Partnership agreement terms

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Reference no: EM132289352

Smith, Defendant (D) and Jones Plaintiff (P): A Disjoint Venture”

Jones (P) and Smith (D) formed a “joint venture partnership agreement”, to build a residence in which Smith (D) would serve as general contractor and Jones (P) would provide capital. Upon sale of the dwelling, Smith (D) was to receive 40% of the net profits and Jones (D) 60% as stated in their agreement.

The agreement provided for distribution of the proceeds of the venture as follows:

“9. Distribution. Upon or about completion of the dwelling it shall be placed for sale. Upon sale of same, and after deducting all monies expended by Jones plus interest at prime plus one point and/or including interest or any funds borrowed for the project, not to exceed prime plus one point, engineering fees, architectural fees, legal fees, broker fees, if any, and any other costs connected with the project, the parties, Jones and Smith shall divide the net profits as follows: ...” “ Jones — sixty (60%) percent; Smith — forty (40%) percent”

Both parties complied with the agreement. Jones provided the funds; Smith supervised and delivered the finished house. Unfortunately, the project took over three years to complete. Meanwhile, the real estate market slowed and prices dropped on most housing. The house finally sold for $420,000. The cost incurred in building and selling the house was $498,917. The venture lost $78,917 on the transaction.

In all, Jones (P) was repaid all but $78,917 of the money he advanced pursuant to the contract. He also claimed unreimbursed interest of $85,440 for his self-characterized "loan" to the partnership. Jones (P) thus claimed a total loss of $164,357. If Jones (P) prevails, he could receive a judgment for 40% of this amount, or $65,742.80 from Smith (D). Jones initially sought a summary judgement and was successful. This is now the appeal. Smith (D) contends, in short, that the agreement was for a joint venture, silent as to losses, and that both parties risked and lost their unrecovered contributions, Jones (P) money and Smith's (D) labor.

Prepare a written response to the following questions. Prepare your response using a 12pt font, double spaced. Not to exceed 1 page (one side). Submit under Case Study 1 in Blackboard as a Word Document or a PDF file. Be sure to put your name on the document being submitted.

Given your understanding of the ‘partnership agreement terms’ how would you propose settlement? Explain how you arrive at your settlement decision and apply any contract interpretations you wish to research.

In absence of an agreement, general common law rule of partnership law finds, “The law presumes partners and joint adventurers intend to share equally in the profits and losses of the common enterprise. Regardless of inequalities in capital contributed.” Would this common law rule influence the issue faced by this partnership? Why or why not?

Reference no: EM132289352

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