Partnership in Business Case Study
Added on 2020-03-16
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After going through the facts that have been provided in this question, the issue arises in thepresent case if Violet and Sonny can be held liable to repay the loan owed were Busy Bee FloristShop to Friendly Bank. This liability may arise if Violet and Sonny are treated as the partners inthe business.A partnership can be described as a relationship that is present between the persons were gettingon business in common was the purpose of making a profit. In this way, there is an agreementcreated between two or more persons to enter a legally binding relationship. Therefore thisrelationship is contractual in nature. In Green v Beesley (1835), Tindal J, has stated that thedefinition of partnership has always been understood as a medium participation, yet a legal entityis not created when the participants create a partnership. Similarly in Smith v Anderson (1880),James LJ had described the concept of partnership in the following words. A general partnershipcomprises of definite individuals who are bound together by contract created between themselvesto continue jointly to achieve a joint object, either during their pleasure or for a limited period. Itis essentially composed of the persons who have originally intending to the contract with eachother. However, despite the presence of these definitions, limitations have been placed on thenumber of persons that can become partners. The relevant provision in this regard is present inthe Corporations Act, 2001. Similarly, the law provides that the partnership will have a name,which will be known as the name of the firm. The law of partnership has been derived from case law as well as statute law. The relevantprovisions are present in the Partnership Act, 1892. Partnership law has been described as aspecial type of agency. The reason is that when the partners are acting in course of partnership
business, they are considered to be acting as agents of each other (Lang v James Morrison & CoLtd., 1911).The law provides that three elements should be present so that it can be said that a particularrelationship is a partnership. Therefore, the parties should be carrying on business; in common;and for the purpose of making profit. All these elements need to be satisfied for the purpose ofthe creation of a partnership. On the other hand, even if a single element is not present, thereligion cannot be described as a partnership. In order to decide the meaning of the term 'carrying on business', the issue arises if there is aneed of establishing repetitiveness of action as compared to an isolated action by the parties. In anumber of earlier decisions, the courts have said about the need for having a continuity orrepetition of action. For example, in Smith v Anderson (1880), there was a group of investors.These investors have subscribed to purchase the shares by forming a trust in different submarinecable companies. The trustees, sold his shares to the investors. Along with the other investors,Smith had also received a certificate. However, later on, and application was made by Smithwind up the trust. The reason given in this regard was that the trust was an illegal association,keeping in view section 4 of the English Companies Act, 1862. This section, provided that nocompany, association or partnership comprising more than 20 persons can be formed to carry ona business, unless it is register. Under these circumstances, the issue arose if the trust in thepresent case can be described as a partnership. For this purpose, the court considered the natureof the press as well as the relationship of the parties involved. Although, every person holding acertificate could elect trustees, received a trust report and the trustees had certain powers relatedwith management by the court noted the fact that the trustees did not have the power tospeculate. Similarly, there were no mutual rights and obligations present among the persons
involved in it. As a result, our conclusion was made by the court that they just cannot bedescribed as a partnership because there was a lack of association for 'carrying on business'. There are certain rules present in the Partnership Act which can be used to decide if therelationship between the parties can be described as partnership or not. For example, section 2(2)object provides that merely the fact of sharing the gross returns of the business does not in itselfresult in a partnership, whether the persons who are sharing the returns have got this not have ajoint or common right in any property from which the returns are derived. Hence, only the fact ofsharing the gross profit made by the business is not sufficient for the purpose of the creation of apartnership. An example in this regard can be given of Cribb v Korn (1911). In this case, alandowner has employed Korn as a rural worker. There was an agreement concluded between thelandowner and Cribb. This agreement provided that the landowner will have sloughs reviews andobservation over the particular area of Cribb's land. The agreement also provided that machineryand stock would be provided by Cribb, while the landowner was going to be half of the proceedsof the sale of produce to Cribb. Under these circumstances Korn suffered injuries when he wasworking on the land. He claimed compensation from Cribb. It was submitted by Korn, that in thepresent case, the landowner and Cribb were in fact, partners. However, the high court arrived atthe conclusion that the partnership was not present between the parties, and it was only atenancy. Due to the reason that the landowner enjoyed exclusive right to provide the land and noright was given to Cribb to direct or control the working over the land by the landowner, therelationship cannot be described as a partnership, but it was only a tenancy. Moreover, the fact ofsharing the gross returns was not considered as sufficient for the purpose of establishing apartnership, but it only amounted to rent.
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