Business Law Case Study: Partnership Analysis Under Partnership Act

This case study delves into the business relationship between Todd and Zac, examining whether a partnership exists based on their brewing activities. It addresses key issues such as entitlement to profits from beer sales, liability for outstanding rent, compensation responsibilities following a lawsuit, and the legality of Zac leaving the partnership. Furthermore, it determines whether specific assets like brewing equipment, Zac’s laptop, and the recipe are considered partnership property. The analysis applies relevant sections of the Partnership Act and case law to provide a comprehensive understanding of the legal implications of their business venture. Desklib provides access to this and many other solved assignments.

BUSINESS LAW QUESTIONS 1
BUSINESS LAW QUESTIONS
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Questions
A. Does a partnership between Todd and Zac exist?
Issue
The question whether a partnership between Todd and Zac exist depends on
whether the engagement was procedurally entered.
Rule
According to the Australian partnership Act1, a partnership exists when persons
come together to do business with a purpose of getting a monetary gain2. The coming
together can be express through formal document or implied through conduct or actions
of the parties.
Application
In the scenario presented, the two parties were friends who mutually agreed to
make their own beer. Todd and Zac contributed differently towards supporting their
common activity. They engaged in different tasks that each was best at to make sure the
brewing activity was successful3. The two parties decided to enter into a contest together.
It is also indicated that both of them were interested in making money from the common
activity. When Todd decided to lease a warehouse so as to give their business a
professional look, Zac was very happy to enter into the warehouse and started to do his
experiment from the warehouse.
When Todd organized for a marketing venture in a Christmas party, Zac is seen to
accompany him to the party4. All these reactions by Zac indicates that he fully supported
Todd’s decision and and was therefore in full support of the business venture. It can be
seen that despite lack of written agreement, both parties agreed to work together and did
1 Australian partnership Act (1891),
2 Morrison v. National Australia Bank Ltd., 547 F.3d 167 (2d Cir. 2008).
3 Gold, D. L, “ Introduction. In Law & Economics: Toward Social Justice (pp. xi-xviii)”(2009), Emerald
Group Publishing Limited.
4 Hatzimihail, N. E, “The many lives-and faces-of lex mercatoria: history as genealogy in international
business law”(2008) 12 Law and contemporary problems, 71(3), 169-190.

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their activities in the interest of the venture hence showing that they were determined to
work together as partners.
On the other hand, several reasons may render the partnership nonexistent. The
driving factor for partnership formation is making profit. The concerned parties agree on
how they are going to share profit and how they are going to share responsibility.
In the case of Todd and Zac, it can be clearly observed that the main intention of
coming together was to make a brew for personal consumption. The idea of making
money was conceived along the way and the modality of sharing profit was not
discussed5. Todd and Zac did not discuss the scope of the work of each party. They did
not agree whether individual decision on behalf of the firm was to be taken as the firm’s
decision despite the results of the decision made. Joint ownership of property does not
create a partnership. Despite each party giving a contribution, this is not enough to make
partnership binding. The parties also did not discuss on how each party was to give his
contribution.
Conclusion
In conclusion, it can be said that the behaviors of the two parties all the way
clearly indicates that a partnership exists between them.
B. Is Zac entitled to the money from the beer he has been selling?
Issue
In order to decide whether Zac is entitled to the money, several factors will be
considered.
Rule
In partnership, all the gains obtained by a partner when acting on behalf of the
partnership belong to the partnership and is to be shared by all the partners
proportionately.
Application
5 Mann, R. A., & Roberts, B. S, “Smith and Roberson’s business law” (2011),45 Cengage Learning 234.

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In the case of Todd and Zak, it is observed that both parties agreed to work
together in brewing wine. Each party worked where he was best at. It can also be
observed that .Todd was best at marketing while Zac was best at experimenting. When
there was a local contest, both parties agreed to attend. It can be presumed that if the
contest had any monetary gain, then both of them would have shared the benefits. Each
party was supposed to work in the interest of the partnership.
Conclusion
From the activities of Todd, it can be seen that all that he did was at the interest of
the partnership. Zac’s activity of selling beer is a business activity which is supposed to
benefit both of them. This means that Zac is not entitled to the money of the beer he sold.
C. Who is liable to pay the outstanding rent?
Issue
Before a decision can be made concerning the person who is supposed to cater for
the rent, several issues will be taken into consideration.
Rule
Partnership is all about partnering in business to make profit. Expenses of the
business should be paid by the partners.
Application
In the present case, it can be observed that one of the reasons that prompted Todd
to lease a warehouse was to create more room for production6. The reasons provided by
Todd for leasing the building were for the benefit of both of them. It should also be noted
that Zac would get more space that could help him do his experiments efficiently. It is
also indicated that Zak was impressed with the new building that was leased. In his
words, Zac said that he wanted to quit the “business.” This means that he was aware that
he had a business relation with Todd.
Conclusion
If a business relationship existed, then expenses ought to be paid by all the parties
involved in the business and just some.
6 Nichols, P. M, “The business case for complying with bribery laws”, (2012), American Business Law
Journal, 49(2), 325-368.

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D. If Denton successfully sues Zac and Todd, who is liable to pay the
compensation?
Issue
If Denton is to be compensated, then the person to do the compensation will be
determined by ascertaining how the compensation issue came into place.
Rule
Compensation cost in partnership is incurred by the parties if it resulted from an
act intended to benefit the firm.
Application
Todd gave out the beer used in the charismas party as way to market the beer of
their business. Zac presence in the party may be interpreted to mean that he equally had
consented to giving out beer without charging any cost. It is worthwhile noting that Zac
was involved in direct experimentation of different recipes and production of beer. This
fact does make him liable individually to the quality of the beer produced because he
acted on behalf of the business. From the above facts it can be observed that both Zac and
Todd acted on behalf of the business and are therefore liable.
Conclusion
They should both of them share the cost of compensating Denton.
E. Can Zac leave the partnership the way he did?
Issue
To determine whether Zac can leave the way he did, the nature of the partnership
formation and procedures for leaving have to be examined.
Rule
Partnership Act state very clearly that leaving or disjoining from the partnership
can only happen incase of misconducts like fraud misappropriation of funds.
Application
It can be observed that Zac seeks to leave the partnership when problems start
arising. It is like Zac is seeing Todd as the main cause of the problem and should
therefore shoulder the burden alone. However, from the information given, it can be
observed, at no point is Todd seen to act on personal interest but for the interest of the

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partnership7. Leaving in such a manner can only be allowed in case there are incidences
of fraud or misappropriation of funds. From the information given, it is clear that the
parties agreed to work together to make beer. It is also evident that the partnership has
debts which have not been cleared. The partnership also has a pending court case which
is affecting both parties. Before dissolution can be effected, all parties to the partnership
must mutually agree8.
Conclusion
They should agree on how profit or loss is going to be shared proportionately.
They should also clear debts and wait for the court outcome.
F. Is the brewing equipment, Zac’s laptop, and recipe and formula
partnership property?
Issue
In the question whether the brewing equipment, Todd’s laptop, recipe and
formula is a partnership property, what is entailed in partnership property will be looked
at closely.
Rule
According to the Partnership Act (1891) partnership property entails all property
contributed by individual parties or bought using partnership money. These properties
should be exclusively be used in transacting the interest of the business.
Application
It should also be noted that before a partnership is dissolved and property shared
accordingly, the property should be used to clear any outstanding debts the partnership
has to other people. In the case of Todd and Zak, each party contributed differently to the
partnership9. The property that each person gave was used to further the course of the
business and thus it qualified to be called partnership properties.
Conclusion
7 Schaffer, R., Agusti, F., Dhooge, L. J., & Earle, B. “International business law and its environment,
(2011), Cengage Learning.
8 Bilski v. Kappos, 130 S. Ct. 3218, 561 U.S. 593, 177 L. Ed. 2d 792 (2010).
9 Stoneridge Inv. Partners v. Scientific-Atl., 552 U.S. 148, 128 S. Ct. 761, 169 L. Ed. 2d 627 (2008).

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It is therefore worth while noting that neither Todd nor Zak is entitled to take the
whole of his initial contribution away and terming it as his own10. All business debts must
be cleared before sharing of remaining properties can be done accordingly.
10 Nat. Fedn. of Indep. Business v. Sebelius, 132 S. Ct. 2566, 567 U.S. 519, 183 L. Ed. 2d 450 (2012).

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Bibliography
Journal Article/Books/Reports
Gold, D. L, “ Introduction. In Law & Economics: Toward Social Justice (pp. xi-xviii)”(2009),
Emerald Group Publishing Limited.
Hatzimihail, N. E, “The many lives-and faces-of lex mercatoria: history as genealogy in
international business law”(2008) 12 Law and contemporary problems, 71(3), 169-190.
Mann, R. A., & Roberts, B. S, “Smith and Roberson’s business law” (2011),45 Cengage
Learning 234.
Nichols, P. M, “The business case for complying with bribery laws”, (2012), American Business
Law Journal, 49(2), 325-368.
Schaffer, R., Agusti, F., Dhooge, L. J., & Earle, B. “International business law and its
environment, (2011), Cengage Learning.
Case Law
Morrison v. National Australia Bank Ltd., 547 F.3d 167 (2d Cir. 2008).
Bilski v. Kappos, 130 S. Ct. 3218, 561 U.S. 593, 177 L. Ed. 2d 792 (2010).
Stoneridge Inv. Partners v. Scientific-Atl., 552 U.S. 148, 128 S. Ct. 761, 169 L. Ed. 2d 627
(2008).
Nat. Fedn. of Indep. Business v. Sebelius, 132 S. Ct. 2566, 567 U.S. 519, 183 L. Ed. 2d 450
(2012).
Legislation
Australian partnership Act (1891),