Before we go in depth about tort liability, let’s first understand exactly what is “Tort.” According to Wikipedia, “Tort law is a body of law that addresses, and provides remedies for, civil wrongs not arising out of contractual obligations. A person who suffers legal damages may be able to use tort law to receive compensation from someone who is legally responsible, or liable, for those injuries.”
When dealing with a partnership, tort law principles could be applied to it. In other words, a partnership is liable for the torts of its partners only if the partners were acting within the scope of the partnership business.
As an example, let’s assume that you are an employee of ABC, LLP, a regional public accounting firm that requires you to travel to your client’s location for the year-end audit. After work, you realize that your car has been crashed into and badly damaged. Who do you think will be liable for your car’s repair? In this case, due to the fact that the accident took place while working for ABC, LLP, the firm should be able to reimburse you for any damages incurred.
In the above example, we are not including an insurance claim to make things simple. But obviously your insurance is your primary source to repair your car and your firm should be able to reimburse you or pay you upfront for any damages.
Something similar to this happened to us when I worked for E&Y and the partner took the audit team out for lunch. When we were done, we realized his car had been hit by a guy with a pickup truck that was trying to back into the spot in front of us. Luckily for this partner, the guy waited for us to finish and told us what had happened and that he would pay. But not everyone that hits your car would do the same.
The below “car wrecked” example should be helpful to you in determining negligence:
|
Scenario |
Negligence Prediction |
| Personal car + Personal duties | Partnership is not liable |
| Partnership car + Personal duties | Partnership is not liable |
| Partnership car + Partnership duties | Partnership is liable |
| Personal car + Partnership duties | Partnership is liable if the damages take place while doing what’s required of you by the partnership as your regular course of business. |
Additionally, a partnership would be liable for intentional torts and misapplication of funds. If you knowingly commit a tort, you’ll be held accountable as well as if you use a firm’s funds the wrong way for the wrong reasons.
According to RUPA, a partner may be sued by a creditor and held completely responsible without suing the other partners. Also, contract and tort liability are normally joint and several. Therefore, a partnership’s assets must be exhausted before the creditor digs into the personal assets of an individual partner or partners.
When someone joins a partnership, the new partner will be liable for subsequent incurred debts. However, she will only be responsible for preexisting debts up to her partner contribution amount.
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