This agreement was never drawn up before the parties

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seven months under a full agreement to be drawn up. This agreement was never drawn up before the parties fell out even though more than seven months had elapsed. It was held that the claimant was a full partner. According to the court, the question whether persons are in a partnership is one of substance rather than form; and the label given by the parties is not determinative. The term “salaried partner”, was a convenient expression used widely to denote a person who is held out to the world as being a partner and whose name appears as a partner of the firm’s notepaper. In order for a partnership to be found to exist, there must be business activity, but actual trading does not need to have commenced. Khan v Mia and others [2000] 1 WLR 2123 – Four people agreed to open a restaurant. The appellant contributed most of the capital in return for a 50% share while the respondents contributed management and cooking skill. Pursuant to the agreement, premises and some equipment necessary for the business were acquired, a partnership bank account opened and a loan arranged. The business was also advertised in the local press. In addition, there was a contract for the conversion and fitting out of the premises as a restaurant. However, following difficulties in raising money and a breakdown in the relationship of the parties, the restaurant did not take off as anticipated and the agreement between the parties was terminated. By this time, over £50,000 had been spent on the venture. The respondents eventually completed the preparations and opened the restaurant on their own without settling accounts with the appellant. It was held by the House of Lords that there was a partnership between the parties; that trading does not actually have to start before a partnership could exist; and that the appellant was entitled to a 50% share of the proceeds. According to Lord Millett: The acquisition, conversion and fitting out of the premises and the purchase of furniture and equipment were all part of the joint venture, were undertaken with a view of ultimate profit, and formed part of the business which the parties agreed to carry on in partnership together. But, a mere agreement to start a business will not create a partnership if no business activity has been carried out. In Khan v Mia and others , the House of Lords stated that, “there is no rule of law that the parties to a joint venture do not become partners until actual trading commences. The rule is that persons who agree to carry on a business activity as a joint venture do not become partners until they actually embark on the activity in question.” Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 336 PARTNERSHIPS The above ruling was followed by the Court of Appeal in Ilott v Williams & Ors [2013] EWCA Civ 645. In that case, the court held that no partnership existed because the parties had not commenced any activities in relation to the business. According to the court: The parties had a concept for a new business but as of April 2008 they had no means of
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