HOW TO DETERMINE WHETHER A PARTNERSHIP EXISTS.—In a case, not tried in court, the facts were: A Gloucester cod-fishing vessel made an unsuccessful fishing voyage. The sailors were to secure a certain portion of the profits of the voyage as their wages. When the ship returned to port, an attempt was made to collect bills incurred on the trip and to hold the seamen liable along with the owners of the vessel, as partners. It was contended that sharing in the profits made them partners. While this is true generally, this particular custom, whereby a laborer receives a certain portion of the profits of an undertaking as his wages, does not of itself constitute him a partner with the person operating the vessel. This point has been decided several times. Such questions as these arise and cause great difficulty in determining whether a partnership exists. At times it is very important, as in the case of the seamen, to know whether or not they can be made to assume the obligations pertaining to the partnership relations. While we cannot go into these relations in detail, the framers of the Uniform Partnership Act have laid down, with the utmost care, the rules which are to be used in determining whether a partnership exists or not. But, you say, why cannot the parties avoid all this difficulty by making a written agreement clearing up the entire matter? They could. It is the simplest matter in the world. But the trouble comes because a partnership arrangement is so easy to enter into, and requires so little formality, that it is taken for granted that it will come out satisfactorily, and the precautions which should be taken are sometimes forgotten. Hence, we have to have rules of interpretation to help us when the parties themselves have not taken the necessary precautions to make matters clear. These rules of interpretation are very clearly and very definitely laid down in the Uniform Partnership Act, in the following language:
(1) Except as provided by Section 16, persons who are not partners as to each other are not partners as to third persons.
(2) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not of itself establish a partnership, whether such co-owners do or do not share any profits made by the use of the property.
(3) The sharing of gross returns does not of itself establish a partnership, whether or not the persons sharing them have a joint or common right or interest in any property from which the returns are derived.
(4) The receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business, but no such inference shall be drawn if such profits were received in payment:
(a) As a debt by installments or otherwise,
(b) As wages of an employee or rent to a landlord,
(c) As an annuity to a widow or representative of a deceased partner,
(d) As interest on a loan, though the amount of payment vary with the profits of the business,
(e) As the consideration for the sale of the good-will of a business or other property by installments or otherwise.