An Act to provide for the formation of partnerships in the District of Columbia and to make uniform the law with respect thereto
PL 87-709 (H.R.12675), enacted 09/27/1962

636 
PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
Public Law 87-709 
September 27, 1962 
^ j j A C T 
'•—'• 
To provide for the formation of partnerships in the District of Columbia and 
to make uniform the law with respect thereto. 
D. c. 
Be it enacted hy the Senate and House of Representatives 
of the 
ne^^hip'Act!"* 
United States of America in Congress assembled,, That this Act to pro-
vide for the formation of partnerships in the District of Columbia 
and to make uniform the law with respect thereto shall be in effect in 
the District of Columbia on and after the date of the enactment of 
this Act. 
PART I 
PRELIMINARY PROVISIONS 
SECTION 1. NAME OF ACT.—This Act may be cited as the "Uniform 
Partnership Act". 
SEC. 2. DEFINITION OF TERMS.—In this Act, "court" includes every 
court and judge having jurisdiction in the case. 
"Business" includes every trade, occupation, or profession. 
"Person" includes individuals, partnerships, corporations, and other 
associations. 
"Bankrupt" includes bankrupt under the Federal Bankruptcy Act 
or insolvent under any law of the District of Columbia. 
"Conveyance" includes every assignment, lease, mortgage, or 
encumbrance. 
"Eeal property" includes land and any interest or estate in land. 
SEC. 3. INTERPRETATION OF KNOWLEDGE AND NOTICE.—(1) A person 
has "knowledge" of a fact within the meaning of this Act not only 
when he has actual knowledge thereof, but also when he has knowledge 
of such other facts as in the circumstances show bad faith. 
(2) A person has "notice" of a fact within the meaning of this Act 
when the person who claims the benefit of the notice— 
(a) states the fact to such person, or 
(b) delivers through the mail, or by other means of communica-
tion, a written statement of the fact to such person or to a proper 
person at his place of business or residence. 
SEC. 4. RULES OF CONSTRUCTION.—(1) -The rule that statutes in 
derogation of the common law are to be strictly construed shall have 
no application to this Act. 
(2) The law of estoppel shall apply under this Act. 
(3) The law of agency shall apply under this Act. 
(4) This Act shall be so interpreted and construed as to effect its 
general purpose to make uniform the law of those jurisdictions which 
enact it. 
(5) This Act shall not be construed so as to impair the obligations of 
any contract existing when the Act goes into effect, nor to affect any 
action or proceedings begun or right accrued before this Act takes 
effect. 
SEC. 6. RULES FOR CASES NOT PROVIDED FOR IN THIS ACT.—In any case 
not provided for in this Act the rules of law and equity, including the 
law merchant, shall govern. 
PART I I 
NATURE OF A PARTNERSHIP 
SEC. 6. PARTNERSHIP DEFINED.—(1) A partnership is an association 
of two or more persons to carry on as coowners a business for profit. 
(2) But any association formed under any other statute of this 
jurisdiction, or any statute adopted by authority, other than the au-
76 STAT. ] 
PUBLIC LAW 87-709-SEPT. 27, 1%2 
637 
thority of this jurisdiction is not a partnership under this Act, unless 
such association would have been a partnership in this jurisdiction 
prior to the adoption of this Act; but this Act shall apply to limited 
partnerships except insofar as the statutes of the District of Columbia 
relating to such partnerships are inconsistent herewith. 
SEC. 7. RULES FOR DETERMINING THE EXISTENCE OF A PARTNERSHIP.— 
In determining whether a partnership exists, these rules shall apply: 
(1) Except as provided by section 16 persons who are not partners 
as to each other are not partners as to third persons. 
(2) Joint tenancy, tenancy in common, tenancy by the entireties, 
joint property, common property, or part ownership does not of itself 
establish a partnership, whether such co-owners do or do not share any 
profits made by the use of the property. 
(3) The sharing of gross returns does not of itself establish a 
partnership, whether or not the persons sharing them have a joint or 
common right or interest in any property from which the returns are 
derived. 
(4) The receipt by a person of a share of the profits of a business is 
prima facie evidence that he is a partner in the business, but no such 
inference shall be drawn if such profits were received in payment— 
(a) as a debt by installments or otherwise, 
(b) as wages of an employee or rent to a landlord, 
(c) as an annuity to a widow or representative of a deceased 
partner, 
(d) as interest on a loan, though the amount of payment varies 
with the profits of the business, 
(e) as the consideration for the sale of the goodwill of a busi-
ness or other property by installments or otherwise. 
SEC. 8. PARTNERSHIP 
PROPERTY.—(1) All property 
originally 
brought into the partnership stock or subsequently acquired by pur-
chase or otherwise, on account of the partnership, is partnership 
property. 
(2) Unless the contrary intention appears, property acquired with 
j)artnership funds is partnership property. 
(3) Any estate in real property may be acquired in the partnership 
name. Title so acquired can be conveyed only in the partnership 
name. 
(4) A conveyance to a partnership in the partnership name, though 
without words of inheritance, passes the entire estate of the grantor 
unless a contrary intent appears. 
PART I I I 
R E L A T I O N S OF P A R T N E R S TO P E R S O N S DEALING WITH THE P A R T N E R S H I P 
SEC. 9. PARTNER AGENT OF PARTNERSHIP AS TO PARTNERSHIP BUSI-
NESS.—(1) Every partner is an agent of the partnership for the pur-
j)ose of its business, and the act of every partner, including the execu-
tion in the partnership name of any instrument, for apparently carry-
ing on in the usual way the business of the partnership of which he is 
a member binds the partnership, unless the partner so acting has in 
fact no authority to act for the partnership in the particular matter, 
and the person with whom he is dealing has knowledge of the fact 
that he has no such authority. 
(2) An act of a partner which is not apparently for the carrying 
on of the business of the partnership in the usual way does not bind 
the partnership unless authorized by the other partners. 
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PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
(3) Unless authorized by the other partners or unless they have 
abandoned the business, one or more but less than all the partners 
have no authority to— 
(a) assign the partnership property in trust for creditors or 
on the assignee's promise to pay the debts of the partnership, 
(b) dispose of the goodwill of the business, 
(c) do any other act which would make it impossible to carry 
on the ordinary business of a partnership, 
(d) confess a judgment, 
(e) submit a partnership claim or liability to arbitration or 
reference. 
(4) No act of a partner in contravention of a restriction on authority 
shall bind the partnership to persons having knowledge of the 
restriction. 
SEC. 10. CONVEYANCE OF REAL PROPERTY OF THE PARTNERSHIP.— 
(1) Where title to real property is in the partnership name, any part-
ner may convey title to such property by a conveyance executed in the 
])artnership name; but the partnership may recover such property un-
less the partner's act binds the partnership under the provisions of 
paragraph (1) of section 9, or unless such property has been conveyed 
by the grantee or a person claiming through such grantee to a holder 
for value without knowledge that the partner, in making the convey-
ance, has exceeded his authority. 
(2) Where title to real property is in the name of the partnership, 
a conveyance executed by a partner, in his own name, passes the 
equitable interest of the partnership, provided the act is one within 
Hie authority of the partner under the provisions of paragraph (1) 
of section 9. 
(3) Where title to real property is in the name of one or more but 
not all the partners, and the record does not disclose the right of the 
partnership, the partners in whose name the title stands may convey 
title to such property, but the partnership may recover such property 
if the partners' act does not bind the partnership under the provisions 
of paragraph (1) of section 9, unless the purchaser or his assignee is 
a holder for value, without knowledge. 
^ 
(4) Where the title to real property is in the name of one or more 
or all the partners, or in a third person in trust for the partnership, a 
conveyance executed by a partner in the partnership name, or in his 
own name, passes the equitable interest of the partnership, provided 
the act is one within the authority of the partner under the provisions 
of paragraph (1) of section 9. 
(5) Where the title to real property is in the names of all the part-
ners a conveyance executed by all the partners passes all their rights 
in such property. 
SEC. 11. PARTNERSHIP BOUND B
Y ADMISSION OF PARTNER.—An admis-
sion or representation made by any partner concerning partnership 
affairs within the scope of his authority as conferred by this Act is 
evidence against the partnership. 
SEC. 12. PARTNERSHIP CHARGED W I T H KNOWLEIXJE or OR NOTICE TO 
PARTNER.—Notice to any partner of any matter relating to partner-
ship affairs, and the knowledge of the partner acting in the particular 
matter, acquired while a partner or then present to his mind, and the 
knowledge of any other partner who reasonably could and should have 
communicated it to the acting partner, operate as notice to or knowl-
edge of the partnership, except in the case of a fraud on the partner-
ship committed by or with the consent of that partner. 
SEC. 13. PARTNERSHIP BOUND B
Y PARTNER'S WRONGFUL ACT.—Where, 
by any wrongful act or omission of any partner acting in the ordinary 
course of the business of tJie partnership or with the authority of his 
copartners, loss or injury is caused to any person, not being a partner 
76 STAT. ] 
PUBLIC LAW 87-709-SEPT. 27, 1962 
639 
in the partnership, or any penalty is incurred, the partnership is liable 
therefor to the same extent as the partner so acting or omitting to act. 
SEC. 14. PARTNERSHIP BOUND BY PARTNER'S BREACH OF TRUST.—The 
partnership is bound to make good the loss: 
(a) Where one partner acting within the scope of his apparent 
authority receives money or property of a third person and mis-
applies it; and 
(b) Where the partnership in the course of its business receives 
money or property of a third person and the money or property so 
received is misapplied by any partner while it is in the custody of 
the partnership. 
SEC. 15. NATURE OF PARTNER'S LIABILITY.—All partners are liable— 
(a) jointly and severally for everything chargeable to the 
partnership under sections 13 and 14, 
(b) jointly for all other debts and obligations of the partner-
ship; but any partner may enter into a separate obligation to 
perform a partnership contract. 
SEC. 16. PARTNER BY ESTOPPEL.— (1) When a person, by words 
spoken or written or by conduct, represents himself, or consents to 
another representing him to any one, as a partner in an existing 
partnership or with one or more persons not actual partners, he is 
liable to any such person to whom such representation has been made, 
who has, on the faith of such representation, given credit to the actual 
or apparent partnership, and if he has made such representation or 
consented to its being made in a public manner he is liable to such 
person, whether the representation has or has not been made or com-
municated to such person so giving credit by or with the knowledge 
of the apparent partner making the representation or consenting to 
its being made. 
(a) When a partnership liability results, he is liable as though 
he were an actual member of the partnership. 
a" 
(b) When no partnership liability results, he is liable jointly 
with the other persons, if any, so consenting to the contract or 
representation as to incur liability, otherwise separately. 
(2) When a person has been thus represented to be a partner in an 
existing partnership, or with one or more persons not actual partners, 
he is an agent of the persons consenting to such representation to bind 
them to the same extent and in the same manner as though he were a 
partner in fact, with respect to persons who rely upon the representa-
tion. Where all the members of the existing partnership consent to 
the representation, a partnership act or obligation results; but in all 
other cases it is the joint act or obligation of the person acting and the 
persons consenting to the representation. 
SEC. 17. LIABILITY OF INCOMING PARTNER.—A person admitted as a 
partner into an existing partnership is liable for all the obligations of 
the partnership arisins: before his admission as though he had been a 
partner when such obligations were incurred, except that this liability 
shall be satisfied only out of partnership property. 
PART 
IV 
RELATIONS OF PARTNERS TO ONE ANOTHER 
SEC. 18. RULES I^ETERMTNING RKJHTS AND DUTIES OF PARFNERS.— 
The rights and duties of the partners in relation to the partnership 
shall be determined, subject to any agreement between them, by the 
following rules: 
(a) Each partner shall be repaid his contributions, whether by 
way of capital or advances to the partnership property and share 
640 
PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
equally in the profits and surplus remaining after all liabilities, 
including those to partners, are satisfied; and must contribute 
toward the losses, whether of capital or otherwise, sustained by the 
partnership according to his share in the profits. 
(b) The partnership must indemnify every partner in respect 
of payments made and personal liabilities reasonably incurred by 
him in the ordinary and proper conduct of its business or for the 
preservation of its business or property. 
(c) A partner, who in aid of the partnership makes any pay-
ment or advance beyond the amount of capital which he agreed 
to contribute, shall be paid interest from the date of the payment 
or advance. 
(d) A partner shall receive interest on the capital contributed 
by him only from the date when repayment should be made. 
(e) All partners have equal rights in the management and con-
duct of the partnership business. 
(f) No partner is entitled to remuneration for acting in the 
partnership business, except that a surviving partner is entitled to 
reasonable compensation for hiS services in winding up the part-
nership affairs. 
(g) No person can become a member of a partnership without 
the consent of all the partners. 
(h) Any difference arising as to ordinary matters connected 
with the partnership business may be decided by a majority of the 
partners; but no act in contravention of any agreement between 
the partners may be done rightfully without the consent of all the 
partners. 
SEC. 19, PARTNERSHIP BOOKS.—The partnership books shall be kept, 
subject to any agreement between the partners, at the principal place 
of business of the partnership, and every partner shall at all times 
have access to and may inspect and copy any of them. 
SEC. 20. DUTY OF PARTNERS TO RENDER INFORMATION.—Partners 
shall render on demand true and full information of all things affect-
ing the partnership to any partner or the legal representative of any 
deceased partner or partner under legal disability. 
SEC. 21. PARTNER ACCOUNTABL,E AS A FIDUCIARY.—(1) Every part-
ner must account to the partnership for any benefit, and hold as trustee 
for it any profits derived by him without the consent of the other 
partners from any transaction connected with the formation, conduct, 
, 
or liquidation of the partnership or from any use by him of its 
property. 
(2) This section applies also to the representatives of a deceased 
partner engaged in the liquidation of the affairs of the partnership 
as the personal representatives of the last surviving partner. 
SEC. 22. RIGHT TO AN ACCOUNT,—Any partner shall have the right 
to a formal account as to partnership affairs— 
(a) If he is wrongfully excluded from the partnership business 
or possession of its property by his copartners, 
(b) If the right exists under the terms of any agreement, 
(c) As provided by section 21, 
(d) Whenever other circumstances render it just and rea-
sonable. 
SEC. 23. CONTINUATION OF PARTNERSHIP BEYOND FIXED TERM.— 
(1) When a partnership for a fixed term or particular undertaking 
is continued after the termination of such term or particular under-
taking without any express agreement, the rights and duties of the 
partners remain the same as they were at such termination, so far as is 
consistent with a partnership at will. 
76 STAT. ] 
PUBLIC LAW 87-709-SEPT. 27, 1962 
641 
(2) A continuation of the business by the partners or such of them as 
habitually acted therein during the term, without any settlement or 
liquidation of the partnership affairs, is prima facie evidence of a 
continuation of the partnership. 
PART V 
PROPERTY RIGHTS OF A PARTNER 
SEC. 24. EXTENT OF PROPERTY RIGHTS OF A PARTNER.—The prop-
erty rights of a partner are (1) his rights in specific partnership 
property, (2) his interest in the partnership, and (3) his right to 
participate in the management. 
SEC. 25. NATURE OF A PARTNER'S RIGHT IN SPECIFIC PARTNERSHIP 
PROPERTY.—(1) A partner is coowner with his partners of specific 
partnership property holding as a tenant in partnership. 
(2) The incidents of this tenancy are such that: 
(a) A partner, subject to the provisions of this Act and to any 
agreement between the partners, has an equal right with his 
partners to possess specific partnership property for partnership 
purposes; but he has no right to possess such property for any 
other purpose without the consent of his partners. 
(b) A partner's right in specific partnership property is not 
assignable except in connection with the assignment of rights of 
all the partners in the same property. 
(c) A partner's right in specific partnership property is not 
subject to attachment or execution, except on a claim against the 
partnership. When partnership property is attached for a part-
nership debt the partners, or any of them, or the representatives 
of a deceased partner, cannot claim any right under the homestead 
or exemption laws. 
(d) On the death of a partner his right in specific partnership 
property vests in the surviving partner or partners, except where 
the deceased was the last sursdving partner, when his right in such 
property vests in his legal representative. 
Such surviving part-
ner or partners, or the legal representative of the last surviving 
partner, has no right to possess the partnership property for any 
but a partnership purpose. 
(e) A partner's right in specific partnership property is not 
subject to dower, curtesy, or allowances to widows, heirs, or next 
of kin. 
SEC. 26. NATURE OF PARTNER'S INTEREST IN THE PARTNERSHIP.—^A 
partner's interest in the partnership is his share of the profits and 
surplus, and the same is personal property. 
SEC. 27. ASSIGNMENT OF PARTNER'S INTEREST.—(1) A conveyance 
by a partner of his interest in the partnership does not of itself dis-
solve the partnership, nor, as against the other partners in the absence 
of agreement, entitle the assignee, during the continuance of the part-
nership, to interfere in the management or administration of the 
partnership business or affairs, or to require any information or 
account of partnership transactions, or to inspect the partnership 
books; but it merely entitles the assignee to receive in accordance 
with his contract the profits to which the assigning partner would 
otherwise be entitled. 
(2) In case of a dissolution of the partnership, the assignee is 
entitled to receive his assignor's interest and may require an account 
from the date only of the last account agreed to by all the partners. 
SEC. 28. PARTNER'S INTEREST SUBJECT TO CHARGING ORDER.—(1) 
On due application to a competent court by any judgment creditor of 
a partner, the court which entered the judgment, order, or decree, 
78135 0-63—44 
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PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
or any other court, may charge the interest of the debtor partner with 
payment of the unsatisfied amount of such judgment debt with interest 
thereon; and may then or later appoint a receiver of his share of the 
profits, and of any other money due or to fall due to him in respect 
of the partnership, and make all other orders, directions, accounts, 
and inquiries which the debtor partner might have made, or which 
the circumstances of the case may require. 
(2) The interest charged may be redeemed at any time before fore-
closure, or in case of a sale being directed by the court may be pur-
chased without thereby causing a dissolution: 
(a) With separate property, by any one or more of the part-
ners, or 
(b) With partnership property, by any one or more of the 
partners with the consent of all the partners whose interests 
are not so charged or sold. 
(3) Nothing in this Act shall be held to deprive a partner of his 
right, if any, under the exemption laws, as regards his interest in the 
partnership. 
PART VI 
, 
f 
DISSOLUTION AND WINDING UP 
SEC. 29. DISSOLUTION DEFINED.—The dissolution of a partnership 
is the change in the relation of the partners caused by any partner 
ceasing to be associated in the carrying on as distinguished from the 
winding up of the business. 
SEC. 30. PARTNERSHIP NOT TERMINATED BY DISSOLUTION.—On dis-
solution the partnership is not terminated, but continues until the 
winding up of partnership affairs is completed. 
SEC. 31. CAUSES OF DISSOLUTION.—Dissolution is caused: (1) With-
out violation of the agreement between the partners— 
(a) by the termination of the definite term or particular under-
taking specified in the agreement, 
(b) by the express will of any partner when no definite term 
or particular undertaking is specified, 
(c) by the express will of all the partners who have not assigned 
their interests or suffered them to be charged for their separate 
debts, either before or after the termination of any specified term 
or particular undertaking, 
(d) by the expulsion of any partner from the business bona 
fide in accordance with such a power conferred by the agreement 
between the partners; 
(2) In contravention of the agreement between the partners, where 
the circumstances do not permit a dissolution under any other provi-
sion of this section, by the express will of any partner at any time; 
(3) By any event which makes it unlawful for the business of the 
partnership to be carried on or for the members to carry it on in 
partnership; 
(4) By the death of any partner; 
(5) By the bankruptcy of any partner or the partnership; 
(6) By decree of court under section 32. 
SEC. 32. DISSOLUTION BY DEGREE OF COURT.—(1) On application by 
or for a partner the court shall decree a dissolution whenever— 
(a) a partner has been declared a lunatic in any judicial pro-
ceeding or is shown to be of unsound mind, 
(b) a partner becomes in any other way incapable of perform-
ing his part of the partnership contract, 
(c) a partner has been guilty of such conduct as tends to affect 
prejudicially the carrying on of the business, 
76 STAT. ] 
PUBLIC LAW 87-709-SEPT. 27, 1962 
643 
(d) a partner wilfully or persistently commits a breach of the 
partnership agreement, or otherwise so conducts himself in mat-
ters relating to the partnership business that it is not reasonably 
practicable to carry on the business in partnership with him, 
(e) the business of the partnership can only be carried on at 
a loss, 
,i 
(f) other circumstances render a dissolution equitable. 
(2) On the application of the purchaser of a partner's interest under 
sections 27 and 28— 
(a) after the termination of the specified term or particular 
undertaking, 
(b) at any time if the partnership was a partnership at will 
when the interest was assigned or when the charging order was 
issued. 
SEC. 33. GENERAL EFFECT OF DISSOLUTION ON AUTHORITY OF PART-
NER.—Except so far as may be necessary to wind up partnership affairs 
or to complete transactions begun but not then finished, dissolution 
terminates all authority of any partner to act for the partnership— 
,,, 
(1) with respect to the partners— 
(a) when the dissolution is not by the act, bankruptcy or 
death of a partner; or 
^fj 
(b) when the dissolution is by such act, bankruptcy or 
death of a partner, in cases where section 34 so requires; 
(2) with respect to persons not partners, as declared in section 
35. 
SEC. 34. RIGHT OF PARTNER TO CONTRIBUTION FROM COPARTNERS 
AFTER DISSOLUTION.—Where the dissolution is caused by the act, 
death, or bankruptcy of a partner, each partner is liable to his co-
partners for his share of any liability created by any partner acting 
for the partnership as if the partnership hrd not been dissolved 
unless— 
(a) the .dissolution being by act of any partner, the partner 
acting for.the partnership had knowledge of the dissolution, or 
(b) the dissolution being by the death or bankruptcy of a 
partner, the partner acting for the partnership had knowledge 
or notice of the death or bankruptcy. 
SEC. 35. POWER OF PARTNER To BIND PARTNERSHIP TO THIRD PER-
SONS AFTER DISSOLUTION,—(1) After dissolution a partner can bind 
the partnership except as provided in paragraph (3)— 
(a) by any act appropriate for winding up partnership affairs 
or completing transactions unfinished at dissolution; 
(b) by any transaction which would bind the partnership if 
dissolution had not taken place, provided the other party to the 
transaction, 
(I) had extended credit to the partnership prior to disso-
lution and had no knowledge or notice of the dissolution; or 
(II) though he had not so extended credit, had neverthe-
less known of the partnership prior to dissolution, and, hav-
ing no knowledge or notice of dissolution, the fact of dissolu-
tion had not been advertised in a newspaper of general 
circulation in the place (or in each place if more than one) 
at which the partnership business was regularly carried on. 
(2) The liability of a partner under paragraph (l)(b) shall be 
satisfied out of partnership assets alone when such partner has been 
prior to dissolution— 
(a) unknown as a partner to the person with whom the con-
tract is made; and 
(b) so far unknown and inactive in partnership affairs that 
the business reputation of the partnership could not be said to 
have been in any degree due to his connection with it. 
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PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
(3) The partnership is in no case bound by any act of a partner 
after dissolution— 
(a) where the partnership is dissolved because it is unlawful 
to carry on the business, unless the act is appropriate for wind-
ing up partnership affairs; or 
(b) where the partner has become bankrupt; or 
(c) where the partner has no authority to wind up partnership 
affairs; except by a transaction with one who, 
(I) had extended credit to the partnership prior to dis-
solution and had no knowledge or notice of his want of 
authority; or 
(II) had not extended credit to the partnership prior to 
dissolution, and, having no knowledge or notice of his want of 
authority, the fact of his want of authority had not been 
advertised in the manner provided for advertising the fact 
of dissolution in paragraph (1) (b) (II). 
(4) Nothing in this section shall affect the liability under section 
16 of any person who after di^olution represents himself or consents 
to another representing him as a partner in a partnership engaged in 
carrying on business. 
SEC. 63. EFFECT OF DISSOLUTION ON PARTNER'S EXISITNG LIABILITY.— 
(1) The dissolution of the partnership does not of itself discharge the 
existing liability of any partner. 
(2) A partner is discharged from any existing liability upon dis-
solution of the partnership by an agreement to that effect between 
himself, the partnership creditor and the person or partnership con-
tinuing the business; and such agreement may be inferred from the 
course of dealing between the creditor having knowledge of the disso-
lution and the person or partnership continuing the business. 
(3) Where a person agrees to assume the existing obligations of a 
dissolved partnership, the partners whose obligations have been 
assumed shall be discharged from any liability to any creditor of the 
partnership who, knowing of the agreement, consents to a material 
alteration in the nature or time of payment of such obligations. 
(4) The individual property of a deceased partner shall be liable 
for all obligations of the partnership incurred while he was a partner 
but subject to the prior payment of his separate debts. 
SEC. 37. EIGHT To WIND UP.—Unless otherwise agreed the partners 
who have not wrongfully dissolved the partnership or the legal repre-
sentative of the last surviving partner, not bankrupt, has the right to 
wind up the partnership affairs: Provided, 
hoivever, That any 
partner, his legal representative or his a^ignee, upon cause shown, 
may obtain winding up by the court. 
SEC. 38. RIGHTS OF PARTNERS TO APPLIC;ATION OF PARTNERSHIP 
PROPERTY.—(1) When dissolution is caused in any way, except in con-
travention of the partnership agreement, each partner, as against his 
copartner and all persons claiming through them in respect of their 
interests in the partnership, unless otherwise agreed, may have the 
partnership property applied to discharge its liabilities, and the 
surplus applied to pay in cash the net amount owing to the respective 
partners. But if dissolution is caused by expulsion of a partner bona 
fide under the partnership agreement and if the expelled partner is 
discharged from all partnership liabilities, either by payment or 
agreement under section 36(2), he shall receive in cash only the net 
amount due him from the partnership. 
(2) When dissolution is caused in contravention of the partnership 
agreement the rights of the partners shall be as follows: 
(a) Each partner who has not caused dissolution wrongfully 
shall have— 
76 STAT] 
PUBLIC LAW 87-709-SEPT. 27, 1962 
645 
(I) all the rights specified in paragraph (1) of this section, 
and 
(II) the right, as against each partner who has caused the 
dissolution wrongfully, to damages for breach of the agree-
ment. 
(b) The partners who have not caused the dissolution wrong-
fully, if they all desire to continue the business in the same name, 
either by themselves or jointly with others, may do so, during the 
agreed term for the partnership and for that purpose may possess 
the partnership property, provided they secure the payment by 
bond approved by the court, or pay to any partner who has caused 
the dissolution wrongfully, the value of his interest in the partner-
ship at the dissolution, less any damages recoverable under clause 
(2) (a) (II) of this section, and in like manner indemnify him 
against all present or future partnership liabilities. 
(c) A partner who has caused the dissolution wrongfully shall 
have— 
(I) if the business is not continued under the provisions of 
paragraph (2) (b) all the rights of a partner under paragraph 
(1), subject to clause (2) (a) (II) of this section, 
(II) if the business is continued under paragraph (2) (b) 
of this section, the right as against his copartners and all 
claiming through them in respect of their interests in the 
partnership to have the value of his interest in the partner-
ship, less any damages caused to his copartners by the dis-
solution, ascertained and paid to him in cash, or the payment 
secured by bond approved by the court, and to be released 
from all existing liabilities of the partnership; but in ascer-
taining the value of the partner's interest the value of the 
goodwill of the business shall not be considered. 
SEC. 39. RIGHTS WHERE PARTNERSHIP Is DISSOLVED FOR FRAUD OR 
MISREPRESENTATION.—Where a partnership contract is rescinded on the 
ground of the fraud or misrepresentation of one of the parties thereto, 
the party entitled to rescind is, without prejudice to any other right, 
entitled— 
(a) To a lien on, or right of retention of, the surplus of the 
partnership property after satisfying the partnership liabilities 
to third persons for any sum of money paid by him for the pur-
chase of an interest in the partnership and for any capital or ad-
vances contributed by him; and 
(b) To stand, after all liabilities to third persons have been 
satisfied, in the place of the creditors of the partnership for any 
payments made oy him in respect of the partnership liabilities; 
and 
(c) To be indemnified by the person guilty of the fraud or mak-
ing the representation against all debts and liabilities of the 
partnership. 
646 
PUBLIC LAW 87-709-SEPT. 27, 1962 
[76 STAT. 
SEC. 40. RULES FOR DISTRIBUTION.—In settling accounts between the 
partners after dissolution, the following rules shall be observed, sub-
ject to any agreement to the contrary: 
(a) The assets of the partnership are— 
(I) the partnership property, 
(II) the contributions of the partners necessary for the 
payment of all the liabilities specified in clause (b) of this 
paragraph. 
^;, 
(b) The liabilities of the partnership shall rank in order of 
• • payment, as follows: 
(I) Those owing to creditors other than partners, 
(II) Those owing, to partners other than for capital and 
profits, 
(III) Those owing to partners in respect of capital, 
(IV) Those owing to partners in respect of profits. 
(c) The assets shall be applied in the order of their declaration 
in clause (a) of this paragraph to the satisfaction of the liabilities. 
(d) The partners shall contribute, as provided by section 18 (a), 
the amount necessary to satisfy the liabilities; but if any, but not 
all, of the partners are insolvent, or, not being subject to process, 
refuse to contribute, the other partners shall contribute their 
share of the liabilities, and, in the relative proportions in which 
they share the profits, the additional amount necessary to pay the 
liabilities. 
(e) An assignee for the benefit of creditors or any person ap-
pointed by the court shall have the right to enforce the contribu-
tions specified in clause (d) of this paragraph. 
(f) Any partner or his legal representative shall have the right 
to enforce the contributions specified in clause (d) of this para-
graph, to the extent of the amount which he has paid in excess 
of his share of the liability. 
(g) The individual property of a deceased partner shall be 
liable for the contributions specified in clause (d) of this para-
graph. 
(h) When partnership property and the individual properties 
" 
of the partners are in possession of a court for distribution, part-
,' nership creditors shall have priority on partnership property and 
separate creditors on individual property, saving the rights of 
lien or secured creditors as heretofore. 
(i) Where a partner has become bankrupt or his estate is insol-
vent the claims against his separate property shall rank in the 
following order: 
(I) Those owing to separate creditors, 
(II) Those owing to partnership creditors, 
(III) Those owing to partners by way of contribution. 
SEC. 41. LIABILITY OF PERSONS CONTINUING THE BUSINESS IN CER-
TAIN CASES.—(1) When any new partner is admitted into an existing 
partnership, or when any partner retires and assigns (or the repre-
sentative of the deceased partner assigns) his rights in partnership 
property to two or more of the partners, or to one or more of the 
partners and one or more third persons, if the business is continued 
without liquidation of the partnership affairs, creditors of the first or 
dissolved partnership are also creditors of the partnership so con-
tinuing the business. 
76 STAT. ] 
PUBLIC LAW 87-709-SEPT. 27, 1962 
647 
(2) When all but one partner retire and assign (or the representa-
tive of a deceased partner assigns) their rights in partnership property 
to the remaining partner, who continues the business without liquida-
tion of partnership aif 
airs, either alone or with others, creditors of the 
dissolved partnership are also creditors of the person or partnership 
so continuing the business. 
(3) When any partner retires or dies and the business of the 
dissolved partnership is continued as set forth in paragraphs (1) and 
(2) of this section, with the consent of the retired partners or the 
representative of the deceased partner, but without any assignment 
of his right in partnership property, rights of creditors of the dis-
solved partnership and of the creditors of the person or partnership 
continuing the business shall be as if such assignment had been made. 
(4) When all the partners or their representatives assign their 
rights in partnership property to one or more third persons who 
promise to pay the debts and who continue the business of the dis-
solved partnership, creditors of the dissolved partnership are also 
creditors of the person or partnership continuing the business. 
(5) When any partner wrongfully causes a dissolution and the 
remaining partners continue the business under the provisions of 
section 38(2) (b), either alone or with others, and without liquidation 
of the partnership affairs, creditors of the dissolved partnership are 
also creditors of the person or partnership continuing the business. 
(6) When a partner is expelled and the remaining partners con-
tinue the business either alone or with others, without liquidation of 
the partnership affairs, creditors of the dissolved partnership are also 
creditors of the person or partnership continuing the business. 
(7) The liability of a third person becoming a partner in the part-
nership continuing the business, under this section, to the creditors 
of the dissolved partnership shall be satisfied out of partnership 
property only. 
(8) When the business of a partnership after dissolution is con-
tinued under any conditions set forth in this section, the creditors of 
the dissolved partnership, as against the separate creditors of the re-
tiring or deceased partner or the representative of the deceased part-
ner, have a prior right to any claim of the retired partner or the 
representative of the deceased partner against the person or partner-
ship continuing the business on account of the retired or deceased 
partner's interest in the dissolved partnership or on account of any 
consideration promised for such interest or for his right in partnership 
property. 
(9) Nothing in this section shall be held to modify any right of 
creditors to set aside any assignment on the ground of fraud. 
(10) The use by the person or partnership continuing the business 
of the partnership name, or the name of a deceased partner as part 
thereof, shall not of itself make the individual property of the deceased 
partner liable for any debts contracted by such person or partnership. 
SEC. 42. RIGHTS OF RETIRING OR ESTATE OF DECEASED PARTNER W H E N 
THE BUSINESS IS CONTINUED.—^When any partner retires or dies, and 
the business is continued under any of the conditions set forth in sec-
tion 41 (1), (2), (3), (5), (6), or section 38(2) (b), without any 
settlement of accounts as between him or his estate and the person or 
partnership continuing the business, unless otherwise agreed, he or his 
legal representative, as against such persons or partnership, may have 
the value of his interest at the date of dissolution ascertained, and 
6 ^ 
PUBLIC LAW 87-710-SEPT. 27, 1%2 
[76 STAT. 
shall receive as an ordinary creditor an amount equal to the value of 
his interest in the dissolved partnership with interest, or, at his option 
or at the option of his legal representative, in lieu of interest, the 
profits attributable to the use of his right in the property of the dis-
solved partnership; provided that the creditors, or the representative 
of the retired or deceased creditors of the dissolved partnership as 
against the separate partner, shall have priority on any claim arising 
under this section, as provided by section 41 (8) of this Act. 
SEC. 43. ACCRUAL or EIGHT TO ACCOUNT.—The right to an account 
of his interest shall accrue to any partner, or his legal representative, 
as against the winding up partners or the surviving partners or the 
person or partnership continuing the business, at the date of dissolu-
tion, in the absence of anj'^ agreement to the contrary. 
Approved September 27, 1962. 
Public Law 87-710 
September 27, 1962 
A N A C T 
[H. R
y 12526] 
To amend section 172 of the Internal Revenue Code of 1954 to provide a seven-
year net operating loss carryover for certain 
regulated 
transportation 
corporations. 
Be it enacted hy the Seriate avid House of Representatives 
of the 
Taxes. 
United States of America in Congress assembled, That (a) subsection 
Operating loss 
(b) of SBctiou 172 of the Internal Revenue Code of 1954 (relating to 
'^^^irrt'^'ieyg. 
net operating loss deduction) is amended to read as follows: 
"(b) NET OPERATING LOSS CARRYBACKS AND CARRYOVERS.— 
"(1) YEARS TO WHICH LOSS MAY BE CARRIED.—A net operating 
loss for any taxable year— 
"(A) ending after December 31, 1957, shall be a net op-
erating loss carryback to each of the 3 taxable years preceding 
the taxable year of the loss, and 
"(B) ending after December 31, 1955, shall (except as 
provided in subparagraph (C)) be a net operating loss carry-
over to each of the 5 taxable years following the taxable year 
of such loss, or 
"(C) ending after December 31, 1955, in the case of a tax-
payer which is a regulated transportation corporation (as 
defined in subsection ( j ) ( l ) ) , shall (except as provided in 
subsection (j)) be a net operating loss carryover to each of 
the 7 taxable years following the taxable year of such loss. 
" (2) AMOUNT OF CARRYBACKS AND CARRYOVERS.—Except as pro-
vided in subsections (i) and (j), the entire amount of the 
net operating loss for any taxable year (hereinafter in this section 
"Loss year." 
referred to as the 'loss year') shall be carried to the earliest of the 
taxable years to which (by reason of paragraph (1)) such loss 
may be carried. The portion of such loss which shall be carried 
to each of the other taxable years shall be the excess, if any, of 
the amount of such loss over the sum of the taxable income for 
each of the prior taxable years to which such loss may be carried. 
For purposes of the preceding sentence, the taxable income for 
any such prior taxable years shall be computed— 
"(A) with the modifications specified in subsection (d) 
other than paragraphs (1), (4), and (6) thereof; and 
"(B) by determining the amount of the net operating loss 
deduction without regard to the net operating loss for the 
loss year or for any taxable year thereafter, 
and the taxable incoine so computed shall not be considered to be 
less than zero."