[*] Copyright 1995 by John W. Larson. Return to text.

[**] Associate Professor, Florida State University College of Law. A.B., 1958, University of Michigan; J.D., 1964, University of Iowa. Professor Larson was the Assistant Reporter for the Revised Uniform Partnership Act and served on The Florida Bar Drafting Committee for the Florida Revised Uniform Partnership Act. The views expressed are those of the author and do not necessarily represent the views of the National Conference of Commissioners on Uniform State Laws or The Florida Bar. The author wishes to express his appreciation to Don Weidner for his helpful comments on a draft of this Article. Return to text.

[1] Both acts were enacted as a part of 1995, Fla. Laws ch. 95-242. See infra note 4. Return to text.

[2] The original Uniform Partnership Act (UPA) was promulgated by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1914 and eventually adopted in every state except Louisiana. See Prefatory Note to UNIF. PARTNERSHIP ACT (1994), 6 U.L.A. 1 (1995). Florida adopted the UPA in 1972. See 1972, Fla. Laws ch. 72-108 (codified at FLA. STAT. §§ 620.56-.77 (1995)).

An American Bar Association (ABA) report in 1986 called for change. See UPA Rev. Subcomm. of the Comm. on Partnerships and Unincorporated Business Orgs., Should the Uniform Partnership Act Be Revised?, 43 BUS. LAW. 121 (1987). In 1987, NCCUSL appointed a drafting committee to revise the UPA and named Donald J. Weidner, Dean of the Florida State University College of Law, as the Reporter. Professor Larson was named Assistant Reporter in 1991.

The Revised Uniform Partnership Act was initially approved by NCCUSL in 1992. The following year, in response to suggestions from various groups, including the ABA and several state bar associations, numerous revisions to the Act were adopted. The Revised Act was restyled as the Uniform Partnership Act (1993). Further changes were made the following year, and the Uniform Partnership Act (1994), as finally adopted by NCCUSL, was approved by the ABA House of Delegates in August 1994. See Prefatory Note to UNIF. PARTNERSHIP ACT (1994), 6 U.L.A. 1, 2-5 (1995). Accordingly, all references herein to RUPA are to the final 1994 revision unless otherwise indicated. Return to text.

[3] In 1993, Montana and Wyoming adopted the 1992 version of RUPA. See Montana Uniform Partnership Act, MONT. CODE ANN. §§ 35-10-101 to -616 (1993); Wyoming Uniform Partnership Act, WYO. STAT. §§ 17-21-101 to -1003 (Supp. 1993).

North Dakota and West Virginia adopted the 1994 Revised Act shortly before Florida. See 1995 N.D. Laws ch. 430; 1995 W. Va. Acts ch. 250. Connecticut enacted the Act soon thereafter. See 1995 Conn. Pub. Acts No. 92-341 (Reg. Sess.).

Texas has also adopted a new partnership act heavily influenced by the Revised Uniform Act, although reflecting early drafts of RUPA on several key matters. See Texas Revised Partnership Act, TEX. REV. CIV. STAT. ANN. art. 6132b (West 1995). Return to text.

[4] 1995, Fla. Laws ch. 95-242, § 13, 2150, 2160. The Revised Florida Act was introduced by companion bills in the 1995 Florida Legislature as Florida Senate Bill 1690 and Florida House Bill 2187. Most of the changes from the Revised Uniform Act were drafted by a Florida Bar Drafting Committee, a joint effort between the Business and Tax Law Sections. The committee was co-chaired by Philip B. Schwartz, of Miami, and Louis T.M. Conti, of Orlando. Anderson L. (Trey) Baldy III, of Tampa, was the committee reporter. Professor Larson was a member of The Florida Bar Drafting Committee.

Senate Bill 1690 was approved, with one amendment, by the Commerce Committee on April 24, 1995, was referred to the Judiciary Committee and, subsequently, to the Ways and Means Committee, where it died. FLA. S. JOUR. 532 (Reg. Sess. 1995).

House Bill 2187 was referred to the Finance Committee, see FLA. H.R. JOUR. 244 (Reg. Sess. 1995), where a committee substitute bill was introduced and read for the first time on May 1, 1995. Id. at 1030, 1034. The bill was then referred to the Appropriations Committee but later died on the calendar. FLA. LEGIS., HISTORY OF LEGISLATION, 1995 REGULAR SESSION, HISTORY OF HOUSE BILLS at 242, HB 2187.

On May 2, in the waning days of the session, on recommendation of the Ways and Means Committee, Senator Harris moved that FRUPA be added by amendment to Senate Bill 2296, the Cultural Affairs funding bill. FLA. S. JOUR. 657 (Reg. Sess. 1995). That amendment was further amended by Senator Harris and adopted, as amended. Id. at 669. Senate Bill 2296, as amended, was passed unanimously by the Senate on May 2, id. at 673, and by the House of Representatives on May 4, 1995, FLA. H.R. JOUR. 1283 (Reg. Sess. 1995). The enrolled bill was sent to the Governor on May 24 and became law without the Governor's signature on June 9, 1995. FLA. LEGIS., HISTORY OF LEGISLATION, 1995 REGULAR SESSION, HISTORY OF SENATE BILLS at 165, SB 2296. Return to text.

[5] The LLP provisions were actually enacted twice by the 1995 Florida Legislature. See 1995, Fla. Laws ch. 95-242, §§ 1-12, 2150, 2152; 1995, Fla. Laws ch. 95-409, §§ 1-12, 3372, 3373.

The LLP legislation was introduced by companion bills as Florida House Bill 717 and Senate Bill 894. House Bill 717 was referred to the Commerce and Finance and Taxation Committees. FLA. H.R. JOUR. 56 (Reg. Sess. 1995). The Commerce Committee referred the bill to the Banking and Corporations Subcommittee, which recommended the bill favorably, with one amendment. FLA. LEGIS., HISTORY OF LEGISLATION, 1995 REGULAR SESSION, HISTORY OF HOUSE BILLS at 256, HB 717. On March 16, the Commerce Committee approved a Committee Substitute for HB 717. FLA. H.R. JOUR. 304 (Reg. Sess. 1995). That bill was then referred to the Finance and Taxation Committee, which recommended the bill favorably on April 18. Id. at 565. On April 27, CS for HB 717 was placed on the Consent Calendar and, with amendments, was passed by the House of Representatives by a vote of 115 to 1. Id. at 879. On May 2, the Senate substituted CS for HB 717 for CS for SB 894 and passed the bill, 38 to 0. FLA. S. JOUR. 673 (Reg. Sess. 1995). The enrolled bill was sent to the Governor on June 6 and became law without his signature on June 18, 1995. FLA. LEGIS., HISTORY OF LEGISLATION, 1995 REGULAR SESSION, HISTORY OF HOUSE BILLS at 256, HB 717; see 1995, Fla. Laws ch. 95-409. The effective date of that bill was October 1, 1995. 1995, Fla. Laws ch. 95-409, 3372, 3382.

On May 2, the same day the Senate passed CS for HB 717, Senator McKay moved to amend SB 2296 further by adding the LLP provisions. FLA. S. JOUR. 670 (Reg. Sess. 1995). As amended, SB 2296 passed the Senate on May 2 by a vote of 38 to 0. Id. at 673. Thereafter, on May 4, after the enactment of CS for HB 717 on May 2, the House of Representatives passed SB 2296, as amended to include both FRUPA and the LLP provisions, by a vote of 111 to 0. FLA. H.R. JOUR. 1283 (Reg. Sess. 1995). The enrolled bill was sent to the Governor on May 5 and became law without his signature on June 9, 1995. FLA. LEGIS., HISTORY OF LEGISLATION, 1995 REGULAR SESSION, HISTORY OF SENATE BILLS at 165, SB 2296; see 1995, Fla. Laws ch. 95-242. The effective date of the LLP provisions was July 1, 1995. 1995, Fla. Laws ch. 95-242, 2150, 2152.

The LLP provisions in the two bills were identical, except for their respective effective dates. Chapter 95-242 supersedes Chapter 95-409, having been enacted subsequently by the Legislature. Thus, the LLP provisions became effective July 1, 1995. See FLA. STAT. § 1.04 (1995); Id. at viii (Revisor's explanation in Preface). Return to text.

[6] See Robert R. Keatinge, George W. Coleman, Allan G. Donn & Elizabeth G. Hester, Limited Liability Partnerships: The Next Step in the Evolution of the Unincorporated Business Organization, 51 BUS. LAW. 147, 148 (1995); ABA COMMITTEE ON PARTNERSHIPS AND UNINCORPORATED ORGANIZATIONS, 5 STATE LIMITED LIABILITY COMPANY & PARTNERSHIP LAWS § 1 (Michael A. Bamberger & Arthur J. Jacobson eds., 1995) [hereinafter ABA GUIDE TO LLPS]. The latter contains an excellent commentary on LLPs generally, written by Elizabeth G. Hester, as well as the text of the various state LLP statutes. See generally ALAN R. BROMBERG & LARRY E. RIBSTEIN, LIMITED LIABILITY PARTNERSHIPS AND THE REVISED UNIFORM PARTNERSHIP ACT (1995) [hereinafter BROMBERG & RIBSTEIN ON LLPS]. Return to text.

[7] The exculpatory provision itself usually amends the state's version of UPA § 15, which provides that partners are personally liable for the partnership's debts and obligations. See, e.g., 6 Del. Laws § 1515 (1995); IOWA CODE § 486.15 (1995); N.C. GEN. STAT. § 59-45 (1995). Return to text.

[8] See, e.g., LA. REV. STAT. § 9:3431 (1995); MICH. COMP. LAWS § 449.46 (1995); 15 PA. CONS. STAT. § 8204 (1994). For a general discussion of the structure of LLP provisions, see ABA GUIDE TO LLPS, supra note 6, § 2. Return to text.

[9] Since the Revised Florida Act is, for the most part, identical to the Revised Uniform Act, the discussion and citation herein will be to FRUPA. Material nonuniform Florida amendments will be discussed with appropriate citation to the Revised Uniform Act.

The Revised Florida Act is codified as part IV of chapter 620, sections 620.81001-.91, Florida Statutes. The last three digits of the FRUPA section numbers correspond to the RUPA section numbers, except that FRUPA subsections are numbered and paragraphs are lettered. For example, section 620.8401(1)(b), Florida Statutes, corresponds to RUPA § 401(a)(2), and will be cited herein as FRUPA § 401(1)(b). Return to text.

[10] The Uniform Partnership Act § 6 provides:

(1) A partnership is an association of two or more persons to carry on as co-owners a business for profit.

(2) But any association formed under any other statute of this state . . . is not a partnership under this [A]ct . . . ; but this [A]ct shall apply to limited partnerships except in so far as the statutes relating to such partnerships are inconsistent herewith.

The Revised Florida Act § 202 in part provides:

(1) Except as otherwise provided in subsection (b), the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.

(2) An association formed under a statute, other than this [A]ct, a predecessor statute [i.e., the UPA], or a comparable statute of another jurisdiction is not a partnership under this [A]ct.

The Uniform Partnership Act § 6(1) serves a dual function. It is both the definition of "partnership," as well as the operative provision for the formation of a partnership. Critics frown on statutory "definitions" serving such dual functions. Accordingly, FRUPA § 202 is the operative provision, while FRUPA § 101(5) is definitional: " 'Partnership' means an association of two or more persons to carry on as co-owners a business for profit formed under [§ 202], predecessor law, or comparable law of another jurisdiction." Return to text.

[11] Florida provides for the registration of partnerships with the Department of State. See FRUPA § 105(1). Registration is voluntary, in the sense that it is not required by law, but is a condition precedent to the filing of other "statements," such as a statement of authority. See id. § 105(4). Therefore, registration is required of partnerships seeking the benefits of filed statements. See discussion infra notes 76-97, 202-09, 219-21, 257-62 and accompanying text. Registration is a nonuniform Florida provision. Return to text.

[12] See RUPA § 202, cmt. 1. Return to text.

[13] See id. § 202, cmt. 2. UPA § 6(2) expressly provides that the UPA applies to limited partnerships unless otherwise provided by the Revised Uniform Limited Partnership Act (1976) With The 1985 Amendments, 6A U.L.A. 1 (1995) (RULPA). RUPA § 202(b) provides no such exception. Accord FRUPA § 202(2). Return to text.

[14] See RULPA § 1105. In light of that section, UPA § 6(2), providing that limited partnerships are governed by the UPA, has not been carried over to FRUPA. The Revised Florida Act thus more properly allows RULPA to link FRUPA and RULPA. For clarity, the Florida RULPA has been amended to read: "In any case not provided for in this act [RULPA], the provisions of the Uniform Partnership Act the Revised Uniform Partnership Act, as applicable, and the rules of law and equity shall govern." FLA. STAT. § 620.186 (1995) (as amended by 1995, Fla. Laws ch. 95-242, § 22, 2150, 2189). The new text is intended to afford existing Florida limited partnerships the same deferred applicability date established by 1995, Fla. Laws ch. 95-242, § 14, for existing general partnerships, absent an election to be governed earlier by FRUPA. See infra note 266 and accompanying text. Return to text.

[15] FRUPA § 202(3). Return to text.

[16] Id. § 202(3)(c). The sharing of profits is cast as a rebuttable presumption, rather than as prima facie evidence. Compare UPA § 7(4). No substantive change is intended. See RUPA § 202, cmt. 3. One of the enumerated relationships covers a lender's receipt of profits under a shared appreciation mortgage. See FRUPA § 202(3)(e). Return to text.

[17] Id. § 202(3)(a). Return to text.

[18] Id. § 202(3)(b). Return to text.

[19] See JUDSON A. CRANE & ALAN R. BROMBERG, LAW OF PARTNERSHIP § 3, at 18-25 (1968). Return to text.

[20] See Commissioners' Prefatory Note to the UNIF. PARTNERSHIP ACT (1914), 6 U.L.A. 7 (1969); see also CRANE & BROMBERG, supra note 19, § 3, at 26-29. Return to text.

[21] See MELVIN A. EISENBERG, AN INTRODUCTION TO AGENCY AND PARTNERSHIP 38-39 (2d ed. 1995); CRANE & BROMBERG, supra note 19, § 3, at 26-29. Return to text.

[22] FRUPA § 201. Return to text.

[23] See infra part II. G. Return to text.

[24] FRUPA § 306(1). Return to text.

[25] See Simplification of Entity Classification Rules, I.R.S. Notice 95-14, 1995-14 I.R.B. 7 (Mar. 29, 1995), in which the IRS proposes to discard the complex entity classification system currently used to determine whether an unincorporated business entity, such as a limited partnership or a limited liability company, is to be classified as a "partnership," entitled to pass-through taxation, or as an "association," which must pay tax at the entity level as a corporation. Many unincorporated entities would like to be classified as a partnership to avoid two-tiered taxation. The proposal has been well received. See, e.g., Thomas E. Rutledge, IRS Considers End to Kintner Analysis of Unincorporated Associations, LLC ADVISOR (CCH), Apr. 1995, at 4; Daniel Shefter, Check the Box Partnership Classification: A Legitimate Exercise in Tax Simplification, 95 TAX NOTES TODAY, Apr. 13, 1995, at 72-44; see generally Daniel S. Goldberg, The Tax Treatment of Limited Liability Companies: Law in Search of Policy, 50 BUS. LAW. 995 (1995). Return to text.

[26] Most of the UPA rules may be varied by agreement of the partners. See, e.g., UPA § 18 ("The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules . . . ."). Return to text.

[27] FRUPA § 103(1). Return to text.

[28] Id. Return to text.

[29] RUPA § 103(b). All nine exceptions are clearly identified and conveniently enumerated in that section. Return to text.

[30] See FRUPA § 103(2)(g) (providing that the partnership agreement may not change the notice provisions contained in FRUPA §§ 902(6) and 905(6), themselves additional nonuniform requirements for the Article 9 "safe harbor" for partnership conversions and mergers); infra notes 222-24 and accompanying text. Articulating those notice requirements as immutable rules misperceives the concept of a "safe harbor." As FRUPA § 908 makes clear, the Article 9 "rules" are not exclusive, and partnerships may be converted or merged in any other manner provided by law. The benefit of complying with the "safe harbor" requirements is merely the comfort of knowing that the transaction is valid and has the legal consequences set forth in the Act.

FRUPA § 103(2) was mysteriously edited in the legislative process, so that the uniform exceptions found in RUPA § 103(b)(1)-(3) are lumped irrationally together in FRUPA § 103(2)(a)1-3 and the remaining exceptions are redesignated (b) through (h). It appears that no substantive change is intended, and the section's uniform structure would be restored by House Bill 1043, a so-called "glitch bill" that has already been introduced in the 1996 Legislative Session by Representative Livingston. Return to text.

[31] FRUPA § 103(2)(d). Return to text.

[32] See UPA § 31(2); FRUPA § 602(1). As under UPA § 38(2)(a), a partner who has wrongfully withdrawn in contravention of the agreement is liable for any damages caused by breach of the agreement. See FRUPA § 602(3). Return to text.

[33] FRUPA §§ 103(2)(a)3, (b), (c), discussed infra notes 122-24, 132, 135 and accompanying text. Return to text.

[34] FRUPA § 103(2)(h). Return to text.

[35] The Revised Uniform Act thus provides off-the-rack standard contract terms that may be utilized by the parties without the cost of further negotiation and drafting. Return to text.

[36] One of the primary benefits of a "uniform" law is that a richer body of case law will be developed construing its meaning, especially those terms that suffer from some ambiguity. Uniform language is also the subject of scholarly debate, leading to a better understanding of its nuance of meaning. Return to text.

[37] The Revised Florida Act authorizes a partnership to file the following statements: 1) a statement of partnership authority under FRUPA § 303; 2) a statement of denial under FRUPA § 304; 3) a statement of dissociation under FRUPA § 704; 4) a statement of dissolution under FRUPA § 805; and 5) a statement of merger under FRUPA § 907. The term "statement" is defined to mean those statements, or an amendment or cancellation thereof. FRUPA § 101(13). The filing of such statements is entirely voluntary. See, e.g., id. §§ 105(1), 303(1) (statement of partnership authority). Return to text.

[38] See generally Donald J. Weidner & John W. Larson, The Revised Uniform Partnership Act: The Reporters' Overview, 49 BUS. LAW. 1, 34 (1993) [hereinafter Reporters' Overview]. Return to text.

[39] See RUPA § 105, cmt. 1. Return to text.

[40] See infra note 43 and accompanying text. Return to text.

[41] See FLA. STAT. § 689.045 (1995), discussed infra notes 98-100 and accompanying text. Return to text.

[42] The Revised Florida Act § 105(1) provides that a partnership "may" file a registration statement with the Department of State. A "registration statement" is not a "statement" within the meaning of that term. Compare FRUPA § 101(11) ("registration" or "registration statement") with § 101(13) ("statement"). Return to text.

[43] FRUPA § 105(4). A "statement" may be filed with the Department of State only if the partnership has filed a registration statement, except those statements provided for by FRUPA § 304 (statement of denial) or § 704 (statement of dissociation). Id. § 105(4). Thus, a statement of dissolution may not be filed under § 304 unless the partnership had been previously registered.

The Department of State is authorized to adopt administrative rules as necessary to carry out its duties and functions under the Act. FRUPA § 1055(2). Official forms of partnership statements have been adopted. See SANDRA B. MORTHAM, SECRETARY OF STATE, PARTNERSHIPS IN FLORIDA (1995). Return to text.

[44] FRUPA § 1055(1). The fee for filing a UCC financing statement (Form UCC-1) is also $25. FLA. STAT. § 15.091(1)(a) (1995). Return to text.

[45] See FRUPA § 105(8). Return to text.

[46] Id. § 1055(1)(i). Return to text.

[47] FLA. STAT. § 689.045 (1995), discussed infra notes 98-100 and accompanying text. Return to text.

[48] FRUPA § 203. Return to text.

[49] See UPA § 25(1). Tenancy in partnership reflects the aggregate theory of partnership. See Reporters' Overview, supra note 38, at 28. Return to text.

[50] UPA § 25(2)(a). Return to text.

[51] Id. §§ 25(2)(b), (c). By defining the "incidents of this tenancy" in a manner that denies individual partners the usual incidents of ownership, the UPA reaches an entity result masquerading in aggregate terms. For example, a partner may not grant a security interest in specific partnership property to a personal creditor. In re O'Connell, 119 B.R. 311, 314 (Bankr. M.D. Fla. 1990). Return to text.

[52] FRUPA § 501. The Revised Uniform Act § 501 provides: "A partner is not a co-owner of partnership property and has no interest in partnership property which can be transferred, either voluntarily or involuntarily." The Florida modification merely emphasizes the change from the UPA; no substantive change from RUPA is intended. Return to text.

[53] "The only transferable interest of a partner in the partnership is the partner's share of the profits and losses of the partnership and the partner's right to receive distributions." FRUPA § 502. A "distribution" is "a transfer of money or other property from a partnership to a partner in the partner's capacity as a partner . . . ." Id. § 101(4). A partner's "transferable interest" is to be distinguished from the partner's "partnership interest." The latter means "all of a partner's interests in the partnership, including the partner's transferable interest and all management and other rights," such as a partner's information rights. Id. § 101(8) (emphasis added). Those rights, including the right to participate in management, are not transferable, but are conferred only if the transferee is admitted as a partner. Return to text.

[54] FRUPA § 502, second sentence, which reads: "A partner's interest in the partnership is personal property" (emphasis added). That is a slight change from RUPA § 502, which reads, "The only transferable interest of a partner in the partnership is the partner's share of the profits and losses of the partnership and the partner's right to receive distributions. The interest is personal property." A partner's interest in the partnership is not the same as her transferable interest. See supra note 53. The Florida comment indicates the change was intended to clarify that a partner's entire interest in the partnership is personal property, not merely her transferable interest. The clarification seems unnecessary, especially in light of UPA precedent, and is out of place in a section entitled "Partner's transferable interest in partnership." Return to text.

[55] FRUPA § 204(1)(a). Return to text.

[56] Id. § 302(1). Return to text.

[57] Id. Under UPA § 8(3), real property may be acquired in the partnership name, but the Act is silent regarding personal property. See RUPA § 302, cmt. 2. Return to text.

[58] FRUPA § 204(2). Therefore, the deed or certificate of title by which the partnership acquires the property must indicate the correct name of the partnership. Otherwise, reliance on the record title is unwarranted. Return to text.

[59] FRUPA § 204(1)(b). Return to text.

[60] UPA § 8; see, e.g., Standring v. Standring, 794 P.2d 1089, 1090 (Colo. App. 1990). Return to text.

[61] FRUPA § 204(3) (continuing the presumption in UPA § 8(2) that "property acquired with partnership funds" is partnership property) (emphasis added). The RUPA presumption is expanded to cover property purchased with partnership "assets," which is intended to apply if the firm's credit is used to obtain financing. RUPA § 204, cmt. 3 (emphasis added). Return to text.

[62] FRUPA § 204(4). In effect, the Act presumes that the partner is contributing the use of the property to the partnership, not the property itself. See RUPA § 204, cmt. 3. Return to text.

[63] The intention of the parties is controlling, at least as among the partners. See id. Return to text.

[64] UPA § 9(1). Return to text.

[65] FRUPA § 301(1). Under the UPA, a partner's apparent authority is limited to "carrying on in the usual way the business of the partnership." UPA § 9(1). The Revised Florida Act clarifies that a partner's apparent authority extends to acts done in the ordinary course of business "of the kind carried on by the partnership." FRUPA § 301(1). Florida adds the nonuniform qualification: "in the geographic area in which the partnership operates." Id. That seems implicit in the uniform act, and no substantive change is intended. See FRUPA § 301, Fla. cmt. THE FLORIDA BAR, CONTINUING LEGAL EDUC. COMM., FLORIDA PARTNERSHIP LAW 31 (1995) [hereinafter FLORIDA BAR CLE ON PARTNERSHIP LAW] The Florida comments to FRUPA are not official, but were prepared by The Florida Bar Drafting Committee (see supra note 4) to explain its proposed nonuniform amendments to RUPA. The Comments accompanied the draft bill submitted to the Florida legislature and thus constitute part of FRUPA's legislative history, albeit unofficial. The Florida comments accompany the statutory text of the Revised Florida Act found in The Florida Act found in The Florida Bar's materials. Return to text.

[66] FRUPA § 301(1) states, "Each partner is an agent of the partnership for the purpose of its business . . . ." To the extent that is the default scope of each partner's actual authority, it may be varied in the partnership agreement as provided in FRUPA § 103(1). To the extent that it also defines the scope of each partner's apparent authority, a third party is not bound by an unknown restriction on a partner's authority unless the limitation is contained in a recorded statement of authority, as provided in FRUPA § 303. Return to text.

[67] The Revised Uniform Act § 301(2) provides that the partnership is bound by a partner's act beyond the ordinary course of business "only if the act was authorized by the other partners." Under RUPA § 401(j), an act outside the ordinary course of business may be undertaken only with the consent of all of the partners, unless the partnership agreement provides for less than unanimous consent. Thus, "authorization by the other partners" under RUPA § 301(2) requires unanimous consent unless the partnership agreement provides otherwise.

That result may be changed by FRUPA, which provides that the partnership is bound only if a partner's extraordinary act was "authorized by all of the other partners or is authorized by the terms of a written partnership agreement." FRUPA § 301(2) (emphasis added). According to the Florida comment, the change was intended to make the RUPA rule "particularly clear." FRUPA § 301, Fla. cmt. FLORIDA BAR CLE ON PARTNERSHIP LAW, supra note 65, at 31. Unfortunately, the requirement of a written partnership agreement conflicts with the general rule respecting partnership agreements, "whether written, oral, or implied." FRUPA § 101(6). Moreover, it is unclear under the Florida formulation whether the act itself must be "authorized by the terms of a written partnership agreement" or whether the act may, as contemplated by RUPA, be authorized by less than unanimous consent if so provided in the partnership agreement. If the concern is that the partnership should not be bound by a partner's extraordinary act unless clearly authorized by the other partners, it is somewhat ameliorated by the burden of proof. Under general agency principles, preserved by FRUPA § 104(1), the burden of proof is on a third party who claims that an agent has authority to act beyond the ordinary course of the principal's business. See, e.g., General Overseas Films, Ltd. v. Robin Int'l, Inc., 542 F. Supp. 684, 688-89 (S.D.N.Y. 1982); Croisant v. Watrud, 432 P.2d 799, 803 (Or. 1967).

Finally, it should be noted that the partnership may be bound under FRUPA § 303(3)(a) by a partner's act that is within a grant of extraordinary authority contained in a filed statement of partnership authority, whether or not authorized by all of the other partners, since the § 301 rules are subject to the effect of a statement of authority under § 303. Return to text.

[68] See FRUPA § 102(2) (meaning of "knows"); id. § 102(4) (meaning of "receives a notification"). Return to text.

[69] Id. § 301(1). Under FRUPA § 102(1), a person "knows" a fact if she has actual knowledge of it. Thus, knowledge means cognitive awareness and is a question of fact. See RUPA § 102, cmt. A person "receives a notification" when it comes to her attention or is duly delivered at the person's place of business or at any other place held out as a place for receiving communications, whether or not the person actually learns of the communication. FRUPA § 102(4).

Under FRUPA, a person has "notice" of a fact if she knows or has received a notification of the fact or if she has reason to know it exists from all of the facts known to her at the time in question. Id. § 102(2). Thus, "notice" includes the traditional concept of inquiry notice and requires reasonable diligence when triggered by known facts. The FRUPA definitions are based on those found in UCC §§ 1-201(25)-(27) (1989) (UCC). See RUPA § 102, cmt.

Under FRUPA § 301(1), the partnership is bound by a partner's apparent authority unless the other party knows or has received a notification of the partner's lack of authority; notice is not enough. That marginally shifts the allocation of risk of a partner's lack of authority to the partnership, which ought to bear the risk of a rogue partner acting in the ordinary course of business, but without actual authority. Compare UPA § 9(1), which provides that the partnership is bound unless the other party has "knowledge" of the lack of authority; UPA § 3(1), however, defines "knowledge" to include "knowledge of such other facts as in the circumstances shows bad faith." Under FRUPA, the partnership cannot avoid liability by asserting the other party failed to inquire about the partner's authority. To protect itself, the partnership may send a notification of a partner's lack of authority to persons dealing with that partner. Return to text.

[70] UPA § 10. Return to text.

[71] FRUPA § 302(1)(a). As FRUPA § 302(2) makes clear, however, that authority is subject to the FRUPA § 301 general rules governing a partner's authority. Thus, each partner has apparent and, unless restricted, actual authority to execute conveyances for the transfer in the ordinary course of business of property held in the name of the partnership, but a partner's authority to transfer such property beyond the ordinary course of business must be actual. See FRUPA § 301. Return to text.

[72] Id. § 302(2). The burden of proof is on the partnership. See RUPA § 302, cmt. 3. If the initial transferee of the partnership property has, in turn, transferred the property to a purchaser for value, the partnership must also prove that the subsequent transferee knew or had received a notification that the partner executing the instrument of initial transfer lacked authority. FRUPA § 302(2)(a). The partnership may not recover the property from a subsequent transferee if any prior transferee in the chain of title would have prevailed over the partnership. Id. § 302(3). Return to text.

[73] Id. §§ 302(1)(b) (indication), (c) (no indication). Return to text.

[74] Id. § 302(2)(b). That additional requirement protects only transferees for value. Return to text.

[75] For example, grantees from the partnership and lenders often require that deeds and mortgages be executed by all of the partners or that affidavits of authority be executed and recorded. See Edward S. Merrill, Partnership Property and Partnership Authority Under the Revised Uniform Partnership Act, 49 BUS. LAW. 83, 95 (1994).

Florida has long had a nonuniform provision that somewhat simplifies establishing of record a partner's authority to execute instruments of conveyance of partnership real property. See FLA. STAT. § 620.605(1) (1995), discussed infra notes 98-99 and accompanying text. Return to text.

[76] See RUPA § 303, cmt. 2. In Florida, a partnership's eligibility to file and record a statement of authority is conditioned on its prior registration with the Department of State. FRUPA § 105(4), discussed supra note 43 and accompanying text. Return to text.

[77] FRUPA § 303(1)(a) (emphasis added). Return to text.

[78] Id. § 303(1)(b). The statement may include any other matter the partnership chooses. Return to text.

[79] This nonuniform amendment is found in FRUPA § 105(4). Return to text.

[80] Id. § 105(1)(c); cf. RUPA § 303(a). The registration statement must also include the partnership's name; the street address of its "chief executive office," and principal Florida office, if there is one; the partnership's Federal Employer Identification Number; and the recorded document number of each partner that is a business entity rather than a natural person. FRUPA §§ 105(1)(a), (b), (d), (e).

Under RUPA, there is no provision for the "registration" of partnerships. However, a statement of authority must include the name of the partnership, the street address of its chief executive office and of an office in the state, if any, as well as the names and mailing addresses of all of the partners or of an agent appointed by the partnership to maintain a list of the partners' names and addresses, available to any person on request for good cause shown. RUPA §§ 303(a)(1)(ii), (iii), (b).

Traditionally, public disclosure of partners' names has not been required by law, and so-called silent partners are common. Thus, disclosure of the identity of all the partners is, in effect, a "tax" on the right to use partnership statements; the underlying policy of the requirement is not readily apparent, however. Under FRUPA § 303(2), failure to disclose the names of the partners does not impair a filed statement's operative effect, provided the statement is properly executed and states the name of the partnership. The reference in that section to FRUPA § 105(3) is in error; it should refer to FRUPA § 105(6). Compare RUPA § 303(c). The error will be corrected in the "glitch bill." Return to text.

[81] FRUPA § 105(6). That is a compromise between the security of requiring all or a majority of the partners to sign and the convenience of a single partner. Presumably, a registration statement must also be signed by at least two partners, although § 105(6) applies only to "statements," and a registration statement is not within the FRUPA § 101(13) definition of a "statement." See supra note 42. Return to text.

[82] FRUPA § 105(9). Failure to send a copy of a statement to a partner or other person does not limit its operative effect. Id. Return to text.

[83] Id. § 105(8). A recorded statement that is not a certified copy of a statement filed with the Department of State does not have the effect provided for recorded statements in the Act. Id. This provision avoids inconsistencies between statements affecting the title to real property. See RUPA § 105, cmt. 3. Return to text.

[84] In Florida, the clerk of the circuit court is the recorder of all instruments authorized by law to be recorded, including instruments relating to the transfer of real property located in the county. FLA. STAT. § 28.222(1) (1995). All instruments are recorded in one general series of books called the "Official Records." Id. § 28.222(2). Unless recorded, a transfer of real property is not effective against creditors or subsequent purchasers for value and without notice. See id. § 695.01(1). Return to text.

[85] FRUPA § 105(7). Unless canceled earlier, a statement of authority is canceled by operation of law after five years. Id. § 303(6). Return to text.

[86] Id. § 304. A statement of denial is a limitation on authority as provided in FRUPA § 303(3) and (4), the operative effect of which is discussed infra in notes 90-91 and accompanying text. See FRUPA § 304(3). The references in that section to FRUPA § 303(5) and (6) are in error. The references should be to FRUPA § 303(3) and (4). Compare RUPA § 304. This error will be corrected in the "glitch bill." A statement of denial may be filed even if the partnership is not registered. See FRUPA § 304(2). The significance of this rule is minimal, inasmuch as the only other statement that may be filed without the partnership having been registered is a statement of dissociation. See id. §§ 105(4), 704(2). Return to text.

[87] A recorded statement has no legal effect on the authority of a partner to transfer partnership real property not held in the name of the partnership. Return to text.

[88] FRUPA § 303(3)(b). A statement of authority is accorded that effect only if it is properly recorded in the local real estate records. Id.

A recorded grant of authority is given conclusive effect only "so long as and to the extent that a certified copy of a filed statement containing a limitation on that authority is not then of record." Id. Thus, reliance on a partner's record authority is confined to situations in which there is no conflict among the recorded statements and amendments. A statement of denial also operates as a limitation on authority. Id. § 304. If the record is in conflict, the partner's actual authority must be determined outside the record. See RUPA § 303, cmt. 2. A cancellation of a limitation on a partner's authority, however, revives the previous grant of authority, so inadvertent conflicts can be resolved and reliance on the record restored. FRUPA § 303(3)(b) (last sentence).

Record authority is conclusive only if the transferee is "without knowledge to the contrary," that is, actual knowledge of a partner's lack of authority. See id. § 102(1). Thus, transferees are under no obligation to inquire, even if alerted to possible defects, since "notice" of a lack of authority does not preclude the record presumption of authority. See id. § 102(2). Sending a notification of a partner's lack of authority to a transferee is insufficient, unless it actually comes to the transferee's attention. Compare id. § 301(1) (apparent authority unless other party knew or received a notification). Return to text.

[89] See id. § 301(2), discussed supra note 67 and accompanying text. Return to text.

[90] FRUPA § 303(4). Return to text.

[91] See id. § 301(1). Return to text.

[92] If partnership property is held in the name of one or more of the partners, with or without an indication of the partner's partnership capacity or of a partnership's interest in the property, a search of the record would not reveal the partnership's interest, and thus reliance on the record would be unwarranted. To be protected from unauthorized transfers, therefore, a partnership must acquire and hold its real property in its own name.

Titled personal property is not accorded the same protection as real property because reliance on record title may not be appropriate. A filed limitation on a partner's authority might, however, be a source of actual knowledge of the partner's lack of authority, thereby cutting off the partner's apparent authority under FRUPA § 301(1). Return to text.

[93] That is not affirmatively stated in the Act, but is the negative implication of FRUPA § 303(3)(a), which covers the effect of a recorded statement "except for transfers of real property," and § 303(3)(b), which covers the effect with respect to the transfer of real property held in the name of the partnership. By its terms, § 303(4) applies only to limitations of authority to transfer real property held in the name of the partnership. Return to text.

[94] FRUPA § 303(5). Return to text.

[95] Id. § 303(3)(a). Return to text.

[96] Id. § 303(5). That is not true of limitations contained in a statement of dissociation or dissolution, which are in effect exceptions to the general principle embodied in FRUPA § 303(5). See id. §§ 704(4), 805(3), discussed infra notes 202-09, 219-21 and accompanying text. Return to text.

[97] FRUPA § 301(1). Thus, there is no need for third parties to monitor the Department of State's partnership records in order to protect themselves from a limitation contained in a filed statement of authority. But see infra text accompanying note 221 (discussing the need to monitor records for limitations based on a statement of dissociation or dissolution). Return to text.

[98] See FLA. STAT. § 620.605(1) (1995). The provision was added to UPA § 10(1) at the time Florida adopted the UPA. See 1972, Fla. Laws ch. 72-108, § 10, 351, 354. Section 620.605(1) provides:

When title is held in the partnership name and it is necessary to identify the partners at the time of a conveyance, encumbrance, or other instrument affecting partnership real property, one of the partners may execute an affidavit stating the names of the partners and that they are the partners then existing. The affidavit shall be conclusive as to the facts therein stated as to purchasers without notice.

FLA. STAT. § 620.605 (1) (1995). Return to text.

[99] 1995, Fla. Laws ch. 95-242, § 23, 2150, 2189. Chapter 689, Florida Statutes, is entitled Conveyances of Land and Declarations of Trust. For the original text of § 620.605(1), Florida Statutes, SEE supra note 98. Return to text.

[100] First, it is unclear what the purchaser must not have notice of, although presumably it is that the partner does not, in fact, enjoy the authority stated in the affidavit. More difficult, however, is the meaning and effect of such notice. FRUPA distinguishes between "knowledge" and "notice" and uses the two concepts carefully. See FRUPA §§ 102(1) (knowledge), 102(2) (notice). If the FRUPA concept of "notice" is used in applying § 689.045, it affords less protection to a purchaser than does FRUPA § 303(3)(b). Under FRUPA, a purchaser may rely on a partner's record authority unless the purchaser actually knows the partner lacks authority. Conversely, under § 689.045, a purchaser may not rely if she has reason to know of the partner's lack of authority because of what is known. Return to text.

[101] In time, the FRUPA regime should far surpass § 689.045 in certainty because of the national body of case law construing the provision. There are no Florida cases construing the affidavit provision of § 620.605(1). Return to text.

[102] See infra note 108-13 and accompanying text. Return to text.

[103] Uniform Partnership Act § 21 is entitled "Partner Accountable as a Fiduciary" and is the only section dealing with such duties. The text of the UPA itself does not use the word "fiduciary." Return to text.

[104] Uniform Partnership Act § 4(3) provides that the law of agency shall apply under that Act. "Every partner is an agent of the partnership for the purpose of its business." UPA § 9(1); FRUPA § 301(1). The law of partnership reflects the broader law of principal and agent, under which every agent is a fiduciary. RUPA § 404, cmt. 1; see RESTATEMENT (SECOND) OF AGENCY § 13 (1957). Return to text.

[105] 164 N.E. 545, 546 (N.Y. 1928). Return to text.

[106] Id. at 547. Return to text.

[107] Id. Return to text.

[108] J. Dennis Hynes, Fiduciary Duties and RUPA: An Inquiry into Freedom of Contract, 58 LAW & CONTEMP. PROBS. 29 (1995); Larry E. Ribstein, The Revised Uniform Partnership Act: Not Ready for Prime Time, 49 BUS. LAW. 45, 52-61 (1993); Larry E. Ribstein, A Mid-Term Assessment of the Project To Revive the Uniform Partnership Act, 46 BUS. LAW. 111, 137-41 (1990) [hereinafter A Mid-Term Assessment]. Return to text.

[109] Allan W. Vestal, Fundamental Contractarian Error in the Revised Uniform Partnership Act of 1992, 73 B.U. L. REV. 523 (1993); Claire M. Dickerson, Is It Appropriate To Appropriate Corporate Concepts: Fiduciary Duties and the Revised Uniform Partnership Act, 64 U. COLO. L. REV. 111 (1993). Return to text.

[110] Donald J. Weidner, the Reporter for the Revised Uniform Act, argues that RUPA "represents a major and sufficient move toward a contractarian statement of the law" and rejects the assertion "that partners should be free to contract away all their fiduciary duties." See Donald J. Weidner, RUPA and Fiduciary Duty: The Texture of Relationships, 58 LAW & CONTEMP. PROBS. 81 (1995). He states:

First, individuals rarely "bargain" as equals for partnership agreements that completely define their relationship. The law should assume that the completely defined partnership relationship is the exception rather than the norm. It should also take into account the probability that the bargaining process involves human foible and important information asymmetries, if not outright fraud. Second, even apart from the imperfections of bargaining, prohibiting certain types of relationships is preferable to permitting them. Mandatory minima are designed to prevent types of relationships that would cost more than they would benefit. Finally, the language of fiduciary law, with its mandatory rules, is preferable to the language of the law of the sale of goods, with its mandatory rules. The language stating the minima among partners ought to reflect the texture of their relationship, which is one of a powerful mutual agency, ill-defined hierarchy, and joint and several liability. If the indeterminacy of the minima is kept in check, the benefit of the minima will far exceed the cost.

Id. at 82. Return to text.

[111] See FRUPA § 404(1). Section 404 is entitled "General Standards of Partner's Conduct." The title comes from § 8.30 of the Revised Model Business Corporation Act (RMBCA). See also FLA. STAT. § 607.0830 (1995) (General Standards for Directors). Return to text.

[112] FRUPA § 404(1). Return to text.

[113] See Vestal, supra note 109, at 537-45; Reporters' Overview, supra note 38, at 33. In light of the common law tradition which spawned the concept of fiduciary duty, the ultimate success of the Act's efforts to limit that duty would seem problematic. Return to text.

[114] FRUPA § 404(5). Return to text.

[115] See RUPA § 404, cmt. 5. That principle may also be relevant in applying the obligation of good faith and fair dealing. See infra notes 133-35 and accompanying text. Return to text.

[116] That rule is based on UPA § 21(1). Return to text.

[117] That rule is derived from §§ 389 and 391 of the RESTATEMENT (SECOND) OF AGENCY (1957). See RUPA § 404, cmt. 2. Return to text.

[118] That rule is derived from § 393 of the RESTATEMENT (SECOND) OF AGENCY (1957). The duty not to compete terminates upon the dissolution of the partnership or, under FRUPA § 603(2)(b), upon a partner's dissociation. Return to text.

[119] See RUPA § 404(b) ("A partner's duty of loyalty . . . is limited to the following . . . .") (emphasis added). Return to text.

[120] FRUPA § 404(2). Return to text.

[121] See id. § 404, Fla. cmt. FLORIDA BAR CLE ON PARTNERSHIP LAW, supra note 65, at 66. Return to text.

[122] Id. § 103(2)(a)3. Return to text.

[123] That is a compromise between the traditional view that the fiduciary duty of loyalty cannot be waived ex ante and the contractarian view that the duty may be waived entirely. Both camps have been critical of the RUPA compromise. See supra notes 108-09 (citing authorities critical of the compromise). Return to text.

[124] See, e.g., Singer v. Singer, 634 P.2d 766 (Okla. Ct. App. 1981). In Singer, the court upheld a broadly worded exculpatory clause that probably would not be enforced under RUPA as drafted. If, however, the agreement were drafted to provide that the partners are free to compete with the partnership "with respect to the acquisition of mineral interests in the Britton area," it quite possibly would meet RUPA's specificity requirements. Given the Singers' sophistication and past practice, such an exculpatory provision might also pass muster under RUPA's "not manifestly unreasonable" standard. See Weidner, supra note 110, at 92-93. Return to text.

[125] See RUPA § 103, cmt. 5. Return to text.

[126] FRUPA § 103(2)(a)3. Return to text.

[127] Id. Return to text.

[128] See RUPA § 404, cmt. 3. A few courts have recognized a duty of care. See, e.g., Rosenthal v. Rosenthal, 543 A.2d 348, 352 (Me. 1988) (recognizing the duty of care not to act in grossly negligent manner). Return to text.

[129] FRUPA § 404(1). Return to text.

[130] Id. § 404(3). A partner's duty of care extends to the conduct and winding up of the partnership business. Id. Upon a partner's dissociation, the duty continues "only with regard to matters arising and events occurring before the partner's dissociation, unless the partner participates in winding up the partnership's business." Id. § 603(2)(c). Return to text.

[131] See Reporters' Overview, supra note 38, at 22. Return to text.

[132] FRUPA § 103(2)(b). An agreement releasing a partner from liability for any action taken in good faith and in the honest belief that the action is in the best interests of the partnership would seem reasonable; an agreement absolving a partner of intentional misconduct is probably not. See RUPA § 103, cmt. 6. The partners may always agree to a heightened standard of care. Id. Return to text.

[133] See id. § 404, cmt. 4. The duty is recognized as an implied obligation of every contract by § 205 of the RESTATEMENT (SECOND) OF CONTRACTS (1981). See, e.g., Foley v. Interactive Data Corp., 765 P.2d 373, 389 (Cal. 1988) (construing an employment agreement); Gelder Medical Group v. Webber, 363 N.E.2d 573, 577 (N.Y. 1977) (construing a partnership agreement). Many courts, however, articulate good faith and fair dealing as a component of the fiduciary duty of loyalty. See, e.g., Meehan v. Shaughnessy, 535 N.E.2d 1255, 1263 (Mass. 1989); Covalt v. High, 675 P.2d 999, 1001 (N.M. Ct. App. 1983); Wyler v. Feuer, 149 Cal. Rptr. 626, 632 (Cal. Ct. App. 1978). Return to text.

[134] See RUPA § 404, cmt. 4. The UCC defines "good faith" as honesty in fact and, in the case of a merchant, the observance of reasonable commercial standards of fair dealing in the trade. See UCC §§ 1-201(19), 2-103(b). Some view good faith as an "excluder" with no intrinsic meaning of its own, better understood by what it rules out as bad faith. See Robert S. Summers, "Good Faith" in General Contract Law and the Sales Provision of the Uniform Commercial Code, 54 VA. L. REV. 195, 262 (1968). For a novel analysis of fiduciary duty and good faith as the opposite ends of the same continuum, see Claire M. Dickerson, From Behind the Looking Glass: Good Faith, Fiduciary Duty & Permitted Harm, 22 FLA. ST. U. L. REV. 955 (1995). Return to text.

[135] FRUPA § 103(2)(c). The language is drawn from UCC § 1-102(3). See RUPA § 103, cmt. 7. Return to text.

[136] FRUPA § 404(6). That is based on RULPA § 107. The partner's rights are subject to "other applicable law," such as equitable subordination and insider preference rules, which are not intended to be displaced. See RUPA § 404, cmt. 6. Return to text.

[137] FRUPA § 403(2). Compare UPA § 19. The right of access includes the right to inspect and, at the partner's expense, to copy books and records during ordinary business hours. FRUPA § 403(2). Return to text.

[138] See RUPA § 403, cmt. 2. Under FRUPA, a partner's right of access to the books and records is not conditioned on a proper purpose. Compare RMBCA § 16.02(c)(1) (shareholder must have proper purpose to inspect certain corporate records). Return to text.

[139] FRUPA § 103(2)(a)2. Return to text.

[140] Id. § 403(3)(b). Compare UPA § 20. The right to such information extends to the legal representative of a deceased partner or a partner under legal disability. FRUPA § 403(3). The partnership may refuse to provide information if either the demand or the information requested is unreasonable or otherwise improper. Id. § 403(3)(b). Return to text.

[141] Id. § 403(3)(a) (emphasis added). Return to text.

[142] Absent a demand, there is no express disclosure duty under the UPA. Under some circumstances, however, an affirmative disclosure duty has been inferred, either from other sections of the Act or the common law duty of good faith. See RUPA § 403, cmt. 3. The existence and scope of those duties were not well- developed under prior law. The Revised Florida Act § 403(3)(a) is not intended to be exclusive, and other affirmative disclosure duties may still be inferred from other provisions of FRUPA. See id. Return to text.

[143] FRUPA § 103(2)(a)2. Under RUPA § 103(b)(2), a partner's right of access to the partnership books and records is immutable, but a partner's other information rights are not, and thus the latter may be abolished by agreement. Return to text.

[144] Uniform Partnership Act § 29 defines "dissolution" as the change in the relationship caused by any partner's ceasing to be "associated" in the carrying on (as distinguished from the winding up) of the business. Under the UPA, the partnership is merely the aggregation of interests resulting from the "association" of the individual partners. See UPA § 6; supra notes 19-25 and accompanying text (discussing aggregate theory). With the departure of any partner, that association disappears, even if it is instantly replaced by another association with a similar cast of characters, save the departed partner. See UPA § 41 and general discussion; RUPA § 601, cmt. 1. Return to text.

[145] See UPA § 38(1). Return to text.

[146] Id. § 31(2). Return to text.

[147] The Revised Florida Act § 602(1) expressly provides that a partner has the power to dissociate at any time, whether rightfully or wrongfully, by express will pursuant to FRUPA § 601(1). That rule is made immutable by FRUPA § 103(2)(d). See infra note 161 and accompanying text (discussing the consequence of wrongful dissociation). Return to text.

[148] FRUPA § 103(2)(e). As previously discussed, an agreement that purports to prevent a partner from dissociating at will is not specifically enforceable, but the breach of such an agreement may open the wrongfully dissociating partner to liability for consequential damages. See infra note 161 (discussing FRUPA § 602(3)). Return to text.

[149] FRUPA § 601(5). The partnership itself, or any other partner, has standing to seek the partner's expulsion. Id. Return to text.

[150] Id. § 601. Return to text.

[151] See UPA §§ 31, 32. Return to text.

[152] FRUPA § 601(7)(a). There are analogous events of dissociation for various types of entity partners. See id. § 601(8) (trust), (9) (estate), (10) (other entity). Return to text.

[153] Id. § 601(7)(b) (appointment of guardian or general conservator), (c) (judicial determination that a partner is incapable of performing duties). Return to text.

[154] Id. § 601(6)(a). Other indicia of financial distress are also included. Id. § 601(6)(b) (assignment for benefit of creditors), (c) (appointment of trustee, receiver, or liquidator), (d) (failure to vacate involuntary appointment).

Under the Revised Uniform Act, "debtor in bankruptcy" is defined as a person subject to an order for relief under any chapter of the federal Bankruptcy Code (Title 11 of the United States Code), or a comparable order under federal, state, or foreign law governing insolvency. RUPA § 101(2) (emphasis added). Surprisingly, in light of the prevalence of foreign partners in Florida partnerships, FRUPA deletes the reference to foreign insolvency law. See FRUPA § 101(3)(b). Thus, in Florida, the partnership agreement must provide for a partner's dissociation by reason of a foreign bankruptcy proceeding, if that is the desired outcome. Return to text.

[155] In addition to judicial expulsion under FRUPA § 601(5) and expulsion pursuant to the partnership agreement under FRUPA § 601(3), the Act now affords a default right of expulsion by the unanimous vote of the partners if:

(i) it is unlawful to carry on the business with the partner;

(ii) the partner has made a voluntary assignment (other than a security interest) of substantially all of his partnership interest; or

(iii) an entity partner has been dissolved or its right to conduct business suspended for more than 90 days without cure.

FRUPA § 601(4). Return to text.

[156] See UPA § 38(2), which provides special rules for a partner "who has caused the dissolution wrongfully." The term is not clearly defined, but includes a partner who has caused dissolution "in contravention of the partnership agreement." Under FRUPA, a partner's dissociation may be wrongful, but it does not result in a dissolution of the partnership. See FRUPA § 801(2)(a), discussed infra notes 164-67 and accompanying text. Return to text.

[157] FRUPA § 602(2)(a). Return to text.

[158] Id. § 602(2)(b)1. There is an exception if the partner withdraws within 90 days after the dissociation of another partner. Id. Thus, such a "reactive" dissociation is rightful. See infra notes 168-69 and accompanying text. Return to text.

[159] FRUPA § 602(2)(b)2. The dissociation is wrongful only if the partner is expelled by a court under FRUPA § 601(5). Thus, expulsion by the other partners under FRUPA § 601(3) or (4) is not a wrongful dissociation. The expulsion or willful dissolution of a partner that is a business entity is a wrongful dissociation, however. Id. § 602(2)(b)4. Return to text.

[160] Id. § 602(2)(b)3. That rule recognizes that a person may file bankruptcy today with little financial or reputational loss, thereby creating a loophole by which a partner could file bankruptcy in lieu of withdrawing from a term partnership. Return to text.

[161] Id. § 602(3). Return to text.

[162] See id. § 103(2)(f). The reference in that section to FRUPA § 601 is erroneous; the reference should be to FRUPA § 801. Compare RUPA § 103(b)(8). The error will be corrected in the "glitch bill."

The FRUPA § 801(5) grounds for judicial dissolution are:

(i) the partnership's economic purpose is likely to be unreasonably frustrated;

(ii) another partner has acted so as to make it impracticable to carry on the business with that partner; or

(iii) it is not otherwise reasonably practicable to carry on the business in conformity with the partnership agreement.

The Uniform Partnership Act § 32(1) provides for judicial dissolution. The new language is drawn from RULPA § 802. See RUPA § 801, cmt. 8.

The Revised Florida Act § 801(6) provides for judicial dissolution on application of a transferee of a partner's interest in the partnership. That right is also immutable. FRUPA § 103(2)(f).

The only other immutable cause of dissolution is an event making it unlawful to continue the partnership business. See id. §§ 103(2)(f), 801(4). Return to text.

[163] Id. § 801(3). Return to text.

[164] See id. § 801. The Revised Florida Act retains the word "dissolution," as does RUPA, but its meaning is not the same as under the UPA. Under UPA § 29, dissolution refers to the change in the relation of the partners caused by the departure of any partner, which is a fundamental change under the aggregate theory of partnership. Under the entity theory, the partnership entity continues until the business has been wound up. "Dissolution," as it is used in FRUPA, is merely a shorthand way of noting that the winding up process has begun. Thus, it is redundant to say, as does FRUPA § 801, that a partnership "is dissolved and its business must be wound up."

Early drafts of RUPA did not use the term "dissolution," and the Revised Texas Act, which is based on an earlier draft of RUPA, does not use the term "dissolution." See Texas Revised Partnership Act, TEX. REV. CIV. STAT. ANN. art. 6132b-8.01 (West 1995). For a more complete discussion of the new meaning of "dissolution," see Reporters' Overview, supra note 38, at 8. Return to text.

[165] The Revised Florida Act does not define "term partnership." As used in FRUPA, it means a partnership that is not a "partnership at will." "Partnership at will" is defined as a partnership "in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking." FRUPA § 101(7). Thus, a term partnership is one in which the partners have agreed to remain partners for a definite term or a particular undertaking.

The distinction is critical, since the grounds for dissolution under FRUPA § 801 differ depending on whether the partnership is a term partnership or an at-will partnership. The distinction is also crucial in determining whether a partner's dissociation is wrongful under FRUPA § 602(2)(b). Where the partnership agreement is not clear, the result depends upon the intention of the partners, which is a question of fact. In close cases, courts often infer a term or undertaking from the partnership's purpose. See, e.g., Baker v. City of Orlando, 427 So. 2d 1130 (Fla. 5th DCA 1983) (purpose to complete a single construction contract); see also RUPA § 101, cmt. (citing cases). Return to text.

[166] FRUPA § 801(2)(c). Return to text.

[167] Id. § 801(2)(b). That follows the general rule that any transaction outside the ordinary course of business or an amendment to the partnership agreement requires unanimous consent. Id. § 401(10). Return to text.

[168] See id. § 801(2)(a). Return to text.

[169] Id. Allowing a majority of the partners to continue the business is a change in the law. Under the UPA, unanimous consent is required to continue the business of a term partnership following the premature departure of one partner, thus giving each of the remaining partners a right to dissolution. See UPA § 38(2)(b). This broad dissolution power was viewed as inappropriate in light of the partners' original agreement to continue the partnership for a definite term or particular undertaking. In effect, FRUPA allows the remaining partners to decide collectively whether the first partner's premature departure jeopardizes the successful continuation of the business. If the business is continued by the majority, any dissenting partner who wishes to withdraw may rightfully do so under the exception to FRUPA § 602(2)(b)1. See RUPA § 801, cmt. 5. The interest and vote of a partner who dissociates rightfully under FRUPA § 602(2)(b)1 is counted in determining whether a majority in interest agrees to continue.

Majority in interest is not the normal FRUPA default rule for partnership business. See FRUPA § 401(10) (majority of the partners). Requiring a majority in interest satisfies Internal Revenue Service concerns regarding a partnership's continuity of life. See Treas. Reg. § 301.7701-2(b)(1). "Majority in interest" is not defined in FRUPA, but is intended to satisfy Rev. Proc. 94-45 (June 29, 1994). The "in-interest" concept refers to partners' economic interests in both profits and capital of the partnership. See RUPA § 801, cmt. 5. Those concerns may soon be eliminated, if the IRS's recent "check-the-box" proposal is adopted. See supra note 25. Return to text.

[170] RUPA § 801(1). The dissolution occurs when the partnership has notice of the partner's will to withdraw, unless a later date is specified by the partner. A partner at will who has already been dissociated by expulsion, bankruptcy, incompetency, or otherwise under RUPA § 601(2) through (10) is not entitled to have the partnership wound up. Id. § 801(1). Return to text.

[171] See, e.g., A Mid-Term Assessment, supra note 108, at 148-50. Return to text.

[172] FRUPA § 801(1). Return to text.

[173] See supra note 164. Return to text.

[174] See FRUPA § 802(1). The curtailment of the partnership's purpose after dissolution results in a similar curtailment of the partners' actual authority. See id. § 804(1).

After dissolution, the partnership's business may be preserved as a going concern for a reasonable time in order to preserve its going concern value. See id. § 803(3). When the winding up of its business is completed, the partnership is terminated. Id. § 802(1). Return to text.

[175] Id. § 802(2)(a). Return to text.

[176] Id. § 802(2). A dissociating partner's waiver of the right to dissolution means that the dissociating partner's interest will be bought out. The need for her consent to resume the business should give the departing partner the necessary leverage to negotiate a fair buyout price. Under § 802(2), the consent of a wrongfully dissociating partner is not required, because such a partner never had a right to have the business liquidated. Return to text.

[177] Id. § 802(2)(a). Return to text.

[178] Id. § 802(2)(b). Return to text.

[179] Id. § 701(1). That section literally provides that the partnership must "cause" the dissociated partner's interest to be purchased. That is intended to accommodate a purchase by one or more of the remaining partners or a new investor. See id. § 701, cmt. 2. The buyout price and terms of the buyout may be varied by the partnership agreement. Although § 701 is not made immutable by FRUPA § 103(2), a partnership agreement that provides for a total forfeiture of a partner's interest upon dissociation would probably not be enforced under general law. See Jones v. Chester, 363 S.W.2d 150, 157 (Tex. Ct. App. 1962) (forfeiture of partner's entire interest upon dissolution is unconscionable and unenforceable). In that sense, a buyout is mandatory. Return to text.

[180] FRUPA § 701(2). Return to text.

[181] Id. "Buyout price" is a new term. The drafters intended that its meaning be developed as an independent concept appropriate to the context of a partnership buyout. Traditional terms, such as "fair value" or "fair market value," were not used because they have become terms of art in some contexts. See RUPA § 701, cmt. 3.

Liquidation value is not intended to mean distress sale value. Under either the going concern or liquidation value standard, the hypothetical selling price should be the price that a willing and informed buyer would pay a willing and informed seller, with neither being under any compulsion to deal. Going concern value is intended to negate any notion of a minority discount. Other discounts, such as for a lack of marketability, may be appropriate. Id. Return to text.

[182] See FRUPA § 807(1). Return to text.

[183] The Revised Florida Act does not expressly address whether only known liabilities are taken into account in determining the buyout price or whether unknown liabilities may also be considered. When a partnership's business is actually wound up under Article 8, every partner remains jointly and severally liable for all partnership debts and must contribute the amount necessary to satisfy any partnership obligations that were unknown at the time the business was wound up and the partners' "final" accounts were settled. See FRUPA § 807(4). This contingent liability continues until the statute of limitations has run on all partnership obligations. Thus, in determining the buyout price of a dissociated partner's interest in the partnership, it would seem appropriate to take known contingent liabilities into account in the hypothetical liquidation, and arguably the value of the partner's interest should be discounted for unknown liabilities. It is clear, however, that § 701(2) provides an incentive for the partnership to disclose all known liabilities, however remote or contingent, and an incentive for the dissociating partner to withhold information about possible obligations known only to her. Return to text.

[184] See FRUPA § 602(3), discussed supra note 161 and accompanying text. Return to text.

[185] FRUPA § 701(3). Therefore, the offset might include damages for the dissociating partner's breach of the partnership agreement or of her fiduciary duties or for partnership debts incurred by the partner without actual authority. Under FRUPA, the partnership itself has standing to maintain an action for such relief. See id. § 405(1).

Other amounts then due from the partnership to the dissociating partner may be offset under general law against the buyout price. There is no provision for the acceleration of amounts due to the dissociating partner, however. Thus, repayment of a term loan that is not yet due made to the partner by the partnership is accelerated and offset, but such a loan made by the partner to the partnership is not; the latter need not be repaid until actually due. The partnership agreement or the loan agreement may, of course, provide for the acceleration and setoff of a partner's loan to the partnership. Return to text.

[186] FRUPA § 701(2). The Revised Florida Act § 104(2) provides that the default interest rate is that specified in § 687.01, Florida Statutes, which, in the absence of a contract, is the statutory rate of interest. Section 687.01 sets that rate as the rate provided for in § 55.03. The rate is currently 10% per annum. Return to text.

[187] See FRUPA § 701(5)-(9); RUPA § 701, cmts. 6-10. For a more complete discussion of the buyout procedure, see Reporters' Overview, supra note 38, at 10-13. Return to text.

[188] FRUPA § 701(5). The dissociated partner's written demand triggers the other buyout rules. Return to text.

[189] Id. Return to text.

[190] Id. § 701(7). Return to text.

[191] Id. § 701(9). The action must be brought within 120 days after the partnership has tendered payment of the amount it believes is due or, if no payment is tendered, within one year after the dissociated partner's written demand for payment. Id. Return to text.

[192] Id. Return to text.

[193] Id. § 701(4). A partner's dissociation does not of itself discharge the partner's liability for all partnership obligations incurred while she was a partner. Id. § 703(1). A dissociated partner may also be held personally liable to partnership creditors for debts incurred by the partnership for up to one year after the partner's dissociation. Id. § 703(2). The indemnification required by § 701(4) covers a dissociated partner's lingering liability for both old and new debts.

In principle, the indemnification required by § 701(4) is overinclusive because it protects the dissociated partner from unknown future liabilities that could not have been taken into account in determining the value of her interest but for which she would have been liable for contribution if the partnership were liquidated. Return to text.

[194] Id. § 701(4). A dissociated partner's apparent authority to bind the partnership may linger for up to one year after dissociation. See id. § 702(1), discussed infra notes 195-98 and accompanying text. Return to text.

[195] FRUPA § 702(1) (providing that the partnership is bound by a dissociated partner's act which would have bound it under FRUPA § 301 before the partner's dissociation). For a discussion of § 301, see supra notes 65-69 and accompanying text. Return to text.

[196] RUPA § 702(a). Return to text.

[197] FRUPA § 702(1). The statute is somewhat redundant because a party with notice of the partner's dissociation obviously cannot reasonably believe the dissociated partner is still a partner. "Notice" is defined in FRUPA § 102(2). For clarity, FRUPA § 702(1)(c) further provides that the dissociated partner's apparent authority is cut off if the other party to the transaction is "deemed" to have had either knowledge under § 303(4) by reason of a recorded statement of dissociation or notice under § 704(4) by reason of a filed statement. The effect of a statement of dissociation is discussed infra notes 202-09 and accompanying text. The reference in FRUPA § 702(1)(c) to § 303(5) is in error. The reference should be to § 303(4). Compare RUPA § 702(a)(3). This error will be corrected in the "glitch bill." Return to text.

[198] FRUPA § 702(2). Return to text.

[199] Id. § 703(1). Return to text.

[200] See id. § 703(2). Section 703(2)(c), like § 702(1)(c), contains an incorrect reference to § 303(5). The correct reference is § 303(4). Compare RUPA § 703(b)(3). This error will be corrected in the "glitch bill." Return to text.

[201] RUPA § 703(b). Return to text.

[202] FRUPA § 704(1). A statement of dissociation may be filed even if the partnership has not registered with the Department of State. Id. § 704(2). Return to text.

[203] Id. § 704(3). Return to text.

[204] See id. § 303(4), discussed supra note 90 and accompanying text. Return to text.

[205] See id. § 303(5), discussed supra notes 96-97 and accompanying text. Return to text.

[206] See id. § 702(1), discussed supra notes 195-97 and accompanying text. Return to text.

[207] See id. § 703(2), discussed supra note 200 and accompanying text. Return to text.

[208] Id. § 704(4). The Revised Florida Act § 704(3) provides that a statement of dissociation is also a limitation on the authority of a dissociated partner for the purposes of § 303(5) and (6). Those cross references to § 303(5) and (6) are in error. The correct references are to § 303(3) and (4). Compare RUPA § 704(b). The error will be cured by the "glitch bill." Return to text.

[209] FRUPA § 704(2). Under FRUPA § 105(4), registration with the Department of State is generally a condition precedent to filing statements under FRUPA. See supra note 43 and accompanying text (discussing registration). Return to text.

[210] FRUPA § 803(1). A wrongfully dissociated partner may not participate in the winding up, however. Id. Any partner may, for good cause, request that a court supervise the winding up. Id. Return to text.

[211] See id. §§ 803(1),(3), 807(1). Final distributions to the partners must be in cash, unless otherwise agreed. Id. § 807(1). Return to text.

[212] Id. § 807(2). Return to text.

[213] Id. One of FRUPA's significant contributions is the creation of a default system of partnership accounting. The Revised Florida Act § 401(1) provides that each partner is deemed to have an account that is credited with the amount of the partner's capital contributions and share of the profits. All distributions to the partner and the partner's share of the losses are charged to the account. That establishes a rudimentary system of partner capital accounts, the generally accepted method of partnership accounting. The Revised Florida Act § 807(2) provides for closing out those accounts upon winding up. Return to text.

[214] FRUPA § 807(2). That is only a default rule. The partners may agree that a negative account balance does not reflect a debt to the partnership and need not be repaid in settling the partners' accounts. See RUPA § 807, cmt. 3. Return to text.

[215] FRUPA § 802(1). Return to text.

[216] Thus, after dissolution, the partnership is bound by a partner's act that is appropriate for winding up the business, and each partner is liable to the other partners for her share of any partnership liability incurred in winding up. See id. §§ 804(1), 806(1). Return to text.

[217] Id. § 804(2). That is a slight change from a partner's usual apparent authority under FRUPA § 301(1), which provides that the partnership is bound by a partner's act in the ordinary course of business unless the other party knew or had received a notification of the partner's lack of authority. Under § 804(2), the partnership is not bound by an act inappropriate for winding up if the other party should have known of the dissolution. Return to text.

[218] Id. § 806(2). Return to text.

[219] See id. § 805(1). Any partner who has not wrongfully dissociated may file a statement of dissolution. Id. In Florida, a statement of dissolution may not be filed unless the partnership is registered with the Department of State. See id. § 105(4), discussed supra note 43 and accompanying text. Return to text.

[220] FRUPA § 805(2). The statement must be properly recorded to be a limitation on a partner's authority to transfer real property held in the name of the partnership. Id. § 303(4), discussed supra note 90 and accompanying text. The error in FRUPA § 704(3) is repeated in FRUPA § 805(2). See supra note 208. The cross references to §§ 305(5) and 303(6) are incorrect. They should refer to § 303(3) and (4). Compare RUPA § 805(b). This error will be cured in the "glitch bill." Return to text.

[221] FRUPA § 805(3). Thereafter, a dissolved partnership may file and record a new statement of partnership authority granting authority to one or more of the partners to transfer partnership property during the winding up period (or limiting the authority of a partner to do so). The new statement of partnership authority is binding on the partnership and third parties as provided in FRUPA § 303(3) and (4), whether or not the transaction is appropriate for winding up the partnership business. FRUPA § 805(4). Again, the cross-references to FRUPA § 303(5) and (6) are in error and will be corrected in the "glitch bill." Compare RUPA § 805(d). Return to text.

[222] FRUPA § 908. Return to text.

[223] Id. Some state limited partnership acts authorize the conversion of a limited partnership to a general partnership or the merger of limited and general partnerships, while other states have adopted so-called cross-entity merger and conversion statutes. Those procedures may be followed. See RUPA § 908, cmt. Return to text.

[224] See FRUPA §§ 904(1) (effect of conversion), 906(1) (effect of merger). Return to text.

[225] See id. §§ 902(2) (general to limited partnership), 903(2) (limited to general partnership). Section 902(2) provides a narrow exception for approval of the conversion of a general to a limited partnership by a lesser number or a percentage specified for conversion in the partnership agreement. Section 903(2) expressly provides that the approval of the conversion of a limited to a general partnership must be unanimous, notwithstanding a provision to the contrary in the limited partnership agreement. That safeguard protects a limited partner from exposure to personal liability as a general partner unless the partner clearly and knowingly consents. See RUPA § 903, cmt. Return to text.

[226] The Revised Florida Act § 901 provides several definitions that are unique to Article 9. For example, the term "partner," standing alone, includes both general and limited partners. Id. § 901(4). The term "partnership," as used in Article 9, retains its usual FRUPA definition meaning a partnership formed under FRUPA § 202, that is, a general partnership. FRUPA § 101(4). Return to text.

[227] Id. § 902(6). It is difficult to see how the conversion could be approved by a partner who did not have notice of it. FRUPA § 103(2)(g), itself a nonuniform addition to RUPA's list of immutable rules, further provides that the Florida notice requirement may not be changed in the partnership agreement. That addition to the list of immutable rules is misguided. Article 9 itself accomplishes the purpose by according "safe harbor" validity and certainty only to conversions and mergers where the dictates of Article 9 have been followed. Thus, failure to give the required notice would leave the conversion or merger outside the peaceful waters of Article 9's safe harbor. Return to text.

[228] FRUPA § 902(5). Return to text.

[229] Id. Return to text.

[230] See supra notes 207-08 and accompanying text. Although FRUPA does not authorize the filing of a statement of conversion, the conversion of a general to a limited partnership does not take effect until a certificate of limited partnership is filed. FRUPA § 902(4). Under § 620.108(1)(c), Florida Statutes, the certificate must include the name of each general partner. Return to text.

[231] FRUPA § 902(5). The liability of a limited partner is governed by § 620.129, Florida Statutes. Return to text.

[232] FRUPA § 903(5). Obviously, a partner who remains a general partner of the converted limited partnership is personally liable for all partnership obligations regardless of when they were incurred. Return to text.

[233] Id. § 904(1). Return to text.

[234] RUPA § 904(b)(1). Return to text.

[235] FRUPA § 904(2)(a) ("Title to all personal property owned by the converting partnership or limited partnership remains vested in the converted entity.") (emphasis added). Return to text.

[236] Id. § 904(2)(a) (emphasis added). The amendment was proposed by Senator Harris and adopted by the Senate on May 2, 1995. FLA. S. JOUR. 669 (Reg. Sess. 1995). Return to text.

[237] Memorandum from Pam Johnson, Division of Economic and Demographic Research to Consensus Estimating Conference Principals and Participants (Apr. 7, 1995) (on file with author). Return to text.

[238] See FLA. STAT. § 201.02, .022 (1995). Return to text.

[239] Fla. H.R. Comm. on Fin. & Tax'n, CS for HB 2187 (1995) Staff Analysis 2 (Apr. 30, 1995) (on file with committee). Return to text.

[240] FRUPA § 904(2)(b), (3). Florida has modified the text of FRUPA to parallel the corporate merger provisions of § 607.1106, Florida Statutes, so that FRUPA § 904(2)(b) reads "All liabilities and obligations . . ." and FRUPA § 904(3) reads "A claim existing or action or proceeding pending by or against a converting partnership . . . ." (additions to text boldfaced.) No substantive change is intended. See FRUPA § 904, Fla. cmt. FLORIDA BAR CLE ON PARTNERSHIP LAW, supra note 65, at 144. Return to text.

[241] Id. § 904(4). That admonition would not appear to add anything substantive to the rights of creditors or lienors. Return to text.

[242] Id. § 905(1). Return to text.

[243] Id. § 905(2). A partner may also be "cashed out" under the terms of the plan of merger. Id. § 905(2)(e). The Florida Revised Act then adds specifically: "Each partner of a party to the merger is entitled only to the rights provided in the plan of merger." Id. § 906(1)(f). Presumably, "rights" means "economic rights."

That nonuniform amendment is troubling, however. The Revised Florida Act § 906(5) provides, as does RUPA, that a partner of a party to a merger who does not become a partner of the surviving entity is dissociated from the entity of which she was a partner, and "the surviving entity shall cause such partner's interest in the entity to be purchased" under § 701. Unless otherwise provided in the partnership agreement, that entitles a dissociating partner to the buyout value of her partnership interest, which may be more than provided in the plan of merger. In effect, a dissociating partner's FRUPA § 701 right to a buyout is similar to a dissenting shareholder's appraisal right in a corporate merger. See FLA. STAT. § 607.1302 (1995). The issue is unlikely to arise in the partnership merger context, however, because under FRUPA § 905(3), with limited exceptions, every partner must consent to the plan of merger. In any event, a partner of the surviving entity may always dissociate after the merger, thereby triggering a buyout of her interest in the surviving entity under FRUPA § 701, unless the partnership agreement provides otherwise. See FRUPA §§ 103(a), 601, 602(1), 603(1), and 701, discussed supra notes 26-32, 147-54, 179-81 and accompanying text.

A partner who is dissociated in a merger has apparent authority to bind the partnership under FRUPA § 702 and is personally liable for post-merger obligations under FRUPA § 703 to the same extent as any other dissociated partner. See FRUPA § 906(5). Return to text.

[244] Id. § 905(3)(a). Notwithstanding a provision to the contrary in the partnership agreement, a merger must be approved by all of the partners of a limited partnership, including limited partners, except as otherwise specifically provided by the law of the jurisdiction in which the limited partnership is organized. Id. § 905(3)(b). That is to protect limited partners from exposure to liability as general partners without their clear and knowing consent.

Florida requires that each partner be given prompt notice of the merger, together with a copy of the FRUPA merger provisions. FRUPA § 905(6) cf. id. § 902(6) (notice of conversion). The notice requirement may not be changed in the partnership agreement. Id. § 103(2)(g). The notice requirement is redundant, and its obligatory character is misguided. See supra note 227. Return to text.

[245] FRUPA § 905(2)(c). Return to text.

[246] Id. § 906(3). Return to text.

[247] Id. § 906(3)(a). Return to text.

[248] See id. § 906(1)(c). If the surviving entity becomes insolvent before satisfying a pre-merger obligation of a party to the merger, the general partners of that party must contribute the amount necessary to satisfy that party's obligations. Id. § 906(4). Return to text.

[249] See id. § 905(5). Return to text.

[250] Id. § 906(1)(a). Return to text.

[251] Id. § 906(1)(c). The Revised Florida Act § 906(1)(b)-(e) contain nonuniform changes similar to those in FRUPA §§ 904(2)-(4), § 906(1)(b)-(e) discussed supra notes 235-41 and accompanying text. Return to text.

[252] FRUPA § 906(1)(d). Return to text.

[253] Id. § 906(1)(b); cf. id. § 904(2)(a) (effect of conversion). Return to text.

[254] Compare RUPA § 906(a)(2); see supra notes 237-39 and accompanying text (discussing the reason for the Florida alteration). Return to text.

[255] See FRUPA § 906(1)(b). With respect to personal property, however, FRUPA follows the uniform rule that title to personal property owned by each of the merged partnerships vests in the surviving entity, adding "without reversion or impairment." Id. That qualification is taken from the Florida corporate merger provision. FLA. STAT. § 607.1106(1)(b) (1995). Since, under general law, property conveyed to a corporation no longer reverts to the grantor upon the corporation's dissolution, this qualification has no operative effect and thus is unnecessary. See THOMPSON ON REAL PROPERTY § 22.02, at 263 (Thomas ed. 1994). Return to text.

[256] See FLA. STAT. § 607.1106(1)(b) (1995) (title to real property owned by each party to merger vests in surviving entity by operation of law). Return to text.

[257] FRUPA § 907. Florida adds, as a condition of filing a statement of merger, that any limited partnership that is a party to the merger must be registered with the Department of State. Id. § 907(3). Return to text.

[258] Id. § 907(2). Return to text.

[259] See RUPA § 907(c) (all property except real property), (d) (real property). The Revised Florida Act § 907(4), the Florida counterpart to RUPA § 907(c), applies only to "personal property." To the extent that "personal property" includes intangible property, there is no substantive difference. Return to text.

[260] See FRUPA § 302(1)(a). Return to text.

[261] That is, FRUPA has no counterpart to RUPA § 907(d). Thus, the FRUPA § 302 rules for the transfer of property held in the name of the partnership do not apply to real property of the surviving entity which before the merger was held in the name of another party to the merger unless the chain of title to the property is evidenced by a deed to the surviving entity.

Therefore, the cross reference to subsection (4) in the last line of FRUPA § 907(5), the counterpart to RUPA § 907(e), is correct in limiting the operation of that subsection to personal property. The reference to FRUPA § 105(3) is erroneous, however. The correct reference will be to FRUPA § 105(6). Compare RUPA §§ 105(c), 907(e). It will be corrected in the "glitch bill."

The Revised Florida Act § 907(6) is both redundant and incorrect, being identical to FRUPA § 907(5), except for the additional and inappropriate cross reference to subsection (5) in the last line. The Revised Uniform Act § 907(e), from which FRUPA § 907(6) is derived, refers to subsections (d) and (e), but FRUPA has no counterpart to RUPA § 907(d), since Florida requires a deed to transfer real property to the surviving entity in a merger. The Revised Florida Act § 907(6) will be repealed in the "glitch bill." Return to text.

[262] See FRUPA § 906(1)(b), discussed supra notes 253-55 and accompanying text. Return to text.

[263] 1995, Fla. Laws ch. 95-242, § 13, 2150, 2160. The Act does not affect any action or proceeding commenced or any right accrued before January 1, 1996. Id. § 15 (codified at FLA. STAT. § 620.91 (1995)). For an explanation of the meaning of that provision, see RUPA § 1007, cmt. Return to text.

[264] Accord RUPA § 1006. Return to text.

[265] FLA. STAT. § 620.90(1)(a) (1995). There is an exception for partnerships that are formed after January 1, 1996, to continue the business of a dissolved partnership under FLA. STAT. § 620.76 (1995) (UPA § 41). Return to text.

[266] FLA. STAT. § 620.90(1)(b) (1995). Return to text.

[267] Id. § 620.645(8) (UPA § 18(h)). That section requires the unanimous consent of all the partners to amend the partnership agreement, unless otherwise agreed. Return to text.

[268] Id. § 620.90(3). If before January 1, 1998, an existing partnership elects to be governed by FRUPA, the provisions of the new Act that limit a partner's liability (such as FRUPA § 704(4), which cuts off a dissociated partner's lingering liability 90 days after the filing of a statement of dissociation) are inapplicable to a third party who had done business with the partnership within the preceding year unless that party knows (or has received a notification) of the partnership's election. Id. Return to text.

[269] Id. § 620.90(2). The provisions of the Florida UPA, FLA. STAT. §§ 620.56- .77 (1995), are repealed effective January 1, 1998. 1995, Fla. Laws ch. 95-242, § 25. Return to text.

[270] See 1991 Tex. Gen. Laws, ch. 901, §§ 83-85 (codified at TEX. REV. CIV. STAT. ANN. art. 6132b, § 15, 45-A to -C (West 1995)); Robert W. Hamilton, Registered Limited Liability Partnerships: Present at the Birth (Nearly), 66 U. COLO. L. REV. 1065 (1995). For further background and an analysis of the Texas Act, see R. Dennis Anderson et al., Registered LLPs, 55 TEXAS B.J. 728 (1992). The American Institute of Certified Public Accountants has lobbied extensively for the adoption of LLPs. It is no surprise that all of the so-called "Big Six" accounting firms are now Delaware-registered LLPs. See Hamilton, supra, at 1066. Return to text.

[271] See Kendall L. Houghton, Limited Liability Companies and Partnerships: Multistate Issues Case Study, LLC ADVISOR (CCH), Oct. 1995, at 2, 4. Return to text.

[272] See, e.g., Lee Berton & Joann S. Lublin, Seeking Shelter: Partnership Structure Is Called in Question as Liability Risk Rises, WALL ST. J., June 10, 1992, at A1; Hamilton, supra note 270, at 1065; BROMBERG & RIBSTEIN ON LLPS, supra note 6, § 1.01(a), at 2. Return to text.

[273] See 6 DEL. CODE § 1515(b) (1995); IOWA CODE § 486.15(2) (1995); N.C. GEN. STAT. § 59-45 (1995). See generally ABA GUIDE TO LLPS, supra note 6, § 2; BROMBERG & RIBSTEIN ON LLPS, supra note 6, § 1.02(b), at 15.

A growing number of states, however, shield partners of LLPs from personal liability for all partnership debts and obligations, not just vicarious tort liability. See infra note 289 and accompanying text. Return to text.

[274] See NCCUSL POLICY CHOICES 8 (1994). Return to text.

[275] The ABA Prototype Act was approved by the Partnership Committee at its meeting on August 8, 1995, and has been recommended to the ABA Business Law Section and to NCCUSL. Elizabeth (Bitsy) Hester, of Richmond, Virginia, and Edward (Doc) Merrill, of Walnut Creek, California, co-chaired the working group that authored the ABA Prototype Act. Doc Merrill was also one of the ABA advisors to the RUPA drafting committee. Louis T.M. Conti, of Orlando, was a member of the ABA Prototype Act working group and is an ABA advisor to the NCCUSL drafting committee. Betsy Hester, Working Group RLLPs Completes Prototype Registered Limited Liability Partnership Statutes, PUBOGRAM 3 (ABA Section of Business Law, Chicago, Ill, July 1995). Return to text.

[276] Telephone Interview with John M. McCabe, NCCUSL Legislative Director/Legal Counsel (Nov. 15, 1995). The committee is chaired by Dean Harry J. Haynsworth, IV, of William Mitchell College of Law. The reporter is Professor Carter G. Bishop of Suffolk University Law School. Return to text.

[277] 1995, Fla. Laws ch. 95-242, § 13, 2150, 2152. Return to text.

[278] Id. §§ 1-12, 2150, 2152. The failure to integrate the LLP provisions into FRUPA creates several ambiguities, and it has been suggested that the "glitch bill" amend FRUPA to provide a number of coordinating provisions, along the lines of the ABA Prototype Act. Return to text.

[279] 1995, Fla. Laws ch. 95-242, § 33, 2150, 2192. The provisions of FRUPA became effective on January 1, 1996. Id. § 13, 2150, 2160. Thus, an existing Florida partnership created under the UPA could have registered as an LLP, even before FRUPA became effective. Return to text.

[280] Section 620.786(2), Florida Statutes, provides that a filed statement of registration as an LLP is "notice" that the partnership is an LLP. The significance of such notice is unclear. Omission of the LLP designation (or the equivalent) in the use of the name of the partnership renders any person who participates in the omission, or knowingly acquiesces in it, liable for any indebtedness, damage, or liability "occasioned by the omission," unless the claimant had "actual notice" ("knowledge" per FRUPA), or in the exercise of reasonable diligence should have had actual notice ("notice" per FRUPA), that the partnership was an LLP. FLA. STAT. § 620.784(3) (1995). That would seem to require use of the LLP designation in the partnership's letterhead and on all billing statements, although the exact meaning is not clear. Return to text.

[281] FLA. STAT. § 620.78(1) (1995). The registration statement includes the usual basic information about the partnership, such as its name, principal office, registered Florida office, number of partners, and a brief statement describing its business. Id. There is no requirement that the partnership be formed under Florida law, and thus a foreign partnership could file as a registered LLP under the Florida statute. This may be changed in the "glitch bill." Return to text.

[282] Id. § 620.78(3), (6). Non-resident partners were exempted from the registration fee at the urging of large, national accounting and law firms with fewer than 100 Florida partners. Return to text.

[283] Id. § 620.784(1). Return to text.

[284] Id. § 620.788(1), (2)(c). Only a domestic limited partnership may become an LLP in Florida. Id. Limited liability limited partnerships are being referred to as LLLPs. Return to text.

[285] Id. § 620.7851(1)(a). An LLP may, in lieu of such insurance, provide an irrevocable letter of credit in the minimum coverage amount, issued by an authorized bank or savings association. Id. § 620.7851(1)(b). Return to text.

[286] Id. § 620.7851(2). Return to text.

[287] See, e.g., GA. CODE §§ 14-8-44 to 64 (1995); MINN. STAT. §§ 323.44-.47 (1994); N.Y. PARTNERSHIP LAW §§ 121-1500 to 1503 (McKinney 1995). The ABA Prototype Act does not have an insurance requirement. Return to text.

[288] SEE ABA GUIDE TO LLPS, supra note 6, § 2. Return to text.

[289] See BROMBERG & RIBSTEIN ON LLPS, supra note 6, § 1.01. New York and Minnesota were the first states to adopt so-called full-shield statutes. See id. § 1.01(d). Many of the "second generation" LLP acts adopted in 1995 completely eliminate partners' vicarious liability. In addition to the eleven states cited by Bromberg and Ribstein, id. § 1.10(e), four additional states have now adopted full-shield statutes. See CAL. CORP. CODE § 15015 (West 1995); 1995 Mass. Laws ch. 281 (H.B. 4045); 1995 Or. Laws ch. 689.; PA. CONS. STAT. ANN. §§ 8201-21 (1995).

Section 306(c) of the ABA Prototype Act provides a full corporate-type shield:

A person is not, solely by reason of being a partner, liable, directly or indirectly, including by way of indemnification, contribution, assessment or otherwise, for debts, obligations or liabilities of, or chargeable to, the partnership, whether sounding in tort, contract or otherwise, which are incurred, created or assumed by the partnership while the partnership is a registered limited liability partnership.

Unlike Section 620.782(2)(b), Florida Statutes, and most state LLP statutes, the ABA Prototype Act is silent with respect to a partner's liability for the partner's own malpractice and other misconduct, including the partner's failure to supervise others. Those matters are thus left to general law, in the same manner as the personal liability of an active corporate shareholder.

The uniform LLP amendments to RUPA, soon to be considered by the NCCUSL drafting committee, include full-shield protection. Section 306(c) of the initial proposed draft provides:

Notwithstanding contrary provisions in a partnership agreement existing on the effective date of a registration statement, obligations incurred while a partnership is a registered limited liability partnership, whether arising in contract, tort, or otherwise, are solely the obligations of the registered limited liability partnership. A partner is not personally liable for such an obligation of the registered limited liability partnership solely by reason of being or acting as a partner.

UNIFORM PARTNERSHIP ACT (Discussion Draft Dec. 6, 1995). New Article 11 provides for the registration of a domestic partnership (or limited partnership) as an LLP (or LLLP), and Article 12 provides for the registration of a foreign LLP. The proposed uniform amendments do not contain any insurance requirement.

Limiting the vicarious personal liability of partners runs counter to the economic analysis of some commentators. These commentators suggest that limited liability is not efficient in the context of a closely held enterprise and therefore the shareholders of a close corporation should be held personally liable. See FRANK H. EASTERBROOK & DANIEL R. FISCHEL, THE ECONOMIC STRUCTURE OF CORPORATE LAW 55-56 (1991). This argument is strongest in the case of tort liability. See Henry Hansmann & Reinier Kraakman, Toward Unlimited Shareholder Liability for Corporate Torts, 100 YALE L.J. 1879 (1991). Others argue that limited liability is efficient and should be extended to any form of closely held enterprise. See, e.g., Stephen B. Presser, Thwarting the Killing of the Corporation: Limited Liability, Democracy, and Economics, 87 NW. U. L. REV. 148, 171-72 (1992); Larry E. Ribstein, The Deregulation of Limited Liability and the Death of Partnership, 70 WASH. U. L.Q. 417, 438-50 (1992). One commentator has taken a middle ground. See David W. Leebron, Limited Liability, Tort Victims, and Creditors, 91 COLUM. L. REV. 1565, 1636 (1991) (limited liability conditioned on adequate liability insurance). Whether or not limited liability for closely held business enterprises is economically efficient, t