Albert, Betty, and Carol own and operate the Roy Lumber Company. Each contributed one-third of the capital, and they share equally in the profits and losses.Their partnership agreement provides that two partners must authorize all purchases over $2,500 in advance and that only Albert is authorized to draw checks. Unknown to Albert or Carol, Betty purchases on the firm’s account a $5,500 diamond bracelet and a $5,000 forklift and orders $5,000 worth of logs, all from Doug, who operates a jewelry store and is engaged in various activities connected with the lumber business. Before Betty madethese purchases, Albert told Doug that Betty is not thelog buyer. Albert refuses to pay Doug for Betty’s purchases. Doug calls at the mill to collect, and Albert again refuses to pay him. Doug calls Albert an unprintable name, and Albert then punches Doug in the nose, knocking him out. While Doug is lying unconscious onthe ground, an employee of Roy Lumber Company negligently drops a log on Doug’s leg, breaking three bones. The firm and the three partners are completely solvent. What are the rights of Doug against Roy Lumber Company, Albert, Betty, and Carol?2. Paula, Fred, and Stephanie agree that Paula and Fred will form and conduct a partnership business and that Stephanie will become a partner in two years. Stephanieagrees to lend the firm $50,000 and take 10 percent of the profits in lieu of interest. Without Stephanie’s knowledge, Paula and Fred tell Harold that Stephanie is a partner, and Harold, relying on Stephanie’s sound financial status, gives the firm credit. The firm later becomes insolvent, and Harold seeks to hold Stephanie liable as a partner. Should Harold succeed? Explain.
3. Simmons, Hoffman, and Murray were partners doing business under the firm name of Simmons & Co. The firm borrowed money from a bank and gave the bank the firm’s note for the loan. In addition, each partner guaranteed the note individually. The firm became insolvent, and a receiver was appointed. The bank claims that it has a right to file its claim as a firm debt and that it has a right to participate in the distribution of theassets of the individual partners before partnership creditors receive any payment from such assets.a. Explain the principle involved in this case.b. Is the bank correct? Why or why not?
4. Anthony and Karen were partners doing business as the Petite Garment Company. Leroy owned a dye plant that did much of the processing for the company. Anthony and Karen decided to offer Leroy an interest in their company, in consideration for which Leroy would con- tribute his dye plant to the partnership. Leroy accepted the offer and was duly admitted as a partner. At the time he was admitted as a partner, Leroy did not know thatthe partnership was on the verge of insolvency. About three months after Leroy was admitted to the partnership, a textile firm obtained a judgment against the partnership in the amount of $50,000. This debt represented an unpaid balance that had existed before Leroy was admitted as a partner.The textile firm brought an action to subject the partnership property, including the dye plant, to the satisfaction of its judgment. The complaint also requested thatin the event the judgment was unsatisfied by sale of the partnership property, Leroy’s home be sold and the proceeds applied to the balance of the judgment. Anthony and Karen own nothing but their interest in the partnership property.What should be the result (a) with regard to the dye plant and (b) with regard to Leroy’s home?
5. Jones and Ray formed a partnership on January 1, known as JR Construction Co., to engage in the construction business, each partner owning a one-half interest. On February 10, while conducting partnership business, Jones negligently injured Ware, who brought an action against Jones, Ray, and JR Construction Co. and obtained judgment for $250,000 against them on March 1. On April 15, Muir joined the partnership bycontributing $100,000 cash, and by agreement, each partner was entitled to a one-third interest. In July, the partners agreed to purchase new construction equipment for the partnership, and Muir was authorized to obtain a loan from XYZ Bank in the partnership name for $200,000 to finance the purchase. On July 10, Muir signed a $200,000 note on behalf of the partnership, and the equipment was purchased. In November, the partnership was in financial difficulty, its total assets amounting to $50,000. The note was in default, with a balance of $150,000 owing to XYZ Bank. Muir has substantial resources, while Jones and Ray each individually have assets of $20,000.


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