Law School Discussion


« on: March 23, 2007, 12:32:37 PM »
Hello everyone, I can't seem to figure out what the issues are other than breach of duty of loyalty from this business assoc/corporations hypo. What do you guys think? Thanks

HYPO: G and H opened a restaurant. G is a great cook and has recipes passed down from his grandmother. He is
responsible for creating menus and meals. H is responsible for being host and arranging parties. G and H agreed to split revenues 65% for G and 35% for H, but each responsible for expenses associated with their specific endeavors. H would pay for waiters' salaries and G would pay for salaries of cooking staff & food ingredients. G would pay rent, utilities, insurance, and ads.

A yr later, G wanted to expand restaurant and G signed lease to open another one. H dissaproved and wants to
get out of it.


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Re: Help?
« Reply #1 on: March 23, 2007, 01:06:02 PM »
Just off the top of my head, you're going to have issues about what sort of agreement they had (in writing?).  And you'll have dissolution issues, because H wants out of the partnership.

Re: Help?
« Reply #2 on: March 23, 2007, 01:26:43 PM »
The question's worded somewhat confusingly.  H disapproves and wants out of what? The lease, the partnership (if there is one), both?

I don't see a breach of duty of loyalty (unless, perhaps, if G was not candid and did not disclose to H that he signed a new lease for the partnership).  It looks like you've got a simple partnership formed by implication here (go through the elements: manifestation of intent, mutual control, some form of contribution by either party, profit sharing).  If that's the case, either partner can unilaterally withdraw (barring an express partnership agreement to the contrary).  Even if there's an express partnership agreement preventing unilateral withdrawal, H can still withdraw, it's just that this will amount to wrongful dissolution and G will then be allowed to continue the partnership in H's absence (which would otherwise require G's consent) upon paying H the value of his partnership interest, minus goodwill, minus any damages caused by H's wrongful dissolution.

Plus, you've got G committing the partnership to a lease.  Is H bound by G's commitment to the lease?  Partners are both agents and principles for one another.  Under the RUPA, any partner can bind the partnership. And under RUPA, H would be liable on the lease to the extent that the partnership could not satisfy the obligation.

Those are a few things to think about, and I'm sure I'm missing quite a few more (having had Bus. Org. some time ago).