MA506/GA506 Business and Company Law
Added on 2019-10-30
7 Pages2364 Words263 Views
Running Head: PARTNERSHIP LAWPartnership LawName of the StudentName of the universityAuthor note
1PARTNERSHIP LAW1.Introduction Just like sole proprietorship and incorporated business organizations, a partnership is a businessstructure used to carry out business operations. The meaning of partnership in Australia is the sameacross all states and territories in spite of different legislations governing it. Every definition provided bysuch legislation provides the same meaning in relation to the existence of a partnership. Firstly apartnership comes to an existence through a valid agreement between two or more partners. Theagreement must satisfy all the essential elements of a contract. The agreement must be for the purposeof carrying on a business activity comprising of various business transaction. In case an agreement isformed between two or more parties to carry out a particular transaction it results in joint venture andnot a partnership. The partnership provides mutual rights to all partners in the business as per the termsof the agreement. The partners are in accordance to the law of agency bound to each other actions andeach partner is regarded as an agent of the business. Therefore if one partner gets into a contract onbehalf of the business the contract would be binding on all the partners of the business. A partnershiphas to be initiated for the purpose of making a profit. Non profit businesses like sporting clubs andcharities are not considered as partnership and neither governed by the Partnership Act (Callison &Sullivan, 2012). The commonwealth legislation which governs partnership in Australia is the PartnershipAct 1963. In order to find out the position of mary, violet, sonny and rose it has to be firstly determinedthat whether a relationship of partnership exists between them on not. In case they are partners theywould be liable to the third party for the actions of each other. Whether a partnership between theparties exists or not would be determined through the application of the elements of partnership inrelation to the scenario. 2.Existence of a partnership This section of the paper determines whether a relationship of partnership is present or not betweenMary, Violet, Sonny and Rose through applying case laws and legislation to the facts of the case. Asprovided by Morse (2010) a partnership is a association among individuals indulging in businessactivities for the general purpose of making profit. It requires an agreement between two or moreparties which is binding legally and contractual in nature. In the case of Green v Beesley (1835) 2 Bing NC 108 at 112 Tindal CJ defined partnerships as mutual participation however no legal entity is created bya partnership. In the case of Smith v Anderson (1880) 15 Ch D 247 at 273 it was provided by James LJ a
2PARTNERSHIP LAWpartnership is a relationship between fixed person who are bound to each other with respect to anagreement which is carried out for a mutual objective, both in times of profit and loss. However alimited number of people are only allowed to form a partnership as provided by the Corporation Act2001. The law of partnership is taken from both common law and statutory provisions. In the case ofLang v James Morrison & Co Ltd (1911) 13 CLR 1 at 11 it was ruled by the court that partners whileperforming their duties in relation to the course of business acts as the agents of each other. The Partnership Act 1963 (PA) through section 6 provides the meaning of partnership. Thesection states that relationship between people having a common aim of profit making is a partnershipwhich also includes an incorporated partnership. An external partnership is also included in thepartnership as per section 6. 2.1Mary and Rose It has been provided by the scenario that Rose and Mary run a business known as the Busy Bee FloristShop as partners. This means that they are bond to each other’s action which is committed during thecourse of business. There has been unseasonal weather and a drought which have resulted in losses forthe business. They have also taken loan from friendly bank which is according to the provisions ofpartnership binding on each other. The profits and losses also have to shared by them equally as acontrary agreement has not been provided. Rose has approached one of her friends Violate to obtain aloan by providing her a share of profit. She has the authority to enter into contracts on behalf of thepartnership therefore the contract is valid. Latter Mary had approached Sonny who is also the employeeof the partnership for a lone in return of profit sharing in the business. After obtaining the loan bothMary and Rose go for a vacation even when the business was declining. They had also informed thebank from which they have taken loan that they have incorporated Sonny and Violet as partners. Thequestion which has to be determined is that whether Violate and Sonny are the partners of the firm andthereby bond to the bank loan. 2.2The legal position of violet The agreement which Violet has entered upon with Rose in relation to providing the loan of$20000 to the business had the following terms. Firstly violet would have the right to share 20% profitand losses in relation to the business. Secondly violet would have the right to examine the books ofaccount of the partnership. Thirdly, she would be entitled to be provided with a business statementquarterly. Finally, the money provided by her has to be considered by a mere loan and she is not to be
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