Case Review

Zhang wanted to run a fruit shop, but due to insufficient funds, he approached his good friend Li and invited him to join him as a partner. Zhang assured Li, 'You don't have to worry about store management. If you lose money, it's all mine, and if you make money, it's everyone's.'. Li happily accepted this profitable business and signed an "Investment Cooperation Agreement", agreeing that Zhang would be responsible for operating the store. Li would pay an investment of 100000 yuan and Zhang would pay a fixed monthly dividend of 2000 yuan to Li. Afterwards, Zhang operated the store alone. However, one year later, due to poor store management, Zhang was unable to continue paying dividends to Li. Li saw that Zhang's promise was not fulfilled, so he demanded investment funds. But Zhang claimed that the money he invested in the first time has already been lost, and besides, Li is also a partner and should bear some responsibility. Li was very angry and sued to the court.

Lawyer analysis

Article 967 of the Civil Code stipulates that a partnership contract is an agreement between two or more partners to share benefits and risks for a common business purpose. From this, it can be seen that partnerships have several characteristics, including joint investment, joint operation, shared benefits, and shared risks, and there is also uncertainty about whether the partnership can ultimately obtain profits. If the partnership agreement between the two parties stipulates that one party only enjoys fixed income, does not participate in operations, and does not bear risks, it is obviously inconsistent with the characteristics of the aforementioned partnership contract.

Article 15 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the General Principles of the Civil Code of the People's Republic of China on Contracts stipulates that when a people's court determines the rights and obligations between the parties, it should not be confined to the name used in the contract, but should be based on the content agreed upon in the contract. If the rights and obligations claimed by the parties are inconsistent with the rights and obligations determined based on the contract content, the people's court shall determine the actual civil legal relationship between the parties based on the contracting background, transaction purpose, transaction structure, performance behavior, and whether there is a fictitious transaction subject matter.

Article 667 of the Civil Code stipulates that a loan contract is a contract in which the borrower borrows money from the lender, returns the loan at maturity, and pays interest. In a lending relationship, regardless of whether the borrower has obtained income after using the loan, it has nothing to do with the lender and should repay the principal and interest at maturity as agreed by both parties. The transaction model in which one party provides funds and obtains fixed income in this case conforms to the characteristics of lending. So in practice, the court often determines that such relationships are "called partnerships, but actually loans", and ultimately makes a determination based on the loan relationship. The fixed dividends are determined based on the interest generated by the loan, and the party receiving the investment funds is required to repay the loan and a certain amount of interest to the other party.

In summary, partnership management should pay attention to the characteristics of joint operation, shared risks, and shared benefits. Partners jointly participate in business management and make decisions on daily operational matters. Make detailed agreements on capital contribution and dividends, clarify the conditions for withdrawal from the partnership, and calculate the capital at the time of withdrawal. Prevent the partnership contract from being considered "misnamed" and becoming a loan contract.