Pam and Pete formed a partnership in order to start a computer software consulting business. Pam was well aware that Pete could not be trusted with the partnership's money (he was likely to spend every penny they had on new computer hardware that they didn't really need) so as part of their partnership agreement, they included the following provision:

The partners promise and agree that neither will make any purchase for more than $10 without the prior consent and written approval of the other partner; and that any purchase in violation of this provision must be paid for by the partner who makes such purchase with no contribution from the other or from partnership funds."
Pete understood the provision and agreed to it, but in a moment of weakness made a winning Internet auction bid in the partnership's name for an expensive flat-screen monitor. When Pam saw the credit card bill, she refused to pay on the grounds that it was Pete's personal debt. Pete refused to pay on the grounds that the partnership is using the monitor. The credit card company wants its money and has filed suit against Pam, individually.

Required:

1. What result for Pam? Why?
2. What result for Pete? Why?

Answer rating: 100% (QA)

1 Pam may have to pay the credit card company to avoid the consequences of a late or missed payment ... View the full answer