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321 midterm review answers 07

321 midterm review answers 07 - Business Law II Spring 2007...

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Business Law II Spring, 2007 Midterm Review Answers 1. All of the information regarding how/why the partnership interests came to be auctioned off is irrelevant. When Dave died, B & B as surviving partners got the right to control partnership property to effect a reasonable termination of the partnership. Dave’s executor has no right to participate in this process . It was not intended that B & B appear negligent in how they wound up the business but some students did reach that conclusion. While Paul purchased B & B’s interests at auction, this doesn’t give him the right to participate in decision-making like a partner or give him an interest in any specific piece of partnership property [like the liquor license]. He only gets B & B’s share of the profits . This is a difficult distinction to make but one which is crucial to a correct answer. Since the facts say that the only valuable asset in the business is the license, it would seem legitimate as part of the winding up process for Bob to renew the license so that the business as a going concern can be sold for a decent price. When the business is sold, Paul gets 2/3 of the sale price and Dave’s estate gets 1/3. 2. When Olson signs a new agreement and becomes a general partner, does backdating the agreement to predate the time of a breach of contract cause Olson to be liable for the debt incurred when he was a limited partner? The general rule is that a limited partner is not personally liable and a new general partner is only personally liable for debts incurred by the partnership after s/he comes on board . See UPA 309. The exception applies to a new general partner who agrees to be personally liable. Therefore the issue is whether Olson is so agreeing when he signs a revised agreement that is backdated. Even if you conclude that Olson has not so agreed, the ULPA provides that a limited partner will be liable to a creditor/third party who did business with the partnership believing that the limited partner was a general partner or otherwise had agreed to be personally liable. See ULPA 303(a). Since the general partner signed the contract at issue, there is nothing in the facts to suggest that this provision would control but a student would get brownie points for noting the exception.
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3. a. Reid has no right to extra compensation because he made the greater capital contribution (as opposed to a loan to the partnership) unless the partnership agreement specifically authorizes such a payment. b. Normally a partner has no implied authority, without the express approval of his or her copartners, to sell all or substantially all of the partnership's assets or take any action which would make further conduct of the partnership business impossible (U.P.A.
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