When it comes to forming a business partnership, having a written agreement is typically considered the gold standard. But what happens when there is no written agreement?
The Importance of Past Conduct and Intention
Even in the absence of a written partnership agreement, the parties’ past actions and intentions can shed light on whether a partnership was meant to be formed. The onus is on the person asserting the existence of the partnership to provide the necessary evidence to the court.
How Courts Evaluate Partnership Validity
Legal precedents like Harrington v. Fester 1980 and Pezzutto v. Dreyer 1992 serve as instructive case studies. In Harrington, the court found that a mere intention to form a partnership wasn’t sufficient, especially when other evidence pointed to an employer-employee relationship instead. Conversely, in Pezzutto, a ‘handshake agreement’ was considered valid for forming a partnership, as the court found clear, unchallenged evidence of an agreement between the parties.
Essential Elements For Partnership Formation
It’s crucial to remember that specific essential elements must be present for a partnership to be legally valid. These include mutual contributions, the intent to make a profit, and an agreement—written or otherwise—among the parties. Without even one of these key components, the partnership is considered nonexistent.
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