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Bob and Dan orally agreed to become partners in an equipment rental business. Bob, who had experience in equipment rental, was to operate the business.

Bob and Dan orally agreed to become partners in an equipment rental business. Bob, who had experience in equipment rental, was to operate the business. Dan was to take no active part but was to contribute the entire $500,000 capitalization. Bob worked ten hours a day at the business, for which he was paid nothing. Nevertheless, despite Bobs best efforts, the business failed. The $500,000 capital was depleted, and the partnership owed $500,000 in debts. Prior to the failure of the partnership business, Dan became personally insolvent; consequently, the creditors of the partnership collected the entire $500,000 indebtedness from Bob, who was forced to sell his home and farm to satisfy the indebtedness. Dan later regained his financial responsibility, and Bob brought an appropriate action against Dan for (a) one-half of the $500,000 he had paid to partnership creditors and (b) one-half of $80,000, the reasonable value of Bobs services during the operation of the partnership.

  1. Is Bob entitled to one-half of the amount ($500,000) he paid to the creditors?
  2. Is Bob entitled to the reasonable value of his services ($80,000) during the operation of the partnership?

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