Stephen set up a film production company in partnership with Hilary.The company has never made a successful film,and,as such,their only asset is their camera,worth $20 000.Thinking that their new film will be a success,Stephen signs a contract with Brad Pitt,despite Hilary's protests,promising to pay him $1 million or 5% of the profits of the film,whichever is higher.The film is a flop and now they can't afford to pay Brad.Which of the following is true?

Question

Quizplus · Accepted Answer

In a general partnership, all partners are jointly and severally liable for the actions and debts of the company. Therefore, if Brad Pitt decides to sue for breach of contract, both Stephen and Hilary will be equally responsible for paying him, regardless of who signed the contract. Option A is incorrect because, as stated above, all partners are equally liable. Option B is also incorrect because both partners are equally responsible for the company's actions. Option D is incorrect because breaking a fiduciary duty does not exempt a company from fulfilling the terms of a contract they willingly entered into. Option E is also incorrect because Stephen's status as an employee or not has no bearing on the company's liability.

Stephen Set Up a Film Production Company in Partnership with Hilary.The