A Business Relationship Under a Partnership

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Contents
Solution 1...................................................................................................................... 2
Issue......................................................................................................................... 2
Law.......................................................................................................................... 2
Application................................................................................................................. 3
Conclusion..................................................................................................................... 4
Solution 2...................................................................................................................... 4
Reference List................................................................................................................. 8

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Solution 1
Issue
Law
In Australia, one of the forms in which a business can be carried out is in the form of partnership.
As per section 1 of the NSW partnership Act, a partnership is an association amid two or more
than two persons herein they agreed to carry out a business of continues nature with common
intention and with the aim of carrying profits amid themselves and is rightly held in Smith v
Anderson (1880) and Lang v James Morrison & Co Ltd (1911).
As per section 2 of the Act, the main elements to constitute a partnership are: (Graw, 2011)
i. Two or more persons – It is necessary to have more two persons to conduct
partnership. No single person can carry out partnership amid themselves. In
Ballantyne v Raphael (1889) relationship was carried don amid more than 20 persons
and is not considered as partnership in nature.
ii. Common intention – It is necessary that all the persons must have common intention
to carry out business. All the partners must aim at carrying the business with common
motive and intention. In Re Ruddock (1879) it was held that it is necessary that all the
person intent to be part of the business. It is not necessary that all partners must take
active participation; rather, it is necessary that there must be common intention.
iii. Carrying on business - It is necessary that they must carry on the business on
continuous basis. At times single transaction can be considered as carrying on
business provided the parties intend to consider the same as partnership. in Re Griffin;
Ex parte Board of Trade (1890) it was rightly held that at times a single trabeation if
repeated results in the carrying on of a business intent and then such single
transaction is considered as compliance of one of the elements of partnership, that is,
carrying on business.
iv. Aim of profit sharing – It is very important that the partners must share the profits. It
makes no difference on the amount of ratio that is to be shared amid the parties, but, it
is necessary that they must share the profits and is rightly held in Bond Corporation
Holdings Ltd & Anor v Grace Bros Holdings Ltd & Ors (1983).

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Application
Samuel, Thomas and Peta want to start a business. The business is to be deal in reselling
products over the vast online marketplace. They will purchase goods from type companies, who
went into liquidation and then sell the same for profit However, nothing is decided by them on
the kind of business structure they intent to start. Peta has invested $100,000 as a start up costs of
the business. It is submitted that Samuel, Thomas and Peta are in the relationship of partners and
the business is carried out in the form of partnership because of the following facts:
i. There are three people involve in the business, that is, Samuel, Thomas and Peta,
thus, the first requirement of moiré than two persons to carry partnership is comply
with.
ii. It is submitted that all the three intend to carry out business by purchasing goods from
different type of companies, who went into liquidation and then sell the same for
profit. Thus, they have common intention to carry out business as all the three,
Samuel, Thomas and Peta, joined together as work force and carry out the business
venture together.
iii. In the given question, Samuel, Thomas and Peta, intend to carry on the basis on
continuous basis as they decided to share the profits for continues basis which depicts
their intention the business must be carried out regularly. They intend to carry on the
transaction on repeated mode and thus the business is not a single transaction with no
intention of continuity.
iv. Lastly, it was agreed amid the parties that since the business is profitable thus they
will divide the share as follows, nothing is paid to Peter for 1st Year but there after he
will be paid $6,000 per month (the payment is as a gratuity and a thanks giving);
Samuel and Thomas were not paid as employees but through consultancy
arrangements with the venture. The ratio is not equal but they decided to share the
profits.
Thus, all the elements to carry out the relationship in the form of partnership is settled.