Bltc-8e Case Problem with Sample Answer Chapter 30: Partnerships 20. 5 Case Problem with Sample Answer

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BLTC-8e Case Problem with Sample Answer

Chapter 30: Partnerships

20.5 Case Problem with Sample Answer
At least six months before the 1996 Summer Olympic Games in Atlanta, Georgia, Stafford Fontenot, Steve Turner, Mike Montelaro, Joe Sokol, and Doug Brinsmade agreed to sell Cajun food at the games and began making preparations. Calling themselves “Prairie Cajun Seafood Catering of Louisiana,” on May 19 the group applied for a license with the Fulton County, Georgia, Department of Public Health–Environmental Health Services. Later, Ted Norris sold a mobile kitchen for an $8,000 check drawn on the “Prairie Cajun Seafood Catering of Louisiana” account and two promissory notes, one for $12,000 and the other for $20,000. The notes, which were dated June 12, listed only Fontenot “d/b/a Prairie Cajun Seafood” as the maker (d/b/a is an abbreviation for “doing business as”). On July 31, Fontenot and his friends signed a partnership agreement, which listed specific percentages of profits and losses. They drove the mobile kitchen to Atlanta, but business was “disastrous.” When the notes were not paid, Norris filed a suit in a Louisiana state court against Fontenot, seeking payment. What are the elements of a partnership? Was there a partnership among Fontenot and the others? Who is liable on the notes? Explain. [Norris v. Fontenot, 867 So.2d 179 (La.App. 3 Cir. 2004)]
Sample Answer:
Partnership agreements can be oral, written, or implied by contract. In this case, the parties orally agreed to sell Cajun food at the Summer Olympics prior to entering a written partnership agreement. Because the promissory notes were executed prior to the written partnership contract, the court had to decide if the elements of a partnership existed. The elements of a partnership are (1) a sharing of profits and losses, (2) a joint ownership of the business, and (3) an equal right to be involved in the management of the business. The court found that a partnership existed between Fontenot and his friends and held the partnership li­able on the notes. Norris appealed to a state intermediate appellate court, which affirmed the lower court’s judgment. The appellate court noted that several months before the Olympics, Fontenot and his friends agreed to sell Cajun food in Atlanta and on May 19 applied for a license as a group. Although “the partnership agreement was not signed until July 31, 1996, it is apparent from the evidence that Mr. Fontenot and his friends had an oral agreement to form an asso­ciation and to work together toward a common goal before they purchased the mobile kitchen on June 12, 1996.” The partnership agreement contained specific divisions of profits and losses. In other words, in signing the notes, Fontenot “entered into the act of sale on behalf of a partnership.”

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