A useful little reminder about the nature of partnerships and contractual negotiations in Valencia v Llupar, [2012] EWCA Civ 396. Valencia owned two restaurants. Llupar, a friend of Valencia’s daughter, wanted to become involved in Valencia’s business. He alleged that Valencia had represented that the restaurants were flourishing and that he could become her business partner and rent out the apartment above one of the locations. Llupar made payments to Valencia totalling ₤80,000 although on exactly what basis was unclear. Profits from the restaurants turned out to be considerably less than Llupar claimed he had been led to believe, and the flat wasn’t ready for occupation. He sued, claiming that a letter sent to him by Valencia constituted a partnership agreement. It was headed ‘partnership agreement – subject to contract’.
The trial judge accepted that Valencia had made misrepresentations but held that because the partnership agreement was never signed, the parties should simply be restored to their original position, either on the basis of the misrepresentations or a total failure of contractual consideration. Correct result, but wrong on the law, said the English Court of Appeal. Partnership can, of course, arise at will without the need for a written agreement, but it was clear from the actual letter that any relation of partnership was to come into existence only when an agreement was concluded – the ‘subject to contract’ bit. Moneys transferred in anticipation of a formal contract that never materialise are to be refunded. There was no need to consider whether Valencia had misrepresented the state of the business to Llupar; this was a simple case of unjust enrichment.
[Link available here].
