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(APD) Business Law and Practice > 10. Partnerships > Flashcards

10. Partnerships Flashcards

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1
Q

What is a ‘partnership’?

A

Where 2 or more people are ‘carrying on a BUSINESS with a view of making PROFIT’

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2
Q

Is a partnership:
(a) A separate legal entity?
(b) Limited liability?

A

(a) No
(b) No

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3
Q

In the absence of Partnership Agreement (PA), what default provision applies?

A

Partnership Act 1890

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4
Q

What are the 3 ways a Partnership can be formed?

A

(1) Orally
(2) Writing (Partnership Agreement)
(3) Conduct

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5
Q

A Partnership can be formed by conduct. What are 2 ‘prima facie’ pieces of evidence of a partnership formed by conduct?

A

(1) Profit sharing
(2) Everyone takes part in decision making

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6
Q

(1) Who can be a partner?
(2) Can a company be a partner?
(3) Is there a maximum number of partners?

A

(1) Any legally capable person (including minors)
(2) Yes
(3) No

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7
Q

When will the CA 2006 govern the rules around the name of a ‘Partnership’?

A

Any partnership name UNLESS it’s only the forenames and /or surnames of the partners

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8
Q

Under the Partnership Act 1890, what is required to add a new partner?

A

Consent of ALL current partners

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9
Q

Under the Partnership Act 1890, what is required to change the nature of the business?

A

Consent of ALL current partners

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10
Q

What are the 2 types of partnerships?

A

(1) Fixed term partnership
(2) Partnership at will

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11
Q

What is a ‘fixed term partnership’?

A

A partnership that terminates on a certain date / on completion of a project

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12
Q

What is a ‘partnership at will’?

A

A partnership that continues indefinitely

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13
Q

(1) Who can bring a partnership to an end?
(2) How can they bring the partnership to an end?
(3) In what form must the method in (2) be done?
(4) What is the exception to (3)?

A

(1) Any partner
(2) By giving notice
(3) Any form
(4) UNLESS Partnership Agreement made by deed

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14
Q

What is the rule about when a partnership will end following notice by a partner and what is the exception to this?

A

End by DATE IN NOTICE
IF none - when notice communicated

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15
Q

Under the Partnership Act 1890, how is CAPITAL profit and loss shared in the partnership?

A

Equally

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16
Q

Under the Partnership Act 1890, what right to interest on the capital do partners have?

A

None

17
Q

Under the Partnership Act 1890, how is INCOME profit and loss shared in the partnership?

A

Equally

18
Q

Under the Partnership Act 1890, are salaries paid to partners?

A

No

19
Q

(1) Can a partnership own property?
(2) Under Partnership Act 1890, what will be defined as partnership property?

A

(1) No (NOT a separate legal personality)
(2) Partnership property =
(a) Property purchased with partnership money
(b) Property used in course of partnership business

20
Q

(1) What is the general rule about how decisions are made in a partnership
(2) What are the 3 exceptions to this?
(3) How are these 3 exceptions made?

A

(1) Majority
(2)
(a) Add a new partner
(b) Change nature of business
(c) Change rights / duties of partner
(3) 100% / unanimous

21
Q

Can a partner be expelled / removed by the other partners?

A

NO
UNLESS they consent

22
Q

What type of liability does a partner in a partnership have in respect of debts?

A

Personal liability - joint and severally

23
Q

(1) Under the Partnership Act 1890, what are the 2 key duties partners have to each other?
(2) What is the exception to this?

A

(1)
(a) Must account to the firm for any private PROFIT earned from transactions concerning partnership
(b) Must not COMPETE with the firm

(2) Other partners’ CONSENT

24
Q

(1) What is the rule on indemnities between partners under PA 1890?
(2) What is the effect of this if a partner becomes personally liable for a debt?

A

(1) The firm must indemnify every partner
(2) If a parter becomes personally liable for a debt, seek reimbursement from the partnership

25
Q

Partners are ……..of their fellow partners?

A

Agents

26
Q

When will a partner be personally liable v the partnership as a whole be liable for debts to a third party?

A

Partnership - entered transaction with ACTUAL or APPARENT/OSTENSIBLE AUTHORITY

Personally - neither authority above

27
Q

What are the 2 ways a partner will have acted with ‘Actual Authority’?

A

(1) Express agreement

(2) Implied by conduct (e.g. previous dealings with supplier)

28
Q

What does a partner acting with ‘Apparent / Ostensible Authority’ mean?

A

Third party believes the partner had authority to enter into the transaction on behalf of the partnership

29
Q

What is the key question to ask when deciding if a partner is personally liable for debts?

A

Was the debt incurred before the partner retired?

30
Q

Generally, will a retiring partner be liable for:
(1) Debts incurred BEFORE retirement?
(2) Debts incurred AFTER retirement?

A

(1) YES unless Novation Agreement
(2) NO IF comply with s36 PA 1890 (give notice)

31
Q

(1) Will a retiring partner escape liability from debts entered into after they have left the partnership (i.e. future debts)?

(2) What are the s36 requirements for:
(a) Third parties who has dealt with the firm before?
(b) Third parties who has NOT dealt with the firm before?

A

(1) Yes AS LONG as comply s36 PA 1890 requirements

(2)
(a) Dealt before - actual notice (i.e. DIRECTLY INFORMED) that the partner has left (NOT newspaper)
(b) NOT dealt before - notice of retirement in London Gazette

32
Q

What are the 2 main ways a retiring partner can protect themselves from 3rd party debts that occurred BEFORE they retired?

A

(1) Novation Agreement

(2) Indemnity from partners (from PA 1890 or Partnership Agreement)

33
Q

A ‘Novation Agreement’ is one method of a retiring partner escaping liability from debts that occurred BEFORE they retired?

(a) Who is the agreement between?
(b) What is the effect?
(c) What type of debts are they typically used for?

A

(a) Creditors, original partners, new parters
(b) Releases the retiring partner from the existing debt liability
(c) Ongoing debts (e.g. loans)
RARE for one-off debts

34
Q

(a) What does ‘holding out’ mean re partnerships?

(b) What is the effect of ‘holding out’?

A

(a) A third party relies on a representation that a person is a partner (either made by themselves or with their knowledge by someone else)

(b) Person can be personally liable for partnership’s debts

35
Q

What are the 2 ways a Partnership will be AUTOMATICALLY ended?

A

(1) Bankruptcy
(2) Illegality

(APD) Business Law and Practice (11 decks)

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