Business Law

This document discusses the concept of partnership in business law and explores the rules and implications of partnership agreements and contracts. It examines the criteria for determining whether a partnership exists and analyzes a specific case scenario to determine if a partnership exists and if the partnership will be bound by a contract entered into by one of the partners. The document also provides references for further reading on the topic.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Issue 1
Whether Ben, Jenny and Sue are in a partnership.
Rule
Section 5 of the Partnership Act 1958 defines the term partnership. The term partnership
implies a relationship existing among two or more persons who are conducting a business
common to each of them and the business is conducted with the sole perspective of earning
profit. This includes a limited partnership, which has been incorporated. However, companies
are excluded from the purview of the definition of partnership (Cohen, 2017).
Section 6 of the Partnership Act 1958 contains the provisions that enables the
determination of whether a partnership exists between persons conducting a common
business. This section provides for certain aspects of the business that are required to be
considered for the purpose of bringing the same under the purview of partnership. The
definition of partnership does not include tenancy in common, part ownership, joint tenancy,
common property or joint property irrespective of any profits being accrued to the property or
shared amongst the tenants. Gross returns being shared, which has been accrued from the use
of a common interest or joint right existing over a property does not create the relationship of
partnership (English, 2006).
The prima facie evidence that is required for the purpose of identification of a venture as a
partnership is the sharing of profits by persons that has been accrued in that venture.
However, this cannot be treated to be a conclusive proof of the existence of the relationship
of partnership. Due consideration needs to be given to the contingencies upon which the
accruing of the shares are depending upon. An amount that has been received by a person in
instalments toward the repayment of a liquidated amount or debt will not make him a partner
in the business. An agent or a servant of a business who has been hired through a contract to

2BUSINESS LAW
be paid remuneration in accordance to the profit incurred by the business cannot be treated to
be partner. A payment of interest on a loan or a payment of the portion of annuity on a
regular basis does not render a person to be partner under this Act (CHARLES, 1983).
There are certain elements that are common to all the forms of partnership and are
essential for the purpose of creating a partnership. For a partnership to exist, a firstly a valid
agreement between the parties with respect to the partnership is required. Secondly, there
must be a business that has been carried out by the persons so rendered to be partners. The
carrying out of a single transaction or a few transaction can be construed to be more of a joint
venture and not partnership. The continuity of the business is necessary for the purpose of
achieving the status of partnership. Thirdly, there needs to be common rights, obligations and
interest of the partners, which are available mutually. There must be a relationship of agency
between the partners themselves and with the firm. Fourthly, the main purpose for which a
partnership business is carried on is the view to earn profits. The associations, which are not
concerned with the objective of earning profits are not considered to be partnership (Regan,
Smith & Love, 2015).
A partnership is required to be construed as a joint ownership. All the partners are required
to have participated in the business, by virtue of which the profit or returns has been accrued.
The sharing of the profits that has been earned from the partnership is the chief objective of
the partnership business. The losses of the business is also an essential characteristic of a
partnership business.
Application
In the present scenario, Ben, Jenny and Sue operate a creative writing and music festival in
Western Victoria each year. The festival is held on the last weekend in November. The
operating of the creative writing and music festival sounds more of a venture than that of a

3BUSINESS LAW
partnership. This is because there must be a business that has been carried out by the persons
so rendered to be partners. The carrying out of a single transaction or a few transaction can be
construed to be more of a joint venture and not partnership. The continuity of the business is
necessary for the purpose of achieving the status of partnership.
However, Ben, Jenny and Sue are also the owners of the business named CreativFun. This
can be construed to be a partnership as the same has the continuity and they own a business.
This is because there must be a business that has been carried out by the persons so rendered
to be partners.
Moreover, the organisers make money from entrance fees, sponsorships, childcare, car
parking and the sale of food and drinks. This can be construed to be the money making
motive of the business, which is the chief motive of the partnership. And this would render
the business between them to be a partnership.
The entrance fees and sponsorship money are used to pay the costs associated with
running the festival with any amount left over split equally between Ben, Jenny and Sue. The
organisers have never discussed how losses would be dealt with as, in the five years that the
festival has run, it has never made a loss. This satisfies the sharing of the profit criteria that
creates a partnership. As the sharing of the profits that has been earned from the partnership
is the chief objective of the partnership business. The losses of the business is also an
essential characteristic of a partnership business. Although there has not been any agreement
between Ben, Jenny and Sue, regarding the distribution of losses, the sharing of losses is
implied from the sharing of profit.
Jenny organises all the food and drinks, Sue arranges children friendly activities and
childcare and Ben runs the car park next to the venue and each of them keep the net proceeds
from the particular activities they have carried out. All equipment used in the Festival,

4BUSINESS LAW
including the tents and stalls are leased for the weekend and returned. Casual workers are
employed as needed to set up and take down the different parts of the Festival venue, but
these are treated as independent contractors and are paid a fixed amount. Generally, Ben,
Jenny and Sue plan the festival together and make all the major decisions unanimously.
Hence, it can be stated that the activities carried out separately are to be treated as venture
and the activities that are collectively carried out can be construed to be a partnership.
Conclusion
Ben, Jenny and Sue are in a partnership.
Issue 2
Whether the partnership will be bound by the contract entered into by Ben with Bowling.
Rule
Section 9 of the Partnership Act 1958 contains provisions relating to the power that a
partner has which enables him to bind the firm. There exists an agency relationship between
the partners and the firm. Each of the partners are treated as the agents of the firm as well as
each other. The firm and the partners are bound by the actions that has been taken or the
ventures that has been undertaken by each of the partners within the scope of their
authorisation arising from the agency relationship. However, in case the partner acts in a way
which exceeds the scope of his authority as a partner, he will not bind he firm by his actions
when the party with whom he has effected that activity has the knowledge of his lack of
authority to the same.
Section 10 of the Partnership Act 1958 renders any instrument or any actions that has been
instituted on behalf of the firm or under the name of the firm, will be treated to be binding
upon each of the partners and upon the firm as a whole (Hodge & Greve, 2017).

5BUSINESS LAW
Application
In the present scenario, an assumption has been made with respect to the existence of a
partnership between Ben, Jenny and Sue. This will create an agency relationship between the
partners and the firm. The firm and the partners are bound by the actions that has been taken
or the ventures that has been undertaken by each of the partners within the scope of their
authorisation arising from the agency relationship owing to the assumption of the existence of
partnership. In this case, Ben has signed a contract to hire famous and successful author, PK
Bowling to attend the Festival. This has been effected for the preparation of the Festival. This
renders the action of Ben to be under the scope of his authority under the partnership.
irrespective of the risk of the decision and the lack of knowledge of the other partners, the
other partners and the firms are bound by the contract.
Conclusion
The partnership will be bound by the contract entered into by Ben with Bowling.

6BUSINESS LAW
Reference
CHARLES, D. (1983). Law of partnership. London, Sweet and Maxwell.
Cohen, G. M. (2017). Law and Economics of Agency and Partnership. The Oxford Handbook
of Law and Economics, 2, 399.
English, L. M. (2006). Public Private Partnerships in Australia: An overview of their nature,
purpose, incidence and oversight. UNSWLJ, 29, 250.
Hodge, G. A., & Greve, C. (2017). On public–private partnership performance: A
contemporary review. Public Works Management & Policy, 22(1), 55-78.
Hodge, G. A., & Greve, C. (2017). On public–private partnership performance: A
contemporary review. Public Works Management & Policy, 22(1), 55-78.
Regan, M., Smith, J., & Love, P. E. D. (2015). Better infrastructure procurement for public
private partnerships: An Australian perspective. In Proceedings of 5th
International/11th Construction Specialty Conference/5e International/11e Conférence
spécialisée sur la construction, 8th–10th June, Vancouver, British Columbia, Canada.
The Partnership Act 1958