Trust and Confidence
By: Adriane Lauren Luna,

What is Partnership?

A “partnership” exists when two or more persons agree to contribute their money, industry or property into a common fund to be used in a business, trade or profession. Partners share in the profits gained as well as in the losses obtained by the partnership; their contributions and share not necessarily equal.

Basis of Partnership

All partnerships are based on the principle, “delictus personarum” or mutual trust and confidence. Naturally, a person would not share his resources with another person whom he does not trust. This is also the reason why the unanimous consent of all the partners is required in order for a new person to join the partnership. There is a presumption that a partner has the authority to represent another partner and even the entire partnership in business dealings or in a suit.

What are the Obligations of Partners?

Every partner is to contribute something to the partnership. Like for instance, an industrial partner contributes his services to the partnership; while a general partner contributes his money or property and has more control over the partnership affairs as opposed to a limited partner. In addition, every partner has his designated obligation and responsibility. For instance, in case of loss, a general liability partner is obligated to give his personal money to pay the partnership’s creditors. On the other hand, the money obligation of a limited liability partner is only up to his partnership contribution.

Breach of Partnership:

There is breach of partnership when a partner has failed to do what is incumbent upon him.

Section 16404 of the Corporation Code provides that a partnership may file an action against a partner for the following reasons:

1. Breach of partnership agreement

2. For violation of the partnership’s duty

When is there a Breach of Partnership Agreement?

There is a breach of Partnership Agreement when one partner failed to perform his obligation as indicated in the agreement or the article of partnership. This may include:

1. Failure to give his assigned contributions to the partnership despite numerous demand

2. Failure to share in the loss encountered by the partnership

3. Disclosure to other parties of confidential matters concerning the partnership affairs

When is there a Violation of the Partnership’s duty?

The partnership has duties to the partners as well as to its clients. There may be a violation of these duties when a partner does an act that would harm his partners or his clients such as when he discloses confidential matters of the partnership to a third person.

Is Breach of Partnership an actionable wrong?

Yes it is. Breach by a partner of his duties or obligation becomes a legal ground to expel him from the partnership. A single breach may be a reason for the partners to lose their trust and confidence on a partner.

If you have a partner who is remiss on his duties, which may be a ground for Breach of Partnership, then avail the services of a lawyer who can address your issue and concern.

To help you address business issues such as breach of partnership, you can consult with our expert Los Angeles corporate business lawyers. You can visit our website to avail of our free case analysis.

 

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