A man sued a partnership for making misleading representations in negotiating a franchise agreement and selling a coffee shop operation, after it became apparent that a business license could not be obtained. At some point, the partners sold their share of the partnership to a third party.
The court ruled that only the original partners are liable to the person who was misled, but not the partner who joined after the events. Each partner is liable, together with the other partners and separately, for all the obligations that the partnership owed while being a partner, with the partner’s liability not ending even if after the debt was incurred his membership in the partnership ended. On the other hand, someone who was admitted as a partner to an existing partnership will not be liable to its creditors for what was done before he became a partner. Here, the agreement was made in the period before the partners sold their share in the partnership to a third party. On the other hand, the partner to whom the shares of the original partners were sold had no connection to the transaction, and therefore only the original partners are liable to the person who was misled.
