In July 2018, Dean and Diana, friends who shared their love of healthy foods and nutrition, opened up a health food grocery in Brooklyn selling organic and environmentally conscious foods and nutritional supplements. Diana had no previous experience in retail, but Dean worked for a long time as a manager at a Whole Foods. Diana provided $100,000 in capital contribution to start, and she and Dean agreed that in lieu of his capital contribution in cash, Dean would run the day-to-day operations, and that they “would be equal partners.” The business was popular and profitable, and operated under the name “D&D Health Foods” (D&D). Although Dean and Diana did not have a written partnership agreement, the business was a success, and they shared in the profits and liabilities equally. From day one, D&D rented the building that the store was located in. Diana helped throughout the store only when needed at first, but Dean ran the store operations, including the hiring and buying. By the end of the first year, both Dean and Diana grew comfortable in Diana’s role as more of a “silent partner,” although she and Dean spoke periodically to discuss the business. After business turned promising enough to plan for D&D’s longer term business prospects, Dean and Diana wanted to buy the building they were in. Dean asked the owner of their building, an elderly gentleman who talked about moving closer to his kids in Florida, whether he would sell the building to them. Dean asked him several times over a period of two years, but the owner repeatedly said the building was not for sale. One month ago, the building owner visited the store and said to Dean, “I’m planning to retire and would like to see if you’re still interested in buying the building. You’ve been such a good tenants. I’ll sell the building below market value if you still want it.” Dean replied, “Yes, but may we have a week to think about it?” The building owner agreed.

 

Five days later, Dean texted Diana the following:

 

Hey D – I’ve been doing a lot of soul searching, and decided that I am withdrawing from our partnership. I will wind up the partnership’s business and send you a check for half your share. I promise to do this fairly and apologize for telling you this over text. Diana did not reply. Without letting Diana know, Dean called the building owner five minutes after he sent the text to Diana and made an offer for the building. The building owner accepted, and he and Dean entered into a contract for the purchase/sale of the building.

 

Four weeks later, Dean took ownership and title to the building, and two weeks ago, Dean sent to Diana a check for half the total dissolution distribution and explained everything to Diana in a letter, in which he included a full accounting of dissolution. After receiving the check, Diana sent Dean the following text: Dude – What? I got your check, but I’m not cashing it. I never agreed to end the partnership. Not right that that you did this without talking to me first! And then purchased OUR building without me! It is OUR building, so you should the title to the building should be in OUR partnership. Can you even end the partnership by yourself? What makes you think you can do that? I paid all the money to start our business, and now you’re gonna do  me like this? By giving me only half of what’s left?

Dean replied by text: I am so, so sorry, D. I needed a change in my life. I loved working with you, but feel like I had to do something on my own. I enjoyed our partnership, but it is dissolved, and I’ve moved on. Please understand and do the same. Dean then proceeded to operate the store as “D’s Health Foods,” with the same employees and selling the same products. Diana sues Dean for withdrawing from the partnership and for breaching his partner duties.

 

QUESTION:

1. Addressing Diana’s allegations, explain fully the rights of both parties, Diana and Dean, and what arguments each would raise during litigation. Also, what outcome?

Answer rating: 100% (QA)

Relation of Partners with each other All partners are absolve to form their own terms and conditions with relevance functioning in their partnership deed The Indian Partnership Act 1932 has also presc... View the full answer