A person filed a claim against a partnership for misrepresentation in negotiations for an agreement for a franchise and the sale of a coffee shop, after it became clear that a business license could not be obtained. At some point, the partners sold their share in the partnership to a third party.
The Court held that only the original partners were liable to the person who was misled but not the partner who entered the partnership after the events. Each partner is liable, jointly with the other partners and severally, for all obligations that the partnership owed while being a partner, with the partner's liability not severed even if, after the debt incurred, his membership in the partnership terminated. However, a person who was admitted as a partner to an existing partnership shall not be liable to its creditors for the period prior to him becoming a partner. Here, the agreement was executed before the partners sold their share in the partnership to a third party. However, the partner to whom the original partners' shares were sold had no connection to the transaction and therefore only the original partners are liable to the person who was misled.