Three men, Dewey, Cheatham, and Howe, form a partnership, DCH Associates. The business will do commercial leasing and run a dry cleaning business. Only the UPA or the RUPA governs the partnership, or common law where neither Act addresses the matter (i.e., the partners have not entered into an agreement that deviates from that law). Discuss the outcome of each scenario, explaining your conclusions.

1) The police arrest Cheatham and charge him with criminal assault.

• What is the extent of Deweys, Howes, and or DCHs liability? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

2) While being questioned by the police, Cheatham figures he can cut a better deal for himself by revealing that Howe mishandled dry cleaning chemicals, which is a violation of environmental regulations, punishable by a fine.

• If the accusation is true, who is liable for paying the fine? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

3) Howe, learning of Cheathams accusation regarding the chemicals, accuses Cheatham of violating the duty of loyalty.

• Do you think that a court would find that Cheatham violated the duty of loyalty to the partnership? Why or why not? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

4) Cheatham spends six months of the next year in jail awaiting trial on the assault charges. Over the course of that year, DCH Associates brings in $300,000 in profit. Dewey and Howe give Cheatham $50,000, and they take $125,000 each.

1. Cheatham sues, claiming that the profits must be divided equally. Will Cheatham win his lawsuit? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?
2. Dewey and Howe argue that they are entitled to an extra $25,000 each as salary for the extra work they had to put in running the business without Cheatham. Will the court agree? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

Although the business has been profitable, Dewey and Howe conclude that it is too risky to continue running the business with Cheatham.

5) Dewey and Howe consider selling the location.

• Can the property be sold without Cheathams permission? Does your answer hinge on whether Dewey and How agree to split the proceeds with Cheatham? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

6) Dewey and Howe investigate ways to end their relationship with Cheatham, including both continuing the business and not continuing the business.

1. Under the UPA, what is the process for ending the partnership, and would this process differ depending on whether Dewey and Howe want to continue the business? Explain.
2. Under the RUPA what is the process for ending the partnership, and would this process differ depending on whether Dewey and Howe want to continue the business?

7) Dewey and Howe consider whether they should find someone to buy out Cheathams interest in the partnership. Lovett agrees to pay Cheatham $200,000 for his interest and become a new partner.

• If the lawsuit filed by Client remains unresolved after Lovett buys Cheatham out, does Cheatham remain liable, and if so, is there any way for him to get out of this liability? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?

8) After Lovett buys Cheatham out of the partnership, the business purchases new PCs on credit.

• Is Cheatham liable for this debt? What can Cheatham do to avoid being liable on this debt? Does your answer differ depending on whether the computers are purchased from Crapple or from a new vendor? Does your answer differ whether the partnership is governed by the UPA or RUPA, and if so, how?