Fact Pattern 19-2 Maxine and Vince Verbally Agree to Form a Dog Grooming

question 38

Multiple Choice

Fact Pattern 19-2
Maxine and Vince verbally agree to form a dog grooming partnership called "XYZ Grooming." They file nothing with the state. Maxine puts up 80% of the capital needed for the partnership, and Vince supplies 20%. Maxine assumed that Vince would do extra work to account for the small amount of capital contributed by him, but that did not occur. Maxine found herself grooming more than 90% of the animals on her own. Maxine told Vince that he was only entitled to 10% of the profits because he was only doing 10% of the work. Vince disagreed, and a heated argument occurred. Not surprisingly, Maxine and Vince decided to end the partnership. While winding up affairs, Maxine discovered that Vince paid an excessive amount for some dog shampoo. She thought he bought it from a certain supplier just so he could flirt with the receptionist there. She told him that paying for the shampoo was entirely his responsibility because she had not agreed to the purchase. Maxine and Vince also became aware of a lawsuit filed by the owner of a Welsh Pembroke Corgi complaining that the dog developed a skin rash following bathing by Vince in the expensive shampoo he had purchased, and that the owner lost money because the dog could not be entered into shows. Maxine told Vince that the litigation was entirely his responsibility and that she disavowed any liability to the plaintiff.
-Refer to Fact Pattern 19-2.Which of the following is true regarding liability on the lawsuit brought by the Corgi owner?

• A) The partnership is liable and Vince is liable in the event there are insufficient partnership assets to pay any judgment, but Maxine would not be liable on any judgment.
• B) The partnership is liable, and so are both Vince and Maxine if insufficient partnership funds exist to pay any judgment.
• C) Vince is liable on any judgment, but neither Maxine nor XYZ Grooming would be liable.
• D) Since the winding-up process has begun, neither Maxine, Vince, nor XYZ Grooming would be liable on any judgment obtained.

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Definitions:

Liquidated

The process of converting assets into cash or settling debts, often used in the context of closing a business or satisfying creditors.

Creditors

Individuals or entities that lend money or extend credit, and to whom a debt is owed by debtors.

Assumes

Taking something for granted or accepting it as true without verification.

Debts

Amounts of money owed by one party to another, typically as a result of borrowing funds or purchasing goods and services on credit.