Partnerships cases - notes PDF

Preview

Summary

notes...

Description

PARTNERSHIPS NOTES & CASES A partnership can be defined as “the relationship that exists between persons carrying on business in common with a view of making a profit” (Gibson & Douglas 2016). There are three essential elements that must be presented for a business to be a partnership under the Partnership Act 1982(Cth). They include: 1. Carrying on a business (suggesting an effective occupation continuously carried on) 2. Carrying on a business in common (functioning on behalf of all partners) 3. Carrying on a business with a view of making a profit (associations produced to make a profit) In saying this, partnership only exits when all parties have the intention of structuring a partnership business and complying with the Partnership Act 1892 Cth. If all parties agree on sharing profits/losses and each party is able to have a voice in business decisions then partnership exists. 



Under Contract law NSW s9, it states “Each partner is liable jointly (collectively) with the other partners for all debts and contractual obligations of the firm” (Gibson & Douglas 2016). Under Tort law NSW s10-13 it states that “to establish liability of co-partners it must be shown that the act or omission was in the ordinary course of the business of the firm” (Gibson & Douglas 2016).

Lecture slide Notes Relation of partners with outsiders (s 5) -

Partners ae bound by acts on behalf of PA (Mercantile Credit Co Ltd v Garrod) (Goldberg v Jenkins)

Liability of partners to outsiders -

Under joint liability (s9) Acts that are wrong or omission Committed by a partner who was acting for the business Third party suffered a loss

-

The loss that was induced by the representation to act to his detriment Polkinghorne v Holland & Whitington Dubai Aluminium Co Ltd v Salaam

TEXTBOOK- While each partner is liable for the whole of the debts of a firm, the creditor is entitled to bring only one action against the members of a frim, because their liability is jointly Under contract law – The plaintiff must sue all partners jointly. Those partners being sued can have remaining partners joined as co-defendants. Under tort law – the plaintiff can sue partners jointly or severally. This is due to the fact that it is possible to bring an action against each one of the partners until the judgement is satisfied. To do so, it must be established that the liability of co-partners it must be shown that the act or omission was in the ordinary course of the business, if an act or omission was not in the ordinary course of the business that it was with the authority of the co-partners.

Relationship between partners (s24) TEXTBOOK – The relationship between the parties in a partnership is one of trust and good faith. This means that any matters affecting the partnership must be disclosed to the other partners and are expressly set out in the partnership Acts. The mutal right and duties of partners should be clearly set out in the partnership agreement. If nothing is said in the partnership agreement, then the partnership Act outlines the rights that the partners will have. Right of partners -

Share equally capital, profits and losses Indemnity Interest on advances Interest on capital Share in management Wages/drawings Introduce new partners Partnership differences Access to books Expulsion

Partners duties -

2

Render true accounts Account for private profits Refrain from competition

Lecture slides – each partner has their own fiduciary obligation and fiduciary duties -

There must act in the common good of the partnership This means they must avoid conflict of interest relating to no competition with the partnership or no secret profit There must be full discourse between partner

What happens to partnership property? Property used for the purpose of a partnership business won’t necessarily become partnership property. It may remain the separate legal property of one or some of the partners or even be owned, either jointly or in common, by all the partners as the private property of each of them. Whether the property used in a partnership has become the partnership is a question of fact. This can be determined by the express terms of the partnership agreement, or by inference from the way in which the parties have dealt with the property during the existence of the partnership.

Smith v Anderson (1880) Facts – trust was formed to purchase shares and debentures in a number of companies. Smith and more than 20 others were the holders of trust certificates. Each trust holder had the right to choose the trustees, who had restricted powers of management. Smith applied to wind up the trust on the basis that it had more than 20 ‘partners’, thus making it illegal under s 4 of the companies Act 1862 (UK). Issue – Was the business structure, which was called a ‘trust’, a partnership?

3

Decision – The trust was not a partnership. There was no association for the purpose of ‘carrying on a business’ because there was no repetition of act. The association was formed for the purpose of doing one particular act that was never to be repeated and therefore there was no infringement of the companies Act. Comment – An isolated act or undertaking, even where it is entered into with a view to making a profit, won’t necessarily constitute carrying on a business, unless there is some intention of repeating the act or understanding. You should refer to the topic of joint ventures under ‘Relationships that can look like partnerships’ Case reflection – In this case there was no association for the purpose of ‘carrying on a business’ because there was no repetition of acts, but what if the parties had intended to repeat the undertaking only twice.

Keith Spicer Ltd v Mansell (1970) Facts – Mansell agreed to go into the restaurant business with another person by forming a company. Before incorporation, the other person ordered furniture for the new business from Spicer Ltd. When the furniture wasn’t paid for, Spicer sought payment from Mansell Issue – At the pre-incorporation stage were the parties in a partnership relationship such that the furniture could be said to have been bought on behalf of both Mansell and the other party Decision – At the time the furniture was ordered there was no evidence to suggest that there was a partnership, since Mansell and the other party had not been carrying on business in common with a view to profit. Rather there had been preparations for carrying on business as a company. Thus, Mansell wasn’t liable for the cost of the furniture.

4...