Cross-7e: Case Problem with Sample Answer

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Cross-7e: Case Problem with Sample Answer

Chapter 16: Sole Proprietorships, Franchises, and Partnerships

16–7. 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 received for the sale of a mobile kitchen 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. 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:

To be considered a partnership, a business relationship must meet the following criteria: (1) the parties must have consented to form a partnership and to share in the business’s profits and losses; (2) the parties must jointly own the venture; and (3) the parties must have an equal right to manage the operation. Here, several months before the Olympics, Fontenot and his friends agreed to sell Cajun food in Atlanta and applied for a license as a group. Although a written partnership agreement was not signed until a couple of months later, Fontenot and his friends had an oral agreement to form an asso­ciation and to work together toward a common goal before they bought the mobile kitchen. The written agreement contained specific divisions of profits and losses. Thus, a partnership existed between Fontenot and his friends. In signing the notes to buy the kitchen, Fontenot was acting on behalf of this partnership. The partnership is thus liable on the notes.

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