Partner liability, duties, dissociation, and dissolution

Black-letter propositions

1. 01

   The partnership is liable for partner acts in ordinary business or with authority and for partner torts within ordinary course.

2. 02

   General partners are jointly and severally liable for partnership obligations, usually after exhaustion requirements under governing law.

3. 03

   Partners owe duties of loyalty and care and an obligation of good faith; the agreement can define but not unreasonably eliminate core duties.

4. 04

   Dissociation changes a partner's status and can be rightful or wrongful; lingering authority and buyout rules protect relevant parties.

5. 05

   Dissolution triggers winding up in specified events; continuation can occur under agreement or statute.

Use this attack sequence under time

Common wrong turns

• Incoming partners are generally not personally liable for preexisting obligations beyond their investment.
• Dissociation is not always dissolution.
• A filed statement may alter third-party notice only after statutory timing.

Worked example

A partner leaves a term partnership early without authorization and a vendor still believes she is a partner.

Practice this topic

Liability and dissolution

Cornell says in a general partnership every partner remains personally liable for the debts and obligations of the partnership. In a limited partnership at least one general partner has unlimited personal liability, while limited partners typically are liable only up to their contribution. Dissolution is a fundamental change in the relationship among partners that ends a governance relation, and generally the death of a partner operates as a dissolution. Liquidation of the partnership's assets occurs as part of dissolution.

NCBE's outline distinguishes dissolution from winding up and termination, asks whether dissolution is rightful or wrongful, and covers general partnerships, limited partnerships and limited liability partnerships.

Partners' rights among themselves

The outline lists the rights of partners among themselves as profits and losses, management and control, and the duties of care and loyalty. For limited partnerships it lists disclosure requirements, the control limitation and the economic rights of limited partners.

Cornell says a limited partner who takes part in decision making may be treated as a general partner depending on state law, which is the control limitation the outline names.

Dissolution beyond partnerships

Cornell defines dissolution generally as bringing an end to a legal relationship between two parties, such as a partnership, a contract or a marriage. In partnership law the entry describes it as a fundamental change in the relations among partners, and liquidation of the partnership's assets occurs as part of it. Ask on an exam what event caused the change, and what happens to the assets afterwards.

Frequently asked questions