Duty of Loyalty

Topics: Corporation, Partnership, Limited liability partnership Pages: 1 (338 words) Published: November 2, 2008
With the limited information given the most relevant quote is “Sue and Tom are business partners”. This would mean that Tom and Sue are fifty-fifty principals within there partnership. I believe that Sue had the requirement to inform Tom of the decision to buy the property and also to increase Tom’s response time when it was apparent he was on vacation and unable to give her his decision. Tom’s response to Sue of “I think the partnership should buy the property”, without knowing that Sue had already made the purchase shows his intent to add the property to the partnership. As partners Sue and Tom are in a fiduciary relationship with one another. As such they owe certain duties of loyalty. At the beginning of the deal to purchase the property Sue did not break this loyalty, but as the transaction went along, I believe Sue can be accused of usurping a partnership opportunity. The property was offered to the partnership. This is apparent because they had discussed the purchase several months prior to Sue’s purchase. A partner who is offered an opportunity on behalf of the partnership cannot take the opportunity for himself or herself unless the partnership rejects the offer. In that case Sue would not hat breeched her duty of loyalty to Tom. In this case Tom did not reject the offer as much as Sue did not wait for his response. If Tom had rejected the offer and stated that he was not willing to purchase the property for the business, Sue could have purchased the property without usurping a partnership opportunity.

Regardless of Tom not meeting the deadline to respond to Sue about the property purchase, Sue broke a duty of loyalty by purchasing the property and competing with the partnership. A partner may not compete with the partnership without the permission of the other partner. In this case Sue purchased the property independent of Tom and her dealings with the property will compete with their existing partnership.
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