The elements are carrying on a business

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

1PARTNERSHIP ASSIGNMENT
Answer 1:
Issue:
The issue which is to be analyzed here is whether it provides a better idea for Mitsi, Kai,
Sen and Luc for continuing without any discussion regarding the legal arrangements among
them.
Rules:
Section 6 of the Partnership Act 1963 (Cth), hereinafter referred to as Act defines the
term partnership. It states that partnership relation exists among two or more people when they
are involved in a business having a common capacity with the only objective of gaining profits.
This definition was further discussed in decision given in the case of United Dominions
Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, (1985) 60 ALR 741. Section 9 of the Act
states that the partners are empowered to bind the firm by their acts. It provides that a partner can
be regarded as the firm’s agent and also other partners’ agent for the reason of business of the
firm. Any act done by one partner of a partnership business will not only bind the firm but also
the partners except when the partner does an act without having any authority to do it in that
particular manner and the person with whom the partner deals with either has knowledge that the
partner is acting without such authority or has no knowledge that he is the partner of the firm.
This was entrenched in the case of Smith v Anderson (1880) 15 Ch D 247.
Application:
In the present case, Mitsi, Kai, Sen and Luc started offering consultancy services to the
clients of small business. Sen and Kai were specialization in providing help to the clients in order

2PARTNERSHIP ASSIGNMENT
to incur finance for growing business. Luc deals with clients having solvency issues. He wants to
get the registration of a liquidator such that later on he can offer services related to liquidation.
Marketing services are sold by Mitsi to the clients. All of them gave 20,000 $ as the startup
costs. For this consultancy services, rented premises were shared by them and all of them signed
the lease agreement of these premises. Sen and Kai used the name ‘Time to glow’ as a trading
name whereas Luc trades using another name ‘Moving Forward’ whereas Mitsi uses ‘Tip Top
Marketing’ as the business name. None of them got their trading name registered. They also have
not decided about the legal arrangements in this regard. It will result into confusion and
ambiguity about their liability in their business. As there was no proper business structure
available for their business, the rights of the parties will not be known. Hence, any third party
claim cannot be ascertained against the business due to the absence of proper business structure.
Conclusion:
Hence, it can be inferred that idea of Mitsi, Kai, Sen and Luc of continuing the business
without any proper legal arrangements is not a good idea.
Answer 2:
Issue:
The issue here is whether a partnership has resulted among four partners without any
proper legal agreement.
Rules:
Section 6 of the Partnership Act 1963 (Cth), hereinafter referred to as Act defines the
term partnership. It states that partnership relation exists among two or more people when they

3PARTNERSHIP ASSIGNMENT
are involved in a business having a common capacity with the only objective of gaining profits.
This definition was further discussed in decision given in the case of United Dominions
Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, (1985) 60 ALR 741. Section 1 of the said
Act supplies three main ingredients that are to be satisfied for determining whether any
partnership exists. The elements are carrying on a business, to earn profit, in common capacity.
Thus, in order to determine whether there exists any partnership business, firstly it is to be
observed whether there is a business as seen in Re Griffin; Ex parte Board of Trade (1890) 60
LJQB 235 at 237. Secondly it is to be seen whether such continuing of the business is done in
common capacity as observed in Re Ruddock (1879) 5 VLR (IP & M) 51. Finally, a profit
making objective must be present behind running of the business as discussed in the case of Wise
v Perpetual Trustee Co Ltd [1903] AC 139. When all the 3 ingredients are present, the said
business will be regarded as a partnership business. This was entrenched in the case of Fletcher
Moulton LJ in Re Spanish Prospecting Co Ltd [1911] 1 Ch 92 at 98-99.
Application:
In the present case, Mitsi, Kai, Sen and Luc started offering consultancy services to
the clients of small business. Sen and Kai were specialization in providing help to the clients in
order to incur finance for growing business. Luc deals with clients having solvency issues. He
wants to get the registration of a liquidator such that later on he can offer services related to
liquidation. Marketing services are sold by Mitsi to the clients. All of them gave 20,000 $ as the
startup costs. But they were using different names for running business.
From the discussion made above, it is seen that they were carrying on a business which
shows the presence of first ingredient of the partnership. Four of them are carrying on business
for incurring profit which satisfies the 2nd element of the partnership. Moreover, for this

4PARTNERSHIP ASSIGNMENT
consultancy services, rented premises were shared by them and all of them signed the lease
agreement of these premises. This showed that all the elements of the partnership are satisfied as
seen in Bond Corporation Holdings Ltd & Anor v Grace Bros Holdings Ltd & Ors (1983) 1
ACLC 1009.
Conclusion:
From the above discussion, it is seen that a partnership is formed among the four
members unless any other agreement in contrary.
Answer 3:
Issue:
The issue to be discussed here is what can be suggested to Mitsi, Kai, Sen and Luc if they
desire to create a partnership business in future.
Rules:
The section 13 of the Act provides a partner’s liability in any partnership business. Every
partner of a partnership firm can be made liable jointly along with the other partners for the
liabilities including debts, losses and others of the firm when such person is the partner of the
firm. However, in the case of a company type business structure, the owners or the directors
cannot be made liable for the debts or losses of the company except in some of the situations.
This is because the company is said to possess a distinct legal entity separate from that of its
owners or directors. They are protected from getting liable for the company’s liabilities. This
has been construed in the decision of the case of Salomon v A Salomon & Co Ltd [1896] UKHL
1. Moreover, in a company one director or owner cannot be held liable for the act of other

5PARTNERSHIP ASSIGNMENT
director or owner. However, in a partnership firm, the each of the partners is held jointly liable
together with other partners for the liabilities of the firm as long they are the partners of the firm.
This is not present in case of a company. In a company, the directors or owners are protected
under the principle of corporate veil.
Application:
In the present case, Mitsi, Kai, Sen and Luc started offering consultancy services to
the clients of small business. Sen and Kai were specialization in providing help to the clients in
order to incur finance for growing business. Luc deals with clients having solvency issues. He
wants to get the registration of a liquidator such that later on he can offer services related to
liquidation. Marketing services are sold by Mitsi to the clients. All of them gave 20,000 $ as the
startup costs. For this consultancy services, rented premises were shared by them and all of them
signed the lease agreement of these premises. Sen and Kai used the name ‘Time to glow’ as a
trading name whereas Luc trades using another name ‘Moving Forward’ whereas Mitsi uses ‘Tip
Top Marketing’ as the business name. None of them got their trading name registered. They also
have not decided about the legal arrangements in this regard. It will result into confusion and
ambiguity about their liability in their business. As there was no proper business structure
available for their business, the rights of the parties will not be known. Hence, any third party
claim cannot be ascertained against the business due to the absence of proper business structure.
Thus the best possible solution for this is to form a company which will safeguard all of the
members, Mitsi, Kai, Sen and Luc from being held liable personally for the losses or liabilities of
the firm which is not present in a partnership business form.

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Conclusion:
The best business structure that can be suggested to Mitsi, Kai, Sen and Luc if they desire
to create a partnership business in future is the company model.

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References:
Bond Corporation Holdings Ltd & Anor v Grace Bros Holdings Ltd & Ors (1983) 1 ACLC 1009
Fletcher Moulton LJ in Re Spanish Prospecting Co Ltd [1911] 1 Ch 92 at 98-99.
Re Griffin; Ex parte Board of Trade (1890) 60 LJQB 235 at 237
Re Ruddock (1879) 5 VLR (IP & M) 51
Salomon v A Salomon & Co Ltd [1896] UKHL 1
Smith v Anderson (1880) 15 Ch D 247
The Partnership Act 1963 (Cth)
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1, (1985) 60 ALR 741
Wise v Perpetual Trustee Co Ltd [1903] AC 139.