Downs, Frey, and Vick formed the DFV general partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for five years.
After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000.
Which of the following statements about the form of the DFV partnership agreement is correct?
- It must be in writing because the partnership was to last for longer than one year.
- It must be in writing because partnership profits would not be equally divided.
- It could be oral because the partners had explicitly agreed to do business together.
- It could be oral because the partnership did not deal in real estate.
Answer(s): A
Explanation:
Choice "a" is correct. Under the statute of frauds, an agreement, which by its terms cannot be performed within a year, must be evidenced by a writing containing the material terms and signed by the parties to be charged.
Absent a writing, the partnership will be treated as a partnership at will.
Choice "b" is incorrect. There is no requirement that partnership agreements be in writing merely because profits will be divided unequally.
Choice "c" is incorrect. The statute of frauds requires contracts that cannot by their terms be performed within one year to be evidenced by a writing containing the material terms and signed by the parties to be charged. Choice "d" is incorrect. Whether or not a partnership is to deal in real estate is irrelevant to whether the partnership agreement must be in writing.