Story Case

Herbert Betts, a skilled plumber, agreed to work for Thomas Collins, a plumbing contractor, as general superintendent. Betts promised to use his skill in the business, and to direct the other workmen. Collins agreed to give Betts forty per cent of the profits of the business during the year; and to give him an advance drawing account of $100 a month, to be later deducted from his share of the profits. During the course of the year, one of the workmen was injured because of defective machinery belonging to this business. The laborer brought suit for damages against Betts and Collins, as partners, basing the alleged partnership on the above contract. Does this contract create a partnership relation?

Ruling Court Case. Dry Vs. Boswell, Volume 1 Campbell's Reports, Page 329

Russell was the owner of a certain lighter; as owner, he let the vessel to the defendant, Boswell, under an agreement, whereby the defendant was to have half the gross earnings, in consideration of his working the lighter, and Russell was to have the other half. During the time that Boswell worked the lighter, repairs were made on the vessel by the plaintiff, Dry, for which this action is brought against the defendant. It was contended by the plaintiff, that Boswell and Russell were partners, and that, therefore, the defendant was individually liable for the repairs made.

Lord Ellenborough observed that this was only a mode of paying the defendant wages for his labor, and was different from a participation of profits and loss; under these circumstances no partnership could be considered as existing between him and the owner of the lighter.

Ruling Law. Story Case Answer

The mere fact that a person is to share the profits of a given enterprise does not, of itself, conclusively show that a partnership exists between the persons. It often happens that this is only a mode of compensating one of the persons for Ms services. Although participation in the profits is a usual incident to the relation of partnership, the existence of that fact is entirely consistent with the relation of employer and employee. If there is an agreement that the one party should receive as compensation for his services, and only as such compensation, a share in the profits, and he is not held out to the world as a partner, then he is not a partner as to the owner or to third persons. If, however, this party is entitled to share in the profits as a proprietor in the business, and his services and skill amount to his contribution to the capital of the firm, so that he has a common interest in all of the assets of the concern, then he is a partner. A partnership relation does not exist in the Story Case, because the contract of Betts and Collins does not satisfy this last requirement.