Brief Fact Summary. Plaintiff, Stephen Kovacik, solicited Defendant, Henry Reed, to enter a partnership wherein Plaintiff provided the money and Defendant provided the labor. Plaintiff sought to collect half of the money that he contends the business lost during their partnership.
Synopsis of Rule of Law. In a partnership wherein one partner contributes capital and the other labor, the partner contributing capital can not hold the other accountable for money lost, just as the partner responsible for services can not hold the other responsible for any losses he suffered.
Another view would be that in such a situation the parties have, by their agreement to share equally in profits, agreed that the value of their contributions--the money on the one hand and the labor on the other--were likewise equal; it would follow that upon the loss, as here, of both money and labor, the parties have shared equally in the losses.View Full Point of Law
Issue. The issue is whether partners who agreed to split profits equally are also equally responsible for financial losses.
Held. Plaintiff is not entitled to collect any money from Defendant for operating losses. The agreement did not expressly allocate each party’s liabilities in the event of an operating loss, and therefore it is assumed that the partner providing the financing is responsible for any financial losses. The other partner is responsible for the potential loss of any services rendered.
Discussion. Plaintiff was not required to perform any services to the extent that Defendant had to perform. It would be counterintuitive to believe that Defendant would have agreed to perform all the labor while still being liable for half of any losses.