Proprietorships and Partnerships, Essay Example

Case

Kuli owned a tobacco farm and entered into an agreement with Magory whereby Magori would:

1. Work the land for a year;
2. Be given possession of a house on the land during that period;
3. Receive from Kuli half the necessary supplies for the land and provide the other half himself;
4. Market the crop and give half the proceeds to Kuli.

Were Kuli and Magory partners? If not what type of arrangement was it?

Kuli and Magory were partners in this agreement concerning the land because by definition, a partnership is a consensual and contractual relationship between two or more persons. According to Canadian Law, they are four basic elements of a partnership and these are:

1. There must be a relationship,
2. The relationship must be between two or more persons,
3. The business must be common to the parties, and
4. There must be a profit motive behind the operation

They both agree verbally that Magory would work the land for a year, take possession of the house on the land during that time, both of them would share equally the supplies needed for the operation, and on marketing of the products, they would share the proceeds. The agreement was created verbally, but would stand up as valid in Canadian Courts according to The Law and Business Administration, 12^th edition.

The purpose of the partnership was to make a profit, but was only implied, by the statement that the y would share the proceeds at the conclusion of the marketing exercise. Logical thinking shows that at the end of the sales transactions, should they both deduct the expenses incurred on the farm; they would either have made a profit or a loss.

The other elements of the partnership, namely the business being common to both, was also prevalent, therefore the arrangement constitutes a partnership. Had they decided to donate the proceeds to a charitable organization? there would be no partnership, because the profit motive would have been eliminated.

In the event both men had a dispute over the handling of the affairs, and end up in a court of law, the judge would look at the substance of the relationship and with out doubt declare that they had a partnership relationship, and would settle it base on what the law states on implied profit making business activities.

Reference

West Encyclopedia of American Law, 2005, 2nd Edition, Partnerships, pp.377-381

Mann& Roberts, 2004, Essentials of Business Law, 8th edition, pp.581-584