jamescastle wrote:I just did a business associations question from yesterday's BARBRI assignment (in Texas if that matters).
Essay #22.
The model answer says "Partners may not eliminate their duties of loyalty, care, and good faith;..." but the CMR says (p. 5 in Partnerships and LLCs) that "The partnership agreement may limit or eliminate a partner's liability to the partnership or other partners. However, a partner's liability for the following acts cannot be limited: (i) beach of the duty of loyalty; ...". My notes have the duty of loyalty cannot be eliminated but that the other two can. Can someone clarify?
Thanks.
Yeah, I mentioned this yesterday. According to Sokolow's lecture, partners can limit/eliminate duties of care and good faith by agreement. Further, both Conviser and the full outline mention that one may not eliminate the duty of loyalty, but do not address the other duties.
BUT, TBOC 152.002 says, in part:
This section of TBOC is new, having replaced the Texas Revised Partnership Act. As a result, there's not a lot of case law on the TBOC language and I'm too tired to dig into cases based off the old act.(b) A partnership agreement or the partners may not:
(1) unreasonably restrict a partner's right of access to books and records under Section 152.212;
(2) eliminate the duty of loyalty under Section 152.205, except that the partners by agreement may identify specific types of activities or categories of activities that do not violate the duty of loyalty if the types or categories are not manifestly unreasonable;
(3) eliminate the duty of care under Section 152.206, except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable;
(4) eliminate the obligation of good faith under Section 152.204(b), except that the partners by agreement may determine the standards by which the performance of the obligation is to be measured if the standards are not manifestly unreasonable;
. . . .
Anyway, it looks like Sokolow may have been wrong regarding elimination of the duties of care/good faith, but that you could limit them.
