Legal Issues in Partnership: A Case Study Analysis

1
Contents
Assignment..................................................................................................................................................2
Issues A...................................................................................................................................................2
Applicable Law...................................................................................................................................2
Application of Law and conclusion.....................................................................................................2
Solution B................................................................................................................................................3
Issue.....................................................................................................................................................3
Applicable Law...................................................................................................................................3
Application of Law and conclusion.....................................................................................................4
Solution C................................................................................................................................................4
Issue.....................................................................................................................................................4
Applicable Law...................................................................................................................................4
Application of law and conclusion......................................................................................................4
Solution D...............................................................................................................................................5
Issue.....................................................................................................................................................5
Applicable Law...................................................................................................................................5
Application of law and conclusion......................................................................................................5
Solution E................................................................................................................................................5
Issue.....................................................................................................................................................5
Applicable Law...................................................................................................................................5
Application of Law and conclusion.....................................................................................................6
Solution F................................................................................................................................................6
Issue.....................................................................................................................................................6
Applicable Law...................................................................................................................................7
Application of law and conclusion......................................................................................................7
Reference List.............................................................................................................................................8

2
Assignment
Issues A
Does a partnership between Todd and Zac exist?
Applicable Law
The Partnership Act 1891 is the applicable legislation in the given situation.
Section 1 of the Act submits that a partnership is nothing but a relationship that is between two
or more persons which is carried on by them on continuous bases with the basic purpose to earn
profit and share losses. There are few basic rules which must be evaluated before considering
any association as partnership. The same are submitted under section 2 of the Act1:
i. Sharing of gross returns does not established partnership
ii. Joint tenancy, common property, tenancy in common, joint property are not the
elements which help in the establishment of partnership between the parties;
iii. If the parties are sharing profits and losses then it is considered as one of the prime
element to establish partnership;
iv. However if there is presence of contract for the remuneration or if payment is
received for the death or by way of annuity or advances over the loan from the
profits , then, it cannot be considered as a proof for the presence of partnership
between the parties.
These are the basic rules which must be kept in mind in order to formulate partnership between
the parties.
Application of Law and conclusion
Zac and Todd are friends. Todd was a business student in Marketing and Zac was a science
student (Chemistry). Both of them are very fond of beer and thus decided to establish their own
home brew. The main activities that are undertaken by them are:
i. Zac uses his money and bought a 50 liter micro-brew equipment set.
ii. The shed of Todd’s dad was used for the setting up of business;
iii. Both worked together to set up the equipment in the shed;
iv. Both worked together and established their first batch of beer.
1 Julie Cassidy, ‘Concise Corporations Law’, 2006, Federation Press.

3
It is submitted that there can be a partnership that is established amid the two, because:
i. Both Todd and Zed are two persons who formulated the business. The presence of
two or more persons is the first requirement for the establishment of partnership;
ii. Both carry on business of brewing on continuous basis;
iii. It is to be assumed that both have agreed to share profits;
iv. Both indulge in several activities together.
Thus, these are the arguments which can be put forth for the establishment of a partnership amid
Todd and Zac.
But, it is submitted that there was no evidence that shows that both Todd and Zac intend to share
profits and losses. as per section 2, presence of profits and losses is the prime ingredient to form
a partnership. Since this element is missing, thus, there cannot be any partnership amid the two.
There cannot be any partnership amid Todd and Zac as there was nothing which could prove that
they intend to share profits and losses from the business.
Solution B
Issue
Is Zac entitled to the money from the beer he had been selling?
Applicable Law
Section 29 (1) of the Act is applicable in the given situation. It is submitted that the partner are
authorized to receive gain for the transaction which is related to the business of the partnership.
But, if any income is generated by using the property of the partnership without seeking the
consent of all the other partners of the firm then such defaulting partner must account the profits
to the firm2. Section 29 (2) submits that this obligation is applicable even if the partnership is
dissolved because of the death of the partner till the time the partnership is wound up.3
2 Powell v. Powell (1932) 32 SR (NSW) 407
3 ATO, ‘Elder's Trustee and Executor Co Ltd v Federal Commissioner of Taxation’ 2017 <
https://www.ato.gov.au/law/view/document?Mode=type&TOC=%2205%3ACases%3AHigh%20Court%3A1961%3AElder%27s
%20Trustee%20and%20Executor%20Co%20Ltd%20v.%20Federal%20Commissioner%20of%20Taxation%20-
%20(12%20January%201961)%3A%230102%23Judgment%20by%20Windeyer%20J%3B%22&DOCID=%22JUD
%2F104CLR12%2F00002%22>.