Partner Liability: A Comprehensive Guide for Law Students

Question 1

In a partnership, what is the extent of each partner's liability for the partnership's debts and obligations?

Accepted Answer

Partners are jointly and severally liable for the partnership's debts and obligations.

Answer

Partners are liable only for the debts and obligations they personally incurred.

Answer

Partners are liable for the partnership's debts and obligations up to the amount of their capital contribution.

Answer

Partners are not liable for the partnership's debts and obligations.

Question 2

Which of the following best describes the liability of partners in a partnership?

Accepted Answer

Partners are jointly and severally liable for the debts and obligations of the partnership.

Answer

Partners are only liable for the debts and obligations that they personally incur.

Answer

Partners are jointly liable for the debts and obligations of the partnership, but only up to the amount of their investment in the partnership.

Answer

Partners are not liable for the debts and obligations of the partnership.

Question 3

In the context of partnership law, which statement accurately describes the liability of partners for partnership debts and obligations?

Accepted Answer

Partners share joint and several liability for partnership debts and obligations.

Answer

Partners are only responsible for the debts and obligations they personally incur.

Answer

Partners are not liable for partnership debts and obligations unless they are explicitly named in the partnership agreement.

Answer

Partners are exempt from liability for partnership debts and obligations if they do not participate in partnership management.

Question 4

Under what circumstances can a partner's personal assets be used to satisfy partnership debts?

Accepted Answer

Only if the partnership assets are insufficient

Answer

In all cases

Answer

Never

Answer

Only if the partner is the managing partner

Question 5

In a limited partnership, who is personally liable for partnership debts?

Accepted Answer

General partners

Answer

Limited partners

Answer

Both general and limited partners

Answer

Neither general nor limited partners

Question 6

Which of the following does NOT affect the extent of a partner's liability?

Accepted Answer

Partner's age

Answer

Type of partnership

Answer

Partner's role in the partnership

Answer

Partner's knowledge of the partnership's business

Question 7

What is a key characteristic of a partnership at will?

Accepted Answer

Any partner can dissolve the partnership at any time

Answer

The partnership can only be dissolved by mutual agreement of all partners

Answer

The partnership can only be dissolved by a court order

Answer

The partnership dissolves automatically upon the death or withdrawal of a partner

Question 8

Which of the following statements regarding creditor rights against partners is accurate?

Accepted Answer

Creditors can sue both the partnership and individual partners

Answer

Creditors can only sue the partnership, not individual partners

Answer

Creditors can sue individual partners, but not the partnership

Answer

Creditors can only sue the general partners, not the limited partners

Question 9

What is the purpose of the doctrine of marshalling of assets?

Accepted Answer

To require partnership creditors to exhaust partnership assets before pursuing individual partner assets

Answer

To give priority to partnership creditors over individual creditors

Answer

To give priority to individual creditors over partnership creditors

Answer

To require individual creditors to exhaust individual partner assets before pursuing partnership assets

Question 10

What is NOT a step in dissolving a partnership?

Accepted Answer

Filing annual tax returns

Answer

Selling partnership assets

Answer

Paying off debts

Answer

Distributing remaining funds to partners

Question 11

How does the dissolution and winding up of a partnership impact the liability of its partners?

Accepted Answer

Partners continue to be jointly and severally liable for partnership debts incurred before and during the winding up process.

Answer

Partners are absolved of all liabilities once the winding up process begins.

Answer

Only the partner who initiated the dissolution is responsible for partnership debts incurred after the commencement of winding up.

Question 12

How does a partner's authority affect their personal liability in a partnership?

Accepted Answer

Partners can bind the partnership to contracts, but only within their agreed-upon roles.

Answer

Partner authority has no impact on individual liability.

Answer

Partner authority is always implied, never explicitly stated.

Question 13

Which of the following is an exception to the general rule of joint and several liability for partners?

Accepted Answer

Partnership agreement

Answer

Statute of limitations running out

Answer

Bankruptcy

Answer

Act of God

Question 14

Which of the following is NOT a factor considered when determining the implied authority of a partner?

Accepted Answer

Legal advice received by the partners

Answer

Nature of the partnership business

Answer

Previous conduct of the partner

Answer

Partnership agreement

Question 15

Which of the following circumstances can limit or eliminate a partner's liability for partnership debts and obligations?

Accepted Answer

Limited partners have limited liability due to their investment and non-involvement in management.

Accepted Answer

Dormant partners are not liable because they do not participate in the partnership's business or decision-making.

Answer

Partners are only liable for debts they personally incur on behalf of the partnership. (Incorrect)

Question 16

Which of the following best describes the consequences of the joint and several liability of partners?

Accepted Answer

Each partner is individually liable for the entire partnership debt.

Answer

Partners are only liable for debts incurred during their tenure.

Answer

Partners have limited personal liability for partnership obligations.

Answer

Creditors can only pursue the partner who incurred the debt.

Question 17

What is the primary fiduciary duty owed by partners to each other?

Accepted Answer

Duty of loyalty

Answer

Duty of care

Answer

Duty of accounting

Answer

Duty of indemnification

Question 18

Which of the following statements about joint and several liability is true?

Accepted Answer

Each partner is fully and individually liable for the entire debt or obligation of the partnership.

Answer

The liability of each partner is limited to their capital contribution.

Answer

Only the managing partner is liable for the debts of the partnership.

Question 19

In a partnership, how does the liability of general partners differ from that of limited partners?

Accepted Answer

General partners have unlimited liability, while limited partners have limited liability.

Answer

General partners have limited liability, while limited partners have unlimited liability.

Answer

General partners and limited partners share equal liability for partnership debts.

Answer

Limited partners have unlimited liability, while general partners have limited liability.

Question 20

What is the effect of an incoming partner on the liability of existing partners?

Accepted Answer

Existing partners become jointly and severally liable for debts incurred after the new partner joins.

Answer

Existing partners are no longer liable for any debts of the partnership.

Answer

The liability of existing partners is reduced in proportion to the new partner's capital contribution.

Question 21

What is the liability of a limited partner for the debts of the partnership?

Accepted Answer

Limited to the amount of their capital contribution.

Answer

Unlimited.

Answer

Jointly and severally liable.

Question 22

Which of the following statements about the fiduciary duty of partners is accurate?

Accepted Answer

Partners owe each other a duty of loyalty, which requires them to act in the best interests of the partnership.

Answer

The duty of care is the highest fiduciary duty owed by partners.

Answer

Partners have no fiduciary duties to each other.

Question 23

In the context of joint and several liability, what does it mean for a partner to be 'severally' liable?

Accepted Answer

Each partner is individually responsible for the entire debt or obligation.

Answer

Liability is divided equally among all partners, regardless of their involvement.

Answer

Partners are only liable for the portion of the debt proportionate to their ownership interest.

Question 24

When does a partnership automatically dissolve?

Accepted Answer

Upon the death, retirement, or withdrawal of a general partner

Answer

When the partnership agreement expires

Answer

When the partnership becomes insolvent

Question 25

What is the effect of partnership dissolution on the liability of the partners for debts incurred before dissolution?

Accepted Answer

Partners remain jointly and severally liable unless otherwise agreed upon

Answer

The liability of each partner is limited to their capital contribution

Answer

Partners are no longer liable for any debts of the partnership

Question 26

What is the primary duty of care owed by partners to each other?

Accepted Answer

To act in good faith and in the best interests of the partnership

Answer

To disclose all material information to other partners

Answer

To act with the utmost care and diligence

Question 27

Which of the following describes the fundamental principle of partner liability?

Accepted Answer

Joint and several

Answer

Determined by seniority of partners

Answer

Proportional to profit share

Answer

Limited to capital contributions

Question 28

Which of the following is a valid defense to a partner's liability for partnership debts?

Accepted Answer

Statute of limitations

Answer

Lack of knowledge of partnership activities

Answer

Age of the partner

Answer

Financial hardship

Question 29

Which statement about joint and several liability among partners is incorrect?

Accepted Answer

Liability is limited to the amount of capital each partner contributed.

Answer

Creditors can pursue any partner for full payment of debts.

Answer

If one partner is insolvent, the other partners remain liable.

Question 30

What is a primary advantage of limited liability?

Accepted Answer

It protects partners' personal assets from partnership debts

Answer

It simplifies record-keeping for the partnership

Answer

It attracts more investors to the partnership

Question 31

What is a benefit of joint and several liability for partnerships?

Accepted Answer

It enhances the partnership's creditworthiness

Answer

It reduces the potential for disputes among partners

Answer

It limits the liability of each individual partner

Answer

It expedites the process of debt collection

Question 32

Which of the following is a key factor that courts consider when determining whether a partnership exists?

Accepted Answer

The parties' intent to form a partnership

Answer

The filing of a partnership registration statement

Answer

The payment of taxes as a partnership

Answer

The use of the word "partnership" in the business name

Question 33

In a general partnership, which of the following statements accurately describes the liability of the partners?

Accepted Answer

Each partner is jointly and severally liable for the debts and obligations of the partnership, regardless of their level of participation

Answer

Only the general partners are liable for the debts and obligations of the partnership.

Answer

The partners are only liable for the debts and obligations they have personally incurred.

Question 34

When a partner commits a tort while acting within the scope of the partnership's business, which of the following is true regarding liability?

Accepted Answer

All partners are jointly and severally liable for the tort, even if they did not participate in or have knowledge of the wrongful act.

Answer

Only the partner who committed the tort is liable.

Answer

The partnership itself is the only entity liable for the tort.

Question 35

In a limited partnership, which of the following parties is personally liable for the debts and obligations of the partnership?

Accepted Answer

General partners

Answer

None of the partners

Answer

Limited partners

Answer

All partners

Question 36

Which of the following is a consequence of a partner's withdrawal from a partnership?

Accepted Answer

The withdrawing partner is no longer personally liable for debts and obligations incurred after the date of withdrawal, provided that proper notice is given to third parties.

Answer

The withdrawing partner is only liable for debts incurred before the withdrawal.

Answer

The withdrawing partner remains liable for all debts of the partnership, regardless of when they were incurred.

Question 37

In a partnership at will, partners are jointly and severally liable for partnership obligations. Which of the following statements regarding the partners' ability to dissolve the partnership and their liability is accurate?

Accepted Answer

Any partner has the authority to dissolve the partnership at any time, but they remain personally liable for any outstanding obligations.

Answer

No partner can dissolve the partnership without the consent of all other partners, and all partners remain jointly liable for partnership obligations even after the partnership is dissolved.

Question 38

Which of the following factors is irrelevant in determining the extent of a partner's liability in a partnership?

Accepted Answer

The partner's spouse's income

Answer

The partner's role and authority within the partnership

Answer

The partner's personal assets

Answer

The type of partnership

Question 39

The 'holding out' principle in partnership law primarily refers to:

Accepted Answer

Situations where a person who is not a partner is held liable for partnership obligations because they have been represented as a partner to third parties.

Answer

The duty of partners to disclose all material information to each other.

Question 40

Which statement accurately describes the nature of partner liability in general partnerships?

Accepted Answer

Partners are jointly and severally liable for all partnership debts and obligations, with their personal assets potentially at risk.

Answer

Partners are not personally liable for partnership debts and obligations, but the partnership itself may be held liable.

Answer

Partners are only liable for partnership debts and obligations to the extent of their investment in the partnership.

Question 41

In a limited partnership, which type of partner has unlimited personal liability for partnership obligations?

Accepted Answer

General partners

Answer

All partners

Answer

No partners have unlimited personal liability

Answer

Limited partners

Question 42

When determining the scope of a partner's apparent authority to bind the partnership, which of the following factors is not taken into consideration?

Accepted Answer

The partner's personal financial history

Answer

The nature of the partnership business

Answer

The creditor's reasonable belief that the partner had authority to act on behalf of the partnership

Answer

The terms of the partnership agreement

Question 43

Partner C enters into a contract on behalf of the partnership without the knowledge or consent of the other partners. The partnership does not perform under the contract. What is the likely outcome of the lawsuit filed by the other party?

Accepted Answer

The partnership will be held liable because Partner C acted within the scope of the partnership business.

Answer

The partnership will not be held liable because Partner C did not have the consent of the other partners.

Question 44

Partner D withdraws from the partnership. A creditor sues the partnership for a debt incurred before Partner D's withdrawal. What is the likely outcome?

Accepted Answer

Partner D will remain liable for the debt because withdrawing partners remain liable for pre-withdrawal debts.

Answer

Partner D will not be liable for the debt because they withdrew from the partnership.

Question 45

A partnership is formed by two partners. One partner commits a tort while acting within the scope of the partnership business. Which of the following statements is TRUE?

Accepted Answer

Both partners are jointly and severally liable for the tort.

Answer

Only the partner who committed the tort is liable.

Answer

Each partner is liable only for their pro rata share of the damages.

Question 46

A partnership is dissolved. The partnership assets are insufficient to cover all outstanding debts. How will the remaining debts be allocated?

Accepted Answer

The partners are personally liable for the remaining debts, even if the partnership assets are insufficient.

Answer

The remaining debts will be written off because the partnership assets are insufficient.

Question 47

Partner E is a limited partner in a limited partnership. A creditor sues the partnership for a debt. Which of the following is TRUE regarding Partner E's liability?

Accepted Answer

Partner E's liability is limited to their capital contribution to the partnership.

Answer

Partner E is liable for the full amount of the debt because they are a partner.

Answer

Partner E is liable only for a pro rata share of the debt, based on their limited partnership interest.

Question 48

A partnership is sued by a customer for breach of contract. The partnership has a limited liability company (LLC) as a partner. Which of the following statements is TRUE regarding the LLC's liability?

Accepted Answer

The LLC is liable for the breach of contract, but its members are not personally liable.

Answer

The LLC is liable, and its members are also personally liable.

Answer

The LLC is not liable because it is a separate legal entity from the partnership.

Question 49

A partnership is sued by a customer for negligence. One partner is found to have been personally negligent. Which of the following statements is TRUE?

Accepted Answer

The negligent partner is personally liable for the negligence, and the other partners may also be liable.

Answer

Only the negligent partner is liable for the negligence.

Question 50

A partner in a general partnership commits a tort within the course and scope of partnership business. Which of the following is true regarding the liability of the other partners?

Accepted Answer

The other partners are jointly and severally liable for the tort.

Answer

The other partners are not liable because torts are considered individual acts.

Answer

The other partners are only liable if they expressly authorized the tort.

Question 51

Which of the following acts would generally NOT fall within the scope of partnership business, thus shielding other partners from liability?

Accepted Answer

A partner uses partnership funds to gamble while on a personal vacation.

Answer

A partner enters into a contract on behalf of the partnership that exceeds their authority.

Answer

A partner negligently operates a company vehicle while making deliveries for the partnership.

Question 52

Explain the primary difference between joint liability and several liability.

Accepted Answer

In a joint liability, all partners are jointly liable for the entire debt; in several liability, each partner is liable for their proportionate share.

Answer

Joint liability applies to torts, while several liability applies to contracts.

Question 53

A partnership incurs a debt of $100,000. One partner is personally bankrupt, while the other two are solvent. What is the maximum amount a solvent partner may be required to pay to satisfy the debt?

Accepted Answer

$100,000

Answer

$50,000

Answer

$33,333.33

Answer

$0

Question 54

What is the effect of a partner's dissociation from the partnership on their liability for pre-existing partnership obligations?

Accepted Answer

They generally remain liable for obligations incurred before their dissociation.

Answer

They are automatically released from all liability upon dissociation.

Answer

They are only liable for obligations they personally guaranteed.

Question 55

Which legal principle protects a partnership's assets from being seized by the personal creditors of an individual partner?

Accepted Answer

Entity Theory of Partnership

Answer

Ultra Vires Doctrine

Answer

Doctrine of Respondeat Superior

Answer

Piercing the Corporate Veil

Question 56

Under what circumstances might a court pierce the partnership veil and hold individual partners personally liable for partnership debts?

Accepted Answer

Commingling of personal and partnership funds, leading to fraud or injustice.

Answer

When a partner withdraws from the partnership without giving proper notice.

Answer

When the partnership suffers financial losses due to poor business decisions.

Question 57

In a partnership agreement, partners can agree to modify their liability exposure. Which of the following modifications is generally enforceable?

Accepted Answer

An agreement limiting a partner's liability for certain types of contractual obligations.

Answer

An agreement completely eliminating a partner's liability for all partnership debts.

Answer

An agreement shifting all liability for torts to a single partner, even if others are at fault.