Effect of death of a partner on partnership and determination of partnership property

The article discusses the effect of death of a partner on partnership and determination of partnership property. It explains the rules and application of partnership act in such cases. The article also provides relevant case laws to support the discussion.

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Business and Corporate Law

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Answer e
Issue
What effect will be on the partnership after the death of Seamus?
Rule
In case a partnership agreement has formed between partners, then it usually contains
a clause setting out what would happen in case a partner die or become permanently
disabled. Often the terms provide that the share of the deceased’s partner will be
transferred to his/her family members. The partners can also include a clause which
contains an option where other partners can purchase the share of the deceased partner
using a financial formula. However, in case there is no partnership agreement between
the parties, then the Partnership Act of state or territory in which the partnership is
formed will be applied (Fletcher, 2007).
Generally, after the death of a partner, the partnership relationship will dissolve
immediately. Other partners will then owe the deceased partner’s estate debt for their
share. Other partners will have to wind up their business and divide the assets and
profits between each other. This can be understood based on the element of
partnership which was established in the judgement of Saywell v Pope (1979) STC
824 (Ch) case. The court provided in its judgement that the partners must run the
operations of the business in common or else it cannot be constituted as a valid
partnership.
Application
In the present scenario, Lucy, Seamus and Koo did not form a written partnership
agreement; therefore, they have to comply with the guidelines given in the Partnership
Act. As discussed in the case of Saywell v Pope, they have to run the operations of the
business in common based on which they cannot continue their business after the
death of Seamus. They have to wind up their partnership, and Lucy and Koo have to
repay the share of Seamus to his family member.

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Conclusion
To conclude, the death of Seamus will lead to the dissolution of the partnership.

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Answer f
Issue
The issue is how Lucy and Koo will determine what is partnership property and how
they can be used to meet the losses of LuSeKo.
Rule
The assets which are brought by partners in the business to run its operations are
considered as partnership property. These properties are used to manage and run the
operations of the partnership business. These properties can be used to meet the loss
of the partnership if there is not enough profit left in the business (Pentony et al.,
2012). In the case of National Commercial Banking Corporation of Australia Ltd v
Batty (1986) HCA 21, the court provided that partners are jointly and severally liable
to repay the debts of the partnership business in case it suffers a loss.
Application
In the given case study, the truck of Lucy, lawnmower of Seamus and the computer of
Koo are partnership properties since they were brought by the partners to run the
operations of the business. These assets can be used to meet the loss suffered by
LuSeKo. All partners are liable equally in the business as discussed in National
Commercial Banking Corporation of Australia Ltd v Batty case; therefore, their assets
will be used equally to repay the debts of LuSeKo. All the partners will be equally
liable, and rest of the amount left after selling their assets will be given back to them,
or they can be asked to bring more to meet the debts of the business.
Conclusion
To conclude, the assets brought by each partner in the business is considered as
partnership property which can be used equally to meet the losses of LuSeKo.

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References
Fletcher, K.L. (2007) The law of partnership in Australia / Keith L. Fletcher. 9th ed.
Pyrmont: Lawbook Co.
National Commercial Banking Corporation of Australia Ltd v Batty (1986) HCA 21
Pentony, B., Graw, S., Parker, D. and Whitford, K. (2012) Understanding Business
Law. London: LexisNexis Butterworths.
Saywell v Pope (1979) STC 824 (Ch)