Mistake regarding the financial statements and tax breaks

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Case: Five realtors, Aaron, Barend, and their three friends form a partnership through a partnership agreement to make a real estate brokerage firm. Each of the partners shares equally in the liability and management of the partnership. One of the partners, Aaron, has been placed in charge of a major account to sell a piece of lakefront property. It is the company's biggest potential sale. In the course of the dealings to sell the land, however, Aaron becomes involved with one of the potential buyers of the property. This potential buyer happens to be his uncle's business firm. He becomes involved in a way that constitutes a conflict of interest to the partnership. He then gives preferential treatment to the potential buyer, thus harming the financial status of the partnership. He falsifies statements regarding the purchase of the lakefront property, and tampers with the numbers to give the client a better tax break and better deal because the client is his uncle. He does so without Barend and/or the other partners' permission. Barend finds out about the secret actions of Aaron, and is rightfully unhappy. He wants to investigate whether Aaron was in violation of his duties to the partnership.

Question: Suppose Aaron did not engage in preferential treatment, but was guilty of only an honest mistake regarding the financial statements and tax breaks. Is Aaron liable?

Reference no: EM133299328

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