Vohland v. Sweet
Citation and Court
Vohland v. Sweet, 433 N.E.2d 860 (Ind. App. 1982)
Facts
Sweet worked in Vohland’s nursery business and was introduced to customers and held out to third parties as Vohland’s partner, even though no formal partnership agreement existed and Sweet was actually compensated differently than a true partner. When Sweet sought a share of the business’s assets upon leaving, Vohland denied a partnership existed. Third parties had dealt with the business believing Sweet was a partner.
Issue
Whether a person who is held out to third parties as a partner—but who has no formal partnership agreement—may be treated as a partner by estoppel, creating liability to those third parties.
Holding
The Indiana Court of Appeals held that a partnership by estoppel existed, and Sweet could be treated as a partner with respect to third parties who had reasonably relied on the holding-out.
Rule / Doctrine
Under the Uniform Partnership Act, a person who is represented to be a partner by another (or who consents to such representation) is liable as a partner to third parties who reasonably rely on that representation. This is “partnership by estoppel”—not a true partnership, but one that creates liability to protect the reliance interests of third parties.
Significance
Illustrates the doctrine of partnership by estoppel, which protects third parties who reasonably rely on representations of partnership. Important for understanding how courts protect creditors and contracting parties in informal business arrangements and how liability can arise without a formal partnership agreement.