D and E are capitalist partners while F is an industrial partner in their restaurant business. Later, F starts cellphone-related business. Has F any liability under the circumstances?

D and E are capitalist partners while F is an industrial partner in their restaurant business. Later, F starts cellphone-related business. Has F any liability under the circumstances?

• A. No, since his other business is not competing with the partnership
• B. Yes, because he cannot engage in business for himself always
• C. Yes, because he is precluded by law to engage in any other business, except if there is stipulation allowing him
• D. No, there is no showing that the partnership's business is prejudiced

Answer: (C)

The main idea is the duty of loyalty that every partner owes to the partnership. Partners must avoid conflicts of interest and refrain from engaging in other ventures that could compete with or divert opportunities away from the partnership unless the partnership agreement explicitly allows it. An industrial partner like F contributes value in labor, and starting a cellphone business could compete with or pull resources and attention away from the restaurant business. Without a stipulation permitting such outside business, this violates his fiduciary duty, exposing him to liability to the partnership for breach of that duty. If the partnership agreement does allow it, then he would not face liability on that ground.

The main idea is the duty of loyalty that every partner owes to the partnership. Partners must avoid conflicts of interest and refrain from engaging in other ventures that could compete with or divert opportunities away from the partnership unless the partnership agreement explicitly allows it. An industrial partner like F contributes value in labor, and starting a cellphone business could compete with or pull resources and attention away from the restaurant business. Without a stipulation permitting such outside business, this violates his fiduciary duty, exposing him to liability to the partnership for breach of that duty. If the partnership agreement does allow it, then he would not face liability on that ground.