Business Law Final Exam
1. George Walton, Sr., the sole owner of a small retailing business, was attempting to arrange a credit purchase of goods from a wholesaler with whom he had not previously done business. While talking in person to the wholesaler's representative, Mr. Walton pointed to his son, George-Boy (a famous musician who was home visiting his parents for a few days), and stated that "my partner and I have always paid our bills on time." George-Boy saw and heard what his father had done and said, but made no comments in the presence of the wholesaler's representative. George-Boy later informed his father that he had no intention of assuming liability for any of his father's debts. The wholesaler sold goods to Mr. Walton on credit, in reliance on the notion that Mr. Walton and the well-known George-Boy were partners. Mr. Walton failed to pay for the goods when payment was due.
After various efforts to collect payment from Mr. Walton proved unsuccessful, the wholesaler sued Mr. Walton and George-Boy in an effort to collect the debt. Is George-Boy liable for the debt? Why or why not?
Since George-Boy did not make any comments in the presence of the wholesaler's representative, and the wholesaler relied on the notion that George-Boy and Mr. Walton were partners, George-Boy is liable for the debt. The relevant legal principle is partnership by estoppel. Under this legal doctrine, a person can be liable as a partner even though no such partnership existed. It was not sufficient for George-Boy to inform his father that he had no intention of assuming liability for any of his father's debts. For George-Boy to avoid liability, he would have had to similarly inform the wholesaler of this decision.
It is significant that the wholesaler relied on the...