John, Samuel, and Jim Are General Partners in the Development

question 36

Multiple Choice

John, Samuel, and Jim are general partners in the development of an electric car. Jim pours all his money into the project, but it never seems to work out. Eventually the partnership and Jim cannot meet their daily obligations, and the partnership is dissolved. Jim files for bankruptcy. If the partnership assets are insufficient to pay all claims against the partnership:

• A) the trustee in bankruptcy must seek recovery of the deficiency first from John and Samuel.
• B) Jim is released from liability because of the bankruptcy proceedings.
• C) Jim's personal assets are not available for the partnership debts because he has limited liability.
• D) the bankruptcy court must follow the doctrine of marshaling of assets.

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Definitions:

Account

A record summarizing the financial transactions pertaining to a specific period or purpose, such as savings or checking in a bank.

Agency by Ratification

A situation where actions taken by a person who is not officially an agent are approved and accepted by the principal after the fact, thereby creating an agency relationship.

Affirms

To declare something to be true, confirm, or ratify, especially in a legal context.

Scope of Authority

The range or extent of power given to an individual or entity to act on behalf of another or make decisions.