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65.(p. 347)In Clancy v. King, the plaintiff and defendant had operated a general partnership to promote certain literary works. Their partnership agreement contained standard language requiring the duty of diligence and care but specifically permitted the partners to freely compete against the partnership on an individual basis. The partnership entered into a very profitable agreement to have Clancy lend his name to fictional works of other authors taking advantage of Clancy's substantial fame and marketing power. Clancy retained the right to withdraw the use of his name at any time. Subsequent to his divorce from King, Clancy withdrew the use of his name from use in the agreement despite the lucrative nature of the agreement although the Clancy/King partnership continued to operate. Clancy's only participation in the agreement was the use of his name and no labor or other duties were required of him. King sued claiming a lack of good faith and the court decided: A. the partnership's clause allowing competition by a partner with the partnership violated common law principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.B. the partnership's clause allowing competition by a partner with the partnership violated RUPA standards and principles and could not be enforced so Clancy could opt out of the illegal contract and King had no case.C. the partnership agreement clause allowing individual competition was enforceable and preempted the duty to act in good faith so Clancy could add or withdraw his name pursuant tothe contract without liability.D.the duty to act in good faith was not negated by the clause permitting competition so because Clancy withdrew his name solely to spite and injure his ex-wife he is liable to her andmay not withdraw his name from the contract.The duty to act in good faith may not be contracted away.AACSB: Reflective ThinkingBloom's: AnalyzeBloom's: ApplyDifficulty: HardLearning Objective: 13-05 Distinguish between personal liability for general partners and limited partners.Topic: Case 13.113-45
Chapter 13 - Choice of Business Entity, Sole Proprietorships, and Partnerships66.(p. 353)Bill is a general partner in a four member limited partnership with two general and two limited partners. The partnership is silent with regard to the duration of the partnership and Bill wishes to retire.