E-Portfolio Partnership

The following facts and questions are designed to help you learn the material in this module and
to begin developing skills that you will use as an attorney. A good business attorney needs to be
able to use his or her understanding of the law and the cases to assess situations and to provide
advice to clients.

Pedro has a new business, called “Pedro’s
Products,” which plans to sell and distribute
handmade textile and craft products from a small
country in South America. Because of various
licenses and regulations, Pedro is one of the few
individuals who is allowed to import to, and sell
these products in, the United States. Pedro is very
proud of the innovative business model he has
developed to help distribute the products. Pedro
will import the products and list them on a website.
While anyone can purchase Pedro’s products from
his website, Pedro has made special arrangements
with a group of individuals who will be able to
purchase products from Pedro at a discount. These
individuals, whom Pedro refers to as “Pedro’s
Partners” must deposit at least $25,000 with Pedro.
When these individuals purchase products the price
of the items purchased is deducted from their
respective accounts. Each “Partner’s” account may
be replenished at any time, but a requirement for
future purchases is that the balance in the account
must exceed $10,000 as well as the price of the
products purchased. The balance in the account is
non-refundable, but may be applied to any of the
products that are available on the Pedro’s Products
website. Pedro also has an arrangement (that he has
called a “profit sharing arrangement”) with the
Partners through which the Partners receive a
discount on any product purchased from Pedro.
The discount is equal to 30% of Pedro’s retail
profit. (Pedro’s retail profit is equal to the
difference between the product price, listed on
Pedro’s website, and Pedro’s cost for that product.)
Any Partner who purchases products from Pedro,
even at a discount, is entitled to resell those
products for any price he or she chooses.
Recently Pedro has learned that there are
many liabilities associated with partnership. Pedro
is also very concerned about liability that might
result from the Pedro’s Partners program and does
not want any of his so-called Partners to create
liability for him. Pedro also provides each Partner
with business cards that say “Pedro’s Products,”
but Partners have no right to participate in
management.

Pedro would like you to revise a portion of his form Letter Agreement with the Partners with a
view toward minimizing Pedro’s liability under partnership law. You should not re-write the entire
Agreement. Pedro wants your input about some ways to strengthen his protection from liability
that might be created by Pedro’s Partners. You should assume that Pedro’s Partners will probably
not have sufficient resources to indemnify Pedro’s for any liabilities that might result. In addition,
please assume that there are other provisions which address any other concerns you think that
Pedro might have about the Agreement. Furthermore, please do not revise the “Miscellaneous”
provisions. Those provisions were included merely to provide context. At this point Pedro is most
interested in minimizing his exposure to liability under partnership law. Therefore, please limit
your efforts to revising the section of the Agreement below. If you feel that it might be beneficial
to include a few sentences, explaining your revisions to Pedro, please feel free to do so, but Pedro
does not want a memo on every reason for every change you suggest.
Dear Pedro,

Attached are my revisions to your letter agreement with distributors of Pedro’s Products.
Pursuant to your desire to limit your liability under partnership law, I added a provision that
stated the discount, though tied to your profits, is simply a payment to the distributors as
independent contractors. This will negate the presumption of partnership that would arise
otherwise. Additionally, I edited the language to reflect that the relationship is an authorized
distributorship, rather than a partnership. Finally, with respect to your business cards, I would
recommend including a disclaimer that notes that the authorized distributor does not represent
Pedro’s Products in any capacity and merely sells those products. This should also reduce
potential liability that might arise from authorized distributors that purport to conduct business
on your behalf. Please feel free to reach out if you have any concerns.

Regards,

Jake

LETTER AGREEMENT

Dear Authorized Distributor of Pedro’s Products:Pedro’s Partner:

This letter constitutes the whole agreement between you and Pedro’s Products
(“Pedro’s”). By signing this Letter Agreement with Pedro’s, you are entitled to
receiveparticipate in the Pedro’s Partner benefits a discount as an authorized
distributor pursuant to the following terms of participation.

In exchange for providing Pedro’s with a payment of at least $25,000 (the

“Payment Amount”), you will be entitled to purchase products from Pedro’s at the
Authorized DistributorPartner Rate. This payment does not entitle you to any
ownership interest in Pedro’s Products. These products may be kept or resold by you
anywhere in the U.S., unless prohibited by law.

The Authorized DistributorPartner Rate is equal to the retail price shown for
a product on the Pedro’s website, reduced by the authorized distributor
discountPartner Profit Share. The Authorized distributor discount Partner Profit
Share equals 30% of Pedro’s retail profit. (Pedro’s retail profit is equal to the
difference between the price of the product, as listed on Pedro’s website, and Pedro’s
cost for that product.) For example, if a product is listed on Pedro’s Product’s
website for a retail price of $30, and Pedro’s costs is $10, then Pedro’s retail profit
is $20. The authorized distributor discountPartner Profit Share on $20 is $6 (which
is 30% of $20). Therefore, authorized distributorsPedro’s Partners would pay $24
for the product, rather than $30 for the product. All calculations of Pedro’s retail
profit and the authorized distributor discountPartner Profit Share shall be done by
Pedro’s in Pedro’s sole and absolute discretion. This discount is payment for your
services as an independent contractor in the distribution of Pedro’s Products.

The cost of any product purchased from Pedro’s website will be deducted
from the Payment Amount. The Payment Amount may be increased by you at any
time but it must always exceed the amount of any products you purchase from
Pedro’s website. If the Payment Amount is ever less than $10,000, the amount must
be increased to $25,000, or you will not receive the authorized distributor discount
Partner Profit Share. Furthermore, the Payment is NON-REFUNDABLE. It may be
applied to purchases from Pedro’s website, but it may never be repaid.

Pedro’s will also provide you with Business cards identifying you as one of
Pedro’s authorized distributorsPartners.

[Other provisions in the Letter Agreement omitted from the excerpt include
rights, requirements, reporting, and termination provisions.]

Miscellaneous Provisions:

If any provision in this Agreement is held by a court of competent jurisdiction

to be invalid, void or unenforceable, the remaining provisions shall still continue in
full force without being impaired or invalidated in any way. This Agreement
constitutes the entire agreement between you and Pedro’s and may not be released,
discharged, changed or modified except by an instrument in writing, signed by both
you and Pedro’s. A waiver of, or failure to enforce any provision contained in this
Agreement on any occasion shall not be deemed to be a continuing waiver or a
waiver on any other occasion. Pedro’s may terminate this Agreement or your Pedro’s
Partner status for any reason upon 30 days’ notice to you, or at any time, with or
without notice, for any conduct that Pedro’s in its sole discretion believes violates
this Agreement, or is harmful to another buyer, third-party, or Pedro’s interests. You
agree to comply with any and all applicable laws and regulations and shall indemnify
and hold Pedro’s harmless for any failure, on your part, to do so.

Welcome! I am so glad you are partnering with us, and we are excited to call
you one of Pedro’s authorized distributorsPartners.

Pedro,
 Pedro’s Products, Owner

I HAVE REVIEWED THE ABOVE LETTER AGREEMENT AND

UNDERSTAND AND AGREE TO ALL OF ITS TERMS AND CONDITIONS.

By:____________________ Date: ________________

[PRINT NAME], Pedro’s authorized distributorPartner

________________________________________________