GIANNA SCATCHELL

KENT LAW SCHOOL

ID #68967

Central Subs will be liable. At issue is whether a partnership can be bound by the actions
of another partner. To determine liability of a partnership, ordinary agency principles
apply. A partner is an agent of the partnership and can bind the partnership for anything
that occurs within the usual course of business.

Central Subs is a partnership even though the facts do not expressly state that Central
Subs is a partnership, it . A partnership arises when two or more persons agree to carry on
as co-owners of a business for profit. No formalities or express intent is required. In this
case, Laura, Tammy, and Sam all agreed to open up Central Subs, they each invested
$10,000. Moreover, the agreement to share profits raises a presumption of a partnership.
Here, the parties agreed to share profits and losses. While an tenuous argument can be
made that the money was simply loaned to Sam and the sharing of profits creates a
presumption of a partnership. Thus, Laura, Tammy, and Sam formed a partnership.

Meatco:

Central Sub is liable to Meatco. At issue is whether a partner’s actions can bind the
partnership in contract. A partnership can become liable in contract law by either actual
or apparent authority. Actual authority is the authority that the partner reasonably believes
he has based on communications with the partnership. This can occur in two ways: (1)
express in the partnership agreement or (2) by consent. Consent is granted by either a
majority vote of the partners if the business is within the ordinary course of business and
unanimous consent if the act is not within the scope of the partnership’s usual business. In
this case, the facts do not indicate that there is an express partnership agreement, so
Sam’s actions must be granted by a vote from the partners. Sam’s act of purchasing meat
is likely within the usual course of business because Central Sub is a sandwich shop, so
he needs a majority approval by the partners. He was to seek approval on all orders over
$500.00, which he failed to do. The facts do not indicate that Tammy and Laura approved
this transaction. Thus, it appears that Sam lacked actual authority to purchase the meats
from meatco.

Nonetheless, the partnership can be bound by apparent authority. Apparent authority is

the authority that a third party reasonably believes that the partner has in carrying out the
apparent business of the partnership. A partnership will be bound unless (1) the partner
did not have authority AND (2) the third party was on notice or received notice that the
partner lacks authority. Here, Central Subs is liable to Meatco because Meatco reasonably
relied on the promotional flier which held out Tammy, Laura, and Sam as the owners of
Central Sub. Even though Sam was exceeding his authority here, Central Sub will still be
liable because they held Sam out as a person with authority by letting him manage
Central Sub and featuring him on the promotional fliers as an owner. Moreover, he
received no notice of Sam’s lack of authority. Thus, Central Sub is liable to Meatco.
Karly:
Central subs is liable in tort law for Karly‘s injuries. At issue is whether a partnership can
be liable for the torts committed by another partner. As discussed above ordinary agency
rules apply. Here, Sam committed the tort when he was cleaning the bathroom at Central
Subs which is in the usual course of business. Thus, Central Subs is liable for Sam’s Tort.

Pat:

Central Subs will be liable for Pat’s injuries. At issue is whether the partnership can be
bound by the acts of a partner after it has been dissolved. A partnership does not
terminate until it is wound up. Thus, any partner can still be liable for acts taken by the
partners until the partnership winds up. Here, Sam negligently ran over Pat right after
notice of dissolution was given. Thus, Central Subs is liable to Pat for his injuries.

Laura, Tammy, and Sam’s Individual Liability:

The investors individually are liable to the parties. At issue is the individual liability of
the partners for the acts committed by other partners. Each partner is jointly and severally
liable for the acts committed by the other partners in the usual course of business, in both
tort and contract law. Each individual is responsible for the total amount of the obligation.
Here, Karly, Meatco, and Pat can recover both from Central Sub and individually from
Tammy, Sam, and Laura. Thus, Laura, Tammy, and Sam are liable to Karly, Meatco, and
Pat.