Demi is an accounting analyst. She made a name for herself in the Florida panhandle with several small businesses. Growing tired of working seven days a week, Demi formed a partnership with a local software saleswoman, Danica. They agreed via e-mail as to how expenses and such would be handled-each department would be its own profit center and each partner should be responsible for her individual departments. Although they agreed to this via e-mail, the partners failed to draft a formal partnership written agreement. While Demi went about working with clients and reimbursing her expenses, Danica grew resentful of Demi's growing profits. Seven weeks into the partnership, Demi realized that Danica had cleaned out the partnership bank account and closed it. Three years of litigation ensued over P200,000 profits and hundred of thousands of pesos were spent in legal and accounting fees, not to mention the time each former partner spent on the case. The judge ruled that in absence of written partnership agreement, Demi had mutual agency liability for the actions of Danica. Demi filed bankruptcy while Danica lost most of her clients in the aftermath.
Requirements:
- Did either of the partners commit a fraud?
- Should an electronic agreement be held identical to a formal, written partnership
- agreement? Does the fact that the two partners worked in an environment where
- most decisions and work are performed electronically make a difference?
- What could the partners have done to protect themselves from the situations?