Effect of Dissolution of Partnership on Existing Liability of Partners

  1. Law
  2. Georgia Code
  3. Corporations, Partnerships, and Associations
  4. Partnerships
  5. Effect of Dissolution of Partnership on Existing Liability of Partners

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  1. The dissolution of the partnership does not of itself discharge the existing liability of any partner.
  2. A partner is discharged from any existing liability upon dissolution of the partnership by an agreement to that effect between himself, the partnership creditor, and the person or partnership continuing the business; and such agreement may be inferred from the course of dealing between the creditor having knowledge of the dissolution and the person or partnership continuing the business.
  3. Where a person agrees to assume the existing obligations of a dissolved partnership, the partners whose obligations have been assumed shall be discharged from any liability to any creditor of the partnership who knowing of the agreement, and without the consent of the partners whose obligations have been assumed, consents to a material alteration in the nature or time of payment of such obligations.
  4. The individual property of a deceased partner shall be liable for those obligations of the partnership incurred while the deceased partner was a partner and for which he or she was liable under Code Section 14-8-15, but subject to the prior payment of his or her separate debts.

(Code 1981, §14-8-36, enacted by Ga. L. 1984, p. 1439, § 1; Ga. L. 1995, p. 470, § 6.)

Law reviews.

- For survey article on business associations, see 34 Mercer L. Rev. 13 (1982).

COMMENT

Note to Uniform Partnership Act This section provides that a partner or his estate remains personally liable after dissolution for pre-dissolution partnership debts unless the creditor expressly or impliedly agrees to discharge the partner or, knowing of an assumption by the successor owners, consents to alteration of the obligation. Individual creditors of a deceased partner have priority over partnership creditors as to the deceased's individual property.

Prior Georgia Law Prior O.C.G.A. § 14-8-92 provided, consistently with subsection (a), that dissolution does not absolve partners' liabilities "for . . . transactions that are past." Georgia case law is consistent with subsections (b) and (c). See Venable & Heyman v. Stevens, 94 Ga. 281, 21 S.E. 516 (1894) (subsection (b)); Preston v. Gerrard, 120 Ga. 689, 48 S.E. 118 (1904) (subsection (c)). Prior O.C.G.A. § 14-8-69 was inconsistent with subsection (d) in according individual creditors of the deceased partner only a sufficient priority as to assets of the estate vis a vis partnership creditors to equalize total payments to the two groups of creditors.

Official UPA This section is the same as the official version except for the addition of the clause following "agreement" in subsection (c). This change is consistent with the rule stated in the prior Georgia case law. See Preston v. Garrard, supra.

Cross-References Definition of "knowledge": § 14-8-3(a). The rights of pre-dissolution creditors against partnership property and successor owners: §§ 14-8-17 and14-8-41. Rights of post-dissolution creditors: § 14-8-35.

JUDICIAL DECISIONS

Editor's notes.

- In light of the similarity of the statutory provisions, decisions under former Code 1882, § 1896; former Civil Code 1910, §§ 3162, 3164, 3176, 3178, and 3180; and former Code 1933, § 75-109, in effect prior to the 1984 repeal and reenactment of this chapter, have been included in the annotations for this Code section.

Dissolution by operation of law ends all executory contracts. Lesser v. Gray, 8 Ga. App. 605, 70 S.E. 104 (1911), aff'd, 236 U.S. 70, 35 S. Ct. 227, 59 L. Ed. 471 (1915) (decided under former Civil Code 1910).

Dissolution not absolute until complete winding up.

- "Dissolution" of a partnership caused by the death of a partner is not absolute until the partnership becomes extinct by a complete winding up of all its affairs by the surviving partner or partners. Ledbetter v. Farrar Lumber Co., 177 Ga. 779, 171 S.E. 374 (1933) (decided under former Civil Code 1910, §§ 3162, 3176, 3178).

Partnership continues until all past debts of partnership, or those necessarily assumed in winding up of the partnership, are extinguished. Ledbetter v. Farrar Lumber Co., 177 Ga. 779, 171 S.E. 374 (1933) (decided under former Civil Code 1910, §§ 3162, 3176, 3178).

Liability for past transactions.

- Under former Code 1882, § 1896, the dissolution of a partnership does not absolve the partners from liability upon past transactions. First Nat'l Bank v. Cody, 93 Ga. 127, 19 S.E. 831 (1894) (decided under former Code 1882, § 1896).

Liability for tort committed by surviving partner.

- When conversion is committed by a surviving partner, whose firm received goods for storage, the firm would not be liable for such tort by the surviving partner. Blanchard v. Farmers State Bank, 158 Ga. 780, 124 S.E. 695 (1924) (decided under former Civil Code 1910, § 3164).

Partner may be relieved of liability by express dissent before dissolution.

- Even before dissolution of a partnership and notice to creditors, a partner may relieve oneself of liability for future transactions by "express notice of dissent to the person about to be contracted with," although otherwise, under former Civil Code 1910, § 3180 (formerly § 14-8-61), "all the partners are bound by the acts of any one, within the legitimate business of the partnership." McMillan v. Gilmour, 49 Ga. App. 400, 175 S.E. 672 (1934) (decided under former Civil Code 1910, § 3180).

RESEARCH REFERENCES

Am. Jur. 2d.

- 59A Am. Jur. 2d, Partnership, § 573 et seq.

C.J.S.

- 68 C.J.S., Partnership, § 427 et seq.

ALR.

- Liability of former partners as such in respect of transactions subsequent to incorporation of their business, 89 A.L.R. 986.


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