If two or more people have decided to carry on a business together, they face the question which type of business association to choose. Since every sophisticated legal order furnishes a set of national business associations, traditionally parties, familiar with their own legal system, opted for one of those. However, the increase of cross-border commerce has broadened parties’ and their legal advisors’ perspective and has made them aware of the existence of alternative types of business associations under foreign law. At the same time, a gradual transition from the real seat theory to the incorporation theory in international company law facilitates the extraterritorial use of national business associations. Besides, the predominantly mandatory nature of business associations law in respect of external relationships with third parties can be a strong incentive to employ a foreign type of business association that differs from an otherwise comparable domestic type in a significant matter.
The form of liability for the debts of a business association is such a matter of crucial importance and of mandatory nature alike. Existence and extent of this liability define the risk a member incurs by its participation. Even minor variances in this risk can affect the choice of a business association.
The modern trend is to avoid personal liability as far as possible, either by choosing a corporate form, or a particular partnership form providing for limited liability. Nevertheless, it is still conceivable that the founders of a business would be willing to promote the impression of personal liability in order to attract business. This limits their choice to all kinds of internationally available “partnerships,” the concept of which, in contrast to the concept of “corporations,” is widely associated with personal liability.
However, personal liability need not equal personal liability, and thus, in spite of likewise representing the general idea of personal liability, partners might consider the “partnership” of one legal order preferable to the “partnership” of another legal order. This hypothesis prompts a comparative analysis of the liability in a general partnership under UPA and RUPA and its equivalent under German law.
Table of Contents
A. Introduction
B. GbR and OHG
C. Creation of the Obligation During Membership
I. Contractual Obligations
1. UPA
2. RUPA
3. HGB
4. Conclusion
II. Tortious and Breach of Trust Obligations
1. UPA
2. RUPA
3. HGB
4. Conclusion
D. Creation of the Obligation Before Membership
1. UPA
2. RUPA
3. HGB
4. Conclusion
E. Creation of the Obligation After Membership Ceases
1. UPA
2. RUPA
3. HGB
4. Conclusion
F. Dissociation and Partner’s Existing Liability
1. UPA
2. RUPA
3. HGB
4. Conclusion
G. Conclusion and Critique
Objectives and Key Themes
This paper examines the legal form of personal liability in general partnerships, providing a comparative analysis between U.S. law (under UPA and RUPA) and German law (specifically the OHG and GbR). The core research question addresses which liability regime offers the most effective balance between protecting partners and safeguarding the interests of third-party creditors.
- Comparative analysis of U.S. Uniform Partnership Act (UPA) and Revised Uniform Partnership Act (RUPA) versus German commercial law (HGB/BGB).
- Legal distinctions regarding contractual versus tortious obligations.
- Liability of incoming partners for existing partnership debts.
- Liability of dissociated partners for obligations incurred after or before their departure.
- Normative assessment of partnership liability systems and the "ideal" balance between creditor protection and partner autonomy.
Excerpt from the Book
C. Creation of the Obligation During Membership
The analysis starts with the legal situation of simultaneity between the membership of a partner and the creation of a partnership obligation. In addition, the concept of UPA requires to distinguish between contractual obligations and tortious and breach of trust obligations.
I. Contractual Obligations
1. UPA
Under § 15 (b) UPA all partners are liable jointly for contractual obligations of the partnership; but any partner may enter into a separate obligation to perform a partnership contract. Joint liability is an ambiguous term, the understanding of which depends on the tradition of the respective legal system. In common law systems like the United States it is interpreted in contrast to several liability. “Several liability” means that there is a separate cause of action against each individual partner or any combination of partners. Consequently, “joint liability” refers to the requirement to bring suit against all obligors jointly. However, as the second sentence of the provision reveals, a several liability in the sense of an independent cause of action can be established by agreement. Then, in essence, liability becomes joint and several. This discussion of joint liability also shows that under UPA, joint liability has a procedural meaning, which does not directly affect the substantive character of a debt.
Summary of Chapters
A. Introduction: Outlines the significance of business association choices and the central role of personal liability in defining participant risk.
B. GbR and OHG: Differentiates the German partnership forms and establishes the applicability of OHG liability provisions to the GbR.
C. Creation of the Obligation During Membership: Analyzes the liability structures for contractual and tortious obligations under UPA, RUPA, and HGB.
D. Creation of the Obligation Before Membership: Discusses the liability of new partners for debts incurred prior to their admission.
E. Creation of the Obligation After Membership Ceases: Evaluates the liability of partners for new obligations incurred after their dissociation from the partnership.
F. Dissociation and Partner’s Existing Liability: Investigates whether and how the departure of a partner affects their responsibility for obligations created before dissociation.
G. Conclusion and Critique: Provides a final assessment of the liability regimes and suggests criteria for an "ideal" system balancing creditor and partner interests.
Keywords
Personal Liability, General Partnership, UPA, RUPA, German Law, HGB, Contractual Obligations, Tortious Obligations, Dissociation, Joint and Several Liability, Primary Liability, Subsidiary Liability, Business Associations, Creditor Protection, Commercial Register
Frequently Asked Questions
What is the core subject of this paper?
The paper provides a comparative legal analysis of personal liability for partnership debts, contrasting the regulatory frameworks of the United States (UPA/RUPA) and Germany (HGB/GbR).
What are the primary themes discussed?
The study covers liability creation during membership, liability for obligations incurred before or after joining/leaving a partnership, and the distinctions between contractual and tortious claims.
What is the primary objective of this research?
The goal is to determine which legal system provides the most balanced approach for partners' liability and to explore the components of an "ideal" liability model.
Which scientific methodology is employed?
The author uses a comparative legal approach, examining statutory provisions and case law to analyze procedural and substantive differences between U.S. and German partnership law.
What does the main body of the work cover?
It covers four distinct phases of partnership liability: creation during membership, obligations prior to admission, post-dissociation obligations, and existing liabilities upon exit.
Which keywords characterize this work?
Key terms include Personal Liability, General Partnership, UPA, RUPA, HGB, Joint and Several Liability, and Commercial Register.
How does the U.S. approach to dissociation differ from the German one?
The U.S. systems generally rely on implied creditor assent for release, whereas German law uses a formal registration and promulgation process to provide legal certainty regarding liability.
What is the significance of the "procedural joinder requirement"?
The author critiques this requirement because it neglects the entity nature of a partnership and places an excessive burden on creditors trying to pursue their legal rights.
- Arbeit zitieren
- Michael Müller (Autor:in), 2011, Personal Liability in a Partnership , München, GRIN Verlag, https://www.hausarbeiten.de/document/179725
