Business Divorce: Court Held That Parties Did Not Form A Partnership Where Certain Express Conditions Precedent Were Not Met
Parties often begin a business together without thinking through all of the legal details that define their rights. When they eventually divorce, they need to resort to the language in agreements that they entered into and also rely on statutory and common-law principles. In one recent case, the court held that the parties’ agreement’s language on the requirements for the formation of a partnership will trump other legal theories. In Anubis Pictures, LLC v. Selig, entities sued a defendant for choosing not to proceed with them and working with directly with a film company. No. 05-19-00817-CV, 2021 Tex. App. LEXIS 1580 (Tex. App.—Dallas March 3, 2021, no pet. history). The plaintiffs asserted a claim that they formed a partnership with the defendant, and that the defendant breached fiduciary duties by cutting the plaintiffs out of business deals. The trial court granted summary judgment for the defendant, and the plaintiffs appealed. Regarding the plaintiffs’ breach of fiduciary duty claim, the court of appeals held:
Anubis contends it presented evidence of the factors indicating the creation of a partnership under section 152.052(a) of the Texas Business Organizations Code. These factors are irrelevant, however, where the parties have agreed that no binding or enforceable obligations will be created unless certain conditions are met. Such an agreement to not be bound absent the specified conditions is ordinarily conclusive on the issue of partnership formation. In this case, Selig and Anubis agreed they were not obligated to work together on any transaction unless both parties signed a formal, written transactional contract. It is undisputed that this did not occur. Although performance of a condition precedent to forming a partnership can be waived, in determining whether such waiver has occurred, we consider only evidence directly tied to the condition precedent, and not the factors relevant to partnership creation set out in section 152.052(a). As discussed above, the evidence conclusively shows Selig did not waive her right to require a signed contract before being obligated to work with Anubis. Accordingly, Selig negated the creation of a partnership as a matter of law.