Which of the following is not true of joint and several liability in a general partnership?

Overview

When two or more parties are jointly and severally liable for a tortious act, each party is independently liable for the full extent of the injuries stemming from the tortious act. Thus, if a plaintiff wins a money judgment against the parties collectively, the plaintiff may collect the full value of the judgment from any one of them. That party may then seek contribution from the other wrong-doers. This concept of choosing the defendant(s) from whom to collect damages is called  the law of indivisible injury.  

The issue of joint and several liability is often involved in "toxic torts" claims, such as cases involving asbestos-related mesothelioma. This is because mesothelioma can be caused by exposure to asbestos, but often times workers exposed to asbestos had faced exposure in multiple jobs on multiple job sites, and so it is difficult to pick a single tortfeasor responsible for the resulting mesothelioma. 

Example

For example suppose that A, B, and C negligently injure V. V successfully sues A, B, and C, for $1,000,000. If the court used a joint and several liability system, V could demand that A pay V the full $1,000,000. A could them demand contribution from B and C. However, if B or C could not pay, A would be stuck paying the full $1,000,000.

Risk Reduction and Liability Reduction

Joint and several liability reduces plaintiffs' risk that one or more defendants are judgment-proof by shifting that risk onto the other defendants. Only if all defendants are judgment-proof will a plaintiff be unable to recover anything. However, this system can cause inequities, particularly where a relatively blameless defendant is forced to bear the financial burden of an incredibly guilty co-defendant's insolvency.

The court in Ford Motor v. Boomer (2003) investigated the issue of liability reduction, and found that when two tortfeasors are liable for one incident (i.e. two negligent drivers were involved in a car accident), but the court cannot determine which tortfeasor is more responsible and to what degree, then the the court may lessen the liability of both or either tortfeasor. 

Other Varieties

There is another type of joint and several liability called market share liability. This doctrine is invoked when a good causes an injury, and there are multiple manufacturers of the good. When a court cannot determine which manufacturer created the precise good which caused the harm, the manufacturers will be held proportionately liable in accordance with their market share in the market of the good. Sindell v. Abbott Laboratories (1980) helped to develop this doctrine.

Another type of joint and several liability is called the doctrine of alternative liability. Summers v Tice (1948) contributed to the doctrine when the court found that under the doctrine of alternative liability, two independent tortfeasors may each be held liable for the full extent of the plaintiff's injuries if it is impossible to tell which tortfeasor caused the plaintiff's injuries. The burden of proof will shift to the defendants to either absolve themselves of liability or apportion the damages between themselves. If the defendants, however, are acting in concert with each other, then the doctrine would not apply, because then both Ds would be responsible regardless of who pulled the trigger

A third variety is typically referred to as either "preempted causes" or "doomed plaintiffs." Dillon v. Twin State Gas & Electric Co (1932) helped to develop this doctrine. In the case, a boy was playing on a bridge when he lost his balance and fell from the bridge; but he was fatally electrocuted when he tried to steady himself by grabbing a nearby high voltage wire. The court found that because the boy would have probably died anyway in falling from the bridge, the defendant (electrical company which maintained the electrical wires) should not be held liable for any damages except those that would compensate for the increase in boy’s suffering due to electrocution.

What Is a General Partnership?

A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business. In a general partnership, partners agree to unlimited liability, meaning liabilities are not capped and can be paid through the seizure of an owner's assets. Furthermore, any partner may be sued for the business's debts.

Each is responsible for their personal tax liabilities—including partnership earnings—on their income tax returns as taxes do not flow through the general partnership.

Understanding General Partnerships

General partnerships offer participants the flexibility to structure their businesses however they see fit, giving partners the ability to control operations more closely. This allows for more swift and decisive management as compared to corporations, which must often slog through multiple levels of bureaucracy and red tape, further complicating and slowing down the implementation of new ideas.

A general partnership must satisfy the following conditions:

• The partnership must minimally include two people.
• All partners must agree to any liability that their partnership may incur.
• The partnership should ideally be memorialized in a formal written partnership agreement, though oral agreements are valid.

Key Takeaways

• A general partnership is a business made up of two or more partners, each sharing the business's debts, liabilities, and assets.
• Partners assume unlimited liability, potentially subjecting their personal assets to seizure if the partnership becomes insolvent.
• Partners should create a written partnership agreement.
• General partnerships are less expensive to form compared to a corporation.

General Partnership Features

In a general partnership, each partner has the agency to unilaterally enter into binding agreements, contracts, or business deals, and all other partners are consequently obligated to adhere to those terms. Not surprisingly, such activities may lead to disagreements; as a result, many successful general partnerships build conflict resolution mechanisms into their partnership agreements.

In some cases, the partners agree only to proceed with major decisions if there's either a complete consensus or a majority vote. In other cases, the partners designate non-partner appointees to manage the partnerships, similar to a company's board of directors. In any case, a broad agreement is essential because when all partners have unlimited liability, even innocent players can be fiscally on the hook when the other partners commit inappropriate or illegal actions.

General partnerships typically dissolve when one partner dies, becomes disabled, or exits the partnership. Provisions may be written into an agreement that provides directives for moving forward during these situations. For example, the agreement may stipulate that the deceased partner's interest is transferred to the surviving partners or a successor.

Benefits of General Partnership

The cost of creating a general partnership is less expensive than setting up a corporation or a limited liability partnership like an LLC. General partnerships likewise involve substantially less paperwork. Case in point: In the United States, filing limited partnership paperwork with a state is generally not required, though certain registration forms, permits, and licenses may be necessary at the local level.

Which of the following is not true about the partnership?

What is true about general partnership?

What are the liabilities of a general partnership?

Which of the following is not a characteristic of a general partnership?