Taylor's University LAW60104 Partnership Law Assignment

This assignment analyzes a case study involving a partnership business named Blueberry Organics formed by three friends, Cranberry, Raspberry, and Strawberry. The solution examines whether the arrangement satisfies the conditions of a partnership under the Partnership Act 1961. The analysis covers key aspects such as the definition of a partnership, the requirements for a valid partnership, and the liabilities of partners, including the impact of actions taken by one partner on the others. The assignment considers the roles of each partner, including their contributions, profit-sharing arrangements, and the implications of Strawberry's actions in borrowing money without the knowledge of the others. It also references relevant case laws like Smith v Anderson, Mercantile Credit v Garrod, and others to support the arguments. The conclusion affirms that the arrangement constitutes a valid partnership and that the other partners, Cranberry and Raspberry, are liable for Strawberry's conduct. The assignment serves as a comprehensive guide to understanding partnership law and its practical applications.

Running head: PARTNERSHIP ASSIGNMENT
PARTNERSHIP ASSIGNMENT
Name of the Student:
Name of the University:
Author Note:

1PARTNERSHIP ASSIGNMENT
Answer 1:
Issue:
The issue that has to be discussed in the present case study is whether the
arrangement among three friends satisfies the conditions required in partnership
business. Another issue to be determined here is whether the other partners
Cranberry and Raspberry will be made liable for the conduct of Strawberry.
Rules:
The present case study is to be dealt in the light of
Partnership Act
1961, hereinafter referred to as the Act. Section 3(1) defines the partnership
business which is denoted by a relation existing between minimum of 2 or more
persons for carrying out a business having an objective of incurring profit. Such
relation must arise from a contract.
However, as per
KeowSeng & Co v. Trustees Of Leong San Tong
KhooKongsi (Penang). 283. Registered (1983) 2 MLJ 103, a partnership firm
cannot be regarded as a legal entity. In this case, it is not entitled to hold a
tenancy due to the lack of legal character. Similar observation was also made in
the
Fatimah HiewYen Won & 1 Ors–v-SarojaA/P Palaniappan [2011] case.
Section 3 of the Act provides certain requirements to be fulfilled. Firstly,
there shall be a business that may include any profession, trade or business.
Members of a club or an NGO cannot be considered as partners as they are not
carrying a business.

2PARTNERSHIP ASSIGNMENT
Secondly, the business must be continuing one. There has to be presence
of continuous business which will not comprise of an isolated or single act or
transaction. This was entrenched in
Smith v Anderson(1880) 15 Ch D 247
case, where it construed that business of partnership is implied by repetitive
acts and must not include any business formed to execute a single act which will
never be repeated. In another case of
Mann v D’Arcy [1968] 1 WLR 893, the
parties had become partners of a business formed for a single transaction to
purchase potatoes. This is because they were continuing the business for buying
as well as selling the potatoes for the business type for which the firm was
formed.
Thirdly, the business has to be continued in common. It denotes that
there shall be participation of the partners jointly in the common business.
However all the partners may not take active part in the business affairs equally.
It was entrenched in
Lang v James Morrison & Co Ltd [1911] 13 CLR 1.
Fourth condition provided by section 3 includes aim of earning profit.
The main objective behind running it is gaining profit. The business may or may
not gain profits but the intention of gaining profit must be present. This was the
main point of dispute in
Lek Bong Hwa v Lek Boon Chye (1999) 1 SLR 523
whether main issue before court was to decide whether partners have the
intention earn profit.
Fifth condition to be fulfilled is that the partners in common are carrying
out the business. This was entrenched in
Chooi Siew Cheong v Lucky Heights
Development Sdn Bhd (1995) 1 MLJ I which the Federal court decided that
the parties in a joint venture are not partners because they did not carry out the

3PARTNERSHIP ASSIGNMENT
business-in-common. In this case, it is seen that the parties have intention of
carrying on separate businesses and not in common.
For determining whether there is partnership or not, few situations are to
be considered. This is given in section 4 of the said Act which provides the rule
for determining the existence of partnership. The following points are given in
the said section;
 That a part ownership, joint tenancy or joint property is not a partnership,
 That partnership is also not formed if gross return is shared by the
members,
 Sharing profits is not the main condition behind presence of partnership,
however if a person is paid a debt from the business profits, he cannot be
considered as partners. Similarly, agent or servant of a person who is
paid remuneration out the profits gained from the business cannot be
considered to the partner too. Again, child or even widow of a partner
who has died cannot be considered to be the partner of the firm.
Similarly, lender receiving interest cannot be considered to be the partner
in such business. In the same manner, an individual who receives a part
of profits for the selling the goodwill of the business cannot be
considered to be the partner in the business.
A partnership is said to be created through a contract. The agreement is
either express or implied. Such agreement can be made orally or written. The
creation of a contract is implied from the parties’ behavior and conduct even if
they were not aware of the fact that they are partners. The parties are free to
label their business as syndicate or joint venture but the characteristic of such

4PARTNERSHIP ASSIGNMENT
business has to be decided considering the conduct and behavior of the parties.
For instance, in the case of
Ratna Ammal & Anor. V Tan Chow Soo [1964]
MLJ 399, the court decided that though the word used was syndicate and not
partnership, arrangement was more like a partnership as in this case, the parties
have agreed to conduct a business with an aim to gain profit in a common
venture.
Section 7 of the said Act provides the partnership business’s relation with
3rd parties. It provides that an act committed by any partner within the ambit of
his authority is binding not only the partnership but also all the partners.
However, an act done by any partner without any authority but while remaining
the partner of the business and the third party has no idea that the partner has no
authority, then also both the partnership as well as the partners being liable to
such 3rd party. Further if the transaction with the third party is within the
partnership business then also both are liable. This was seen in the case of
Mercantile Credit v Garrod [1962] 3 All ER 1103. In this case, a garage for
repairing the cars is run by Garrod and Parkin. The agreement of the partnership
states that they must not involve in buying or selling of cars. Perkin without
having any authority made sale of a car to Mercantile who later on discovered
the fraud committed and claimed for refund from the partnership. It was argued
by Garrod that Parkin possess no authority of selling cars. But the court made
Garrod liable for this as the selling of car made by Parkin was present within the
ambit of the business of the firm. Similar observation was also found in the case
of
Brettel v Williams (1849).
Hence, as per section 7, the partners plus the firm will be made liable for the
act of a partner if the transaction was made by the partner in the usual manner,

5PARTNERSHIP ASSIGNMENT
the third party has no knowledge or suspicion that the partner is acting beyond
his authority and the third party must be knowing or has belief that such person
with whom he is dealing is a partner. This was construed in the case of
Dr
Kartar Singh v Preston Corp. [2012].
Section 11 further states that a partner of a partnership business is jointly
liable along with all partners for the debts or obligations incurred by the
business when he was the partner.
Application:
From the facts of the case, it is seen that three friends Cranberry, Raspberry
and Strawberry had entered into a business with the aim of running a large
nursery. They planned and named the business as the Blueberry Organics. Thus
it is seen that three individuals have formed a business in the name of Blueberry
Organics.
The business agreement was done in writing. It was stated that each of them
had contributed 40,000 RM as capital. Raspberry also lent 100,000 RM. Further
they decided that after the salaries as well as the interest were paid, they will be
sharing the profit equally. Thus intention of earning profit is also present as
observed in
Lek Bong Hwa v Lek Boon Chye case. These show that they are
planning to carry on the business for long term with the aim of earning profits as
seen in
Smith v Anderson case. They are also running a common business as
given in
Lang v James Morrison & Co Ltd.
From discussion made above the elements of section 3 are satisfied. Hence a
valid partnership business has resulted.

6PARTNERSHIP ASSIGNMENT
Although Strawberry together with Cranberry left their jobs for providing
full time service in the new business. But Raspberry decided to continue with his
present job though he agreed to help towards the new business. All of them
agreed that Strawberry together with Cranberry will be paid 6500 RM as salary
of every month and Raspberry will get 4 percent interest on loan. But as per
section 4, any lender who is getting interest for the amount lent cannot be
considered to be a partner. But from the facts of the case, it is seen that sharing
of profits is the main condition behind a partnership. Hence, Raspberry is also a
valid partner together with other partners.
But later on it is observed that Strawberry after borrowing money in
company’s name fled away without the knowledge of anyone. As per section 7,
it is seen that every partner is the agent of the firm as well of the other partners.
Hence the act of Strawberry will be binding on the firm as well as on both
Cranberry and Raspberry.
However, from the facts of the case, it is not known that that for what
purpose Strawberry has borrowed the money from the third party. However, for
whatever reason the money is borrowed by Strawberry, it will be binding on
both the company and other partners, Raspberry and Cranberry as the third party
had no knowledge of Strawberry’s intention and Strawberry was acting within
the authority of a partner. Moreover the transaction was within the scope of
partnership business. This was held in
Mercantile Credit v Garrod [1962] 3
All ER 1103 case. Moreover, as per Section 11, a partner of a partnership is
jointly liable along with remaining partners for any debt plus obligations that
were incurred by the firm when he was the partner. But this is not required in

7PARTNERSHIP ASSIGNMENT
this case study as Strawberry had borrowed money for himself and not for the
company.
Conclusion:
Thus it can be concluded that the arrangement among 3 friends satisfies
the elements of a partnership business. Moreover, other partners Cranberry and
Raspberry will be made liable for the conduct of Strawberry.

8PARTNERSHIP ASSIGNMENT
References:
Brettel v Williams (1849)
Chooi Siew Cheong v Lucky Heights Development Sdn Bhd (1995) 1 MLJ
Dr Kartar Singh v Preston Corp. [2012]
Fatimah HiewYen Won & 1 Ors–v-SarojaA/P Palaniappan [2011].
KeowSeng & Co v. Trustees Of Leong San Tong KhooKongsi (Penang). 283.
Registered (1983) 2 MLJ 103
Lang v James Morrison & Co Ltd [1911] 13 CLR 1
Lek Bong Hwa v Lek Boon Chye (1999) 1 SLR 523
Mann v D’Arcy [1968] 1 WLR 893
Mercantile Credit v Garrod [1962] 3 All ER 1103
Partnership Act 1961
Ratna Ammal & Anor. V Tan Chow Soo [1964] MLJ 399
Smith v Anderson(1880) 15 Ch D 247