Business Associations Professor Arizmendi

Class 4 Worksheet
Learning Objectives:

As you read the assigned portions of the Kleinberger volume in preparation for
class, you should focus on the following questions and prepare written answers
to each of them. The notations after each question refer to sections of the Revised
Uniform Partnership Act (“RUPA”). The Kleinberger volume also discusses
provisions of the Uniform Partnership Act. You can disregard those passages
and focus solely on the rules that appear in RUPA.

1. How many fiduciary duties does a partner owe to the partnership and/or
the other partners? What are they? RUPA § 404(a).
The only fiduciary duties a partner owes to the partnership and the other partners
are the duty of loyalty and the duty of care.

2. What standard is applied to determine whether a partner has violated the

duty of care owed to the partnership and the other partners? RUPA §
404(d).
Breached when partner acts with gross negligence.

A partner shall discharge the duties to the partnership and the other
partners under this [Act] or under the partnership agreement and exercise
any rights consistently with the obligation of good faith and fair dealing.

3. Under what conditions will a partnership be bound by a commitment

made by a partner who appeared to be acting in the ordinary course of the
partnership’s business? RUPA § 301(1).
(1) Each partner is an agent of the partnership for the purpose of its business. An
act of a partner, including the execution of an instrument in the partnership name,
for apparently carrying on in the ordinary course the partnership business or
business of the kind carried on by the partnership binds the partnership, unless
the partner had no authority to act for the partnership in the particular matter and
the person with whom the partner was dealing knew or had received a
notification that the partner lacked authority.

4. Under what conditions will a partnership be bound by a commitment

made by a partner who did not appear to be acting in the ordinary course
of the partnership’s business? RUPA § 301(2).
2) An act of a partner which is not apparently for carrying on in the ordinary
course the partnership business or business of the kind carried on by the
partnership binds the partnership only if the act was authorized by the other
partners.

Problem:

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Business Associations Professor Arizmendi
Class 4 Worksheet
Instructions: In view of the assigned reading, consider the following hypothetical
and each question that follows it. Be prepared to discuss your answers in class.

Pete owns a company that manufactures golf clubs. Duke is a scientist that has
perfected a new compound that could potentially revolutionize golf club design
and production. Duke and Pete form a partnership to commercialize and market
the product. Pete contributed management expertise and money to fund the
final stages of research and development. Duke contributed the rights to the
compound. However, some months later, Duke told Pete that he sold all the
rights in the new compound to Nike for $10.1 million.

Is the partnership bound by the contract that Duke made to sell the rights to the
compound to Nike?

The common goal of the partnership was to commercialize and market the
product, not sell the rights of the compound. He did not market nor
commercialized the product; he sold the rights to the compound. So Duke’s act
was not in the ordinary course of the partnership. Duke told Pete about the Nike
deal after he already sold the compound to Nike; Pete did not authorize this act.
Thus, partnership is not bound by the contract that Duke made to Nike.

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