Sebastian was the manager of Thai Bistro, a restaurant specializing in Southeast Asian foods. Sebastian opened a bank account in Thai Bistro's name, signing the account signature card as "owner." Umeko, who was often at Thai Bistro and had free access

Question

to its office, told others that she was "an owner" and "a partner." She also opened a bank account in Thai Bistro's name, and signed the account signature card as "owner." Sebastian told Vijay, the owner of Wong Noodles, Inc, that Umeko was a member of a partnership that owned Thai Bistro. On this basis, Wong Noodles delivered its goods to Thai Bistro on credit. In fact, Thai Bistro was owned by a corporation. When the unpaid account totaled more than $10,000, Wong Noodles filed a suit against Umeko to collect. On what basis might Umeko be liable for the debt?

Answer 1

The theory under which Umeko would most likely be liable for Thai Bistro's debt to Wong Noodles is partnership by estoppel.
The first requirement of this theory is a representation, by a nonpartner or by another with the nonpartner's consent, that the non-partner is a partner. The second requirement is reliance on that representation.

In this case, Wong Noodles could prove both elements. Both Sebastian and Umeko made representations with respect to Umeko's status in relation to Thai Bistro-they both signed bank cards as "owner," Umeko was often at Thai Bistro and had free access to its office, Umeko told others that she was a "partner" in the business, which is what Sebastian also told Vijay. As for the reliance element, Wong Noodles extended credit to Thai Bistro only because Wong Noodles believed that Thai Bistro was owned by a partnership.

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