An Act To Establish the Uniform Partnership Act
Maine Legislature, Session 122, LD 1609
Committee: Judiciary
Sponsors: HOBBINS
Amends: Title 6, Section 17803, 31 MRSA §811, 31 MRSA §822, 31 MRSA §858, 31 MRSA §858-A, 31 MRSA §864, 31 MRSA §873, 31 MRSA §874

Legislative Document 
No. 1609 
S.P.591 
In Senate, April 28, 2005 
An Act To Establish the Uniform Partnership Act 
Reference to the Committee on Judiciary suggested and ordered printed. 
Presented by Senator HOBBINS of York. 
Printed on recycled paper 
JOY J. O'BRIEN 
Secretary of the Senate 
Be it enacted by the People of the State of Maine as follows: 
PART A 
Sec. A-I. 31 MRSA c. 9, as amended, is repealed. 
Sec. A-2. 31 MRSA c.17 is enacted to read: 
PREFA'l'ORY BOrE 
The National Conference of Commissioners on Uniform State 
Laws first considered a 
uniform law of partnership in 1902. 
Although early drafts had proceeded along the mercantile or 
"enti ty" theory of partnerships, later drafts were based on the 
common-law "aggregate" theory. 
The resulting Uniform Partnership 
Act ("UPA"), which embodied certain aspects of each theory, was 
finally approved by the Conference in 1914. 
The UPA governs 
general 
partnerships, 
and 
also 
governs 
limited 
partnerships 
except where the limited partnership statute is inconsistent. 
The UPA has been adopted in every State other than Louisiana and 
has been the subject of remarkably few amendments in those States 
over the past 80 years. 
In January of 1986, an American Bar Association subcommittee 
issued a detailed report that recommended extensive revisions to 
the UPA. 
See 
UPA 
Revision Subcommittee of the Committee 
on 
Partnerships and Unincorporated Business Organizations, Section 
of Business Law, 
American Bar Association, 
Should the Uniform 
Partnership Act 
be 
Revised?, 
Bus. 
Law. 
(1987) 
("ABA 
Report") . 
The 
ABA 
Report 
recommended that the entity theory 
"should be incorporated into any revision of the UPA whenever 
possible." 
Id. at 124. 
In 1987, the Conference appointed a Drafting Committee to 
Revise the Uniform Partnership Act and named a Reporter. 
The 
Committee held its initial meeting in January of 1988 and a first 
reading of the Committee's draft was begun at the Conference's 
1989 Annual Meeting in Kauai, 
Hawaii. 
The first reading was 
completed at the 1990 Annual Meeting in Milwaukee. 
The second 
reading was begun at Naples, Florida, in 1991 and completed at 
San Francisco in 1992. 
The 
Revised Uniform Partnership Act 
(1992) was adopted unanimously by a vote of the States on August 
6, 1992. 
The following year, in response to suggestions from 
various 
groups, 
including 
an 
American 
Bar 
Association 
subcommittee and several state bar associations, 
the Drafting 
Committee recommended numerous revisions to the Act. 
Those were 
adopted at the Charleston, 
South Carolina, 
Annual Meeting in 
1993, and the Act was restyled as the Uniform Partnership Act 
(1993). 
Subsequently, a final round of changes was incorporated, 
and the Conference unanimously adopted the Uniform Partnership 
Page l-LR1469(1) 
Act (1994) at its 1994 Annual Meeting in 
Act 
was 
approved 
by 
the 
American 
Bar 
Delegates in August, 1994. 
Chicago. 
The Revised 
Association 
House 
of 
The Uniform Partnership Act (1994) ("Revised Act" or "RUPA") 
gives 
supremacy 
to 
the partnership 
agreement 
in almost all 
situations. 
The Revised Act is, therefore, largely a series of 
"default rules" that govern the relations 
among partners in 
situations they have not addressed in a partnership agreement. 
The 
primary 
focus 
of 
RUPA 
is 
the 
small, 
often 
informal, 
partnership. 
Larger partnerships generally have a partnership 
agreement addressing, and often modifying, many of the provisions 
of the partnership act. 
The 
Revised 
Act 
enhances 
the 
entity 
treatment 
of 
partnerships 
to 
achieve 
simplicity 
for 
state 
law 
purposes, 
particularly 
in 
matters 
concerning 
title 
to 
partnership 
property. 
RUPA does not, however, relentlessly apply the entity 
approach. 
The aggregate approach is retained for some purposes, 
such as partners' joint and several liability. 
The Drafting Committee spent significant effort on the rules 
governing 
partnership 
breakups. 
RUPA's 
basic 
thrust 
is 
to 
provide 
stability 
for 
partnerships 
that 
have 
continuation 
agreements. 
Under the UPA, a partnership is dissolved every time 
a member leaves. 
The Revised Act provides that there are many 
departures or "dissociations" that do not result in a dissolution. 
Under the Revised Act, the withdrawal of a partner is a 
"dissociation" that results in a dissolution of the partnership 
only in certain limited circumstances. 
Many dissociations result 
merely in a buyout of the withdrawing partner's interest rather 
than a winding up of the partnership's business. 
RUPA defines 
both the substance and procedure of the buyout right. 
Article 6 of the Revised Act covers partner dissociations; 
Article 7 covers buyouts; and Article 8 covers dissolution and 
the winding up of the partnership business. 
See generally Donald 
J. Weidner & John W. Larson, The Revised Uniform Partnership Act: 
The Reporters' Overview, 49 Bus. Law. 1 (1993). 
The Revised Act also includes a more extensive treatment of 
the fiduciary duties of partners. 
Although RUPA continues the 
traditional rule that a partner is a fiduciary, it also makes 
clear that a 
partner is not required to be 
a 
disinterested 
trustee. 
Provision 
is 
made 
for 
the 
legitimate 
pursuit 
of 
self-interest, 
with 
a 
counterbalancing 
irreducible 
core 
of 
fiduciary duties. 
Another significant change introduced by RUPA is provlSlon 
for the public filing of statements containing basic information 
about 
a 
partnership, 
such 
as 
the 
agency 
authority 
of 
its 
partners. 
Because of the informality of many partnerships, and 
the inadvertence of 
some, 
mandatory filings were eschewed in 
favor of a voluntary regime. 
It was the Drafting Committee I s 
belief, 
however, 
that 
filings 
would 
become 
routine 
for 
sophisticated partnerships and would be required by lenders and 
others for major transactions. 
Another innovation is found in Article 9. 
For the first 
time, the merger of two or more partnerships and the conversion 
of partnerships to limited partnerships 
(and the reverse) is 
expressly authorized, and a "safe harbor" procedure for effecting 
such transactions is provided. 
One 
final 
change 
deserves 
mention. 
Partnership 
law 
no 
longer governs limited partnerships pursuant to the provisions of 
RUPA itself. 
First, limited partnerships are not "partnerships" 
within the 
RUPA definition. 
Second, 
UPA 
Section 6(2), 
which 
provides that the UPA governs limited partnerships in cases not 
provided for in the Uniform Limited Partnership Act (1976) (1985) 
("RULPA") has been deleted. 
No substantive change in result is 
intended, however. 
Section 1105 of RULPA already provides that 
the UPA governs in any case not provided for in RULPA, and thus 
the express linkage in RUPA is unnecessary. 
Structurally, it is 
more appropriately left to RULPA to determine the applicability 
of RUPA to limited partnerships. 
It is contemplated that the 
Conference will review the linkage question carefully, although 
no changes in RULPA may be necessary despite the many changes in 
RUPA. 
Finally, the Drafting Committee wishes to express its deep 
appreciation for the extraordinary time and effort that has been 
devoted to this project by its Reporter, Donald J. Weidner, Dean 
of the Florida State University College of Law; by its Assistant 
Reporter, 
Professor 
John 
W. 
Larson 
of 
the 
Florida 
State 
University College 
of 
Law; 
by its American 
Bar 
Association 
Advisors Allan G. 
Donn, 
of Norfolk, Virginia 
(ABA Section of 
Taxation and later the ABA Advisor, and a member of the original 
ABA 
subcommittee that recommended revlslng the UPA), 
Harry J. 
Haynsworth, Dean of the Southern Illinois University School of 
Law (the original ABA Advisor until he became a Commissioner and 
member of the Drafting Committee in 1992 and who 
was also a 
member of the original ABA subcommittee), S. Stacy Eastland, of 
Houston, Texas (Probate and Trust Division of the ABA Section of 
Real Property, Probate and Trust Law), and Caryl B. Welborn, of 
San Francisco, California (Real Property Division of the 
ABA 
Section of Real Property, Probate and Trust Law); and by a number 
of other advisors and observers without whose assistance the 
successful 
completion 
of 
this 
project 
would 
not 
have 
been 
possible: 
Edward S. Merrill of Walnut Creek, California, Gregory 
P.L. Pierce of Chicago, Illinois, Paul L. Lion, III, of San Jose, 
California, Professor Robert 
W. 
Hillman of the University of 
California at Davis 
School of 
Law, 
John 
Goode of 
Richmond, 
Virginia, Ronald H. 
Wilcomes of New York, New York, Professor 
Gary S. Rosin of the South Texas College of Law, James F. Fotenos 
of San Francisco, California, and Joel S. Adelman of Detroit, 
Michigan 
(who 
also 
was 
a 
member 
of 
the 
original 
ABA 
subcommittee). 
The Drafting Committee also would like to express 
its 
appreciation 
to 
the 
members 
of 
the 
ABA 
Committee 
on 
Partnerships and Unincorporated Business Organizations, and its 
chairs, Thurston R. 
Moore of Richmond, Virginia, 
and John H. 
Small of Wilmington, Delaware, for all the time and effort they 
devoted 
to 
this 
project, 
and 
to 
that 
Committee's 
special 
Subcommi ttee on the Revised Uniform Partnership Act, the chairs 
of that subcommittee, Lauris G.L. RaIl of New York, New York, and 
Gerald V. Niesar of San Francisco, California, and its members, 
in particular, Robert R. Keatinge of Denver, Colorado, Professor 
Larry E. Ribstein of the George Mason University School of Law, 
and Anthony van Westrum of Denver, 
Colorado. 
Each of these 
individuals 
added 
immeasurably 
to 
the 
Drafting 
Committee's 
discussion and consideration of both the major policy issues and 
the technical drafting issues raised by the Act. 
Addendum 
In 1995, the Conference appointed a Drafting Committee to 
add provlslons to RUPA authorizing the creation of a new form of 
general 
partnership 
called 
a 
limited 
liability 
partnership 
(LLP). 
At the time RUPA was first approved in 1992, only two 
states had adopted limited liability partnership legislation. 
By 
the 
time 
the 
LLP 
amendments 
to 
RUPA 
were 
approved 
by 
the 
Conference at the 1996 Annual Meeting, 
over forty states had 
adopted limited liability partnership provisions to their general 
partnership statutes. 
The LLP amendments to RUPA deal with four major issues: (1) 
scope of a partner's liability shield; (2) the voting requirement 
to become an LLP; 
(3) the effect of becoming an LLP 
on the 
partnership agreement; and (4) the annual filing requirement. 
1. 
Scope of a Partner's Liability Shield 
The amendments to add LLP provisions to RUPA include a new 
Section 306(c) providing for a corporate-styled liability shield 
which protects partners from vicarious personal liability for all 
partnership obligations incurred while a partnership is a limited 
liability partnership. 
The complete liability shield comports 
with the modern trend among the states. 
Most states, however, 
have adopted a partial liability shield protecting the partners 
only 
from 
vicarious 
personal 
liability 
for 
all 
partnership 
obligations arising from negligence, wrongful acts or misconduct, 
whether characterized as tort, contract or otherwise, committed 
while the partnership is an LLP. 
The Act does not alter a 
partner's liability for personal misconduct and does not alter 
the 
normal partnership rules 
regarding 
a 
partner's right to 
indemnification 
from 
the 
partnership 
(Section 
401(c». 
Therefore, the primary effect of the new liability shield is to 
sever a partner's personal liability to make contributions to the 
partnership when partnership assets are insufficient to cover its 
indemnification obligation to a partner who incurs a partnership 
obligation in the ordinary course of the partnership's business. 
2. 
Voting Requirement to Become an LLP 
The Act includes a new Section 1001(b) which provides that 
the decision to become 
an 
LLP 
is a 
major partnership event 
equivalent 
to 
an 
amendment 
of 
the 
partnership 
agreement. 
Therefore, the required vote equals the vote required to amend 
the partnership agreement. 
When the agreement is silent on these 
matters, 
the 
required 
vote 
would 
be 
unanimous. 
Where 
the 
agreement 
includes 
several 
amendment 
votes 
depending 
on 
the 
nature 
of 
the 
amendment, 
the 
required 
vote 
is 
that 
which 
considers contribution obligations since those obligations are 
the most affected by the 
amendments. 
Most 
states currently 
consider 
the 
required 
vote 
to 
become 
a 
limited 
liability 
partnership to be an ordinary partnership decision requiring only 
a majority consent. 
In becoming an LLP, each partner should consider a personal 
liability calculus. 
Where partnership assets are insufficient to 
indemnify a partner for an LLP obligation, each partner forfeits 
a right to receive contributions from other partners in exchange 
for 
being 
relieved of 
the 
obligation to 
contribute 
to 
the 
personal liability of other partners. 
This calculus will be 
different for each partner and will vary, for example, depending 
on the size and business of the partnership, 
the number of 
partners, the amount of insurance, and the relative risk of each 
partner's business practice compared to fellow partners. 
To 
adequately consider these varying interests, the Act adopts the 
vote required to amend the partnership agreement in special and 
general cases. 
3. 
Effect of Becoming an LLP on the Partnership Agreement 
The last sentence in new Section 306(c) provides that when a 
partnership 
becomes 
an 
LLP, 
the 
resulting liability shield 
applies 
notwithstanding 
inconsistent 
provisions 
of 
the 
partnership agreement existing immediately before the vote to 
become an LLP was taken. 
When the partners vote to become an 
LLP, they obviously intend to sever their personal responsibility 
to make contributions to the partnership when partnership assets 
are insufficient to cover partnership indemnification obligations 
to 
a 
partner. 
A partner's 
contribution obligation 
may 
be 
enforced not only by a partner (Sections 401 and 405) but also by 
a partner's creditors (Section 807(f». 
In eSSenCe, 
the new 
Section 306 (c) automatically "amends" the partnership agreement 
to remove personal liability for contribution obligations that 
may exist under the terms of. the partnership agreement as it 
exists immediately before the vote. 
However, the partners are 
not prohibited from thereafter amending the partnership agreement 
again 
to 
reestablish 
contribution 
obligations 
(see 
Section 
103(b». 
4. 
Annual Filing Requirement 
The Act includes new Section lOOl(d) which provides that a 
partnership's status as an LLP 
remains effective until it is 
revoked by a vote of the partners or is canceled by the Secretary 
of State under new Section 1003 (c) for the failure to file an 
annual report or pay the required annual fees. 
Most states 
provide that unless an LLP timely files an annual registration 
statement, its LLP status is "automatically" terminated but may 
be resurrected prospectively only with a subsequent corrective 
filing. 
Under 
this view, 
an operating partnership may 
have 
significant "gaps" in its shield which is further complicated by 
sourcing 
rules 
necessary 
to 
determine 
when 
a 
partnership 
obligation 
belongs 
to 
the 
shielded 
LLP 
or 
the 
unshielded 
partnership. 
As 
with 
corporations 
and 
limited 
liability 
companies, the Act preserves the LLP status and the partners' 
liability shield unless the LLP status is revoked by the partners 
or canceled by the Secretary of State. 
In the latter case, 
potential 
gaps 
in 
the 
liability 
shield 
are 
cured 
with 
a 
retroactive resurrection of the LLP status if a corrective filing 
is made within two years (Section 1003(e». 
The LLP Drafting Committee wishes to express its gratitude 
to the Reporter for this project, Professor Carter G. Bishop of 
Suffolk University Law School. 
Professor Bishop's comprehensive 
knowledge of partnership law and tax and his drafting expertise 
were instrumental in enabling the Drafting Committee to complete 
this project in one year. 
The Drafting Committee also wishes to 
thank the following advisors and observers, whose expertise and 
advice 
were 
very important to 
the 
success of this project: 
Elizabeth G. 
Hester of Richmond, 
Virginia 
(ABA Advisor); 
Lou 
Conti of Orlando, Florida (ABA Section of Business Law Advisor); 
Steven G. 
Frost of Chicago, Illinois (ABA Section of Taxation 
Advisor); Professor Thomas 
E. 
Geu of the University of South 
Dakota School of Law (ABA Section of Real Property, Probate and 
Trust Advisor); Sanford J. Liebschutz of Rochester, New York (ABA 
Section of Real Property, Probate and Trust Advisor and American 
College of Real Estate Lawyers Advisor); Robert A. 
Creamer of 
Chicago, Illinois (Attorneys' Liability Assurance Society, Inc.); 
R. 
Michael 
Duffy 
of 
Washington, 
D.C. 
(The 
Accountant's 
Coalition); 
Professor 
Philip 
Hablutzel 
of 
Chicago, 
Illinois 
(Illinois 
Secretary 
of 
State's 
Corporation 
Law 
Advisory 
Commi ttee; Robert R. Keatinge of Denver, Colorado (ABA Business 
Law Section); Mark Lubin of San Francisco, California (California 
Bar 
Association); 
Professor 
Sandra 
Miller 
of 
Chester, 
Pennsylvania; 
and William 
R. 
Stein of Washington, 
D.C. 
(The 
Accountant's Coalition); and Ronald H. Wilcomes of Paramus, New 
Jersey (American College of Real Estate Lawyers). 
CHAPTER 17 
UNIFORM PAR7NERSHIP ACT 
SUBCHAPTER 1 
GENERAL PROVISIQRS 
§1001. 
Definitions 
As 
used in this 
chapter. 
unless 
the 
context otherwise 
indicates, the following terms have the following meanings. 
1. 
Business. 
"Business" includes eVery trade, occupation 
and profession. 
2. 
Debtor in bilnkruptcy. 
"Debtor in bankruptcy" means a 
person who is the subject of: 
A. 
An order for relief under 11 United States Code or a 
comparable 
order 
under 
a 
successor 
statute 
of 
general 
application; or 
B. 
A comparable order under federaL state or foreign law 
governing insolvency. 
3. 
Distribution. 
"Distribution" means a transfer of money 
or 
other property 
from 
a 
partnership to 
a 
partner 
in 
the 
partner's capacity as a partner or to the partner's transferee. 
4. 
Foreign limited liability partnership. 
"Foreign limited 
liability partnership" means a partnership that: 
At 
Is formed under laws other than the laws of this State; 
Ml:l 
. Page 7-LR1469(1) 
T 
B. 
Has the status of a limited liability partnership under 
those laws. 
5. 
Limited 
liability partnership. 
"Limited 
liability 
partnership" means a partnership that has registered as a limited 
liability partnership pursuant to section 821 and does not have a 
similar statement in effect in any other jurisdiction. 
6. 
Partnership. 
"Partnership" means an association of 2 or 
more persons to carryon as co-owners a business for profit 
formed under section 1022, predecessor law or comparable law of 
another jurisdiction. 
7. 
Partnership agreement. 
"Partnership agreement" 
means 
the 
agreement, 
whether written, 
oral or 
implied, 
among 
the 
partners concerning the partnership, including amendments to the 
partnership agreement. 
8. 
Partnership at .ill. 
"Partnership at will" means 
a 
partnership in which the pa.l::.tJlers 
have not agreed to remain 
partners 
until 
the 
expiration 
of 
a 
definite 
term 
or 
the 
completion of a particular undertaking. 
9. 
Partnership 
in~rest; 
partner's 
inter~t 
in 
partnershi.,-p. 
"Partnership interest" or "partner's interest in 
the partnership" 
means all of 
a 
partner's interests in the 
partnership, 
including the partner's transferable interest and 
all management and other rights. 
10. 
Person. 
"Person" 
means 
an individual, 
corporation, 
limited 
liability 
company, 
business 
trust, 
estate, 
trust. 
partnership. association, joint venture, goVernment. governmental 
SUbdivision, 
agency or instrumentality or any other legal or 
commercial entity. 
11. 
Property. 
"Property" 
means 
all 
property, 
real. 
personal or mixed. tangible or intangible or any interest therein. 
12. 
State. 
"State" means a state of the United States, the 
District of Columbia, 
the Commonwealth of Puerto Rico or any 
territory or insular possession subject to the jurisdiction of 
the United States. 
13. 
Statement. 
"Statement" 
means 
a 
statement 
of 
dissociation under section 1074, a statement of dissolution under 
section 
1085, 
a 
statement 
of 
merger 
under 
section 
1097. 
a 
statement electing to be governed by this chapter prior to July 
1, 2006 or an amendment or cancellation of any of the foregoing. 
14. 
Transfer. 
"Transfer" 
includes 
an 
assignment, 
conveyance, lease, mortgage, deed and encumbrance. 
Comment 
(This is Section 101 of the Uniform Partnership Act (1997).) 
These Comments include the original Comments to the Revised 
Uniform Partnership Act (RUPA or the Act) and the new Comments to 
the Limited Liability Partnership Act Amendments to the Uniform 
Partnership Act 
(1994). 
The 
new 
Comments 
regarding 
limited 
liability partnerships are integrated into the RUPA Comments. 
The RUPA continues the definition of "business" from Section 
of the Uniform Partnership Act (UPA). 
& 
RUPA uses the more contemporary term "debtor in bankruptcy" 
instead of "bankrupt." 
The definition is adapted from the new 
Georgia Partnership Act, Ga. Code Ann. § 1482(1). 
The definition 
does not distinguish between a 
debtor whose estate is being 
liquidated under Chapter 7 of the Bankruptcy Code and a debtor 
who 
is being rehabilitated under 
Chapter 
11, 
or 
and 
includes both. 
The filing of a voluntary petition under Section 
of the Bankruptcy Code constitutes an order for relief, but 
the debtor is entitled to notice and an opportunity to be heard 
before the entry of an order for relief in an involuntary case 
under Section 303 of the Code. 
The term also includes a debtor 
who is the subject of a comparable order under state or foreign 
law. 
The definition of "distribution" is new and adds precision 
to the accounting rules established in Sections 401 and 807 and 
related sections. 
Transfers 
to 
a 
partner 
in the partner's 
capacity as a creditor, lessor or employee of the partnership, 
for example, are not "distributions." 
The definition of a "foreign limited liability partnership" 
includes a partnership formed under the laws of another State, 
foreign country or other jurisdiction provided it has the status 
of a limited liability partnership in the other jurisdiction. 
Since 
the 
scope 
and 
nature 
of 
foreign 
limited 
liability 
partnership 
liability 
shields 
may 
vary 
in 
different 
jurisdictions, 
the definition avoids 
reference to 
similar or 
comparable laws. 
Rather, the definition incorporates the concept 
of a limited liability partnerShip in the foreign jurisdiction, 
however defined in that juriSdiction. 
The reference to formation 
"under laws other than the laws of this State" makes clear that 
the definition includes partnerships formed in foreign countries 
as well as in another State. 
The definition of a "limited liability partnership" makes 
clear that a partnership may adopt the special liability shield 
characteristics of 
a 
limited liability partnership simply by 
filing 
a 
statement 
of qualification under 
Section 
1001. 
A 
partnership may file the statement in this State regardless of 
where formed. 
When coupled with the governing law provisions of 
Section 106(b), this definition simplifies the choice of law 
issues applicable to partnerships with multi-state activities and 
contacts. 
Once 
a 
statement 
of 
qualification 
is 
filed, 
a 
partnership's internal affairs and the liability of its partners 
are determined by the law of the State where the statement is 
filed. 
See Section 106(b). 
The partnership may not vary this 
particular requirement. 
See Section 103(b)(9). 
The reference to a 
"partnership" in the definition of a 
limited 
liability 
partnership 
makes 
clear 
that 
the 
RUPA 
def ini tion of the term rather than the UPA concept controls for 
purposes 
of 
a 
limited liability partnership. 
Section 101(6) 
defines a "partnership" as "an association of two or more persons 
to carryon as co-owners 
a business for profit formed under 
Section 
202, 
predecessor 
law 
or 
comparable 
law 
of 
another 
jurisdiction." 
Section 
202(b) 
further 
provides 
that 
"an 
association formed under 
a 
statute other than this 
[Act], 
a 
predecessor 
statute, 
or 
a 
comparable 
statute 
of 
another 
jurisdiction is 
not 
a 
partnership 
under 
this 
[Act]." 
This 
language was intended to clarify that a limited partnership is 
not a RUPA general partnership. 
It was not intended to preclude 
the application of any RUPA general partnership rules to limited 
partnerships where limited partnership law otherwise adopts the 
RUPA rules. 
See Comments to Section 202(b) and Prefatory Note. 
The 
effect 
of 
these 
definitions 
leaves 
the 
scope 
and 
applicability 
of 
RUPA 
to 
limited 
partnerships 
to 
limited 
partnership law, not to sever the linkage between the two Acts in 
all cases. 
Certain provisions of RUPA will continue to govern 
limited 
partnerships 
by 
virtue 
of 
Revised 
Uniform 
Limited 
Partnership Act (RULPA) Section 1105 which provides that "in any 
case not provided for in this [Act] the provisions of the Uniform 
Partnership 
Act 
govern." 
The 
RUPA 
partnership 
definition 
includes 
partnerships 
formed 
under 
the 
UPA. 
Therefore, 
the 
limited 
liability 
partnership 
rules 
will 
govern 
limited 
partnerships "in any case not provided for" in RULPA. 
Since 
RULPA does not provide for any rules applicable to a limited 
partnership becoming a limited liability partnership, the limited 
liability partnership rules should apply to limited partnerships 
that file a statement of qualification. 
Partner liability 
(b) provides that a 
"has 
the liabilities 
deserves special mention. 
RULPA Section 
general partner of a limited partnership 
of 
a 
partner in 
a 
partnership without 
limi ted 
partners." 
Thus 
limited 
partnership 
law 
expressly 
references general partnership law for general partner liability 
and does not separately consider the liability of such partners. 
The liability of a general partner of a limited partnership that 
becomes a 
LLLP would therefore be the liability of a general 
partner in an LLP and would be governed by Section 306. 
The 
liability of a limited partner in a LLLP is a more complicated 
matter. 
RULPA Section 303 (a) separately considers the liability 
of a limited partner. 
Unless also a general partner, a limited 
partner 
is 
not 
liable 
for 
the 
obligations 
of 
a 
limited 
partnership unless the partner participates in the control of the 
business 
and 
then only 
to 
persons 
reasonably believing the 
limited 
partner 
is 
a 
general 
partner. 
Therefore, 
arguably 
limited partners in a LLLP will have the specific RULPA Section 
303(c) 
liability shield while 
general 
partners will 
have 
a 
superior Section 306(c) liability shield. 
In order to clarify 
limited partner liability and other linkage issues, States that 
have adopted RUPA, these limited liability partnership rules, and 
RULPA may wish to consider an amendment to RULPA. 
A suggested 
form of such an amendment is: 
SECTION 1107. 
LIMITED LIABILITY LIMITED PARTNERSHIP. 
(a) 
A limited partnership may become a limited liability 
partnership by: 
(1) obtaining approval of the terms and conditions of the 
limited partnership becoming 
a 
limited liability limited 
partnership by the vote necessary to 
amend 
the 
limited 
partnership agreement except, 
in the case of 
a 
limited 
partnership agreement that expressly considers contribution 
obligations, the vote necessary to amend those provisions; 
(2) 
filing 
a 
statement 
of 
qualification 
under 
Section 
lOOl(c) of the Uniform Partnership Act (1994); and 
(3) complying with the name requirements of Section 1002 of 
the Uniform Partnership Act (1994). 
(b) 
A limited liability limited partnership continues to be 
the same entity that existed before the filing of a statement of 
qualification under Section 1001(c) of the Uniform Partnership 
Act (1994). 
(c) 
Sections 306(c) and 307(b) of the Uniform Partnership 
Act 
(1994) 
apply to both general 
and limited partners of 
a 
limited liability limited partnership. 
"Partnership" is defined to mean an association of 
more persons to carryon as co-owners 
a business for 
formed under Section 202 (or predecessor law or comparable 
two or 
profit 
law of 
another jurisdiction), that is, a·general partnership. 
Thus, as 
used in RUPA, the term "partnership" does not encompass limited 
partnerships, 
contrary to 
the 
use of 
the 
term in the 
UPA. 
Section 901 (3) defines "limited partnership" for the purpose of 
Article 9, which deals with conversions and mergers of general 
and limited partnerships. 
The definition of "partnership agreement" is adapted from 
Section 101(9) of RULPA. 
The 
RUPA definition is intended to 
include the agreement among the partners, including amendments, 
concerning either the affairs of the partnership or the conduct 
of its business. 
It does not include other agreements between 
some or all of the partners, such as a lease or loan agreement. 
The partnership agreement need not be written; it may be oral or 
inferred from the conduct of the parties. 
Any partnership in which the partners have not agreed to 
remain partners until the expiration of a definite term or the 
completion of 
a 
particular undertaking is 
a 
"partnership at 
will." 
The distinction between an "at-will" partnership and a 
partnership 
for 
"a 
definite 
term 
or 
the 
completion 
of 
a 
particular undertaking" is important in determining the rights of 
dissociating and continuing partners following the dissociation 
of a partner. 
See Sections 601, 602, 701(b), 801(a), 802(b), and 
803. 
It is sometimes difficult to determine whether a partnership 
is at will or is for a definite term or the completion of a 
particular undertaking . 
Presumptively, every partnership is an 
at-will partnership. 
See, e.g., Stone v. Stone, 292 So. 2d 686 
(La. 1974); Frey v. Hauke, 171 Neb. 852, 108 N.W.2d 228 (1961). 
To 
constitute 
a 
partnership 
for 
a 
term 
or 
a 
particular 
undertaking, 
the partners must agree (i) that the partnership 
will 
continue 
for 
a 
definite 
term 
or 
until 
a 
particular 
undertaking is completed and (ii) that they will remain partners 
until the expiration of 
the 
term or 
the 
completion of 
the 
undertaking. 
Both are necessary for a term partnership; if the 
partners have the unrestricted right, as distinguished from the 
power, 
to withdraw 
from 
a 
partnership formed for 
a 
term or 
particular undertaking, the partnership is one at will, rather 
than a term partnership. 
To find that the partnership is formed for a definite term 
or a particular undertaking, there must be clear evidence of an 
agreement 
among 
the partners that the partnership (i) 
has 
a 
minimum or maximum duration or (ii) terminates at the conclusion 
of a particular venture whose time is indefinite but certain to 
occur. 
See, e.g., Stainton v. Tarantino, 637 F. Supp. 1051 (E.D. 
Pa. 
1986) (partnership to dissolve no later than December 30, 
2020); Abel v. American Art Analog, Inc., 838 F.2d 691 (3d Cir. 
1988) (partnership purpose to market an art book); 68th Street 
Apts., Inc. v. Lauricella, 
A.2d 78 (N.J. Super. Ct. 1976) 
(partnership purpose 
to construct an apartment building). 
A 
partnership to conduct a business which may last indefinitely, 
however, is an at-will partnership, even though there may be an 
obligation of the partnership, such as a mortgage, which must be 
repaid by a certain date, absent a specific agreement that no 
partner can rightfully withdraw until the obligation is repaid. 
See, e.g., Page v. Page, 
Cal. 2d. 
192, 
P.2d 41 (1961) 
(partnership purpose to operate a linen supply business); Frey v. 
Hauke, 
supra 
(partnership purpose 
to contract 
and operate 
a 
bowling alley); Girard Bank v. Haley, 460 Pa. 237, 332 A.2d 443 
(1975) (partnership purpose to maintain and lease buildings). 
"Partnership 
interest" 
or 
"partner's 
interest 
in 
the 
partnership" is defined to mean all of a partner's interests in 
the partnership, including the partner's transferable interest 
and all management and other rights. 
A partner's "transferable 
interest" is a more limited concept and means only his share of 
the profits and losses and right to receive distributions, that 
is, 
the partner's 
economic 
interests. 
See 
Section 
and 
Comment. 
Compare 
RULPA 
§ 
(10) 
("partnership 
interest" 
includes partner's economic interests only). 
The definition of "person" is the usual definition used by 
the National Conference of Commissioners on Uniform State Laws 
(NCCUSL or the Conference). 
The definition includes other legal 
or commercial entities such as limited liability companies. 
"Property" 
is 
defined 
broadly 
to 
include all 
types 
of 
property, as well as any interest in property. 
The 
definition 
of 
definition. 
"State" 
is 
the 
Conference's 
usual 
The definition of "statement" is new and refers to one of 
the various statements authorized by RUPA to enhance or limit the 
agency authority of a partner, to deny the authority or status of 
a partner, or to give notice of certain events, 
such as the 
dissociation of a partner or the dissolution of the partnership. 
See Sections 303, 304, 704, 805, and 907. 
Generally, Section 105 
governs the execution, filing, and recording of all statements. 
The definition also makes clear that a statement of qualification 
under Section 1001 and a statement of foreign qualification under 
Section 
1102 
are 
considered 
statements. 
Both 
qualification 
statements are therefore subject to the execution, filing, and 
recordation rules of Section 105. 
"Transfer" is defined broadly to include all manner 
of 
conveyances, including leases and encumbrances. 
§l002. 
Knowledge and notice 
1. 
Knows. 
A person knows a fact if the person has actual 
knowledge of it. 
2. 
Has notice. 
A person has notice of a fact if the person: 
A. 
Knows of it: 
B. 
Has received a notification of it: or 
C. 
Has reason to know it exists from all of the facts known 
to the person at the time in guestion. 
3. 
Notifies or gives notification. 
A person notifies or 
gives 
a 
notification to 
another 
by 
taking steps 
reasonably 
reguired to inform the other person in ordinary course, whether 
or not the other person learns of it. 
4. 
Receives notification. 
A person receives a notification 
when the notification: 
A. 
Comes to the person's attention: or 
B. 
Is duly delivered at the person's place of business or 
at any other place held out by the person as a place for 
receiving communications. 
5. 
Person other than individual: 
reasonable diligence. 
Except as otherwise provided in subsection 6, a person other than 
an individual knows, has notice or receives a notification of a 
fact for purposes of a particular transaction when the individual 
conducting 
the 
transaction 
knows, 
has 
notice or 
receives 
a 
notification of the fact or in any event when the fact would have 
been brought to the individual's attention if the person had 
exercised reasonable diligence. 
The person exercises reasonable 
diligence 
if 
that 
person 
maintains 
reasonable 
routines 
for 
communicating 
significant 
information 
to 
the 
individual 
conducting the transaction and there is reasonable compliance 
with the routines. 
Reasonable diligence does not reguire an 
individual 
acting 
for 
the 
person 
to 
communicate 
information 
unless the communication is part of the individual's regular 
duties or the individual has reason to know of the transaction 
and that the transaction would be materially affected by the 
information. 
6. 
Effective as to partnerShip. 
A partner' s 
knowledge« 
notice or receipt of a notification of a fact relating to the 
partnership is effective immediately as knowledge by, notice to 
or receipt of a notification by the partnership except in the 
case of a 
fraud on the partnership committed by or with the 
consent of that partner. 
Comment 
(This is Section 102 of the Uniform Partnership Act (1997).) 
The concepts and definitions of "knowledge," "notice," and 
"notification" draw heavily on Section 1201 (25) to (27) of the 
Uniform Commercial Code 
(UCC). 
The UCC text has been altered 
somewhat 
to 
improve 
clarity 
and 
style, 
but 
in 
general 
no 
substantive changes 
are 
intended 
from 
the 
UCC 
concepts. 
"A 
notification" replaces the UCC' s redundant phrase, "a notice or 
notification," throughout the Act. 
A person "knows" 
a 
fact only if that person has actual 
knowledge of it. 
Knowledge is cognitive awareness. 
That is 
solely an issue of fact. 
This is a change from the UPA Section 
3(1) definition of "knowledge" which included the concept of "bad 
faith" knowledge arising from other known facts. 
"Notice" is a lesser degree of awareness than "knows" and is 
based on a person's: (i) actual knowledge; (ii) receipt of a 
notification; or (iii) reason to know based on actual knowledge 
of other facts and the circumstances at the time. 
The latter is 
the traditional concept of inquiry notice. 
Generally, under RUPA, statements filed pursuant to Section 
do not constitute constructive knowledge or notice, except as 
expressly provided in the Act. 
See Section 301(1) 
(generally 
requiring 
knowledge 
of 
limitations 
on 
partner's 
apparent 
authority). 
Properly recorded statements of limitation on 
a 
partner's authority, 
on the other hand, 
generally constitute 
constructive knowledge with respect to 
the transfer of real 
property held in the partnership name. 
See Sections 303(d)(1), 
303(e), 704(b), and 805(b). 
The other exceptions are Sections 
704(c) (statement of dissociation effective 90 days after filing) 
and 805(c) 
(statement of dissolution effective 90 
days after 
filing) . 
A person "receives" a notification 
is delivered to the person's place of 
for 
rece~v~ng communications) or (ii) 
actually learns of its existence. 
when (i) the notification 
business (or other place 
the recipient otherwise 
The sender "notifies" or gives a notification by making an 
effort to inform the recipient, which is reasonably calculated to 
do so in ordinary course, even if the recipient does not actually 
learn of it. 
r 
The Official Comment to UCC Section 1201(26), on which this 
subsection is based, explains that "notifies" is the word used 
when the essential fact is the proper dispatch of the notice, not 
its receipt. 
When 
the essential fact is the other party's 
receipt of the notice, that is stated. 
A notification is not required to be in writing. 
That is a 
change from UPA Section 3(2)(b). 
As under the UCC, the time and 
circumstances 
under 
which 
a 
notification 
may 
cease 
to 
be 
effective are not determined by RUPA. 
Subsection 
(e) 
determines 
when 
an agent's 
knowledge 
or 
notice is imputed to an organization, such as a corporation. 
In 
general, only the knowledge or notice of the agent conducting the 
particular 
transaction 
is 
imputed 
to 
the 
organization. 
Organizations 
are 
expected 
to 
maintain 
reasonable 
internal 
routines 
to 
insure 
that 
important 
information 
reaches 
the 
individual agent handling a transaction. 
If, in the exercise of 
reasonable diligence on the part of the organization, the agent 
should have 
known or had notice of 
a 
fact, 
or 
received 
a 
notification of it, the organization is bound. 
The Official 
Comment to UCC Section 1201(27) explains: 
know, 
knowledge, 
or 
a 
instance by a clerk in 
is 
effective 
for 
a 
B only from the time 
communicated 
to 
the 
This 
makes 
clear that reason to 
notification, although "received" for 
Department 
A 
of 
an 
organization, 
transaction conducted in Department 
when it was 
or 
should 
have 
been 
individual conducting that transaction. 
Subsection 
(e) 
uses 
the 
phrase 
"person 
other 
than 
an 
individual" in lieu of the UCC term "organization." 
Subsection (f) continues the rule in UPA Section 12 that a 
partner's 
knowledge 
or 
notice 
of 
a 
fact 
relating 
to 
the 
partnership is imputed to the partnership, except in the case of 
fraud on the partnership. 
Limited partners, however, are not 
"partners" within the meaning of RUPA. 
See Comment 4 to Section 
202. 
It is anticipated that RULPA will address the issue of 
whether notice to a 
limited partner is imputed to a limited 
partnership. 
§l003. 
Effect of partnership agreement: nonwaiYable provisions 
1. 
Partnership 
agreement 
governs: 
default. 
Except 
as 
otherwise provided in subsection 2. relations among the partners 
and between the partners and the partnership are governed by the 
partnership agreement. 
To the extent the partnership agreement 
Page l6-LRl469(1) 
does not otherwise provide, this chapter governs relations among 
the partners and between the partners and the partnership. 
2. 
Honwaivable provisions of chapter. 
The 
partnershi~ 
agreement may not: 
A. 
Vary the rights and duties under section 1005 except to 
eliminate the duty to provide copies of statements to all of 
the partners; 
B. 
Unreasonably restrict the right of access to books and 
records under section 1043, subsection 2; 
C. 
Eliminate 
the 
duty 
of 
loyalty 
under 
section 
1044, 
subsection 2 or section 1063, subsection 2, paragraph C, but; 
(1) 
The partnership agreement may identify specific 
types or categories of activities that do not violate 
the duty of loyalty if not manifestly unreasonable: or 
(2) 
All of the partners or 
a 
number or percentage 
~ecified in the partnership agreement may authorize or 
ratify, after full disclosure of all material facts, a 
specific 
act 
or 
transaction 
that 
otherwise 
would 
violate the duty of loyalty; 
D. 
Unreasonably reduce the duty of care under section 1044, 
subsection 3 or section 1063, subsection 2, paragraph Cj 
E. 
Eliminate the obligation of good faith and fair dealing 
under 
section 
1044, 
subsection 
4, 
but 
the 
partnership 
agreement 
may 
prescribe 
the 
standards 
by 
which 
the 
performance of the obligation is to be measured if the 
standards are not manifestly unreasonablej 
F. 
Vary the power to dissociate as a partner under section 
1062, 
sUbsection 1, 
except to 
reguire 
the notice 
under 
section 1061, subsection 1 to be in writing; 
G. 
Vary the right of a court to expel a partner in the 
events specified in section 1061, subsection 5; 
H. 
Vary the reguirement to wind up the partnership business 
in cases specified in section 1081, subsection 4, 5 or 6; 
I. 
Vary 
the 
law 
applicable 
to 
a 
limited 
liability 
partnership under section 1006, subsection 2; or 
J. 
Restrict rights of 3rd parties under this chapter . 
. Page 17-LR1469(1) 
.. 
Comment 
(This is Section 103 of the Uniform Partnership Act (1997).) 
1. 
The general rule under Section 103(a) is that relations 
among the partners and between the partners and the partnership 
are governed by the partnership agreement. 
See Section 101( 5) . 
To the extent that the partners fail to agree upon a contrary 
rule, RUPA provides the default rule. 
Only the rights and duties 
listed 
in 
Section 
103(b), 
and 
implicitly 
the 
corresponding 
liabilities and remedies under Section 405, 
are mandatory and 
cannot 
be 
waived 
or 
varied 
by 
agreement 
beyond 
what 
is 
authorized. 
Those 
are 
the 
only 
exceptions 
to 
the 
general 
principle that the provisions of RUPA with respect to the rights 
of the partners inter se are merely default rules, subject to 
modification by the partners. 
All modifications must also, of 
course, satisfy the general standards of contract validity. 
See 
Section 104. 
2. 
Under subsection (b)(l), the partnership agreement may 
not vary the requirements for executing, filing, and recording 
statements under Section 105, except the duty to provide copies 
to all the partners. 
A statement that is not executed, filed, 
and recorded in accordance with the statutory requirements will 
not be 
accorded the effect prescribed in the Act, 
except as 
provided in Section 303(d). 
3. 
Subsection 
(b)(2) 
provides 
that 
the 
partnership 
agreement 
may 
not unreasonably restrict 
a 
partner or 
former 
partner's 
access 
rights 
to 
books 
and 
records 
under 
Section 
403(b). 
It is left to the courts to determine what restrictions 
are reasonable. 
See Comment 2 to Section 403. 
Other information 
rights 
in Section 
can 
be 
varied or 
even eliminated by 
agreement. 
4. 
Subsection (b) ( 3) through (5) are intended to ensure a 
fundamental 
core 
of 
fiduciary 
responsibility. 
Neither 
the 
fiduciary duties of loyalty or care, nor the obligation of good 
faith and fair dealing, may be eliminated entirely. 
However, the 
statutory requirements of each can be modified by agreement, 
subject to the limitation stated in subsection (b)(3) through (5). 
There has always been a 
tension regarding the extent to 
which a partner's fiduciary duty of loyalty can be varied by 
agreement, as contrasted with the other partners' consent to a 
particular and known breach of duty. 
On the one hand, courts 
have 
been loathe 
to enforce 
agreements 
broadly 
"waiving" 
in 
advance a partner's fiduciary duty of loyalty, especially where 
there 
is 
unequal 
bargaining 
power, 
information, 
or 
Page l8-LR1469(1) 
sophistication. 
For this reason, 
a very broad provision in a 
partnership agreement in effect negating any duty of loyalty, 
such as a provision giving a managing partner complete discretion 
to manage the business with no liability except for acts and 
omissions that constitute willful misconduct, will not likely be 
enforced. 
See, e.g., Labovitz v. Dolan, 189 Ill. App. 
3d 403, 
Ill. Dec. 780, 545 N.E.2d 304 (1989). 
On the other hand, it 
is 
clear 
that 
the 
remaining 
partners 
can 
"consent" 
to 
a 
particular conflicting interest transaction or other breach of 
duty, after the fact, provided there is full disclosure. 
RUPA attempts to provide a standard that partners can rely 
upon in drafting exculpatory agreements. 
It is not necessary 
that the agreement be restricted to a particular transaction. 
That 
would 
require 
bargaining 
over 
every 
transaction 
or 
opportunity, 
which 
would 
be 
excessively 
burdensome. 
The 
agreement may be drafted in terms of types or categories of 
activities or transactions, but it should be reasonably specific. 
A 
provision 
in 
a 
real 
estate 
partnership 
agreement 
authorizing a 
partner who 
is 
a 
real estate agent to retain 
commissions 
on partnership property bought 
and 
sold by that 
partner would be an example of a "type or category" of acti vi ty 
that 
is 
not 
manifestly 
unreasonable 
and 
thus 
should 
be 
enforceable under the Act. 
Likewise, 
a provision authorizing 
that partner to buy or sell real property for his own account 
without prior disclosure to the other partners or without first 
offering it to the partnership would be enforceable as a valid 
category of partnership activity. 
Ultimately, 
the courts 
must 
decide the outer limits of 
validi ty of such agreements, and context may be significant. 
It 
is 
intended 
that 
the 
risk 
of 
judicial 
refusal 
to 
enforce 
manifestly unreasonable exculpatory clauses will discourage sharp 
practices while accommodating the legitimate needs of the parties 
in structuring their relationship. 
5. 
Subsection (b)(3)(i) 
permits 
the partners, 
in their 
partnership agreement, to identify specific types or categories 
of partnership activities that 
do 
not violate 
the 
duty 
of 
loyalty. 
A modification of the statutory standard must not, 
however, 
be 
manifestly 
unreasonable. 
This 
is 
intended 
to 
discourage overreaching by a partner with superior bargaining 
power since the courts may refuse to enforce an overly broad 
exculpatory clause. 
See, e.g., Vlases v. Montgomery Ward & Co., 
F.2d 
846, 
(3d 
Cir. 
1967) 
(limitation 
prohibits 
unconscionable agreements); 
PPG 
Industries, 
Inc. 
v. 
Shell Oil 
Co., 
F.2d 
17, 
(5th 
Cir. 
1990) 
(apply 
limitation 
deferentially to agreements of sophisticated parties). 
. Page 19-LR1469(1) 
Subsection (b)(3)(ii) is intended to clarify the right of 
partners, recognized under general law, to consent to a 
known 
past or anticipated violation of duty and to waive their legal 
remedies for redress of that violation. 
This is intended to 
cover 
situations 
where 
the 
conduct 
in 
question 
is 
not 
specifically authorized by the partnership agreement. 
It can 
also be used to validate conduct that might otherwise not satisfy 
the "manifestly unreasonable" 
standard. 
Clause (ii) 
provides 
that, after full disclosure of all material facts regarding a 
specific act or transaction that otherwise would violate the duty 
of loyalty, it may be authorized or ratified by the partners. 
That authorization or ratification must be unanimous unless a 
lesser number or percentage is specified for this purpose in the 
partnership agreement. 
6. 
Under subsection (b)(4), the partners' duty of care may 
not be unreasonably reduced below the statutory standard set 
forth in Section 404 (d), that is, to refrain from engaging in 
grossly negligent or reckless conduct, intentional misconduct, or 
a knowing violation of law. 
For 
example, 
partnership 
agreements 
frequently 
contain 
provisions releasing a partner from liability for actions taken 
in good faith and in the honest belief that the actions are in 
the 
best interests 
of 
the 
partnership 
and 
indemnifying 
the 
partner against any liability incurred in connection with the 
business of the partnership if the partner acts in a good faith 
belief that he has authority to act. 
Many partnership agreements 
reach this same result by listing various activities and stating 
that 
the 
performance 
of 
these 
activities is 
deemed 
not 
to 
constitute gross negligence or willful misconduct. 
These types 
of 
prov1s10ns 
are 
intended to 
come 
within the modifications 
authorized by subsection (b) (4). 
On the other hand, absolving 
partners of intentional misconduct is probably unreasonable. 
As 
with contractual 
standards of loyalty, 
determining the outer 
limit in reducing the standard of care is left to 
the courts. 
The standard may, of course, be increased by agreement to 
one of ordinary care or an even higher standard of care. 
7. 
Subsection (b) (5) author i zes the partners to determine 
the standards by which the performance of the obligation of good 
faith and fair dealing is to be measured. 
The 
language of 
subsection (b) (5) is based on UCC Section 1102(3). 
The partners 
can negotiate and draft specific contract provisions tailored to 
their particular needs (e.g., five days notice of a partners' 
meeting 
is 
adequate 
notice), 
but 
blanket 
waivers 
of 
the 
obligation are unenforceable. 
See, e.g., 
PPG Indus., Inc. v. 
Shell Oil Co., 919 F. 2d 17 (5th Cir. 1990); First Security Bank 
v. Mountain View Equip. Co., 112 Idaho 158, 730 P.2d 1078 (Ct. 
App. 1986), aff'd, 112 Idaho 1078,739 P.2d 377 (1987); American 
Bank of Commerce v. Covo10, 88 N.M. 405, 540 P.2d 1294 (1975). 
8. 
Section 602(a) 
continues the traditional UPA 
Section 
31(2) rule that every partner has the power to withdraw from the 
partnership at any time, which power can not be bargained away. 
Section 103(b)(6) provides that the partnership agreement may not 
vary the power to dissociate as a partner under Section 602 (a), 
except to require that the notice of withdrawal under Section 
601(1) 
be 
in writing. 
The 
UPA 
was 
silent with respect to 
requiring a written notice of withdrawal. 
9. 
Under subsection (b)(7), the right of a partner to seek 
court expulsion of another partner under Section 601(5) can not 
be 
waived 
or 
varied 
(e.g., 
requ~r~ng 
a 
90day 
notice) 
by 
agreement. 
Section 601(5) refers to judicial expulsion on such 
grounds as misconduct, breach of duty, or impracticability. 
10. 
Under subsection (b) (8), the partnership agreement may 
not vary the right of partners to have the partnership dissolved 
and its business wound up under Section 801(4), 
(5), or (6). 
Section 801(4) provides that the partnership must be wound up if 
its business is unlawful. 
Section 801( 5) provides for judicial 
winding up in such circumstances as frustration of the firm's 
economic 
purpose, 
partner 
misconduct, 
or 
impracticability. 
Section 801(6) accords standing to transferees of an interest in 
the partnership to seek judicial dissolution of the partnership 
in specified circumstances. 
11. 
Subsection (b)(9) makes clear that a limited liability 
partnership may not designate the law of a State other than the 
State where it filed its statement of qualification to govern its 
internal affairs and the liability of its partners. 
See Sections 
101(5), 106(b), and 202(a). 
Therefore, the selection of a State 
within which to file a statement of qualification has important 
choice of law ramifications, particularly where the partnership 
was formed in another State. 
See Comments to Section 106(b). 
12. 
Although 
stating 
the 
obvious, 
subsection(b) (10) 
provides expressly that the rights of a third party under the Act 
may not be restricted by an agreement among the partners to which 
the third party has not agreed. 
A non-partner who is a party to 
an 
agreement 
among 
the partners is, 
of course, 
bound. 
Cf. 
Section 703(c) (creditor joins release). 
13. 
The Article 9 rules regarding conversions and mergers 
are not listed in Section 103(b) as mandatory. 
Indeed, Section 
states expressly that partnerships may 
be 
converted and 
merged in any other manner provided by law. 
The effect of 
compliance with Article 9 is to provide a "safe harbor" assuring 
• 
the legal validity of such conversions and mergers. 
Although not 
immune from variation in the partnership agreement, noncompliance 
with the requirements of Article 9 in effecting a conversion or 
merger 
is 
to 
deny 
that 
"safe 
harbor" 
validity 
to 
the 
transaction. 
In this 
regard, 
Sections 
903(b) 
and 
905(c)(2) 
require that the conversion or merger of a limited partnership be 
approved by all of the partners, 
notwithstanding a 
contrary 
provision in the limited partnership agreement. 
Thus, in effect, 
the 
agreement 
can 
not 
vary 
the 
voting 
requirement 
without 
sacrificing the benefits of the "safe harbor." 
§l004. 
Supplemental principles of law 
1. 
Law 
and 
equiq. 
Unless 
displaced 
by 
particular 
prov~s~ons of this chapter, 
the principles of law and equity 
supplement this chapter. 
2. 
Interest rate. 
If an obligation to pay interest arises 
under this chapter and the rate is not specified, the rate is 
that specified in Title 14, section 1602-B. 
2 
C01llllent 
(This is Section 104 of the Uniform Partnership Act (1997).) 
The principles of law and equity supplement RUPA 
unless 
displaced by 
a particular provision of the Act. 
This broad 
statement combines the separate rules contained in UPA Sections 
4(2), 4(3), and 5. 
These supplementary principles encompass not 
only 
the 
law 
of 
agency 
and 
estoppel 
and 
the 
law merchant 
mentioned in the UPA, but all of the other principles listed in 
uee 
Section 1103: 
the 
law relative to capacity to contract, 
fraud, misrepresentation, duress, coercion, mistake, bankruptcy, 
and other common law validating or invalidating causes, such as 
unconscionability. 
No substantive change from either the UPA or 
the uee is intended. 
It was thought unnecessary to repeat the UPA Section 4(1) 
admonition that statutes in derogation of the common law are not 
to 
be 
strictly construed. 
This 
principle 
is 
now 
so 
well 
established that it is not necessary to so state in the Act. 
No 
change in the law is intended. 
See the Comment to RUPA Section 
1101. 
Subsection (b) is new. 
It is based on the definition of 
"interest" in Section 1482 (5) of the Georgia act and establishes 
the applicable rate of interest in the absence of an agreement 
among the partners. 
Adopting States can select the State's legal 
rate of interest or other statutory interest rate, such as the 
rate for judgments. 
§1005. 
Execution. filing and recording of statements 
1. 
Filing with Secretary of State. 
To be effective under 
this chapter, a statement must be filed in the office of the 
Secretary of State. 
A certified copy of a statement that is 
filed in an office in another state may be filed in the office of 
the Secretary of State. 
Either filing has the effect provided in 
this chapter with respect to partnership property located in or 
transactions that occur in this State. 
2. 
Recorded in registry of deeds. 
A certified copy of a 
statement that has been filed in the office of the Secretary of 
State and recorded in the registry of deeds of the county in 
which real property is located has 
the effect provided for 
recorded statements in this chapter. 
A recorded statement that 
is not a certified copy of a statement filed in the office of the 
Secretary of State does not have the effect provided for recorded 
statements in this chapter. 
3. 
Execution. 
A statement filed by a partnership must be 
executed by at least one partner. 
Other statements must be 
executed either by a partner or other person authorized by this 
chapter. 
An individual who executes a statement as, or on behalf 
of, a partner or other person named as a partner in a statement 
shall 
personally declare 
under 
penalty of perjury that 
the 
contents of the statement are accurate. 
4. 
Amendment or cancellation. 
A person authorized by this 
chapter to file a statement may amend or cancel the statement by 
filing an amendment or cancellation that names the partnership, 
identifies 
the 
statement 
and 
states 
the 
substance 
of 
the 
amendment or cancellation. 
5. 
Capies. 
A person who files a statement pursuant to this 
section shall promptly send a copy of the statement to every 
nonfiling partner and to any other person named as a partner in 
the statement. 
Failure to send a 
copy of a 
statement to 
a 
partner or other person does not limit the effectiveness of the 
statement as to a person not a partner, 
6. 
Secretary of State. 
The Secretary of State may collect 
a fee for filing or providing a certified copy of a statement. 
The registry of deeds may collect a fee for recording a statement. 
Comment 
(This is Section 105 of the Uniform Partnership Act (1997).) 
1. 
Section 105 is new. 
It'mandates the procedural rules 
for 
the 
execution, 
filing, 
and 
recording 
of 
the 
various 
"statements" (see Section 101(11» 
authorized by RUPA. 
Section 
101(13) makes clear that a statement of qualification filed by a 
partnership to become a limited liability partnership is included 
in the definition of a 
statement. 
Therefore, 
the execution, 
filing, 
and recording rules of this section must be followed 
except that the decision to file the statement of qualification 
must be approved by the vote of the partners necessary to amend 
the partnership agreement as to contribution requirements. 
See 
Section 1001(b) and Comments. 
No 
filings are mandatory under RUPA. 
In all cases, the 
filing of a statement is optional and voluntary. 
A system of 
mandatory filing and disclosure for partnerships, similar to that 
required for corporations and limited partnerships, was rejected 
for several reasons. 
First, RUPA is designed to accommodate the 
needs 
of 
small partnerships, 
which often have 
unwritten or 
sketchy 
agreements 
and 
limited 
resources. 
Furthermore, 
inadvertent partnerships are also governed by the Act, 
as the 
default form of business organization, in which case filing would 
be unlikely. 
The RUPA filing prov~s~ons are, however, likely to encourage 
the voluntary use of partnership statements. 
There are a number 
of strong incentives for the partnership or the partners to file 
statements or for third parties, such as lenders or transferees 
of partnership property, to compel them to do so. 
Only 
statements 
that 
are 
executed, 
filed, 
and, 
if 
appropr iate (such as the authority to transfer real property), 
recorded 
in 
conformity 
with 
Section 
have 
the 
legal 
consequences accorded statements by RUPA. 
The requirements of 
Section 105 cannot be varied in the partnership agreement, except 
the duty to provide copies of statements to all the partners. 
See Section 103(b)(1). 
In most States today, the filing and recording of statements 
requires written documents. 
As technology advances, alternatives 
suitable for filing and recording may be developed. 
RUPA itself 
does not impose any requirement that statements be in writing. 
It is intended that the form or medium for filing and recording 
be left to the general law of adopting States. 
2. 
Section 105(a) provides for a single, central filing of 
all 
statements, 
as 
is 
the 
case 
with 
corporations, 
limited 
partnerships, and limited liability companies. 
The expectation 
is that most States will assign to the Secretary of State the 
responsibility of maintaining the filing system for partnership 
statements. 
Since a partnership is an entity under RUPA, 
all 
statements should be indexed by partnership name, 
not by the 
names of the individual partners. 
Partnerships transacting business in more than one State 
will want to file copies of statements in each State because 
sUbsection (a) limits the legal effect of filed statements to 
property located or transactions occurring within the S~~~~. 
The 
filing of a certified copy of a statement originally filed in 
another State is permitted, and indeed encouraged, in order to 
avoid 
inconsistencies 
between 
statements 
filed 
in 
different 
States. 
3. 
Subsection (b), in effect, mandates the use of certified 
copies of filed statements for local recording in the real estate 
records by limiting the legal effect of recorded statements under 
the Act to those copies. 
The reason for recording only certified 
copies of filed statements is to eliminate the possibility of 
inconsistencies affecting the title to real property. 
Subsection (c) requires that statements filed on behalf of a 
partnership, that is, the entity, be executed by at least two 
partners. 
Individual partners and other persons authorized by 
the Act to file a statement may execute it on their own behalf. 
To protect the partners and the partnership from unauthorized or 
improper filings, 
an individual who executes a statement as a 
partner must personally declare under penalty of perjury that the 
statement is accurate. 
The amendment or cancellation of statements is authorized by 
subsection (d). 
As 
a further safeguard against inaccurate or unauthorized 
filings, subsection (e) requires that a copy of every statement 
filed be sent to each partner, although the failure to do so does 
not limit the effectiveness of the statement. 
This requirement 
may, however, be eliminated in the partnership agreement. 
See 
Section 103(b)(1). 
Partners may also file a statement of denial 
under Section 304. 
4. 
A filed statement may be amended or canceled by any 
person authorized by the Act to file an original statement. 
The 
amendment or cancellation must state the name of the partnership 
so that it can be properly indexed and found, 
identify the 
statement being amended or canceled, and the substance of the 
amendment or cancellation. 
An amendment generally has the same 
operative effect as an original statement. 
A cancellation of 
extraordinary 
authority 
terminates 
that 
authority. 
A 
cancellation of a 
limitation on authority revives 
a 
previous 
grant of authority. 
See Section 303(d). 
The subsequent filing 
of a statement similar in kind to a statement already of record 
is treated as an amendment, 
even if not so denominated. 
Any 
substantive conflict between filed 
statements 
operates 
as 
a 
cancellation of authority under Section 303. 
§1006. 
Governing law 
1. 
Partnership. 
Except as otherwise provided in a filed 
statement, in a written partnership agreement or in subsection 2, 
the law of the jurisdiction in which a partnership has its chief 
executive office governs relations among the partners and between 
the partners and the partnership. 
2. 
Limited liabiliq partnership. 
The law of this State 
governs relations among the partners and between the partners and 
the partnership and the liability of partners for an obligation 
of a limited liability partnership. 
Comment 
(This is Section 106 of the Uniform Partnership Act (1997).) 
The subsection (a) 
internal relations rule is new. 
Cf. 
RULPA § 901 (internal affairs governed by law of State in which 
limited partnership organized). 
RUPA 
looks to the jurisdiction in which 
a partnership's 
chief executive office is located to provide the law governing 
the 
internal 
relations 
among 
the 
partners 
and 
between 
the 
partners and the partnership. 
The concept of the partnership's 
"chief executive office" is drawn from UCC Section 9103(3) (d). 
It was chosen in lieu of the State of organization because no 
filing is necessary to form a general partnership, and thus the 
si tus of its organization is not always clear, unlike a limited 
partnership, 
which 
is 
organized 
in 
the 
State 
where 
its 
certificate is filed. 
The term "chief executive office" is not defined in the Act, 
nor is it def ined in the UCC. 
Paragraph 
of the Off icial 
Comment to UCC Section 9l03(3)(d) explains: 
"Chief executive office" . . . means the place from which in 
fact 
the debtor manages 
the 
main part of his business 
operations. 
Doubt may arise as to which is the 
"chief executive office" of a multi-state enterprise, but it 
would 
be 
rare 
that 
there 
could 
be 
more 
than 
two 
possibilities. 
[The rule] will be simple to apply in 
most cases ... 
In the absence of any other clear rule for determining a 
partnership's legal situs, it seems convenient to use that 
rule for choice of law purposes as well. 
The choice-of-law rule provided by subsection (a) is only a 
default rule, and the partners may by agreement select the law of 
another 
State to 
govern their internal affairs, 
subject 
to 
generally applicable conflict of laws requirements. 
For example, 
where the partners may not resolve a particular issue by an 
explicit provlslon of the partnership agreement, 
such as the 
rights and duties set forth in Section 103(b), the law chosen 
will not be applied if the partners or the partnership have no 
substantial relationship to the chosen State or other reasonable 
basis for their choice or if application of the law of the chosen 
State would be contrary to a fundamental policy of a State that 
has a materially greater interest than the chosen State. 
See 
Restatement (Second) of Conflict of Laws § 187(2) (1971). 
The 
partners must, however, select only one State to govern their 
internal 
relations. 
They 
cannot 
select 
one 
State 
for 
some 
aspects of their internal relations and another State for others. 
Contrasted with the variable choice-of-law rule provided by 
subsection (a), the law of the State where a limited liability 
partnership files its statement of qualification applies to such 
a partnership and may not be varied by the agreement of the 
partners. 
See Section 103(b)(9). 
Also, a partnership that files 
a statement of qualification in another State is not defined as a 
limited 
liability 
partnership 
in 
this 
State. 
See 
Section 
101(5). 
Unlike a general partnership which may be formed without 
any filing, 
a partnership may only become a limited liability 
partnership by filing a statement of qualification. 
Therefore, 
the situs of its organization is clear. 
Because it is often 
unclear where 
a 
general partnership is actually formed, 
the 
decision to file a statement of qualification in a particular 
State constitutes 
a 
choice-of-law for 
the 
partnership which 
cannot be altered by the partnership agreement. 
See Comments to 
Section 103 (b) (9). 
If the partnership agreement of an existing 
partnership specifies the 
law of 
a 
particular State as its 
governing law, and the partnership thereafter files a statement 
of qualification in another State, 
the partnership agreement 
choice is no longer controlling. 
In such cases, the filing of a 
statement of qualification "amends" the partnership agreement on 
this 
limited 
matter. 
Accordingly, 
if 
a 
statement 
of 
qualification is revoked or canceled for 
a 
limited liability 
partnership, the law of the State of filing would continue to 
apply unless the partnership agreement thereafter altered the 
applicable law rule. 
§I007. 
Partnership subject to amendment or repeal of ch~ter 
A partnership governed by this chapter is subject to any 
amendment to or repeal of this chapter. 
• 
COl1'lllent 
(This is Section 107 of the Uniform Partnership Act (1997).) 
The reservation of power provision is new. 
It is adapted 
from Section 1.02 of the Revised Model Business Corporation Act 
(RMBCA) and Section 1106 of RULPA. 
As 
explained in the Official Comment to the 
RMBCA, 
the 
genesis of those provisions is Trustees of Dartmouth College v. 
Woodward, 
U.S. 
(4 Wheat) 
(1819), 
which held that the 
United States Constitution prohibits the application of newly 
enacted statutes to existing corporations, while suggesting the 
efficacy of a reservation of power provision. 
Its purpose is to 
avoid any possible argument that a legal entity created pursuant 
to statute or its members have a contractual or vested right in 
any specific statutory provision and to ensure that the State may 
in the future modify its enabling statute as it deems appropriate 
and require existing entities to comply with the statutes as 
modified. 
Sl008. 
Forms 
The Secretary of State may prescribe and furnish on reguest 
forms for any documents reguired or permitted to be filed by this 
chapter. If the Secretary of State so reguires, use of these 
forms is mandatory. 
Sl009. 
Filing, service and copying fees 
1. 
Filing fees. The following fees must be paid to the 
Secretary of State. 
A. 
For filing a statement of disassociation under section 
1074, the fee is $20; 
B. 
For filing a 
statement of dissolution under section 
1085, the fee is $75; 
C. 
For filing a statement of conversion under section 1092 
or 1093, the fee is $150; 
D. 
For filing a statement of merger under section 1095, the 
fee is $150; 
E. 
For any other statement reguired or permitted to be 
filed by this chapter, the fee is $35; and 
F. 
For preclearance of any statement for filing, the fee is 
llillL.. 
2. 
Process fee. 
The Secretary of State shall collect a fee 
of $20 each time process is served on the Secretary of State 
under this chapter. 
The party to a proceeding causing service of 
process is entitled to recover this fee as costs if that party 
prevails in the proceeding. 
3. 
Copying and certifying fees. 
The Secretary of State 
shall charge the following fees for copying and certifying the 
copy of any filed documents. 
A. 
For copying, the fee is $2 per page. 
B. 
For certifying the copy, the fee is $5. 
§1010. 
E.pedited service 
The Secretary of State may provide expedited service for the 
processing of documents in accordance with this chapter. 
The 
Secretary of State shall establish a fee schedule and adopt rules 
to set forth the procedures governing this expedited service. All 
fees collected as provided by this section must be deposited into 
a fund for use by the Secretary of State in providing improved 
filing service. 
§1011. 
Filing duty of Secretary of St~ 
1. 
Duty to fi1e. 
If a document delivered to the office of 
the Secretary of State for 
filing pursuant 
to this 
chapter 
satisfies the requirements of section 1005, 
the Secretary of 
State shall file the document. 
2. 
Recording as fi1ed: acknowledgment. 
The Secretary of 
State files a document pursuant to subsection 1 by recording it 
as filed on the date of receipt. After filing a document, the 
Secretary of 
State shall deliver to 
the partnership or its 
representative a copy of the document with an acknowledgment of 
the date of filing. 
3. 
Refusal to file: written e~lanation. 
If the Secretary 
of State refuses to file a document, the Secretary of State shall 
return it to the partnership or its representative within 5 days 
after the document was delivered, together with a brief, written 
explanation of the reason for the refusal. 
4. 
Ministerial. 
The Secretary of State's duty to file a 
document under this section is ministerial, and the filing or 
refusal to file a document does not: 
A. 
Affect the validity or invalidity of the document in 
whole or part; 
B. 
Relate 
to 
the 
correctness 
or 
incorrectness 
of 
information contained in the document; or 
C. 
Create 
a 
presump~ion that the document 
invalid or that information contained in the 
correct or incorrect. 
is valid or 
document is 
Sl012. 
Appeal Secretary of State's refusal to file document 
1. 
Commencing an appeal. 
If the Secretary of State refuses 
to file a document delivered to the Secretary of State's office 
for filing, the partnership within 30 days after the return of 
the dQC~ent ma~ppeal the refusal to the Superior Court of the 
county where the corporation's principal office is located or, if 
~e is not 
a 
principal office in this State. of Kennebec 
County. 
The 
appeal is commenced by petitioning the court to 
compel filing of the document and by attaching to the petition 
the document and the Secretary of State's explanation of the 
refusal to file. 
2. 
Court order. 
Upon the receipt of a petition filed under 
subsection I. the court may summarily order the Secretary of 
State to file a document or take other action the court considers 
appropriate. 
3. 
ApR~~rt's decision. 
The court's final decision may 
be appealed as in other civil proceedings. 
Sl013. 
Evidentiary effect of copy of filed document 
A certificate from the Secretary of State delivered with a 
copy of a document filed by the Secretary of State pursuant to 
section 1011 is conclusive evidence that the original document is 
on file with the Secretary of State. 
§l014. 
Penalty for signing false document 
A person commits a Class E crime if that person signs a 
document pursuant to this chapter knowing it is false in any 
material respect with intent that the document be delivered to 
the Secretary of State for filing. 
Sl015. 
Powers 
The Secretary of State has the power reasonably necessary to 
QS1rform the duties required of the Secretary of State by this 
chapter. including the power to make rules not inconsistent with 
this chapter. Rules adopted pursuant to this section are routine 
technical rules as defined in Title 5, chapter 375, subchapter 
2-A. 
§l016. 
Access to Secretary of State's database 
The Secretary of State may provide public access to the 
database of the Department of the Secretary of State through a 
dial-in modem, public terminals and electronic duplicates of the 
database. If access to the database is provided to the public, 
the Secretary of State may 
adopt 
rules 
to establish a 
fee 
~chedule and goyerni~ocedures. Rules adopted pursuant to this 
section are routine technical rules 
as 
defined in Title 
S, 
chapter 375, subchapter 2-A. 
~l017. Publications 
1. 
Informational publications. 
The Secretary of State may 
establish by rule a fee schedule to cover the cost of printing 
and distribution of publications and to set forth the procedures 
for the sale of these publications, Rules adopted pursuant to 
this subsection are routine technical rules as defined in Title 
5, chapter 375, subchapter 2-A. 
2. 
Funds: fees deposited. 
All fees collected pursuant to 
this section must be deposited in a fund for use by the Secretary 
of State for the purpose of replacing and updating publications 
offered in accordance 
with this Title 
and 
for 
funding 
new 
publications. 
SUBCHAPTER 2 
NATURE OF PARTNERSHIP 
Sl02l. 
Partnership as enti~ 
1. 
Distinct 
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distinct from its partners. 
2. 
Limited liability partnership. 
A limited liability 
partnership continues to be the same entity that existed before 
the filing of a statement of qualification under section 821. 
Comment 
(This is Section 201 of the Uniform Partnership Act (1997).) 
RUPA 
embraces the entity theory of the partnership. 
In 
light of the UPA'S ambivalence on the nature of partnerships, the 
explicit 
statement 
provided 
by 
subsection 
(a) 
is 
deemed 
.. 
• 
appropriate as an expression of the increased emphasis on the 
entity theory 
as 
the 
dominant 
model. 
But 
see 
Section 
(partners' liability joint and several unless the partnership has 
filed a statement of qualification to become a limited liability 
partnership) . 
Giving 
clear 
expression 
to 
the 
entity 
nature 
of 
a 
partnership is intended to allay previous concerns stemming from 
the aggregate theory, such as the necessity of a deed to convey 
title from the "old" partnership to the "new" partnership every 
time there is a change of cast among the partners. 
Under RUPA, 
there 
is 
no 
"new" 
partnership 
just 
because 
of 
membership 
changes. 
That will avoid the result in cases such as Fairway 
Development Co. v. Title Insurance Co., 621 F. Supp. 120 (N.D. 
Ohio 1985), which held that the "new" partnership resulting from 
a 
partner's death did not have standing to enforce 
a title 
insurance policy issued to the "old" partnership. 
Subsection (b) makes clear that the explicit entity theory 
provided by subsection (a) applies to a partnership both before 
and after it files 
a 
statement of qualification to become 
a 
limited liability partnership. 
Thus, just as there is no "new" 
partnership resulting from membership changes, the filing of a 
statement of qualification does not create a "new" partnership. 
The 
filing partnership continues 
to be 
the 
same 
partnership 
entity that existed before the filing. 
Similarly, the amendment 
or cancellation of a 
statement of qualification under Section 
105(d) or the revocation of a statement of qualification under 
Section 1003 (c) does not terminate the partnership and create a 
"new" 
partnership. 
See 
Section 
1003(d). 
Accordingly, 
a 
partnership 
remains 
the 
same entity regardless 
of 
a 
filing, 
cancellation, or revocation of a statement of qualification. 
§l022. 
Formation of partnership 
1. 
Formation o~~e~hip. Except as otherwise provided 
in subsection 2, the a~ciation of 2 or more persons to carryon 
as co-owners a business for profit forms a partnership, whether 
or not the persons intend to form a partnership. 
2. 
Not partnership. 
An association formed under a statute 
other than this chapter, a predecessor statute or a comparable 
statute of another jurisdiction is not a partnership under this 
chapter. 
3. 
Determination of 
formation: 
rules. 
In 
determining 
whether a partnership is formed, the following rules apply. 
A. 
Joint 
tenancy, 
tenancy 
in 
common. 
tenancy 
by 
the 
entireties. 
joint 
property. 
cOmmon 
property 
or 
part 
ownership does not by itself establish a partnership, eve!! 
if the co-owners 
share profits made 
by the use of the 
property. 
~. 
The 
sharing 
of 
gross 
returns 
does 
not 
by 
itself 
establish a partnership, even if the persons sharing them 
have a joint or cOlTlmon right or interest in property from 
which the returns are derived. 
C. 
A person who 
receives 
a 
share of the profits of a 
business is presumed to be a partner in the business, unless 
the profits were received in payment: 
(1) 
Of a debt by installments or otherwise: 
(2) 
For services as an independent contractor or of 
wages or other compensation to an employee; 
(3) 
Of rent; 
(4) 
Of 
an 
annuity 
or 
other 
retirement 
or health 
benefit to a beneficiary, representative or designee of 
a deceased or retired partner; 
(5) of interest or other charge on a loan, even if the 
amount 
of 
payment 
varies 
with 
the 
profits 
of 
the 
~iness, including a direct or indirect present or 
future 
ownership 
of 
the 
collateral, 
or 
rights 
to 
income, proceeds or increase in value derived from the 
collateral: or 
(6) 
For the sale of the goodwill of a business or 
other property by installments or otherwise. 
Comment 
(This is Section 202 of the Uniform Partnership Act (1997).) 
1. 
Section 
combines 
UPA 
Sections 
and 
7. 
The 
tradi tional UPA Section 6 (1) 
"def ini tion" of a partnership is 
recast as an operative rule of law. 
No substantive change in the 
law is intended. 
The UPA "definition" has always been understood 
as an operative rule, as well as a definition. 
The addition of 
the 
phrase, 
"whether 
or 
not 
the 
persons 
intend 
to 
form 
a 
partnership," merely codifies the universal judicial construction 
of 
UPA 
Section 
6(1) 
that 
a 
partnership is 
created 
by 
the 
association of persons whose intent is to carryon as co-owners a 
business for profit, regardless of their subjective intention to 
be 
"partners." 
Indeed, 
they 
may 
inadvertently 
create 
a 
. Page 33-LR1469(1) 
... 
partnership despite their expressed subjective intention not to 
do so. 
The new language alerts readers to this possibility. 
As 
under 
the 
UPA, 
the 
attribute 
of 
co-ownership 
distinguishes a partnership from a mere agency relationship. 
A 
business is a series of acts directed toward an end. 
Ownership 
involves the power of ultimate control. 
To state that partners 
are co-owners of a business is to state that they each have the 
power of ultimate control. 
See Official Comment to UPA § 6 (1) • 
On the other hand, 
as subsection (c) (1) 
makes clear, passive 
co-ownership of property by itself, as distinguished from the 
carrying on of a business, does not establish a partnership. 
2. 
Subsection 
(b) 
provides 
that 
business 
associations 
organized 
under 
other 
statutes 
are 
not 
partnerships. 
Those 
statutory 
associations 
include 
corporations, 
limited 
partnerships, 
and limited liability companies. 
That continues 
the UPA concept that general partnership is the residual form of 
for profit business association, existing only if another form 
does not. 
A 
limited partnership is 
not 
a 
partnership 
under 
this 
definition. 
Nevertheless, 
certain 
prov~s~ons 
of 
RUPA 
will 
continue to govern limited partnerships because RULPA itself, in 
Section 1105, 
so requires "in any case not provided for" 
in 
RULPA. 
For example, the rules applicable to a limited liability 
partnership will generally apply to limited partnerships. 
See 
Comment to Section 101(5) 
(definition of 
a 
limited liability 
partnership). 
In light of that RULPA Section 1105, UPA Section 
(2), which provides that limited partnerships are governed by 
the UPA, is redundant and has not been carried over to RUPA. 
It 
is 
also 
more 
appropriate 
that the applicability of 
RUPA 
to 
limited partnerships 
be 
governed 
exclusively 
by 
RULPA. 
For 
example, a RULPA amendment may clarify certain linkage questions 
regarding the application of the limited liability partnership 
rules to limited partnerships. 
See Comment to Section 101(5) for 
a suggested form of such an amendment. 
It is not intended that RUPA change any common law rules 
concerning 
special 
types 
of 
associations, 
such 
as 
m~n~ng 
partnerships, which in some jurisdictions are not governed by the 
UPA. 
Relationships 
that 
are 
called 
"joint 
ventures" 
are 
partnerships 
if 
they 
otherwise 
fit 
the 
definition 
of 
a 
partnership. 
An association is not classified as a partnership, 
however, simply because it is called a "joint venture." 
An 
unincorporated 
nonprofit 
organization 
partnership under 
RUPA, 
even if it qualifies as 
because it is not a "for profit" organization. 
is 
a 
not 
a 
business, 
3. 
Subsection (c) provides three rules of construction that 
apply in determining whether a partnership has been formed under 
subsection (a). 
They are largely derived from UPA Section 7, and 
to that extent no substantive change is intended. 
The sharing of 
profits is recast as a rebuttable presumption of a partnership, a 
more 
contemporary 
construction, 
rather 
than 
as 
prima 
facie 
evidence thereof. 
The protected categories, in which receipt of 
a share of the profits is not presumed to create a partnership, 
apply whether the profit share is a single flat percentage or a 
ratio which varies, for example, after reaching a dollar floor or 
different levels of profits. 
Like its predecessor, 
RUPA makes no attempt to answer in 
every 
case 
whether 
a 
partnership 
is 
formed. 
Whether 
a 
relationship is more properly characterized as that of borrower 
and lender, employer and employee, or landlord and tenant is left 
to the trier of fact. 
As under the UPA, a person may function in 
both partner and nonpartner capacities. 
Paragraph (3)(v) adds a new protected category to the list. 
It shields from the presumption a share of the profits received 
in payment of interest or other charges on a loan, "including a 
direct or indirect present or future ownership in the collateral, 
or rights to income, proceeds, or increase in value derived from 
the collateral." 
The quoted language is taken from Section 211 
of the Uniform Land Security Interest Act. 
The purpose of the 
new 
language 
is 
to 
protect 
shared-appreciation 
mortgages, 
contingent or other variable or performance-related mortgages, 
and other equity participation arrangements by clarifying that 
contingent 
payments 
do 
not 
presumptively 
convert 
lending 
arrangements into partnerships. 
4. 
Section 202 (e) of the 1993 Act stated that partnerships 
formed under RUPA are general partnerships and that the partners 
are 
general 
partners. 
That 
section 
has 
been 
deleted 
as 
unnecessary. 
Limited partners are not "partners" within the 
meaning of RUPA, however. 
§l023. 
partnership property 
Property acquired 
by 
a 
partnership is property of 
the 
partnership and not of the partners individually. 
Comment 
(This is Section 203 of the Uniform Partnership Act (1997).) 
All property acquired by 
a 
partnership, 
by transfer or 
otherwise, 
becomes 
partnership 
property 
and 
belongs 
to 
the 
partnership 
as 
an 
entity, 
rather 
than 
to 
the 
indi vidual 
partners. 
This expresses the substantive result of UPA Sections 
8(1) and 25. 
Nei ther UPA Section 8 (1) nor RUPA Section 203 provides any 
guidance 
concerning 
when 
property 
is 
"acquired 
by" 
the 
partnership. 
That problem is dealt with in Section 204. 
UPA Sections 25(2)(c) and (e) also provide that partnership 
property is not subject to exemptions, allowances, or rights of a 
partner's spouse, heirs, or next of kin. 
Those provisions have 
been omitted as unnecessary. 
No substantive change is intended. 
Those 
exemptions 
and 
rights 
inure 
to 
the 
property 
of 
the 
partners, and not to partnership property. 
§1024. 
When prQPerty is partnership property 
1. 
Partnership property. 
Property is partnership property 
if acquired in the name of: 
A. 
The partnership; or 
B. 
One 
or 
more 
partners 
with 
an 
indication 
in 
t~ 
instrument 
transferring 
title 
to 
the 
property 
of 
the 
p-erson's capacity as a partner or of the existence of a 
partnership but without an indication of the name of the 
partnership. 
2. 
Property acquired by partnership. 
Property is acquired 
in the name of the partnership by a transfer to: 
A. 
The partnership in its name; or 
B. 
One or more pill.t..ners in their capacity as partners in 
the partnership, if the name of the partnership is indicated 
in the instrument transferring title to the property. 
3. 
Presumed 
to 
be 
partnership 
property. 
Property 
is 
presumed to be partnership property if purchased with partnership 
assets, even if not acquired in the name of the partnership or of 
one 
or 
more 
partners 
with 
an 
indication in the 
instrument 
transferring title to the property of the person's capacity as a 
partner or of the existence of a partnership. 
4. 
PreS~<L-b!L_.1ieB_ri,).t.~rj)P.erty. 
Property acquired in 
the name of one or more of the partners, without an indication in 
the instrument transferring title to the property of the person's 
capacity as a partner or of the existence of a partnership and 
without use of partnership assets, is presumed to be separate 
property, even if used for partnership purposes. 
Comment 
(This is Section 204 of the Uniform Partnership Act (1997).) 
1. 
Section 204 sets forth the rules for determining when 
property is acquired by the partnership and, 
hence, 
becomes 
partnership property. 
It is based 
on 
UPA 
Section 8(3), 
as 
influenced by the recent Alabama and Georgia modifications. 
The 
rules govern the acquisition of personal property, as well as 
real property, that is held in the partnership name. 
See Section 
101(9). 
2. 
Subsection (a) 
governs the circumstances under which 
property 
becomes 
"partnership 
property," 
and 
subsection 
(b) 
clarifies the circumstances under which property is acquired "in 
the name of the partnership." 
The concept of record title is 
emphasized, 
although 
the 
term 
itself 
is 
not 
used. 
Titled 
personal property, as well as all transferable interests in real 
property acquired in the name of the partnership, are covered by 
this section. 
Property becomes partnership property if acquired (1) in the 
name of the partnership or (2) in the name of one or more of the 
partners with an indication in the instrument transferring title 
of either (i) their capacity as partners or (ii) of the existence 
of a partnership, even if the name of the partnership is not 
indicated. 
Property acquired "in the name of the partnership" 
includes property acquired in the name of one or more partners in 
their 
capacity 
as 
partners, 
but 
only 
if 
the 
name 
of 
the 
partnership is indicated in the instrument transferring title. 
Property transferred to a partner is partnership property, 
even though the name of the partnership is not indicated, if the 
instrument transferring title indicates either (i) the partner's 
capacity as a partner or (ii) the existence of a partnership. 
This is consonant with the entity theory of partnership and 
resolves the troublesome issue of a conveyance to fewer than all 
the 
partners 
but 
which 
nevertheless 
indicates 
their partner 
status. 
3. 
Ultimately, it is the intention of the partners that 
controls whether property belongs to the partnership or to one or 
more of the partners in their individual capacities, at least as 
among the partners themselves. 
RUPA sets forth two rebuttable 
,Page 37-LRI469(1) 
presumptions that apply when the partners have failed to express 
their intent. 
First, 
under 
subsection 
(c), 
property 
purchased 
with 
partnership 
funds 
is 
presumed 
to 
be 
partnership 
property, 
notwithstanding the name in which title is held. 
The presumption 
is intended to apply if partnership credit is used to obtain 
financing, as well as the use of partnership cash or property for 
payment. 
Unlike the rule in subsection (b), under which property 
is deemed to be partnership property if the partnership's name or 
the 
partner's 
capacity 
as 
a 
partner 
is 
disclosed 
in 
the 
instrument 
of 
conveyance, 
subsection 
(c) 
raises 
only 
a 
presumption that the property is partnership property if it is 
purchased with partnership assets. 
That presumption is also subject to an important caveat. 
Under Section 302(b), partnership property held in the name of 
individual partners, without an indication of their capacity as 
partners 
or 
of 
the 
existence 
of 
a 
partnership, 
that 
is 
transferred by the partners in whose name title is held to a 
purchaser without knowledge that it is partnership property is 
free of any claims of the partnership. 
Second, under subsection (d), property acquired in the name 
of one or more of the partners, without an indication of their 
capacity as partners and without use of partnership funds or 
credi t, is presumed to be the partners' separate property, even 
if used for partnership purposes. 
In effect, it is presumed in 
that case that only the use of the property is contributed to the 
partnership. 
4. 
Generally, 
under 
RUPA, 
partners 
and 
third 
parties 
dealing with partnerships will be able to rely on the record to 
determine whether property is owned by the partnership. 
The 
exception is property purchased with partnership funds without 
any reference to the partnership in the title documents. 
The 
inference 
concerning 
the 
partners' 
intent 
from 
the 
use 
of 
partnership funds outweighs any inference from the State of the 
title, subject to the overriding reliance interest in the case of 
a purchaser without notice of the partnership's interest. 
This 
allocation of risk should encourage the partnership to eliminate 
doubt about ownership by putting title in the partnership. 
5. 
UPA Section 8 (4) provides, "A transfer to a partnership 
in the partnership 
name, 
even without words 
of 
inheritance, 
passes the entire estate or interest of the grantor unless a 
contrary intent appears." 
It has 
been omitted from 
RUPA 
as 
unnecessary because modern conveyancing law deems all transfers 
to pass the entire estate or interest of the grantor unless a 
contrary intent appears. 
SUBCHAPTER 3 
BELATIJ>NS OF PART.matS TO 
PERSONS DEALING WITH PARTNERSHIP 
S1031. 
Partner agent of partnership 
1. 
Partner as agent. 
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 pellJLn wi th wh~the partner was dealing knew or 
had received a notification that the partner lacked authority. 
2. 
Other act binding on partnership if authorized. 
An act 
of 
a partner that is 
no_~parentJ.y 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. 
Comment 
(This is Section 301 of the Uniform Partnership Act (1997).) 
1. 
Section 301 sets forth a partner's power, as an agent of 
the firm, to bind the partnership entity to third parties. 
The 
rights of the partners among themselves, including the right to 
restrict a partner's authority, are governed by the partnership 
agreement and by Section 401. 
The agency rules set forth in Section 301 are subject to an 
important qualification. 
They may be affected by the filing or 
recording of a 
statement of partnership authority. 
The legal 
effect 
of 
filing 
or 
recording 
a 
statement 
of 
partnership 
authority is set forth in Section 303. 
2. 
Section 301(1) retains the basic principles reflected in 
UPA Section 9 (1) • 
It declares that each partner is an agent of 
the partnership and that, by virtue of partnership status, each 
partner 
has 
apparent 
authority 
to 
bind 
the 
partnership 
in 
ordinary course transactions. 
The effect of Section 301(1) is to 
characterize a partner as a general managerial agent having both 
actual and apparent authority co-extensive in scope with the 
.Page 39-LR1469(1) 
.. 
firm's ordinary business, at least in the absence of a contrary 
partnership agreement. 
Section 301( 1) effects two changes from UPA Section 9( 1). 
First, it clarifies that a partner's apparent authority includes 
acts for carrying on in the ordinary course "business of the kind 
carried on by the partnership," not just the business of the 
particular partnership in question. 
The UPA is ambiguous on this 
point, but there is some authority for an expanded construction 
in accordance with the so-called English rule. 
See, e.g., Burns 
v. Gonzalez, 439 S.W.2d 128, 131 (Tex. Civ. App. 1969) (dictum); 
Commercial Hotel Co. 
v. 
Weeks, 
S.W. 
(Tex. 
Civ. 
App. 
1923). 
No substantive change is intended by use of the more 
customary phrase "carrying on in the ordinary course" in lieu of 
the UPA phrase "in the usual way." 
The UPA and the case law use 
both terms without apparent distinction. 
The other change from the UPA concerns the allocation of 
risk of a partner's lack of authority. 
RUPA 
draws the line 
somewhat differently from the UPA. 
Under UPA Section 9(1) and (4), only a person with knowledge 
of 
a 
restriction on 
a 
partner's authority is bound 
by it. 
Section 
301(1) 
provides 
that 
a 
person 
who 
has 
received 
a 
notification of a partner's lack of authority is also bound. 
The 
meaning of "receives a notification" is explained in Section 
102(d). 
Thus, 
the 
partnership 
may 
protect 
itself 
from 
unauthorized acts by giving a notification of a restriction on a 
partner's authority to a person dealing with that partner. 
A 
notification may be effective upon delivery, whether or not it 
actually comes to the other person's attention. 
To that extent, 
the risk of lack of authority is shifted to those dealing with 
partners. 
On the other hand, as used in the UPA, the term "knowledge" 
embodies the concept of "bad faith" knowledge arising from other 
known facts. 
As used in RUPA, however, "knowledge" is limited to 
actual 
knowledge. 
See 
Section 102(a). 
Thus, 
RUPA 
does 
not 
expose persons dealing with a partner to the greater risk of 
being bound by a restriction based on their purported reason to 
know of the partner' s lack of authority from all the facts they 
did know. 
Compare Section 102(b)(3) (notice). 
With one exception, this result is not affected even if the 
partnership files a statement of partnership authority containing 
a 
limitation on 
a partner's authority. 
Section 303(f) 
makes 
clear that a person dealing with a partner is not deemed to know 
of such a limitation merely because it is contained in a filed 
statement 
of 
authority. 
Under 
Section 
303(e), 
however, 
all 
persons are deemed to know of a limitation on the authority of a 
partner 
to 
transfer 
real 
property 
contained 
in 
a 
statement. 
Thus, a recorded limitation on authority 
real 
property 
constitutes 
constructive 
knowledge 
limitation to the whole world. 
recorded 
concerning 
of 
the 
3. 
Section 301(2) is drawn directly from UPA Section 9(2), 
with conforming changes to mirror the new language of subsection 
(1). 
Subsection (2) makes it clear that the partnership is bound 
by a partner I s 
actual authority, 
even if the partner has 
no 
apparent 
authority. 
Section 
(j) 
requires 
the 
unanimous 
consent of the partners for a grant of authority outside the 
ordinary course of business, 
unless the partnership agreement 
provides 
otherwise. 
Under 
general 
agency 
principles, 
the 
partners can subsequently ratify a partner I s 
unauthorized act. 
See Section 104(a). 
4. 
UPA Section 9 (3) contains a list of five extraordinary 
acts that require unanimous consent of the partners before the 
partnership is bound. 
RUPA omits that section. 
That leaves it 
to the courts to decide the outer limits of the agency power of a 
partner. 
Most of the acts listed in UPA Section 9 (3) probably 
remain outside the apparent authority of a partner under RUPA, 
such 
as 
disposing 
of 
the 
goodwill 
of 
the 
business, 
but 
elimination of a statutory rule will afford more flexibility in 
some situations specified in UPA Section 9(3). 
In particular, it 
seems archaic that the submission of 
a 
partnership claim to 
arbitration always requires unanimous consent. 
See UPA § 9(3)(e). 
5. 
Section 301(1) fully reflects the principle embodied in 
UPA Section 9(4) that the partnership is not bound by an act of a 
partner in contravention of a restriction on his authority known 
to the other party. 
Sl032. 
Transfer of partnership prQPerty 
1.. 
Transfer of partnership property. 
Partnership property 
may be transferred as follows. 
A. 
Partnership property held in the name of the partnership 
may be transferred by an instrument of transfer executed by 
a partner in the partnership name. 
B. 
Partnership property held in the name of one or more 
partners with an indication in the instrument transferring 
the property to those partners of their capacity as partners 
or 
of 
the 
existence 
of 
a 
partnership, 
but without 
an 
indication 
of 
the 
name 
of 
the 
partnership. 
may 
be 
,Page 41-LR1469(1) 
.. 
• 
transferred by an instrument of transfer executed by the 
persons in whose name the property is held. 
C. 
Partnership property held in the name of one or more 
persons other than the partnership, without an indication in 
the instrument transferring the property to those persons of 
their 
capacity 
as 
partners 
or 
of 
the 
existence 
of 
a 
partnership, may be transferred by an instrument of transfer 
executed by the persons in whose name the property is held. 
2. 
Recovery of property from transferee. 
A partnership may 
recover 
partnership property 
from 
a 
transferee 
only if the 
partnership proves that execution of the instrument of initial 
transfer did not bind the partnership under section 1031 and: 
A. 
As 
to 
a 
subsequent 
transferee 
who 
gave 
value 
for 
property transferred under subsection L 
paragraph A or B, 
proves that the subsequent transferee knew or had received a 
notification that the person who executed the instrument of 
initial transfer lacked authority to bind the partnership; or 
S. 
As 
to 
a 
transferee 
who 
gave 
value 
for 
property 
transferred under subsection 1, paragraph C, proves that the 
transferee 
knew or had received a notification that the 
property was partnership property and that the person who 
executed the instrument of initial transfer lacked authority 
to bind the partnership. 
3. 
No recovery. 
A partnership may not recover partnership 
P-L0-l:liUty from a 
subse!;lJ,i.ent transferee if the partnership would 
not have been entitled to recover the property, under subsection 
2, from any earlier transferee of the property. 
4. 
All partners' ipterests in one person. 
If a person 
holds all of the partners' interests in the partnership, all of 
the partnership property vests in that person. 
The person may 
execute a document in the name of the partnership to evidence 
vesting of the property in that person and may file or record the 
document. 
Comment 
(This is Section 302 of the Uniform Partnership Act (1997).) 
1. 
Section 302 replaces UPA Section 10 and provides rules 
for 
the transfer and 
recovery of partnership property. 
The 
language is adapted in part from Section 14810 of the Georgia 
partnership statute. 
2. 
Subsection (a)(l) deals with the transfer of partnership 
property held in the 
name 
of the partnership and subsection 
(a)(2) with property held in the name of one or more of the 
partners with an indication either of their capacity as partners 
or of the existence of a partnership. 
Subsection (a) (3) deals 
with partnership property held in the name of one or more of the 
partners without an indication of their capacity as partners or 
of the existence of a partnership. 
Like the general agency rules 
in Section 301, the power of a partner to transfer partnership 
property under subsection (a) (1) is subject to the effect under 
Section 
of 
the 
filing 
or 
recording 
of 
a 
statement 
of 
partnership 
authority. 
These 
rules 
are 
intended 
to 
foster 
reliance on record title. 
UPA 
Section 10 
covers only real property. 
Section 302, 
however, 
also 
governs 
the 
transfer 
of 
partnership 
personal 
property acquired by instrument and held in the 
name of the 
partnership or one or more of the partners. 
3. 
Subsection (b) deals with the right of the partnership 
to recover partnership property transferred by a partner without 
authority. 
Subsection (b)(l) deals with the recovery of property 
held in either the name of the partnership or the name of one or 
more of the partners with an indication of their capacity as 
partners or of the existence of a partnership, while subsection 
(b)(2) deals with the recovery of property held in the name of 
one or more persons without an indication of their capacity as 
partners or of the existence of a partnership. 
In either case, 
a transfer of partnership property may be 
avoided only if the partnership proves that it was not bound 
under Section 301 by the execution of the instrument of initial 
transfer. 
Under 
Section 301, 
the partnership is bound by 
a 
transfer 
in 
the 
ordinary 
course 
of 
business, 
unless 
the 
transferee actually knew or had received a notification of the 
partner's lack of authority. 
See Section 102(a) and (d). 
The 
reference to Section 301, rather than Section 301(1), is intended 
to clarify that a partner's actual authority is not revoked by 
Section 302. 
Compare UPA § 10(1) (refers to partner's authority 
under Section 9(1». 
The burden of proof is on the partnership to prove the 
partner's lack of authority and, 
in the case of a 
subsequent 
transferee, the transferee's knowledge or notification thereof. 
Thus, even if the transfer to the initial transferee could be 
avoided, 
the partnership may not recover the property from 
a 
subsequent purchaser or other transferee for value unless it also 
proves that the subsequent transferee knew or had received a 
notification of the partner's lack of authority with respect to 
the initial transfer. 
Since knowledge is required, rather than 
• 
.. 
notice, 
a 
remote purchaser 
authority for the initial 
partnership property. 
has no duty to inquire as 
transfer, 
even if he 
knows 
to 
it 
the 
was 
The burden of proof is on the transferee to show that value 
was given. 
Value, as used in this context, is synonymous with 
valuable consideration and means any consideration sufficient to 
support a simple contract. 
The burden of proof on all other issues is allocated to the 
partnership because it is generally in a better position than the 
transferee to produce the evidence. 
Moreover, 
the partnership 
may protect itself against unauthorized transfers by ensuring 
that partnership real property is held in the 
name 
of 
the 
partnership and that a 
statement of partnership authority is 
recorded specifying any limitations on the partners' authority to 
convey real property. 
Under Section 303(e), transferees of real 
property held in the partnership name are conclusively bound by 
those limitations. 
On the other hand, transferees can protect 
themselves by insisting that the partnership record a statement 
specifying who is authorized to transfer partnership property. 
Under 
Section 
303(d), 
transferees 
for 
value, 
without 
actual 
knowledge to the contrary, may rely on that grant of authority. 
4. 
Subsection 
(b) (2) 
replaces 
UPA 
Section 
(3) 
and 
provides that partners who hold partnership property in their own 
names, without an indication in the record of their capacity as 
partners or of the existence of a partnership, may transfer good 
title 
to 
a 
transferee 
for 
value 
without 
knowledge 
or 
a 
noti f ication that it was partnership property. 
To recover the 
property under this subsection, the partnership has the burden of 
proving that the transferee knew or had received a notification 
of the partnership's interest in the property, as well as of the 
partner's lack of authority for the initial transfer. 
5. 
Subsection (c) is new and provides that property may not 
be recovered by the partnership from a remote transferee if any 
intermediate transferee of 
the property would 
have prevailed 
against the partnership. 
Cf. Uniform Fraudulent Transfer Act, §§ 
(a) (subsequent transferee from bona fide purchaser protected), 
( b ) ( 2) (s ame ) . 
6. 
Subsection 
(d) 
is 
new. 
The 
UPA 
does 
not 
have 
a 
provision 
dealing 
with 
the 
situation 
in 
which 
all 
of 
the 
partners' interests in the partnership are held by one person, 
such as 
a 
surviving partner or a purchaser of all the other 
partners' 
interests. 
Subsection 
(d) 
allows 
for 
clear record 
title, 
even 
though 
the 
partnership 
no 
longer 
exists 
as 
a 
technical 
matter. 
When 
a 
partnership 
becomes 
a 
sole 
proprietorship by reason of the dissociation of all but one of 
the partners, title vests in the remaining "partner," although 
there is no "transfer" of the property. 
The remal.nl.ng "partner" 
may execute a deed or other transfer of record in the name of the 
non-existent partnership to evidence vesting of the property in 
that person's individual capacity. 
7. 
UPA Section 10 (2) provides that, where title to real 
property is in the partnership name, a conveyance by a partner in 
his own name transfers the partnership's equitable interest in 
the property. 
It has been omitted as was done in Georgia and 
Florida. 
In this situation, the conveyance is clearly outside 
the chain of title and so should not pass title or any interest 
in the property. 
UPA Section 10(2) dilutes, albeit slightly, the 
effect of 
record title and is, 
therefore, 
inconsistent with 
RUPA's broad policy of fostering reliance on the record. 
UPA Section 10(4) and (5) have also been omitted. 
situations are now adequately covered by Section 302(a). 
Those 
SI033. 
Partnership liable for partner's actionable conduct 
1. 
Partnership liable for loss, 
injury or penalty. 
A 
partnership is liable for loss or injury caused to a person, or 
for 
a 
penalty incurred, 
as 
a 
result of 
a 
wrongful 
act or 
omission, or other actionable conduct, of a partner acting in the 
ordinary course of business of the partnership or with authority 
of the partnership. 
2. 
Partnership liable for misapplication. 
If, 
in the 
course 
of 
the 
partnership's 
business 
or 
while 
acting 
with 
authority of the partnership, a partner receives or causes the 
partnership to receive money or property of 
a 
person not 
a 
partner. and the money or property is misapplied by a partner, 
the partnership is liable for the loss. 
Conanent 
(This is Section 305 of the Uniform Partnership Act (1997).) 
Section 
305(a), 
which 
is 
derived 
from 
UPA 
Section 
13, 
imposes liability on the partnership for the wrongful acts of a 
partner 
acting in the 
ordinary 
course 
of 
the 
partnership's 
business or otherwise within the partner's authority. 
The scope 
of the section has been expanded by deleting from UPA Section 13, 
"not being a partner in the partnership." 
This is intended to 
permit a partner to sue the partnership on a tort or other theory 
during the term of the partnership, rather than being limited to 
the remedies of dissolution and an accounting. 
See also Comment 
to Section 405. 
. Page 45-LR1469(1) 
• 
The section has also been broadened to cover no-fault torts 
by the addition of the phrase, "or other actionable conduct." 
The partnership is liable for the actionable conduct or 
omission of 
a 
partner acting in the ordinary course of its 
business or "with the authority of the partnership." 
This is 
intended to include a partner's apparent, 
as well as actual, 
authority, thereby bringing within Section 305(a) the situation 
covered in UPA Section 14(a). 
The phrase in UPA Section 13, "to the same extent as the 
partner so acting or omitting to act," has been deleted to 
prevent a partnership from asserting a partner's immunity from 
liability. 
This is consistent with the general agency rule that 
a 
principal is not entitled to its agent's immunities. 
See 
Restatement (Second) of Agency § 217(b) (1957). 
The deletion is 
not intended to limit a partnership's contractual rights. 
Section 305(b) is drawn from UPA Section 14(b), but has been 
edited to improve clarity. 
It imposes strict liability on the 
partnership for the misapplication of money or property received 
by 
a partner in the course of the partnership's business or 
otherwise within the scope of the partner's actual authority. 
§l034. 
Partner's liability 
1. 
Jointly 
an~~~rally liable. 
Except 
as 
otherwi~ 
provided in subsections 2 and 3, all partners are liable jointly 
and severally for all obligations of 
the partnership unless 
Qtherwise agreed by the claimant or provided by law. 
2. 
Not 
~ersonally 
liable 
for 
Qbligation 
~rior 
to 
admission. 
b. 
person admitted as 
a 
partngr intQ 
an exi§ting 
pgrtnership 
is 
not 
personally 
liable 
fQr 
any 
partngr§hip 
obligation incurred before thg person's admi§siQn a§ a partngr. 
3. 
Obligation 
incurred 
while 
limited 
liability 
~artnershi~. 
An obligation of a I?artngr§hip incurred while the 
partnership is a limited liability partnership, whether arising 
in contract. tort or otherwisg, is solgly thg Qbligation Qf thg 
partnership. 
A partner is not pgrsQnally liable, dirgctly Qr 
indirectly, 
by way of contribution or othgrwi§g, 
for §uch an 
obligation solely by reason of being or so acting as a partner. 
This subsection applies notwithstandipg anything incQnsi§tgnt in 
the partnership agreement that existed immediatgly bgforg thg 
vote required to become a 
limited liability partner§hip undgr 
section 821, 
subsection~ 
4. 
Exce~tiQns tQ limited liability Qf shareholders. 
Thg 
exceptions 
under 
common 
law 
tQ 
a 
limitgd 
liability 
Qf 
shareholders of a business corporation organized under the Maine 
Business 
Corporation 
Act 
and 
shareholders 
of 
a 
professional 
corporation 
organized 
under 
the 
Maine 
Professional 
Service 
Corporation Act apply to the limited liability of partners in a 
professional limited liability partnership. 
Comment 
(This is Section 306 of the Uniform Partnership Act (1997).) 
1. 
Section 306 (a) changes the UPA rule by imposing joint 
and 
several 
liability 
on 
the 
partners 
for 
all 
partnership 
obligations where the partnership is not a 
limited liability 
partnership. 
Under UPA Section 15, partners' liability for torts 
is joint and several, while their liability for contracts is 
joint but not several. 
About ten States that have adopted the 
UPA already provide for joint and several liability. 
The UPA 
reference to "debts and obligations" is redundant, and no change 
is intended by RUPA's reference solely to "obligations." 
Joint and several liability under 
RUPA differs, however, 
from the classic model, 
which permits a 
judgment creditor to 
proceed immediately against any of the joint and several judgment 
debtors. 
Generally, 
Section 
307(d) 
requires 
the 
judgment 
creditor to exhaust the partnership's assets before enforcing a 
judgment against the separate assets of a partner. 
2. 
RUPA continues the UPA scheme of liability with respect 
to an incoming partner, but states the rule more clearly and 
simply. 
Under 
Section 
306(a), 
an 
incoming 
partner 
becomes 
jointly and severally liable, as a partner, for all partnership 
obligations, 
except as 
otherwise provided in subsection 
(b). 
That 
subsection 
eliminates 
an 
incoming 
partner's 
personal 
liabili ty 
for 
partnership 
obligations 
incurred 
before 
his 
admission as a partner. 
In effect, a new partner has no personal 
liability to existing creditors of the partnership, and only his 
investment in the 
firm is at risk for 
the satisfaction of 
existing partnership debts. 
That is presently the rule under UPA 
Sections 17 and 41(7), and no substantive change is intended. 
As 
under the UPA, 
a new partner's personal assets are at risk with 
respect to partnership liabilities incurred after his admission 
as a partner. 
3. 
Subsection 
(c) 
alters 
classic 
joint 
and 
several 
liability of general partners for obligations of a partnership 
that is a limited liability partnership. 
Like shareholders of a 
corporation and members of a limited liability company, partners 
of a limited liability partnership are not personally liable for 
partnership obligations incurred while the partnership liability 
shield is in place solely because they are partners. 
As with 
.Page 47-LR1469(1) 
• 
shareholders of a corporation and members of a limited liability 
company, 
partners remain personally liable for their personal 
misconduct. 
In cases of partner misconduct, Section 401(c) sets forth a 
partnership's obligation to indemnify the culpable partner where 
the partner's liability was incurred in the ordinary course of 
the partnership's business. 
When 
indemnification occurs, 
the 
assets of both the partnership and the culpable partner are 
available to a creditor. 
However, Sections 306(c), 401(b), and 
(b) 
make clear that a partner who is not otherwise liable 
under Section 306(c) is not obligated to contribute assets to the 
partnership in excess of agreed contributions to share the loss 
with the culpable partner. 
(See Comments to Sections 401(b) and 
(b). regarding a slight variation in the context of priority 
of payment of partnership obligations.) 
Accordingly, 
Section 
(c) makes clear that an innocent partner is not personally 
liable 
for 
specified 
partnership 
obligations, 
directly 
or 
indirectly, by way of contribution or otherwise. 
Although the liability shield protections of Section 306(c) 
may be modified in part or in full in a partnership agreement 
(and by way of private contractual guarantees), the modifications 
must 
constitute 
an 
intentional 
waiver 
of 
the 
liability 
protections. 
See Sections 103(b), 104(a), and 902(b). 
Since the 
mere act of filing a 
statement of qualification reflects the 
assumption that the partners intend to modify the otherwise 
applicable 
partner 
liability 
rules, 
the 
final 
sentence 
of 
subsection (c) makes clear that the filing negates inconsistent 
aspects of the partnership agreement that existed immediately 
before 
the 
vote 
to 
approve 
becoming 
a 
limited 
liability 
partnership. 
The negation only applies to a partner's personal 
liability for future partnership obligations. 
The filing however 
has no effect as to previously created partner obligations to the 
partnership 
in 
the 
form 
of 
specific 
capital 
contribution 
requirements. 
Inter se contribution agreements may erode part or all of 
the effects of the liability shield. 
For example, Section 807(f) 
provides that an assignee for the benefit of creditors of a 
partnership or a partner may enforce a partner's obligation to 
contribute to the partnership. 
The 
ultimate effect of 
such 
contribution 
obligations 
may 
make 
each 
partner 
jointly 
and 
severally liable for all partnership obligations 
even those 
incurred 
while 
the 
partnership 
is 
a 
limited 
liability 
partnership. 
Although 
the 
final 
sentence 
of 
subsection 
(c) 
negates 
such 
provlslons 
existing 
before 
a 
statement 
of 
qualification is filed, it will have no effect on any amendments 
to the partnership agreement after the statement is filed. 
The connection between partner status and personal liability 
for partnership obligations is severed only with respect to 
obligations incurred while the partnership is a limited liability 
partnership. 
Partnership 
obligations 
incurred 
before 
a 
partnership becomes a limited liability partnership or incurred 
after limited liability partnership status is revoked or canceled 
are treated as obligations of 
an ordinary partnership. 
See 
Sections 
1001 
(filing) , 
1003 
(revocation) , 
and 
1006 
(cancellation). 
Obligations incurred by a partnership during the 
period when its statement of qualification is administratively 
revoked will be considered as incurred by a limited liability 
partnership 
provided 
the 
partnership' s 
status 
as 
such 
is 
reinstated wi thin two years under Section 1003 (e) • 
See Section 
1003(0. 
When an obligation is incurred is determined by other law. 
See Section 104(a). 
Under that law, and for the limited purpose 
of 
determining 
when 
partnership 
contract 
obligations 
are 
incurred, 
the 
reasonable 
expectations 
of 
creditors 
and 
the 
partners are paramount. 
Therefore, partnership obligations under 
or relating to a note, contract, or other agreement generally are 
incurred when the note, contract, or other agreement is made. 
Also, 
an amendment, 
modification, 
extension, 
or renewal of a 
note, contract, or other agreement should not affect or otherwise 
reset 
the 
time 
at which 
a 
partnership obligation under 
or 
relating to that note, contract, or other agreement is incurred, 
even as to a claim that relates to the subject matter of the 
amendment, 
modification, 
extension, 
or 
renewal. 
A 
note, 
contract, or other agreement may expressly modify these rules and 
fix the time a partnership obligation is incurred thereunder. 
For the limited purpose of determining when partnership tort 
obligations 
are 
incurred, 
a 
distinction is 
intended 
between 
injury and the conduct causing that injury. 
The purpose of the 
distinction 
is 
to 
prevent 
unjust 
results. 
Partnership 
obligations under or relating to a tort generally are incurred 
when the tort conduct occurs rather than at the time of the 
actual injury or harm. 
This interpretation prevents a culpable 
partnership from engaging in wrongful conduct and then filing a 
statement of qualification to sever the vicarious responsibility 
of its partners for future injury or harm caused by conduct that 
occurred prior to the filing. 
§1035. 
Actions by and against partnership and partners 
1. 
Sue and be sued. 
A partnership may sue and be sued in 
the name of the partnership. 
2. 
Action against partnership and partners. 
An action may 
be 
brought 
against 
the 
partnership 
and, 
to 
the 
extent 
not 
.Page 49-LR1469(1) 
inconsistent with section 1034, any or all of the partners in the 
same action or in separate actions. 
3. 
Judgment 
agains~artnership; partner. 
A 
judgment 
against a 
partnershJ-P------is not by itself a 
judgment against a 
partner. 
A judgment against a partnership may not be satisfied 
from a partner's assets unless there is also a judgment against 
the partner. 
4. 
Execution 
against 
assets 
of 
partner. 
A 
judgment 
creditor of a partner may not levy execution against the assets 
of the partner to satisfy a judgment based on a claim against the 
partnership unless the partner is personally liable for the claim 
under section 1034 and: 
A. 
A judgment based on the same claim has been obtained 
against the partnership and a writ of execution on the 
judgment has been returned unsatisfied in whole or in part; 
B. 
The partnership is a debtor in bankruptcy; 
c. 
The 
partner has 
agreed that the creditor 
need 
not 
exhaust partnership assets; 
D. 
A court grants permission to the judgment creditor to 
levy execution against the assets of a partner based on a 
finding that partnership assets subject to execution are 
clearly 
insufficient 
to 
satisfy 
the 
judgment, 
that 
exhaustion of partnership assets is excessively burdensome 
or that the grant of permission is an appropriate exercise 
of the court's equitable powers; or 
E. 
Liability is imposed on the partner by law or contract 
independent of the existence of the partnership. 
5. 
Applic~tion to 
partJ;J,~:r.s4ip liability or 
obliga~n. 
This section applies to any partnership liability or obligation 
resulting from a representation by a partner or purported partner 
under section 1036. 
Comment 
(This is Section 307 of the Uniform Partnership Act (1997).) 
1. 
Section 307 is new. 
Subsection (a) provides that a 
partnership may sue and be sued in the partnership name. 
That 
entity approach is designed to simplify suits by and against a 
partnership. 
At common law, 
a partnership, not being a legal entity, 
could not sue or be sued in the firm name. 
The UPA itself is 
silent on this point, 
so in the absence of another enabling 
statute, it is generally necessary to join all the partners in an 
action against the partnership. 
Most States have statutes or rules authorizing partnerships 
to sue or be 
sued in the partnership name. 
Many of those 
statutes, however, are found in the state provisions dealing with 
civil procedure rather than in the partnership act. 
2. 
Subsection 
(b) 
provides that suit generally may 
be 
brought against the partnership and any or all of the partners in 
the 
same action or in separate actions. 
It is intended to 
clarify that the partners need not be named in an action against 
the 
partnership. 
In 
particular, 
in 
an 
action 
against 
a 
partnership, it is not necessary to name a partner individually 
in addition to the partnership. 
This will simplify and reduce 
the cost of litigation, especially in cases of small claims where 
there are known to be significant partnership assets and thus no 
necessity to collect the judgment out of the partners' assets. 
Where the partnership is a limited liability partnership, 
the limited liability partnership rules clarify that a partner 
not liable for the alleged partnership obligation may not be 
named in the action against the partnership unless the action 
also seeks to establish personal liability of the partner for the 
obligation. 
See subsections (b) and (d). 
3. 
Subsection (c) 
provides that a 
judgment against the 
partnership is not, 
standing alone, 
a 
judgment 
against 
the 
partners, and it cannot be satisfied from a partner's personal 
assets unless there is a judgment against the partner. 
Thus, a 
partner must be individually named and served, either in the 
action against the partnership or in a later suit, before his 
personal assets may be subject to levy for a claim against the 
partnership. 
RUPA leaves it to the law of judgments, as did the UPA, to 
determine the collateral effects to be accorded a prior judgment 
for or against the partnership in a subsequent action against a 
partner individually. 
See Section 60 of the Second Restatement 
of Judgments (1982) and the Comments thereto. 
4. 
Subsection (d) requires partnership creditors to exhaust 
the partnership's assets before levying on a 
judgment debtor 
partner's individual property where the partner is personally 
liable for the partnership obligation under Section 306. 
That 
rule respects the concept of the partnership as an entity and 
makes partners more in the nature of guarantors than principal 
.Page 51-LR1469(1) 
• 
debtors on every partnership debt. 
It is already the law in some 
States. 
As a general rule, a final judgment against a partner cannot 
be enforced by a creditor against the partner's separate assets 
unless 
a 
writ of execution against the partnership has been 
returned unsatisfied. 
Under subsection (d), however, a creditor 
may proceed directly against the partner's assets if (i) the 
partnership is a debtor in bankruptcy (see Section 101(2»; (ii) 
the partner has consented; or (iii) the liability is imposed on 
the partner independently of the partnership. 
For example, 
a 
judgment creditor may proceed directly against the assets of a 
partner who is liable independently as the primary tortfeasor, 
but 
must 
exhaust 
the 
partnership's 
assets 
before 
proceeding 
against the separate assets of the other partners who are liable 
only as partners. 
There is also a judicial override provision in subsection 
(d)(4). 
A court may authorize execution against the partner's 
assets on the grounds that (i) 
the partnership's assets are 
clearly insufficient; (ii) exhaustion of the partnership's assets 
would 
be 
excessively 
burdensome; 
or 
(iii) it is 
otherwise 
equitable to do so. 
For example, if the partners who are parties 
to the action have assets located in the forum State, but the 
partnership does not, a court might find that exhaustion of the 
partnership's assets would be excessively burdensome. 
5. 
Although 
subsection 
(d) 
is silent with 
respect 
to 
pre-judgment remedies, the law of pre-jUdgment remedies already 
adequately embodies the principle that partnership assets should 
be exhausted before partners' assets are attached or garnished. 
Attachment, for example, typically requires a showing that the 
partnership's 
assets 
are 
being 
secreted 
or 
fraudulently 
transferred 
or 
are 
otherwise 
inadequate 
to 
satisfy 
the 
plaintiff's claim. 
A showing of some exigent circumstance may 
also be required to satisfy due process. 
See Connecticut v. 
Doehr, 501 U.S. 1, 16 (1991). 
6. 
Subsection 
(e) 
clarifies 
that 
actions 
against 
the 
partnership 
under 
Section 
308, 
involving 
representations 
by 
partners or purported partners, are subject to Section 307. 
§l036. 
Liability of purported partner 
1. 
Liability of purported partner. 
If a person, by words 
Q_r 
conduct, 
purports to be 
a 
partner, 
or consents to being 
represented by another as a partner, in a partnership or with on~ 
or more persons not partners, the purported partner is liable to 
a person to whom the representation is made, if that pe~ 
relying on the representation, enters into a transaction with the 
actual or purported partnership. 
If the representation, either 
by the purported partner or by 
~erson with the purported 
partner's consent. is made in a public manner, 
the purported 
partner is liable to 
a person who relies upon the purported 
partnership even if the purported partner is not aware of being 
held out as a partner to the claimant. 
If partnership li.a,hllity 
~sults, the purported P9rtner is liable with respect to that 
liability as if the purported partner were a partner. 
If no 
partnership liabil ity resul ts, the purported partner is liable 
with respect to that liability jointly and severally with any 
other person consenting to the representation. 
2. 
Purported partner 
as 
agent. 
If 
a 
person is 
thus 
represented to be a partner in an existing partnership, or with 
one or more persons not partners, the purported partner is an 
agent of persons consenting to the representation to bind them to 
the 
sarne extent and in the 
Same manner as if the purported 
partner were a partner, with respect to persons who enter into 
transactions in reliance upon the representation. 
If all of the 
partners 
of 
the 
existing 
partnership 
consent 
to 
the 
representation, 
a 
partnership act or obligation results. 
If 
fewer 
than all of 
the partners of the existing partnership 
consent to the representation, the person acting and the partners 
consenting to the representation are jointly and severally liable. 
3. 
Liability of dissociated pgtner. 
A person does not 
continue to be liable as a partner merely because of a failure to 
file a statement of dissociation. 
~~oDPartDers ~Qt liable ~_~a~rs. Except as otherwise 
provided in subsections land 2, persons who are not partners as 
to each other are not liable as partners to other persons. 
Comment 
(This is Section 308 of the Uniform Partnership Act (1997).) 
Section 308 continues the basic principles of partnership by 
estoppel 
from 
UPA 
Section 
16, 
now 
more 
accurately entitled 
"Liability of Purported Partner." 
Subsection (a) continues the 
distinction between representations made to specific persons and 
those made in a public manner. 
It is the exclusive basis for 
imposing liability as a partner on persons who are not partners 
in fact. 
As under the UPA, there is no duty of denial, and thus 
.Page 53-LRl469(l) 
a person held out by another as a partner is not liable unless he 
actually 
consents 
to 
the 
representation. 
See 
the 
Official 
Comment to UPA Section 16. 
Also see Section 308 (c) (no duty to 
file statement of denial) and Section 308(d) 
(no duty to file 
statement of dissociation or to amend statement of partnership 
authority). 
Subsection (b) emphasizes that the persons being protected 
by Section 308 are those who enter into transactions in reliance 
upon a representation. 
If all of the partners of an existing 
partnership 
consent 
to 
the 
representation, 
a 
partnership 
obligation results. 
Apart from Section 308, 
the firm may be 
bound in other situations under general principles of apparent 
authority or ratification. 
If a partnership liability results under Section 308, the 
creditor must exhaust the partnership's assets before seeking to 
satisfy the claim from the partners. 
See Section 307. 
Subsections (c) 
and (d) 
are new and deal with potential 
negative 
inferences 
to 
be 
drawn 
from 
a 
failure 
to 
correct 
inaccurate or outdated filed statements. 
Subsection (c) makes 
clear that an otherwise innocent person is not liable as 
a 
partner for failing to deny his partnership status as asserted by 
a third person in a statement of partnership authority. 
Under 
subsection (d), 
a partner's liability as 
a 
partner does 
not 
continue after dissociation solely because of a failure to file a 
statement of dissociation. 
Subsection (e) is derived from UPA Section 7(1). 
It means 
that only those persons who are partners as among themselves are 
liable as partners to third parties for the obligations of the 
partnership, 
except 
for 
liabilities 
incurred 
by 
purported 
partners under Section 308(a) and (b). 
SUBCHAPTER 4 
RELATIONS OF ~~'.mER.s TO EACH OTHER 
AND TO PARTNERSHIP 
§1041. 
Partner's rights and duties 
1. 
Partner's account. 
Each partner is deemed to have an 
account that is: 
A. 
Credited with an amount egual to the money plus the 
value of 
any other 
proge~ty, net of the 
amount of any 
liabilities, that the partner contributes to the partnership 
and the partner's share of the partnership profits; and 
B. 
Charged with an amount equal to the money plus the value 
of any other property, net of the amount of any liabilities, 
that is distributed by the partnership to the partner and 
the partner's share of the partnership losses. 
2. 
Partnership 
profits 
and 
losses. 
Each 
partner 
is 
entitled to an equal share of the partnership profits and is 
chargeable with a share of the partnership losses in proportion 
to the partner's share of the profits. 
3. 
Reimbursement and indemnification. 
A partnership shall 
reimburse a partner for payments 
made and indemnify a partner 
for liabilities incurred by the partner in the ordinary course of 
the business of the partnership or for the preservation of its 
business or propertYL 
4. 
AdYance to partner~hip. 
A partnership shall reimburse a 
partner for an advance to the partnership beyond the amount of 
capital the partner agreed to contribute. 
5. 
Loan to partnership; interest. 
A payment or advance 
made by a partner that gives rise to a partnership obligation 
under subsection 3 or 4 constitutes a loan to the partnership 
that accrues interest from the date of the payment or advance. 
6. 
Management 
an~_p.duct of 
b\1$hi-",!n~ec;lsu;sL!.<-------.!.E~a~c,,-,h"----.I;pu;a~--,rLtbn~e~r~hl!Qa.Qs 
equal rights in the management and conduct of the partnership 
business. 
7. 
Use or PQSS~s partn~ip property. 
A partner may use 
or possess partnership property only on behalf of the partnership. 
8. 
Remuneration. 
A partner is not entitled to remuneration 
for services performed for the partnership, except for reasonable 
compensation for services rendered in winding up the business of 
the partnership. 
9. 
Consent of all partners required. 
A person may become a 
partner only with the consent of all of the partners. 
10. 
Decision by majority 
or 
unanimous. 
A difference 
arising as to a matter in the ordinary course of business of a 
partnership may be decided by a majority of the partners. 
An act 
outside the ordinary course of business of a partnership and an 
amendment to the partnership agreement may be undertaken only 
with the consent of all of the partners . 
. Page 55-LR1469(l) 
11. 
Obl.i,gatj_Qns to other persons. 
This section does not 
affect the obligations of a partnership to other persons under 
section 1031. 
Comment 
(This is Section 401 of the Uniform Partnership Act (1997).) 
1. 
Section 401 is drawn substantially from UPA Section 18. 
It establishes 
many 
of 
the 
default 
rules 
that 
govern 
the 
relations 
among partners. 
All of 
these rules are, 
however, 
subject to contrary agreement of the partners as provided in 
Section 103. 
2. 
Subsection (a) provides that each partner is deemed to 
have an account that is credited with the partner's contributions 
and 
share 
of 
the 
partnership 
profits 
and 
charged 
with 
distributions 
to 
the 
partner 
and 
the 
partner's 
share 
of 
partnership 
losses. 
In 
the 
absence 
of 
another 
system 
of 
partnership accounts, these rules establish a rudimentary system 
of 
accounts 
for 
the 
partnership. 
The 
rules 
regarding 
the 
settlement of the partners' accounts upon the dissolution and 
winding up of the partnership business are found in Section 807. 
3. 
Subsection (b) establishes the default rules for the 
sharing of partnership profits and losses. 
The UPA Section 18(a) 
rules that profits are shared equally and that losses, whether 
capital or operating, are shared in proportion to each partner's 
share of the profits are continued. 
Thus, 
under the default 
rule, partners share profits per capita and not in proportion to 
capital contribution as do corporate shareholders or partners in 
limited partnerships. 
Compare RULPA Section 504. 
With respect 
to losses, the qualifying phrase, "whether capital or operating," 
has been deleted as inconsistent with contemporary partnership 
accounting practice and terminology; 
no substantive change is 
intended. 
If partners 
agree 
to 
share profits other than equally, 
losses will be shared similarly to profits, absent agreement to 
do 
otherwise. 
That 
rule, 
carried 
over 
from 
the 
UPA, 
is 
predicated on the assumption that partners would likely agree to 
share losses on the same basis as profits, but may fail to say 
so. 
Of 
course, 
by 
agreement, 
they 
may 
share 
losses 
on 
a 
different basis from profits. 
The default rules apply, as does UPA Section 18 (a), where 
one or more of the partners contribute no capital, although there 
is case law to the contrary. 
See, e.g., Kovacik v. Reed, 49 Cal. 
2d 166,315 P.2d 314 (1957); Becker v. Killarney, 177 Ill. App. 
3d 793, 
N. E. 2d 467 
(1988). 
It may 
seem unfair that the 
contributor of services, who contributes little or no capital, 
should be obligated to contribute toward the capital loss of the 
large contributor who contributed no services. 
In entering a 
partnership with such a capital structure, the partners should 
foresee that application of the default rule may bring about 
unusual results and take advantage of their power to vary by 
agreement the allocation of capital losses. 
Subsection (b) provides that each partner "is chargeable" 
with a share of the losses, rather than the UPA formulation that 
each partner shall "contribute" to losses. 
Losses are charged to 
each partner's account as provided in subsection (a) (2) . 
It is 
intended to 
make 
clear that 
a 
partner is not obligated to 
contribute to partnership losses before his withdrawal or the 
liquidation 
of 
the 
partnership, 
unless 
the 
partners 
agree 
otherwise. 
In effect, unless related to an obligation for which 
the partner is not personally liable under Section 306 (c), 
a 
partner's negative account represents a debt to the partnership 
unless 
the partners 
agree 
to 
the contrary. 
Similarly, 
each 
partner's share of the profits is credited to his account under 
subsection (a)(l). 
Absent an agreement to the contrary, however, 
a partner does not have a right to receive a current distribution 
of the profits credited to his account, the interim distribution 
of profits being a matter arising in the ordinary course of 
business to be decided by majority vote of the partners. 
However, where a liability to contribute at dissolution and 
winding up relates to a partnership obligation governed by the 
limited liability rule of Section 306(c), 
a 
partner is 
not 
obligated to contribute additional assets even at dissolution and 
winding up. 
See Section 807(b). 
In such a case, although a 
partner is not personally liable for the partnership obligation, 
that partner's interest in the partnership remains at risk. 
See 
also Comment to Section 40l(c) relating to indemnification. 
In the case of an operating limited liability partnership, 
the Section 306 liability shield may be partially eroded where 
the 
limited 
liability partnership 
incurs 
both 
shielded 
and 
unshielded liabilities. 
Where the limited liability partnership 
uses 
its 
assets 
to 
pay 
shielded 
liabilities 
before 
paying 
unshielded liabilities, each partner's obligation to contribute 
to the limited liability partnership for that partner's share of 
the unpaid and unshielded obligations at dissolution and winding 
up remains intact. 
The same issue is less likely to occur in the 
context of the termination of a limited liability partnership 
since a partner's contribution obligation is based only on that 
partner's share of unshielded obligations and the partnership 
will ordinarily use the contributed assets to pay unshielded 
claims 
first 
as 
they 
were 
the 
basis 
of 
the 
contribution 
obligations. 
See Comments to Section 807(b). 
4. 
Subsection (c) is derived from UPA Section 18(b) and 
provides 
that 
the 
partnership 
shall 
reimburse 
partners 
for 
payments made and indemnify them for liabilities incurred in the 
ordinary 
course 
of 
the 
partnership's 
business 
or 
for 
the 
preservation of its business or property. 
Reimbursement 
and 
indemnification 
is 
an 
obligation 
of 
the 
partnership. 
Indemnification may create a loss toward which the partners must 
contribute. 
Although the right to indemnification is usually 
enforced 
in the 
settlement of 
accounts 
among 
partners 
upon 
dissolution and winding up of the partnership business, the right 
accrues when the liability is incurred and thus may be enforced 
during the term of the partnership in an appropriate case. 
See 
Section 405 and Comment. 
A partner's right to indemnification 
under this Act is not affected by the partnership becoming a 
limited liability partnership. 
Accordingly, partners continue to 
share partnership losses to the extent of partnership assets. 
5. 
explicit 
advance 
capital 
Subsection (d) is based on UPA Section 18(c). 
It makes 
that the partnership must reimburse a partner for an 
of 
funds 
beyond 
the 
amount of the partner's agreed 
contribution, thereby treating the advance as a loan. 
6. 
Subsection (e), which is also drawn from UPA Section 
18(c), 
characterizes 
the 
partnership's 
obligation 
under 
subsection (c) or (d) as a loan to the partnership which accrues 
interest from the date of the payment or advance. 
See Section 
104(b) (default rate of interest). 
7. 
Under subsection (f), each partner has equal rights in 
the management and conduct of the business. 
It is based on UPA 
Section 18 (e), which has been interpreted broadly to mean that, 
absent contrary agreement, each partner has a continuing right to 
participate in the 
management of 
the partnership 
and to 
be 
informed about the partnership business, even if his assent to 
partnership 
business 
decisions 
is 
not 
required. 
There 
are 
special rules regarding the partner vote necessary to approve a 
partnership becoming 
(or 
canceling its status as) 
a 
limited 
liability partnership. 
See Section 1001(b). 
8. 
Subsection (g) provides that partners may use or possess 
partnership property only for partnership purposes. 
That is the 
edited remains of UPA Section 25(2)(a), which deals in detail 
with the incidents of tenancy in partnership. 
That tenancy is 
abolished as a consequence of the entity theory of partnerships. 
See Section 501 and Comments. 
g. 
Subsection (h) continues the UPA Section l8(f) rule that 
a partner is not entitled to remuneration for services performed, 
except in winding up the partnership. 
Subsection (h) deletes the 
UPA reference to a "surviving" partner. 
That means any partner 
winding up the business is entitled to compensation, not just a 
surviving partner winding up after the death of another partner. 
The 
exception is not 
intended to 
apply 
in the hypothetical 
winding up that takes place if there is a buyout under Article 7. 
10. 
Subsection (i) continues the substance of UPA Section 
18(g) that no person can become a partner without the consent of 
all the partners. 
11. 
Subsection 
(j) 
continues 
with 
one 
important 
clarification 
the 
UPA 
Section 
(h) 
scheme 
of 
allocating 
management authority among the partners. 
In the absence of an 
agreement to the contrary, matters arising in the ordinary course 
of the business may be decided by a majority of the partners. 
Amendments to the partnership agreement and matters outside the 
ordinary course of the partnership business require unanimous 
consent of the partners. 
Although the text of the UPA is silent 
regarding extraordinary matters, courts have generally required 
the consent of all partners 
for 
those matters. 
See, 
e.g., 
Paciaroni v. 
Crane, 
A.2d 
(Del. 
Ch. 
1989); 
Thomas 
v. 
Marvin E. Jewell 
& Co., 
Neb. 
261, 
N.W.2d 437 
(1989); 
Duell v. Hancock, 83 A.D.2d 762, 443 N.Y.S.2d 490 (1981). 
It is not intended that subsection (j) embrace a claim for 
an objection to a partnership decision that is not discovered 
until after the fact. 
There is no cause of action based on that 
after-the-fact second-guessing. 
12. 
Subsection (k) is new and was added to make 
that Section 301 governs partners' 
agency power 
to 
partnership to third persons, while Section 401 governs 
rights among themselves. 
§1042. 
Distributions in kind 
it clear 
bind the 
partners' 
A partner has no right to receive. and may not be reguired 
to accept, a distribution in kind. 
Comment 
(This is Section 402 of the Uniform Partnership Act (1997).) 
Section 402 provides that a partner has no right to demand 
and receive a distribution in kind and may not be required to 
take a distribution in kind. 
That continues the "in kind" rule 
of UPA Section 38 (1) • 
The new language is suggested by RULPA 
Section 605. 
.Page 59-LR1469(1) 
• 
• 
This 
section 
is 
complemented 
provides 
that, 
in 
winding 
up 
the 
dissolution, 
any 
surplus 
after 
the 
obligations must 
be 
applied to 
pay 
distributable to each partner. 
by 
Section 
partnership 
payment 
of 
(a) 
which 
business 
on 
partnership 
in cash the 
net 
amount 
§1043. 
Partner's rights and duties with respect to information 
1. 
Q.Q~t_~ __ 
iUld~ecj)~d~a.t 
partnership shall keep its books 
chi~~~~~e office. 
A 
and records, if any, at its 
chief executive office. 
~_. __ 
~~~eAIL-.t2----».9..9~~aAd recor!ls. 
A partnership shall 
provide partners and their agents and attorneys access to its 
books and records. 
It shall provide former partners and their 
Ments and attorneys access to books and records pertaining to 
the period during which they were partners. 
The right of access 
provides the opportunity to inspect and copy books and records 
during ordinary business hours. 
A partnership may 
impose 
a 
reasonable charge, covering the costs of labor and material, for 
copies of documents furnished. 
3. 
Furnishing 
of 
information. 
Each 
partner 
and 
the 
pgrtnership 
shall 
furnish 
to 
a 
partner, 
representative of 
a 
deceased partner or 
disabilitll 
and 
to 
the 
legal 
partner under legal 
A. 
Without 
demand, 
any 
information 
concerning 
the 
partnership's business and affairs reasonably required for 
the proper exercise of the partner's rights and duties under 
tll~Lj2_artnership agreement or this chapter; and 
B. 
On 
demand~ny other 
information 
concerning 
the 
partnership's business and affairs, except to the extent the 
demand 
or 
the 
information 
demanded 
is 
unreasonable 
or 
otherwise improper under the circumstances. 
Comment 
(This is Section 403 of the Uniform Partnership Act (1997).) 
1. 
Subsection (a) provides that the partnership's books and 
records, if any, shall be kept at its chief executive office. 
It 
continues 
the 
UPA 
Section 
rule, 
modified 
to 
include 
partnership records other than its "books," 
i.e., financial 
records. 
The concept of "chief executive office" comes from UCC 
Section 9l03(3)(d). 
See the Comment to Section 106. 
Since 
general 
partnerships 
are 
often 
informal 
or 
even 
inadvertent, no books and records are enumerated as mandatory, 
such as that found in RULPA Section 105. 
Any requirement in UPA 
Section 19 that the partnership keep books is oblique at best, 
since it states merely where the books shall be kept, not that 
they shall be kept. 
Under RUPA, there is no liability to either 
partners or third parties for the failure to keep partnership 
books. 
A partner who undertakes to keep books, however, must do 
so accurately and adequately. 
In general, a partnership should, at a minimum" 
keep those 
books and records necessary to enable the partners to determine 
their share of the profits and losses, as well as their rights on 
wi thdrawal. 
An action for an accounting provides an adequate 
remedy 
in 
the 
event 
adequate 
records 
are 
not 
kept. 
The 
partnership must also maintain any books and records required by 
state or federal taxing or other governmental authorities. 
2. 
Under subsection (b), partners are entitled to access to 
the partnership books and records. 
Former partners are expressly 
given a similar right, although limited to the books and records 
pertaining to the period during which they were partners. 
The 
line between partners and former partners is not a bright one for 
this purpose, 
however, 
and should be 
drawn in light of 
the 
legitimate 
interests 
of 
a 
dissociated 
partner 
in 
the 
partnership. 
For example, a withdrawing partner's liabil i ty is 
ongoing 
for 
pre-withdrawal 
liabilities 
and will 
normally 
be 
extended to new liabilities for at least 90 days. 
It is intended 
that a former partner be accorded access to partnership books and 
records 
as 
reasonably 
necessary 
to 
protect 
that 
partner's 
legitimate interests during the period his rights and liabilities 
are being wound down. 
The right of access is limited to ordinary business hours, 
and the right to inspect and copy by agent or attorney is made 
explicit. 
The partnership may impose a 
reasonable charge for 
furnishing copies of documents. 
Accord, RULPA § 105(b). 
A partner's right to inspect and copy the partnership's 
books and records is not conditioned on the partner's purpose or 
motive. 
Compare RMBCA Section 16.02(c)(I) (shareholder must have 
proper 
purpose 
to 
inspect 
certain 
corporate 
records) . 
A 
partner's unlimited personal liability justifies an unqualified 
right of access to the partnership books and records. 
An abuse 
of the right to inspect and copy might constitute a violation of 
the obligation of good faith and fair dealing for which the other 
partners would have a remedy. 
See Sections 404(d) and 405. 
Under Section 103(b)(2), 
a 
partner's right of access to 
partnership books and records may not be unreasonably restricted 
by the partnership agreement. 
Thus, to preserve a partner's core 
information rights despite unequal bargaining power, an agreement 
• 
.. 
limiting a partner's right to inspect and copy partnership books 
and 
records 
is 
subject 
to 
judicial 
review. 
Nevertheless, 
reasonable 
restrictions 
on 
access 
to 
partnership 
books 
and 
records by agreement are authorized. 
For example, a provision in 
a 
partnership 
agreement 
denying 
partners 
access 
to 
the 
compensation of other partners should be upheld, absent any abuse 
such as fraud or duress. 
3. 
Subsection (c) is a significant revision of UPA Section 
and provides a more comprehensive, 
although not exclusive, 
statement 
of 
partners' 
rights 
and 
duties 
with 
respect 
to 
partnership information other than books and records. 
Both the 
partnership and 
the other partners are obligated to 
furnish 
partnership information. 
Paragraph (1) is new and imposes an affirmative disclosure 
obligation on the partnership and partners. 
There is no express 
UPA provision imposing an affirmative obligation to disclose any 
information 
other 
than 
the 
partnership 
books. 
Under 
some 
circumstances, however, an affirmative disclosure duty has been 
inferred from other sections of the Act, 
as well as from the 
common law, such as the fiduciary duty of good faith. 
Under UPA 
Section l8(e), for example, all partners enjoy an equal right in 
the management and conduct of the partnership business, absent 
contrary agreement. 
That right has been construed to require 
that 
every 
partner 
be 
provided 
with 
ongoing 
information 
concerning the partnership business. 
See Comment 7 to Section 
401. 
Paragraph 
(1) 
provides expressly that partners must be 
furnished, 
without 
demand, 
partnership 
information 
reasonably 
needed for them to exercise their rights and duties as partners. 
In addition, 
a disclosure duty may, 
under some circumstances, 
also spring from the Section 404(d) obligation of good faith and 
fair dealing. 
See Comment 4 to Section 404. 
Paragraph 
(2) 
continues 
the 
UPA 
rule that partners are 
entitled, 
on demand, 
to any other information concerning the 
partnership's business and affairs. 
The demand may be refused if 
either the demand or the information demanded is unreasonable or 
otherwise improper. 
That qualification is new to the statutory 
formulation. 
The burden is on the partnership or partner from 
whom the information is requested to show that the demand is 
unreasonable 
or 
improper. 
The 
UPA 
admonition 
that 
the 
information furnished be "true and full" has been deleted as 
unnecessary, and no substantive change is intended. 
The 
Section 403(c) 
information rights 
can be 
waived or 
var ied by agreement of the partners, since there is no Section 
103(b) limitation on the variation of those rights as there is 
with respect to the Section 403(b) access rights to books and 
records. 
See Section 103(b)(2). 
§l044. 
General standards of partner's conduct 
1. 
Partner's fiduciary duties. 
The only fiduciary duties a 
partner owes to the partnership and the other partners are the 
duty of loyalty and the duty of care set forth in subsections 2 
and 
as 
those duties 
may 
be clarified or 
limited in the 
partnership agreement to the extent and in the manner authorized 
by section 1003, subsection 2. 
2. 
Duty of loyalty limited. 
~he 
pa~tnership and 
the 
other 
following: 
A partner's duty of loyalty to 
partners 
is 
limited 
to 
the 
A. 
To account to the partnership and hold as trustee for it 
any property. profit or benefit derived by the partner in 
the conduct and winding up of the partnership business or 
derived from a use 
by the partner of partnership property, 
including the appropriation of a partnership opportunity; 
B. 
To refrain 
from~_nowingly dealing with the partnership 
in the conduct or winding up of the partnership business as 
or on behalf of a party having an interest adverse to the 
partnership; and 
C. 
To refrain from competing with the partnership in the 
conduct of the partnership business before the dissolution 
of the partnership. 
3. 
Duty 
of 
care. 
A partner's 
duty 
of 
care 
to 
the 
partnership and the other partners in the conduct and winding up 
of 
the 
partnership 
business 
is 
limited 
to 
refraining 
from 
engaging in grossly negligent or reckless conduct, intentional 
misconduct or a knowing violation of law. 
4. 
Qblig~Qn of g~faith and fair dealing. 
A partner 
shall discharge the duties to the partnership and the other 
partners under this chapter or under the partnership agreement 
and exercise any rig~onsistently with the obligation of good 
faith and fair dealing, as those obligations may be clarified in 
the 
partnership 
agreement 
to 
the 
extent 
and 
in 
the 
manner 
authorized by section 1003, subsection 2. 
5. 
Partner's own interest. 
A partner does not violate a 
duty or obligation under this chapter or under the partnership 
agreement 
merely 
because 
the 
partner's 
conduct 
furthers 
the 
partner's own interest. 
6. 
LOan to and business with partnership. 
A partner may 
lend money to and transact other business with the partnership, 
and as to each loan or transaction the rights and obligations of 
the partner are the same as those of a person who is not a 
partner, subject to other applicable law. 
7. 
Per.6Qna~r 19qal 
r~lt:t:ese:Qt.ati'yg. 
This section applies 
to a person winding up the partnership business as the personal 
or legal representative of the last surviving partner as if the 
person were a partner. 
Comment 
(This is Section 404 of the Uniform Partnership Act (1997).) 
1. 
Section 404 is new. 
The title, "General Standards of 
Partner's Conduct," is drawn from RMBCA Section 8.30. 
Section 
is both comprehensive and exclusive. 
In that regard, it is 
structurally different from the UPA which touches only sparingly 
on a partner's duty of loyalty and leaves any further development 
of the fiduciary duties of partners to the common law of agency. 
Compare UPA Sections 4(3) and 21. 
Section 404 begins by stating that the only fiduciary duties 
a partner owes to the partnership and the other partners are the 
duties of loyalty and care set forth in subsections (b) and (c) 
of the Act. 
Those duties may not be waived or eliminated in the 
partnership agreement, but the agreement may identify activities 
and determine standards for measuring performance of the duties, 
if not manifestly unreasonable. 
See Sections 103(b)(3)(5). 
Section 404 continues the term "fiduciary" from UPA Section 
21, 
which is entitled "Partner Accountable as 
a 
Fiduciary." 
Arguably, 
the term "fiduciary" is inappropriate when used to 
2 
descr ibe 
the 
duties 
of 
a 
partner 
because 
a 
partner 
may 
legi timately pursue self -interest (see Section 404 (e» 
and not 
solely the interest of the partnership and the other partners, as 
must 
a 
true trustee. 
Nevertheless, 
partners have 
long been 
characterized as fiduciaries. 
See, e.g., Meinhard v. Salmon, 249 
N.Y. 458, 463, 164 N.E. 545, 546 (1928) (Cardozo, J.). 
Indeed, 
the law of partnership reflects the broader law of principal and 
agent, under which every agent is a fiduciary. 
See Restatement 
(Second) of Agency § 13 (1957). 
2. 
Section 
404(b) 
provides 
three 
specific 
rules 
that 
comprise a partner's duty of loyalty. 
Those rules are exclusive 
and encompass the entire duty of loyalty. 
Subsection 
(b) (1) 
is 
based 
on 
UPA 
Section 
21(1) 
and 
continues 
the 
rule 
that 
partnership 
property 
usurped 
by 
a 
partner, 
including 
the 
misappropriation 
of 
a 
partnership 
opportunity, is held in trust for the partnership. 
The express 
reference to the appropriation of a partnership opportunity is 
new, 
but merely codifies case law on the point. 
See, e.g., 
Meinhard v. Salmon, supra; Fouchek v. Janicek, 190 Ore. 251, 225 
P.2d 
(1950). 
Under 
a 
constructive 
trust 
theory, 
the 
partnership can recover any money or property in the partner's 
hands that can be traced to the partnership. 
See, e.g., Yoder v. 
Hooper, 
P.2d 1182 
(Colo. 
App. 
1984), aff'd, 
P.2d 852 
(Colo. 1987); Fortugno v. Hudson Manure Co., 51 N.J. Super. 482, 
A.2d 207 (1958); Harestad v. Weitzel, 242 Or. 199, 536 P.2d 
(1975). 
As a result, the partnership's claim is greater than 
that of 
an 
ordinary creditor. 
See Official 
Comment 
to 
UPA 
Section 21. 
UPA Section 21(1) imposes the duty on partners to account 
for profits and benefits in all transactions connected with "the 
formation, 
conduct, 
or 
liquidation 
of 
the 
partnership." 
Reference 
to 
the 
"formation" 
of 
the 
partnership 
has 
been 
eliminated by RUPA because of concern that the duty of loyalty 
could be inappropriately extended to the pre-formation period 
when the parties are really negotiating at arm's length. 
Compare 
Herring v. Offutt, 295 A.2d 876 (Ct. App. Md. 1972), with Phoenix 
Mutual Life Ins. Co. v. Shady Grove Plaza Limited Partnership, 
F. Supp. 1181 (D. Md. 1990), aff'd, 937 F.2d 603 (4th Cir. 
1991). 
Once a partnership is agreed to, each partner becomes a 
fiduciary 
in 
the 
"conduct" 
of 
the 
business. 
Pre-formation 
negotiations are, 
of course, 
subject to the general contract 
obligation to deal honestly and without fraud. 
Upon a partner's dissociation, Section 603(b)(3) limits the 
application of the duty to account for personal profits to those 
derived 
from matters 
arlSlng or 
events 
occurring before 
the 
dissociation, unless the partner participates in winding up the 
partnership's business. 
Thus, 
after withdrawal, 
a 
partner is 
free 
to 
appropriate 
to 
his 
own 
benefit 
any 
new 
business 
opportunity thereafter 
coming 
to his 
attention, 
even if the 
partnership continues. 
Subsection (b)(2) provides that a partner must refrain from 
dealing with the partnership as or on behalf of a party having an 
interest adverse to the partnership. 
This rule is derived from 
Sections 
and 
of the Restatement 
(Second) 
of Agency. 
Comment c to Section 389 explains that the rule is not based upon 
the harm caused to the principal, but upon avoiding a conflict of 
opposing interests in the mind of an agent whose duty is to act 
for the benefit of his principal. 
Upon a partner's dissociation, Section 603(b)(3) limits the 
application of the duty to refrain from representing interests 
adverse to the partnerShip to the same extent as the duty to 
.Page 65-LR1469(1) 
.. 
account. 
Thus, after withdrawal, 
a partner may deal with the 
partnership as an adversary with respect to new matters or events. 
Section 404(b)(3) provides that a partner must refrain from 
competing with the partnership in the conduct of its business. 
This rule is derived from Section 393 of the Restatement (Second) 
of Agency and is an application of the general duty of an agent 
to act solely on his principal's behalf. 
The duty not to compete applies only to the "conduct" of the 
partnership business; it does 
not extend to winding 
up 
the 
business, as do the other loyalty rules. 
Thus, a partner is free 
to compete immediately upon an event of dissolution under Section 
801, 
unless 
the partnership agreement otherwise provides. 
A 
partner who dissociates without a winding up of the business 
resulting is also free to compete, 
because Section 603(b)(2) 
provides 
that 
the 
duty 
not 
to 
compete 
terminates 
upon 
dissociation. 
A dissociated partner is not, however, free to use 
confidential partnership 
information after dissociation. 
See 
Restatement (Second) of Agency § 393 cmt. e (1957). 
Trade secret 
law also may apply. 
See the Uniform Trade Secrets Act. 
Under Section 103 (b) (3), the partnership agreement may not 
"eliminate" the duty of loyalty. 
Section 103 (b)( 3) (i) expressly 
empowers the partners, however, 
to identify specific types or 
categories of activities that do not violate the duty of loyalty, 
if not manifestly unreasonable. 
As 
under UPA Section 21, 
the 
other partners may also consent to a specific act or transaction 
that otherwise violates one of the rules. 
For the consent to be 
effective 
under 
Section 
103(b)(3)(ii), 
there 
must 
be 
full 
disclosure of all material facts regarding the act or transaction 
and the partner's conflict of interest. 
See Comment 5 to Section 
103. 
3. 
Subsection (c) is new and establishes the duty of care 
that partners owe to the partnership and to the other partners. 
There is no statutory duty of care under the UPA, 
although a 
common law duty of care is recognized by some courts. 
See, e.g., 
Rosenthal v. Rosenthal, 
A.2d 348, 
(Me. 
1988) (duty of 
care limited to acting in a manner that does not constitute gross 
negligence or willful misconduct). 
The 
standard of care 
imposed by 
RUPA 
is that of gross 
negligence, which is the standard generally recognized by the 
courts. 
See, 
e.g., 
Rosenthal 
v. 
Rosenthal, 
supra. 
Section 
103(b)(4) provides that the duty of care may not be eliminated 
entirely 
by 
agreement, 
but 
the 
standard 
may 
be 
reasonably 
reduced. 
See Comment 6 to Section 103. 
4. 
Subsection (d) is also new. 
It provides that partners 
have 
an 
obligation of 
good 
faith 
and 
fair 
dealing 
in 
the 
discharge of all their duties, including those arising under the 
Act, 
such as their fiduciary duties of loyalty and care, 
and 
those arising under the partnership agreement. 
The exercise of 
any rights by a partner is also subject to the obligation of good 
fai th and fair dealing. 
The obligation runs to the partnership 
and to the other partners in all matters related to the conduct 
and winding up of the partnership business. 
The obligation of good faith and fair dealing is a contract 
concept, imposed on the partners because of the consensual nature 
of a partnership. 
See Restatement (Second) of Contracts § 205 
(1981). 
It is not characterized, in RUPA, 
as a fiduciary duty 
arising out of the partners' special relationship. 
Nor is it a 
separate 
and 
independent 
obligation. 
It 
is 
an 
ancillary 
obligation that applies whenever a partner discharges a duty or 
exercises a right under the partnership agreement or the Act. 
The meaning of "good faith and fair dealing" is not firmly 
fixed 
under 
present 
law. 
"Good 
faith" 
clearly 
suggests 
a 
subjective element, 
while "fair dealing" implies 
an objective 
component. 
It was decided to leave the terms undefined in the 
Act and allow the courts to develop their meaning based on the 
exper ience of real cases. 
Some commentators, moreover, believe 
that good faith is more properly understood by what it excludes 
than by what it includes. 
See Robert S. Summers, "Good Faith" in 
General Contract Law and the Sales Provisions of the Uniform 
Commercial Code, 54 Va. L. Rev. 195, 262 (1968): 
Good faith, 
as 
judges generally use the term in matters 
contractual, is best understood as an "excluder" -
a phrase 
with no general meaning or meanings of its own. 
Instead, it 
functions to rule out many different forms of bad faith. 
It 
is hard to get this point across to persons used to thinking 
that every word must have one or more general meanings of 
its own - must be either univocal or ambiguous. 
The UCC definition of "good faith" is honesty in fact and, in the 
case of 
a 
merchant, 
the 
observance 
of 
reasonable 
commercial 
standards of fair dealing in the trade. 
See UCC §§ 1201(19), 
2103(b). 
Those definitions were rejected as too narrow or not 
applicable. 
In some situations the obligation of good faith includes a 
disclosure component. 
Depending on the circumstances, a partner 
may have an affirmative disclosure obligation that supplements 
the Section 403 duty to render information. 
Under Section 103(b)(5), the obligation of good faith and 
fair dealing may not be eliminated by agreement, but the partners 
by agreement may determine the standards by which the performance 
of the obligation is to be measured, if the standards are not 
manifestly unreasonable. 
See Comment 7 to Section 103. 
5. 
Subsection (e) is new and deals expressly with a very 
basic issue on which the UPA is silent. 
A partner as such is not 
a trustee and is not held to the same standards as a trustee. 
Subsection (e) makes clear that a partner's conduct is not deemed 
to 
be 
improper 
merely 
because it serves 
the partner's 
own 
individual interest. 
That admonition has particular application to the duty of 
loyalty and the obligation of good faith and fair dealing. 
It 
underscores the partner's rights as an owner and principal in the 
enterprise, which must always be balanced against his duties and 
obligations as an agent and fiduciary. 
For example, 
a partner 
who, with consent, owns a shopping center may, under subsection 
(e), legitimately vote against a proposal by the partnership to 
open a competing shopping center. 
6. 
Subsection (f) authorizes partners to lend money to and 
transact other business with the partnership and, in so doing, to 
enjoy the same rights and obligations as a 
nonpartner. 
That 
language 
is 
drawn 
from 
RULPA 
Section 
107. 
The 
rights 
and 
obligations of a partner doing business with the partnership as 
an 
outsider 
are 
expressly 
made 
subject 
to 
the 
usual 
laws 
governing those transactions. 
They include, for example, rules 
limiting 
or 
qualifying 
the 
rights 
and 
remedies 
of 
inside 
creditors, 
such 
as 
fraudulent 
transfer 
law, 
equitable 
subordination, and the law of avoidable preferences, as well as 
general debtor-creditor law. 
The reference to "other applicable 
law" makes clear that subsection (f) is not intended to displace 
those laws, and thus they are preserved under Section 104(a). 
It is unclear under the UPA whether a partner may, for the 
partner's own account, purchase the assets of the partnership at 
a foreclosure sale or upon the liquidation of the partnership. 
Those 
purchases 
are 
clearly 
within 
subsection 
(f)'s 
broad 
approval. 
It is also clear under that subsection that a partner 
may purchase partnership assets at a foreclosure sale, whether 
the partner is the mortgagee or the mortgagee is an unrelated 
third party. 
Similarly, 
a 
partner 
may 
purchase partnership 
property at a tax sale. 
The obligation of good faith requires 
disclosure of the partner's interest in the transaction, however. 
7. 
Subsection (g) provides that the prescribed standards of 
conduct apply equally to a person engaged in winding up the 
partnership business as the personal or legal representative of 
the last surviving partner, as if the person were a partner. 
This is derived from UPA Section 21(2), but now embraces the duty 
of care and the obligation of good faith and fair dealing, as 
well as the duty of loyalty. 
§1045. 
Actions by partnership and partners 
1. 
Partnership action against partner. 
A partnership may 
maintain 
an 
action against 
a 
partner 
for 
a 
breach of 
the 
partnership agreement. or for the violation of a duty to the 
partnership. causing harm to the partnership. 
2. 
Partner 
action against partnership. 
A partner 
may 
mgintain an action against the partnership or another partner for 
legal or equitable relief, with or without an accounting as to 
partnership business. to: 
A. 
Enforce 
the partner's 
rights 
under 
the 
partnership 
agreement: 
B. 
Enforce 
the 
partner's 
rights 
under 
this 
chapter, 
including: 
(1) 
The partner's rights under sections 1041, 1043 and 
~ 
(2) 
The partJl.er's 
partner's 
interest 
right on dissociation to have 
th~ 
in 
the 
partnership 
purchased 
pursuant to section 
under subchapter 6 or 
1071 or enforce any other right 
7: or 
(3) 
The partner's right to compel a dissolution and 
winding up of the partnership business or enforce any 
other right under subchapter 8; or 
C. 
Enforce the rights and otherwise protect the interests 
of 
the partner, 
including 
rights 
and 
interests 
arising 
independently of the partnership relationship. 
3. 
Time 
limitation. 
The 
accrual 
of, 
and 
any 
time 
limitation on. a right of action for a remedy under this section 
is governed by other law. 
A right to 
an accounting upon a 
dissolution and winding up does not revive a claim barred by law. 
Comment 
(This is Section 405 of the Uniform Partnership Act (1997).) 
1. 
Section 405( a) is new and reflects the entity theory of 
partnership. 
It 
provides 
that 
the 
partnership 
itself 
may 
. Page 69-LR1469(l) 
maintain an action against a partner for 
any breach of the 
partnership agreement or for the violation of any duty owed to 
the partnership, such as a breach of fiduciary duty. 
2. 
Section 405(b) is the successor to UPA Section 22, but 
with significant changes. 
At 
common 
law, 
an accounting was 
generally not available before dissolution. 
That was modified by 
UPA Section 22 which specifies certain circumstances in which an 
accounting action is available without requ1rl.ng a partner to 
dissolve the partnership. 
Section 405(b) goes far beyond the UPA 
rule. 
It provides that, during the term of the partnership, 
partners may maintain a variety of legal or equitable actions, 
including an action for an accounting, as well as a final action 
for an accounting upon dissolution and winding up. 
It reflects a 
new policy choice that partners should have access to the courts 
during the term of the partnership to resolve claims against the 
partnership 
and 
the 
other 
partners, 
leaving 
broad 
judicial 
discretion to fashion appropriate remedies. 
Under 
RUPA, 
an accounting is not 
a prerequisite to the 
availability of the other remedies a partner may have against the 
partnership or the other partners. 
That change reflects the 
increased willingness courts have shown to grant relief without 
the requirement of an accounting, in derogation of the so-called 
"exclusivity rule." 
See, e.g., Farney v. Hauser, 109 Kan. 75, 
79, 
Pac. 178, 180 (1921) 
("[For] all practical purposes a 
partnership may be considered as a business entity"); Auld v. 
Estridge, 86 Misc. 2d 895, 901, 382 N.Y.S.2d 897, 901 (1976) ("No 
purpose of justice is served by delaying the resolution here on 
empty procedural grounds"). 
Under subsection (b), 
a partner may bring a direct suit 
against the partnership or another partner for almost any cause 
of 
action 
arising 
out 
of 
the 
conduct 
of 
the 
partnership 
business. 
That eliminates the present procedural barriers to 
suits 
between partners 
filed 
independently of 
an 
accounting 
action. 
In addition to a formal account, the court may grant any 
other 
appropriate legal or equitable 
remedy. 
Since general 
partners are not passive investors like limited partners, RUPA 
does not authorize derivative actions, as does RULPA Section 1001. 
Subsection (b)(3) makes it clear that a partner may recover 
against the partnership and the other partners for personal 
injuries or damage to the property of the partner caused by 
another partner. 
See, e.g., Duffy v. Piazza Construction Co., 
P.2d 267 (Wash. App. 1991); Smith v. Hensley, 354 S.W.2d 744 
(Ky. 
App.). 
One partner's negligence is not imputed to bar 
another partner's action. 
See, e.g., Reeves v. Harmon, 475 P.2d 
(Okla. 1970); Eagle Star Ins. Co. v. Bean, 134 F.2d 755 (9th 
Cir. 
1943) 
(fire 
insurance 
company 
not 
subrogated to 
claim 
against 
partners 
who 
negligently 
caused 
fire 
that 
damaged 
partnership property). 
3. 
Generally, partners may limit or contract away their 
Section 405 remedies. 
They may not, however, eliminate entirely 
the remedies for breach of those duties that are mandatory under 
Section 103(b). 
See Comment 1 to Section 103. 
4. 
Section 405(c) replaces UPA Section 43 and provides that 
other (i.e., non-partnership) law governs the accrual of a cause 
of action for 
which subsection 
(b) 
provides 
a 
remedy. 
The 
statute of limitations on such claims is also governed by other 
law, 
and claims barred by 
a 
statute of limitations are not 
revived by reason of the partner's right to an accounting upon 
dissolution, as they were under the UPA. 
The effect of those 
rules is to compel partners to litigate their claims during the 
life 
of 
the 
partnership 
or 
risk 
losing 
them. 
Because 
an 
accounting is an equi table proceeding, it may also be barred by 
laches where there is an undue delay in bringing the action. 
Under general law, the limitations periods may be tolled by a 
partner's fraud. 
5. 
UPA Section 39 grants ancillary remedies to a person who 
rescinds 
his participation in 
a 
partnership because it was 
fraudulently induced, including the right to a lien on surplus 
partnership property for the amount of that person's interest in 
the partnership. RUPA has no counterpart provision to UPA Section 
39, and leaves it to the general law of rescission to determine 
the rights of 
a 
person fraudulently induced to invest in a 
partnership. 
See Section 104(a). 
§1046. 
Continuation of partnership beyond definite term or 
particular undertaking 
1. 
Rights and duties as at expiration or completion. 
If a 
partnership for 
a definite term or particular undertaking is 
continued, without an express agreement, after the expiration of 
the term or completion of the undertaking, the rights and duties 
of the partners remain the same as they were at the expiration or 
completion, so far as is consistent with a partnership at will. 
2. 
Presumption of ~~~ent to continue. 
If the partners, 
or those of them who habitually acted in the business during the 
term or undertaking, continue the business without any settlement 
or liquidation of the partnership, they are presumed to have 
agreed that the 
partnership will continue. 
Comment 
(This is Section 406 of the Uniform Partnership Act (1997).) 
,Page 71-LR1469(1) 
• 
Section 406 continues UPA Section 23, with no substantive 
change. 
Subsection (a) provides that, if a term partnership is 
continued without an express agreement beyond the expiration of 
its term or the completion of the undertaking, 
the partners' 
rights and duties remain the same as they were, so far as is 
consistent with a partnership at will. 
Subsection (b) provides that if the partnership is continued 
by the partners without any settlement or liquidation of the 
business, it is presumed that the partners have agreed not to 
wind up the business. 
The presumption is rebuttable. 
If the 
partnership is continued under this subsection, 
there is 
no 
dissolution under (2) (iii) . 
As a partnership at will, however, 
the partnership may be dissolved under (1) at any time. 
SUBCHAPTER 5 
TRANSFEREES AND CREDITORS OF PARTHER 
§l051. 
Partner not co-owner of partnership property 
A partner is not a co-owner of partnership propert~ and has 
no interest in partnership 
propert~ that can be transferred, 
either voluntaril~ or involuntaril~. 
Comment 
(This is Section 501 of the Uniform Partnership Act (1997).) 
Section 501 provides that a partner is not a co-owner of 
partnership property and has no interest in partnership property 
that can be transferred, either voluntarily or involuntarily. 
Thus, 
the section abolishes the UPA Section 25(1) 
concept of 
tenants in partnership and reflects the adoption of the entity 
theory. 
Partnership property is owned by the entity and not by 
the individual partners. 
See also Section 203, which provides 
that 
property 
transferred 
to 
or 
otherwise 
acquired 
by 
the 
partnership 
is property of 
the 
partnership 
and 
not 
of 
the 
partners individually. 
RUPA also deletes the references in UPA Sections 24 and 25 
to a partner's "right in specific partnership property," although 
those rights are largely defined away by the detailed rules of 
UPA Section 25 itself. 
Thus, it is clear that a partner who 
misappropriates partnership property is guilty of embezzlement 
the same as a shareholder who misappropriates corporate property. 
Adoption of 
the entity theory 
also 
has 
the effect of 
protecting partnership property from execution or other process 
by a partner's personal creditors. 
That continues the result 
under UPA Section 25(2)(c). 
Those creditors may seek a charging 
order 
under 
Section 
to 
reach the partner's transferable 
interest in the partnership. 
RUPA does not interfere with a partner's exemption claim in 
nonpartnership property. 
As under the UPA, disputes over whether 
specific property belongs to the partner or to the firm will 
likely arise in the context of an exemption claim by a partner. 
A partner's spouse, heirs, or next of kin are not entitled 
to allowances or other rights in partnership property. 
That 
continues the result under UPA Section 25(2)(e). 
§l052. 
Partner's transferable interest in partnership 
The 
only 
transferable 
interest 
of 
a 
partner 
in 
the 
partnership is the partner's share of the profits and losses of 
the partnership, the allocations of income, gain, loss, deduction 
Qr credit or similar items related to such profits and lo&~nd 
the partner's right to receive distributions. 
The interest is 
personal property. 
Comment 
(This is Section 502 of the Uniform Partnership Act (1997).) 
Section 502 continues the UPA Section 26 
concept that a 
partner's only transferable interest in the partnership is the 
partner's share of profits and losses 
and right to receive 
distributions, that is, the partner's financial rights. 
The term 
"distribution" 
is 
defined 
in Section 101(3). 
Compare 
RULPA 
Section 101(10) ("partnership interest"). 
The partner's transferable interest is deemed to be personal 
property, regardless of the nature of the underlying partnership 
assets. 
Under 
Section 
503(b)(3), 
a 
transferable interest has standing 
of the partnership business. 
transferee 
of 
a 
partner's 
to seek judicial dissolution 
A partner has other interests in the partnership that may 
not be transferred, 
such as the right to participate in the 
management of the business. 
Those rights are included in the 
broader concept of a "partner's interest in the partnership." 
See Section 101(9). 
.Page 73-LR1469(1) 
.. 
§l053. 
Transfer of partner's transferable interest 
1. 
Tran~fer of int~J_~~. 
A transfer, in whole or in part, 
of a partner's transferable interest in the partnership: 
A. 
Is permissible: 
B. 
Does not by itself cause the partner's dissociation or a 
dissolution and winding up of the partnership business: and 
C. 
Does 
not~s against 
the 
other 
partners 
or 
the 
partnership, entitle the transferee, during the continuance 
of the partnership, to participate in the management or 
conduct of the partnership business, to reguire access to 
information 
concerning 
partnership 
transactions 
or 
to 
inspect or copy the partnership books or records. 
2. 
Transferee of partner's interest. 
A transferee of a 
partner's transferable interest in the partnership has a right: 
A. 
To 
receive, 
in 
accordance 
with 
the 
transfer, 
distributions to which the transferor would otherwise be 
entitled: 
B. 
To receive upon the dissolution and winding up of the 
partnership business, in accordance with the transfer, the 
net amount otherwise distributable to the transferor: and 
C. 
To seek under section 1081, subsection 6, 
a judicial 
determination 
that 
it 
is 
eguitable 
to 
wind 
up 
the 
partnership business. 
3. 
Account of transaction to transferee. 
In a dissolution 
and winding 
up, 
a 
transferee is entitled to 
an 
account of 
l2...ctrtllership tr~tions only from the date of the latest account 
agreed to by all of the partners. 
4. 
Rights 
and 
duties 
retained. 
Upon 
transfer, 
the 
tr_9_nsferor retainLJ;he rights and duties of a partner other than 
the interest in distributions transferred. 
5. 
Effect to transferee's rights: notice. 
A partnership 
need not give effect to a transferee's rights under this section 
until the partnership has notice of the transfer. 
6. 
Transfer in violations. 
A transfer of 
a 
partner's 
transferable interest in the partnership in violation of 
a 
restriction on trap~i~r~9~ained in the partnership agreement is 
ineffective as to a person having notice of the restriction at 
the time of transfer. 
Comment 
(This is Section 503 of the Uniform Partnership Act (1997).) 
1. 
Section 503 is derived from UPA Section 27. 
Subsection 
(a)(l) states explicitly that a partner has the right to transfer 
his 
transferable 
interest 
in 
the 
partnership. 
The 
term 
"transfer" 
is 
used 
throughout 
RUPA 
in 
lieu 
of 
the 
term 
"assignment." 
See Section 101(10). 
Subsection (a)(2) continues the UPA Section 27(1) rule that 
an assignment of a partner's interest in the partnership does not 
of itself cause a winding up of the partnership business. 
Under 
Section 
60l(4)(ii), 
however, 
a 
partner 
who 
has 
transferred 
substantially all of his partnership interest may be expelled by 
the other partners. 
Subsection (a)(3), which is also derived from UPA Section 
(I), provides that a transferee is not, as against the other 
partners, 
entitled 
(i) 
to participate in 
the 
management 
or 
conduct 
of 
the 
partnership 
business; 
(ii) 
to 
inspect 
the 
partnership books or records; or (iii) to require any information 
concerning or an account of partnership transactions. 
2. 
The rights of a transferee are set forth in subsection 
(b). 
Under subsection (b)(l), which is derived from UPA Section 
27(1), a transferee is entitled to receive, in accordance with 
the 
terms of the assignment, 
any distributions to which the 
transferor 
would 
otherwise 
have 
been 
entitled 
under 
the 
partnership agreement before dissolution. 
After dissolution, the 
transferee is also entitled to receive, under subsection (b)( 2), 
the net amount that would otherwise have been distributed to the 
transferor upon the winding up of the business. 
Subsection (b)(3) confers standing on a transferee to seek a 
judicial dissolution and winding up of the partnership business 
as provided in Section 801(6), thus continuing the rule of UPA 
Section 32(2). 
rights of a transferee 
to the 
a charging order. 
The same rule 
other 
purchasers 
who 
acquire 
uee remedies or statutory liens 
Section 504 (b) accords the 
purchaser at a sale foreclosing 
should 
apply 
to 
creditors 
or 
partnership interests by pursuing 
under federal or state law. 
3. 
Subsection (c) is based on UPA Section 27(2). 
It grants 
to 
transferees 
the 
right 
to 
an 
account 
of 
partnership 
transactions, limited to the period since the date of the last 
account agreed to by all of the partners. 
,. 
.. 
4. 
Subsection (d) 
is new. 
It makes clear that unless 
otherwise 
agreed 
the 
partner 
whose 
interest 
is 
transferred 
retains all of the rights and duties of a partner, other than the 
right to receive distributions. 
That means the transferor is 
entitled to participate in the management of the partnership and 
remains personally liable for all partnership obligations, unless 
and until he withdraws as a partner, is expelled under Section 
601(4)(ii), or is otherwise dissociated under Section 601. 
A divorced spouse of a partner who is awarded rights in the 
partner's partnership interest as part of a property settlement 
is entitled only to the rights of a transferee. 
The spouse may 
instead be granted a money judgment in the amount of the property 
award, enforceable by a charging order in the same manner as any 
other 
money 
judgment 
against 
a 
partner. 
In 
neither 
case, 
however, 
would the spouse become 
a partner by virtue of the 
property settlement or succeed to any of the partner's management 
rights. 
See, e.g., Warren v. 
Warren, 
Ark. 
App. 
260, 
S.W.2d 371 (1984). 
5. 
Subsection (e) is new and provides that the partnership 
has no duty to give effect to the transferee's rights until the 
partnership receives notice of the transfer. 
This is consistent 
with UCC Section 9318(3), which provides that an "account debtor" 
is authorized to 
pay the 
assignor until 
the 
account debtor 
receives notification that the amount due or to become due has 
been assigned and that payment is to be made to the assignee. 
It 
further provides that the assignee, 
on request, 
must furnish 
reasonable proof of the assignment. 
6. 
Subsection (f) is new and provides that a transfer of a 
partner's transferable interest in the partnership in violation 
of a restriction on transfer contained in a partnership agreement 
is 
ineffective 
as 
to 
a 
person 
with 
timely 
notice 
of 
the 
restriction. 
Under Section 103(a), the partners may agree among 
themselves to restrict the right to transfer their partnership 
interests. 
Subsection (f) 
makes explicit that a 
transfer in 
violation of such a restriction is ineffective as to a transferee 
with notice of the restriction. 
See Section 102(b) 
for 
the 
meaning of "notice." 
RUPA leaves to general law and the uec the 
issue of whether a transfer in violation of a valid restriction 
is effective as to a transferee without notice of the restriction. 
Whether 
a 
particular 
restriction 
will 
be 
enforceable, 
however, must be considered in light of other law. 
See 11 U.S.C. 
§ 
541(c)(1) 
(property 
owned 
by 
bankrupt 
passes 
to 
trustee 
regardless of restrictions on transfer); UCC § 9318(4) (agreement 
between 
account 
debtor 
and 
assignor 
prohibiting creation of 
security interest in a general intangible or requiring account 
debtor's consent is ineffective); Battista v. Carlo, 57 Misc. 2d 
495,293 
N.Y.S.2d 
(1968) 
(restriction 
on 
transfer 
of 
partnership 
interest 
subject 
to 
rules 
against 
unreasonable 
restraints on alienation of property) (dictum); Tupper v. Kroc, 
Nev. 146,494 P.2d 1275 (1972) (partnership interest subject 
to 
charging 
order 
even 
if 
partnership 
agreement 
prohibits 
assignments). 
Cf. 
TuVu Drive-In Corp. v. Ashkins, 
Cal. 
2d 
283, 
Cal. 
Rptr. 
348, 
P.2d 
(1964) 
(restraints on 
transfer of corporate stock must be 
reasonable). 
Even if a 
restriction on the transfer of a partner's transferable interest 
in a partnership were held to be unenforceable, the transfer 
might be grounds for expelling the partner-transferor from the 
partnership under Section 601(5)(ii). 
7. 
Other rules that apply in the case of transfers include 
Section 
601(4)(ii) 
(expulsion 
of 
partner 
who 
transfers 
substantially 
all 
of 
partnership 
interest); 
Section 
601(6) 
(dissociation of partner who makes an assignment for benefit of 
creditors); and Section 801(6) (transferee has standing to seek 
judicial winding up). 
§1054. 
Partner's transferabl~erest subject to charging~rder 
1. 
Charging 
order; 
interest 
of 
judgment 
debtor. 
On 
application by a judgment creditor of a partner or of a partner's 
transferee, 
a 
court 
having 
jurisdiction 
may 
charge 
the 
transferable interest of the 
judgment debtor 
to satisfy the 
judgment. 
The court may appoint a receiver of the share of the 
distributions due or to become due to the judgment debtor in 
respect of the partnership and make all other orders, directions, 
accounts and 
inqu~r~es th~udgment debtor might have made or 
that the circumstances of the case may require. 
2. 
Charging order; lien. 
A charging order constitutes a 
lien 
on 
the 
judgment debtor's 
transferable interest in 
the 
partnership. 
The court may order a foreclosure of the interest 
subject to the cha~ging order at any time. 
The purchaser at the 
foreclosure sale has the rights of a transferee. 
3. 
Re~~lJIRti..Q~~ch~~qed 
ip.te~est. 
At any time before 
foreclosure, an interest charged may be redeemed: 
A. 
By the judgment debtor; 
B. 
With property other than partnership property. by one or 
more of the other partners; or 
C. 
With partnership property, by one or more of the other 
partners with the consent of all of the partners whose 
interests are not so charged. 
4. 
Exemptions 
apply. 
This chapter 
does 
not deprive 
a 
partner of a 
right under exemption laws with respect to the 
partner's interest in the partnership. 
_!;i. 
Exclusive reme(l...Y--f.Qr 
jud~nt creditor. 
This section 
provides the exclusive remedy by which a judgment creditor of a 
partner or partner's transferee may satisfy a judgment out of the 
judgment debtor's transferable interest in the partnership. 
Conanent 
(This is Section 504 of the Uniform Partnership Act (1997).) 
1. 
Section 504 continues the UPA Section 28 charging order 
as the proper remedy by which a judgment creditor of a partner 
may reach the debtor's transferable interest in a partnership to 
satisfy the judgment. 
Subsection (a) makes the charging order 
available 
to 
the 
judgment 
creditor 
of 
a 
transferee 
of 
a 
partnership interest. 
Under 
Section 503(b), 
the transferable 
interest of a partner or transferee is limited to the partner's 
right to receive distributions from the partnership and to seek 
judicial liquidation of the partnership. 
The court may appoint a 
receiver of the debtor's share of the distributions due or to 
become due and make all other orders that may be required. 
2. 
Subsection (b) is new and codifies the case law under 
the UPA holding that a charging order constitutes a lien on the 
debtor's transferable interest. 
The lien may be foreclosed by 
the court at any time, and the purchaser at the foreclosure sale 
has the Sectior. 503(b) rights of a transferee. 
For a general 
discussion of the charging order remedy, see I Alan R. Bromberg & 
Larry E. Ribstein, Partnership (1988), at 3:69. 
3. 
Subsection (c) continues the UPA Section 28(2) right of 
the debtor or other partners to redeem the partnership interest 
before 
the 
foreclosure 
sale. 
Redemption 
by 
the 
partnership 
(i.e., with partnership property) requires the consent of all the 
remaining partners. 
Neither the UPA nor RUPA provide a statutory 
procedural framework for the redemption. 
4. 
Subsection (d) provides that nothing in RUPA deprives a 
partner of his rights under the State's exemption laws. 
That is 
essentially the same as UPA Section 28(3). 
5. 
Subsection (e) provides that the charging order is the 
judgment creditor's exclusive remedy. 
Although the UPA nowhere 
states that a 
charging order is the exclusive process for 
a 
partner's individual judgment creditor, the courts have generally 
so interpreted it. 
See, e.g., Matter of Pischke, 11 B.R. 
(E.D. 
Va. 
1981); 
(1959); Atlantic 
(Fla. App. 1986). 
Baum v. 
Baum, 
Mobile Homes, Inc. 
Cal. 
2d 610, 
P.2d 481 
v. LeFever, 481 So. 2d 1002 
Notwithstanding subsection (e), there may be an exception 
for the enforcement of family support orders. 
Some States have 
unique 
statutory 
procedures 
for 
the 
enforcement 
of 
support 
orders. 
In Florida, for example, a court may issue an "income 
deduction 
order" 
requiring 
any 
person 
or 
entity 
providing 
"income" 
to the obligor of a 
support order to remit to the 
obligee or a depository, as directed by the court, a specified 
portion of the income. 
Fla. Stat. § 61.1301 (1993). 
"Income" is 
broadly defined to include any form of payment to the obligor, 
including 
wages, 
salary, 
compensation 
as 
an 
independent 
contractor , dividends, interest, or other payment, regardless of 
source. 
Fla. Stat. § 61.046(4) (1993). 
That definition includes 
distributions payable to an obligor partner. 
A charging order 
under RUPA would still be necessary to reach the obligor's entire 
partnership interest, however. 
SUBCHAPTER 6 
PARTNER'S DISSOCIATION 
§I061. 
Events causing partner's dissociation 
A 
partner 
is 
dissociated 
from 
a 
partnership 
upon 
the 
occurrence of any of the following events: 
1. 
Notice of express will to withdraw. 
The partnership's 
having notice of the partner's express will to withdraw as a 
partner or on a later date specified by the partner; 
2. 
Agreed event. 
An event agreed to in the partnershil? 
agreement as causing the partner's dissociation; 
3. 
ExpulA~o~~~~~ant 
to 
agTeemen~t~. ____ ~T~h~e~~I?~a~r~t~n~e~r_'~s 
expulsion pursuant to the partnership agreement; 
4. 
Expulsion b~~im~us vote. 
The partner's expulsion by 
the unanimous vote of the other partners if: 
A. 
It is unlawful to carryon the partnership business with 
that partner; 
B. 
There has been a transfer of all or substantially all of 
that partner's transferable interest in the partnershiQL 
other than a 
transfer for security purposes, or a 
court 
order charging the partner's interest. that has not been 
foreclosed; 
C. 
Within 90 days after the partnership notifies a partner 
who is a limited liabliily company or corporation that it 
will be expelled because it has filed a 
certificate of 
dissolution or t~~iY~le~r that it has been judicially 
or administratively dissolved, the applicable certificate of 
dissolution or its equivalen~ not been revoked or it has 
not been administratively reinstated: 
.R.~thin~~-Y!LJl.iJ,!H~th~g.x.~nership notifies a p.artner 
who is a limited liability company or corporation that it 
will be expelled becausg its right to do business has been 
suspended 
by 
the 
jurisdiction 
of 
organization 
or 
incorporation, there has been no reinstatement of its right 
to do business by such jurisdiction: or 
E. 
A partnership that is a partner has been dissolved and 
its business is being wound up: 
5. 
Expulsion by judicial determination. 
On application by 
the partnership or another partner, the partner's expulsion by 
judicial determination because: 
A. 
The partner engaged in wrongful conduct that adversely 
and materially affected the partnership business: 
B. 
The 
partner 
willfully 
or 
persistently 
committed 
a 
mater ial breach of the partnership agreement or of a duty 
owed to the partnership or the other partners under section 
1044; or 
C. 
The 
partner 
engaged 
in 
conduct 
relating 
to 
the 
partnership 
business 
that 
makes 
it 
not 
reasonably 
practicable to carryon the business in partnership with the 
partner; 
6. 
Partner's actions. 
The partner's: 
A. 
Becoming a debtor in bankruptcy; 
B. 
Executing an assignment for the benefit of creditors; 
C. 
Seeking, co~ng to or acquiescing in the appointment 
of a trustee, receiver or liquidator of that partner or of 
all or substantially all of that partner's property; or 
D. 
Fai_ling, 
withj.~ 90 day.s_after the appointment. to have 
vacated or stayed the appointment of a trustee, receiver or 
liquidator of the partner or of all or substantially all of 
the 
partner's 
property 
obtained 
without 
the 
partner's 
consent or acquiescence or failing within 90 days after the 
expiration of a stay to have the appointment vacated; 
7. 
Partner who is individual. 
In the case of a partner who 
is an individual: 
A. 
The partner's death; 
B. 
The appointment of a guardian or general conservator for 
the partner: or 
C. 
A judicial determination that the partner has otherwise 
become incapable of performing the partner's duties under 
the partnership agreement; 
8. 
Partner is trust or trustee. 
In the case of a partner 
that is a trust or is acting as a partner by virtue of being a 
trustee 
of 
a 
trust, 
distribution 
of 
the 
trust's 
entire 
transferable interest in the partnership, 
but not merely by 
reason of the substitution of a successor trustee; 
9. 
Partner is estate or personal representative of estate. 
In the case of a partner that is an estate or is acting as a 
partner 
by virtue of being 
a 
personal 
representatjve of 
an 
estate. distribution of the estate's entire transferable interest 
in the partnership. but not merely by reason of the substitution 
of a successor personal representative; or 
10. 
Termination. Termination of a partner who is not an 
individuaL partnership. limited liability company. corporation. 
trust or estate. 
Comment 
(This is Section 601 of the Uniform Partnership Act (1997).) 
1. 
RUPA dramatically changes the law governing partnership 
breakups 
and 
dissolution. 
An 
entirely 
new 
concept, 
"dissociation," is used in lieu of the UPA term "dissolution" to 
denote the 
change in the relationship caused by 
a 
partner's 
ceasing to be associated in the carrying on of the business. 
"Dissolution" is retained but with a different meaning. 
See 
Section 
802. 
The 
entity 
theory 
of 
partnership 
provides 
a 
conceptual 
basis 
for 
continuing 
the 
firm 
itself despite 
a 
partner's withdrawal from the firm. 
Under RUPA, unlike the UPA, 
the dissociation of a partner 
does not necessarily cause a dissolution and winding up of the 
business 
of 
the 
partnership. 
Section 
identifies 
the 
• 
situations in which the dissociation of 
a 
partner causes 
a 
winding up of the business. 
Section 701 provides that in all 
other situations there is a buyout of the partner's interest in 
the 
partnership, 
rather 
than 
a 
windup 
of 
the 
partnership 
business. 
In those other situations, 
the partnership entity 
continues, unaffected by the partner's dissociation. 
A dissociated partner remains a partner for some purposes 
and 
still 
has 
some 
residual 
rights, 
duties, 
powers, 
and 
liabili ties. 
Although Section 601 determines when a partner is 
dissociated 
from 
the 
partnership, 
the 
consequences 
of 
the 
partner's dissociation do not all occur at the same time. 
Thus, 
it is more useful to think of a dissociated partner as a partner 
for 
some purposes, but as 
a 
former partner for others. 
For 
example, 
see 
Section 
403(b) 
(former 
partner's 
access 
to 
partnership books and records). 
The consequences of a partner's 
dissociation depend on whether the partnership continues or is 
wound up, as provided in Articles 6, 7, and 8. 
Section 
enumerates all of 
the events 
that cause 
a 
partner's dissociation. 
Section 601 is similar in approach to 
RULPA Section 402, which lists the events resulting in a general 
partner's withdrawal from a limited partnership. 
2. 
Section 601 (1) provides that a partner is dissociated 
when the partnership has notice of the partner's express will to 
withdraw as a partner, unless a later date is specified by the 
partner. 
If a future date is specified by the partner, other 
partners may dissociate before that date; specifying a future 
date does not bind the others to remain as partners until that 
date. 
See also Section 801(2)(i). 
Section 602(a) provides that a partner has the power to 
wi thdraw at any time. 
The power to withdraw is immutable under 
Section 103(b)(6), with the exception that the partners may agree 
the notice must be in writing. 
This continues the present rule 
that a partner has the power to withdraw at will, even if not the 
right. 
See UPA Section 31(2). 
Since no writing is required to 
create 
a 
partner 
relationship, 
it 
was 
felt 
unnecessarily 
formalistic, and a trap for the unwary, to require a writing to 
end one. 
If a written notification is given, 
Section 102(d) 
clarifies when it is deemed received. 
RUPA 
continues 
the 
UPA 
"express 
will" 
concept, 
thus 
preserving existing case law. 
Section 601( 1) clarifies existing 
law by providing that the partnership must have notice of the 
partner's 
expression 
of 
will 
before 
the 
dissociation 
is 
effective. 
See Section 102(b) for the meaning of "notice." 
3. 
Section 601(2) 
provides expressly that 
a 
partner is 
dissociated upon an event agreed to in the partnership agreement 
as causing dissociation. 
There is no such provision in the UPA, 
but that result has been assumed. 
4. 
Section 601 (3) provides that a partner may be expelled 
by the other partners pursuant to a power of expulsion contained 
in the partnership agreement. 
That continues the basic rule of 
UPA 
Section 31(1)(d). 
The expulsion can be with or without 
cause. 
As under existing law, the obligation of good faith under 
Section 404(d) does not require prior notice, specification of 
cause, or an opportunity to be heard. 
See Holman v. Coie, 11 
Wash. App. 195, 522 P.2d 515, cert. denied, 420 U.S. 984 (1974). 
5. 
Section 601(4) empowers the partners, by unanimous vote, 
to expel a partner for specified causes, even if not authorized 
in the partnership agreement. 
This 
changes 
the 
UPA 
Section 
31( 1) (d) rule that authorizes expulsion only if provided in the 
partnership agreement. 
A partner may be expelled from 
a 
term 
partnership, 
as 
well 
as 
from 
a 
partnership at will. 
Under 
Section 103 (a), the partnership agreement may change or abolish 
the partners' power of expulsion. 
Subsection (4)(i) is derived from 
UPA 
Section 31(3). 
A 
partner 
may 
be expelled if it is unlawful 
to carryon the 
business with that partner. 
Section 801(4), on the other hand, 
provides that the partnership itself is dissolved and must be 
wound up if substantially all of the business is unlawful. 
Subsection (4) (ii) provides that a partner may be expelled 
for transferring substantially all of his transferable interest 
in the partnership, other than as security for a loan. 
(He may, 
however, 
be expelled upon foreclosure.) 
This rule is derived 
from UPA Section 3l(1)(c). 
To avoid the presence of an unwelcome 
transferee, the remaining partners may dissolve the partnership 
under Section 801(2)(ii), after first expelling the transferor 
partner. 
A transfer of a partner's entire interest may, in some 
circumstances, 
evidence the transferor's intention to withdraw 
under Section 601(1). 
Subsection 
(4) (iii) 
provides 
for 
the 
expulsion 
of 
a 
corporate partner if it has filed a certificate of dissolution, 
its charter has been revoked, or its right to conduct business 
has been suspended, unless cured 
within 90 days after notice. 
This provision is derived from RULPA Section 402(9). 
The cure 
proviso is important because charter revocation is very common in 
some States and partner status should not end merely because of a 
technical noncompliance with corporate law that can easily be 
cured. 
Withdrawal of a voluntarily filed notice of dissolution 
constitutes a cure. 
Subsection (4) (i v) is the partnership analogue of paragraph 
(iii) and is suggested by RULPA Section 402(8). 
It provides that 
a partnership that is a partner may be expelled if it has been 
dissolved and its business is being wound up. 
It is intended 
that the right of expulsion not be triggered solely by the 
dissolution event, but only upon commencement of the liquidation 
process. 
6. 
Section 601(5) empowers a court to expel a partner if it 
determines that the partner has engaged in specified misconduct. 
The enumerated grounds for judicial expulsion are based on the 
UPA 
Section 
32(1) 
grounds 
for 
judicial 
dissolution. 
The 
application for expulsion may be brought by the partnership or 
any partner. 
The phrase "judicial determination" is intended to 
include an arbitration award, as well as any final court order or 
decree. 
Subsection (5) (i) provides for the partner's expulsion if 
the court finds that the partner has engaged in wrongful conduct 
that adversely and materially affected the partnership business. 
That language is derived from UPA Section 32(1)(c). 
Subsection 
determines that 
material breach 
the partnership 
would include 
(ii), together 
of UPA Section 
(5)(ii) 
provides 
for 
expulsion if the 
court 
the partner willfully or persistently committed a 
of the partnership agreement or of a duty owed to 
or to the other partners under Section 404. 
That 
a partner's breach of fiduciary duty. 
Paragraph 
with paragraph (iii), carry forward the substance 
32(1)(d). 
Subsection (5)(iii) provides for judicial expulsion of 
a 
partner 
who 
engaged 
in 
conduct 
relating to 
the 
partnership 
business that makes it not reasonably practicable to carryon the 
business in partnership with that partner. 
Expulsion for such 
misconduct 
makes 
the 
partner's 
dissociation 
wrongful 
under 
Section 602 (a) (ii) and may also support a 
judicial decree of 
dissolution under Section 801(5)(ii). 
7. 
Section 601 (6) provides that a partner is 
upon becoming a debtor in bankruptcy or upon taking 
other action evidencing the partner's 
insolvency 
financial responsibility. 
dissociated 
or suffering 
or 
lack of 
Subsection (6)(i) is derived from UPA Section 31(5), which 
provides for dissolution upon 
a partner's bankruptcy. 
Accord 
RULPA 
§ 402(4)(ii). 
There is 
some 
doubt as 
to whether 
UPA 
Section 31(1) is limited to so-called "straight bankruptcy" under 
Chapter 7 or includes other bankruptcy relief, such as Chapter 
11. 
Under RUPA Section 101 (2), however, "debtor in bankruptcy" 
includes a person who files a voluntary petition, or against whom 
relief is ordered in an involuntary case, under any chapter of 
the Bankruptcy Code. 
Initially, upon the filing of the bankruptcy petition, the 
debtor partner's transferable interest in the partnership will 
pass to the bankruptcy trustee as property of the estate under 
Section 541(a)(1) of the Bankruptcy Code, 
notwithstanding any 
restrictions on transfer provided in the partnership agreement. 
In most Chapter 7 cases, that will result in the eventual buyout 
of the partner's interest. 
The 
application 
of 
various 
provisions 
of 
the 
federal 
Bankruptcy Code to Section 601(6)(i) is unclear. 
In particular, 
there is uncertainty as to the validity of UPA Section 31(5), and 
thus its RUPA counterpart, under Sections 365(e) and 541(c)(1) of 
the 
Bankruptcy 
Code. 
Those 
sections 
generally 
invalidate 
so-called 
ipso 
facto 
laws 
that 
cause 
a 
termination 
or 
modification of the debtor's contract or property rights because 
of 
the 
bankruptcy 
filing. 
As 
a 
consequence, 
RUPA 
Section 
(6) (i), 
which 
provides 
for 
a 
partner's 
dissociation 
by 
operation of law upon becoming a debtor in bankruptcy, may be 
invalid under the Supremacy Clause. 
See, e. g., In the Matter of 
Phillips, 
F.2d 
(5th 
Cir. 
1992); 
In 
re 
Cardinal 
Industries, Inc., 105 B.R. 385 (Bankr. S.D. Ohio 1989), 116 B.R. 
(Bankr. S.D. Ohio 1990); In re Corky Foods Corp., 85 B.R. 903 
(Bankr. S.D. Fla. 1988). 
But see, In re Catron, 
B.R. 
(E.D. Va. 
1993) (partnership agreement could not be assumed by 
debtor under Bankruptcy Code § 365(c) (1) because other partners 
excused 
by 
UPA 
from 
accepting 
performance 
by 
or 
rendering 
performance to party other than debtor and buyout option not 
invalid ipso 
facto 
clause under 
Code § 365 (e», aff'd per 
curiam, 25 F. 3d 1038 (4th Cir. 1994). 
RUPA reflects the policy 
choice, as a matter of state partnership law, that a partner be 
dissociated upon becoming a debtor in bankruptcy. 
Subsection (6)(ii) is new and provides for dissociation upon 
a general assignment for the benefit of a partner's creditors. 
The 
UPA 
says nothing about 
an assignment for 
the benefit of 
credi tors 
or 
the 
appointment 
of 
a 
trustee, 
receiver, 
or 
liquidator. 
Subsection (6) (iii) and (iv) cover the latter and 
are based substantially on RULPA Section 402(4) and (5). 
8. 
UPA 
Section 31(4) provides for the dissolution of a 
partnership upon the death of any partner, although by agreement 
the remaining partners may continue the partnership business. 
RUPA 
Section 
(7) (i) , 
on 
the 
other 
hand, 
provides 
for 
dissociation upon the death of a partner who is an individual, 
rather 
than 
dissolution 
of 
the 
partnership. 
That 
changes 
existing 
law, 
except 
in 
those 
States 
previously 
adopting 
a 
similar non-uniform provision, such as California, Georgia, and 
• 
t. 
Texas. 
Normally, under RUPA, the deceased partner's transferable 
interest in the partnership will pass to his estate and be bought 
out under Article 7. 
Section 
601(7)(ii) 
replaces 
UPA 
Section 
32(l)(a) 
and 
provides for dissociation upon the appointment of a guardian or 
general 
conservator 
for 
partner 
who 
is 
an 
individual. 
The 
appointment itself operates as the event of dissociation, and no 
further order of the court is necessary. 
Section 601(7)(iii) is based on UPA Section 32(1)(b) and 
provides for dissociation upon a judicial determination that an 
individual partner has in any other way 
become 
incapable of 
performing his 
duties 
under 
the 
partnership 
agreement. 
The 
intent is to include physical incapacity. 
9. 
Section 601(8) is new and provides for the dissociation 
of a partner that is a trust, or is acting as a partner by virtue 
of being a trustee of a trust, upon the distribution by the trust 
of its entire transferable interest in the partnership, but not 
merely 
upon 
the 
substitution 
of 
a 
successor 
trustee. 
The 
provision is inspired by RULPA Section 402(7). 
10. 
Section 601(9) is new and provides for the dissociation 
of a partner that is an estate, or is acting as a partner by 
virtue of being a personal representative of an estate, upon the 
distribution of the estate's entire transferable interest in the 
partnership, 
but 
not merely the substitution of 
a 
successor 
personal representative. 
It is based on RULPA Section 402(10). 
Under 
Section 
601(7), 
a 
partner 
is 
dissociated 
upon 
death, 
however, 
and the estate normally becomes 
a 
transferee, not a 
partner. 
11. 
Section 601(10) is new and provides that a partner that 
is not an individual, partnership, corporation, trust, or estate 
is 
dissociated 
upon its 
termination. 
It is 
the 
comparable 
"death" analogue for other types of entity partners, such as a 
limited liability company. 
§l062. 
Partner's power to dissociate; wrongful dissociation 
1. 
By express will. 
A partner has the power to dissociate 
_ctt~ time, rightJJllly or wrongfully, by express will pursuant 
to section 1061, subsection 1. 
2. 
Wrongful 
dissociation. 
A partner's dissociation is 
wrongful only if: 
A. 
It is 
in 
breach 
of 
an 
express 
provision 
of 
the 
partnership agreement: or 
B. 
In the case of a partnership for a definite term or 
particular undertaking, before the expiration of the term or 
the completion of the undertaking: 
(1) 
The partner withdraws by express will, unless the 
withdrawal 
follows 
within 
days 
after 
another 
partner's dissociation 
by 
death or 
otherwise 
under 
section 
1061. 
subsections 
to 
or 
wrongful 
dissociation under this subsection; 
(2) 
The partner is expelled by judicial 
determination 
under section 1061, subsection 5; 
(3) 
The partner is dissociated by becoming a debtor in 
bankruptcy; or 
(4) 
In the case of a partner who is not an individual, 
trust other 
than 
a 
business 
trust or estate, ~ 
partner is expelled or otherwise dissociated because 
the partner willfully dissolved or terminated. 
3. 
Liability for wrongful dissociation. 
A partner 
who 
wrongfully dissociates is liable to the partnership and to the 
other partners 
for 
damages 
caused by 
the dissociation. 
The 
liability is in addition to any other obligation of the partner 
to the partnership or to the other partners. 
Conment 
(This is Section 602 of the Uniform Partnership Act (1997).) 
1. 
Subsection (a) states explicitly what is implicit in UPA 
Section 31(2) and RUPA Section 601(1) -
that a partner has the 
power to dissociate at any time by expressing a will to withdraw, 
even in contravention of the partnership agreement. 
The phrase 
"rightfully or wrongfully" reflects the distinction between 
a 
partner's power to withdraw in contravention of the partnership 
agreement and 
a partner's right to do so. 
In this context, 
although a partner can not be enjoined from exercising the power 
to dissociate, the dissociation may be wrongful under subsection 
(b). 
2. 
Subsection (b) provides that a partner's dissociation is 
wrongful only if it results from one of the enumerated events. 
The significance of a wrongful dissociation is that it may give 
rise to damages under subsection (c) and, if it results in the 
dissolution 
of 
the 
partnership, 
the 
wrongfully 
dissociating 
partner is not entitled to participate in winding up the business 
under Section 804. 
• 
• 
• 
Under subsection (b), a partner's dissociation is wrongful 
if 
(1) it breaches 
an 
express provision of 
the partnership 
agreement or (2), in a term partnership, before the expiration of 
the term or the completion of the undertaking (i) the partner 
voluntarily 
withdraws 
by 
express 
will, 
except 
a 
withdrawal 
following another partner's wrongful dissociation or dissociation 
by death or otherwise under Section 601(6) through (10); (ii) the 
partner is expelled for misconduct under Section 601(5): (iii) 
the partner becomes a debtor in bankruptcy (see Section 101(2»: 
or (iv) 
a partner that is an entity (other than a trust or 
estate) 
is 
expelled 
or 
otherwise 
dissociated 
because 
its 
dissolution or termination was willful. 
Since subsection (b) is 
merely a default rule, the partnership agreement may eliminate or 
expand the dissociations that are wrongful or modify the effects 
of wrongful dissociation. 
The exception in subsection (b)(2)(i) is intended to protect 
a partner's reactive withdrawal from a term partnership after the 
premature departure of another partner, such as the partnership's 
rainmaker 
or 
main 
supplier 
of 
capital, 
under 
the 
same 
circumstances 
that 
may 
result 
in 
the 
dissolution 
of 
the 
partnership under Section 801 (2) (i) • 
Under that section, a term 
partnership 
is 
dissolved 
days 
after 
the 
bankruptcy, 
incapaci ty, death (or similar dissociation of a partner that is 
an entity), or wrongful dissociation of any partner, unless a 
majority in interest (see Comment 
5(i) to Section 801 for 
a 
discussion of the term "majority in interest") of the remaining 
partners 
agree 
to 
continue 
the 
partnership. 
Under 
Section 
602(b)(2)(i), a partner's exercise of the right of withdrawal by 
express will under those circumstances is rendered "rightful," 
even if the partnership is continued by others, 
and does not 
expose 
the 
withdrawing 
partner 
to 
damages 
for 
wrongful 
dissociation ~nder Section 602(c). 
A partner 
wishing 
to 
withdraw 
prematurely 
from 
a 
term 
partnership for 
any other 
reason, 
such 
as 
another partner's 
misconduct, can avoid being treated as a wrongfully dissociating 
partner by applying to a court under Section 601(5)(iii) to have 
the offending partner expelled. 
Then, the partnership could be 
dissolved 
under 
Section 
801(2)(i) 
or 
the 
remaining 
partners 
could, by unanimous vote, dissolve the partnership under Section 
801(2)(ii). 
3. 
Subsection (c) provides that a wrongfully dissociating 
partner is liable to the partnership and to the other partners 
for 
any 
damages 
caused 
by 
the 
wrongful 
nature 
of 
the 
dissociation. 
That 
liability is 
in 
addition 
to 
any 
other 
obligation of the partner to the partnership or to the other 
partners. 
For 
example, 
the partner would be liable for 
any 
damage caused by breach of the partnership agreement or other 
misconduct. 
The 
partnership 
might 
also 
incur 
substantial 
expenses resulting from a partner's premature withdrawal from a 
term partnership, such as replacing the partner's expertise or 
obtaining new 
financing. 
The wrongfully dissociating partner 
would be liable to the partnership for 
those 
and all other 
expenses and damages that are causally related to the wrongful 
dissociation. 
Section 
701(c) 
provides 
that 
any 
damages 
for 
wrongful 
dissociation may be offset against the amount of the buyout price 
due to the partner under Section 701(a), 
and Section 701(h) 
provides that a partner who wrongfully dissociates from a term 
partnership is not entitled to payment of the buyout price until 
the term expires. 
Under UPA Section 38(2)(c)(II), in addition to an offset for 
damages, the goodwill value of the partnership is excluded in 
determining the value of 
a 
wrongfully dissociating partner's 
partnership 
interest. 
Under 
RUPA, 
however, 
unless 
the 
partnership's goodwill is damaged by the wrongful dissociation, 
the value of the wrongfully dissociating partner's interest will 
include any goodwill value of the partnership. 
If the firm's 
goodwill is damaged, the amount of the damages suffered by the 
partnership and the remaining partners will be offset against the 
buyout price. 
See Section 701 and Comments. 
§l063. 
Effect of partner's dissociation 
1. 
Apprec i a tion 
f 
aw~. 
_~I"-f=----"a"---J;;.p-",a..."r,-,t"",n,,,-,e,,,-,,-r_' -"s,--------,d""-",-i-",s,"",s,-"o,-,C,,-,l.,,,,· a.....",t-=i""oc..n 
results in 
a 
dissolution 
and winding 
up 
of 
the partnership 
business, subchapter 8 applies; otherwise, subchapter 7 applies. 
2. 
Internal effects of partner's dissociation. 
Upon 
a 
partner's dissociation: 
A. 
The partner's right to participate in the management and 
conduct of the partnership business terminates, except as 
otherwise provided in section 1083; 
B. 
The 
partner's 
duty 
of 
J.o~l ty 
under 
section 
1044, 
subsection 2, paragraph C terminates; and 
C. 
The 
partner's 
duty 
of 
loyalty 
under 
section 
104~ 
subsection 2, paragraphs A and 
B and duty of care under 
section 
104~ubsection 3 continue only with regard to 
matters arising and events occurring before the partner's 
dissociation, 
u:I}Jes~s th~tner participates in winding up 
the partnership's business pursuant to section 1083. 
• 
Conanent 
(This is Section 603 of the Uniform Partnership Act (1997).) 
1. 
Section 603(a) is a "switching" provision. 
It provides 
that, after a partner's dissociation, the partner's interest in 
the partnership must be purchased pursuant to the buyout rules in 
Article 7 unless there is a dissolution and winding up of the 
partnership 
business 
under 
Article 
8. 
Thus, 
a 
partner's 
dissociation will 
always 
result 
in either 
a 
buyout 
of 
the 
dissociated partner's interest or a dissolution and winding up of 
the business. 
By 
contrast, 
under 
the 
UPA, 
every partner dissociation 
results in the dissolution of the partnership, most of which 
trigger 
a 
right 
to 
have 
the 
business 
wound 
up 
unless 
the 
partnership agreement provides otherwise. 
See UPA § 38. 
The 
only exception in which the remaining partners have a statutory 
right to continue the business is when 
a 
partner wrongfully 
dissolves 
the 
partnership 
in 
breach 
of 
the 
partnership 
agreement. 
See UPA § 38(2)(b). 
2. 
Section 
603(b) 
is 
new 
and 
deals 
with 
some 
of 
the 
internal effects of a partner's dissociation. 
Subsection (b) (1) 
makes it clear that one of the 
consequences of 
a 
partner's 
dissociation is the immediate loss of the right to participate in 
the 
management 
of 
the 
business, 
unless 
it 
results 
in 
a 
dissolution 
and winding 
up 
of 
the 
business. 
In that case, 
Section 804 (a) provides that all of the partners who have not 
wrongfully dissociated may participate in winding up the business. 
Subsection 
(b)(2) 
and 
(3) 
clarify 
a 
partner's fiduciary 
duties 
upon 
dissociation. 
No 
change 
from 
current 
law 
is 
intended. 
With respect to the duty of loyalty, 
the Section 
404(b) (3) duty not to compete terminates upon dissociation, and 
the 
dissociated partner is free 
immediately to 
engage 
in 
a 
competitive business, without any further consent. 
With respect 
to the partner's remaining loyalty duties under Section 404(b) 
and duty of care under Section 404(c), a withdrawing partner has 
a 
continuing duty after dissociation, 
but it is limited to 
matters that arose or events that occurred before the partner 
dissociated. 
For example, a partner who leaves a brokerage firm 
may immediately compete with the firm for new clients, but must 
exercise care in completing on-going client transactions and must 
account to the firm for any fees received from the old clients on 
account of those transactions. 
As the last clause makes clear, 
there is no contraction of a dissociated partner's duties under 
subsection (b) (3) if the partner thereafter participates in the 
dissolution and winding up the partnership's business. 
SUBCHAPTER 7 
PAR".L"ID:R~SSOCIATION WHEN 
BUSINESS NOT WOUND UP 
§1011. 
Purchase of dis~~~ted partner's interest 
1. 
Purchase of interest if no dissolution. 
If a partner is 
dissociated from a partnership without resulting in a dissolution 
~:!'d,nding up of the 
partn~rship business under section 1081_L 
the partnership shall cause the dissociated partner's interest in 
the partnership to be purchased for a buyout price determined 
pursuant to subsection 2. 
2. 
Buyout price. 
The 
buyout 
price 
of 
a 
dissociated 
partner's 
interest 
is 
the 
amount 
that 
would 
have 
been 
distributable to the dissociating partner under section 1087, 
subsection 2 if, on the date of dissociation, the assets of the 
partnership were 
sol~t a price equal to the greater of the 
liquidation value or the value based on a sale of the entire 
business as a going concern without the dissociated partner and 
the partnership were wound up as of that date. 
Interest must be 
paid from the date of dissociation to the date of payment. 
3. 
Damages for wrongful dissociation; interest. 
Damages 
for wrongful dissociation under section 1062, subsection 2, and 
all other amounts owing, whether or not presently due, from the 
dissociated partner to 
th~grtnership, must be offset 
again~t 
the buyout price. 
Interest must be paid from the date the amount 
owed becomes due to the date of payment. 
4. 
Inde~ification. 
A 
partnership 
dissociated partner whose interest is being 
partnership liabilities, whether incurred 
dissociation, 
except liabilities 
incurred 
dissociated partner under section 1072. 
shall 
indemnify 
a 
purchased against all 
before or after the 
by 
an 
act 
of 
the 
5. 
Payment 
after 
days. 
If 
no 
agreement 
for 
the 
purchase of a dissociated partner's interest is reached wi thin 
days after a written demand for payment, 
the partnership 
shall pay, 
or cause to 
b_~paid, in cash to the 
dissocia~~q 
partner the amount the pal-tnership estimates to be the buyout 
pr ice and accrued interest, reduced by any offsets and accrued 
interest under subsection 3. 
6. 
Defe,.!'~e~ayJMrnt. 
If a deferred--p.§yment is authorized 
under subsection 8, the partnership may tender a written offer to 
pay the amount it estimate_~to be the buyout price and accrued 
interest, reduced by any offsets under subsection 3, stating the 
• 
time of payment, the amount a~pe of security for payment and 
the other terms and conditions of the obligation. 
1. 
Disclosures with payroent or tender. 
The payment or 
tender required by subsection 5 or 6 must be accompanied by the 
following: 
A. 
A statement of partnership assets and liabilities as of 
the date of dissociation; 
B. 
The 
latest available 
partnership balance 
sheet 
and 
income statement, if any; 
k_. 
An 
explanation of 
how 
the estimated 
amount 
of 
the 
payment was calculated; and 
D. 
Written notice that the payment is in full satisfaction 
of the obligation to purchase unless, within 120 days after 
the written notice, 
the dissociated partner commences 
an 
action to determine the buyout price, 
any offsets under 
subsection 3 or other terms of the obligation to purchase. 
8. 
Wrongful 
dissoci~.tion. 
A 
partner 
who 
wrongfully 
dissociates before the expiration of 
a definite term or the 
completion of a particular undertaking is not entitled to payment 
of any portion of the buyout price until the expiration of the 
term 
or 
completion 
of 
the 
undertaking, 
unless 
the 
partner 
establishes to the satisfaction of the court that earlier payment 
will 
not 
cause 
undue 
hardship 
to 
the 
business 
of 
the 
p-artnership. 
A deferred payment must be adequately secured and 
bear interest. 
9. 
Dissociated partner' s 
action against partnership. 
A 
d~ssociated 
partner 
may 
maintain 
an 
action 
against 
the 
partnership, pursuant to section 1045, subsection 2, paragraph B, 
~~~paragraph (2), to determine the buyout price of that partner's 
interest. any offsets under subsection 3, or other terms of the 
oQligation to purchase. 
The action must be commenced within 120 
days after the partnership has tendered payment or an offer to 
payor within one year after written demand for payment if no 
payment or offer to pay is tendered. 
The court shall determine 
the 
buyout price of the dissociated partner's interest, 
any 
offset due under subsection 3, and accrued interest. and enter 
judgment 
for 
any additional 
payment or 
refund. 
If deferred 
p-ayment is authorized under subsection 8, the court shall also 
determine 
the 
security 
for 
payment 
and 
other 
terms 
of 
the 
obligation 
to 
purchase. 
The 
court 
may 
assess 
reasonable 
attorney's fees and the fees and expenses of appraisers or other 
~xp--erts for a party to the actioll, in amounts the court finds 
~i 
table, 
against 
a 
party 
that 
the 
court 
finds 
acted 
arbitrarily, vexatiously or not in good faith. 
The finding may 
be based on the partnership's failure to tender payment or an 
offer to payor to comply with subsection 7. 
Comment 
(This is Section 701 of the Uniform Partnership Act (1997).) 
1. 
Article 7 is new 
and provides for the buyout of 
a 
dissociated 
partner's 
interest 
in 
the 
partnership 
when 
the 
partner's dissociation does 
not result in 
a 
dissolution and 
winding up of its business under Article 8. 
See Section 603(a). 
If there is no dissolution, the remaining partners have a right 
to continue the business and the dissociated partner has a right 
to be paid the value of his partnership interest. 
These rights 
can, 
of course, 
be varied in the partnership agreement. 
See 
Section 103. 
A dissociated partner has a continuing relationship 
with the partnership and third parties as provided in Sections 
(b), 702, and 703. 
See also Section 403 (b) (former partner's 
access to partnership books and records). 
2. 
Subsection 
(a) 
provides 
that, 
if 
a 
partner's 
dissociation does not result in a windup of the business, the 
partnership shall cause the interest of the dissociating partner 
to 
be 
purchased 
for 
a 
buyout 
price 
determined 
pursuant 
to 
subsection (b). 
The buyout is mandatory. 
The 
"cause to be 
purchased" language is intended to accommodate a purchase by the 
partnership, one or more of the remaining partners, or a third 
party. 
For federal income tax purposes, a payment to a partner for 
his interest can be characterized either as a purchase of the 
partner's interest or as 
a liquidating distribution. 
The 
two 
have different tax consequences. 
RUPA permits either option by 
providing that the payment may come from either the partnerShip, 
some 
or all 
of 
the 
continuing partners, 
or 
a 
third party 
purchaser. 
3. 
Subsection (b) provides how the "buyout price" is to be 
determined. 
The terms "fair market value" or "fair value" were 
not used because they are often considered terms of art having a 
special meaning depending on the context, 
such as in tax or 
corporate law. 
"Buyout price" is a 
new term. 
It is intended 
that the term be developed as an independent concept appropriate 
to the partnership buyout situation, while drawing on valuation 
principles developed elsewhere. 
Under subsection (b), the buyout price is the amount that 
would have been distributable to the dissociating partner under 
Section 807(b) if, on the date of dissociation, the assets of the 
• 
• 
partnership 
were 
sold at 
a 
price 
equal 
to 
the greater 
of 
liquidation value or going concern value without the departing 
partner. 
Liquidation value is not intended to mean distress sale 
value. 
Under general principles of valuation, the hypothetical 
selling price in either case should be the price that a willing 
and informed buyer would pay a willing and informed seller, with 
nei ther being under any compulsion to deal. 
The notion of a 
minority discount in determining the buyout price is negated by 
valuing the business as a going concern. 
Other discounts, such 
as for a lack of marketability or the loss of a key partner, may 
be appropriate, however. 
Since the buyout price is based on the value of the business 
at the time of dissociation, the partnership must pay interest on 
the amount due from the date of dissociation until payment to 
compensate the dissociating partner for the use of his interest 
in the firm. 
Section 104(b) provides that interest shall be at 
the 
legal 
rate unless otherwise provided in the partnership 
agreement. 
The UPA Section 42 option of electing a share of the 
profits in lieu of interest has been eliminated. 
UPA Section 38(2)(c)(II) provides that the good will of the 
business not be considered in valuing a wrongfully dissociating 
partner's 
interest. 
The 
forfeiture 
of 
good 
will 
rule 
is 
implicitly rejected by RUPA. 
See Section 602(c) and Comment 3. 
The 
Section 
rules 
are 
merely 
default 
rules. 
The 
partners may, 
in the partnership agreement, fix the method or 
formula for determining the buyout price and all of the other 
terms and conditions of the buyout right. 
Indeed, the very right 
to 
a 
buyout 
itself 
may 
be 
modified, 
although 
a 
provision 
providing 
for 
a 
complete 
forfeiture 
would 
probably 
not 
be 
enforceable. 
See Section 104(a). 
4. 
Subsection (c) provides that the partnership may offset 
against the buyout price all amounts owing by the dissociated 
partner 
to 
the 
partnership, 
whether 
or 
not 
presently 
due, 
including any damages 
for wrongful dissociation under Section 
(c) . 
This has the effect of accelerating payment of amounts 
not yet 
due 
from 
the 
departing partner to 
the partnership, 
including a long-term loan by the partnership to the dissociated 
partner. 
Where appropriate, the amounts not yet due should be 
discounted to present value. 
A dissociating partner, 
on the 
other hand, is not entitled to an add-on for amounts owing to him 
by the partnership. 
Thus, 
a departing partner who has made a 
long-term loan to the partnership must wait for repayment, unless 
the terms of the loan agreement provide for acceleration upon 
dissociation. 
It is not intended that the partnership's right of setoff be 
construed to limit the amount of the damages for the partner's 
wrongful 
dissociation 
and 
any 
other 
amounts 
owing 
to 
the 
partnership to the value of the dissociated partner's interest. 
Those amounts may result in a net sum due to the partnership from 
the dissociated partner. 
5. 
Subsection 
(d) 
follows 
the 
UPA 
Section 
rule and 
provides 
that 
the 
partnership 
must 
indemnify 
a 
dissociated 
partner against all partnership li ab i li ti e s , 
whether 
incurred 
before or after the dissociation, except those incurred by the 
dissociated partner under Section 702. 
6. 
Subsection (e) provides that, if no agreement for the 
purchase of the dissociated partner's interest is reached within 
days 
after 
the dissociated partner's written demand 
for 
payment, the partnership must pay, or cause to be paid, in cash 
the amount it estimates to be the buyout price, adjusted for any 
offsets allowed and accrued interest. 
Thus, 
the dissociating 
partner will receive in cash within 120 days of dissociation the 
undisputed minimum value of the partner's partnership interest. 
If the dissociated partner claims that the buyout price should be 
higher, suit may thereafter be brought as provided in subsection 
(i) to have the amount of the buyout price determined by the 
court. 
This is similar to the procedure for determining the 
value of dissenting shareholders' 
shares under 
RMBCA 
Sections 
13.20-13.28. 
The 
"cause 
to 
be 
repeated here to permit 
the continuing partners, 
payment of the estimated 
paid" 
either 
or a 
language 
of 
subsection 
the partnership, one or 
third-party purchaser to 
amount due. 
(a) 
is 
more of 
tender 
7. 
Subsection (f) provides that, when deferred payment is 
authorized in the case of a wrongfully dissociating partner, a 
written offer stating the amount the partnership estimates to be 
the purchase price should be tendered within the 120day period, 
even 
though 
actual 
payment 
of 
the 
amount 
may 
be 
deferred, 
possibly for many years. 
See Comment 8. 
The dissociated partner 
is entitled to know at the time of dissociation what amount the 
remaining partners think is due, including the estimated amount 
of 
any 
damages 
allegedly 
caused 
by 
the 
partner's 
wrongful 
dissociation that may be offset against the buyout price. 
8. 
Subsection 
(g) 
provides 
that 
the 
payment 
of 
the 
estimated price (or tender of a written offer under subsection 
(f)) by the partnership must be accompanied by (1) a statement of 
the partnership's assets and liabilities as of the date of the 
partner's dissociation; 
(2) the latest available balance sheet 
and income statement, if the partnership maintains such financial 
.. 
statements; (3) an explanation of how the estimated amount of the 
payment was calculated; and (4) a written notice that the payment 
will 
be 
in 
full 
satisfaction 
of 
the 
partnership's 
buyout 
obligation unless the dissociated partner commences an action to 
determine the price wi thin 120 days of the notice. 
Subsection 
(g) is based in part on the dissenters' rights provisions of 
RMBCA Section 13.25(b). 
Those 
disclosures 
should 
serve 
to 
identify 
and 
narrow 
substantially 
the 
items 
of 
dispute 
between 
the 
dissociated 
partner and the partnership over the valuation of the partnership 
interest. 
They will also serve to pin down the parties as to 
their claims of partnership assets and values and as to the 
existence and amount of all known liabilities. 
See Comment 4. 
Lastly, 
it 
will 
force 
the 
remaining 
partners 
to 
consider 
thoughtfully the difficult and important questions as to the 
appropriate method of valuation under the circumstances, and in 
particular, whether they should use going concern or liquidation 
value. 
Simply getting that information on the record in a timely 
fashion should increase the likelihood of a negotiated resolution 
of the parties' differences during the 120day period within which 
the dissociated partner must bring suit. 
9. 
Subsection 
(h) 
replaces 
UPA 
Section 
38(2)(c) 
and 
provides a somewhat different rule for payment to a partner whose 
dissociation before the expiration of 
a definite term or the 
completion of a particular undertaking is wrongful under Section 
(b) . 
Under subsection (h), a wrongfully dissociating partner 
is not entitled to receive any portion of the buyout price before 
the expiration of the term or completion of the undertaking, 
unless the djssociated partner establishes to the satisfaction of 
the court thE'':: earlier payment will not cause undue hardship to 
the business of the partnership. 
In all other cases, there must 
be an immediale payment in cash. 
10. 
Subsection (i) provides that a dissociated partner may 
maintain 
an action against the partnership to determine 
the 
buyout 
price, 
any 
offsets, 
or 
other 
terms 
of 
the 
purchase 
obligation. 
The action must be commenced within 120 days after 
the partnership tenders payment of the amount it estimates to be 
due or, if deferred payment is authorized, its written offer. 
This provision creates a l20day "cooling off" period. 
It also 
allows the parties an opportunity to negotiate their differences 
after disclosure by the partnership of its financial statements 
and other required information. 
If the partnership fails to tender payment of the estimated 
amount 
due 
(or 
a 
written 
offer, 
if 
deferred 
payment 
is 
authorized), the dissociated partner has one year after written 
demand for payment in which to commence suit. 
If the parties fail to 
reach agreement, 
the 
co~rt must 
determine 
the 
buyout 
price 
of 
the 
partner's 
interest, 
any 
offsets, 
including damages for wrongful dissociation, 
and the 
amount 
of 
interest 
accrued. 
If 
payment 
to 
a 
wrongfully 
dissociated partner is deferred, 
the 
court may 
also 
require 
security 
for 
payment 
and 
determine 
the 
other 
terms 
of 
the 
obligation. 
Under subsection (i), attorney's fees and other costs may be 
assessed against 
any party found 
to have 
acted arbitrarily, 
vexatiously, 
or 
not 
in 
good 
faith 
in 
connection 
with 
the 
valuation dispute, including the partnership's failure to tender 
payment 
of 
the 
estimated 
price 
or 
to 
make 
the 
required 
disclosures. 
This provision is based in part on RMBCA Section 
13.31(b). 
§l072. 
Dissociated partner's power to bind and liability to 
partnership 
1. 
Apparent authority of dissociated partner. 
For 2 years 
after a partner dissociates without resulting in a dissolution 
and winding up of the partnership business, 
the partnership, 
including a surviving partnership under subchapter 9, is bound by 
an act of the dissociated partner that would have bound the 
partnership under section 1031 before dissociation only if at the 
time of entering into the transaction the other party: 
A. 
Reasonably believed that the dissociated partner was 
then a partner: 
B. 
Did not have notice of the partner's dissociation; and 
C. 
Is 
not 
deemed 
to 
have 
notice 
under 
section 
1074, 
subsection 2. 
_2. 
Liabilit.Y..----.fQ~pli_qati_Qn __ atJ:.er 
dissQciatJ9.1l_. __ A 
dissociated partner is liable to the I?artnershil? for any damage 
caused to the I?artnership ar isJng from an obligation incurred by 
the 
dissociated 
I?artner 
after 
dissociation 
for 
which 
the 
partnership is liable under subsection 1. 
COlIBRent 
(This is Section 702 of the Uniform Partnership Act (1997).) 
1. 
Section 702 deals with a dissociated partner's lingering 
apparent authority to bind the partnership in ordinary course 
partnership 
transactions 
and 
the partner's liability to 
the 
partnership for any loss caused thereby. 
It also applies to 
.. 
.. 
partners who withdraw incident to a merger under Article 9. 
See 
Section 906(e). 
A dissociated partner has no actual authority to act for the 
partnership. 
See Section 603 (b) (1) • 
Nevertheless, in order to 
protect innocent third parties, Section 702(a) provides that the 
partnership 
remains 
bound, 
for 
two 
years 
after 
a 
partner's 
dissociation, 
by that partner's acts that would, 
before his 
dissociation, have bound the partnership under Section 301 if, 
and 
only if, 
the other party to 
the 
transaction reasonably 
believed that he was still a partner, did not have notice of the 
partner's dissociation, and is not deemed to have had knowledge 
of the dissociation under Section 303(e) or notice thereof under 
Section 704(c). 
Under Section 301, every partner has apparent authority to 
bind the partnership by any act for carrying on the partnership 
business in the ordinary course, unless the other party knows 
that 
the 
partner 
has 
no 
actual 
authority 
to 
act 
for 
the 
partnership or has received a notification of the partner's lack 
of authority. 
Section 702(a) continues that general rule for two 
years 
after 
a 
partner's 
dissociation, 
subject 
to 
three 
modifications. 
After 
a 
partner's 
dissociation, 
the 
general 
rule 
is 
modified, first, by requiring the other party to show reasonable 
reliance on the partner's status as a partner. 
Section 301 has 
no explicit reliance requirement, 
although the partnership is 
bound only if the partner purports to act on its behalf. 
Thus, 
the other party will normally be aware of the partnership and 
presumably the partner's status as such. 
The second modification is that, under Section 702 (a), the 
partnership is not bound if the third party has notice of the 
partner's dissociation, while under the general rule of Section 
the partnership is bound unless the third party knows of the 
partner's lack of authority. 
Under Section 102(b), a person has 
"notice" of a fact if he knows or has reason to know it exists 
from all the facts that are known to him or he has received a 
notification of it. 
Thus, the partnership may protect itself by 
sending a notification of the dissociation to a third party, and 
a third party may, in any event, have a duty to inquire further 
based on what is known. 
That provides the partnership with 
greater protection from the unauthorized acts of a dissociated 
partner than from those of partners generally. 
The third modification of the general apparent authority 
rule under Section 702(a) involves the effect of a statement of 
dissociation. 
Section 704 (c) provides that, for the purposes of 
Sections 702(a)(3) 
and 703(b)(3), third parties are deemed to 
have notice of a partner's dissociation 90 days after the filing 
of a statement of dissociation. 
Thus, the filing of a statement 
operates as constructive notice of the dissociated partner's lack 
of 
authority 
after 
days, 
conclusively 
terminating 
the 
dissociated partner's Section 702 apparent authority. 
With 
respect 
to 
a 
dissociated 
partner's 
authority 
to 
transfer partnership real property, Section 303(e) provides that 
third parties are deemed to have knowledge of a limitation on a 
partner's 
authority 
to 
transfer 
real 
property 
held 
in 
the 
partnership 
name 
upon 
the 
proper 
recording 
of 
a 
statement 
containing such a limitation. 
Section 704(b) provides that a 
statement 
of 
dissociation 
operates 
as 
a 
limitation 
on 
the 
dissociated partner's 
authority 
for 
the 
purposes 
of 
Section 
303(e). 
Thus, 
a 
properly recorded statement of dissociation 
operates as constructive knowledge of 
a dissociated partner's 
lack 
of 
authority 
to 
transfer 
real 
property 
held 
in 
the 
partnership name, effective immediately upon recording. 
Under RUPA, therefore, a partnership should notify all known 
creditors of 
a 
partner's dissociation 
and 
may, 
by filing 
a 
statement 
of dissociation, 
conclusively limit 
to 
days 
a 
dissociated partner's lingering agency power. 
Moreover, 
under 
Section 703 (b), a dissociated partner's lingering liability for 
post-dissociation partnership liabilities may be limited to 90 
days by filing a statement of dissociation. 
These incentives 
should encourage both partnerships and dissociating partners to 
file 
statements 
routinely. 
Those 
transacting 
substantial 
business with partnerships can protect themselves from the risk 
of dealing with dissociated partners, or relying on their credit, 
by checking the partnership records at least every 90 days. 
2. 
Section 702(b) is a 
corollary to subsection (a) 
and 
provides that a dissociated partner is liable to the partnership 
for any loss resulting from an obligation improperly incurred by 
the partner under subsection (a). 
In effect, the dissociated 
partner must indemnify the partnership for any loss, meaning a 
loss net of 
any gain from 
the transaction. 
The dissociated 
partner is also personally liable to the third party for the 
unauthorized obligation. 
§l013. 
Dissociated partner's liability to other persons 
1. 
Liability 
fo~rtne~_~~ip obligation. 
A 
partner's 
dissociation does not of itself discharge the partner's liability 
for 
a 
partnership obligation incurred before dissociation. 
A 
dissociated partner is not liable for a partnership obligation 
~ncurLed after 
dissoci~tio~~Kc~t as 
otherwise provided in 
subsection 2. 
., 
2. 
Liability to oJ:heL-Pjirt;.y. 
A partner who dissociates 
without 
resulting 
in 
a 
dissolution 
and 
winding 
up 
of 
the 
partnership business is liable as a partner to the other party in 
a transaction entered into by the partnership, or a 
surviving 
partnership 
under 
subchapter 
9, 
within 
years 
after 
the 
partner's dissociation, only if the partner is liable for the 
obligation under section 1034 and at the time of entering into 
the transaction the other party: 
A.,------"R.,..,e<->i;l.sonably 
believed that the dissociated partner was 
then a partner; 
B. 
Did not have notice of the partner's dissociation; and 
C. 
Is not deemed to have had notice under section 1074, 
subsection 2. 
3. 
Released from liability for partnership obligation :by 
agreement. 
By agreement with the partnership creditor and the 
partners continuing the business, 
a dissociated partner may be 
released from liability for a partnership obligation. 
4. 
Released 
from 
liability 
for 
partnership 
obligatioQ 
because 
of 
material 
alteration. 
A 
dissociated 
partner 
is 
released 
from 
liability 
for 
a 
partnership 
obligation if 
a 
partnership creditor, with notice of the partner's dissociation 
but 
without 
the 
partner's 
consent. 
agrees 
to 
a 
material 
alteration in the nature or time of payment of a partnership 
obligation. 
Comment 
(This is Section 703 of the Uniform Partnership Act (1997).) 
Section 703 (a) is based on UPA Section 36 (1) and continues 
the basic rule that the departure of a partner does not of itself 
discharge 
the 
partner's liability to 
third parties 
for 
any 
partnership obligation incurred before dissociation. 
The word 
"obligation" is used instead of "liability" and is intended to 
include broadly both tort and contract liability incurred before 
dissociation. 
The second sentence states affirmatively that a 
dissociating partner is not liable for any partnership obligation 
incurred after dissociation except 
as 
expressly provided 
in 
subsection (b). 
Section 
703(b) 
is 
new 
and 
deals 
with 
the 
problem 
of 
protecting third parties who extend credit to the partnership 
after a partner's dissociation, believing that he is still a 
partner. 
It provides that the dissociated partner remains liable 
as a partner for transactions entered into by the partnership 
within two years after departure, if the other party does not 
have notice of the partner's dissociation and reasonably believes 
when entering the transaction that the dissociated partner is 
still 
a 
partner. 
The 
dissociated partner is not personally 
liable, however, if the other party is deemed to know of the 
dissociation under Section 303(e) or to have notice thereof under 
Section 704(c). 
Also, 
a dissociated partner is not personally 
liable for limited liability partnership obligations for which 
the partner is not personally liable under Section 306. 
Section 703(b) operates similarly to Section 702(a) in that 
it 
requires 
reliance 
on 
the 
departed 
partner's 
continued 
partnership status, as well as lack of notice. 
Under Section 
704(c), 
a 
statement of dissociation operates 
conclusively as 
constructive notice 
days after filing for the purposes of 
Section 703(b)(3) 
and, 
under 
Section 704(b), 
as 
constructive 
knowledge when recorded for the purposes of Section 303 (d) and 
(e) • 
Section 703(c) continues the rule of UPA Section 36(2) that 
a departing partner can bargain for a contractual release from 
personal liability for a partnership obligation, but it requires 
the consent of both the creditor and the remaining partners. 
Section 703(d) continues the rule of UPA Section 36(3) that 
a 
dissociated 
partner 
is 
released 
from 
liability 
for 
a 
partnership obligation if 
the 
creditor, 
with 
notice 
of 
the 
partner's departure, 
agrees 
to 
a 
material alteration in the 
nature or time of payment, without that partner's consent. 
This 
rule covers all partner dissociations and is not limited, as is 
the UPA rule, to situations in which a third party "agrees to 
assume the existing obligations of a dissolved partnership." 
In general under RUPA, 
as a result of the adoption of the 
entity 
theory, 
relationships 
between 
a 
partnership 
and 
its 
creditors are not affected by the dissociation of a partner or by 
the 
addition 
of 
a 
new 
partner, 
unless 
otherwise 
agreed. 
Therefore, there is no need under RUPA, 
as there is under the 
UPA, 
for an elaborate provision deeming the new partnership to 
assume the liabilities of the old partnership. 
See UPA Section 
41. 
The "dual priority" rule in UPA Section 36(4) is eliminated 
to reflect the abolition of the "j ingle rule," providing that 
separate debts have first claim on separate property, in order to 
conform to the Bankruptcy Code. 
See Comment 2 to Section 807. 
A 
deceased 
partner's 
estate, 
and 
thus 
all 
of 
his 
individual 
property, 
remains 
liable for partnership obligations 
incurred 
while he was a partner, however. 
• 
§1074. 
Statement of dissociation 
1. 
Filin~~~~t~~P.~t~. __ ~A~~d~i~s~s~o~c~i~a~t~e~d~~p~a~r~t~n~e~r __ ~o~r~~t~h~e 
partnership may file a statement of dissociation stating the name 
~,-f the partnership and that the partner is dissociated from the 
partnership. 
2. 
Deemed to have notice. 
For the purposes of section 
1072, subsection 1, paragraph C and section 1073, subsection 2, 
p-aragraph C, a person not a partner is deemed to have notice of 
the dissociation 90 days after the statement of dissociation is 
filed. 
Comment 
(This is Section 704 of the Uniform Partnership Act (1997).) 
Section 
is 
new 
and 
provides 
for 
a 
statement 
of 
dissociation and its effects. 
Subsection (a) authorizes either a 
dissociated partner or the partnership to file a statement of 
dissociation. 
Like 
other 
RUPA 
filings, 
the 
statement 
of 
dissociation 
is 
voluntary. 
Both 
the 
partnership 
and 
the 
departing partner have an incentive to file, however, and it is 
anticipated 
that 
those 
filings 
will 
become 
routine 
upon 
a 
partner's dissociation. 
The execution, filing, and recording of 
the statement is governed by Section 105. 
Filing 
or 
recording 
a 
statement 
of 
dissociation 
has 
threefold significance: 
(1) 
It is a 
statement of limitation on the dissociated 
partner's authority to the extent provided in Section 303(d) and 
(e). 
Under Section 303(d), a filed or recorded limitation on the 
authority of a partner destroys the conclusive effect of a prior 
grant of authority to the extent it contradicts the prior grant. 
Under Section 303(e), nonpartners are conclusively bound by a 
limitation 
on 
the 
authority of 
a 
partner 
to 
transfer 
real 
property held in the partnership 
name, 
if the 
statement is 
properly recorded in the real property records. 
(2) 
Ninety days after the statement is filed, nonpartners 
are 
deemed 
to 
have 
notice 
of 
the 
dissociation 
and 
thus 
conclusively bound for purposes of cutting off the partner's 
apparent authority under Sections 301 and 702(a)(3). 
(3) 
Ninety days after the statement is filed, third parties 
are 
conclusively 
bound 
for 
purposes 
of 
cutting 
off 
the 
dissociated 
partner's 
continuing 
liability 
under 
Section 
(b) (3) for transactions entered into by the partnership after 
dissociation. 
Sl075. 
Continued use of partnership name 
~ontinued use 
of 
a 
partnership 
name, 
or 
a 
dissQciateQ 
partner's 
name 
as 
part thereof, 
by 
partners 
continuing 
the 
business does not of itself make the dissociated partner liable 
for an obligation of the p_rtners or the partnership continuing 
the business. 
Comment 
(~his is Section 705 of the Uniform Partnership Act (1997).) 
Section 705 is an edited version of UPA Section 41(10) and 
provides that a dissociated partner is not liable for the debts 
of the continuing business simply because of continued use of the 
partnership name or the dissociated partner's name as 
a part 
thereof. 
That prevents forcing the business to forego the good 
will associated with its name. 
SUBCHAPTER 8 
WINDING UP PARTNERSHIP BUSINESS 
Sl08l. 
Events causing dissolution and winding up of partnership 
business 
A partnership is dissolved, and its business must be wound 
up, only upon the occurrence of any of the following events: 
1. 
Notice of ez~~s will to withdraw. 
In a partnership at 
will, the partnership's having notice from a partner, other than 
a partner who is dissociated under section 1061, subsections 2 to 
10, of that partner's express will to withdraw as a partner, or 
on a later date specified by the partn~ 
2. 
Dissolution before e~iration of term. 
In a partnership 
for a definite term or particular undertaking: 
A. 
Within 90 days after a partner's dissociation by death 
or otherwise under section 1061, 
subsections 
to 10 or 
wrongful dissociation under section 1062, subsection 2, the 
express will of at least 112 of the remaining partners to 
wind 
up 
the 
partnership business, 
for 
which 
purpose 
a 
partner's rightful dissociation pursuant to section 1062, 
subsection 2, paragraph a, subparagraph (1) constitutes the 
expression of that partner's will to wind up the partnership 
business; 
a. 
The express will of all of the partners to wind up the 
partnership business; or 
• 
C. 
The expiration of the term or the completion of the 
undertaking; 
3. 
Event in paxt~~:Lshi-1LJ',q~f;tem~nJ:. 
the partnership agreement resulting in 
partnership business; 
An event agreed to in 
the winding up of the 
-"4'-"._--""U=n'-.."l'""'a=1I'-"f'-"u""l"------"'c"'o=n~t.."i~nuati...Q!u 
cure. 
An event that makes it 
unlawful for all or substantially all of the business of the 
partnership to be continued, but a cure of illegality within 90 
days after notice to the partnership of the event is effective 
retroactively to the date of the event for purposes of this 
section; 
.5 -"-------JJldj.j:ijl~etenn.i:g.ati,.ol).;_Qpplic.qt.i.on 
b,y 
pqr;tner. 
On 
application by a partner, a judicial determination that: 
A. 
The economic purpose of the partnership is likely to be 
unreasonably frustrated; 
B. 
Another partner has engaged in conduct relating to the 
partnership 
business 
that 
makes 
it 
not 
reasonably 
practicable to carryon the business in partnership with 
that partner; or 
C. 
It is not otherwise reasonably practicable to carryon 
the partnership business in conformity with the partnership 
agreement; or 
6. 
Judicial determination; application by transferee. 
On 
application by a transferee of a partner's transferable interest, 
a 
judicial determination that it is equitable to wind up the 
partnership business: 
A. 
After the expiration of the term or completion of the 
undertaking, if the partnership was for a definite term or 
particular undertaking at the time of the transfer or entry 
of the charging order that gave rise to the transfer; or 
B. 
At any time, if the partnership was a partnership at 
will at the time of the transfer or entry of the charging 
order that gave rise to the transfer. 
Comment 
(This is Section 801 of the Uniform Partnership Act (1997).) 
1. 
Under UPA Section 29, a partnership is dissolved every 
time a partner leaves. 
That reflects the aggregate nature of the 
partnership 
under 
the 
UPA. 
Even 
if 
the 
business 
of 
the 
partnership 
is 
continued 
by 
some 
of 
the 
partners, 
it is 
technically 
a 
new 
partnership. 
The 
dissolution 
of 
the 
old 
partnership 
and 
creation 
of 
a 
new 
partnership 
causes 
many 
unnecessary problems. 
Under RULPA, 
than 
do 
general 
partnership does 
partner, nor does 
general partner. 
limi ted partnerships dissolve far less readily 
partnerships 
under 
the 
UPA. 
A 
limited 
not dissolve on the withdrawal of 
a 
limited 
it necessarily dissolve on the withdrawal of a 
See RULPA § 801(4). 
, 
RUPA's move to the entity theory is driven in part by the 
need to prevent a 
technical dissolution or its consequences. 
Under RUPA, 
not every partner dissociation causes a dissolution 
of 
the 
partnership. 
Only 
certain 
departures 
trigger 
a 
dissolution. 
The basic rule is that a partnership is dissolved, 
and its business must be wound up, only upon the occurrence of 
one of the events listed in Section 801. 
All other dissociations 
result in a buyout of the partner's interest under Article 7 and 
a 
continuation of the partnership entity and business by the 
remaining partners. 
See Section 603(a). 
With only three exceptions, the provisions of Section 801 
are merely default rules 
and 
may 
by agreement 
be varied or 
eliminated as grounds for dissolution. 
The first exception is 
dissolution under Section 801 (4) resulting from carrying on an 
illegal business. 
The other two exceptions cover the power of a 
court 
to 
dissolve 
a 
partnership 
under 
Section 
801( 5) 
on 
application of a partner and under Section 801(6) on application 
of 
a 
transferee. 
See Comments 
for further explanation of 
these provisions. 
2. 
Under RUPA, "dissolution" is merely the commencement of 
the 
winding 
up 
process. 
The 
partnership 
continues 
for 
the 
limited purpose of winding up the business. 
In effect, that 
means 
the 
scope 
of 
the 
partnership 
business 
contracts 
to 
completing work in process and taking such other actions as may 
be necessary to wind up the business. 
Winding up the partnership 
business 
entails 
selling its assets, 
paying its debts, 
and 
distributing the net balance, if any, to the partners in cash 
according to their interests. 
The partnership entity continues, 
and the partners are associated in the winding up of the business 
until winding up is completed. 
When the winding up is completed, 
the partnership entity terminates. 
3. 
Section 801 
First, it continues 
partnership has the 
negative implication, 
continues two basic rules from the UPA. 
the rule that any member 
of 
an at-will 
right to force a liquidation. 
Second, 
by 
it continues the rule that the partners who 
t 
wish to continue the business of a term partnership can not be 
forced to liquidate the business by a 
partner who 
withdraws 
prematurely in violation of the partnership agreement. 
Those rules are gleaned from the separate UPA provisions 
governing dissolution and its consequences. 
Under UPA Section 
31(1)(b), 
dissolution is caused by 
the express will of 
any 
partner 
when 
no 
definite 
term 
or particular 
undertaking is 
specified. 
UPA Section 38(1) provides that upon dissolution any 
partner has the right to have the business wound up. 
That is a 
defaul t 
rule and applies only in the absence of an agreement 
affording the other partners a right to continue the business. 
UPA Section 3l( 2) provides that a term partnership may be 
dissolved at 
any 
time, 
in contravention of 
the 
partnership 
agreement, by the express will of any partner. 
In that case, 
however, 
UPA 
Section 38(2)(b) 
provides that the 
nonbreaching 
partners may by unanimous consent continue the business. 
I f the 
business is continued, they must buyout the breaching partner. 
4. 
Section 801 (1) provides that a partnership at will is 
dissolved 
and 
its 
business 
must 
be 
wound 
up 
upon 
the 
partnership's 
having 
notice 
of 
a 
partner's 
express 
will 
to 
withdraw as a partner, unless a later effective date is specified 
by 
the 
partner. 
A partner 
at will 
who 
has 
already 
been 
dissociated in some other manner, such as a partner who has been 
expelled, 
does 
not 
thereafter 
have 
a 
right 
to 
cause 
the 
partnership to be dissolved and its business wound up. 
If, 
after 
dissolution, 
none 
of 
the 
partners 
wants 
the 
partnership wound up, 
Section 802(b) 
provides that, with the 
consent of all the partners, including the withdrawing partner, 
the remaining partners may continue the business. 
In that event, 
although there is a technical dissolution of the partnership and, 
at least in theory, a temporary contraction of the scope of the 
business, the partnership entity continues and the scope of its 
business is restored. 
See Section 802(b) and Comment 2. 
5. 
Section 801(2) 
provides three ways 
in which 
a 
term 
partnership may be dissolved before the expiration of the term: 
(i) 
Subsection (2)(i) 
provides 
for dissolution after 
a 
partner's dissociation by death or otherwise under Section 601(6) 
to (10) or wrongful dissociation under Section 602(b), if within 
days after the dissociation at least half of the remaining 
partners express their will to dissolve the partnership. 
Thus if 
a term partnership had six partners and one of the partners dies 
or 
wrongfully dissociates 
before 
the 
end 
of 
the 
term, 
the 
partnership will, as a result of the dissociation, be dissolved 
only if three of the remaining five partners affirmatively vote 
in favor of dissolution within 90 days after the dissociation. 1 
This 
reactive dissolution of 
a 
term partnership protects the 
remaining partners where the dissociating partner is crucial to 
the successful continuation of the business. 
The corresponding 
UPA 
Section 38(2)(b) 
rule 
requires 
unanimous 
consent of the 
remaining partners to continue the business, 
thus giving each 
partner an absolute right to a reactive liquidation. 
Under UPA 
1994, 
if the partnership is 
continued by 
the majority, 
any 
dissenting partner who wants to withdraw may do so rightfully 
under the exception to Section 602(b)(2)(i), in which case his 
interest in the partnership will be bought out under Article 7. 
By itself, however, a partner's vote not to continue the business 
is 
not 
necessarily 
an 
expression 
of 
the 
partner's will 
to 
wi thdraw, and a dissenting partner may still elect to remain a 
partner and continue in the business. 
The Section 601 dissociations giving rise to 
a 
reactive 
dissolution are: (6) a partner's bankruptcy or similar financial 
impairment; 
(7) 
a 
partner's 
death 
or 
incapacity; 
(8) 
the 
distribution 
by 
a 
trust-partner 
of 
its 
entire 
partnership 
interest; (9) the distribution by an estate-partner of its entire 
partnership 
interest; 
and 
(10) 
the 
termination 
of 
an 
enti ty-partner. 
Any 
dissociation 
during 
the 
term 
of 
the 
partnership that is wrongful under Section 602(b), including a 
partner's voluntary withdrawal, 
expulsion or 
bankruptcy, 
aJso 
gives rise to a reactive dissolution. 
Those statutory grounds 
may be varied by agreement or the reactive dissolution may be 
abolished entirely. 
Under 
Section 60l(6)(i), 
a 
partner 
is dissociated 
upon 
becoming a debtor in bankruptcy. 
The bankruptcy of a partner or 
of the partnership is not, however, an event of dissolution under 
Section 
801. 
That 
is 
a 
change 
from 
UPA 
Section 
31(5). 
A 
partner's bankruptcy does, however, cause dissolution of a term 
partnership 
under 
Section 
80l(2)(i), 
unless 
a 
majority 
in 
interest of the remaining partners thereafter agree to continue 
the partnership. 
Affording the other partners the option of 
buying out the bankrupt partner's interest avoids the necessity 
of winding up a term partnership every time a partner becomes a 
debtor in bankruptcy. 
Similarly, under Section 80l(2)(i), the death of any partner 
will result in the dissolution of a term partnership, only if at 
least half of the remaining partners express their will to wind 
up the partnership's business. 
If dissolution does occur, the 
deceased 
partner's 
transferable 
interest 
in 
the 
partnership 
passes to his estate and must be bought out under Article 7. 
See 
Comment 8 to Section 601. 
(ii) 
Section 80l(2)(ii) provides that a 
term partnership 
may be dissolved and wound up at any time by the express will of 
.. 
• 
• 
, 
all the partners. 
That is merely an expression of the general 
rule that the partnership agreement may override the statutory 
default 
rules 
and 
that the 
partnership 
agreement, 
like 
any 
contract, can be amended at any time by unanimous consent. 
UPA Section 31(1)(c) provides that a term partnership may be 
wound 
up 
by 
the 
express 
will 
of 
all 
the 
partners 
whose 
transferable interests have not been assigned or charged for a 
partner's separate debts. 
That rule reflects the belief that the 
remaining partners may find transferees very intrusive. 
This 
provision has been deleted, however, because the liquidation is 
easily accomplished under Section 801 (2) (ii) by first expelling 
the transferor partner under Section 601(4)(ii). 
(iii) 
Section 801(2)(iii) is based on UPA Section 31(1)(a) 
and 
provides 
for 
winding 
up 
a 
term 
partnership 
upon 
the 
expiration of the term or the completion of the undertaking. 
Subsection (2)(iii) must be read in conjunction with Section 
406. 
Under Section 406(a), if the partners continue the business 
after the expiration of 
the 
term or the 
completion of 
the 
undertaking, the partnership will be treated as a partnership at 
will. 
Moreover, if the partners continue the business without 
any settlement or liquidation of the partnership, under Section 
406(b) they are presumed to have agreed that the partnership will 
continue, despite the lack of a formal agreement. 
The partners 
may also agree to ratify all acts taken since the end of the 
partnership's term. 
6. 
Section 
(3) 
provides 
for 
dissolution 
upon 
the 
occurrence of an event specified in the partnership agreement as 
resulting in the winding up of the partnership business. 
The 
partners may, 
however, 
agree to continue the business and to 
ratify all acts taken since dissolution. 
7. 
Section 801 (4) continues the basic rule in UPA Section 
31(3) and provides for dissolution if it is unlawful to continue 
the business of the partnership, 
unless cured. 
The "all or 
substantially all" proviso is intended to avoid dissolution for 
insubstantial 
or 
innocent 
regulatory 
violations. 
If 
the 
illegality 
is 
cured 
within 
days 
after 
notice 
to 
the 
partnership, it is effective retroactively for purposes of this 
section. 
The requirement that an uncured illegal business be 
wound up cannot be varied in the partnership agreement. 
See 
Section 103(b)(8). 
8. 
Section 
801(5) 
provides 
for 
judicial dissolution on 
application by a partner. 
It is based in part on UPA Section 
32(1), and the language comes in part from RULPA Section 802. 
A 
court 
may 
order 
a 
partnership 
dissolved 
upon 
a 
judicial 
determination that: (i) the economic purpose of the partnership 
is likely to be unreasonably frustrated; (ii) another partner has 
engaged in conduct relating to the partnership business which 
makes it not reasonably practicable to carryon the business in 
'~'r!-nership with that partner; or (iii) it is not otherwise 
"unably practicable to carryon the partnership business in 
( , 
,lni ty wi th the partnel ship agreement. 
The court's power to 
wind up the partnership under Section 801(5) cannot be varied in 
tl,' 
<tIl rshi'·' Rgreement. 
See Section 103(b)(8). 
RUPA 
deletes 
UPA 
Section 
(1) (e). 
which 
provides 
for 
dissolution when the business can only be carried on at a loss. 
That provision might result in a dissolution contrary to the 
partners' expectations in a start-up or tax shelter situation, in 
which 
case 
"book" 
or 
"tax" 
losses 
do 
not 
signify business 
failure. 
Truly 
poor 
financial 
performance 
may 
justify 
dissolution under 
subsection (5)(i) 
as 
a 
frustration of 
the 
partnership's economic purpose. 
RUPA also deletes UPA Section 32(1) (f) which authorizes a 
court 
to 
order 
dissolution 
of 
a 
partnership 
when 
"other 
circumstances render a dissolution equitable." 
That provision 
was 
regarded 
as 
too 
open-ended 
and, 
given 
RUPA's 
expanded 
remedies for partners, 
unnecessary. 
No 
significant change in 
result is intended, 
however, 
since the interpretation of 
UPA 
Section 32 (1) (f) is comparable to the specific grounds expressed 
in subsection (5). 
See, e.g., Karber v. Karber, 145 Ariz. 293, 
P.2d 1 (Ct. App. 
1985) (partnership dissolved on basis of 
suspicion and ill will, citing UPA §§ 32(I)(d) and (f»; Fuller 
v. Brough, 159 Colo. 147,411 P.2d 18 (1966) (not equitable to 
dissolve partnership for trifling causes or temporary grievances 
that do not render it impracticable to carryon partnership 
business); Lau v. Wong, 
Haw. 
App. 
217, 
P.2d 1031 (1980) 
(partnership dissolved where business operated solely for benefit 
of managing partner). 
9. 
Section 801(6) 
provides 
for 
judicial dissolution on 
application by a transferee of a partner's transferable interest 
in the 
partnership, 
including 
the 
purchaser 
of 
a 
partner's 
interest upon foreclosure of a charging order. 
It is based on 
UPA 
Section 32(2) 
and authorizes dissolution upon 
a 
judicial 
determination that it is equitable to wind up the partnership 
business (i) after the expiration of the partnership term or 
completion of the undertaking or (ii) 
at 
any 
time, 
if the 
partnership were 
a 
partnership at will at the 
time of 
the 
transfer or when the charging order was issued. 
The requirement 
that the court determine that it is equitable to wind up the 
business is new. 
The rights of a transferee under this section 
cannot be varied in the partnership agreement. 
See 
Section 
103(b)(8). 
• 
• 
Prior to August 1997, Section 801(2)(i) provided that upon 
the dissociation of a partner in a term partnership by death or 
otherwise 
under 
Section 
601(6) 
through 
(10) 
or 
wrongful 
dissociation under 602(b) the partnership would dissolve unless 
"a majority in interest of the remaining partners 
(including 
partners 
who 
have 
rightfully dissociated pursuant to Section 
(b) (2) (i» 
agree to continue the partnership." 
This language 
was 
thought to be necessary for 
a 
term partnership to lack 
continuity 
of 
life 
under 
the 
Internal 
Revenue 
Act 
tax 
classification 
regulations. 
These 
regulations 
were 
repealed 
effective January 1, 1997. 
The current language, approved at the 
1997 annual meeting of the National Conference of Commissioners 
on Uniform State Laws, 
allows greater continuity in 
a 
term 
partnership than the prior version of this subsection and UPA 
Section 38(2)(b). 
S1082. 
Partnership continues after dissolution 
1. 
Continuation for purpose of winding u,p. 
Subject to 
subsection 2, a partnership continues after dissolution only for 
the purpose of winding up its business. 
The partnership is 
terminated when the winding up of its business is completed. 
2. 
Waiver 
of 
right 
to 
wind 
u,p 
business: 
terminate 
p~rtneurnj,p~_ any time after the dissolution of a partnershlE 
and before the winding up of its business is completed, all of 
the partners, 
incl~ng any dissociating partner other than a 
wrongfully dissociating partner, may waive the right to have the 
partnership's business wound up and the partnership terminated. 
In that event: 
A. 
The partnership resumes carrying on its business as if 
dissolution had never occurred, and any liability incurred 
by the partnership or a partner after the dissolution and 
before the waiver is determined as if dissolution had never 
occurred; and 
B. 
The rights of a 3rd party accruing under section 1084, 
subsection 1 or arising out of conduct in reliance on the 
dissolution 
before 
the 
3rd 
party 
knew 
or 
received 
a 
notification of the waiver may not be adversely affected. 
Conment 
(This is Section 802 of the Uniform Partnership Act (1997).) 
1. 
Section 802(a) 
is derived 
from 
UPA 
Section 
and 
provides that a partnership continues after dissolution only for 
the 
purpose of winding 
up its business, 
after which it is 
terminated. 
RUPA continues the concept of "termination" to mark 
the completion of 
other formality is 
only by hindsight. 
termination or the 
previously unknown 
still liable. 
the winding up process. 
Since no filing or 
required, the date will often be determined 
No legal rights turn on the partnership's 
date thereof. 
Even after termination, if a 
liability is asserted, all of the partners are 
2. 
Section 802(b) makes explicit the right of the remaining 
partners to continue the business after an event of dissolution 
if all of the partners, including the dissociating partner or 
partners, waive the right to have the business wound up and the 
partnership terminated. 
Only those "dissociating" partners whose 
dissociation was 
the immediate cause of the dissolution must 
waive the right to have the business wound up. 
The consent of 
wrongfully dissociating partners is not required. 
3. 
Upon waiver of the right to have the business wound up, 
Paragraph (1) of the subsection provides that the partnership 
entity may resume carrying on its business as if dissolution had 
never occurred, thereby restoring the scope of its business to 
normal. 
"Resumes" is intended to mean that acts appropriate to 
winding up, authorized when taken, are in effect ratified, and 
the 
partnership 
remains 
liable 
for 
those 
acts, 
as 
provided 
explicitly in paragraph (2). 
If the business is continued following a waiver of the right 
to dissolution, any liability incurred by the partnership or a 
partner after the dissolution and before the waiver is to be 
determined as if dissolution had never occurred. 
That has the 
effect of validating transactions entered into after dissolution 
that might not have been appropriate for winding up the business, 
because, 
upon 
waiver, 
any 
liability incurred 
by 
either 
the 
partnership or a partner in those transactions will be determined 
under Sections 702 and 703, rather than Sections 804 and 806. 
As 
to 
the 
liability 
for 
those 
transactions 
among 
the 
partners 
themselves, 
the 
partners 
by 
agreement 
may 
provide 
otherwise. 
Thus, a partner who, after dissolution, incurred an 
obligation appropriate for winding up, but hot appropriate for 
continuing the business, may protect himself by conditioning his 
consent to the continuation of the business on the ratification 
of the transaction by the continuing partners. 
Paragraph (2) of the subsection provides that the rights of 
third parties accruing under Section 804(1) before they knew (or 
were notified) of the waiver may not be adversely affected by the 
waiver. 
That is intended to mean the partnership is bound, 
notwithstanding a subsequent waiver of dissolution and resumption 
of its business, by a transaction entered into after dissolution 
that was appropriate for winding up the partnership business, 
.. 
• 
even if not appropriate for continuing the business. 
Similarly, 
any rights of a third party arising out of conduct in reliance on 
the dissolution are protected, absent knowledge (or notification) 
of the waiver. 
Thus, for example, a partnership loan, callable 
upon dissolution, that has been called is not reinstated by a 
subsequent waiver. 
If the loan has not been called before the 
lender learns (or is notified) of the waiver, however, it may not 
thereafter be called because of the dissolution. 
On the other 
hand, a waiver does not reinstate a lease that is terminated by 
the dissolution itself. 
§l083. 
Right to wind up partnership business 
.1_. 
ParticipatiQn o_~~rt!le~L~JL(Uc~al syp~ry~$ion. 
After 
dissolution, 
a partner who has not wrongfully dissociated may 
£Q£ticipate in winding up the partnership's business, but on 
£J?Qlication of any partner, partner's legal representative or 
j;,r-.9nlieree, the Syp-erior COy:t:t, for good cause shown, may order 
judicial supervision of the winding up. 
2. 
Legal representQtive of last 
surv~v~ng partner. 
The 
~al representative of the last surviving partner may wind up a 
partnership's business. 
3. 
Powers of person ~~Dding up business. 
A person winding 
up a partnership's business may preserve the partnership business 
or property as a going concern for a reasonable time, prosecute 
and defend actions and proceedings, whether civiL criminal or 
administ£gtive, 
settle 
and 
close 
the 
partnership's 
business, 
dispose of and transfer the partnership's property, discharge the 
partnership's 
liabilities, 
distribute 
the 
assets 
of 
the 
wrtnership 
pursuC3,nt 
to 
section 
1087, 
settle 
disputes 
by 
mediation or arbitration and perform other necessary acts. 
Comment 
(This is Section 803 of the Uniform Partnership Act (1997).) 
Section 803(a) is drawn from UPA Section 37. 
It provides 
that 
the 
partners 
who 
have 
not 
wrongfully 
dissociated 
may 
participate in winding up the partnership business. 
Wrongful 
dissociation is defined in Section 602. 
On application of any 
partner, 
a court may for good cause judicially supervise the 
winding up. 
Section 803(b) continues the rule of UPA Section 25(2)(d) 
that the legal representative of the last surviving partner may 
wind up the business. 
It makes clear that the representative of 
the last surviving partner will not be forced to go to court for 
authority to wind up the business. 
On the other hand, the legal 
representative 
of 
surviving partner, 
deceased partner's 
Section 601. 
a 
deceased 
partner, 
other 
than 
the 
has only the rights of a transferee of 
transferable 
interest. 
See 
Comment 
last 
the 
to 
Section 803 (c) is new and provides further guidance on the 
powers of a person who is winding up the business. 
I t is based 
on Delaware Laws, Title 6, Section 17803. 
The powers enumerated 
are not intended to be exclusive. 
Subsection (c) expressly authorizes the preservation of the 
partnership's business or property as 
a 
going concern for 
a 
reasonable time. 
Some courts have reached that result without 
benefit of statutory authority. 
See, e.g., Paciaroni v. Crane, 
A.2d 946 
(Del. 
Ch. 
1979). 
An 
agreement to continue the 
partnership business in order to preserve its going-concern value 
until sale is not a waiver of a partner's right to have the 
business liquidated. 
The authorization of mediation and arbitration implements 
Conference policy to encourage alternative dispute resolution. 
A partner's fiduciary duties 
Section 404 extend to winding up the 
by Section 603(b). 
of 
care 
and 
loyalty under 
business, except as modified 
§l084. 
Partner's power to bind partnership after dissolution 
~ct to 
section 
1085, 
a 
partnership 
is 
bound 
by 
a 
partner's act after dissolution that: 
1. 
Appropriate act. 
Is appropriate for winding 
up the 
partnership business: or 
2. 
Act would have bound~rtnership. 
Would have bound the 
partnership under section 1031 before dissolution, if the other 
party to the transaction did not have notice of the dissolution. 
Comment 
(This is Section 104 of the Uniform Partnership Act (1997).) 
Section 804 is the successor to UPA Sections 33(2) and 35, 
which wind down the authority of partners to bind the partnership 
to third persons. 
Section 804(1) provides that partners have the authority to 
bind the partnership after dissolution in transactions that are 
appropriate 
for winding-up the partnership business. 
Section 
(2) 
provides 
that 
partners 
also 
have 
the 
power 
after 
Page ll3-LR1469(1) 
.. 
• 
dissolution to bind the partnership in transactions that are 
inconsistent with winding up. 
The partnership is bound in a 
transaction not appropriate for winding up, however, only if the 
partner's act would have bound the partnership under Section 301 
before dissolution and the other party to the transaction did not 
have notice of the dissolution. 
See Section 102(b) 
(notice). 
Compare Section 301(1) 
(partner has apparent authority unless 
other party knows or has received a 
notification of lack of 
authority) . 
Section 804(2) 
attempts to balance the interests of the 
partners to terminate their mutual agency authority against the 
interests 
of 
outside 
creditors 
who 
have 
no 
notice 
of 
the 
partnership's dissolution. 
Even if the partnership is not bound 
under Section 804, the faithless partner who purports to act for 
the partnership after dissolution may be liable individually to 
an innocent third party under the law of agency. 
See Section 330 
of 
the 
Restatement 
(Second) 
of 
Agency 
(agent 
liable 
for 
misrepresentation 
of 
authority), 
applicable 
under 
RUPA 
as 
provided in Section 104(a). 
RUPA eliminates the special and confusing UPA rules limiting 
the 
authority 
of 
partners 
after 
dissolution. 
The 
special 
protection 
afforded 
by 
UPA 
Section 
35(l)(b) (I) 
to 
former 
creditors 
and 
the 
lesser special protection afforded 
by 
UPA 
Section 35(1)(b)(11) to other parties who knew of the partnership 
before 
dissolution 
are 
both 
abolished. 
RUPA 
eschews 
these 
cumbersome notice provisions in favor of the general apparent 
authority rules of Section 301, subject to the effect of a filed 
or recorded statement of dissolution under Section 805. 
This 
enhances the protection of innocent third parties and imposes 
liability on the partnership and the partners who choose their 
fellow partner-agents and are in the best position to protect 
others by providing notice of the dissolution. 
Also deleted are the special rules for unknown partners in 
UPA Section 35(2) and for certain causes of dissolution in UPA 
Section 35(3). 
Those, too, are inconsistent with RUPA's policy 
of adhering more closely to the general agency rules of Section 
301. 
Section 804 should be contrasted with Section 702, 
which 
winds down the power of a partner being bought out. 
The power of 
a dissociating partner is limited to transactions entered into 
within two years after the partner's dissociation. 
Section 804 
has 
no 
time 
limitation. 
However, 
the 
apparent authority of 
partners in both situations is now subject to the filing of a 
statement of dissociation or dissolution, as the case may be, 
which operates to cut off such authority after 90 days. 
Page l14-LR1469(1) 
Sl085. 
Statement of dissolution 
1. 
Filing of statement. 
After dissolution, a partner who 
has 
not 
wrongfully 
dissociated 
may 
file 
a 
statement 
of 
c:'!issolution stating the nP.me 
of the partnership and that the 
l.:3~L-;le..I. chi~s dissolved and is winding up its business. 
2. 
Deemed to have notice. 
For the purposes of sections 
~\L.~" 
. ~dJ084 
t 
a person not a partner is deemed to have notice of 
j;,)]~ =l_'~solution and the limitation on the partners' authority as 
a 
resu.l t 
of the statement of dissolution 30 days after it is 
filed. 
Comment 
(This is Section 805 of the Uniform Partnership Act (1997).) 
1. 
Section 805 is new. 
Subsection (a) provides that, after 
an event of dissolution, 
any partner who 
has 
not wrongfully 
dissociated may file a statement of dissolution on behalf of the 
partnership. 
The 
filing 
and 
recording 
of 
a 
statement 
of 
dissolution is optional. 
The execution, filing, and recording of 
the statement is governed by Section 105. 
The legal consequences 
of filing a statement of dissolution are similar to those of a 
statement of dissociation under Section 704. 
2. 
Subsection (b) provides that a statement of dissolution 
cancels 
a 
filed 
statement 
of 
partnership authority 
for 
the 
purposes of Section 303(d), thereby terminating any extraordinary 
grant of authority contained in that statement. 
A statement of dissolution also operates as a limitation on 
authority for 
the purposes of Section 303(e). 
That section 
provides that third parties are deemed to know of a limitation on 
the authority of a partner to transfer real property held in the 
name of the partnership if a certified copy of the statement 
containing 
the 
limitation is 
recorded 
with 
the 
real 
estate 
records. 
In effect, a properly recorded statement of dissolution 
restricts 
the 
authority 
of 
all 
partners 
to 
real 
property 
transfers that are appropriate for 
winding 
up 
the business. 
Thus, third parties must inquire of the partnership whether a 
contemplated real property transfer is appropriate for winding 
up. 
After dissolution, the partnership may, 
however, file and 
record 
a 
new 
statement 
of 
authority 
that 
will 
bind 
the 
partnership under Section 303(d). 
3. 
Subsection (c) operates in conjunction with Sections 301 
and 
to 
wind 
down 
partners' 
apparent 
authority 
after 
dissolution. 
It provides that, for purposes of those sections, 
days 
after 
the 
filing 
of 
a 
statement 
of 
dissolution 
, 
.. 
nonpartners are deemed to have notice of the dissolution and the 
corresponding 
limitation 
on 
the 
authority 
of 
all 
partners. 
Sections 301 and 804 provide that a partner's lack of authority 
is binding on persons with notice thereof. 
Thus, after 90 days 
the 
statement of dissolution operates 
as 
constructive notice 
conclusively 
limiting 
the 
apparent 
authority of 
partners 
to 
transactions that are appropriate for winding up the business. 
4. 
Subsection 
(d) 
provides that, 
after filing and, 
if 
appropriate, 
recording 
a 
statement 
of 
dissolution, 
the 
partnership may file and record a new statement of partnership 
authori ty that will operate as provided in Section 303 (d) . 
A 
grant of authority contained in that statement is conclusive and 
may be relied upon by a person who gives value without knowledge 
to the contrary, whether or not the transaction is appropriate 
for 
winding 
up 
the 
partnership 
business. 
That 
makes 
the 
partners' 
record 
authority conclusive 
after dissolution, 
and 
precludes going behind the record to inquire into whether or not 
the transaction was appropriate for winding up. 
§1086. 
Partner's 1iabi1ity to other partners after disso1ution 
1. 
Liable 
for 
partner's 
share. 
Except 
as 
otherwise 
provided in subsection 2 and section 1034, after dissolution a 
partner is liable to the other partners for the partner's share 
of any partnership liability incurred under section 1084. 
2. 
Liability for inappropriate act. 
A partner who, with 
knowledge 
of 
the dissolution, 
incurs 
a 
partnership liability 
under 
section 
1084, 
subsection 
by 
an 
act 
that 
is 
not 
appropriate for winding up the partnership business is liable to 
the partnership for any damage caused to the partnership arising 
from the liability. 
Comment 
(This is Section 806 of the Uniform Partnership Act (1997).) 
Section 806 is the successor to UPA Sections 33(1) and 34, 
which govern the rights of partners among themselves with respect 
to post-dissolution liability. 
Subsection (a) provides that, except as provided in Section 
306(a) 
and subsection (b), 
after dissolution each partner is 
liable to the other partners by way of contribution for his share 
of any partnership liabi li ty incurred under Section 804. 
That 
includes not only obligations that are appropriate for winding up 
the business, 
but also obligations that are inappropriate if 
within the partner's apparent authority. Consistent with other 
provisions of this Act, Section 806(a) makes clear that a partner 
Page l16-LR1469(1) 
does not have a contribution obligation with regard to limited 
liabili ty partnership obligations for which the partner is not 
liable under Section 306. 
See Comments to Section 401(b). 
Subsection 
(a) 
draws 
no 
distinction 
as 
dissolution. 
Thus, 
as 
among the partners, 
treated alike in all events of dissolution. 
from UPA Section 33(1). 
to 
the 
cause 
of 
their liability is 
That is a change 
Subsection (b) creates an exception to the general rule in 
subsection (a). 
It provides that a partner, who with knowledge 
of the winding up nevertheless incurs a liability binding on the 
partnership by an act that is inappropriate for winding up the 
business, 
is liable to 
the partnership for 
any 
loss 
caused 
thereby. 
Section 806 is merely a default rule and may be varied in 
the partnership agreement. 
See Section 103(a). 
§l087. 
Settlement of account~d contributions among partners 
1. 
Application of assets. 
In winding up a partnership's 
business, 
the 
assets 
of 
the 
partnership, 
including 
the 
contributions of the partners reguired by this section, must be 
applied to discharge the partnership's obligations to creditors, 
including, 
to the extent permitted by 
law, 
partners 
who 
are 
creditors. 
Any surplus must be applied to pay in cash the net 
amount distributable to partners in accordance with their right 
to distributions under subsection 2. 
2. 
Settlement 
of 
partnership 
accounts; 
distribution~_L 
contribution. 
Each partner is entitled to a settlement of all 
partnership 
accoun~Qn win.Q.i.!l--9--lJp the partnership 
busines_~ 
In settling accounts among the partners, profits and losses that 
result from the liguidation of the partnership assets must be 
credi ted and charged to the partners' accounts. 
The partnership 
shall make a distribution to a partner in an amount egual to any 
excess of the credits over the charges in the partner's account. 
A partner shall contribute to the partnership an amount egual to 
any excess of the charges over the credits in the partner's 
account, but excluding from the calculation charges attributable 
to an obligation for which the partner is not personally liable 
under section 1034. 
3. 
Contribution by other partners; recovery. 
If a partner 
fails to contribute the full amount reguired under subsection 2, 
all of the other partners shall contribute, in the proportions in 
which those partners share partnership losses, 
the additional 
amount necessary to satisfy the partnership obligations for which 
they are personally liable under section 1034. 
A partner or 
• 
.. 
• 
~tner's legal 
representative 
may 
recover 
partners any contributions the partner makes to 
amount 
contributed 
exceeds 
that 
partner's 
from 
the 
other 
the extent the 
share 
of 
the 
partnership obligations 
for 
which 
the 
partner is personally 
liable under section 1034. 
4. 
Contribution for losses after settlement. 
After the 
set tlement of accounts, each partner shall contribute, in the 
PLQIDLrtion in which the partner shares partnership losses, the 
runount necessary to satisfy partnership obligations that were not 
known at the time of the settlement and for which the partner is 
personally liable under section 1034. 
.5. 
Deceased 
p~ner 
·~e_sJ;...ate liable. 
The 
deceased partner 
is liable 
for 
the 
partner's 
contribute to the partnership. 
estate of 
obligation 
a 
to 
6. 
Enforcement for creditors. 
An assignee for the benefit 
of creditors of a partnership or a partner, or a person appointed 
by a court to represent creditors of a partnership or a partner, 
may 
enforce 
a 
partner's 
obligation 
to 
contribute 
to 
the 
partnership. 
COlIDIent 
(This is Section 807 of the Uniform Partnership Act (1997).) 
1. 
Section 
provides 
the 
default 
rules 
for 
the 
settlement of accounts and contributions among the partners in 
winding up the business. 
It is derived in part from UPA Sections 
38(1) and 40. 
2. 
Subsection (a) continues the rule in UPA Section 38 (1) 
that, in winding up the business, the partnership assets must 
first 
be 
applied 
to 
discharge 
partnership 
liabilities 
to 
credi tors. 
For this purpose, any required contribution by the 
partners is treated as an asset of the partnership. 
After the 
payment 
of all partnership liabilities, 
any 
surplus 
must 
be 
applied to pay in cash the net amount due the partners under 
subsection (b) by way of a liquidating distribution. 
RUPA continues the "in-cash" rule of UPA Section 38(1) and 
is consistent with Section 402, which provides that a partner has 
no 
right to receive, 
and may 
not be 
required to accept, 
a 
distribution in kind, unless otherwise agreed. 
The in-cash rule 
avoids 
the 
valuation 
problems 
that afflict 
unwanted 
in-kind 
distributions. 
The 
partnership must 
apply its assets 
to discharge 
the 
obligations of partners who are creditors on a parity with other 
Page l18-LR1469(1) 
creditors. 
See Section 404(f) and Comment 6. 
In effect, that 
abolishes the priority rules in UPA Section 40(b) and (c) which 
subordinate the payment of inside debt to outside debt. 
Both 
RULPA 
and the 
RMBCA 
do likewise. 
See RULPA § 804; 
RMBCA §§ 
6.40(f), l4.05(a). 
Ultimately, however, a partner whose "debt" 
has been repaid by the partnership is personally liable, as a 
partner, 
for any outside iebt remaining unsatisfied, unlike a 
li~5ted partner 
or 
corporate 
shareholder. 
Accordingly, 
the 
obJ _Jation tG contribute sufficient funds to satisfy the claims 
of Qutsi}e creditors may result in the equitable subordination of 
inside debt when partnership assets are insufficient to satisfy 
all obligations to non-partners. 
RUPA in effect abolishes the "dual priority" or "jingle" 
rule 
of 
UPA 
Section 
40(h) 
and 
(i). 
Those 
sections 
gave 
partnership creditors priority as to partnership property and 
separate creditors priority as to separate property. 
The jingle 
rule has already been preempted by the Bankruptcy Code, at least 
as 
to 
Chapter 
partnership 
liquidation proceedings. 
Under 
Section 
(c) 
of 
the 
Bankruptcy 
Code, 
and 
under 
RUPA, 
partnership 
creditors 
share 
pro 
rata 
with 
the 
partners' 
individual creditors in the assets of the partners' estates. 
3. 
Subsection (b) provides that each partner is entitled to 
a settlement of all partnership accounts upon winding up. 
It 
also establishes the default rules for closing out the partners' 
accounts. 
First, 
the profits and 
losses 
resulting 
from 
the 
liquidation of the partnership assets must be credited or charged 
to the partners' accounts, according to their respective shares 
of profits and losses. 
Then, the partnership must make a final 
liquidating distribution 
to 
those 
partners 
with 
a 
positive 
account balance. 
That distribution should be in the amount of 
the excess of credits over the charges in the account. 
Any 
partner with a negative account balance must contribute to the 
partnership an amount equal to the excess of charges over the 
credits 
in 
the 
account 
provided 
the 
excess 
relates 
to 
an 
obligation for 
which the partner is personally liable under 
Section 306. 
The partners may, however, agree that a negative 
account does not reflect a debt to the partnership and need not 
be repaid in settling the partners' accounts. 
Section 807(b) 
makes clear that a partner's contribution 
obligation to a partnership in dissolution only considers the 
partner's 
share 
of 
obligations 
for 
which 
the 
partner 
was 
personally liable under Section 306 ("unshielded obligations"). 
See Comments to Section 401(b) (partner contribution obligation 
to an operating partnership). 
Properly determined under this 
Section, 
the 
total 
required 
partner 
contributions 
will 
be 
sufficient 
to 
satisfy 
the 
partnership's 
total 
unshielded 
obligations. 
In special circumstances where a partnership has 
• 
both shielded and unshielded obligations and the partner required 
contributions 
are 
used 
to 
first 
pay 
shielded 
partnership 
obligations, 
the 
partners 
may 
be 
required 
to 
make 
further 
contributions 
to 
satisfy 
the 
partnership 
unpaid 
unshielded 
obligations. 
The proper resolution of this matter is left to 
debtor-credi tor law as well as the law governing the fiduciary 
obligations of the partners. 
See Section 104(a). 
RUPA eliminates the distinction in UPA Section 40(b) between 
the liability owing 
liability owing in 
simply of the right 
That implements the 
to a partner in respect of capital and the 
respect of profits. 
Section 807 (b) 
speaks 
of a partner to a liquidating distribution. 
logic of RUPA Sections 401(a) and 502 under 
which contributions to capital and shares in profits and losses 
combine to determine the right to distributions. 
The partners 
may, however, agree to share "operating" losses differently from 
"capital" losses, thereby continuing the UPA distinction. 
4. 
Subsection (c) continues the UPA Section 40(d) rule that 
solvent partners share proportionately in the shortfall caused by 
insolvent partners who fail to contribute their proportionate 
share. 
The partnership may enforce a partner's obligation to 
contribute. 
See 
Section 405(a). 
A partner 
is entitled to 
recover from the other partners any contributions in excess of 
that partner's 
share 
of 
the 
partnership's liabilities. 
See 
Section 405(b)(iii). 
5. 
Subsection 
(d) 
provides 
that, 
after 
settling 
the 
partners' 
accounts, 
each 
partner 
must 
contribute, 
in 
the 
proportion in which he shares losses, the amount necessary to 
satisfy partnership obligations that were not known at the time 
of the settlement. 
That continues the basic rule of UPA Section 
(d) and underscores that the obligation to contribute exists 
independently 
of 
the 
partnership's 
books 
of 
account. 
It 
specifically covers the situation of a partnership liability that 
was unknown when the partnership books were closed. 
6. 
Under subsection (e), the estate of a deceased partner 
is 
liable 
for 
the 
partner's 
obligation 
to 
contribute 
to 
partnership losses. 
That continues the rule of UPA Section 40(g). 
7. 
Subsection (f) provides that an assignee for the benefit 
of creditors of the partnership or of a partner (or other court 
appointed creditor 
representative) 
may 
enforce 
any partner's 
obligation to contribute to the partnership. 
That continues the 
rules of UPA Sections 36(4) and 40(e). 
SUBCHAPTER 9 
CONVERSIONS AND MERGERS 
§l091. 
Definitions 
As 
used in this subchapter, unless the context otherwise 
indicates, the following terms have the following meanings. 
1. 
General partner. 
"General partner" means a partner in a 
~tnership and a general partner in a limited partnership. 
2. 
Limited partner. 
"Limited partner" 
means 
a 
limited 
partner in a limited partnership. 
3. 
Limited partnership. 
"Limited partnership" 
means 
a 
limited partnership created 
under 
the 
Maine 
Reyised 
Uniform 
Limited Partnership Act. 
predecessor law or comparable law of 
another jurisdiction. 
~.JlrtXl,er. 
"Partner" includes both a general partner and 
a limited partner. 
Comment 
(This is Section 901 of the Uniform Partnership Act (1997).) 
1. 
Article 9 is new. 
The UPA is silent with respect to the 
conversion or merger of partnerships, and thus it is necessary 
under the UPA to structure those types of transactions as asset 
transfers. 
RUPA 
provides 
specific 
statutory 
authority 
for 
conversions and mergers. 
It provides for continuation of the 
partnership entity, thereby simplifying those transactions and 
adding certainty to the legal consequences. 
A number of States currently authorize the merger of limited 
partnerships, 
and 
some 
authorize 
them 
to 
merge 
with 
other 
business entities 
such 
as 
corporations 
and 
limited liability 
companies. 
A few States currently authorize the merger of a 
general and a limited partnership or the conversion of a general 
to a limited partnership. 
2. 
As Section 908 makes clear, the requirements of Article 
are not mandatory, and a partnership may convert or merge in 
any other manner provided by law. 
Article 9 is merely a "safe 
harbor." 
If the requirements of the article are followed, the 
conversion or merger is legally valid. 
Since most States have no 
other established procedure 
for 
the 
conversion or 
merger 
of 
partnerships, it is likely that the Article 9 procedures will be 
used in virtually all cases. 
3. 
Article 9 does not 
conversions 
and 
mergers 
to 
restrict the provisions 
domestic 
partnerships. 
Page l2l-LR1469(1) 
authorizing 
Since 
no 
.. 
filing is required for the creation of a partnership under RUPA, 
it is often unclear where a partnership is domiciled. 
Moreover, 
a 
partnership 
doing 
business 
in 
the 
State 
satisfies 
the 
definition of a partnership created under this Act since it is an 
association of two or more co-owners carrying on a business for 
profit. 
Even a partnership clearly domiciled in another State 
could easily amend its partnership agreement to provide that its 
internal 
affairs 
are 
to 
be 
governed 
by 
the 
laws 
of 
a 
jurisdiction that has enacted Article 9 of RUPA. 
No 
harm is 
likely to result from extending to foreign partnerships the right 
to convert or merge under local law. 
4. 
Because Article 9 deals with the conversion and merger 
of both general and limited partnerships, Section 901 sets forth 
four 
definitions 
distinguishing 
between 
the 
two 
types 
of 
partnerships solely for the purposes of Article 9. 
"Partner" 
includes both general and limited partners, and "general partner" 
includes 
general 
partners 
in 
both 
general 
and 
limited 
partnerships. 
Sl092. 
Conversion of partnership to limited partnership 
L 
Conversion. 
A p_artnership may be converted to a limited 
partnership pursuant to this section. 
2. 
Terms and conditions. 
The terms and conditions of a 
conversion of 
a 
partnership to 
a 
limited partnership must be 
gpproved by all of the partners or by a 
number or percentage 
specified for conversion in the partnership agreement. 
3. 
Certificate 
of 
limited 
partnership. 
After 
the 
conversion is approved by the partners, the partnership shall 
file a certificate of limited partnership in the jurisdiction in 
which the limited partnership is to be formed. 
The certificate 
must include: 
b.. 
A statement 
tha,~tne----p_artnership was converted to a 
limited partnership from a partnership; 
B. 
Its former name; and 
C. 
A statement of the number of votes cast by the partners 
for and against the conversion and, if the vote is less than 
unanimous, the number or percentage reguired to approve the 
conversion under the partnership agreement. 
4. 
Effective date of conversion. 
The 
conversion 
effect when the certificate of limited partnership is filed 
any later date specified in the certificate. 
Page l22-LR1469(1) 
takes 
or at 
5. 
Liability. 
A general partner who 
becomes 
a 
limited 
partner as a result of the conversion remains liable as a general 
partner for an obligation incurred by the partnership before the 
conversion takes effect. 
If the other party to a transaction 
wi th the limited partnership reasonably believes when entering 
the transaction that the limited partner is a general partner, 
the limited partner is liable for an obligation incurred by the 
limited partnership within 30 days after the conversion takes 
effect. 
The 
limited 
partner's 
liability 
for 
all 
other 
obligations 
of 
the 
limited 
partnership 
incurred 
after 
the 
~Qnyersion takes effect is that of a limited partner as provided 
in the Maine Revised Uniform Limited Partnership Act. 
Comment 
(This is Section 902 of the Uniform Partnership Act (1997).) 
Section 902 (a) authorizes the conversion of a 
"partnership" 
to a "limited partnership." 
Section 202(b) limits the usual RUPA 
definition 
of 
"partnership" 
to 
general 
partnerships. 
That 
definition is applicable to Article 9. 
If a limited partnership 
is contemplated, Article 9 uses the term "limited partnership." 
See Section 901(3). 
Subsection (b) provides that the terms and conditions of the 
conversion must be approved by all the partners, 
unless the 
partnership agreement specifies otherwise for a conversion. 
Subsection 
(c) 
partnership must file 
includes the requisite 
provides 
that, 
after 
approval, 
the 
a certificate of limited partnership which 
information concerning the conversion. 
Subsection (d) 
provides 
when the certificate is filed, 
specified. 
that the conversion takes effect 
unless a later effective date is 
Subsection 
(e) 
establishes 
the 
partners' 
liabilities 
following a conversion. 
A partner who becomes a limited partner 
as a result of the conversion remains fully liable as a general 
partner for any obligation arising before the effective date of 
the conversion, both to third parties and to other partners for 
contribution. 
Third parties 
who 
transact business 
with 
the 
converted partnership unaware of a partner's new status as 
a 
limited partner are protected for 90 days after the conversion. 
Since RULPA Section 201(a)(3) requires the certificate of limited 
partnership to name all of the general partners, and under RUPA 
Section 902(c) the certificate must also include a statement of 
the conversion, parties transacting business with the converted 
partnership can protect themselves by checking the record of the 
State where the limited partnership is formed (the State where 
, 
• 
the 
conversion 
takes 
place). 
A 
former 
general 
partner 
who 
becomes a limited partner as a result of the conversion can avoid 
the lingering 90day exposure to liability as a general partner by 
notifying those transacting business with the partnership of his 
limited partner status. 
Although Section 
does 
not expressly provide that 
a 
partner's withdrawal upon a term partnership's conversion to a 
limi ted 
partnership 
is 
rightful, 
it 
was 
assumed 
that 
the 
unanimity requirement for the approval of a 
conversion would 
afford a withdrawing partner adequate opportunity to protect his 
interest as a condition of approval. 
This question is left to 
the partnership agreement if it provides for conversion without 
the approval of all the partners. 
Sl093. 
Conversion of limited partnership to partnership 
1. 
Conversion. 
A limited partnership may be converted to a 
partnership pursuant to this section. 
2. 
Terms and conditions. 
Notwithstanding a 
proviti.Q..1LJ;.Q 
the contrary in a limited partnership agreement. the terms and 
conditions 
of 
a 
conversion 
of 
a 
limited 
partnership 
to 
a 
partnership must be approved by all of the partners. 
3. 
Cancellation of certJfic..a..te. 
After the conversion is 
approved by the partners, the limited partnership shall cancel 
its certificate of limited partnership. 
4. 
Effective date of 
cJ~!lversion. 
The 
conversion takes 
effect when the certificate of limited partnership is canceled. 
5. 
Liability. 
A limited partner who 
becomes 
a 
general 
l2-p.rtner as a result of the conversion remains liable only as a 
limited 
partner 
for 
an 
obligation 
incurred 
by 
the 
limited 
partnership 
before 
the 
conversion 
takes 
effect. 
Except 
as 
otherwise provided in section 1034, the partner is liable as a 
general partner for an obligation of the partnership incurred 
after the conversion takes effect. 
Conwnent 
(This is Section 903 of the Uniform Partnership Act (1997).) 
Section 
903(a) 
authorizes 
the 
conversion 
of 
a 
limited 
partnership to a general partnership. 
Subsection (b) provides that the conversion must be approved 
by all of 
the 
partners, 
even if 
the 
partnership 
agreement 
provides to the contrary. 
That includes all of the general and 
limited partners. 
See 
Section 
901(4). 
The 
purpose 
of 
the 
unanimity 
requirement 
is 
to 
protect 
a 
limited partner 
from 
exposure to personal liability as a general partner without clear 
and knowing consent at the time of conversion. 
Despite a general 
voting provision to the contrary in the partnership agreement, 
conversion 
to 
a 
general 
partnership 
may 
never 
have 
been 
contemplated 
by 
the 
lim ~ ted 
partner 
when 
the 
partnership 
lnvestment was made. 
Subsection 
(c) 
provides 
that, 
after 
approval 
of 
the 
conversion, the converted partnership must cancel its certificate 
of limited partnership. 
See RULPA § 203. 
Subsection (d) 
provides that the conversion takes effect 
when the certificate of limited partnership is canceled. 
Subsection (e) provides that a limited partner who becomes a 
general 
partner 
is 
liable 
as 
a 
general 
partner 
for 
all 
partnership 
obligations 
for 
which 
a 
general 
partner 
would 
otherwise 
be 
personally 
liable 
for 
if 
incurred 
after 
the 
effective date of the conversion, but still has only limited 
liability for obligations incurred before the conversion. 
§1094. 
Effect of conversion; entity unchanged 
1. 
Same entity. 
A partnership or limited partnership that 
has 
been 
converted pursuant 
to 
this 
subchapter 
is 
for 
all 
purposes the Same entity that existed before the conversion. 
2. 
Effect of conversion. 
When a conversion takes effect: 
A. 
All property owned by the converting partnership or 
limited partnership remains vested in the converted entity; 
B. 
All obligations of the converting partnership or limited 
partnership continue as obligations of the converted entity; 
gru;l 
C. 
An action or proceeding pending against the converting 
partnership or limited partnership may be continued as if 
the conversion had not occurred. 
COllllllent 
(This is Section 904 of the Uniform Partnership Act (1997).) 
Section 904 sets forth the 
partnership. 
Subsection 
(a) 
partnership is for all purposes 
effect of a conversion on the 
provides 
that 
the 
converted 
the same entity as before the 
conversion. 
.. 
Subsection 
(b) 
provides 
that 
upon 
conversion: 
(1) 
all 
partnership property remains vested in the converted entity: (2) 
all obligations remain the obligations of the converted entity: 
and (3) all pending legal actions may be continued as if the 
conversion had 
not occurred. 
The 
term "entity" 
as 
used in 
Article 
refers 
to 
either 
or 
both 
general 
and 
limited 
partnerships as the context requires. 
Under 
subsection 
(b)(l), 
title 
to 
partnership 
property 
remains vested in the converted partnership. 
As 
a matter of 
general property law, title remains vested without fUrther act or 
deed and without reversion or impairment. 
SI095. 
Merger of partnerships 
1. 
Merger pursuant to plan. 
Pursuant to a plan of merger 
approved as provided in subsection 3, a partnership may be merged 
with one Or mare partnerships or limited partnerships. 
2. 
Plan of merger. 
The plan of merger must set forth: 
A. 
The name of each partnership or limited partnership that 
is a party to the merger; 
B. 
The name of the surviving entity into which the other 
partnerships or limited partnerships will merge; 
C. 
Whether 
the surviving entity is a 
partnership or 
a 
limited partnership and the status of each partner; 
D. 
The terms and conditions of the merger; 
E. 
The manner and basis of converting the interests of each 
party to the merger into interests or obligations of the 
surviving entity or into money or other property in whole or 
part; and 
F. 
The 
street address 
of 
the surviving entity's chief 
executive office. 
3. 
Approval of plan. 
The plan of merger must be approved: 
A. 
In the case of a partnership that is a party to the 
merger, by all of the partners, or a number or percentage 
specified for merger in the partnership agreement; and 
B. 
In the case of a limited partnership that is a party to 
the merger, by the vote required for approval of a merger by 
the law of the State or foreign jurisdiction in which the 
Page l26-LR1469(l) 
limited partnership is organized and, in the absence of such 
a 
specifically applicable 
law, 
by all of 
the partners L 
notwithstanding 
a 
prov~s~on 
to 
the 
contrary 
in 
the 
partnership agreement. 
4. 
Amendment or abandonment. 
After a plan of merger is 
.a_rurr.Qy~d and before the merger takes effect. the plan may be 
amended or abandoned as provided in the plan. 
5. 
Effective date of merger. 
The merger takes effect on 
the later of: 
A. 
The approval of the plan of merger by all parties to the 
merger, as provided in subsection 3; 
B. 
The filing of all dQcum~nts reguired by law to be filed 
as a condition to the effectiveness of the merger: or 
C. 
Any effective date specified in the plan of merger. 
Comment 
(This is Section 905 of the Uniform Partnership Act (1997).) 
Section 905 provides a "safe harbor" for the merger of a 
general 
partnership 
and 
one 
or 
more 
general 
or 
limited 
partnerships. 
The surviving entity may be either a general or a 
limited partnership. 
The plan of merger must set forth the information required 
by subsection (b), including the status of each partner and the 
manner and basis of converting the interests of each party to the 
merger into interests or obligations of the surviving entity. 
Subsection (c) provides that the plan of merger must be 
approved: 
(1) 
by all the partners of each general partnership 
that is a party to the merger, unless its partnership agreement 
specifically provides otherwise for mergers; and (2) by all the 
partners, including both general and limited partners, of each 
limited 
partnership 
that 
is 
a 
party 
to 
the 
merger, 
notwithstanding 
a 
contrary 
provision 
in 
its 
partnership 
agreement, 
unless 
specifically authorized by 
the 
law of 
the 
jurisdiction in which that limited partnership is organized. 
Like Section 902(b), the purpose of the unanimity requirement is 
to protect limited partners from exposure to liability as general 
partners without their clear and knowing consent. 
Subsection (d) 
provides that the plan of merger 
may 
be 
amended or abandoned at any time before the merger takes effect, 
if the plan so provides. 
Subsection (e) provides that the merger takes effect on the 
later of: (I) approval by all parties to the merger; (2) filing 
of all required documents; or (3) the effective date specified in 
the 
plan. 
The 
surv~v~ng entity must file all notices 
and 
documents relating to the merger required by other applicable 
statutes governing the entities that are parties to the merger, 
such 
as 
articles 
of 
merger 
or 
a 
certificate 
of 
limited 
partnership. 
It 
may 
also 
amend 
or 
cancel 
a 
statement 
of 
partnership authority previously filed by any party to the merger. 
§l096. 
Effect of merger 
1. Effect of merger. 
When a merger takes effect: 
A. 
The separate existence of every partnership or limited 
partnership that is a party to the merger, other than the 
surviving entity, ceases: 
B. 
All property owned by each of the merged partnerships or 
limited partnerships vests in the surviving entity: 
C. 
All 
obligations 
of 
every 
partnership 
or 
limi ted 
Rartnership 
that is 
a 
partY--t9 
the 
merger 
become 
the 
obligations of the surviving entity: and 
D. 
An action or proceeding pending against a partnership or 
limited partnership that is a party to the merger may be 
continued 
as 
if 
the 
merger 
had 
not 
occurred, 
or 
the 
surviving entity may be substituted as a party to the action 
or proceeding. 
2. 
Agent for $ervice ~~~cess. The Secretary of State is 
the agent for service of process in an action or proceeding 
against a surviving foreign partnership or limited partnership to 
enforce 
an 
obligation of 
a 
domestic 
partnership or 
limited 
partnership that is a party to a merger. 
The surviving entity 
shall promptly notify the Secretary of State of the mailing 
address of its chief executive office and of any change of 
address. 
Upon receipt of process, the Secretary of State shall 
mail a copy of the process to the surviving foreign partnership 
or limited partnership. 
3. 
Liability of partner. 
A partner of 
the 
surviving 
partnership or limited partnership is liable for: 
A. 
All obligations of a party to the merger for which the 
partner was personally liable before the merger; 
Page l28-LRI469(1) 
B. 
All other obligations of the 
surv~v~ng entity incurred 
before the merger by 
a 
party to the merger, 
but those 
obligations may be satisfied only out of property of the 
entity; and 
~_ Except 
as 
otherwise 
provided 
in section 
1034, 
all 
~igations of 
the 
furviving entity incurred after 
the 
merger takes effect, but those obligations may be satisfied 
;;.'L./ out of property of the entity if the partner is a 
U:"jted partner. 
4. 
Obligations incurred before merger. 
If the obligations 
incurred before the merger by a party to the merger are not 
satisfied out of the property of the surviving partnership or 
limited 
partnership, 
the 
general 
partners 
of 
that 
party 
immediately 
before 
the 
effective 
date 
of 
the 
merger 
shall 
contribute 
the 
amount 
necessary 
to 
satisfy 
that 
party's 
obligations to the surviving entity, in the manner provided in 
section 
1087 
or 
in 
the 
limited 
partnership 
act 
of 
the 
jurisdiction in which the party was formed, as the case may be, 
as if the merged party were dissolved. 
5. 
Dis§ociated partner. 
A partner of a party to a merger 
who does not become a partner of the surviving partnership or 
limited partnership is dissociated from the entity of which that 
partner was a partner as of the date the merger takes effect. 
The surviving entity shall cause the partner's interest in the 
entity to be purchased under section 1071 or another statute 
specifically applicable to thaJ;, partner's interest wit~s.peG.t 
to a merger. 
The surviving entity is bound under section 1072 by 
an act of a general partner dissociated under this subsection, 
and the partner is liable under section 1073 for transactions 
entered into by the surviving entity after the merger takes 
effect. 
Comment 
(This is Section 906 of the Uniform Partnership Act (1997).) 
Section 
states 
the 
effect 
of 
a 
merger 
on 
the 
partnerships that are parties to the merger and on the individual 
partners. 
Subsection (a) provides that when the merger takes effect: 
(1) the separate existence of every partnership that is a party 
to the merger (other than the surviving entity) ceases; (2) all 
property 
owned 
by 
the parties 
to 
the 
merger 
vests 
in 
the 
surviving entity; 
(3) all obligations of every party to the 
merger become the obligations of the surviving entity; and (4) 
all legal actions pending against a party to the merger may be 
.. 
continued as if the merger had not occurred or 
entity may be substituted as 
a party. 
Title 
property vests in the surviving entity without 
deed and without reversion or impairment. 
the surviving 
to partnership 
further act or 
Subsection (b) makes the Secretary of State the agent for 
service of process in any action against the surviving entity, if 
it is a foreign entity, to enforce an obligation of a domestic 
partnership that is a party to the merger. 
The purpose of this 
rule is to make it more convenient for local creditors to sue a 
foreign surviving entity when 
the credit was 
extended to 
a 
domestic partnership that has disappeared as 
a 
result of the 
merger. 
Subsection 
(c) 
provides 
that 
a 
general 
partner of 
the 
surviving entity is liable for (1) all obligations for which the 
partner was personally liable before the merger; (2) all other 
obligations of the surviving entity incurred before the merger by 
a party to the merger, which obligations may be satisfied only 
out of the surviving entity's partnership property; and (3) all 
obligations incurred by the surviving entity after the merger, 
limited to the surviving entity's property in the case of limited 
partners and also limited to obligations of the partnership for 
which the partner was personally liable under Section 306. 
This scheme of liability is similar to that of an incoming 
partner under Section 306(b). 
Only the surviving partnership 
itself is 
liable 
for 
all obligations, 
including obligations 
incurred by every constituent party before the merger. 
A general 
partner 
of 
the 
surviving 
entity 
is 
personally 
liable 
for 
obligations of the surviving entity incurred before the merger by 
the partnership of which he was a partner and those incurred by 
the surviving entity after the merger. 
Thus, a general partner 
of the surviving entity is liable only to the extent of his 
partnership interest for obligations incurred before the merger 
by a constituent party of which he was not a general partner. 
Subsection (d) requires general partners to contribute the 
amount necessary to satisfy all obligations for which they were 
personally liable before the merger, if such obligations are not 
satisfied out 
of 
the partnership property of 
the 
surviving 
enti ty, in the same manner as provided in Section 807 or the 
limited partnership act of the applicable jurisdiction, as if the 
merged party were then dissolved. 
See RULPA §§ 502, 608. 
Subsection (e) provides for the dissociation of a partner of 
a party to the merger who 
does not become 
a partner in the 
surviving entity. 
The 
surviving entity 
must 
buyout that 
partner's interest in the partnership under Section 701 or other 
specifically 
applicable 
statute. 
If 
the 
state 
limited 
partnership act has a dissenter's rights provision providing a 
different method of determining the amount due 
a dissociating 
limi ted partner, it would apply, rather than Section 701, since 
the two statutes should be read in pari materia. 
Although subsection (e) does not expressly provide that a 
partner's withdrawal upon the merger of a term partnership is 
rightful, it was assumed that the unanimity requirement for the 
approval of a merger would afford a withdrawing partner adequate 
opportunity to protect his interest as a condition of approval. 
This question is left to the partnership agreement if it provides 
for merger without the approval of all the partners. 
Under 
subsection 
(e), 
a 
dissociating 
general 
partner's 
lingering agency power is wound down, pursuant to Section 702, 
the same as in any other dissociation. 
Moreover, a dissociating 
general partner may be liable, under Section 703, for obligations 
incurred by the surviving entity for up to two years after the 
merger. 
A dissociating general partner can, however, limit to 90 
days 
his 
exposure 
to 
liability 
by 
filing 
a 
statement 
of 
dissociation under Section 704. 
§1091. 
Statement of merger 
1. 
Filing of statement. 
After 
a 
merger, 
the surviving 
partnership or limited partnership may file a statement that One 
or more partnerships or limited partnerships have merged into the 
surviving entity. 
2. 
Statement of merger. 
A statement of merger must contain: 
A. 
The ~ame of each partnership or limited partnership that 
is a party to the merger; 
B. 
The name of the surviving entity into which the other 
partnerships or limited partnerships were merged; 
C. 
The street address 
of 
the 
surv~v~ng entity's chief 
executive office and of an office in this State, if any; 
D. 
Whether 
the surviving entity is a 
partnership or 
a 
limited partnership; and 
E. 
If the surviving partnership or limited partnership is 
not organized under the laws of this State, a statement that 
the surviving partnership or limited partnership: 
(1) 
Agrees that it may be served with process in this 
State in a proceeding for enforcement of an obligation 
of a party to the merger that was organized under the 
Page l3l-LR1469(1) 
l 
laws of this 
St_~~Q,s well as for enforcement of an 
obligation of 
the 
surv~v~ng partnership 
or 
limited 
partnership arising from the merger: and 
(2) 
Appoints 
t~e_Sect:etary of State as its ag~;m.~Q~ 
service of 
process 
in 
any 
such proceeding 
and 
the 
surv~v~ng partnership 
or 
limited 
partnership 
shall 
specify the address to which a copy of the process must 
be mailed by the Secretary of State. 
3. 
Name 
in which property held. 
Except 
as 
otherwise 
provided in subsection 4, 
for 
the purposes of section 1032, 
property Qf the surviving partnership or limited partnership that 
illLtQx.e the merger was held in the name of another party to the 
merger is property held in the name of the surviving entity upon 
filing a statement of merger. 
4. 
Transf.e.LQt.~L-pI:.QP.H:Y. 
For the purposes of sect..iQn 
1032, 
real property of 
the 
surviving partnership or limited 
partnership that before the merger 
was 
held in the 
name 
of 
another party to the merger is property held in the name of the 
surviving entity. 
A certified copy of the statement of merger 
may be recorded in the registry of deeds of the county in which 
the real property is located as 
evidence of title, but the 
failure to record the statement does not affect the validity Qf 
the transfer of title. 
5. 
IncQIDPlete 
statemeQt. 
A filed and, if appropriate, 
recorded 
statement 
of 
merger, 
executed 
and 
declared 
to 
be 
accurate pursuant to section 1005, subsection 3, stating the name 
of a partnership or limited partnership that is a party to the 
merger in whose name property was held before the merger and the 
name of the surviving entity. but not containing all of the other 
information required by subsection 2, operates with respect to 
the partnerships or limited partnerships 
named to the extent 
provided in subsections 3 and 4. 
Comment 
(This is Section 907 of the Uniform Partnership Act (1997).) 
Section 907(a) provides that the surviving entity may file a 
statement of merger. 
The execution, filing, and recording of the 
statement are governed by Section 105. 
Subsection (b) requires the statement to contain the name of 
each party to the merger, the name and address of the surviving 
entity, and whether it is a general or limited partnership. 
Page l32-LR1469(1) 
Subsection (c) provides that, for the purpose of the Section 
rules regarding the transfer of partnership property, all 
personal and intangible property which before the merger was held 
in the name of a party to the merger becomes, upon the filing of 
the statement of merger wi th the Secretary of State, property 
held in the name of the surviving entity. 
Subsection (d) provides a similar rule for real property, 
except that real property does not become property held in the 
name 
of the surviving entity until 
a 
certified copy of the 
statement of merger is recorded in the office for 
recording 
transfers of that real property under local law. 
Subsection 
(e) 
is 
a 
savings 
provision 
in 
the 
event 
a 
statement of merger fails to contain all of the information 
required 
by 
subsection 
(b). 
The 
statement 
will 
have 
the 
operative effect provided in subsections (c) and (d) if it is 
executed and declared to be accurate pursuant to Section 105 (e) 
and correctly states the name of the party to the merger in whose 
name the property was held before the merger, so that it would be 
found by someone searching the record. 
Compare Section 303 (c) 
(statement of partnership authority). 
Sl098. 
Nonexclusive 
This subchapter 
Qartnerships may 
be 
llovided by law. 
is not exclusive. 
Partnerships 'Jr limited 
converted or merged in any other manner 
Comment 
(This is Section 908 of the Uniform Partnership Act (1997).) 
Section 908 provides that Article 9 is not exclusive. 
It is 
merely a "safe harbor." 
Partnerships may be converted or merged 
in any other manner provided by statute or common law. 
Existing 
statutes in a 
few States already authorize the conversion or 
merger of general partnerships and limited partnerships. 
See 
Comment 1 to Section 901. 
Those procedures may be followed in 
lieu of Article 9. 
SUBCHAPTER 10 
MISCELLANEOUS PROVISIONS 
SllOl. 
Uniformity of application and construction 
This chapter must be 
app~lied and construed to effectuate its 
general purpose to make 
uniform the law with respect to the 
subject of this chapter among states en~cting it. 
S1102. 
Short tit1e 
This 
chapter 
may 
be 
known 
and 
cited 
as 
"the 
Uniform 
Partnership Act." 
S1103. 
Effectiye date 
This chapter takes effect July 1, 2006. 
Connent 
(This is Section 1204 of the Uniform Partnership Act (1997).) 
The effective date of the Act established by an adopting 
State has operative effects under Section 1206, 
which defers 
mandatory application of the Act to existing partnerships. 
S1104. 
Applicability 
1. 
Application before July 1. 2006. 
Before July L 
2006, 
this chapter governs only a partnership formed: 
A. 
After 
July 1, 
2006, 
except 
a 
partnership that is 
continuing the business of a dissolved partnership under 
former Title 31, section 318; and 
B. 
Before 
July 
1, 
2006 
that 
elects, 
as 
provided 
by 
subsection 3, to be governed by this chapter. 
2. 
ApplicatioJLJ)~~att_er July L 
2006. 
On and after 
July 1, 2006, this chapter governs all partnerships. 
3. 
Election before July L 
2006. 
Before July 1, 2006, a 
partnership voluntarily may elect, in the manner provided in its 
partnership agreement or by law for 
amending the partnership 
agreement, to be governed by this chapter. 
The provisions of 
this chapter relating to the liability Qf 
the partnership's 
partners to 3rd parties apply to limit those partners' liability 
to a 3rd party who had done business with the partnership within 
one year before the partnership's election to be governed by this 
~b~pter 
only 
if 
the 
3rd 
party 
knows 
or 
has 
received 
a 
notification of the partnership's election to be governed by this 
chapter. 
A partnership may elect to be governed by this chapter 
by 
filing 
a 
statement of election stating the 
name 
of 
the 
partnership 
and 
that 
the 
partnership has 
made 
the 
election 
pursuant to this section. 
Connent 
(This is Section 1206 of the Uniform Partnership Act (1997).) 
This 
section 
provides 
for 
a 
transition 
period 
in 
the 
applicabili ty of the Act to existing partnerships, similar to 
that provided in the revised Texas partnership act. 
See Tex. 
Rev. 
Civ. 
Stat. 
Ann. 
art. 
6l32blO.03 
(Vernon 
Supp. 
1994). 
Subs~ction (a) makes application of the Act mandatory for all 
partnprships 
formed after the effective date of the Act 
and 
permissive, by election, for existing partnerships. 
That affords 
existing partnerships and partners an opportunity to consider the 
changes 
effected 
by 
RUPA 
and 
to 
amend 
their 
partnership 
agreements, if appropriate. 
Under 
subsection 
(b), 
application 
of 
the 
Act 
becomes 
mandatory for all partnerships, including existing partnerships 
that did not previously elect to be governed by it, upon a future 
date 
to 
be 
established 
by 
the 
adopting State. 
Texas, 
for 
example, deferred for five years mandatory compliance by existing 
partnerships. 
Subsection (c) 
provides that an existing partnership may 
voluntarily elect to be governed by RUPA in the manner provided 
for amending its partnership agreement. 
Under UPA Section l8(h), 
that requires the consent of all the partners, unless otherwise 
agreed. 
Third parties doing business with the partnership must 
know or be notified of the election before RUPA's rules limiting 
a partner's liability become effective as to them. 
Those rules 
would 
include, 
for 
example, 
the 
provlslons 
of 
Section 
limiting the liability of a partner 90 days after the filing of a 
statement 
of 
dissociation. 
Without 
knowledge 
of 
the 
partnership's election, third parties would not be aware that 
they 
must 
check 
the 
record 
to 
ascertain 
the 
extent 
of 
a 
dissociated partner's personal liability. 
SIlOS. 
Rules of construction 
1. 
Savings cla~e. 
or proceeding commenced 
This chapter does not affect an action 
or right accrued before this chapter 
takes effect. 
2. 
Freedom to contract. 
It is the policy of the chapter to 
give 
maximum effect to 
the 
freedom 
of contract 
and 
to 
the 
enforceability of partnership agreements. 
-",3~.,--_L!o!!I!a.!!!.~-!an~d""---"eg..,..,.u~i"-,t,,,,y.f-.~_~Unl e s s 
di s p I aced 
by 
prov1s1ons of this chapter, 
the principles of law 
supplement this chapter. 
particular 
and equity 
\ 
; 
4. 
~_tatutes 
construed 
Statutes in 
derQfLatio~n~_o~f __ ~c~o~mmo~~n~~l~a~v~.~~R~u~l~e~s __ ~t~h~a~t 
in derogation of the common 
law are to be strictly 
do not apply to this chapter. 
5. 
Obligatj.Qns of contract. 
Neither this chapter nor any 
amendment 
of 
this 
chapter 
may 
be 
construed 
to 
impair 
the 
Qpligations 
of 
any 
contract existing 
when 
this 
chapter 
or 
amendment goes into effect. 
Comment 
(Subsection 1 is section 1207 of the Uniform Partnership Act 
(1997).) 
This section continues the prior law after the effective 
date of the Act with respect to a pending action or proceeding or 
a right accrued at the time of the effective date. 
Since courts 
generally apply the law that exists at the time an action is 
commenced, in many circumstances the new law of this Act would 
displace the old law, but for this section. 
Almost all States have general savings statutes, usually as 
part of their statutory construction acts. 
These are often very 
broad. 
Compare Uniform Statute and Rule Construction Act § 16(a) 
(narrow savings clause). 
As RUPA is remedial, the more limited 
savings provisions in Section 1207 are more appropriate than the 
broad savings provisions of the usual general savings clause. 
See generally, Comment to Uniform Statute and Rule Construction 
Act § 16. 
Pending "action" refers to 
a 
judicial proceeding, 
while 
"proceeding" is broader and includes administrative proceedings. 
Although it is not always clear whether a right has "accrued," 
the term generally means that a cause of action has matured and 
is ripe for legal redress. 
See, e.g., Estate of Hoover v. Iowa 
Dept. of Social Services, 299 Iowa 702, 251 N.W.2d 529 (1977); 
Nielsen v. State of Wisconsin, 
Wis. 
1110, 
N.W.2d 194 
(1966). 
An inchoate right is not enough, and thus, for example, 
there is no accrued right under a contract until it is breached. 
PARTB 
Sec. B-1. 31 MRSA §811, first 11', as corrected by RR 2001, c. 2, 
Pt. C, §5 and affected by §7, is amended to read: 
A limited liability partnership may be registered under this 
Act for any lawful purpose. 
A professional limited liability 
partnership, 
as 
defined 
in 
Title 
13, 
section 
723, 
subsection -§-A-
~, is subject to the Maine Professional Service 
Corporation Act except as follows. 
Sec. B-2. 31MRSA§821~ as enacted by PL 1995, c. 633, Pt. B, 
§1, is repealed and the following enacted in its place: 
§82l. 
Registration 
1. 
Filing of certificate. 
A partnership formed under the 
Uniform Partnership Act may be registered as a registered limited 
liability partnership by signing and filing 
a 
certificate of 
limited liability partnership with the Secretary of State. 
2. 
Terms and conditions. 
The terms and conditions on which 
a partnership becomes 
a 
limited liability partnership must be 
approved by the vote necessary to amend the partnership agreement 
or. 
in 
the 
case 
of 
a 
partnership 
agreement 
that expressly 
considers obligations to contribute to the partnership. by the 
vote necessary to amend those provisions. 
Sec. B-3. 31 MRS A §822, sub-§I, ,C, as enacted by PL 1995, c. 
633, Pt. B, §1, is amended to read: 
C. 
The name and the business, residence or mailing address 
of the contact partner; aRe 
Sec. 8-4. 31 MRSA §822, sub-§l, ,C-l is enacted to read: 
C-1. 
The 
street 
address 
of 
the 
partnership's 
chief 
executive office and. if different. the street address of an 
office in the State. if any; and 
Sec. B-5. 31 MRSA §822, sub-§3 is enacted to read: 
3. 
Errors: later ch~ggs. The status of a partnership as a 
limited liability partnership and the liability of its partners 
is not affected by errors or later changes in the information 
reguired to be contained in the certificate under subsection 1. 
Sec. B-6. 31 MRSA §858, as enacted by PL 1995, c. 633, Pte B, 
§1, is repealed. 
Sec. B-7. 31 MRSA §858-A is enacted to read: 
§858-A. 
Effect of failure to qualify 
1. 
No action or proceeding until granted authority: fees 
pa,id. 
A 
foreign 
limited 
liability 
partnership 
transacting 
business in this State may not maintain an action or proceeding 
in this State until it is granted authority to do business in 
this State and pays to the State all fees and penalties for the 
~rs or parts of years during which it did business in this 
State without having been granted authority to do business. 
2. 
Validity 
of 
contract 
or 
act: 
defend 
action 
or 
px.Q_ceeding. 
The 
failure 
of 
a 
foreign 
limited 
liability 
partnership to obtain authority to do business in this State in 
accordance with this chapter does not impair the validity of a 
contract or act of the foreign limited liability partnership or 
preclude it from defending an action or proceeding in this State. 
3. 
Limitation on personal liability. 
A limitation on 
personal 
liability 
of 
a 
partner 
is 
not 
waived 
solely 
by 
transacting 
business 
in 
this 
State 
without 
being 
granted 
authority to do business in this State. 
4. 
Agent for service of process. 
If a 
foreign limited 
liability partnership transacts business in this State without 
being granted the authority to do business in this State, the 
~retary of State is its 
a~t for service of process with 
respect to a right of action arising out of the transaction of 
business in this State. 
Sec. B-S. 31 MRSA §S59-A, first~, as enacted by PL 2003, c. 
631, §71, is amended to read: 
Notwithstanding Title 4, chapter 5 and Title 5, chapter 375, 
the Secretary of State may commence a proceeding under section 
859-B 
to 
revoke the 
stat~s authority of 
a 
partnership as 
a 
foreign limited liability partnership authorized to do business 
in this State if: 
Sec. B-9. 31 MRSA §S59-B, sub-§§2, 3 and 6, as enacted by PL 
2003, c. 631, §71, are amended to read: 
2. 
Revocation. 
The 
foreign partnership's 
stat~s--as--a 
*imitee-*iaei*i~Y-Fa~ERe~sRiF authority to do business is revoked 
if within -.eQ N 
days after the notice under subsection 1 was 
issued the Secretary of State determines that the foreign limited 
liability partnership has failed to correct the ground or grounds 
for revocation. 
The Secretary of State shall send notice to the 
foreign partnership at the partnership' s last registered office 
address in this State and to its last registered or principal 
office address in its jurisdiction of registration that recites 
the ground or grounds for revocation of the foreign partnership's 
status as a limited liability partnership and the effective date 
of revocation. 
3. 
Authority to transact business ceases. 
The authority of 
a foreign limited liability partnership to transact business in 
this State ceases on the date of revocation of its authority 
unless 
such 
revocation is stayed pursuant to section 859-C, 
subsection 2. 
6. 
Authorization after 
revocation. 
A 
foreign 
limited 
liability partnership whose authority to transact business in 
this State has been revoked under this section and that wishes to 
transact business again in this State may be 
FeiBS~a~eQ-PQ£sQan~ 
F.e-See~ieB-g99-g regualified by applying for authority under this 
subchapter. 
Sec. ~31O. 31 MRSA §§859-D and 859-E, as enacted by PL 2003, 
c. 03:, §71, are repealed. 
Sec. B-ll. 31 MRSA §864 is enacted to read: 
§864. 
Action by Attorney General 
The Superior Court has jurisdiction to 
enJo~n a 
foreign 
limited liability partnership or any agent of the foreign limited 
liability partnership from doing business in this State if the 
foreign limited liability partnership has not been granted the 
authority to do business under this subchapter. 
The Attorney 
General may file a complaint in any county in which the foreign 
limited liability partnership is doing or has done business for 
the purpose of obtaining an injunction under this section. 
Sec. B-12. 31 MRSA §873, sub-§I. ~D, as enacted by PL 1995, c. 
633, Pt. 
B, §l, is repealed and the following enacted in its 
place: 
D. 
The street address of the partnership's chief executive 
office, the street address of an office of the partnership 
in this State and the name and street address of the contact 
partner. 
Sec. B-13. 31 MRSA §874. sub-§I, as amended by PL 2003, c. 
631, §80, is further amended to read: 
1. 
Failure to file annual report; penalty. 
A registered or 
foreign limited liability partnership that is required to deliver 
an annual report for filing, as provided by section 873, that 
fails to deliver its properly completed annual report to the 
Secretary of State shall pay, in addition to the regular annual 
report fee, 
the late filing penalty described in section 871, 
subsection 22, as long as the report is received by the Secretary 
of State prior to revocation of its status as a limited liability 
partnership or authority to do business as 
a 
foreign limiteg 
liability partnership, respectively. 
Upon a 
limited liability 
partnership's failure to file the annual report and to pay the 
annual 
report 
fee 
or 
the 
penalty, 
the 
Secretary of 
State, 
notwithstanding Title 4, 
chapter 5 
and Title 5, 
chapter 375, 
shall 
revoke 
the 
statQS 
authority 
to 
do 
business 
of 
that 
• 
J 
partnership as a foreign limited liability partnership or ~ 
revoke the status of that partnership as a registered limited 
liability partnership. 
The Secretary of State shall use the 
procedures set forth in section 808-B to revoke the status of a 
registered limited liability partnership and the procedures set 
forth in section 859-B to revoke the 
stat~s authority to do 
business 
of 
a 
partnership 
as 
a 
foreign 
limited 
liability 
partnership 
in 
this 
State. 
A 
foreign 
limited 
liability 
partnership whose 
l~ffi~teQ-~~~~~~~-~~~~~-stat~s authority 
to do business has been revoked under section 859-B that wishes 
to do business again as a limited liability partnership in this 
State must 
~ellew-~~-~~~~-5e~-~~~~-ia-~€£~~~-~~-~e 
Fe~Bs~a~e 
regualify 
by 
applying 
for 
authority 
under 
this 
subchapter. 
A partnership whose status as a registered limited 
liability partnership has been revoked under section 808-B must 
follow the requirements set forth in section 808-C to reinstate. 
Sec. B·14. Savings clause. 
This Part does not affect an action 
or proceeding commenced or a right accrued before this Act takes 
effect. 
Sec. B·15. Effective date. 
This Part takes effect July 1, 2006. 
SUMMARY 
This bill repeals the existing Uniform Partnership Act and 
enacts the Revised Uniform Partnership Act of 1997 (RUPA) as the 
new Uniform Partnership Act. 
It makes the following changes in 
Maine partnership law. 
Under 
current 
law 
concerning 
the 
agency 
authority 
of 
partners, every partner has apparent authority to carryon the 
business of the partnership. 
This bill continues that concept 
except that the apparent authority includes acts for carrying on 
in the ordinary course business of the kind carried on by the 
partnership, not just the business of the particular partnership 
in question. 
Current law provides that the partnership is bound 
for the acts of a partner wi thin the apparent authority unless 
the partner has no actual authority and the person with whom the 
partner is dealing has knowledge that the partner has no actual 
authority. 
This bill is the same as current law except that 
RUPA provides that a person who has received a notification of a 
partner's lack of authority is also bound. 
RUPA specifies the 
meaning of "receives a notification". 
Under 
current 
property wrongfully 
property unless the 
current law or the 
law 
concerning 
partnership 
recovery 
of 
conveyed, 
the partnership may recover the 
partner binds the partnership as provided in 
purchaser or the purchaser's assignee is a 
holder 
for 
value without 
knowledge. 
Under 
RUPA, 
the 
burden 
shifts to the partnership to show that the act was not authorized 
and that the grantee and subsequent grantee for value had no 
knowledge or notice of the partner's lack of authority. 
Under 
current 
law 
concerning 
partnership 
liability 
for 
partner 
conduct, 
the partnership is liable 
for 
the 
wrongful 
conduct of a partner performed in the ordinary course of the 
business of the partnership or with the authority of the other 
partners, but only to persons who are not also partners in the 
partnership. 
RUPA is the same as the current law, except that a 
partner 
can 
sue 
as 
well. 
The 
RUPA 
provision also 
includes 
no-fault torts under the phrase "other actionable conduct." 
Under current law concerning partner liability, there is 
joint 
and 
several 
liability for 
tortuous 
conduct 
and 
joint 
liability for 
contractual obligations. 
Under 
RUPA, 
there is 
joint 
and 
several 
liability 
for 
all 
obligations 
of 
the 
partnership. 
With regard to registered liability partnerships 
except 
for 
professional 
limited 
liability 
partnerships, 
the 
liability shield under current law for a Maine limited liability 
partnership 
protects 
only 
against 
tort 
liabilities. 
RUPA 
provides 
full 
shield 
liability 
protection 
for 
a 
tortuous 
liabi Ii ty and for contractual obligations. 
Current law contains 
no provision concerning whether the partnership agreement affects 
the 
liability 
imposed 
by 
the 
statute. 
In 
contracts, 
RUPA 
provides that it expressly overrides anything to the contrary in 
the partnership agreement. 
The current law limits the liability 
of 
an 
incoming 
partner 
to 
the 
partnership 
property. 
RUPA 
provides that there is no liability to incoming partners for 
preadmission liabilities. 
Current law contains no provision concerning actions by 
against 
the 
partnership 
and 
partners. 
RUPA 
establishes 
partnership as distinct from partners for judgments, levies 
legal actions generally. 
and 
the 
and 
Under current law, 
a 
partner is obligated to contribute 
immediately 
to 
offset 
a 
deficit 
of 
the 
partnership. 
RUPA 
provides that each partner is chargeable with a 
share of the 
partnership 
losses 
in proportion 
to 
the 
partner's 
share 
of 
profits. 
The partner is not obligated to contribute to 
any 
deficit 
obligation 
before 
the 
partner 
withdraws 
or 
the 
partnership liquidates. 
Under current law and under RUPA, 
profits and losses are 
split evenly under default provisions. 
Under 
current 
law, 
partners 
have 
a 
tenancy 
partnership. 
RUPA provides that the partners have no 
Page l4l-LR1469(1) 
in 
the 
separate 
.J 
interest in partnership property. 
The partnership is treated as 
an entity separate from the partners for purposes of property 
interests. 
Under current Maine law, every partner has access at all 
times to inspect and copy the partnership's books and records. 
RUPA is generally the same as the current law except that access 
is also afforded to former partners with respect to books and 
records 
pertaining 
to 
the 
period 
during 
which 
they 
were 
partners. 
Also under RUPA, 
a partner's right of access to books 
and records may not be unreasonably restricted by the partnership 
agreement. 
Thus, 
reasonable 
restrictions 
by 
agreement 
are 
authorized. 
RUPA 
provides that partners and the partnership have an 
affirmative obligation to furnish to a partner without demand any 
information concerning the partnership's business 
and affairs 
reasonably required for the proper exercise of the partner's 
rights and duties under the partnership agreement for the act. 
As 
to other information, 
a 
partner and the partnership must 
furnish the information on demand, except to the extent that the 
demand or information is unreasonable or otherwise improper under 
the circumstances. 
Current law contains no express provision. 
RUPA clearly and exclusively defines the duties of loyalty 
and duty of care; it specifies that a 
partner may transact 
business with the partnership without violating any duties and it 
provides that there is no per se violation of a duty solely on 
account 
of 
the 
fact 
that 
the 
conduct 
furthers 
a 
partner's 
interest. 
There is no comparable provision in current law on 
standards of partner conduct, 
so it must be addressed by the 
common law. 
Current law does not address 
against a partner. 
RUPA permits 
action against a partner. 
an action of 
a partnership 
the partnership 
to maintain an 
Current Maine law provides that any partner has the right to 
a 
formal 
account 
as 
to 
partnership 
affairs 
under 
certain 
circumstances. 
The right of a partner to make an action against 
a partnership is much broader and more specific under RUPA. 
In 
particular, 
RUPA 
allows 
an 
action 
to 
be 
made 
against 
the 
partnership by a partner with or without an accounting as to the 
partnership business. 
Under current law, the partners are tenants in partnership 
as to partnership property. 
Under RUPA, 
a partner is not a 
co-owner of partnership property; a partner has no interest in 
partnership property that can be transferred. 
Under current law, 
only a partner's financial rights are 
transferable. 
RUPA makes no change. 
RUPA provides that a transferor partner retains the rights 
and 
duties 
of 
a 
partner 
other 
than 
the 
economic 
rights 
transferred. 
There is no comparable provision in current law. 
RUPA provides 
a~ainst _ ansfer is 
of 
th~ restrlction. 
law. 
that a transfer in violation of restrictions 
ineffective as to a person with timely notice 
There is no comparable provision in current 
RUPA 
expressly 
provides 
that 
a 
charging 
order 
is 
the 
exclusive remedy. 
Current law contains no provision although 
case law provides that the charging order remedy is generally an 
exclusive remedy. 
Under current Maine law, the departure of a partner causes 
the dissolution of the partnership. 
Dissolution of a partnership 
because 
a 
partner departs is referred to as the "aggregate" 
theory. 
Under 
RUPA, 
"dissociate" 
means 
separation. 
The 
dissociation does not necessarily cause 
a dissolution of the 
partnership. 
This is referred to as the "entity" theory. 
With regard to a wrongful dissociation, current law provides 
that a partner may depart the partnership at any time. 
The 
departing partner can be charged with any damages caused by the 
departure. 
Under RUPA, 
a partner who dissociates wrongfully is 
liable to the partnership and the other partners. 
Under current Maine law, after the departure of a partner 
the other partners can continue the partnership only if the 
partner wrongfully departed. 
Under 
RUPA, 
the result of 
the 
dissociation is a buyout of the dissociated partner's interest 
unless there is a dissolution of the partnership. 
RUPA clarifies 
a partner's duties upon dissociation. 
Under RUPA, 
when a partner's dissociation does not cause 
dissolution, 
the 
partner's 
interest 
is 
purchased. 
RUPA 
enumerates the purchase price and terms of the purchase. 
It also 
provides special rules for the timing of a buyout when a partner 
wrongfully dissociates from 
a 
term partnership or partnership 
established to accomplish a specific project and for a claim by 
the dissociated partner against the partnership to determine any 
of the particulars of the buyout. 
There is no similar provision 
under current Maine law because departure of a partner causes a 
dissolution of the partnership. 
Under current law, if a partner 
causes a dissolution wrongfully and if the other partners decide 
to 
continue 
the 
partnership, 
then 
the 
partner 
causing 
the 
Page l43-LR1469(1) 
dissolution can require the purchase of such partner's interest 
for value. 
RUPA 
provides 
that 
for 
a 
period 
of 
years 
after 
dissociation, 
a 
partner 
has 
apparent 
authority 
to 
bind 
the 
partnership under 
the conditions set forth. 
The 
dissociated 
partner is liable to the partnership for any damages resulting 
from 
an 
obligation 
improperly 
incurred 
by 
the 
dissociated 
partner. 
There is no similar provision under current Maine law. 
Under RUPA, 
a dissociation does not automatically discharge 
the 
partner's 
liability 
for 
predissociation 
partnership 
obligations, 
but 
does 
discharge 
postdissociation 
liabilities 
except 
in 
enumerated 
circumstances. 
There 
is 
no 
similar 
provision under current Maine law. 
RUPA 
provides 
that 
a 
dissociated 
partner 
may 
file 
a 
statement 
of 
dissociation. 
This 
statement 
terminates 
the 
dissociated partner's authority to transfer partnership property, 
apparent authority and continuing liability to 3rd parties 30 
days after it is filed. 
The filing is voluntary. 
The proposed 
Maine provision shortens the time before the statement takes 
effect under RUPA from 90 days to 30 days. 
There is no similar 
provision under current Maine law. 
Under 
RUPA, 
a 
dissociated 
partner 
is 
not 
liable 
for 
partnership liabili ties if the partnership name or use of the 
dissociated partner's name is continued. 
There is no similar 
provision under current Maine law. 
The events that cause a dissolution are found in the Maine 
Revised Statutes, Title 31, section 311, with respect to actions 
by 
the partners, 
and section 
312, 
with respect to 
judicial 
dissolution. 
RUPA 
enumerates 
those 
default 
events 
when 
a 
partnership is dissolved and its business wound up. 
If one of 
these events does 
not occur or if the partnership agreement 
provides that such event does not cause a dissolution, then the 
dissociated partner is bought out and the partnership continues. 
Under 
current 
Maine 
law, 
a 
partnership continues 
after 
dissolution only for the purposes of winding up its business. 
All partners who 
have not caused a 
wrongful dissolution may 
continue the partnership and its operations. 
RUPA provides that 
a partnership continues after dissolution only for the purpose of 
winding 
up 
its 
business. 
However, 
all 
remaining 
partners, 
including the dissociated partner if the dissociation was not 
wrongful, 
have the right to continue the partnership and its 
operations. 
Under current law, 
the partners who 
have not wrongfully 
dissolved the partnership may 
wind 
up the partnership. 
RUPA 
enumerates the rules for who may wind up the partnership business 
and 
the 
powers 
of 
the 
person 
or 
persons 
winding 
up 
the 
partnership business. 
Under RUPA, 
a partnership is bound by a partner's act after 
dissolution if the act either is appropriate for winding up the 
partnership 
or 
would 
have 
bound 
the 
partnership 
before 
dissolution if the other party had no notice of the dissolution. 
The current Maine provisions are similar. 
The proposed Maine 
provision removes some complex and cumbersome provisions dealing 
with former creditors and other parties who knew the partnership 
before dissolution. 
RUPA enumerates the rules for the filing of a statement of 
the partnership's dissociation and the effects of the filing with 
respect 
to 
3rd parties 
dealing with 
the 
partnership. 
RUPA 
provides that the statement is effective 90 days after filing, 
but this Maine enactment provides that the statement is effective 
days 
after filing. 
There 
is 
no 
similar provision under 
current Maine law. 
The 
proposed Maine 
law is similar to current Maine 
law 
concerning 
a 
partner's 
liability 
to 
other 
partners 
after 
dissolution. 
RUPA provides that a partner is liable to the other 
partners for the partner's share of any partnership liability 
incurred to wind up the partnership. 
In addition, a partner who 
incurs 
a 
partnership liability for 
an act inappropriate for 
winding up the partnership is liable to the partnership for any 
damage arising from 
the liability. 
Unlike current law, 
RUPA 
draws no distinction as to the cause of dissolution. 
RUPA addresses the settlement of accounts and contributions 
among partners. 
First, the partnership assets are used to pay 
partnership creditors. 
Second, after the payment of creditors, 
any surplus is paid in cash to 
the partners to settle the 
partners' accounts. 
If a partner has a negative account, which 
occurs when the partner's obligations to the partnership are in 
excess of the amount owed from the partnership, then the partner 
must contribute the negative amount to the partnership. 
RUPA 
contains special provisions for coverage of obligations of an 
insolvent partner by solvent partners, the rights of the estate 
of a deceased partner and the rights of a creditor of a partner. 
Under current Maine law, similar rules apply to the settlement of 
partnership 
assets 
upon 
dissolution. 
Current 
Maine 
law 
distinguishes between obligations to creditors and obligations to 
partners. 
The proposed Maine laws do not make this distinction 
and treat all creditors of the partnership equally. 
Moreover, 
., 
, 
current Maine law distinguishes between amounts owed to partners 
in respect of capital and amounts owed in respect of profit. 
The 
proposed Maine laws do not make this distinction. 
Under 
current 
Maine 
law, 
when 
a 
limited 
liability 
partnership fails to file the annual report, appoint a registered 
agent or 
make 
other required filings, 
the partners' 
limited 
liability is revoked. 
RUPA provides that the effect of such 
failures is the suspension of the limited liability partnership's 
authority to do business. 
Under RUPA, the vote for registration of the partnership as 
a 
limited liability partnership generally must be approved by 
vote required to amend the partnership agreement. 
Current law 
includes no explicit provisions. 
Under 
RUPA, 
a 
foreign limited liability partnership that 
fails to qualify to do business in Maine may not maintain action 
in Maine, and the Secretary of State is automatically appointed 
as agent for service of process. 
Under current law, the failure 
results in no limited liability for partners. 
Under current Maine law, if the limited partnership fails to 
file 
the 
annual 
report 
or 
make 
other 
filings, 
the 
limited 
liability of the partners is 
revoked. 
Under 
RUPA, 
the 
same 
failure results in the revocation of authority to do business in 
Maine. 
RUPA explicitly provides that the Attorney General may seek 
an 
inj unction 
in 
any 
county 
where 
the 
limited 
liability 
partnership has done business when a foreign limited liability 
partnership has not been authorized to do business in this State. 
Under current Maine 
law, 
a 
partner in limited liability 
partnership is not liable for liability "arising from omissions, 
negligence, wrongful acts, misconduct or malpractice" of another 
partner 
or 
agent 
of partnership. 
The 
law does 
not prevent 
liability for 
purely contractual 
obligations 
of 
partnership. 
RUPA provides extended liability protection for partners in the 
limi ted 
liability 
partnership 
for 
vicarious 
liability 
for 
partnership obligations, similar to limitations on liability of 
corporate shareholders. 
This bill retains the specific liability 
standards 
for 
partners 
in 
professional 
limited 
liability 
partnerships 
set 
forth 
in 
the 
Maine 
Professional 
Services 
Corporation Act. 
RUPA explicitly sets forth procedures for conversion of a 
general 
partnership 
to 
a 
limited 
partnership. 
Following 
conversion, 
a partner who 
has 
become 
a 
limited partner as 
a 
result of the conversion remains liable as a general partner for 
preconversion obligations and is liable as a general partner for 
partnership 
obligations 
incurred 
within 
days 
after 
the 
conversion, if the transaction counterparty in question believed 
the limited partner to be a general partner. 
Current law does 
not address this circumstance. 
The 
conversion 
of 
a 
limited 
partnership 
to 
a 
general 
partnership is unambiguously permitted under 
RUPA, 
with clear 
pror;edure" fOl" conversion. 
Regardless of the provisions of the 
limited 
partnership 
agreement, 
a 
conversion 
to 
a 
general 
partnership must be approved by all partners. 
Current Maine law 
does not address conversion of a limited partnership to a general 
partnership in the general partnership statute, and it is unclear 
if it is permitted under 
the 
Maine 
Revised Uniform 
Limited 
Partnership Act, due to lack of provisions regarding conversion 
in general partnership statute. 
RUPA 
provides 
partnership 
with 
partnership. 
RUPA 
effects of merger. 
explicit guidance for merger of 
a 
general 
another 
general 
partnership 
or 
a 
limited 
also provides explicit guidance with regard to 
Current Maine law does not address this issue. 
Under RUPA, with respect to duties owed to the partnership 
or other partners only, 
a partner will not be held liable for 
that 
partner's 
good 
faith 
reliance 
on 
the 
terms 
of 
the 
partnership agreement, if any. 
Current law contains no explicit 
provisions. 
The 
following 
are 
deviations 
from 
the 
Revised 
Uniform 
Partnership Act of 1997 contained in this bill. 
1. 
The 
definition 
of 
references 
the 
Maine 
Limited 
Article 10 of RUPA. 
limited 
Liability 
liability 
partnership 
Partnership 
Act, 
not 
2. 
With regard to a partner's liability, new provisions are 
added: 
to 
clarify 
that 
a 
partner 
in 
a 
limited 
liability 
partnership is liable for the partner's own acts, or for acts of 
any person under that partner's direct supervision and control; 
to include particular Maine liability provisions applicable to 
professional limited liability partnerships; and to clarify that 
a partner in a 
limited liability partnership is not a 
proper 
party to a suit against the partnership as an entity. 
3. 
The information to be filed with the Secretary of State 
by a 
surviving party to a 
merger of partnerships is slightly 
revised. 
4. 
The provisions concerning the statement of merger are 
amended: to mandate that any survivor of a merger with a Maine 
Page l47-LR1469(1) 
partnership that is itself a foreign partnership file a consent 
to service of process with the Secretary of State's office for 
obligations arising; and to provide that failure to file a copy 
of a statement of merger with the registrar of deeds will not 
affect the surviving entity's title to real property. 
5. 
Articles 10 and 11 of the RUPA are omitted in deference 
to the more detailed provisions in the Maine Limited Liability 
Partnership Act.