Black-letter propositions
- 01
Each partner is an agent of the partnership for its business, and an act of a partner apparently carrying on in the ordinary course the partnership's business, or business of the kind it carries on, binds the partnership unless the partner had no authority and the other party had notice of that.
- 02
An act of a partner that is not apparently for carrying on the partnership's ordinary business binds the partnership only if the other partners authorized it.
- 03
All partners are liable jointly and severally for all obligations of the partnership unless the claimant agrees otherwise or the law provides otherwise.
- 04
A person admitted as a partner into an existing partnership is not personally liable for any obligation of the partnership incurred before the admission.
- 05
A person who by words or conduct purports to be a partner, or consents to being represented by another as a partner, is liable to a person to whom the representation is made if that person relies on it and enters into a transaction with the actual or purported partnership.
- 06
If the representation is made in a public manner, the purported partner is liable to a person who relies on it even if the purported partner is not aware of being held out as a partner to that claimant.
- 07
If a partnership obligation results, the purported partner is liable as if a partner, and if no partnership obligation results the purported partner is liable jointly and severally with any other person consenting to the representation.
- 08
A person is not liable as a partner merely because another person names the person in a statement of partnership existence, and a person does not stay liable as a partner merely because no statement of dissociation was filed.
- 09
A partnership is liable for a loss or injury caused by a wrongful act or omission of a partner acting in the ordinary course of the partnership's business or with its authority.
- 10
A judgment against a partnership is not by itself a judgment against a partner, and a partner's personal assets cannot be reached to satisfy a partnership judgment unless there is also a judgment against that partner.
Use this attack sequence under time
Frame the issue
Decide first whether an actual partnership exists, then whether the person is only a purported partner.
Resolve the next checkpoint
For a purported partner, find the words or conduct, the consent, and the third party's reliance.
Resolve the next checkpoint
Ask whether the representation was made publicly, which removes the need to show the claimant was told directly.
Resolve the next checkpoint
For a partnership contract, ask whether the act was apparently in the ordinary course of the partnership's business.
Finish the conclusion
Check whether the person joined after the obligation arose, and check the status of any limited liability partnership.
Common wrong turns
- Reliance is required when the representation was made to the claimant directly, so a person who did not rely cannot recover from a purported partner.
- A new partner is not liable for obligations incurred before admission, though the partnership's assets remain exposed.
- Being named in a statement of partnership existence by someone else does not by itself make a person liable as a partner.
- A judgment against the partnership alone does not permit collection from a partner's personal assets.
Worked example
Dana tells a supplier that she is a partner in a landscaping business run by Eli and Fay, and Eli and Fay know she says so and do not object. Dana is only a lender to the business. The supplier ships $30,000 of materials on credit to the business, relying on Dana's statement, and the business does not pay.
Dana purported to be a partner and Eli and Fay consented to the representation. The supplier relied on it and entered into a transaction with the partnership, so Dana is liable to the supplier as if she were a partner, even though she is not one.
Practice this topic
Purported partners
Section 15-308(a) of the Delaware Revised Uniform Partnership Act provides that a person who by words or conduct purports to be a partner, or consents to being represented by another as a partner, in a partnership or with one or more persons who are not partners, is liable to a person to whom the representation is made if that person, relying on the representation, enters into a transaction with the actual or purported partnership.
The same subsection provides that if the representation is made in a public manner, the purported partner is liable to a person who relies on the purported partnership even if the purported partner is not aware of being held out as a partner to that claimant. If a partnership obligation results, the purported partner is liable as if a partner. If no partnership obligation results, the purported partner is liable jointly and severally with any other person consenting to the representation.
Section 15-308(b) makes a person represented to be a partner an agent of the persons who consent to the representation, to bind them as if the person were a partner, for persons who transact in reliance. If all partners of an existing partnership consent, a partnership act or obligation results. If fewer than all consent, the person acting and the consenting partners are jointly and severally liable.
Partner agency and liability
Section 15-301 makes each partner an agent of the partnership for its business, so an act of a partner apparently carrying on in the ordinary course the partnership's business or business of the kind it carries on binds the partnership unless the partner lacked authority and the other party had notice of it. An act that is not apparently in the ordinary course binds the partnership only if the other partners authorized it.
Section 15-305 makes a partnership liable for a loss or injury caused by a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of the partnership's business or with its authority, and for money or property of a nonpartner that a partner misapplies while acting in the partnership's business.
Personal liability of partners
Section 15-306(a) provides that, except as the section otherwise provides, all partners are liable jointly and severally for all obligations of the partnership unless the claimant agrees otherwise or the law provides otherwise. Section 15-306(b) provides that a person admitted as a partner into an existing partnership is not personally liable for any obligation incurred before the person's admission.
Section 15-306(c) provides that for a partnership that is a limited liability partnership, an obligation arising while it is one is solely the obligation of the partnership, and a partner is not personally liable for it solely by reason of being a partner. Section 15-307(c) provides that a judgment against a partnership is not by itself a judgment against a partner, and partnership judgments cannot be satisfied from a partner's assets unless there is also a judgment against the partner.
Section 15-308(c) and (d) provide that a person is not liable as a partner merely because another names the person in a statement of partnership existence, and does not continue to be liable merely because of a failure to file a statement of dissociation.
Frequently asked questions
What is the controlling rule for purported partners, partner agency, and partner liability (delaware revised uniform partnership act)?+
Identify whether a partnership exists, then apply the purported-partner section: words or conduct, consent, reliance, and the public-manner rule, and state the resulting liability.
What makes someone a purported partner?+
Words or conduct by which the person represents herself as a partner, or consent to being represented by another as one, under section 15-308(a).
Must the third party rely on the representation?+
Yes, the claimant must rely on the representation and enter into a transaction with the actual or purported partnership, under section 15-308(a).
Does a public representation change the reliance analysis?+
If the representation is made in a public manner, a person who relies can recover even if the purported partner did not know of the claimant, under section 15-308(a).
Are all partners liable for partnership debts?+
Yes, partners are jointly and severally liable for all partnership obligations unless the claimant agrees otherwise or the law provides otherwise, under section 15-306(a).
Is a new partner liable for older debts?+
No, a person admitted into an existing partnership is not personally liable for obligations incurred before admission, under section 15-306(b).