1 Chapter 2 Partnerships 91-101
1) * two partnership acts are running simultaneous and you need to look to the state to see which act they are following. Just go under the list of adoptions for the statute. There are very few substantial changes between the acts. The revised updates and clarifies many implicit segments that were decided by caselaw.
2) UPA (uniform partnership act) of 1914 §6(1)
a. A partnership is an association [(1) voluntary agt., not contract, to associate] i. The voluntary agreement does not have to rise to the level of a contract. Two people saying to start a popsicle stand.
b. Of two or more persons [(2) at least 2 “persons”] i. A person could be a corporation, LLC, or other partnership. People includes business association].
c. To carry as co-owners [(5) profit sharing & joint control] i. The problem comes in determining the test of co-ownership (tests are in the cases we will do today)
d. A business [(3) must be a business, not just an investment] e. For profit. [(4) anticipation of profit].
f. *** A conjunctive test – or an and – where all five elements must be met.
g. *** unlimited liability for a partnership agreement, so there is almost no general partnerships now. Limited liability partnership / company.
h. *** people form partnerships all the time and just don’t know it – look at the elements.
3) RUPA (Revised uniform partnership act of 1997) §202(a) formation of partnership: “[T]he association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.”
a. This was explicit to show what was implicit in the UPA – that intention was not required.
4) Three policy themes we will encounter during the semester (not core, but important)
a. What role should corporations play in society, but in American and international. What should the respective roles of stackholders and shareholders be. Stakeholders are employees, consumers, the local community. Those who stand to gain or lose a lot by their dealings with the corporations.
b. What role should democracy perform in corporations. Corporations have a central corporate structure – later years more movement to make boards representative of society at large. Should we give other sorts of stakeholders rights to vote on corporate boards or rights to serve on corporate boards.
c. What is the role of federalism on American corporate law. Federalism as the relationship between state and federal governments. A hybrid of state and federal regulations. State regulations overwhelmingly is the regulations of Delaware as more than half the fortune 500 companies are incorporated in Delaware. Legislation in Delaware set the laws for the corporations which spills over to the other states.
5) Summary of course
a. General partnership
b. Business corp and role in society
c. Basic aspects of corporations – limited liability
d. Two key fiduciary duties: care and loyalty.
administration and the reservation in the agreement of the exclusive control of the management of the business – Fenwick excluded Chesire.
Ø In Voorhess v. Jones: share of profits as compensation for services was neither a partner nor liable for partnership debts.
· Language of the agreement à agreement excludes Chesire from most of the ordinary rights of a partner.
· Conduct of parties to third persons à did not file partnership income tax.
· Rights of the parties on dissolution à everything went to Fenwick.
· *** Burden of establishing a partnership is on the one who alleges it exists. à here was nothing more than a mere method of compensation “for the girl”.
a. Partners are equally liable for all of the debts of the partnership
b. What if a partnership is formed and then the ownership is almost immediately ceded. This is okay and in fact what happens in law firm partnerships – they cede control and have no practical control. Here there was no evidence of first ceding authority or separate turfs established. Little evidence of joint control.
Held themselves out to the government authorities as partners. This was what the court looked at as good faith.