Partnership Mechanics Holmes v. Lerner - Forming Businesses & Governing Corporations

Question 1

Fact

Answer 1

There was an expressed oral agreement between Holmes and Lerner that they were going to start a nail polish business
There was no written agreement

Holmes sued on the basis of oral partnership agreement, seeking damages. Defendants contended there was no partnership b/c parties never expressly discussed profit sharing.

Question 2

Issue

Answer 2

Is there an oral contract making Holmes and Lerner partners?

Question 3

Holding

Answer 3

• Ruled in favor of Holmes- good nail polish sense
○ Unified partnership act:
§ This is a backstop in case there is not a formal written consent
□ This law gives each person 50% of the profits
□ It’s ok that one person has all the money, the other is the talent
○ They never discussed the sharing of profits:
Sharing profits only shows there is a partnership, it does not dictate the profits

Question 4

Reasoning

Answer 4

To form partnership, there’s no requirement for an agreement specifically on division of profits; just a manifestation of intent to form a partnership and carry on as co-owners a business for profit. Profit sharing agreement just provides further evidence. Nothing unusual about an agreement where one party provides idea and the other financing.

Question 5

Business Lesson

Answer 5

Lesson Learned:
Formalize a partnership agreement
The mere fact that you are acting as a partner, going to meetings, meeting with distributors, discussing contracts with vendors etc. shows you are vested in the company (Holmes)