Company Law: Partnership Act Case Study - Legal Analysis

This case study examines the application of the Partnership Act 1892 NSW in the context of a business scenario involving a florist shop. The analysis addresses four key issues: whether Violet can be considered a partner, whether Sonny is a partner, whether Violet and Sonny allowed themselves to be called partners, and if Violet would be accountable to the Friendly Bank if she were a partner. The study references relevant sections of the Partnership Act, including those related to the definition of a partnership, determination of partnership existence, partner duties, and liabilities. It uses case law, such as Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. and Rose v Commissioner of Taxation, to support its arguments, concluding that Violet is likely a partner, Sonny is not, and Violet and Sonny presented themselves as partners. The analysis also determines that Violet would be accountable to the bank if she were a partner, according to the duties outlined in the Partnership Act.

Running Head: COMPANY LAW 0
COMPANY LAW
AUSTRALIA
[DATE]
PARTNERSHIP ACT
[Company address]

COMPANY LAW 1
Issue 1
The major issue in this case study is that can Violet be considered as partner?
Rule 1
Accordance with section 1 of the Partnership Act 1892 NSW which while clarifying the
definition of partnership stated that it is that relation between the persons who are carrying on a
business for earning profit and it further also includes an incorporated and limited partnership.
Whereas section 2 of the same act emphases on the rules which can determine the existence of
partnership between two parties such as Joint tenancy rule 1 s 6(1) there must exist a joint
ownership rather than that of self-satisfactory, sharing of the gross returns rule 2 s 6(2) there
must be some evidences relating to the existence of the partnership, receiving shares in the
business profits rule 3 s 6(3) sharing of profit is the basic or the main evidence which suggests
the existence of the partnership. Section 28 suggests that all the partners must also have a share
in the loss of the firm. Section 24 determines the duties which are to be accomplished by all the
partners in a partnership firm Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume
Sales (Finance) Pty. Ltd. (1974) 131 CLR 321, in this case the relationship between the partner
and partnership was discussed and a healthy definition for partnership was set.
Application 1
In the given case study it was seen that Violet agreed to lend his loan for getting a share
in the partnership for $20,000 in exchange of a loan agreement having the following terms i.e.
20% share of loses and profit will be shared with the lender, he could also have the right to
inspect the books of partnership at its own will, can also attain the quarterly statement of
business and lastly if the money is advanced for paying off the loans, the lender cannot be
considered as a partnership. This shows that all the elements of the definition of partnership was

COMPANY LAW 2
meet as was there in the case of Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume
Sales (Finance) Pty. Ltd .Violet had signed the document relating to loan prepared for giving
advance money prepared by Rose. Thus it is clear that agreement was signed by Violet, where he
had agreed to share the liability. The deed was formed between the two parties which cannot be
further disagreed by Violet by stating that he had not undergone all the clauses of the agreement.
Conclusion 1
Hence to sum up with the case study it can be stated that Violet can be considered as a
partner to business of the shop. As all the terns of creating a valid partnership are being meted
here.

COMPANY LAW 3
Issue 2
The major issue in this case is that whether Sonny be considered as partner?
Rule 2
In the case of United Dominions Corp Ltd v Brain Ply Ltd (1985)157 CLR 1, it was
determined by the High Court of Australia that joint venture which is one of the essential
element for proving the existence of the partnership was basically connected with persons for
the purpose of trading or earning mutual profits for all the partners. Whereas in the case of Rose
v Commissioner of Taxation (Cth) (1951) 84 CLR 118 at 124, the court decided that lending
money for attaining certain interest on loan cannot be considered as an element of partnership
but lending a loan for attaining a share in partnership can be addressed as existing partnership.
Application 2
In the case study it was seen that Sonny agreed to lend $10,000 to Mary but wanted some
amount of interest upon the loan given by him. The deal was finalized on the terms that Sonny
would receive its salary as well as 1/8th share of profit or loss in reappearance of giving a loan to
the business institution which was also seen in the case of Rose v Commissioner of Taxation.
Conclusion 2
Thus to conclude it can be said that no partnership was formed between Sonny and the
Busy Bee Florist shop’s business.

COMPANY LAW 4
Issue 3
`The major issue in this case study is that, whether Violet and Sonny allowed themselves
for being called as partners?
Rule 3
A partner is one who is equally involved in the company in all the situations whether of
loss or profit. Certain rubrics in accord with section 2 of the partnership Act NSW can be
imposed for enhancing or fetching the existence of the partnership between two persons.
Partnership is basically done for earning gains or profit out of a business organization, here loses
are also to be bared by all the partners equally.
Application 3
In the given case study it was seen that Violet and Sonny were not aware of the debt
which the shop had to repay the Friendly Bank, they believed that the loan was taken for
increasing the capacity of the business section 2 of partnership act was breached. The shop was
continuously facing losses.
Conclusion 3
They had tried their level best to become the partners in the shop and accomplished all
the duties of good are truthful partners. Hence it’s a yes that Violet and Sonny permitted
themselves to be determined as partners.
Issue 4

COMPANY LAW 5
Can Violet be held as accountable to the Friendly Bank if she would have been a
companion?
Rule 4
Under Australian Partnership Act there are some duties which are to be followed by all
the partners in a partnership. Such as to carry forward the business in such a way that it earns the
greatest profit to it, they must be just as well as faithful towards each other, accounts must be
rendered truly, complete information must be shared with all, must be diligent towards their
duties, share losses, act within the extension of the Authority etc. all these duties are mentioned
under section 24 of the Partnership Act.
Application 4
All the partners owe a duty towards their role in the partnership. So as mentioned in the
case scenario it’s very vibrant that if Violet is considered as a partner in accord with the
provisions of Section 1 and 2 of partnership act so he also has duty toward the business as
mentioned under section 24.
Conclusion 4
Thus to conclude the case study it can be stated that if Violet becomes the partner, then
she could easily be apprehended for all obligations held up with the Friendly Bank.

COMPANY LAW 6
References
Cases
Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd.
(1974) 131 CLR 321
Rose v Commissioner of Taxation (Cth) (1951) 84 CLR 118 at 124,
United Dominions Corp Ltd v Brain Ply Ltd (1985)157 CLR 1,
Act
Partnership Act 1892 NSW