Horn has not sued the partnership itself, nor does he claim that the partnership property is insufficient to satisfy its debts. What result? Explain.
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Horn’s Crane Service furnished supplies and services under a written contract to a partnership engaged in operating a quarry and rock-crushing business. Horn brought action against Prior and Cook, the individual members of the partnership, to recover a personal judgment against them for the partnership’s liability under that contract. Horn has not sued the partnership itself, nor does he claim that the partnership property is insufficient to satisfy its debts. What result? Explain. |
Explanation
It is understood under the entity theory that the individuals forming a partnership are different entities than the partnership itself. This implies that the property of individuals remains untouched till the property of the partnership is exhausted.
This is because the contract exists between two partnerships and not the owners, as individuals.
In case the property of the partnership falls short, such that it cannot fulfill the debts, Company H is, only then, going to succeed in suing the owners as individuals.
Verified Answer
Company H is not going to succeed in suing Individual P and Individual C, as per the concept of separate entity theory.
