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Didn’t I Say to Get it in Writing?!

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In my April 19, 2011, blog post, I talked about the importance of putting agreements in writing.  This was so the terms of the agreement would be clear to both parties, and if there was dispute later on, one party would be unable to “mis-remember” (ala Roger Clemens) the terms.  This principle was recently reaffirmed by the Minnesota federal district court in Milan, et al., v. Colvin, et al. 

Patrick Milan (“Milan”) and William Colvin (“Colvin”) met in 2001 or 2002, and discussed forming a sports marketing company together.  They eventually formed Colvin Sports Network (“CSN”).  They apparently orally agreed to share revenue on clients “that were mutually pitched, won, and worked on together.”  According to Milan, they formed a partnership in which profits of the new business would be equally shared.  Conversely, Colvin claims that Milan was simply to provide services for CSN and be paid for those services.

In April 2008, Colvin and Milan met with a third individual to discuss expanding the business and possibly hiring this individual.  During this meeting, Milan learned that CSN had received management fees and commissions from certain shared clients that were not paid or disclosed to him.  Milan also claimed that he learned that CSN obtained business from clients that he had assisted Colvin in securing.

Among other claims, Milan sued Colvin for breach of contract.  Colvin asked the court to dismiss the matter because Milan could not establish the existence of an enforceable agreement.  Milan argued that partnership law should apply, and not contract law.  In part, the Minnesota Uniform Partnership Act states:

(a) Except as otherwise provided in subsection (b), the association of two or more persons to carry on as co-owners of a business for profit forms a partnership, whether or not the persons intend to form a partnership;

(c) In determining whether a partnership is formed, the following rules apply:

(3) A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:

(ii) for services as an independent contractor or of wages or other compensation to an employee.

The court denied Colvin’s request to dismiss the case because the existence of a partnership is a fact question (something a jury must decide), and each party had their own version of the terms of their “agreement” because it was never written down.

This is a prime example of parties who did not take the time (or incur the nominal expense) to put the terms of their relationship in writing, and now are incurring the undoubtedly high costs of litigation.

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