Question 1

John, Samuel, and Jim are general partners in the development of an electric car. Jim pours all his money into the project, but it never seems to work out. Eventually the partnership and Jim cannot meet their daily obligations, and the partnership is dissolved. Jim files for bankruptcy. If the partnership assets are insufficient to pay all claims against the partnership:

Accepted Answer

In a general partnership, all partners are personally liable for the debts of the partnership. If the partnership assets are insufficient, creditors can seek recovery from any of the partners, including John and Samuel.

Question 2

Under the RUPA, the partners have what type of liability for all contract obligations of the partnership?

Accepted Answer

Under the Revised Uniform Partnership Act (RUPA), partners have joint and several liability for all contract obligations of the partnership. This means that a third party can choose to hold all partners collectively (jointly) or one or more partners individually (severally) responsible for the full amount of the obligation.

Question 3

Smarth, King, and Finkel have been partners for years, but a court of equity is now segregating and considering separately the assets and liabilities of the partnership and the respective assets and liabilities of the individual partners. This process is called:

Accepted Answer

Marshaling of assets is the process where a court of equity segregates and considers separately the assets and liabilities of a partnership and the respective assets and liabilities of the individual partners. This is done to ensure that creditors can satisfy their claims in an orderly manner.

Question 4

A partner has implied authority to:

Accepted Answer

Implied authority allows a partner to perform acts that are reasonably necessary to carry out the partnership's business. This includes hiring and firing employees, purchasing necessary property, and bringing legal actions to enforce the partnership's claims.

Question 5

Chuck, Betty, and Bert form CB&B Partnership to run a specialty grocery store. Bert is the day-to-day manager of the store, Betty buys the groceries, and Chuck does all the administrative work. Betty decides she would like a new car to use when calling on prospective wholesalers. She makes a contract with Big Ben Motors in the name of CB&B without consulting Chuck and Bert. CB&B and the individual partners are:

Accepted Answer

Betty's decision to buy a car for visiting wholesalers, without consulting Chuck and Bert, and without it being a clear part of her role in buying groceries, suggests that this action is outside the scope of the partnership's ordinary business activities. Partnerships are generally bound by the acts of any partner that are within the scope of the partnership's business, but buying a car does not directly relate to the operation of a specialty grocery store or the roles as described.

Question 6

Under the UPA, absent an agreement otherwise, upon dissolution, a partner is entitled to which of the following after payment of partnership creditors?

Accepted Answer

Under the Uniform Partnership Act (UPA), upon dissolution of a partnership and after payment of partnership creditors, a partner is entitled to repayment of his loans to the partnership, return of his capital contribution, and then a share of any remaining profits. This reflects the general principle that partners are entitled to be repaid their loans and capital contributions before any distribution of profits.

Question 7

Paul is driving a truck delivering goods for his partnership when he negligently backs into a customer's new car. The customer sues the partnership and recovers $11,000 in damages. What liability do the other partners have for Paul's actions?

Accepted Answer

In a partnership, all partners are jointly and severally liable for actions taken by any one partner while conducting business activities for the partnership. This means each partner can be held responsible for the full amount of the damages, not just a portion based on their capital contribution or individually without the others.

Question 8

David, a partner in the Speedy Delivery partnership, negligently drove his delivery truck onto the curb during a rush-hour package delivery. Marlene was injured. Against whom can Marlene collect?

Accepted Answer

Marlene can collect from both the Speedy Delivery Partnership and any partner because in a partnership, the entity itself and the individual partners are liable for the actions of any partner acting within the scope of the partnership's business. Since David was performing a delivery, a business activity, both he and the partnership are liable.

Question 9

David, Ed, and Fred are partners in the DEF partnership. The partnership is being dissolved, having $200,000 in assets and owing $410,000 to creditors. David contributed $100,000 in capital; Ed contributed $50,000 in capital; and Fred contributed $25,000 in capital. Profits are shared equally. Which of the following is correct with regard to the responsibility of each partner?

Accepted Answer

The answer of David, Ed, and Fred are partners in...

Question 10

ABC Partnership agrees to hire an "errand runner" 20 hours per week for the summer. Alan, a partner, interviews a college student and decides to offer her the job. But she says she needs a 40-hour-a-week job, so Alan agrees to make it 40 hours. What result?

Accepted Answer

In a partnership, any partner has the authority to make decisions on behalf of the partnership within the scope of the partnership's business. When Alan, acting as a partner, agreed to hire the college student for 40 hours a week, he effectively bound the partnership to that agreement.

Question 11

Roberts, Smith, and Thomas have been partners for twenty years. The partners, however, are now collecting debts, converting assets to cash, paying creditors, and distributing remaining assets to each partner. Roberts, Smith, and Thomas are engaged in:

Accepted Answer

The process described involves collecting debts, converting assets to cash, paying creditors, and distributing remaining assets to partners, which are activities associated with "winding up" a partnership. This is the phase that follows the dissolution of a partnership where its affairs are concluded.

Question 12

Under the UPA, which of the following can be done only with the consent of all of the partners?

Accepted Answer

Under the Uniform Partnership Act (UPA), a confession of judgment requires the consent of all partners because it can significantly affect the partnership's legal and financial standing.

Question 13

Actual authority terminates upon:

Accepted Answer

Actual authority terminates upon the dissolution of the partnership, as the legal entity for which the authority was granted no longer exists. Illness of a partner or physical destruction of partnership papers does not terminate actual authority.

Question 14

Which of the following is NOT considered to be dissolution by operation of law under the UPA?

Accepted Answer

Under the Uniform Partnership Act (UPA), dissolution by operation of law includes events such as the death of a partner, bankruptcy of a partner, and subsequent illegality of the partnership business, but not the expulsion of a partner according to the partnership agreement.

Question 15

Which of the following describes the imposing of partnership duties and liabilities upon a person who is not a partner in an existing partnership by reason of his consenting to representation that he is a partner?

Accepted Answer

Partnership by estoppel occurs when a person who is not an actual partner in a partnership consents to being represented as a partner, leading others to rely on this representation. As a result, this person may be held liable as if they were a partner, despite not officially being one. This concept is used to protect third parties who have been misled into believing that they were dealing with a partner of the firm.

Question 16

Authority that a third person, in view of the circumstances, the conduct of the parties, and a lack of notice or knowledge to the contrary, may reasonably consider to exist is known as:

Accepted Answer

Apparent authority refers to a situation where a third party reasonably believes that an agent has the authority to act on behalf of a principal, even if such authority has not been explicitly granted. This belief can be due to the principal's behavior or past dealings that suggest the agent is authorized.

Question 17

General Widget's partnership assets amount to $34,000 after liquidation. Frank, Gene, and Hank, equal partners, each contributed $3,000 into the capital pool at the inception of the business. Gene later loaned the business $5,000. The partnership owes $23,000 to creditors for inventory. Under the UPA, what will Gene get in distribution, assuming there is no agreement on the distribution of profits?

Accepted Answer

Gene will receive $7,000 in distribution. First, the $23,000 owed to creditors is paid from the $34,000, leaving $11,000. Gene's loan of $5,000 is repaid next, leaving $6,000. This remainder is then divided equally among the three partners, giving Gene an additional $2,000, for a total of $7,000.

Question 18

The UPA provides that partners are __________ liable on all debts and contract obligations of the partnership.

Accepted Answer

Under the Uniform Partnership Act (UPA), partners are jointly liable for the debts and obligations of the partnership.

Question 19

__________ is available to a third person to whom a representation is made and who justifiably relies on the representation.

Accepted Answer

Partnership by estoppel occurs when a person, by words or conduct, represents themselves as a partner or consents to being represented as a partner in a firm to a third party who relies on this representation. If the third party suffers harm because of this reliance, the person making the representation may be held liable as if they were indeed a partner, even if no actual partnership exists. This concept is designed to protect third parties who justifiably rely on the representation of a partnership.

Question 20

Under the UPA, after dissolution:

Accepted Answer

The answer of Under the UPA, after dissolution:
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Quiz 31: Operation and Dissolution of General Partnerships