Fiduciary duties of general partners - Next Generation Bar Exam

1. Under RUPA (1997), what obligation must a partner observe when exercising rights and discharging duties?

   The obligation of good faith and fair dealing. The obligation is contractual in nature and applies to all partner conduct.

2. Under RUPA (1997), what does a partner's duty of care require?

   Refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law. Ordinary negligence does not breach the RUPA duty of care.

3. Under RUPA (1997), what may a partnership agreement not do to the duty of loyalty?

   Eliminate it. The agreement may identify specific activities that do not violate the duty, if not manifestly unreasonable.

4. Under RUPA (1997), which fiduciary duties does a partner owe to the partnership and the other partners?

   Only the duty of loyalty and the duty of care. RUPA defines these duties exclusively; the obligation of good faith is not itself a fiduciary duty.

5. Under RUPA (1997), what may a partnership agreement not do to the duty of care?

   Unreasonably reduce it. The agreement may adjust the standard within reasonable limits.

6. Under RUPA (1997), when does a partner's duty not to compete end?

   On the partner's dissociation. Other loyalty and care duties continue only for matters arising before dissociation, unless the partner winds up the business.

7. Under RUPA (1997), what does a partner's duty of loyalty require?

   Accounting for partnership benefits, not dealing as an adverse party, and not competing before dissolution. Each component is limited to the matters RUPA specifies.

8. Under RUPA (1997), what is the status of conduct that merely furthers a partner's own interest?

   It does not by itself violate a duty or obligation. A partner may pursue self-interest so long as it does not breach the specific duties RUPA imposes.

9. Under RUPA (1997), what action may a partner bring for another partner's breach of fiduciary duty?

   An action against the partnership or another partner, with or without an accounting. RUPA lets partners sue on partnership claims without first dissolving the partnership.

10. A partner managing the firm's leased building secretly arranges a new lease of the building and an adjoining lot for himself, to begin when the firm's lease ends. What duty has he breached?

    The duty of loyalty, by taking a partnership opportunity. The renewal opportunity arose from the partnership's business and had to be disclosed to the other partner.

11. A partner carelessly miscounts inventory, causing the partnership a loss. On what ground has the partner not breached the RUPA duty of care?

    Ordinary negligence does not breach the duty of care, which requires gross negligence or worse. RUPA's duty of care is deliberately set at a low threshold.

12. Under RUPA (1997), how may an act that would otherwise breach the duty of loyalty be authorized?

    By all of the partners, after full disclosure of the material facts. Authorization or ratification may also occur as the partnership agreement specifies.

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