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Wrongfully dissolving a business partnership

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James Rhue and John Dawson formed a partnership to acquire and develop a shopping center. Rhue did the day-to-day management of the business, and Dawson contributed most of the capital and promised to obtain bank financing for the project. Rhue found two adjacent shopping centers, which could be purchased and renovated for $11.8 million. To help obtain bank financing, Dawson obtained an appraisal of the projected value of the renovated shopping centers, $15.6 million, which would return a profit of $1.9 million to each partner. Seven days later, Dawson pressured Rhue into signing a partnership agreement with a buyout clause that allowed Dawson to buyout Rhue merely by paying back Rhue's capital contribution, which was a minimal amount. Rhue was unaware that the buyout clause was in the agreement, because previous drafts of the agreement did not contain the clause and Dawson did not give Rhue time to read the agreement before signing. Later, when Rhue and Dawson had a disagreement, Dawson locked Rhue out of the partnership's office and invoked the buyout clause. Has Dawson wrongfully dissolved the partnership?

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Has Dawson wrongfully dissolved the partnership?

Dawson has definitely wrongfully discharged the partnership. There are a few key facts that contribute to the illegal act that Dawson has committed. These include the following:

1. Dawson pressured Rhue into signing a partnership agreement. A legally binding contract cannot be made under duress to either party. Because he was pressured, the courts would likely consider this as a contract signed under duress.

2. Rhue was unaware that the buyout clause was in the agreement, because previous drafts of the agreement did not contain the clause. This is another illegal element. As a matter of law, a contract cannot be changed without the other party's knowledge, after all parties have agreed to the ...

Solution Summary

This solution determines if Dawson has wrongfully dissolved the partnership. All relevant case aspects are thoroughly identified, analyzed and discussed.

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