What are the typical consequences of a partner's death on a partnership?

The correct response accurately identifies the typical consequences of a partner's death in a partnership situation. When a partner dies, the default legal rule is that the partnership is dissolved unless there are specific provisions in place, such as a buy-sell agreement, that allow for a continuation of the partnership despite the loss of a partner.

A buy-sell agreement can outline the procedures and terms under which a deceased partner's interest is transferred, thereby enabling the partnership to continue and the remaining partners to buy out the deceased partner’s share. This prevents the partnership from being automatically dissolved and facilitates a smoother transition of ownership and ongoing operations.

In contrast, without such agreements, the death of a partner usually triggers a dissolution process, which includes settling debts, liquidating assets, and distributing any remaining assets among the partners or heirs. Thus, the option correctly highlights the conditional nature of a partnership's continuity following a partner's death based on existing agreements.