Question

At least six months before the Summer Olympic Games in Atlanta, Georgia, a group made up of Stafford Fontenot, Steve Turner, Mike Montelaro, Joe Sokol, and Doug Brinsmade agreed to sell Cajun food at the games and began making preparations. On May 19, the group (calling themselves Prairie Cajun Seafood Catering of Louisiana) applied for a business license with the county health department.

Ted Norris sold members of the group a mobile kitchen in return for an $8,000 check drawn on the “Prairie Cajun Sea-food Catering of Louisiana” account and two promissory notes, one for $12,000 and the other for $20,000. The notes, which were dated June 12, listed only Fontenot “d/b/a Prairie Cajun Seafood” as the maker (d/b/a is an abbreviation for “doing business as”).

On July 31, Fontenot and his friends signed a partnership agreement, which listed specific percentages of profits and losses. They drove the mobile kitchen to Atlanta, but business was disastrous. When the notes were not paid, Norris filed a suit in a Louisiana state court against Fontenot, seeking payment.

1. Discuss the elements of a partnership and determine whether there was a partnership among Fontenot and the others.

Answer 1

Elements of Partnership:-

1)Contract for Partnership:

A partnership is contractual in nature. So a partnership results from a contract or an agreement between two or more persons. A partnership does not arise from the operation of law. Neither can it be inherited. It has to be a voluntary agreement between partners.

2)Association of two or more persons:

A partnership is an association between two or more persons(persons must be individuals)

3)Carrying on of business:

The firm must be carrying on some business. Here the business will include any trade, profession or occupation. Only that some business must exist and the partners must participate in the running of such business.Also, the business must be run on a profit motive. The ultimate aim of the business should be to make gains, which are then distributed among the partners. So a firm carrying on charitable work will not be a partnership. If there is no intention to earn profits, there is no partnership.

4)Sharing of Profits:

The sharing of profits is one of the essential elements of a partnership. The profit sharing ratio or the manner of sharing profits is not important. But one partner cannot be entitled to the entire profits of the firm.However, the sharing of losses is not of any essence. It is up to the partners whether the losses will be shared by all the partners. If nothing is said then the losses are also split in the profit sharing ratio.

5)Mutual Agency:

This element in the definition of partnership provides that business must be carried on by all the partners or any(one or more) of them acting for them all, i.e, there must be a mutual agency.This means that every partner is both a principle as well as an agent for all the other partners of the firm. An act done by any of the partners is binding on all the other partners and the firm as well. And so every partner is bound by the acts of all the other partners. This is one of the most important aspects of a partnership.

IN THE GIVEN CASE:-

There has been a partnership agreement made on July 31(before conducting the business) between Fontenot and his friends.It is an association of five members.They came together for conducting business(to sell cajun food). They agreed to share the profits among themselves,There has been a mutual agency between them.

Therefore it is prudent to call it as partnership