48-1-38. Liability of persons continuing the business in certain cases.
(1) When any new partner is admitted into an existing partnership, or when any partner
retires and assigns (or the representatives of a deceased partner assign) his rights in partnership
property to two or more of the partners, or to one or more of the partners and one or more third
persons, if the business is continued without liquidation of the partnership affairs, creditors of the
first, or dissolved, partnership are also creditors of the partnership so continuing the business.
(2) When all but one partner retire and assign (or the representatives of a deceased partner
assign) their rights in partnership property to the remaining partner, who continues the business
without liquidation of partnership affairs either alone or with others, creditors of the dissolved
partnership are also creditors of the person or partnership so continuing the business.
(3) When any partner retires or dies and the business of the dissolved partnership is
continued, as set forth in paragraphs (1) and (2) of this section, with the consent of the retired
partner or the representatives of the deceased partner, but without any assignment of his right in
partnership property, rights of creditors of the dissolved partnership and of creditors of the person
or partnership continuing the business shall be as if such assignment had been made.
(4) When all the partners or their representatives assign their rights in partnership property
to one or more third persons who promise to pay the debts and who continue the business of the
dissolved partnership, creditors of the dissolved partnership are also creditors of the person or
partnership continuing the business.
(5) When any partner wrongfully causes a dissolution and the remaining partners continue
the business under the provisions of Section 48-1-35(2)(b), either alone or with others and without
liquidation of the partnership affairs, creditors of the dissolved partnership are also creditors of
the person or partnership continuing the business.
(6) When a partner is expelled and the remaining partners continue the business, either
alone or with others, without liquidation of the partnership affairs, creditors of the dissolved
partnership are also creditors of the person or partnership continuing the business.
(7) The liability of a third person becoming a partner in the partnership continuing the
business under this section, to the creditors of the dissolved partnership shall be satisfied out of
partnership property only.
(8) When the business of a partnership after dissolution is continued under any conditions
set forth in this section, the creditors of the dissolved partnership, as against the separate creditors
of the retiring or deceased partner or the representatives of the deceased partner, have a prior right
to any claim of the retired partner or the representatives of the deceased partner against the person
or partnership continuing the business on account of the retired or deceased partner's interest in
the dissolved partnership, or on account of any consideration promised for such interest, or for his
right in partnership property.
(9) Nothing in this section shall be held to modify any right of creditors to set aside any
assignment on the ground of fraud.
(10) The use by the person or partnership continuing the business of the partnership name,
or the name of a deceased partner as part thereof, shall not of itself make the individual property
of the deceased partner liable for any debts contracted by such person or partnership.
No Change Since 1953
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Last revised: Wednesday, July 23, 2008