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If it is found that two or more people have agreed upon all those matters which, in law, constitute a contract of partnership, it must be presumed that they intended that contract. If, on the other hand, some essential element to that contract is omitted, it is not a contract of partnership, no matter what it may be called.
When a dispute arose regarding the finances of Hall and Cox Construction Company, Plaintiff Rufus Darden brought suit for a partition of the partnership that he claimed existed between the parties. The evidence showed that after one of the original partners left the company, Defendant told Plaintiff, an employee, that Plaintiff was the new partner. Defendant testified that Plaintiff was not an actual partner and claimed that Plaintiff was only entitled to the net profits. The trial court did not decide whether a partnership actually existed, but ruled that Plaintiff was entitled to 30 percent of the profits and not to any physical assets. The judge further concluded that, while Plaintiff was entitled to his agreed upon share of the profits, he cannot be granted such relief in the action because he sought only a partition and did not alternatively pray for an accounting. Plaintiff has appealed.
Did a partnership exist between the parties, thereby entitling Plaintiff to a partition of the firm’s assets upon the partnership’s dissolution?
On appeal, the court reversed the district court’s decision, finding that the parties intended to form a partnership and that Plaintiff was entitled to a partition. The court found that the verbal agreement between the parties was vague and therefore Plaintiff's construction of the agreement was adopted. The fact that Plaintiff did not contribute any direct capital to the partnership did not mean there was no intent to form a partnership. Furthermore, the evidence showed that Plaintiff reinvested some of his profits into the business, and therefore built up an interest in the partnership interests.