Brief Fact Summary. A brokerage business borrowed money from Peyton (D) and others (D).
Synopsis of Rule of Law. If a transaction bears all of the aspects of a loan, and words are not determinative, a partnership arrangement will not be found.
Mere words will not blind us to realities.View Full Point of Law
Issue. Will a partnership arrangement be found if the only control exerted (and sharing of profits) was to protect and pay off a loan?
Held. (Andrews J.) No. Words alone do not determine a relationship. Declaring that no partnership is intended will not dispose of this issue. The parties will be liable as partners if the words, acts , and agreements create the existence of a partnership arrangement. Neither Peyton’s (D) words nor actions establishes a partnership. The contract also indicates that there was nothing other than necessary precautions in it to protect the loan. Any control was negative in nature, and was emplaced to prevent misuse of funds. Peyton (D) held no power to bind the contract nor steer or initiate policy. Peyton (D) and the other loaners (D) are not liable because it was only a loan. Judgement affirmed.
Discussion. Partnerships result from express or implied contracts. The sharing of profits is an important factor in determining the existence of a partnership. Equally important to this issue is the power to share the decision making function and/or bind contractual obligations to the partnerships.