Case Studies

Recent Cases of Interest

Bank Guaranty is Time Sensitive

Referring to someone as "Partner" is Significant

Frequently many people refer to others as "partner" without realizing the legal implications that accrue. While it's natural to use the term when referring to others with whom you work or have business alliances, the law often takes a strict and often adverse view. For example, Sarah, a manufacturer's representative for the sale of furniture, started a working relationship with Bill. Bill is also a representative for the same company but in a different territory. By working together, the two of them believed that they would be able to increase their combined sales and profit from the alliance. Bill and Sarah did not enter into any formal written agreement - it was done with a handshake. They agreed that they would refer sales opportunities to each other and for about one year their relationship was, indeed, a success. They shared the commissions generated from sales achieved through the referrals. They never agreed to share their individual operating expenses and they each kept their separate business names; although both of them clearly referenced the same manufacturer when soliciting business. During the first year, Sarah repeatedly referred to Bill as her "partner"' in Nevada, Bill's assigned territory. Sarah's territory was limited to California. While observing the installation of the furniture at the project in Nevada, Sarah continued to refer to Bill as her partner in the presence of others including the owner of the commercial space for which the furniture was ordered and to be delivered and installed. A problem arose because the furniture did not meet specifications submitted by Bill. The controversy developed into a lawsuit for damages claiming substantial losses that were sustained as a result of the incorrect furniture and the delayed installation that forced the "opening" of the new space to be pushed back. The owner sued Bill and Sarah. Sarah's defense was that she was an independent representative and had no duty to the owner. Sarah's defense was that Bill was the representative and should be solely liable. The owner claimed that Sarah repeatedly referred to Bill as her "partner" and that was backed up by the testimony of several others who were present when Sarah made the references to Bill. At the end, Sarah was held equally responsible for the loss together with Bill. The Court ruled that because Sarah referred to Bill as her partner, coupled with the absence of any denial by Bill, Sarah held herself out to the general public as a partner and thereby assumed the liability. The solution: don't use the term Partner unless it's really the case!