Business Law Assignment

Running head: BUSINESS LAW ASSIGNMENT
Issues:
The issues involved in the present case study are as follows;
 Whether there is any potential liability of Luke and Liam in respect of the contract with
LL.
 Whether Luke and Liam have any rights against Chris.
Law:
As per section 5 of the Partnership Act 1891 (Qld), hereinafter referred to as the PA,
partnership can be defined as a relation that exists between persons who are carrying on a
common business with an aim of incurring profit (Barkoczy & Wilkinson, 2019).
Section 13 of PA states that a partnership firm will be held liable in case a partner has
committed a wrongful act or omitted an act while acting in the ordinary business course of the
firm or by an authority given by other firm partners to such partner. In such situation, the firm
will be liable to the injury or loss suffered by the third party due to it. This is discussed in the
case of Polkinghorne v Holland (1934).
Further section 15 of PA states that when a firm is made liable under section 13 of PA
and such firm is unable to pay, then the partners are personally liable for such loss or injury of
the third party. Section 15 provides that the liability of the partners is joint and several.
In order to determine who will be held liable in case a partner has caused a breach of
contract in relation to a third party, the following steps are followed. It is checked whether the
partner possesses the actual express authority to do so, if yes then the partnership is liable else it
will be checked whether such partner has the actual implied authority, if the answer is

BUSINESS LAW ASSIGNMENT1
affirmative then the partnership is liable to the 3rd party. If no, it will be checked whether the
partner has ostensible authority for entering into contract, then the section 8 is fulfilled and
partnership is bound else the 3rd party will be made liable.
Every partner is considered to the principal as well as agent of the firm as well as
partners. The partners have fiduciary duties to one another. As per section 31, the partners have a
duty of rendering true accounts to other partners as observed in Law v Law [1905]. Similarly
under section 32, the partners have a duty to account to the firm in case of private benefits earned
by him without permission from other partners in any transaction related to the partnership. This
is seen in Birtchnell v Equity Trustees (1929) case. Further section 33PA, states that partner has a
duty not to engage in any act in competition with the firm.
Application:
From the facts of the case it is seen that three brothers have opened a restaurant in which
Luke has to look after the day to day business of the firm, Liam was entrusted with the duty of
buying ingredients and Chris has the duty of managing staffs of the restaurant. This showed that
as per section 5, a partnership business is established by them. Further, they agreed that for any
expense involving an amount exceeding 5000 $, joint approval is needed. After Chris left
Australia, they got an invoice from LL claiming 40000 $. As per section 8, the partnership firm
is liable for the contract entered by Chris with LL. In addition to this, as the firm is liable for the
cat of Chris u/s 13, the other partners can be made liable in their personal capacity as per section
15. Further as he breached sections 31, 32 and 33 of the Act, he can be made personally liable
for it.
Conclusion: