New York courts are frequently called upon to resolve disputes over the nature of a business relationship. The Uniform Partnership Act (UPA) defines a partnership as “an association of two or more persons to carry on as co-owners a business for profit.” N.Y. Partnership Law §10(1). When there is no enforceable partnership agreement, the party seeking to establish an implied partnership must show that a partnership nevertheless exists based on the conduct, intention and relationship between the parties. The Appellate Division has set forth varying factors courts may consider, including the sharing of profits and losses. Although no one factor is determinative, recent Commercial Division decisions have placed a heightened emphasis on the factor of shared losses.

Implied Partnerships

Sometimes referred to as a de facto partnership or a partnership-in-fact, the leading New York case on quasi-partnership law is Martin v. Peyton, 246 N.Y. 213 (1927). Decided shortly after New York adopted the UPA, the Court of Appeals in Martin established that a partnership can be proven through “the production of some written instrument, by testimony as to some conversation, [or] by circumstantial evidence.” In Martin, a partner at the brokerage firm Knauth, Nachod & Kuhne (K.N.&K.) obtained a loan from the defendants for the purpose of assisting K.N.&K. with a large portion of debt. As part of the loan agreement, defendants and K.N.&K. executed several written contracts, which gave defendants, among other things, a percentage of K.N.&K.’s profits until the loan was repaid. The plaintiff, a creditor of K.N.&K., sued the defendants, arguing that the loan agreement made them partners and therefore liable for K.N.&K.’s debts.