Buyer Beware: Failed Joint Venture Negotiations and Involuntary Business Partnerships

摘要

Using the word "involuntary" to describe a partnership may well seem paradoxical. This article discusses the risk of court-imposed partnerships stemming from a little-discussed and therefore all-the-more insidious doctrine, referred to as the Pallant v Morgan equity. In the paradigm case, two parties agree to make a single bid for their joint benefit in respect of property in which they are both interested. The arrangement avoids competition which would drive the price up, and averts the risk of either party getting nothing. But what happens if the parties' negotiations fail so that no binding contract arises and one of them goes ahead solo, securing the property for himself? In such cases, the successful bidder might become a constructive trustee of the property acquired, with the court imposing a partnership in respect of the said property.