Question:
Davis and Shipman founded a
partnership under the name of Shipman & Davis Lumber Company. Four years later, the
partnership was dissolved by written agreement. Notice of the dissolution was published in a newspaper of general circulation in Merced County, where the business was conducted. No actual notice of dissolution was given to firms that previously had extended credit to the
partnership. By the dissolution agreement, Shipman, who was to continue the business, was to pay all of the partnership’s debts. He continued the business as a sole proprietorship for a short time until he formed a successor corporation, Shipman Lumber Servaes Co. After the partnership’s dissolution, two firms that previously had done business with the
partnership extended credit to Shipman for certain repair work and merchandise. The
partnership also had a balance due to Valley Company for a prior purchase. Five months later, two checks were drawn by Shipman Lumber Servaes Co. and accepted by Valley as partial payment on this debt. Credit Bureaus of Merced County, as assignee of these three accounts, sued the
partnership as well as Shipman and Davis individually. Does the dissolution of the
partnership relieve Davis of personal liability for the accounts? Explain.
Partnership
A legal form of business operation between two or more individuals who share management and profits. A Written agreement between two or more individuals who join as partners to form and carry on a for-profit business. Among other things, it states...