Also known as: monies or property · money and/or property · funds or assets
Written by attorneys · grounded in primary & secondary sources — see below
An asset or thing of value received by a partnership or partner from a nonpartner. Receipt in the course of partnership business or under actual or apparent authority followed by misapplication by a partner renders the partnership liable for the resulting loss.
Jordan delivered settlement proceeds to Clark at Harper & Lane for deposit into the firm's trust account. Clark later transferred the funds to his personal investment account. Jordan sued the firm to recover the missing money. The partnership is liable because the funds were received in the ordinary course of business and then misapplied by a partner.
Swift Indemnity delivered a premium check to Karen at Pinnacle Claims. Karen deposited the check into her personal account and spent the money on personal expenses instead of binding coverage. Swift Indemnity sued the limited partnership after suffering uninsured losses. The limited partnership is liable because the general partner received the funds during partnership activities and then misapplied them.
Select any source to read its text and confirm it supports the definition.
Liability arises when the partner receives the money or property in the course of the partnership's business or while acting with actual or apparent authority and then misapplies it. The partnership must answer for the loss even if other partners were unaware of the misconduct.
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No. The rule focuses on the circumstances of receipt rather than the partner's subsequent personal use. Once the funds are received under the required conditions, the partnership remains liable for the misapplication.
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No. Undisclosed internal limits do not defeat apparent authority created by the partnership's public manifestations and course of dealing. Third parties who reasonably rely on those appearances are protected.
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No. The statute imposes liability when the receipt occurs in the ordinary course or under authority. The misapplication need not be authorized. The rule protects third parties who entrust funds to the partnership through its agents.
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