Creation and Operation of a Partnership (part C)
Bye
Charles Lamson
Liabilities of Partners
The partners liabilities include the following:
- Liability for contracts
- Liability for torts
- Liability for crimes
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Contracts
Every member of a general partnership has individual personal liability for all the enforceable debts of the firm. A partner who incurs a liability in the name of the firm but acted beyond both actual and apparent authority has personal liability. The firm has no liability for such unauthorized acts. The firm also has no liability for illegal contracts made by any member of the firm, since everyone is charged with knowledge of what is illegal. Thus, if a partner in a wholesale liquor firm contracted to sell an individual a case of whiskey, the contract would not be binding on the firm in a state where individual sales are illegal for wholesalers.
Torts
A partnership has liability for the torts committed by a partner in the course of partnership business and in furtherance of partnership interests. When such liability occurs, the responsible partner has liability for indemnifying the partnership for any loss it sustains. The partnership does not have liability for deeds committed by one partner outside the course of partnership business and for the acting partner's own purposes, unless the deeds have been authorized or ratified by the partnership.
In addition to the partners liability, a partner has liability for the torts of another partner committed in the course of partnership business. This rule applies to negligent as well as intentional acts, such as embezzlement of funds, even if the innocent partner has no knowledge of the acts.
Crimes
Courts will not imply criminal liability. In order to be liable for a crime, an individual partner must somehow have agreed to or have participated in the crime. The individual partners cannot be punished if they are free of personal guilt. However, the partnership has liability for any penalty incurred by the act of a partner in the ordinary course of business. In the ordinary course of business means while the partner acts as a partner in the business and in the promotion of partnership interests. The partnership has liability to the same extent as the acting partner. Thus, the criminal acts of one partner can justify a fine levied on partnership assets. The partnership can be guilty of a crime even if no individual is convicted of the crime.
*SOURCE: LAW FOR BUSINESS, 15TH ED., 2005, JANET E. ASHCROFT, J.D., PGS.
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