The Business Relationship Dynamics and Legal Claims in the Case of Dale, the Three Grunts, and New Auto

Dale and two friends decide to supplement their incomes during college by buying two snow blowers and several shovels, which they use to clear snow for businesses and homeowners. The season ends profitably and they divide their earnings three ways. They decide to call themselves the “Three Grunts,” and post ads using that business name. The three friends continue their winter enterprise for four years, always sharing the costs and profits equally, but never with any written agreements.
After leaving college, Dale’s two friends moved on to other careers. Dale, however, decides to stay committed to the “Three Grunts” business. He gains the concurrence of his two friends and properly forms a new business called “Three Grunts Limited Partnership.”
The friends agree to a limited partnership agreement which provides that all of the original Three Grunts business assets will be owned by the new limited partnership. In exchange, Dale’s two friends will each hold a 10% limited partner interest. The agreement also provides that Dale may add additional limited partners, using a portion of his 80% general partner interest as consideration for the new limited partner investments.
A year later, Dale invites Carl Grunt, an experienced snow plow driver, to join as a 5% limited partner. Carl is employed as General Manager for the business enterprise, with responsibility to hire and manage the contract labor.
Dale desires to grow the business and sees a request for proposals for snow removal at a large community shopping mall. This is the biggest job ever tackled by Three Grunts, and to succeed, they need to buy bigger equipment. Dale presents the proposal to all of the partners at a partnership meeting. They all agree to contribute more capital if they get the job. Three Grunts Limited Partnership bids for and wins the job. Dale signs the final contract which states that the contract can be terminated without cause on 30 days’ notice.
As General Manager, Carl visits New Auto alone and buys a new truck to be outfitted with a snowplow. As he picks out the truck, he states, “My employees are going to love the cherry color.” The truck is bought in the name of “Three Grunts Limited Partnership,” and the purchase agreement is signed by Carl as “Carl Grunt, General Manager.” The purchase is financed by New Auto, relying only upon financial information of Three Grunts Limited Partnership.
Six months into performance of the Mall Contract, the Mall Owner lawfully terminates the contract. Three Grunts Limited Partnership stops making its truck payments.
New Auto sues Carl individually and the Three Grunts Limited Partnership in state court to collect the balance due on the truck loan.
(1) Describe the nature of the business relationship among Dale and the two friends while they were in college.
(2) Discuss the basis of New Auto’s legal claims against Carl. (Do not discuss issues of apparent agency.)