Partnership: Ending It (When is a "buy out" possible? (CONSENT,…
Partnership: Ending It
When can a partner dissociate?
If the partnership is "at will," then at any time.
If the partnership is "for a term," then the partner must fulfill the term.
Entity was formed to repay financing.
Pay regular costs
Common hope that the earnings will pay for expenses does not establish a "definite term or particular undertaking."
Page v. Page
If the partner leaves early, then she engages in "wrongful conduct."
UPA § 602(b)
When can an entity dissolve?
If the partnership is "at will," then a dissociation forces an auction, supervised by a judge.
UPA § 601(1)
Partners of either type of partnership may ask the court for dissolution.
Is it reasonably practicable to continue operations?
McCormick v. Brevig
When is a "buy out" possible?
Departing partner agrees to a "buy out."
If there is a legitimate business purpose, then the partners can agree to a "buy out."
UPA § 601(3)
Like a breach in the partnership agreement.
Bohatch v. Butler & Binion
If a partner engages in "wrongful conduct," then the court can order a "buy out."
UPA § 601(5)
Engages in wrongful conduct that materially affects the business.
Willfully commits a material breach of the partnership agreement.
Makes it impracticable to carry on the partnership.
Drashner v. Sorenson
Wrongful partner may have to pay damages for breach and / or wait to receive the partnership interest until after the term ends.
But, the partnership interest is never forfeited!
Sole proprietor may move to "buy out" a financier.
Nicholes v. Hunt.