Bus Law-Old Prelim I - Daniel Opisso 9/28/05 Daniel Opisso...

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Daniel Opisso 9/28/05 Daniel Opisso Business Law 385 Professor Wagner Prelim 1 9/28/05 Question 1 Issue : Was Ursula an equal partner in the partnership? Rule : A Partner Ship exists when: 1. There is an association of 2 or more parties with a common benefit. 2. They are carrying on a business (ongoing business) 3. As Co-owners (each partner contributes property or services) 4. For Profit Application : In this case, it is clear that there was an association between Ursula and the other partners in the bar. It is clear that this association is carrying on business, (Ursula is continuing to work at the bar, and makes it her full time job). She is a co-owner because she contributed 30,000 dollars, which is 50% more than the other two. And this business is operating for a profit. The issue is whether Ursula was actually receiving a portion of the profits, one could argue that she was only getting salary, but the only difference between her check and the check to the others was that hers was called a salary check, the other partners were getting the same amount at the same time. The fact that she later loaned money to Pete for the business is irrelevant because that was a private loan that she wanted to be paid back in full for. That can be considered a private investment by Ursula. The default rules of a corporation state that each partner is entitles to an equal voice in management, each partner is entitles to equal share of profits regardless of contribution, which implies that, absent of specific provisions, they are all equal partners. Conclusion : Yes, Ursula is an equal partner with Pete and Porter, even though the word partnership is not used. Issue 2: Assuming an equal partnership exists, are there grounds for a judicial dissolution of the partnership? Rule : In order to receive a judicial dissolution the court must find that: 1. Partner declared incompetent 2. Partner declared incapable to perform partnership duties 3. Partner declared insane 4. Misconduct of partner that is substantial and materially interferes with conduct of a firm’s business 5. Willful breach of partnerships agreement. 6. Business can only Operate at a loss Application : In this case, it is clear that none of the partners are incompetent, none of the partners are incapable to perform partnership duties, none of the partners are insane, and 1
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Daniel Opisso 9/28/05 the business can operate at gains. There has been no misconduct that is substantial and materially interferes with the conduct of a firms business. The question is whether any of the partners willfully breached the partnership agreement. Because Pete and Porter really believed that Ursula was not an equal partner, they did not willfully breach the partnership agreement. They simply carried on the business after she left, they did not believe that she was an equal partner and therefore entitled to 1/3 of the assets of the business. One can argue that Pete and Porter willfully breached the duty as partners, in which case dissolution with judicial decree would be appropriate, but because they truly
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Bus Law-Old Prelim I - Daniel Opisso 9/28/05 Daniel Opisso...

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