Jones and Ray formed a partnership on January 1, known as JR Construction Co., to engage in the Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 construction business, each partner owning a one-half interest. On February 10, while conducting partnership business, Jones negligently injured Ware, who brought an action against Jones, Ray, and JR Construction Co. and obtained judgment for $250,000 against them on March 1. On April 15, Muir joined the partnership by contributing $100,000 cash, and by agreement, each partner was entitled to a one-third interest. In July, the partners agreed to purchase new construction equipment for the partnership, and Muir was authorized to obtain a loan from XYZ Bank in the partnership name for $200,000 to finance the purchase. On July 10, Muir signed a $200,000 note on behalf of the partnership, and the equipment was purchased. In November, the partnership was in financial difficulty, its total assets amounting to $50,000. The note was in default, with a balance of $150,000 owing to XYZ Bank. Muir has substantial resources, while Jones and Ray each individually have assets of $20,000. What is the extent of Muir’s personal liability and the personal liability of Jones and Ray as to (a) the judgment obtained by Ware and (b) the debt owing to XYZ Bank?

Business Its Legal Ethical & Global Environment

10th Edition

ISBN:9781305224414

Author:JENNINGS

Publisher:JENNINGS

Chapter18: Governance And Structure: Forms Of Doing Business

Section: Chapter Questions

Problem 5QAP

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Jones and Ray formed a partnership on January 1, known as JR Construction Co., to engage in the Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203 construction business, each partner owning a one-half interest. On February 10, while conducting partnership business, Jones negligently injured Ware, who brought an action against Jones, Ray, and JR Construction Co. and obtained judgment for $250,000 against them on March 1. On April 15, Muir joined the partnership by contributing $100,000 cash, and by agreement, each partner was entitled to a one-third interest. In July, the partners agreed to purchase new construction equipment for the partnership, and Muir was authorized to obtain a loan from XYZ Bank in the partnership name for $200,000 to finance the purchase. On July 10, Muir signed a $200,000 note on behalf of the partnership, and the equipment was purchased. In November, the partnership was in financial difficulty, its total assets amounting to $50,000. The note was in default, with a balance of $150,000 owing to XYZ Bank. Muir has substantial resources, while Jones and Ray each individually have assets of $20,000. What is the extent of Muir’s personal liability and the personal liability of Jones and Ray as to (a) the judgment obtained by Ware and (b) the debt owing to XYZ Bank?

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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