PARTNERS’ LIABILITIES
Among themselves, partners may make any agreement they so choose with regard to authority in running the business. Others, however, may not be aware of such internal agreements. If so, the partnership and all partners are liable without limit for all obligations of the firm, which arise out of contracts, made by any partner within the scope of the firm's business.
The partnership and all partners are liable when any partner commits a tort (for example, negligence or fraud) while acting within the ordinary course of the business.
The wrongdoer would be obligated to indemnify the partnership for any damages it had to pay to the injured party. Of course, if the other partners had authorized or participated in the tort, all would share the blame and no indemnity would be payable. Liability for certain crimes committed in the course of business, such as selling alcoholic beverages to minors, is also imposed on the partnership and all the partners.
When a judgment is obtained against a partnership, and the partnership assets are exhausted, the individually owned property of the general partners may be seized and sold under process of law for the satisfaction of the debt. Creditors of the individual partners, however, have first claim to such property. Any partner who pays in obligation of the firm with personal assets is entitled to recover a proportionate share from each of the other partners.
A partner cannot escape responsibility for firm debts by-withdrawing from the partnership. After withdrawing, one remains liable for all debts incurred while a member. A new partner who joins the firm is liable for both existing and new debts of the business. However, creditors with claims, which arose before the new partner joined the firm, cannot seize the new partner’s nonbusiness property. Such creditors are limited to action against the new partner's share of partnership property.
Answer the questions:
1. Who is liable without limit, for all obligations of the partnership?
2. What can be done for the satisfaction of the partnership's debt?
3. Is a new partner who joins the firm liable for existing debts of the partnership?
Task 1
Put your legal skills in action
Partnership Liability Clay, who is a general partner in Harrington Enterprises, believes he will not be liable for a tort committed by Ian, another partner in the firm. Write a letter to Clay explaining whether he will be liable for Ian’s tort.
TEXT 7.
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