Flashcards Studio

A general partnership is formed by three partners, Amara, Benicio, and Cielto, to operate a boutique import-and-distribution business. Amara is designated as managing partner and has authority to sign ordinary-course contracts for the partnership. Without the knowledge or consent of Benicio and Cielto, Amara secretly diverts partnership funds to a new company she controls to finance a rival venture that competes with the partnership. Amara also uses the partnership’s office, staff, and credit lines to support the rival venture and signs contracts in Amara’s name using the partnership’s credit facilities. When Benicio and Cielto discover the arrangement, they seek an accounting and appropriate relief. (a) Identify the central doctrine governing the duties of partners toward one another implicated by Amara’s acts. (b) Did Amara’s conduct amount to a breach of that duty? Explain why or why not, focusing on self-dealing and the use of partnership assets. (c) What remedies are available to Benicio, Cielto, and to the partnership, and what potential impact could this have on the partnership’s continued existence?