⚡ 10-Second Rule
Partners can't compete, deal against the team, or pocket team chances — and only really careless mistakes break the care duty.
🧒 ELI-10 Scene
Four friends run a dog-walking crew and split the money. One of them, Omar, hears that the Hillside apartment building wants a walker for thirty dogs. That's a crew-sized job. Omar takes it secretly, alone, and keeps all the cash. That's cheating the team — the chance belonged to everyone. Now compare his friend Lena. She honestly mixes up a schedule and the crew loses one customer. Ordinary goof, no cheating. The team can't sue Lena for that. The rules punish disloyalty and recklessness, not everyday mistakes. And any partner can always open the money notebook and look.
⚖️ Actual Rule
RUPA § 404(a) (1997) closes the fiduciary universe to exactly two duties: a partner owes the partnership and fellow partners loyalty and care — nothing more can be added to the fiduciary list. Section 404(b) makes the duty of loyalty an exhaustive list of three obligations: (1) to account to the partnership for any property, profit, or benefit derived from partnership business or from appropriating a partnership opportunity; (2) to refrain from dealing with the partnership as, or on behalf of, a party with an adverse interest; and (3) to refrain from competing with the partnership before dissolution. Section 404(c) limits the duty of care to refraining from grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law — ordinary negligence does not breach it. Section 404(d) adds an obligation of good faith and fair dealing in discharging duties and exercising rights, and § 404(e) provides that a partner does not violate a duty merely because the partner's conduct also furthers the partner's own interest. Under § 103(b), the partnership agreement may not eliminate the duty of loyalty, but it may identify specific types or categories of activities that do not violate it, if not manifestly unreasonable; it may not unreasonably reduce the duty of care; and it may not eliminate good faith, though it may set reasonable standards for measuring it. Under § 403, the partnership must keep its books and records available, and each partner is entitled to access them and to information concerning the partnership's business.
ELI-10 translation: the loyalty rule is a short, closed list — no stealing chances, no playing for the other side, no competing — and the care rule only bans really careless or dishonest acts.
🔍 Ask These Questions
- Did a partner take a partnership opportunity, or a profit or benefit from partnership business, without accounting for it? (Did someone grab a chance that belonged to the team and keep the money?)
- Did a partner deal with the partnership on the other side of a transaction, or for someone with an adverse interest? (Did a teammate secretly sit across the table from the team?)
- Did a partner compete with the partnership before dissolution? (Did a teammate open a rival stand while still on the team?)
- If the claim is carelessness, was the conduct grossly negligent, reckless, intentional, or knowingly illegal — not just ordinary negligence? (Was it a wild, really careless move, or an everyday goof?)
- Did the partner act with good faith and fair dealing, even when pursuing self-interest — which § 404(e) permits by itself? (Being out for yourself is allowed; being sneaky and unfair is not.)
- Does the partnership agreement validly narrow the duty — a specific carve-out that is not manifestly unreasonable? (The team can pre-approve certain side deals, but can't erase loyalty entirely.)
- Were information rights honored — books, records, and business information available to every partner? (Every teammate gets to open the money notebook.)
⚠️ Bar Trap
Exam language: Examiners describe a partner whose honest business judgment turns out badly — a losing investment, a bungled negotiation — and bait you into finding a breach of the duty of care. Under RUPA the care standard reaches only gross negligence, recklessness, intentional misconduct, or knowing illegality, so ordinary negligence is not actionable. The companion trap dresses up disloyalty as permitted self-interest: § 404(e) protects conduct that merely also benefits the partner, not the appropriation of a partnership opportunity or secret adverse dealing.
ELI-10: A bad guess made honestly is not a lawsuit. Only really careless or dishonest moves are. And "I'm allowed to help myself" never excuses stealing the team's chance.
🧪 Question
Three partners operate a commercial landscaping partnership. The partnership had bid on a season-long contract to maintain the grounds of an office park, and the property manager told one partner that the partnership was the leading candidate. Without informing his co-partners, that partner formed a solely owned company, submitted a slightly lower bid through it, and won the contract for himself, earning $90,000 in profit. The partnership agreement is silent on outside activities. The co-partners sued him for breach of fiduciary duty, and he defends on the ground that a partner may lawfully further his own interests.
Are the co-partners entitled to relief?
(A) Yes, because the partner appropriated a partnership opportunity and must account to the partnership for the profit. (B) Yes, because a partner may never engage in any outside business activity while the partnership continues. (C) No, because a partner does not violate his duties merely because his conduct furthers his own interest. (D) No, because the partner's bid was a business judgment reviewable only for gross negligence.
Answer: (A). The office-park contract was an opportunity the partnership was actively pursuing. Diverting it to his own company both appropriated a partnership opportunity and constituted competing with the partnership before dissolution, breaching RUPA § 404(b); the remedy is an accounting for the $90,000.
💡 Why the Wrong Answers Are Wrong
- (B) overstates loyalty; RUPA's list is exhaustive, and outside activity is fine unless it competes, takes a partnership opportunity, or involves adverse dealing.
- (C) misuses § 404(e), which shields conduct that incidentally benefits the partner — not the outright diversion of a deal the partnership was chasing.
- (D) grabs the wrong duty; the gross-negligence standard governs care claims, and this is a loyalty claim about a stolen opportunity.
- ELI-10: The misconception is treating "self-interest is allowed" as a free pass. Helping yourself is fine only until you grab something that belonged to the team.
