3034

LAWS OF MARYLAND

Ch. 801

powers of a general partner while avoiding any direct
dealings with third parties, the "is not substantially the
same as" test was introduced. Subsection (b) is intended to
provide a "safe harbor" by enumerating certain activities
which a limited partner may carry on for the partnership
without being deemed to have taken part in control of the
business. Subsection (c) is derived from § 10-106(b)(2) of
the previous Limited Partnership Act (§ 5(2) of the prior
uniform law), but adds as a condition to the limited
partner's liability the fact that a limited partner must
have knowingly permitted his name to be used in the name of
the limited partnership.

10-304. PERSON ERRONEOUSLY BELIEVING HIMSELF LIMITED
PARTNER.

(A)  ACTS TO AVOID LIABILITY. EXCEPT AS PROVIDED IN
SUBSECTION (B) OF THIS SECTION, A PERSON WHO MAKES A
CONTRIBUTION TO A PARTNERSHIP AND ERRONEOUSLY BUT IN GOOD
FAITH BELIEVES THAT HE HAS BECOME A LIMITED PARTNER IN THE
PARTNERSHIP IS NOT A GENERAL PARTNER IN THE PARTNERSHIP AND
IS NOT BOUND BY ITS OBLIGATIONS BY REASON OF MAKING THE
CONTRIBUTION, RECEIVING DISTRIBUTIONS FROM THE PARTNERSHIP,
OR EXERCISING ANY RIGHTS OF A LIMITED PARTNER, IF, ON
ASCERTAINING THE MISTAKE:

(1)  IN THE CASE OF A PERSON WHO WISHES TO BE A
LIMITED PARTNER, HE CAUSES AN APPROPRIATE CERTIFICATE TO BE
EXECUTED AND FILED; OR

(2)  IN THE CASE OF A PERSON WHO WISHES TO
WITHDRAW AS A PARTNER FROM THE PARTNERSHIP, THE PARTNER
TAKES THE NECESSARY ACTION TO WITHDRAW.

(B)  LIABILITY IMPOSED. A PERSON WHO MAKES A
CONTRIBUTION UNDER THE CIRCUMSTANCES DESCRIBED IN SUBSECTION
(A) IS LIABLE AS A GENERAL PARTNER TO ANY THIRD PARTY WHO
TRANSACTS BUSINESS WITH THE PARTNERSHIP PRIOR TO THE
OCCURRENCE OF EITHER OF THE EVENTS REFERRED TO IN SUBSECTION
(A) OF THIS SECTION:

(1)  IF THAT PERSON KNEW OR REASONABLY SHOULD
HAVE KNOWN EITHER THAT NO CERTIFICATE HAS BEEN FILED OR THAT
THE CERTIFICATE INACCURATELY REFERS TO HIM AS A GENERAL
PARTNER; AND

(2)  IF THE THIRD PARTY REASONABLY RELIED UPON
THE FACT THAT THE PERSON WAS A GENERAL PARTNER AT THE TIME
OF THE TRANSACTION.

COMMENT

This section is derived from § 10-110 of the previous
Limited Partnership Act (§ 11 of the prior uniform law).
The "good faith" requirement has been added in the first
sentence of § 10-304(a). The prior law had also called upon
the person making a contribution as described in this