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Thank you. Your thoughtful response to my questions will, again, be much appreciated. I look forward to hearing form you later today. As requested, a possible case citation will be appreciated.
Thank you for your patience, Stuart. I am truly sorry for the delay.To respond directly to your concerns:Limited Partnership provides that "each of the general partners shall individually have the authority to execute any documents,agreements or other instruments" and "shall have authority to make partnership decisions." For thirty years the practice among general partners has been that no partner, by himself, ever exercised such authority and all decisions were made with the knowledge and consent of all general partners. For example, no loans were made without signatures of all general partners.Recently, one general partner excuted several documents, including loan documents without the knowledge or consent of the other partners.(1) Does the 30 year practice of informing all partners override the contract language?It does not. In a partnership, and if there is nothing in writing expressly stating that the conditions for how business is done is modified, each partner (provided that he is a general and not a limited partner) can make decisions that make the whole partnership be responsible for the underlying decision. To stop this practice you would need to modify your articles of partnership and demand a vote.(2) Absent specific language to the contrary, do general partners have the obligation under Partnership Law to inform one another of their actions?No, they do not. But the partnership would still be liable for whatever decisions that partner has made on behalf of the partnership.(3) Can you provide case law and ctatiions in PA. to substantiate position?This is general contract law--however there is some case law that you can take a look at. While not exactly on point, this PA Supreme Court decision discusses that partnership agreements have to be 'narrowly tailored' for the requirements to be binding against the partners, which substantiates my answer from above.http://law.psu.edu/_file/aglaw/Natural_Gas/Szymanowski_v_Brace.pdfGood luck.
Thank you Dimitry. As a follow-up question, let's assume a general partner decides to take out a partnership loan in a substantial amount. This would obligate the partnership and all other general partners. Under Partnership Law, is there a duty as a fiduciary that requires the partner who signs for the loan to notify his partners before taking out the loan or after the loan is made? Isn't there a requirement that the general partner act as a fiduciary and exercise good faith and fair dealing or can he operate in a secretive manner. Thanks!
Thank you for your follow-up, Stuart.Acting as a fiduciary and providing notice are two separate issue and requirements. Someone who is a partner and takes out a loan 'for the benefit' of the partnership is acting as a fiduciary when the loan is created. If that loan is deemed necessary by him, it is hopefully a good faith loan and is not typically in violation of his fiduciary duty. I agree that it can be argued that not telling others of this debt may be a potential claim for bad faith and a violation of fiduciary responsibilities, but it would have to be proven that the behavior was not only intentional but designed to harm the business or other partners. Otherwise there is no duty to notify, albeit that can be read as an implied requirement.Good luck.
Thank you for your thoughtful "on point" comments.
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