Legal Principles in Partnership and Contract Law: Case Studies

These case studies explore legal principles in partnership and contract law, including partners as agents, unlimited liability, false representation, and more. Each case study presents a legal issue and applies relevant principles to reach a conclusion. The studies cover topics such as verbal agreements, language barriers, and contractual obligations.

Running head: CASE STUDIES 1
Case Studies
Name
Institution

CASE STUDIES 2
Case Studies
Case Study 1
The legal issues
1. Does a decision to contract made by a single partner in a partnership bind and amass
liability to the other partners?
2. Can the other partners take action against Lance?
Legal Principles
There are three notable legal principles stemming from the foregoing case in relation to
partnerships. First is the question of partners as agents of partnership, then unlimited liability and
finally the nature of partnership agreements.
Partners as Agents of the Partnership
Every partner is an agent of a partnership and thus, any obligation or contract gotten into by a
single partner is legally binding on all partners (Spadaccini, 2005). Agents have the legal
capacity to contract on behalf of their principles (in this case, the partnership). They have the
power to bind their partnership to a contract. The restriction to this rule is that the agreement is
made on an item within the scope of the partnership’s venture.
Unlimited Liability
Every partner in a general partnership has unlimited liability over the debts of the partnership
(Department of Industry, Australian Government, 2017). In this sense, one can sue a partnership
for all business debts regardless of which partner was at fault. The whole partnership is liable for
all the business debts and one can seek court order for the partners to pay for the debts.

CASE STUDIES 3
Partnership Agreements
Partnerships are considered to be unique business relationships. This is to say while other
business relationships would require documented and signed evidence for agreements,
partnerships do not necessarily require written agreements. If parties agree on how to go about
their business, their investments, their division of tasks and even their budget, it need not to be in
writing, as it is enough that an agreement has been reached by the partners (Radan, Gooley &
Vickovich, 2017). Therefore, the partners are bound by the agreement and a contravention will
be considered a breach of contract and accrue liability to the contravening partner.
Application
Lance was given the responsibility of purchasing a new Ute by the partnership but under a strict
budget of $20,000. However, he decided to disregard the partnership’s terms and purchased the
car from Mighty Motors for $25,000, a $5,000 increment on the advised budget. The question is
whether there is a liability of $5,000 imposed on the other partners in the partnership as a result
of being bound by the contract. Drawing from the principle of partners as agents of partnership,
it is certain that the contract entered into by Lance –an agent to the partnership- was binding to
all the other three members of the partnership. As a result, –and also borrowing from the
principle of unlimited liability in general partnerships- they were all liable for the contractual
obligation set with Mighty Motors.
The other partners’ legal standing on whether they can take action against Lance is
dependent on the nature of partnership agreements. An agreement by partners in a partnership,
whether written or oral, is binding to all partners and a breach of the agreement will accrue
liability on the breaching partner (Poole, 2016).

CASE STUDIES 4
Conclusion
All the three members of the partnership have a contractual obligation to pay the excess $5,000.
Lance’s contractual decision was made on behalf of the whole partnership and bound the other
two partners. However, the two partners can go ahead and sue Lance for a breach of a
partnership agreement for $5,000 in damages.
Case study 2
The Legal Issues
1. Whether Saqlaim will be bound by the contract
2. Whether customers have a remedy for claiming remedy regarding Xiaojing’s moisturizer.
Legal Principles
The following legal principles are evident in the case:
False Representation in Contracts
Anyone who runs a business has the mandate to act in good faith when promoting their goods or
services. A contract is not considered valid but for the parties agreeing on the terms. If the terms
are expressed inaccurately based on a false premise, then the contract is void. False
misrepresentation occurs when a party knowingly makes false statements in a bid to promote
product or service (Paterson, Robertson & Duke, 2012). For it to suffice, the plaintiff has to show
that a representation was made, it was false, the statement was made either knowingly or
recklessly, it was made with the intention of the other party relying on it and the plaintiff relied
on it and the other party suffered damages as a result. The remedies for false representation are
rescission and damages.

CASE STUDIES 5
Language Barrier Effect on Contracts
It is fraudulent to get a non-English speaker to sign a contract in English if the fluent speaking
party intends to gain undue advantage. The plaintiff has to prove that he or she entered the
contract because of an undue advantage which was exploited or deceptively used by the
defendant (Duffy, 2008) However, if the plaintiff fails prove that the defendant exploited his
language advantage in the signing of the contract, then there is no basis for fraudulent
misrepresentation. A mere advantage with regard to language does not render the contract invalid
or voidable. Agreements can be enforced despite language barrier.
Application
In relation to the case, Xiaojing’s advertisement of the mosituriser amount to false
representation. She knowingly makes the representation that her products would “slow the
effects of ageing,” despite knowing that the statement is false and intended to gain more
customers from the statement. Similarly, there is an aspect of fraudulent misrepresentation on the
part of Saqlaim relating to the issue of language barrier. In this case, fast talking and charismatic
Lance talks Saqlaim into buying the car, disregarding and exploiting his language barrier.
Conclusion
Saqlaim will not be bound by the contract to purchase the car. The contract will be voidable due
to fraudulent misrepresentation and thus Saqlaim can choose to sue for damages. Similarly,
consumers purchasing Xiaojing’s moisturizer after relying on his false representation will have a
remedy regarding the contract. They will be subject to rescission which will allow both parties to
be at the position they were prior to getting into the contract.

CASE STUDIES 6
Case Study 3
My Advice to Felix
It is not strange that sometimes people will make verbal agreements in the name of
promises and think that it is not binding. Indeed, not all verbal agreements will be valid and
legally binding to amount to a contract. But can an employer neglect a promise made to an
employee because it was a mere “verbal contract” and get away with it? Can Felix successfully
sue Xiaojing for the extra $100 she promised him for a work done the previous day clearing
garden beds? There are certain elements which make verbally made promises legally
enforceable. These include the following:
First, there has to be an offer and acceptance (Hillman, 2004). The promisor makes the
proposal –in this case Xiaojing’s $100 promise- and the promisee accepts the proposal (by a
mere reply in the affirmative). The promisor’s offer is deemed to be accepted after the promisee
has transmitted an acceptance to him (Carter, Harland, & Lindgren, 1996).
Secondly, there is the consideration principle. The court will consider a promise to be
legally binding if the person set to receive it has provided something valuable in exchange. In the
foregoing case, Xiaojing’s promise was motivated by Felix’s performance. She told him that “he
is doing such great work, she will pay him an extral $100 for work he did.” This statement
qualifies as a consideration. While the promisor’s (Xiaojing’s) consideration was the extra $100,
the promisee’s (Felix’s) was his good performance at work. The promise was made because he
had given out something of value in exchange to the promise.
Another aspect that will be assessed by the courts is the intention of both parties: whether
they showed an intention to be bound by the promise. Courts will recognize promises that have
shown parties intended to be legally bound by it. While the court will use its discretion in

CASE STUDIES 7
determining the parties’ intention by looking at the surrounding circumstances, it is a general
presumption that where there has been an exchange of something valuable, parties intend to be
bound. Xiaojing made her promise because she was pleased with Felix’s performance and thus
intended to be bound by it.
Lastly, the court will look at the promisee’s position after the promise. A party that
makes a promise which causes another party to rely on it in such a manner that he or she may be
financially injured by the reliance is bound by his or her promise. This position encompasses
aspects of consideration and intention as the court will only look at the effect of the promise on
the promisee. The only proof needed is that the detrimental reliance of the promise was
reasonable and the promisor foresaw such a reliance. In this case, Felix financial situation would
be affected by Xiaojing’s defection considering that he is keen to earn some income during the
summer holidays and would have heavily relied on the promise. Additionally, considering the
nature of work and the wages paid to him, Xiaojing ought to have foreseen that a promise of
$100 would create an excitement on Felix and definitely mean a reliance on the promise.

CASE STUDIES 8
References
Carter, J. W., Harland, D. J., & Lindgren, K. E. (1996). Contract law in Australia. MICHIE.
Department of Industry, Australian Government. (2017). Partnership. Retrieved from
https://www.business.gov.au/info/plan-and-start/start-your-business/business-structure/
business-structures-and-types/partnership
Duffy, S. P. (2008). Agreement can be enforced despite language barrier, the legal intelligencer.
Retrieved from
https://www.law.com/thelegalintelligencer/almID/1202424141454/Agreement-Can-Be-
Enforced-Despite-Language-Barrier/?slreturn=20180703075131
Hillman, R. A. (2004). Principles of contract law (p. 305). St. Paul: Thomson West.
LawTeacher. (n.d.). Acceptance must be communicated. Retrieved from
https://www.lawteacher.net/free-law-essays/contract-law/acceptance-must-be-
communicated-contract-law-essay.php
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Partnership: Unlimited Liability Concerns. (2018). Retrieved from
https://obliviousinvestor.com/partnership-unlimited-liability-concerns/
Paterson, J. M., Robertson, A., & Duke, A. (2012). Principles of contract law. Thomson Reuters
(Professional) Australia.
Poole, J. (2016). Textbook on contract law. Oxford: Oxford University Press.
Radan, P., Gooley, J. V., & Vickovich, I. (2017). Principles of Australian contract law.
Chatswood, N.S.W.: LexisNexis Butterworths.
Spadaccini, M. (2005, June 02). The legal ins and outs of forming a partnership. Retrieved from
https://www.entrepreneur.com/article/77980

CASE STUDIES 9
When Will a Promise or Statement Be Considered a Binding Contract? (n.d.). Retrieved from
https://smallbusiness.findlaw.com/business-contracts-forms/when-will-a-promise-or-
statement-be-considered-a-binding.html