The existence and the amount of the partnership liabilities are factors in setting the purchase price of the partner's interest. Deciding how to treat unknown liaibilities e.g.an asserted tort or breach of warranty claim, that cannot specificallly be taken into account in the valuation can be problematic. This problem is compounded by the fact that the decision on whether to indemnify against unknown liabilities must be made whrn the buy-sell agreement is drafted, perhaps years before any sale or liquidation of partnership interest occurs.
Assumption of the unknown liabilities by the remaining partners may result in windfall to the withdrawing partner. However the partnership also may benefit from future windfall profits, such as the award of large contract shortly after withdrawal when work on the contract had been in process before the partner's withdrawal or an unexpected increase in the value of fixed assets.
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