
3) Element 3 – It is a Business – Yes
4) Element 4 – Is profit anticipated – Yes
5) Element 5 – Is there co-ownership
A. Some profit sharing – Yes
B. Sharing of Loses – No. Court made a big deal about this but LOSS SHARING IS NOT RELEVANT in a partnership
C. Is there Joint Control – No. Cheshire never had power….therefore NO PARTNERSHIP
C. Partners Compared with Lenders (Formation by Conduct not Intent)
1. Martin v. Peyton (NY 1927) p.97
1) P is a creditor who says D is a partner. D is a lender who says they are not liable
2) D lent monies to KN&K with certain strings attached – Did the strings make them a partner?
3) Did it meet the elements above for a Partnership?
a. Share of profits – YES. Creates a presumption that there is a partnership (RUPA Section 202) but not dispositive.
b. D says merely compensation for loan.
4) Risk of liability would have been avoided if KNK had been organized as a corp. LLC or LLP not available at this time
5) NO PARTNERSHIP: The absence of an explicit partnership agreement does not preclude the creation of a partnership. Even though they renounced any intention to be partners in the agreement, court still must ask whether they “carried on as co-owners a business for profit.” HOWEVER, although this smells like a partnership, Cardozo pushes edge in this case to protect/encourage investors from being liable for losses
6) Problem w/ partnerships being created by conduct instead of intent – p
doesn’t rise to level of Partnership but still owe each other Fiduciary Duties.
3. RUPA v. UPA
1) UPA 21(1): Partner Accountable as a Fiduciary
· Every partner must account to the partnership for ay benefit, and hold as a trustee or it any profits derived by him without the consent of the other partners from any transaction connected with the formation, conduct, or liquidation of the partnership or from any use by him of its property. (Meinhard read this duty more broadly)
2) RUPA: Skepticism about fiduciary duties
· 404(a): General Standards of Partners Conduct
· 103:Effects of partnership Agreement; nonwaivable provisions
E. Partnership Property
1. Putnam v. Shoaf (1981) p.135
1) Once you leave the p’ship, no claim on its assets/liabilities
2) Putnam says she never conveyed future causes of action in the QuitClaim Deed, only current assests.
3) CT says conveyance of partnership property held in the name of the partnership is made in the name of the partnership and not as a conveyance of the individual interests of the partners.
a. All Ms. Putnam had to convey was her interest in the partnership.
b. She had no specific interest in the admittedly unknown cause of action (unknown inchoate claim) to separately retain or convey.