Legal Issues and Remedies in Partnership, False Advertising, and Promissory Estoppel

0
Commercial and Corporations Law

1
Answer 1
Issue
The legal issue is whether the partnership is binding in the contract formed between Lance
and Lynton? Whether other partners can take legal action against Lance and what remedies
do they have?
Rule
The legal principle, in this case, is related to the principle of partnership legal structure in
Australia. The provisions regarding this business structure are given under the Partnership
Act 1892. It is referred to a legal agreement between two or more parties who had agreed
to form a business and run its operations together. The objective of partners for starting the
business is to earn profits for them which they divide based on their profit sharing ratio
(Business, 2017). The business did not have a separate personality and partners do not have
limited liability. They are liable for the debts of the business, and their personal assets can
be used for repayment of the business liabilities. Moreover, each partner has a duty towards
each other based on which they can be held liable for the action of another partner. Section
10 of the Act provides that liability of partners is unlimited and the partnership can be held
liable for the wrongful actions of a partner (Jade, 2018).
In Re Agriculturist Cattle Insurance Co, Baird’s Case (1870) LR 5 Ch App 725 case, the court
provides provisions regarding liability of partners. In this case, the court provided that each
partner is considered as an unlimited agent of other partners in every matter which is
related to the partnership business. Thus, all the actions taken by partners that are not
outside the scope of the partnership business are binding upon other partners as well
(Morse, 2010). The court provided a similar judgement in the case of National Commercial
Banking Corporation of Australia Ltd v Batty (1986) HCA 21. The court provided that as long
as one partner takes any action which comes within the definition of ordinary course of
partnership business, then the other partners will be bound by such action, and they can be
held liable for any liabilities arising out of such action. Furthermore, partners can take legal
actions against the partner who breached his fiduciary duty to take any action which
resulted in causing harm to any other partner or the business of the partners.

2
Application
In the present scenario, the decision of purchasing a car comes within the definition of the
ordinary course of business. Lance was authorised to purchase a car for the partnership.
Thus, the partnership is bound by the contract formed between him and Lynton. However,
he breached his fiduciary duty by purchasing a car worth $25,000 whereas he was only
authorised to spend $20,000. Thus, other partners can take legal action against him to
recover extra $5,000 from Lance personally.
Conclusion
Based on the above analysis, the partnership is bound in the contract formed between
Lance and Lynton and other partners can take legal action against Lance to recover the extra
amount spent by him on purchasing of the car.