REVISION OF THE LAW OF PARTNERSHIP IN THE UNITED STATES OF AMERICA: A COMMENDABLE PRECEDENT?

Citation: 114 S. African L.J. 684 1997

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REVISION OF THE LAW OFPARTNERSHIP IN THE UNITED STATES

OF AMERICA: A COMMENDABLEPRECEDENT?

JOHAN HENNING*

Professor of Law, Old Mutual Chair of Entrepreneurial Law, Head of the Department ofMercantile Law and of the Department of Roman Law, Legal History and ComparativeLaw, and Director of the Centre of Business Law, Faculty of Law, University of the

Orange Free State

ELIZABETH SNYMANt

Lecturer-Researcher, Centre of Business Law, Faculty of Law, University of the OrangeFree State

1 INTRODUCTION

There can be little doubt that the law of partnership is one of the mostneglected areas of South African entrepreneurial law, especially as far asproactive legal development is concerned. For present purposes it issufficient to point to a few manifestations of this neglect.

As far as research is concerned, the Discipline Oriented Main Com-mittee for Legal Science of the Human Sciences Research Councilconcluded that the main emphasis is on company law, while little is donein the sphere of the law of partnership.' A proposal that provisionsrelating to the incorporation of professional and semi-professional groupsshould not be accommodated in the Companies Act, but rather in aseparate Incorporated Partnerships Act, was rejected by the Van Wyk deVries Commission with the comment that the law of partnership felloutside the scope of its mandate.2 In the 1982 memorandum on the needfor a new legal form for small businesses, the close corporation, thenecessity of a 'comprehensive modern Partnership Act was acknow-ledged, but described as a problem to be addressed at a later date. 3 Hence,

* Bluris LLB LLD (UOFS); Attorney.

t Blunis LLB LLM LLM (UOFS); Advocate.' HSRC (1985) 15 Research Bulletin 32. See in generalJ J Henning 'Feicius-Boxelius Tractus

de Societate--'n miskende vennootskapsregtelike kenbron van die ius commune' (1992) 55THRHR 446 at 451.

2 Main Report of the Commission of Enquiry into the Companies Act RP 45/1970 para 52.01.3 SJ Naud6 'The need for a new legal form for small business' (1982) 4 Modem Business

Law 5.

REVISION OF THE LAW OF PARTNERSHIP IN THE USA

in the drafting of the Close Corporations Act of 19844 certain provisionsof the English Partnership Act of 1890 had to be used as guidance. Thestatement by the Margo Commission on Taxation that no representationswere received in respect of the taxation of partnerships, and that theCommission had to take the initiative itself, is also symptomatic. 5 It istherefore not surprising that the need for a modem Partnership Act hasbeen emphasized repeatedly, inter alia by the Standing Advisory Com-mittee on Company Law in 19896 and by the International Conferenceon the Reform of South African Corporate Law hosted by theCo-ordinating Research Institute for Corporate Law 7 in 1993.8 This direneed is also frankly acknowledged by the proponents of other morepopular forms of business enterprise. 9

In contradistinction to the state of affairs in South Africa, the compre-hensive and innovative revision of the Uniform Partnership Act of191410 (UPA) in the United States, initiated by the National Conferenceof Commissioners on Uniform State Laws11 (NCCUSL) in 1986,resulted in the acceptance of the Uniform Partnership Acts of 1992, 1993and 1994,12 (the RUPA-the Revised Uniform Partnership Act) andtheir enactment by various states. 1 3 One of the most important issueswhich had to be decided was whether a partnership should be considereda separate legal entity or merely as an aggregate of its members. TheNCCUSL essentially decided to move the law of partnership much closerto the entity model, while retaining the aggregate approach in certainexceptional cases. As a result, numerous other aspects had to be dealt with,for example fiduciary duties, agency, and partnership property.

In this contribution the salient aspects of the RUPA are briefly dis-cussed, in view of the repeated appeals for a comprehensive, modem andinnovative South African Partnership Act.

4 Act 69 of 1984. SeeJ j Henning 'Die Aanspreeklikheid van 'n Beslote Korporasie vir dieHandelinge van 'n Lid en Enkele Ander Aspekte van Eksterne Verhoudings' (1984) 9 Tydskrifvir Regswetenskap 155 at 157.

5 Report of the Commission of Inquiry into the Tax Structure of the Republic of South Africa RP34/87 para 11.44.

6 See H S Cilliers, M L Benade, JJ Henning & J J du Plessis Corporate Law 2 ed (1992) 22.7 A standing subcommittee of the Standing Advisory Committee on Company Law.8 j j Henning, P A Delport & M M Katz (eds) The Future Development of South African

Corporate Law (1994) 1 Corporate Law Development Series 181-98.9 Cf J J Henning & H J Delport 'Partnership' in W Ajoubert (ed) The Law of South Africa

volume 19 First Reissue (1997) para 263; Naud6 op cit note 3 at 13.10 References to the Uniform Partnership Act ('UPA') are to the 1914 version, which has

been introduced, in some or other form, by all the states except Louisiana." As indicated, hereinafter NCCUSL.12 Although it is not technically correct, the Uniform Partnership Acts of 1992, 1993 and

1994 will collectively, for the sake of brevity, be referred to as the 'RUPA'.13 It is essential to bear in mind that the NCCUSL makes recommendations and that the

states may then adopt the legislation concerned. But the states are under no obligation to adoptthe NCCUSL's recommendations. See P EJ Brooks 'Uniform Company Law in Federal Statesand Economic Communities' (1993) 20 Transactions of the Centre for Business Law 9.

686 THE SOUTH AFRICAN LAW JOURNAL

2 HISTORICAL BACKGROUND

The historical development of the ordinary partnership in Americanlaw was influenced by two Acts in particular-the UPA and the RUPA.

In 1902 the NCCUSL initiated the drafting of partnership legisla-tion.14 The first two legislative proposals were prepared by James BarrAmes. Upon the death of Ames in 1910, William Draper Lewis took overand completed the work. i - In 1914, a draft Bill was submitted to theNCCUSL, which was adopted as the Uniform Partnership Act on14 October 1914.16 In 1915 the American Bar Association accepted theUPA17 and in the same year Pennsylvania became the first state to adoptthe UPA. 18

The provisions of the UPA may be viewed as a codification of the basicrules and principles applicable during the period in which it was drafted. 19

The UPA did not, however, attempt to regulate all aspects of the law ofpartnership, 20 nor did it introduce new fundamental principles. Wherethe UPA did not make provision for specific matters, the 'rules of law andequity, including the law merchant' found application. 21

American legal literature appears to assess the UPA in various ways.Blackmar views the UPA as a codification of the common law wherebythe law of partnership was simplified and refined. 22 According to Henn,

14 Harold Gill Reuschlein & William A Gregory The Law of Agency and Partnership 2 ed(1990) 248.

15 Harry G Henn Teaching Materials: Agency, Partnership and Other Unincorporated BusinessEnterprises 2 ed (1985) 391; Reuschlein & Gregory op cit note 14 at 248-9; DonaldJ Weidner'A Perspective to Reconsider Partnership Law' (1988) 16 Florida State Univ LR 3.

16 Justin H Folkerth 'The Uniform Partnership Act-Its Effect upon Ohio Probate Practice'(1951) 24 Ohio BarJournal 532; Reuschlein & Gregory op cit note 14 at 516; Larry E Ribstein'A Mid-Term Assessment of the Project to Revise the Uniform Partnership Act' (1990) 46 TheBusiness Lawyer 111 at 113; Donald J Weidner 'Three Policy Decisions Animate Revision of theUniform Partnership Act' (1991) 46 The Business Lawyer 427; Sidney M Wolf The Accountant'sGuide to Corporation, Partnership, and Agency Law (1989) 123; John W Wyatt & Madie B WyattBusiness Law Principles and Cases 3 ed (1966) 509.

17James C Logan 'Creditors Examine Missouri's New Partnership Law' (1949-50) 18University of Kansas City LR 51. 18 Reuschlein & Gregory op cit note 14 at 249.

19 State Street Trust Co v Hall 41 NE 2d 30 (Supreme Judicial Court of Massachusetts 1942);Howard M Rossen & Wilton S Sogg Smith's Review of Agency and Partnership 2 ed (1970) 120;Wyatt & Wyatt op cit note 16 at 509. Charles B Blackmar 'Partnership Precedents in aCorporate Setting-Exit from the Close Corporation' (1982) 7 (Winter)Journal of CorporationLaw 237 at 240 sees the UPA as 'a reliable restatement' of the 'common law of partnership'.However, Alan R Bromberg Crane and Bromberg on Partnership (1968) 13 does not agree:

'Courts and lawyers are fond of saying that the U.P.A. merely codifies the common law. Thiseasy assertion arose with the Act itself, no doubt to facilitate its passage by legislatures and itsacceptance by bench and bar. The assertion is sometimes used as an excuse for ignoring theAct and invoking inconsistent prior precedent. This is an old common law technique forundermining statutes and has little to recommend it. In many respects, depending on ajurisdiction's version of the common law, the Act does merely codify. But in many others,particularly those centering on property and creditor's rights, it makes major changes. ...20 Matthews v Phoenix Mutual Iafe Insurance Co 316 F Supp 1076 (US District Court W D

Pennsylvania 1970) at 1079; Reuschlein & Gregory op cit note 14 at 262.21 Staszak v Romanik 690 F 2d 578 (6th Cir 1982) at 583; Reuschlein & Gregory op cit note

14 at 262. 22 Blackmar op cit note 19 at 240.


the UPA is based on the English Partnership Act of 1890.23 AlthoughHenn cannot be supported unconditionally, there is no denying that somecharacteristics of the UPA are in fact derived from the English Act. 24

The UJPA was initially adopted by approximately three-quarters of thestates in the USA. 25 By 1984, the Act had been adopted by all the statesexcept Louisiana. 26

After 1914 very few amendments were made to the UPA. 27 In January1986, however, extensive revisions were recommended in the UniformPartnership Act Revision Subcommittee Report of the American Bar AssociationCommittee.28 In August 1986 the NCCUSL resolved to revise the UPAcompletely. 29 This followed on the amendments to the UPA introducedby Georgia. 30 In 1987, the NCCUSL appointed the Drafting Committeeto Revise the Uniform Partnership Act.31 The revision committee metfor the first time in January 1988 and periodically thereafter. 32 In August1989, 33 and also in July 1990, 3 4 proposals for a Revised Uniform Partner-ship Act were submitted to the NCCUSL.

Although some of the provisions of the UPA were left unchanged,other, more important, principles of the law of partnership were com-pletely revised by the RUPA. These revisions should be viewed inthe light of the revision committee's basic policy considerations. First, theentity theory was advocated and preferred to the aggregate theory of thelegal nature of partnership. Secondly, the legal position at the dissolutionof a partnership was drastically amended, thus strengthening the conti-nuity of the partnership in the process. The third important considerationis that the proposed RUJPA emphasized the importance of the flexibility

23 Henn op cit note 15 at 388; CorpusJuris Secundum volume 68 (1950) § 2 p 405.24 Reuschlein & Gregory op cit note 14 at 249.25 Wyatt & Wyatt op cit note 16 at 509; according to Folkerth op cit note 16 at 532, the UPA

was adopted by thirty-two states by 1950; according to Rossen & Sogg op cit note 19 at 121, itwas already adopted by forty states by 1970.

26 Ronald A Anderson, Ivan Fox & David P Twomey Business Law: Principles, Cases, LegalEnvironment 10 ed (1989) 959; Alfred F Conard, Robert L Knauss & Stanley Siegel Corporationsand Partnerships: Statutes, Rules and Forms (1982) 1; Melvin Aron Eisenberg An Introduction toAgency and Partnership (1987) 28; John H Williamson Handbook on the Law of Small BusinessEnterprises 3 ed (1990) 19. In the Uniform Partnership Act Revision Subcommittee Report (1986) 2and 5 it was found that the UPA was not adopted only in Louisiana. Georgia adopted a revisedversion of the UPA in 1984.

27 The Committee on Uniform State Laws (1991) 563.28 UPA Revision Subcommittee of the Committee on Partnerships and Unincorporated

Business Organizations of the American Bar Association's Section of Corporation, Banking,and Business Law.

29 Reuschlein & Gregory op cit note 14 at 249; Ribstein op cit note 16 at 113.30 Weidner op cit note 16 at 427.3 Hereafter 'revision committee'. See Norwood P Beveridge 'Duty of Care: The Partner-

ship Cases' (1990) 15 Oklahoma City Univ LR 735 at 754; Weidner op cit note 16 at 427.32 Weidner op cit note 16 at 427. 33 Weidner op cit note 16 at 428.34 Beveridge op cit note 31 at 753; Ribstein op cit note 16 at 113.


of the partnership agreement and reduced the prescriptive rules govern-ing the relationship of partners inter se. 35

In July and August 1992 the revision committee's UPA 1992 was submit-ted to the NCCUSL. After the meeting of the NCCUSL on 28 October1992, an amended version of the UPA 1992 was submitted. This onlycontained the text, with no prefatory note or comments. The UPA 1992 hasbeen adopted by Montana36 and Wyoming. 37 Texas initially adopted theTexas Uniform Partnership Act,3 8 which was largely based on the earlierRUPA drafts,3 9 and then replaced it with the Texas Revised UniformPartnership Act,40 which became effective on 1 January 1994.4 1

The UPA of 1993, and the reporters' overview compiled by Weidnerand Larson, were submitted on 30 July to 6 August 1993 at the annualmeeting of the NCCUSL.

According to the reporters' overview, the UPA 1993 makes an impor-tant contribution in respect of four matters in particular. First, the UPA1993 offers greater stability to partnerships with the rejection of thetraditional approach that a partnership is of necessity dissolved by achange of membership. In addition, the UPA 1993 introduces newprovisions regarding partnership breakups. Secondly, the UPA 1993clearly states that partners are not fiduciaries in relation to one another.Partners may further their own interests without breaching their fiduciaryduties to the partnership. Thirdly, the regulation of the nature and transferof partnership property is simplified by the adoption of the entity theoryof the legal nature of partnership. The Act also makes provision for theregistration of partnership declarations in respect of authority and disso-lution, Fourthly, express provision is made for mergers, and protectivemeasures are created for such transactions. 42

The UPA 1994, with prefatory notes and comments, was approved andrecommended for enactment in all the states at the annual conference ofthe NCCUSL on 29 July to 5 August 1994 and approved by the Ameri-can Bar Association on 10 August 1994. The UPA 1994 introduces sevenimportant changes.

First, it gives supremacy to the provisions of the partnership agreementin most situations. 43 The UPA 1994 emphasizes the importance offlexibility of the partnership agreement and reduces the prescriptive rulesgoverning the relationship of partners inter se: it is largely a series of

35 Weidner op cit note 16 at 428.36 1993 Montana Laws 238 (Montana Senate Bill 46).37 1993 Wyoming Sess, Laws 17-21.38 1993 Texas Sess. Laws ch 917 (1993 Tex. H.B. 273, approved 4June 1993).3 9 Donald J Weidner & John W Larson 'The Revised Uniform Partnership Act: The

Reporters' Overview' (1993) 49 The Business Lauyer 1 at 31; Steven M Cooper 'The TexasRevised Uniform Partnership Act and the Texas Uniform Partnership Act' 1994 57 Texas BarJournal 828 at 831. 40 Cooper op cit note 39 at 831.

41 Cooper op cit note 39 at 828. The Texas Revised Uniform Partnership Act is effective forall Texas partnerships created on or after 1 January 1994; for all Texas partnerships that elect tobe governed by it; and for all Texas partnerships as of 1 January 1999.

42 Weidner & Larson op cit note 39 at 1-2. 43 UPA 1994 Prefatory Note 1.

REVISION OF THE LAW OF PARTNERSHIP IN THE USA 669

default rules that govern the relations among partners in situations theyhave not addressed in a partnership agreement. The reasoning behind thisapproach is that the primary focus of the UPA 1994 is the small, ofteninformal, partnership. Larger partnerships generally have partnershipagreements modifying many provisions of the Act.44

Secondly, it provides a more extensive treatment of the fiduciary dutiesof the partners. 4

5 The UPA 1994 clearly states that partners are notfiduciaries in relation to one another. Partners may further their owninterests without breaching their fiduciary duties to the partnership. 46

Thirdly, the UPA 1994 enhances the entity treatment of partnerships toachieve simplicity for state-law purposes, especially with regard to theregulation of the nature and transfer of partnership property.47

In the fourth place, the legal position at the dissolution of a partnershiphas been drastically amended, thus strengthening the continuity of thepartnership in the process. The UPA 1994 offers greater stability topartnerships with its rejection of the traditional approach that the part-nership is of necessity dissolved by a change of membership. In addition,the UPA 1994 introduces new provisions regarding partnership breakups.It endeavours to provide stability for partnerships that have continuationagreements.

48

In the fifth place, it makes provision for the registration of partnershipdeclarations in respect of authority and dissolution through the publicfiling of statements containing basic information about a partnership. 49

The sixth major change is its making of express provision for mergers,with protective measures for such transactions.50 The UPA 1994 autho-rizes the merger of two or more partnerships and the conversion ofpartnerships to limited partnerships, and the reverse. 51

Finally, the UPA 1994 does not provide that its provisions are appli-cable to limited partnerships as well. 52

It may be of some interest to note that a draft for discussion of theUniform Partnership Act 1995 with comments was prepared by theDrafting Committee on the Limited Liability Company Act and releasedby the NCCUSL on 6 December 1995. This draft makes provision for aregistered limited liability partnership. An analysis of these developmentsfalls outside the scope of the present discussion.

3 IMPORTANT INNOVATIONS OF RUPA

Important amendments affecting the law of partnership in its entiretywere brought about by the UPA 1992, 1993 and 1994.

44 UPA 1994 Prefatory Note 1-2. 45 UPA 1994 Prefatory Note 2.46 Weidner & Larson op cit note 39 at 1.47 UPA 1994 Prefatory Note 2; Weidner & Larson op cit note 39 at 1.48 UPA 1994 Prefatory Note 2; Weidner & Larson op cit note 39 at 1.49 UPA 1994 Prefatory Note 2; Weidner & Larson op cit note 39 at 1.So Weidner & Larson op cit note 39 at 1-2. 51 UPA 1994 Prefatory Note 3.52 UPA 1994 Prefatory Note 3.

(O)U THE SOUTH AFRICAN LAW JOURNAL

3.1 Legal nature

In accordance with the entity theory, a partnership is viewed as anentity independent of its members, which carries its own rights and dutiesand which continues to exist despite a change in its membership.Although partners may indeed be held personally liable for partnershipdebts, this is usually only for the remainder of a judgment debt of thepartnership after excussion of the partnership assets. The entity theory,which is derived from the lex mercatoria, has been adopted in Scotland,Louisiana and, especially in respect of commercial partnerships, in mostContinental legal systems as well. There are, however, also importantexceptions, for example the 'offene Handelsgesellschaft' in Germany and,until the introduction of book 7 title 13 of the Nieuw BurgerlijkWetboek, the 'vennootschap onder firma' in the Netherlands.5 3

Under the aggregate theory, a partnership is merely an association ofindividuals acting jointly. No separate entity is created by the establish-ment of a partnership. The partnership has no legal existence independentof the partners. The rights and duties of the partnership are in essence therights and duties of the partners, and the assets of the partnership are thoseof the partners in joint undivided shares. This theory is so closely relatedto English law that it is often referred to as the 'common-law theory ofpartnership'. It finds application as a general rule in most common-lawjurisdictions.

54

Although divergent opinions do exist, most authorities agree that thegeneral point of departure of the UPA is the aggregate theory. Thepartnership is only viewed as an entity independent of its partners inexceptional cases. 55

One of the most outstanding aspects of the RUPA must surely be thedeliberate and persistent attempt to move away from the aggregate theoryand to accept the entity theory as the general point of departure.5 6

In a report 57 of a partnership law revision committee in April 1986, itwas recommended that the entity theory should be introduced, whereverpossible, in any revision of the UPA and that the aggregate theory shouldonly be retained where it is absolutely essential, for example due to taxconsiderations. This was also the approach which was followed through-out by the drafting committee of the NCCUSL.58

53 See Henning & Delport op cit note 9 at para 286; MJ A van Mourik Rondom depersonenvenootschap (1989) 14. 54 Henning & Delport op cit note 53 at para 286.

55 See, inter alia, Anonymous 'Standing of Limited Partners to Sue Derivatively' (1965) 65Columbia LR 1463 at 1482; Kenneth P Brier 'Like-Kind Exchanges of Partnership Interests: APolicy Oriented Approach' (1983) 38 Tax LR 389 at 402-4; Judson A Crane 'The UniformPartnership Act: A Criticism' (1915) 28 Harvard LR 762; Robert W Hillman 'Law Firms andTheir Partners: The Law and Ethics of Grabbing and Leaving' (1988) 67 Texas LR 1 at 31;Weidner op cit note 16 at 428; Williamson op cit note 26 at 19.

56 Weidner op cit note 16 at 429.57 UPA Revision Subcommittee of the ABA Partnership Committee Should the Uniform

Partnership Act be Revised? (1986) 8. 58 Weidner op cit note 16 at 429.


In clause 201(a) of the draft which was considered by the NCCUSLduring 2 to 9 August 1990, the view that a partnership is a separate entitywas adopted as part of the definition of a partnership. However, thepresent section containing the definitions is silent on this aspect,5 9 since aseparate provision, § 201, is devoted exclusively to the legal nature of apartnership. It expressly and unequivocally provides that 'a partnership isan entity'. This approach is more functional and can be perceivedthroughout the RUPA. 60

The draftsmen were of the opinion that the importance of the newapproach to the legal nature of a partnership is better emphasized bydevoting a particular provision exclusively to it, rather than merelyincorporating it as part of a general definition. In the United States thisapproach is not without precedent or sui generis. In 1986 the NebraskaRevised Statutes defined a partnership as 'an association of personsorganized as a separate entity to carry on a business for profit'. 61

Consequently, the RUPA contains a considerable number of pro-visions based on the entity theory. A variety of reasons may be cited as towhy preference is given to the entity theory. The most obvious is that theentity theory is simpler.62 It also reflects the point of view that businesspeople prefer the partnership to continue in existence notwithstanding achange in its membership. 63 The entity theory fulfils this practicalrequirement. 64 By making it clear that the partnership has an existenceindependent of the individual partners, it eliminates a great deal of theexisting confusion in the law of partnership. For example, this approachputs it beyond doubt that the partnership assets are the property of thepartnership itself and not the property of the partners.65

Nevertheless, the RUPA also provides that the aggregate theory maywell be applied in certain cases. The aggregate theory appears to beparticularly useful in respect of the smaller partnerships. The smallerpartnership is more personal and may find the aggregate theory moresuited to its needs. Partners more often than not document the smallpartnership in terms of the aggregate theory. Larger partnerships are moreimpersonal and are therefore more suited to the application of the entitytheory.

66

If the entity theory is strictly applied, a partner could lose the protec-tion of the Fifth Amendment, since he may be required to criminalizehimself under certain circumstances in that the partner is in the sameposition as an individual shareholder in a corporation. The partner cannot

59 PUPA § 10 1(1)-(10).60 Weidner & Larson op cit note 39 at 3; see also Gary S Rosin 'The Entity-Aggregate

Dispute: Conceptualism and Functionalism in Partnership Law' (1989) 42 Arkansas LR 395.61 Nebraska Revised Statutes § 67-306(1) (1986).62 Weidner op cit note 16 at 429. 63 Weidner op cit note 16 at 430.64 Weidner op cit note 16 at 429-30.65 Larry E Ribstein 'A Mid-Term Assessment of the Project to Revise the Uniform

Partnership Act' (1990) 46 The Business Lauyer 111.66 Weidner op cit note 16 at 433.


lay claim to the protection of the Fifth Amendment if disclosure of thebooks and accounting records of the partnership is required, because thebooks and records belong to the partnership and not to the partner as anindividual. 67 In order to obviate these problems, it should still be possibleto apply the aggregate theory.

3.2 Internal relationship

An important characteristic of the RUPA is that it reflects the drafters'approach that only in specific, exceptional cases is it not permissible forthe partners by agreement to alter the provisions of the RUPA concern-ing internal relationships. 68

Weidner points out that the revision committee attempted to make itvery clear that, with a few exceptions, the specific provisions of theRUPA are purely default rules.69 While § 103(b) of the RUPA states thatcertain rights and duties of the partners cannot be amended by thepartnership agreement, this is an exception to the general rule, since theRUPA primarily follows the point of view that the partners are allowed toregulate their mutual relationships by virtue of the agreement. 70 By andlarge, the statutory rules only apply in the absence of a partnershipagreement to the contrary. In accordance with the RUPA, all the pro-visions which regulate the relationship between partners are default rules,unless they are expressly mandatory.71

3.3 Fiduciary relationship

Both the UPA 1992 and the UPA 1993 provided that a partner stands ina fiduciary relationship to the partnership as such and to his fellowpartners. A partner owes a 'duty of loyalty' and a 'duty of care', which arestatutorily prescribed, both to the partnership and to his partners.7 2

Weidner notes the following in respect of the draft provisions whichpreceded this provision:

'Not only must partners be concerned about the effect of their conduct on thepartnership as an entity, but also they must avoid oppressive behavior toward individualpartners. It is true that this result can be reached under an entity theory, but it may bemore readily understood if it is stated also in aggregate terms.' 73

It is clear that the drafters bore in mind criticism of the entity theory to theeffect that a strict application of its implications could lead to a reductionin the partners' own realization of their moral responsibility for suchconduct.

7 4

67 The Committee on Uniform State Laws 'The Entity Theory of Partnership and the

Proposed Revisions to the Uniform Partnership Act' (1991) 46 Record ofthe Association of the Barof the City of New York 568.

68 RUPA § 103(a). See also John D Hynes 'The Revised Uniform Partnership Act: SomeComments on the Latest Draft of RUPA' (1991) 19 Florida State Univ LR 727; Weidner &Larson op cit note 39 at 2. 69 RUPA § 103(a); Weidner op cit note 16 at 453.

70 R UPA § 103(a); Weidner & Larson op cit note 39 at 2.71 Weidner & Larson op cit note 39 at 1. 72 RUPA § 404.73 Weidner op cit note 16 at 433. 74 Weidner op cit note 16 at 433-4.


According to Vestal, the fiduciary obligations of partners inter se underthe RUPA differ from those under the UPA in four essential aspects. 75

First, the proposed contractarian model is statutory and exclusive, as itpurports to be a complete statement of the fiduciary duties. 76 Secondly,the fiduciary duties of partners are restrictively defined to include only a'duty of loyalty' and a 'duty of care'. 77 The third difference lies in thelimited time provisions of the RUPA, for example the duty to account forany property, profit or benefit without consent, and the duty to refrainfrom nonconsensual adverse dealings with the partnership, apply only tothe period of conduct and winding-up, while the non-competitioncomponent of the duty of loyalty only applies to the period of conduct ofthe partnership business. The nonfiduciary obligation of good faith andfair dealing is indirecdy limited temporally to the conduct andwinding-up and does not apply to the formation stage. 78 The fourthdifference is that the provisions of the RUPA in respect of the fiduciaryduties of the partners can be modified by the partners by agreement, andonly a few statutory provisions restrict or eliminate the power to modify.79

In Vestal's view, two approaches may be differentiated in respect ofpartnership relationships: that the partnership relationship is a fiduciaryrelationship 8° and that the partnership relationship is a contractual rela-tionship. 81 The first approach implies that the partners work together forthe common good and the partners may only pursue their own interests inso far as they are not at the expense of their joint interests. This is theapproach of both the UPA and the courts.8 2 The contractual approach isthe opposite of the fiduciary approach. The adoption of the contractarianworld view changes the entire basis of the partnership and Vestal arguesthat 'this fundamental shift is in error, and will create a regime ofpartnership law incapable of adapting to new situations, evolving businesspractices, and changing social beliefs'. 83

Section 404 is a compromise between the two approaches. On the onehand, it strives towards strict, sound and inviolable fiduciary duties,whereas the other approach is aimed at limiting the fiduciary duties tostatutory default rules. The term 'fiduciary' is thus still used, but its area ofapplication is limited by the Act. 84 The rationale for adhering to the term'fiduciary' in the Act is to retain eighty years' worth of court decisions inwhich the partners are viewed and defined as fiduciaries. 85

75 Allan W Vestal 'Fundamental Contractarian Error in the Revised Uniform PartnershipAct of 1992' (1993) 73 Boston Univ LR 523 at 531. 76 Vestal op cit note 75 at 532.

77 Vestal op cit note 75 at 532-3. 78 Vestal op cit note 75 at 534.79 Vestal op cit note 75 at 534-5.80 See, for example, Claire Moore Dickerson 'Is It Appropriate to Appropriate Corporate

Concepts: Fiduciary Duties and the Revised Uniform Partnership Act' (1993) 64 Univ ofColorado LR 111. 81 Vestal op cit note 75 at 523.

82 Vestal op cit note 75 at 523-4. 83 Vestal op cit note 75 at 524.84 Weidner & Larson op cit note 39 at 18.8- Weidner & Larson op cit note 39 at 19.


Section 404(a) of the RUPA provides that the only fiduciary dutiesowed by a partner to the partnership and his fellow partners are those ofloyalty and care. 86 The Act thus provides that the partner stands in afiduciary relationship to both the partnership as such and his fellowpartners. This fiduciary relationship includes both a 'duty of loyalty' anda 'duty of care', and is statutorily defined. 87

The duty of loyalty is limited to three aspects. First, § 404(b)(1) of theRUPA requires that a partner account to the partnership, and hold astrustee for the partnership, all property, profits or benefits which heobtained from the operation of the partnership business or the liquidationof the partnership without the other partners' permission. Secondly, thepartner must refrain from operating the partnership business as or onbehalf of another party that pursues interests other than those of thepartnership, without the other partners' permission. 88 Thirdly, the partnermay not compete with the partnership before its dissolution without theother partners' permission. 89

The partner's 'duty of care' lies therein that, in the operation of thepartnership and its liquidation, the partner will refrain from acting withgross negligence or recklessness or from being guilty of intentionalmisconduct or knowingly acting contrary to the law.90

3.4 Duty to disclose

In § 21 the UPA provides comprehensively that a partner must discloseto the partnership all benefits obtained by him without the consent of theother partners. 9' The courts have developed § 21 to deal with a widevariety of partner conduct and surrounding circumstances. 92

According to Ribstein, 'good faith' is an implied term of all contractsand it is therefore assumed that the parties contracted to act in compliancewith the explicit contract terms and that there is no hidden intention.However, the RUPA converts good faith into an obligation which existsin all partnerships, and no longer views it merely as a means for interpret-ing contracts. 93

The RUPA follows the UPA in respect of the partnership books andthe partners' duty to disclose. It does indeed make certain changes, butcontinues to require that disclosure needs to be requested. Section 403provides that the disclosure rights are 'not exclusive'. 94 Agreements

86 RUPA § 404(a); Draft for Approval (1992) 63.87 RUPA § 404(a), (b) and (c); Weidner & Larson op cit note 39 at 18.88 RUPA § 404(b)(2); Weidner & Larson op cit note 39 at 23.89 RUPA § 404(b)(3); Weidner & Larson op cit note 39 at 23.90 RUPA § 404(c); Weidner & Larson op cit note 39 at 21.

91 UPA 1914 § 21; Larry E Ribstein 'The Revised Uniform Partnership Act: Not Ready forPrime Time' (1993) 49 The Business Lawyer 45 at 52.

92 Ribstein op cit note 91 at 52. 93 Ribstein op cit note 91 at 55-6.94 RUPA § 403; Ribstein op cit note 91 at 51.


which 'unreasonably restrict the right of access to books and records' arealso invalidated by the RUPA.95

3.5 Agency and representation

The entity approach adopted by the RUPA impacts on the power ofpartners to bind the partnership to third parties dealing with the partner-ship. Article 3 of the RUPA, first, affects the partner's authority to bindthe partnership as an agent or employee; secondly, it redefines thepartner's liability towards partnership creditors; and, thirdly, it affectsthe position of alleged partners. The RUPA amends the provisions of theUPA in respect of the first two aspects in particular. 96 The emphasis isshifted from the protection of the partners in the event of unauthorizedtransactions by a partner to the protection of third parties dealing in goodfaith with the partnership. 97 The adoption of a voluntary system of publicfiling allows both the partnership and third parties dealing with thepartnership to determine whether partners are in fact authorized toconclude certain transactions on behalf of the partnership. 98

Section 104(a) of the RUPA provides that the principles of justice andequity supplement the Act 'unless displaced by particular provisions'. 99

Section 301(1) of the RUPA retains the provision in § 9 of the UPA thata partner is an agent of the partnership. It is therefore possible that the lawof principal and agent will still find application. 100

The basic principle that a partner has authority to bind the partnershipin transactions in the normal course of the partnership business has beenretained. 1 1 However, a subtle change has been made in the rule deter-mining when a third party has knowledge of a partner's lack of author-ity.10 2 The concept of what constitutes the normal course of the partner-ship business has been expanded. The RUPA does not retain the list oftransactions, contained in § 9(3) of the UPA, that are not deemed to bepart of the normal course of the partnership business, 10 3 because it isconsidered to be too rigid. Some of these rules are obsolete, whereasothers have been difficult to put into practice. The RUJPA's approachtherefore appears to be more flexible in enabling the party assessing thefacts to determine, in each individual case, whether a specific transactionfalls within the scope of the normal course of the partnership business. 10 4

These amendments reflect the intention of the drafters of the RUPA to

95 RUPA § 103(b)(2); Ribstein op cit note 91 at 51.96 Ribstein op cit note 91 at 46.97 RUPA § 302; Edward S Merrill 'Partnership Property and Partnership Authority Under

the Revised Uniform Partnership Act' (1993) 49 The Business Lawyer 83.98 RUPA § 303; Merrill op cit note 97 at 83.99 RUPA § 104(a); Weidner & Larson op cit note 39 at 19.100 Weidner & Larson op cit note 39 at 19.1o1 Compare RUPA § 301 with UPA 1914 § 9(1); Merrill op cit note 97 at 87.102 RUPA § 301(1); Merrill op cit note 97 at 87.103 Compare RUPA § 301(2) with UPA 1914 § 9(3); Merrill op cit note 97 at 87..o4 Merrill op cit note 97 at 90.


shift more of the burden of a partner's unauthorized transactions from thethird party bona fide dealing with the partnership to the partners them-selves.105 This approach has also found favour in South Africa with theStanding Subcommittee on Close Corporations of the Standing AdvisoryCommittee on Company Law in recommending amendments to s 54 ofthe Close Corporations Act of 1984.106

The terminology of § 301(1) of the RUPA is based on § 9(1) of theUPA, but there are two important changes. 10 7 The first is that the words'or the business of the kind carried on by the partnership'10 8 have beenadded to the requirement that the partner act in the normal course of thepartnership business. This has the effect that the third party is no longerrequired to have knowledge of how the partnership business is normallyconducted. It is sufficient if the partner's actions will normally take placein the same type of business as that of the partnership. 10 9

The RUPA changes the circumstances in which the partnership will bebound by the 'apparently ... usual' actions of the partner. 110 The UPAprovided that the 'apparently ... usual' actions of the partner did not bindthe partnership if the third party knew that the partner did not have thenecessary authority to bind the partnership. 11' The UPA defined 'know-ledge' as 'actual knowledge' and 'knowledge of such other facts as in thecircumstances shows bad faith'." 2 In this way partners were encouragedto expressly determine the authority of the partners and third parties wereencouraged to heed any information they had obtained. 113 The term'knowledge' in the UPA did cause certain problems, but jurisprudenceoffered adequate guidance and protection. In contradistinction, theRJPA provides that the partnership is not bound not only if third partieshad knowledge of the lack of authority but also where they did not haveactual knowledge of the facts but 'received a notification' in thisrespect. 114

The second change relates to the ways of ascertaining whether the thirdparty has knowledge of the lack of authority. 115 The general rule was thatif the third party had adequate knowledge of the partner's lack ofauthority, the partnership would not be bound by the actions of thepartner. The RUPA compels third parties to require written declarationsof authority or power, even in the case of 'apparently... usual' actions by

105 Merrill op cit note 97 at 87.106JJ Henning & E M de Waal 'Future Development of the Law of Close Corporations'

(1993) 1 Corporate Law Development Senes 155. 107 Merrill op cit note 97 at 88.'o8 Compare RUPA § 301(1) with UPA 1914 § 9(1); Merrill op cit note 97 at 88.109 Merrill op cit note 97 at 88.110 1992 and 1993 RUPA § 301. The 1994 RUPA § 301 uses 'apparently ... ordinary'

instead of 'apparently... usual': Ribstein op cit note 91 at 46.'11 '[Has knowledge of the fact that [the partner] has no... authority': UPA 1914 S (9)(1);

Ribstein op cit note 91 at 46. 112 UPA 1914 § (3)(1); Ribstein op cit note 91 at 46.113 Ribstein op cit note 91 at 46.114 RUPA § 301(1) and 102(c); Ribstein op cit note 91 at 47.115 Merrill op cit note 97 at 88.


partners. This is effected by a system of registration of declarations ofauthority in terms of § 105 and § 303.116

Section 301(1) refers to the fact that the third party should have hadknowledge of the lack of authority or have been given notice of it('knew or had received a notification'). Both 'knew' and 'receivednotification' are defined in § 102. A person is given notification of aspecific fact when it comes to his or her attention or when thenotification is served on him or her at his or her place of business orother suitable address provided by him or her for the serving ofdocuments. The requirement in the RJPA is therefore that the thirdparty had actual knowledge of the lack of authority or that he or shehad been given notification of the lack of authority." 7

Although it seems that the RUPA increases the risk of liability of thepartners for the unauthorized actions of the other partners, it still enablesthe innocent partners to protect themselves, to a certain extent, against theunauthorized actions of another partner in that they may make use of asystem of filing. By filing the declaration of authority, the partners obtainprotection against unauthorized actions, since the declaration is deemedto be actual notification to third parties of any limitation on the partners'authority." 8

The aim of the partnership declaration is primarily threefold. In thefirst place, it may grant additional authority to certain partners. 119 Sec-ondly, it may serve to limit the authority of certain partners. 120 Thirdly, itmay serve to cancel or amend previous declarations. 12

,

The rules laid down in § 804 of the RUPA in respect of a partner'sauthority to bind the partnership after its dissolution are simple, especiallyif they are compared with the rules contained in § 35 of the JPA. Inaccordance with § 804(1) of the RUPA, the partnership is bound by theactions of a partner which are deemed necessary for the liquidation of thepartnership. Alternatively, in terms of § 804(2), the partnership is boundby the actions of a partner if the partnership would be liable, before thedissolution in terms of § 301, should the third party not have been givennotification of the dissolution. 122 The requirement that the creditor mustpreviously have conducted business with the partnership, or have hadknowledge of the existence of the partnership, has been abandoned. 123

3.6 Accounts

A further difference between the UPA and the RLUPA is that the latterassumes that each partner has an 'account' which is 'credited with' the

116 RUPA § 303(d)-(f); Ribstein op cit note 91 at 47-8.117 Merrill op cit note 97 at 88. 18 Merrill op cit note 97 at 89.119 RUPA § 303(d); Merrill op cit note 97 at 95.120 RUPA § 303(a)(2); Merrill op cit note 97 at 95.121 RUPA § 303(g); Merrill op cit note 97 at 95.122 Merrill op cit note 97 at 103.

'23 UPA 1914 § 35(1)(b); Merrill op cit note 97 at 103.


partner's contributions and his participation in the profits, and 'chargedwith' expenditure and the partner's portion of the losses of the partner-ship. 1 2 4 Ribstein points out that this provision may have unexpected andunpredictable consequences for less formal partnerships and especiallythose formed by conduct. Partnerships such as these will not normallyhave formally drawn partnership accounts. 125

3.7 Ownership of partnership property

Sections 24 and 25 of the UPA were problematic in providing that eachpartner had an undivided share or interest in the property of the partner-ship. The partners' interest was expressed in 'tenancy in partnership'. 126

This unique concept of ownership had to be developed, since thepartnership is not, in terms of the aggregate theory, a separate entity andthus the bearer of rights and duties. The principles of the entity theory aretherefore expressed as tenancy in partnership in terms of the aggregatetheory.

Section 510 of the RUPA brings tenancy in partnership to an end, butin practice the change is will not be that dramatic. Under the UPA apartner could in any event not use partnership property except forpartnership purposes, and a partner could not transfer his interest in thepartnership property without the consent of each of the other partners,neither could a creditor lay claim to a partner's interest in partnershipproperty. The primary effect of the change in the law by the RUPA is tocause the legal concept to be consistent with the practical reality.127

The ending of tenancy in partnership is also abundantly manifestfrom § 203 of the RUPA, which clearly states that the partnershipproperty is the property of the partnership and not of the individualpartners.12 8 It is also expressly stated that the partner is not a co-ownerof the partnership property and does not have an alienable interest inthe partnership property as such. 129

Hence it is essential that the question be answered as to which propertyor assets form part of the partnership estate. The RUPA provides thatproperty will be partnership property if it is acquired in the name of thepartnership. 130 Immovable property is deemed to be partnership propertyif it is transferred into the name of the partnership.13 ' Property is alsodeemed to be partnership property in cases where it is transferred into thename of one or more of the partners, but the partnership's name is alsoused.132 The RUPA offers no clear guidelines in respect of partnershipproperty which is not transferred into the correct name of the partnership.

124 RUPA § 401(a)-(b); Ribstein op cit note 91 at 50.125 Ribstein op cit note 91 at 50.126 Larry E Ribstein 'A Statutory Approach to Partner Dissociation' (1987) 65 Washington

Univ LQ 357 at 400. 127 Merrill op cit note 97 at 84. 128 RUPA § 203.129 RUPA § 501. 130 RUPA § 204(a) (1); Merrill op cit note 97 at 85.131 RUPA § 204(b)(1); Merrill op cit note 97 at 85.132 RUPA § 204(b)(2); Merrill op cit note 97 at 85.


Merrill believes that the RUPA deliberately avoids identifying specificcases, but it is left up to the courts to decide whether the property was infact transferred into the name of the partnership. 133

If the property is not acquired in the name of the partnership or of oneor more of the partners, with the indication that they are partners, it willstill be considered as partnership property if it has been acquired withpartnership funds. 13 4 Thus, if property is not acquired in the name of thepartnership or of partners as members of the partnership, or with part-nership funds, the property will be deemed to be the property of thepartner or partners concerned, even if the property is used in thepartnership business. 1 35

Section 302 simplifies and improves the rules relating to the transfer offixed property, in particular by shifting the burden of proof from the thirdparty to the partners in a partnership transaction. Section 302(b) providesthat the partnership has to prove the lack of authority before propertyunauthorizedly transferred may be reclaimed. In comparison, § 10(1) ofthe UPA provided that the third party had to prove that the transactionwas authorized, and only placed the burden of proof on the partnership incases where the transfer occurred in the name of individuals without anyreference to the partnership. 136 Section 302(b) of the RUPA grantsabsolute protection to a bona fide purchaser of property who did notknow or was not notified of the lack of authority, by providing that thepartnership must prove the lack of authority before property which wastransferred without authorization may be reclaimed. 37

3.8 Procedural matters and liability of partners

The RUPA expressly provides that the partnership may sue and be suedin its own name.13 8 A civil process against the partnership and any or all ofthe partners may be instituted by means of the same action or separateactions. 139 Here the intention is to solve the problem that a partnershipmay only sue or be sued in certain states if each partner is cited by namein the action. A judgment against the partnership is not automatically ajudgment against an individual partner. Execution cannot occur againstthe assets in the individual estate of a partner unless the judgment was alsogranted against the particular partner. 40 Section 406, furthermore, pro-vides that a partner may institute an action against the partnership and viceversa.

In terms of § 306, partners are jointly and severally liable for allpartnership debts, unless otherwise agreed. The joint and several liabilityof the partners for the debts of the partnership' 4 ' is tempered by the

133 Merrill op cit note 97 at 85-6.134 RUPA § 204(c); Merrill op cit note 97 at 86. 135 Merrill op cit note 97 at 87.136 UPA 1914 § 10(3); Merrill op cit note 97 at 94.137 Merrill op cit note 97 at 94.138 Draft for Approval (1992) 43 and 44-5; Weidner op cit note 16 at 430.139 RUPA § 307(b). 140 RUPA § 307(c). 141 RUPA § 306.


principle that the assets of the partners' personal estates cannot beexcussed by ajudgment creditor before all the partnership assets have beenexcussed.142 An exception to the general rule applies in cases where thepartner agrees that the partnership assets do not have to be excussed first,or where the court grants permission for execution against the assets of apartner on the grounds that the partnership assets are obviously inad-equate to satisfy the judgment debt concerned.143

3.9 Remedies

The RUPA changes the rules which were laid down by the UPA inrespect of the remedies between partners inter se. 14 4 The UPA providedthat a partner had the right to adjustment.145 This was, however, a longand complicated process and was interpreted by the courts as the exclusiveremedy between partners. Ribstein believes that this is an obsoletemethod or process. In § 405(b), the RUPA provides that 'a partner maymaintain an action against the partnership or another partner for legal orequitable relief, including an accounting as to partnership business'. 146

The RUPA thus attempts to negate the exclusivity of adjustment as aremedy, but does not do this expressly.147

3.10 Changes in membership

Section 601 makes it clear that a partnership continues to exist irre-spective of the fates of the individual members. Thus the resignation,insolvency or death of a partner simply means the disassociation of thepartner concerned and not necessarily the termination, dissolution orliquidation of the partnership.

4 SOUTH AFRICAN PERSPECTIVE

Although the entity theory of the legal nature of partnership enjoyedsome recognition in Roman-Dutch law,' 48 the aggregate theory findsapplication as the general rule in the South African law of partnership.Cognizance is taken of the entity theory only in certain so-called excep-tional cases and then only to a more and more limited extent.14 9 It issymptomatic that a tendency in earlier judgments to give some recogni-tion to the partnership as a separate entity in the law of insolvency, whichwas expressly acknowledged in Noordkaap Lewende Kooperasie Bpk v

142 RUPA § 307(d); see, however, also exceptions in § 307(d)(l)-(5) of the RUPA, where apartner's private assets may well be excussed before partnership assets.

143 RUPA § 307(d)(3) and (4). 144 Ribstein op cit note 91 at 61.145 UPA 1914 § 22; Ribstein op cit note 91 at 61.146 Ribstein op cit note 91 at 61. 147 Ribstein op cit note 91 at 61.148

j M Barels Advysen over den koophandel en zeevaart (1780) 2.62 and 2.86: '[D]e societeit...is een corpus mysticun (een verbeeld lichaem) ... '; Henning & Delport op cit note 9 atpara 287.

149 See inter alia Muller en 'n ander v Pienaar 1968 (3) SA 195 (A) at 202-3; Strydom v ProteaEiendomsagente 1979 (2) SA 206 (T) at 209-11; Du Toit en 'n ander v Barclays Nasionale Bank Bpk1985 (1) SA 563 (A) at 575; Nedbank v Van Zyl 1990 (2) SA 469 (A).


Raath, °5 0 was in effect rejected by the same judge in Pde VReklame (Edms)Bpk v Gesamentlike Onderneming van SA Numismatiese Buro (Edms) Bpk enVitaware (Edms) Bpk. 1s5 There is little reason to hope for a dramatic changewithout statutory intervention. Thus it is all the more encouraging thatthe Standing Advisory Committee on Company Law placed a premiumon the modernization of the law of partnership in its declaration of15 June 1989. In 1993 the International Conference on the Review ofSouth African Corporate Law significantly followed suit. In this regardSouth African law reformers should take note of the innovative approachadopted by the RUPA.

When evaluating the RKJPA as a precedent for the reform of the SouthAfrican law of partnership, the socioeconomic realities of South Africawill obviously have to be taken into account. It seems it may be said thatthe RUPA is primarily aimed at the larger, financially stronger undertak-ings, probably as a consequence of the far bigger, more sophisticated andmarket-oriented American economy. In contradistinction, the SouthAfrican law of partnership has to take cognizance of the reasonable needsand expectations of a far larger informal sector, as well as a moresignificant component of less sophisticated entrepreneurs.

It is therefore to be expected that the solutions provided by the RUPAwill not necessarily render satisfactory results in South African circum-stances. The RUPA introduces a system whereby a declaration of author-ity is filed at a central place as the solution for problems concerningpartnership liability for unauthorized actions of partners. 5 2 A partnershipformed by conduct could thus be subjected to a system which is notdesigned for it. A better solution for the determination of the power ofpartners to bind the partnership to third parties dealing with the partner-ship may be found in an approach similar to that contained in theproposed amendment of s 54 of the Close Corporations Act.15 3 Thisprovides that the close corporation will be bound to bona fide third partiesdealing with the corporation for all the transactions entered into by itsmembers on its behalf, even if the transaction did not fall within theordinary or ostensible scope of business of the corporation. 154 Theprinciple of the protection of third parties in the RUPA is commendable,but the process by which it is effected seems unsuitable to South Africanrealities, which require that the protection of third parties should prefer-ably not be based on such a higly formalized procedure.

'50 1977 (2) SA 815 (NC) at 818. 'st 1985 (4) SA 876 (C) at 881.152 RUPA § 105 and § 303. 153 Act 69 of 1984.154 The following amendment of s 54 of the Close Corporations Act was approved by the

Standing Advisory Committee on Company Law on 30 April 1993: '(1) Subject to theprovisiom of this section, any member of a corporation shall in relation to a person who is nota member and is dealing with the corporation, be an agent of the corporation. (2) An act of amember shall bind a corporation, whether such act was performed for the carrying on of thebusiness of the corporation or not, unless the member so acting has in fact no power to act forthe corporation in the particular matter and the person with whom he deals has, or oughtreasonably to have, knowledge of the fact that the member has no such power.' See Henning& De Waal op cit note 106 at 163.


If the partnership as a form of enterprise is to accommodate theinformal sector and unsophisticated entrepreneurs effectively, the intro-duction of a modem South African Partnership Act should be consideredas a matter of urgency. It has been said that, as far as proactive legaldevelopment is concerned, partnership law may be considered as thestepchild of South African entrepreneurial law, 15 5 and that the theoreticaland practical problems of South African partnership law can best besolved by comprehensive legislation.' 5 6 It has been proposed that suchlegislation should adopt the entity theory of partnership as a point ofdeparture, 5 7 while ensuring that it retains its ability to provide aninformal and highly flexible form of enterprise. Hence no formal regis-tration should be required for the establishment of a partnership.15 8

5 IN CONCLUSION

Although the RUPA is not above criticism, the lasting impression isthat of a well-considered, innovative and modem Partnership Act whichgives effect to the necessary implications of the entity theory withcircumspection and hence without overlooking the valuable role whichthe aggregate theory could conceivably play in particular circumstances.Viewed from this perspective in particular, the RUPA undoubtedlydeserves the attention of those entrusted with law reform and who wishto make a meaningful contribution to the modernization of the SouthAfrican law of partnership.

NO CASE A 'SURE THING'

'The client I find interesting is the one who interviews lawyers before committing.He says his case is a sure thing. There are five lawyers bidding for the case. One letterand there will be a huge settlement. Experience has taught me to tell such a client thatI do not accept such things. I have never had a sure thing. I would not know how todeal with a sure thing. The client should consult a sure-thing specialist': Jacob A Stein'Clients' The Washington Lawyer September-October 1996 p 60.

A CRITERION FOR, THE APPOINTMENT OF JUDGES

'I look about for a gentleman, and if he knows a little law, so much the better':Lord Lyndhurst, Lord Chancellor of Great Britain 1827-30 and 1834-5. SeeSerjeant Ballantine Some Experiences of a Barrister's Lif 2 ed (1882) 148.

155 Henning op cit note 1 at 451.156 C N Templin The Legal Nature of Partnership (1993) 204.

157 Templin op cit note 156 at 204. 158 Templin op cit note 156 at 207.

REVISION OF THE LAW OF PARTNERSHIP IN THE UNITED STATES OF AMERICA: A COMMENDABLE PRECEDENT?

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