Question

The Havana Club operated in Salt Lake City under a lease running to defendant Dale Bowen, who owned the equipment, furnishings, and inventory. He did not himself work in operating the club. He made an oral agreement with Frances Cutler, who had been working for him as a bartender, that she take over the management of the club. She was to have the authority and the responsibility for the entire active management and operation: to purchase the supplies, pay the bills, keep the books, hire and fire employees, and do whatever else was necessary to run the business. As compensation, the arrangement was for a down-the-middle split; each was to receive $300 per week plus one half of the net profits. This went on for four years until the city took over the building for a redevelopment project. The city offered Bowen $30,000 as compensation for loss of business while a new location was found for the club. Failing to find a suitable location, the parties decided to terminate the business. Bowen then contended he was entitled to the entire $30,000 as the owner, Cutler being an employee only. She sued to recover half as a partner. What was the result?

Answer 1

Partnerships can be created informally and do not require any legal agreement for binding the partners. There exists a partnership among 2 or more entities if there exists:

• Sharing of profits
• Co-ownership of business
• Decision making power
• Sharing liability duty
• Business operation characteristic

The relationship between Bowen and Cutler had 4 of the 5 features of partnership. Cutler was looking after the operations of Havana Club like an owner. She qualified as being a partner. The court ruled in her favor and declared her eligible for compensation for the loss of business.