Many partnerships, particularly the real estate development
and oil and
gas industries, are intentionally formed
with written partnership agreements
and full understanding amongst
the participants
as to what are the rights and obligations as partners. There are as well inadvertent partnerships. “Partnership” is a relationship that
exist if the statutory definition of what is a partnership is satisfied. Hence, persons can be in a partnership without
either knowing
that they are partners or, in certain cases, even if they have said they don’t want to be partners. The flipside of that coin is that, even if you say you are partners, if you don’t meet the legal definition
of what is a “partnership,” then no partnership comes into existence. It was this latter rule that was recently considered by a New York Court. Hammond v. Smith, 2017 NY Slip Op. 05337, 151 A.D.3D 1896 (App. Div. Fourth June
30, 2017, corrected
Aug. 2, 2017).
A partnership is defined at section 6(1) of the Uniform Partnership Agreement
as “an association
of two or more persons to carry on as co-owners a business for profit.” Section 7 of the UPA goes on to define a number of relationships or
features thereof
that do not give rise to a partnership. In this instance, the plaintiff alleged
that the defendant had breached an oral partnership
agreement,
the aim of the partnership being
to develop and market a lithographic
tool. The trial court granted summary judgment, finding that no partnership existed. That determination would
be affirmed by the Appellate Division. In that there was no partnership agreement, the court looked: “(1) the parties’ intent, whether express or implied; (2) whether there was joint control and management
of the business; (3) whether the parties shared both profits and losses; and (4) whether the parties combined
their property, skill or knowledge.” From there, making factual assessments
based upon evidence including
depositions and
affidavits,
the court found, notwithstanding the
fact that the parties had referred to one another as partners, determined that
the necessary
elements of a partnership are missing. Citing both UrbanAmerica, L.P. II v. Carl Williams
Group, LLC, 95 A.D. 3D 642, 644 (2012) and Kyle v. Ford, 184 A.D.2D 1036, 1036-1037 (1990), it specifically noted
that “calling an organization a
partnership does
not make it one.”
Peter Mahler, in his blog New York Business Divorce, has as well reviewed this decision, that review in a posting on October 23
titled Calling an Organization
a Partnership
Doesn’t Make it One, But Not Calling it a Partnership Doesn’t
Make it Not One. Got It? HERE IS A LINKto that posting.
No comments:
Post a Comment