Adams v. Jarvis
Citation and Court
Adams v. Jarvis, 23 Wis. 2d 453 (Wis. 1964)
Facts
Adams and Jarvis were partners in a medical practice. Their partnership agreement provided that upon dissolution, the withdrawing partner would not be entitled to a proportionate share of accounts receivable. Adams withdrew from the partnership and sought his share of outstanding accounts receivable, arguing the contractual provision was unenforceable.
Issue
Whether a partnership agreement may validly restrict a withdrawing partner’s right to receive a share of accounts receivable generated before withdrawal, contrary to what would otherwise be owed upon dissolution.
Holding
The Wisconsin Supreme Court upheld the partnership agreement, finding that partners may freely contract to modify the default dissolution rules, and the restriction on accounts receivable was enforceable as written.
Rule / Doctrine
Partnership law provides default rules for dissolution and distribution that partners may modify by agreement. A provision limiting a withdrawing partner’s share of pre-dissolution accounts receivable is enforceable as a valid exercise of the partners’ freedom to define the terms of their business relationship.
Significance
Illustrates the primacy of the partnership agreement over statutory default rules, and the freedom of partners to allocate economic interests differently from the UPA defaults. Useful in discussing the relationship between the written partnership agreement and the Uniform Partnership Act provisions on dissolution and winding up.