Charlie and Mia Have Started Selling T-Shirts with Iron-On Decals

Essay

Charlie and Mia have started selling T-shirts with iron-on decals and lettering. They have no formal written agreement and simply decided to split all profits equally. Each has contributed $1,000 to the enterprise, and since Mia will be doing all of the work, Charlie agrees that he will be responsible for 75 percent of any losses. Charlie does call in to make day-to-day decisions, but Mia purchases the shirts, decals, and lettering, operates the press, and runs the store. Charlie stays home and smokes cigars and drinks scotch. Alan purchases one of their shirts and, after wearing it all day, discovers that the dye has run and his upper body is now blue. After bathing numerous times, he finds that the blue dye will not wash off. Alan sues and is awarded $100,000 in damages. Charlie claims that there was no real business entity formed and that he should not be liable. How will the court decide?