Opinion ID: 1911789
Heading Depth: 1
Heading Rank: 17

Heading: 1998 UPA's Effect on Voluntary Withdrawals

Text: We believe Harley misconstrues RUPA's effect on partnership law. He contends that the partnership was in dissolution under the 1998 UPA because Don failed to strictly comply with the buyout provision. Under the original UPA, dissolution of an at-will partnership was mandatory upon a partner's expressed will to dissolve the partnership. [14] Unless otherwise agreed, the partners who had not wrongfully dissolved the partnership had the right to wind up the partnership affairs. [15] The partnership was terminated once the winding up of its affairs was completed. [16] Although dissolution was mandatory, the partners could agree to prevent termination of the business. [17] But problems arose with third parties and partnership property that partnership agreements could not prevent. [18] By making the partnership a distinct entity from its partners, RUPA avoids problems caused by mandatory dissolution. [19] RUPA's underlying philosophy differs radically from UPA's, thus laying the foundation for many of its innovative measures. RUPA adopts the entity theory of partnership as opposed to the aggregate theory that the UPA espouses.[ [20] ] Under the aggregate theory, a partnership is characterized by the collection of its individual members, with the result being that if one of the partners dies or withdraws, the partnership ceases to exist.[ [21] ] On the other hand, RUPA's entity theory allows for the partnership to continue even with the departure of a member because it views the partnership as an entity distinct from its partners. [22] RUPA effects this change by giv[ing] supremacy to the partnership agreement in almost all situations. [RUPA] is, therefore, largely a series of default rules that govern the relations among partners in situations they have not addressed in a partnership agreement. . . . . . . . . . . RUPA's basic thrust is to provide stability for partnerships that have continuation agreements . . . [RUPA] provides that there are many departures or dissociations that do not result in a dissolution. . . . Many dissociations result merely in a buyout of the withdrawing partner's interest rather than a winding up of the partnership's business. [23] This means that RUPA's default rules are gap-filling rules that control only when a question is not resolved by the parties' express provisions in an agreement. [24] Section 67-404 carries out the legislative intent to make the partnership provisions the controlling rules and the 1998 UPA provisions the default rules. Except for limited exceptions that do not apply here, relations among the partners and between the partners and the partnership are governed by the partnership agreement. To the extent the partnership agreement does not otherwise provide, the Uniform Partnership Act of 1998 governs relations among the partners and between the partners and the partnership. [25] Section 67-431 provides that a partner's voluntary withdrawal no longer results in mandatory dissolution; it results in a partner's dissociation. Section 67-433(1) manifests a legislative intent to create separate pathsdissolution and winding up or mandatory buyout through which a dissociated partner can recover partnership interests: If a partner's dissociation results in a dissolution and winding up of the partnership business, sections 67-439 to 67-445 [dealing with dissolution and winding up] apply; otherwise, sections 67-434 to 67-438 [dealing with mandatory buyout] apply. [26] The comment to § 603 of RUPA, the section upon which § 67-433 is patterned, specifically provides that it operates as a `switching' provision. [27]