58
C
ASE: 8
BACKGROUND
· Two friends, Patricia Holmes, a horse trainer, and Sandra Kruger Lerner, a multi-millionaire
businesswoman, agreed to form a business organization to start a cosmetics company known as
"Urban Decay."
· After returning from a trip to England to purchase horses, the two friends began experimenting
with di erent colors for nail polish. This experiment blossomed into selecting names for the
colors, securing funding for market research and product development, and naming their
company "Urban Decay."
· Holmes claimed that the two friends formed a partnership, and as the business began to
succeed, Lerner pushed her out of this business.
· Lerner claimed that there was no partnership, and although Holmes helped with the original
idea, it was Lerner's business experience and nancial connections that made the business
successful.
BEFORE YOU BEGIN
You Be the Judge!
You Be the Judge!
What is a business organization?
A business organization is an entity formed to
make a pro t. The entity may be in the form of
a sole proprietorship, a partnership, a limited
liability company, or a corporation.
What is a partnership?
A partnership is an association of two or
more persons to carry on as co-owners of a
business for pro t. The partners must "intend"
to form a partnership. This requires the court
to look at the "terms" of their agreement, their
conduct, the sharing of pro ts, and any other
surrounding circumstances that are relevant
to the case.
Can a contract be verbal?
A contract can be verbal or in writing. Some
contracts are required to be in writing; for
example, contracts for the sale of goods over
$500, contracts for the sale of real estate,
contracts that require over a year to complete,
contracts in contemplation of marriage, and
contracts where one person guarantees to
pay for the debt of another.
Holmes v. Lerner
A Case in Partnership Formation
For Evaluation Purposes Only