The following post touches on the discussion activity (3.1/2) from this week which asks us to consider whether the agreement between X and Y regarding their barbershop (Z) constitutes a partnership. I will assume for the sake of this activity that the agreement was made in BC and therefore subject to the BCPA.
Provisions 2.2 and 2.3 of the agreement split the operation and management of Z evenly between X and Y, based on a six-day work week during which each works (i.e. operates and manages) every other day. These provisions furthermore stipulate that “any and all revenues from the Business on such days will be kept exclusively” by whichever partner is working that day. First, it is reasonably clear from these provisions that both X and Y are assuming a high and equal measure of control. As per the control/dependency test in the McCormick case, this would support the position that they are indeed partners. Also, the fact that revenue splitting is part of this agreement suggests that X and Y are “carrying on business in common with a view of profit”, which would likely meet a foundational criterion for a partnership as per s. 2 of the BCPA. The issue of whether or not it is “in common” (are they perhaps just sharing a space and no more?) is addressed by provisions 2.5 and 2.9 which states that the lease for the business is in both of their names. If one or the other of X and Y fails to act in such a way as to produce revenue for Z, then presumably the ability to keep up the lease will be compromised. They are dependent on each other, or in other words which are perhaps more appropriate to our class discussion, they are mutually liable to and for each other. The fact that they both have their names of the lease assumes a great deal of trust, and this, as we have learned is central to a partnership (notwithstanding, of course, the LLP).
The agreement does, however, create distinctions between the responsibilities of X and Y. Namely provisions 2.6, 2.8, and 2.10, wherein they are each individually responsible for such things as their own hair products, advertising, and paying taxes. And while it is true that X and Y are sharing the lease and therefore must have a great deal of trust in one another, they are not necessarily sharing any of each others profits. BCPA s. 4(c) states that share of profit is a strong factor where there is an absence of evidence to the contrary of a proof of partnership (and this is perhaps the most important factor, as the rest of s. 4 simply suggests things that are not partnerships). X and Y are not necessarily sharing each others profit, and certainly according to the provisions just listed there are a number of factors suggesting that the work for their individual revenue, which only they take home, is highly individualized. The provision I would point to, along with the lease-sharing provision (2.5) to support the notion of partnership in spite of this, however, is 2.7 – the cleaning provision. If either partner reneges on this, it will absolutely disrupt the ability of the other to make a profit, as that partner will now have to clean up the mess of the other, thereby cutting into time they could otherwise be serving customers, or perhaps even having the shops reputation tarnished generally for being unclean/unsanitary. While X and Y are making individual revenues which they and they alone take home, their ability to do this successfully depends to a large degree on each others ability and willingness to ‘do their fair share’. They share revenue insofar as they share the ability to damage or grow the business as a whole. Again – they are liable to and for one another.
While this may seem like a flexible working of the facts of the agreement here, I would suggest that the main thing that the cases have shown this week is that partnerships can be defined flexibly (look to Kucor especially). In this instance, if it is the intention of X and Y (the ever-important ‘people behind the entity’) for this agreement to create a partnership between them, then I imagine a court would be willing to find that to be the case as well.
