This is an extract of our Introduction To The Law Of Partnerships document, which we sell as part of our Business Association (Duke Cox) Outlines collection written by the top tier of Duke University School Of Law students.
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Introduction to the Law of Partnerships A. Formation a. Formalities: a partnership can be formed without filings (partnership at will) b. RUPA SS 101(6): A partnership is an association of two or more persons to carry on as co-owners a business for profit formed under Section 202, predecessor law, or comparable law of another jurisdiction.
1. Own implies control c. Alternatives to RUPA- the four element test: where there is no express partnership agreement, four elements must be present:
1. An agreement to share profit
2. An agreement to share losses
3. A mutual right of control
4. A community of interest in the venture d. RUPA SS 203: All property acquired by the partnership is owned by the partnership, not by the partners individually. B. Managing the Partnership a. RUPA SS 103
1. (a) Except as otherwise provided in (b), interpartner and intra-partnership relations are governed by partnership agreement. To the extent that the partnership agreement does not otherwise provide, this Act sets default rules for intra-partnership relations.
2. (b) Partnership agreement cannot vary certain rights, including: 1) Eliminating duty of loyalty and duty of care. (can modify). 2) Restricting rights of third parties under this Act. b. RUPA SS 401(f): (By default) Each partner has equal rights in the management and conduct of the partnership business (regardless of ownership interest).
1. If no agreement says otherwise c. RUPA SS 401(i): A person may become a partner only with the consent of all of the partners. d. RUPA SS 401(j): (By default)
1. Issue in ordinary course of business ?need majority of the partners.
2. Issue outside ordinary course of business?
need consent of all partners (unanimity)
3. An amendment to the partnership agreement
?need consent of all partners (unanimity) 1) BUT NOTE: question is how to differentiate what is in the ordinary course, what is not. 2) Vote counts: the number of partners, not to shares of partnership interest e. RUPA SS 404(e):
1. A partner does not violate a duty or obligation under this Act or under the partnership agreement merely because the partner's conduct furthers the partner's own interest. 1) Sanchez v. Saylor. A partner does not violate a duty or obligation to the partnership/other partners merely by acting in his own interest, even when that action runs against the interests of the partnership. 2) But Page v. Page says you can't act in own self-interest if it contravenes interest of 3P.
2. This rule is radically different in the corporate context, where directors/officers are restricted from acting in a manner that harms the corporation f. RUPA SS 403: Partner's Rights and Duties with Respect to Information
1. Partnership shall keep books and records at executive office
2. Partnership shall provide partners, agents, and attorneys access to books and records 1) Must furnish past partners records pertaining to their period of membership 2) Partners have right to inspection and copy during normal business hours 3) Can charge reasonable fee C. Authority of Partners a. RUPA SS 301: Partners are agents of the partnership
1. Actions of the partners in the ordinary course of business are binding on the partnership unless the partner had no authority to act and the person with whom the partner interacted knew or had notification that the partner lacked authority
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