How should I reply using IRAC method?

Problem 1 - Is Belle a partner or just an employee

Belle, under the agreement that she has with Gaston, is a partner in the Black Forest Beauty Shoppe. The basic definition of partnership describes two or more people that carry on a business for profit. The Shoppe originally owned solely by Gaston was created to turn a profit, and he is hoping to increase its profits by making Belle his partner in the business.

Gaston and Belle have defined the parameters of their partnership agreement. The fact that they have agreed to split profits is generally enough for an implied partnership to exist. But they have gone the extra step of agreeing on a description of the terms of their new partnership. Their agreement states the terms the partnership as:

• The name under of the business is Black Forest Beauty Shoppe,
• The names of the two partners, Gaston and Belle,
• The nature of the business is a beauty shop,
• Any capital investments will be made by Gaston and Belle will not be required to make any,
• Profits are agreed to be divided 80% to Gason and 20% to Belle, if any profits are earned,
• The business roles are clearly defined as Belle will act as cashier and receptionist while Gaston will take the management role,
• Weekly salaries for each partner are stated,
• There is a defined method for a partner to withdraw from the business.

The agreement is missing some other components that are recommended to be part of the partnership agreement such as.

• There is not a plan for the business in the event of a partner's death,
• There is not a method of dissolution,
• There is not discussion of how they may handle losses to the business if that would occur,

but again, a formal agreement is not required for a partnership to have been created.

It appears to be enough with the partnership agreement to prove to the Unemployment Commission that Gaston and Belle are in fact partners. The only piece that could be missing is the Right to Management. Gaston is assuming the managing partner where Belle's role is more that of a traditional employee. However, the partnership agreement does define their individual roles as they pertain to the daily operations of the business. Therefore, it does pass the test of a partnership.

Problem 2(a) - Is Rose personally liable

Rose and Jack are in a partnership agreement. RUPA Section 306 states that partners are liable for "all obligations of the partnership unless otherwise agreed." Even though Rose did not agree with Jack in his decision to hire the firm to build the portal, Jack as partner in the business has the right to enter into the contract, therefore the business is liable to pay the contract.

In the event the partnership does not have the funds to pay the developer then Rose could be liable to pay the bill. RUPA does make the partners guarantors of any liability of the partnership that the partnership may be unable, or possibly in the case unwilling, to pay. Even though Jack did not follow his Duty of Obedience to Rose, in that he made the decision against Rose's wishes, it does relieve Rose from the Developer suing Rose for any unpaid amount.

Jack, however, did sign a contract for the Developer to create the e-commerce portal. With contract liability, under UPA, the liability is joint only. If the Developer sues Rose it then cannot also sue Jack. But again, if the Developer names Rose then Rose individually would be liable to pay the unpaid amount as she is a partner and therefore a guarantor.

Problem 2(b) - Is Jack able to get half the amount from his partner Rose (assume Summers is a typo?)

Jack made the decision, in this example, to pay the money to Developer to settle the unpaid amount. This is similar to the Long v Lopez case mentioned in Chapter 19, Partnership Operation and Termination, of the reading for the week. In this case Long paid a debt of the partnership and then sued his partner Lopez for Lopez to pay his share. The court ruled that Long did not have the power to settle the suit against the debt without notifying Lopez.

In the Jack and Rose issue it appears as though Jack decided to settle the suit and pay the Developer without consulting with his partner Rose. There is a Duty to Inform Copartners, which in this case Jack did not inform Rose. The Duty of Obedience may also apply as the partners should agree on settling debts. So, in this case Jack would be unable to recover have of the debt paid from his partner.