Question

Ms. Circle, Ms. Triangle, and Mr. Square formed a partnership to manufacture and sell shoes. The three partners each signed a written partnership agreement that included the following provisions: (1) partners shall not be deemed to owe a duty of care to the partnership other than to avoid intentionally killing customers ("Clause 1") and (2) if a partner were to dissociate within five years after the partnership was formed for any reason other than death, the dissociation would be considered wrongful ("Clause 2"). Are these clauses permissible under RUPA �� 103?

A. Clause 1 is permissible, but Clause 2 is not.

B. Clause 2 is permissible, but Clause 1 is not.

C. Both clauses are permissible.

D. Neither clause is permissible.

Answer 1

Clause 1 is not permissible under RUPA § 103 as it attempts to waive the fundamental duty of care which is non-waivable. Clause 2 is permissible because it sets conditions on wrongful dissociation, which RUPA allows. Thus, partners must maintain a duty of care and act in good faith, but their agreement can include restrictions on dissociation.

Step-by-step explanation:

Under the Revised Uniform Partnership Act (RUPA) § 103, there are certain non-waivable provisions that maintain the integrity and fair functioning of a partnership. Specifically, RUPA § 103(b)(3) and § 103(b)(7) speak to the impermissibility of clauses that would relieve a partner of the obligation to act in good faith and in accordance with the duty of care or to unreasonably restrict the right of access to partnership books and information. In the context of the partnership agreement in question:

• Clause 1, which states that partners shall not owe a duty of care to the partnership other than to avoid intentionally killing customers, is not permissible. This clause would effectively relieve partners of the duty of care that cannot be waived under RUPA.
• Clause 2, which considers dissociation wrongful if it occurs within five years for any reason other than death, is permissible as RUPA allows for agreements around wrongful dissociations, provided they are reasonable and do not violate RUPA's other non-waivable provisions.

Therefore, the correct answer to the question would be that Clause 1 is impermissible, but Clause 2 is permissible. This is because partners cannot waive their duty of care entirely as Clause 1 suggests, but can agree to certain restrictions on dissociation as described in Clause 2.