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The definition of partnership in view of the business structure

   

Added on  2020-05-04

12 Pages3480 Words278 Views
1a) Under what type of business structure are Mary, Fred and Chris running the business?In this question, it has to be seen that Mary, Fred and Chris are learning the business under whattype of business structure. In this regard, a partnership can be described as a relationship thatexists between the persons who are carrying on business in common and with a view to earnprofit. This definition of the partnership can be found in the Partnership Act. In view of thedefinition of partnership, there are three elements that are essential for the creation of apartnership. (i) Carrying on business(ii) In common;(iii) With a view to one profit. In Smith v Anderson,1 the Court has stated that carrying on a business means the repetition ofacts. Therefore the case of an association that has been formed only for doing one act has beenexcluded. There should be a series of acts that constitute a business. It was stated by the HighCourt in United Dominions Corporation Ltd v Brian Pty Ltd.2 that a single adventure mayamount to carrying on business depending on its scope. The next requirement is that the businessshould be carried on in common. This is also a key element of the definition of partnership.However it is not necessary that and a control should be played by all the partners in managingthe affairs of the business. It simply means that the business should be carried on or on behalf ofall the partners.3 The third element that is necessary for the existence of a partnership is that thebusiness should be carried on with a view to earn profit. Therefore, the objective of the business1 Smith v Anderson (1880) 15 Ch D 2472United Dominions Corporation Ltd v Brian Pty Ltd. (1985) 157 CLR 13 Duke Group Ltd v Pilmer (1999) 31 ACSR 213

should be to achieve financial gain. However it is immaterial if the venture proves to besuccessful or not so long as there is an intention to make profit. In the present case, Mary, Fred and Chris are running the business in common and with a view toearn profit. As a result, in this case, it can be said that the business structure, adopted by them isthat of a partnership. 1b) Discuss whether Fred and/or his business partners are liable for the damages suffered bythe customer X?According to the partnership law, all the partners are considered as the agents of the firm. Thisprinciple was provided by the court in Re Baird’s case.4 Now this principle has also become apart of the statutory law. As a result of this position of knowledge is considered that each partneris an agent of the firm and also an agent of the other partners. Hence, if a transaction has takenplace in the usual or the normal course of business of the firm and a third-party is not aware ofany lack of authority on part of the partner, the law provides that the firm can be held liable asprincipal of the transaction.5 As a result, liability can be imposed under contract or tort, on all thepartners. As a result in the present case, the liability for the negligent misrepresentation made byFred can be imposed on the partnership. Therefore all the partners can be held jointly andseverally liable.6In this context, negligent misrepresentation can be described as the information or advice thathas been given honestly, but it is inaccurate or misleading. In Hedley Byrne & Co v Heller &4 Re Baird’s case (1870) LR 5 Ch App 725Sweeney, O’Reilly & Coleman, 2013, Law in Commerce, 5th Ed., LexisNexis6Stephen Graw, 2011, An Introduction to the Law of Contract, 7th Ed., Thomson Reuters

Partners7, the court had stated that the ability exist in tort, negligent misrepresentation under thecircumstances where information or advise was sought from the person who has a special skill orjudgment and when such person knew or should have known that the other party is going to relyon the information or advise given to it. Similarly in Mutual Life & Citizens’ Assurance Co Ltdv Evatt,8 the High Court had stated that the duty arises when a person has given information areadvised to the other person and it was actively sought or merely accepted by such personregarding a serious matter and the person giving advise knows or should have known that he isbeing trusted and under the circumstances, it was reasonable for the other party to rely on suchinformation or advise.9 It is a success action for negligent misrepresentation can be initiated intothe below mentioned elements are present:-There should be a legal duty under the circumstances, which needs a certain standard of conductto protect against a foreseeable risk.There should be a breach of this duty as a result of the failure to meet the required standard ofcare; andA material injury should have been suffered by the plaintiff due to such breach.In the present case, Fred had given advice to their client X regarding a property. It was a part ofthe business of the firm to give advice to their clients. However in this case, while giving theadvice, Fred had made a mistake. As a result, X, suffers a loss of $15,000. Under thesecircumstances, it is clear that the negligent misrepresentation has been made by Fred. The lawprovides that in such cases all the partners are jointly and severally liable. Therefore in thepresent case, Fred and his business partners are jointly liable for the damages suffered by X.7Hedley Byrne & Co v Heller & Partners [1964] AC 4658 Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 5569Latimer, P, Australian Business Law CC, 2016 Edition

1c) Discuss whether Fred and/or his business partners are liable for the damages suffered byY?The issue in the present case, is if Fred and his business partners can be held liable for thedamages suffered by Y as a result of relying on the negligent misrepresentation that was made byFred to X. Hence, it needs to be seen if Y as a cause of action against Fred for the loss of$18,000 suffered by him as a result of relying on the negligent misrepresentation made by Fred.For this purpose the requirements of negligent misrepresentation also need to be discussed. Inthis regard, a successful claim for negligent misrepresentation can be brought by the plaintiff ifthe below mentioned elements can be established.10For this purpose, it needs to be established a representation was made by the defendant in thecourse of his business or in a transaction in which the defendant had pecuniary interest;False information was supplied by the defendant for the guidance of other persons in theirbusiness transactions;There was a failure on the part of the defendant to exercise reasonable care of competence whileproviding the information;It was justifiable for the plaintiff to rely on the representation; andThe negligent misrepresentation made by the defendant can be described as the proximate causeof the injuries suffered by the plaintiff. 10Vermeesch,R B, Lindgren, K E, Business Law of Australia Butterworths, 12th Edition, 2011

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