Nicholes v. Hunt

Supreme Court of Oregon · 1975 · Corporations

541 P.2d 820 (Or. 1975)

Updated August 22, 2026

CorporationsPartnership dissolutionPartnership at willAccountingDistribution of partnership assetsoral partnershipfixed termclear and convincing evidence

Facts

Defendant had operated a lead shot manufacturing business as a sole proprietor before orally agreeing with plaintiff in 1972 to form an equal partnership in the mining, manufacture, and sale of shot. Plaintiff agreed to buy one-half of the existing business for $50,000, paying $10,000 initially, contributing an airplane interest, and owing the remaining $35,000 in annual installments with interest; no written agreement fixed the duration of the partnership. The business operated successfully as an equal partnership, but after disputes defendant notified plaintiff by telephone and letter in late May 1973 that their business relationship was terminated and that defendant would continue operating the business. Defendant thereafter continued the business and kept records, while both parties claimed the right to continue it and acquire the other's share.

Issue

Whether the oral partnership was for a definite term or was a partnership at will, whether defendant's unilateral dissolution was effective and in good faith, and how the partnership assets and post-dissolution profits should be distributed when defendant continued the business after dissolution.

Rule

A partnership is at will absent sufficient evidence of an agreement for a definite term, and the party asserting a fixed-term oral partnership bears the burden of proving it by clear and convincing evidence. A partnership at will may be dissolved by the express will of any partner when no definite term or particular undertaking is specified. If, after dissolution, the business is continued, the withdrawing partner is entitled to the value of his interest as of dissolution and, at his option after an accounting, either interest or profits attributable to the use of his partnership property; a personal debt owed by one partner to another is treated as a set-off against the final balance, not as a reduction of the partner's capital share for calculating post-dissolution profits. In appropriate circumstances, partnership assets may be apportioned without a liquidation sale, and the continuing partner may receive reasonable compensation for services necessary to winding up the partnership affairs.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Nora Kim and Daniel Ruiz orally agreed to operate a custom metal shop as equal partners. Nora agreed to buy into Daniel’s existing operation by paying $12,000 down and the remaining $48,000 in annual installments over six years, but they never discussed how long the partnership would last.

After 14 months, Daniel tells Nora by phone that he is ending the relationship and will continue the business himself. If Nora argues the installment schedule proves a six-year partnership term, which is the strongest response?

Explanation. The governing rule is that an oral partnership is at will unless the party asserting a definite term proves that term by clear and convincing evidence. A buy-in obligation payable over years does not by itself justify implying a fixed duration.