Formation of Partnerships Flashcards
Vohland v. Sweet (Ind. App. 1982)
Facts: Voland Sr. retires, gives nursery biz to Voland jr. Jr takes care of financials and Sweet does all the work (in charge). Sweet is promised 20% of net profits. Jr invests $$ to get inventory, then pays Sweet 20% “commission” [net profit - purchase of inventory] Issue: Are Sweet and Jr p/ns? Or is Sweet an employee?
Hold: Yes. They are p/ns.
Rule: Conduct (not intent) of parties determines if a p-ship exists
Reasoning: they share in profits bc they are p/ns and they are in p-ship bc they share profits…circular. But also Ct looks at incentives (NOT intent) – only reason to give 20% is to incentivize Sweet to grow biz (like a p/n!)
UPA § 6. Partnership Defined
(1) A partnership is an association of two or more persons to carry on as co-owners a business for profit.
(2) But any association formed under any other statute of this
state, or any statute adopted by authority, other than the authority
of this state, is not a partnership under this act, unless such association would have been a partnership in this state prior to the adoption of this act; but this act shall apply to limited partnerships except in so far as the statutes relating to such partnerships are inconsistent herewith.
UPA § 7. Rules for Determining the Existence of a Partnership
In determining whether a partnership exists, these rules shall apply:
(1) Except as provided by section 16 persons who are not partners as to each other are not partners as to third persons.
(2) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property.
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:
(a) As a debt by installments or otherwise,
(b) As wages of an employee or rent to a landlord,
(c) As an annuity to a widow or representative of a deceased partner,
(d) As interest on a loan, though the amount of payment vary with the profits of the business,
(e) As the consideration for the sale of the good-will of a business or other property by installments or otherwise.
UPA § 8. Partnership Property
(1) All property originally brought into the partnership stock
or subsequently acquired by purchase or otherwise, on account of
the partnership, is partnership property.
(2) Unless the contrary intention appears, property acquired with partnership funds is partnership property.
(3) Any estate in real property may be acquired in the partnership name. Title so acquired can be conveyed only in the partnership name.
(4) A conveyance to a partnership in the partnership name, though without words of inheritance, passes the entire estate of the grantor unless a contrary intent appears.
UPA § 9. Partner Agent of Partnership as to Partnership Business
(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority.
(2) An act of a partner which is not apparently for the carrying
on of the business of the partnership in the usual way does not bind the partnership unless authorized by the other partners.
(3) Unless authorized by the other partners or unless they have abandoned the business, one or more but less than all the partners have no authority to:
(a) Assign the partnership property in trust for creditors or on the assignee’s promise to pay the debts of the partnership,
(b) Dispose of the good-will of the business,
(c) Do any other act which would make it impossible to carry on the ordinary business of a partnership,
(d) Confess a judgment,
(e) Submit a partnership claim or liability to arbitration or reference.
(4) No act of a partner in contravention of a restriction on authority shall bind the partnership to persons having knowledge of the restriction.
UPA § 11. Partnership Bound by Admission of Partner
An admission or representation made by any partner concerning partnership affairs within the scope of his authority as conferred by this act is evidence against the partnership.
UPA § 12. Partnership Charged with Knowledge of or Notice to Partner
Notice to any partner of any matter relating to partnership affairs,
and the knowledge of the partner acting in the particular matter,
acquired while a partner or then present to his mind, and the knowledge
of any other partner who reasonably could and should have communicated it to the acting partner, operate as notice to or knowledge of the
partnership, except in the case of a fraud on the partnership committed by
or with the consent of that partner.
UPA § 16. Partner by Estoppel
(1) When a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to any one, as a partner
in an existing partnership or with one or more persons not actual
partners, he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to
the actual or apparent partnership, and if he has made such
representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been
made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.
(a) When a partnership liability results, he is liable as though he were an actual member of the partnership.
(b) When no partnership liability results, he is liable jointly with the other persons, if any, so consenting to the contract or representation as to incur liability, otherwise separately.
(2) When a person has been thus represented to be a partner in an existing partnership, or with one or more persons not actual partners, he is an agent of the persons consenting to such representation to bind them to the same extent and in the same manner as
though he were a partner in fact, with respect to persons who rely upon the representation. Where all the members of the existing partnership consent to the representation, a partnership act or obligation results;
but in all other cases it is the joint act or obligation of the person
acting and the persons consenting to the representation.
UPA § 18. Rules Determining Rights and Duties of Partners
The rights and duties of the partners in relation to the partnership shall be determined, subject to any agreement between them, by the following rules:
(a) Each partner shall be repaid his contributions, whether by way of capital or advances to the partnership property and share equally in the profits and surplus remaining after all liabilities, including those to
partners, are satisfied; and must contribute towards the losses, whether of capital or otherwise, sustained by the partnership according to his share in the profits.
(b) The partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its
business or property.
(c) A partner, who in aid of the partnership makes any payment or advance beyond the amount of capital which he agreed to contribute, shall be paid interest from the date of the payment or advance.
(d) A partner shall receive interest on the capital contributed by him only from the date when repayment should be made.
(e) All partners have equal rights in the management and conduct of the partnership business.
(f) No partner is entitled to remuneration for acting in the
partnership business, except that a surviving partner is entitled to reasonable compensation for his services in winding up the partnership affairs.
(g) No person can become a member of a partnership without the consent of all the partners.
(h) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; but no act in contravention of any agreement between the partners may be done rightfully without the consent of all the partners.
