Comment

(This is Section 701 of the Uniform Partnership Act (1997).)

1. Article 7 is new and provides for the buyout of a dissociated partner's interest in the partnership when the partner's dissociation does not result in a dissolution and winding up of its business under Article 8. See Section 603(a). If there is no dissolution, the remaining partners have a right to continue the business and the dissociated partner has a right to be paid the value of his partnership interest. These rights can, of course, be varied in the partnership agreement. See Section 103. A dissociated partner has a continuing relationship with the partnership and third parties as provided in Sections 603(b), 702, and 703. See also Section 403(b) (former partner's access to partnership books and records).

2. Subsection (a) provides that, if a partner's dissociation does not result in a windup of the business, the partnership shall cause the interest of the dissociating partner to be purchased for a buyout price determined pursuant to subsection (b). The buyout is mandatory. The "cause to be purchased" language is intended to accommodate a purchase by the partnership, one or more of the remaining partners, or a third party.

For federal income tax purposes, a payment to a partner for his interest can be characterized either as a purchase of the partner's interest or as a liquidating distribution. The two have different tax consequences. RUPA permits either option by providing that the payment may come from either the partnership, some or all of the continuing partners, or a third party purchaser.

3. Subsection (b) provides how the "buyout price" is to be determined. The terms "fair market value" or "fair value" were not used because they are often considered terms of art having a special meaning depending on the context, such as in tax or corporate law. "Buyout price" is a new term. It is intended that the term be developed as an independent concept appropriate to the partnership buyout situation, while drawing on valuation principles developed elsewhere.

Under subsection (b), the buyout price is the amount that would have been distributable to the dissociating partner under Section 807(b) if, on the date of dissociation, the assets of the