Partnership Law Assignment 2022

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

PARTNERSHIP LAW1
Part A:
The main issue involved in the part of the write up is discussing regarding the potential
liability arising out of partnership form of business in comparison with a company together with
their participants to the outsider third parties.
The company form of any business is generally governed under the provisions provided
in the Corporations Act1. The most significant and notable character of the company form of
business is its separate legal identity2. The company possesses a legal identity which is separate
from its directors and officers. This was for the first time seen in the landmark decision by the
House of Lords in the Salomon v Salomon & Company Ltd3 case. Due to the limited liability
principle, the company directors and the officers are never required to answer as well as bear the
liabilities of the company in general circumstances4. Thus the directors and officers are liable and
answerable only in some specific conditions. However in those conditions also, the directors or
the officers are liable only for the unpaid amount of shares and not for the obligation of the
company. This concept of separate legal identity given in the Salomon v Salomon & Co case is
regarded as the veil of Incorporation of the company or the corporate veil. This corporate veil
can be pierced in order to prevent the miscarriage of justice in certain situations. The company
bears an absolutely separate identity from that of its officer, shareholders or directors. The
company has its own name, seal and assets that are not to be mixed with those of directors or
officers. The company being a legal entity can even sue or be sued in its own name and not in the
1 Corporations Act 2001 (Cth).
2 PAMELA & RAMSAY HANRAHAN (IAN & STAPLEDON, GEOF.). Commercial Applications of Company
Law 2019. (OXFORD University Press, 2019) P. 113-119.
3 [1897] AC 2.
4 Yorston, Sir Robert Keith, Edward Eric Fortescue, and Clive Turner. Australian commercial law. (Law Book
Company, 1990) P. 167-169.

PARTNERSHIP LAW2
directors' or officers' name5. Moreover the members' liabilities are limited as per the investment
of capital made by them. The corporate shield is pierced only it is seen that the directors of the
company breaches section 588G6.
However a partnership business has a completely different scenario. The partnership
business is governed by the provisions enumerated in the Partnership Act 1891 (Qld.)7. Section
128 of the Partnership Act states the liabilities possessed by the partners in a partnership
business. It provides that each and every partner of a partnership firm is liable jointly together
with other partners for all the obligations or debts incurred in the name of the firm and it also
binds the partner. In the same Act, section 89 provides the power possessed by the partners for
binding a company. As per this section, the act done by any partner not in the regular way of
business not only binds the firm but also other partners unless that partner has done it without
any authority and the third party with whom such partner is dealing has knowledge that the
partner is without any authority or has no knowledge or believes him to be the valid partner.
Hence it is seen that one partner is also responsible for that act of another partner. Again if third
party institutes a case against the partnership firm for claiming damages, then the personal
property and assets of the partners can be encroached which is not seen in a company where any
member’s assets or properties cannot be encroached unless such member is personally liable for
it. As per section 1510 of the Act, every partner of any partnership business is jointly liable with
other partners and also for everything severally for which the firm becomes liable when he
continues to be the partner of the firm.
5 PAMELA & RAMSAY HANRAHAN (IAN & STAPLEDON, GEOF.). Commercial Applications of Company
Law 2019. (OXFORD University Press, 2019) P. 23-24.
6 Corporations Act 2001 (Cth) s 588G.
7 Partnership Act 1891 (Qld.).
8 Ibid s12.
9 Ibid s8.
10 Ibid s15.