Donald Petersen joined his father, William Petersen, in a chicken hatchery business William had previously operated as a sole proprietorship. When the partnership was formed, William contributed the assets of the proprietorship, which included cash, equipment, and inventory having a total value of $41,000.

Donald contributed nothing. They agreed to share the profits equally.

For fifteen years Donald took over the operation of the hatchery with very little help from his father. When the business was terminated William contended that he was entitled to the return of his capital investment of $41.