Question

Robin and Bol, best friends since second grade, have begun a newsletter or "Palabra for fans of their local poetry scene. Though they have kept their day jobs, they spend most of their free time together producing the Palabra, which they create each week in the garage of the house they rent together. They distribute it for free but earn revenue through sales of advertising, and more often than not break even or even turn a small profit. Their dreams are much bigger, though, and plan for it eventually to be their sole employment. The Palabra was initially Robin's idea, and he put the first several issues together by himself in his dorm room while still in college. When he told Boi about it, she asked if she could help, and said "Just tell me what to do... I don't know anything about this kind of stuff, so I'll just do whatever you tell me to do." They then bought some printing equipment to do a more professional job, deciding between themselves to "go half and half on the cost. They both worked on the actual production of each issue, made sales of advertising space, and made deliveries of the Palabra to newsstands, bars and coffee shops. Robin and Boi don't keep formal books (except for the checkbook of their joint checking account, in which Robin deposits checks from advertising clients, and from which he pays expenses), and they have never written down any sort of agreement between themselves. Boi's uncle Samir, a well-heeled retiree, was sad to hear that money had been tight, and he made two offers to help the Palabra. First, Samir offered to give Boi and Robin the use of $5000 in cash to cover expenses. When Boi insisted that the offer was too generous, Samir said "hey, don't worry mijo. Pay it back when you can. I'm proud of you." Second, he introduced them to a friend named Petral, who runs a local bookstore that has nightly poetry slams. Samir gave Boi Petra's business card and, to make a long story short, Robin and Boi were able to use Samir's name as their introduction and land a lucrative advertising contract for the store. As a down-payment, Petra sent them a check for $1500. For reasons that remain unclear, however, and just shortly after striking their deal with Petra, Boi and Robin closed down their business and absconded with Petra's $1500. Samir being the only viable defendant left to sue, Petra sues him. a.) What business model do Robin and Boi have? b.) Does the fact pattem indicate that Boi really anticipated no ownership or managerial responsibility? c.) What liability and decision making powers do each of the parties have? Midterm Study Guide Page 4

Answer 1

(a): The business model that Robin and Boi have is the business model of partnership. In this case both will be deemed to be partners as both are working actively in the operations of the entity and have a joint checking account. The capital contributed by them in the form of printing equipment is also equal.

(b): The fact pattern indicates that Boi had in fact anticipated an ownership as well as managerial responsibility. Boi was taking all actions to ensure the success of the venture, contributed to the buying of the printing equipment and even managed to get funding from her uncle. All these steps and actions on part of Boi indicate her anticipation of ownership and managerial responsibility.

(c ): Being equal partners both Robin and Boi will have unlimited liability. As per the provisions of partnership partners have unlimited liability for partnership liabilities. Partners are jointly liable on all form contracts. They are also jointly and severally liable for all torts committed by one of the partners. With regards to decision making powers both parties will be regarded to have equal decision making power in the context of this case.