c6 questions Flashcards
1 Humphreys & Co is a partnership involved in the sale of hot tubs. Due to a summer of bad weather,
the business fails and the partnership is dissolved.
Requirements
Are the following statements true or false?
Any partner (whatever their share of profits) can insist on the partnership assets being realised and
any surplus being distributed (after payment of debts) to the partners.
True A
False B
In the event of there being a capital deficiency, the remaining partners of the firm will bear the loss
equally in the absence of an express agreement to the contrary.
True C
False
A
D - share capital deficiency in the ratio to the amount of capital they originally contributed to the firm
Lola and May are in partnership. Their business, Lomays & Co, buys gift products made by local
craftsmen and sells them through well-known retail outlets. Lola sometimes receives a commission
from the suppliers, supposedly for Lomays & Co, when she places an order for a large number of
products. She rarely informs May of the commission nor does she pay the commission into the firm’s
bank account. Lola, to May’s knowledge, also purchases homemade cards from Original Greetings
Ltd, a company that she owns and runs with another friend, and sells them along with other items
through the Lomays business.
Requirement
Which of the following best describes the legal position, in view of the fiduciary duties owed by
partners?
A May is entitled to buy out Lola’s share of the business.
B Lola must account to Lomays & Co for commission monies received.
C Lola must account to Lomays & Co for commissions received and profits made by Original
Greetings Ltd on cards sold through Lomays & Co.
D Lola must account for commission monies received and must refrain from selling products of
Original Greetings Ltd through Lomays & Co because of the obvious conflict of interest
B - A partner is required to avoid conflicts of interest without full disclosure to the other partners. If the
other partners know of the conflict and do not object, then the partner may proceed. A partner must
account to the partnership for all monies received in respect of it.
Millie, Gemma and James are in partnership running a business organising conferences. Gemma and
James nominate Millie to advertise their business and they all agree a total budget of £3,000 for this
purpose. Millie feels that they should advertise in some glossy magazines as well as newspapers but
knows that Gemma and James will not agree. Nevertheless, Millie places an advertisement with
Upmarket Businesses , a high quality monthly glossy magazine. This incurs an additional cost of
£2,000 (resulting in a total cost of £5,000), to be paid within 30 days. When Gemma and James hear
about it, they are angry that Millie has exceeded the authority that they gave her and refuse to pay
the publisher of Upmarket Businesses for the advertisement.
Requirement
Which of the following best describes whether Upmarket Businesses can enforce the contract?
A Millie had no authority to enter into the contract.
B Millie had implied usual authority to advertise the firm’s business.
C Millie had no authority, but Upmarket Businesses was not aware of that fact.
D Millie had no authority, but Upmarket Businesses was not aware of that fact but knew that she was a partner.
D - The Partnership Act 1890 provides that even without authority, a partner’s usual acts for the
partnership business are binding, unless the third party knows that they have no authority or does not know or believe them to be a partner.
Freda, Gaynor and Hilda are in partnership as solicitors. Freda and Gaynor authorise Hilda to appoint a junior solicitor to work in the conveyancing department. Accordingly, Hilda appoints Jane but since
Hilda is overworked in the commercial department, she also appoints Julie, another junior solicitor, to help her in the commercial department.
Requirement
Which of the following statements best describes whether Freda, Gaynor and the firm are bound by
the appointment of Julie?
A Freda, Gaynor and the firm are bound because the appointment is within the usual authority of a partner.
B They are not bound because Hilda has exceeded her authority, which was to appoint a junior solicitor for the conveyancing department.
C They are bound because Julie knew that Hilda was a partner in the firm.
D They are bound because Julie did not know that Hilda did not have express authority to appoint her.
A - Such an appointment is within the usual authority of a partner. The fact that Hilda was given express
authority to appoint Jane does not detract from her implied authority to appoint. The authority was
not to appoint one and no more.
Are the following statements true or false?
An ordinary partnership may only be dissolved by the unanimous consent of the partners.
True A
False B
Where a partnership becomes insolvent, bankruptcy proceedings can be brought in respect of
individual partners.
True C
False D
B C
This is usually expressly provided for in a partnership agreement. However, in the absence of an
express provision, the Partnership Act 1890 provides that a partnership is dissolved in a number of
instances, including on the death or bankruptcy of a partner.
Pascal and his son Roger are partners in the firm, Smith & Co. After a disastrous year, they have
realised that they cannot settle all the debts owed by the partnership. One creditor, with a fixed
charge over the main business premises, now wishes to enforce his security.
Requirements
Can the secured creditor take action against Pascal and Roger individually or sue them in the name
of Smith & Co?
Yes A
No B
Can the partnership be wound up?
Yes C
No D
A C A partnership may be wound up in the same way as an unregistered company under Part V of the
Insolvency Act 1986
Ashad and Michael plan to set up a limited liability partnership (LLP) to continue the business,
Jenkins & Co, that they have conducted for the past 15 years as an ordinary partnership. They
particularly do not want to change the name because it is a successful business.
Requirements
Can they register the LLP under the name Jenkins & Co?
Yes A
No B
Do they need to have a formal partnership agreement?
Yes C
No
B They may be able to use this name as a business name, but the name of an LLP must end with the words ‘limited liability partnership’ or the abbreviation ‘LLP’.
D An LLP will normally have one but it is not essential.
B
The Limited Liability Partnership Act 2000 provides that every member is an agent of the limited liability partnership only.
D
Where he acts without authority, he will still bind the LLP unless the third party knows that he does
not have authority or does not know or believe him to be a member of the LLP.
Ashad and Michael plan to set up a limited liability partnership (LLP) to continue the business,
Jenkins & Co, that they have conducted for the past 15 years as an ordinary partnership. They
particularly do not want to change the name because it is a successful business.
Requirements
Can they register the LLP under the name Jenkins & Co?
Yes A
No B
B - they must have LLP at the end!
Are the following statements true or false in relation to a limited liability partnership (LLP)?
A member of an LLP is an agent of the LLP as well as its members.
True A
False B
A member cannot bind the LLP by their actions unless they act within their actual express or implied authority.
True C
False D
B - only an agent of the LLP
D - Where he acts without authority, he will still bind the LLP unless the third party knows that he does wnot have authority or does not know or believe him to be a member of the LLP.
Under the Limited Liability Partnerships Act 2000 certain requirements need to be met for a limited
liability partnership (LLP) to be legitimately formed.
Requirements
Are the following among those requirements?
One or more persons who are associated for the purposes of carrying on a lawful business with a
view to a profit must have subscribed their names to an incorporation document.
Yes A
No B
The incorporation document must state the name of the LLP which must end with the words ‘Limited Liability Partnership’ or the abbreviation ‘LLP’.
Yes C
No D
B One would not be sufficient. The requirement is for two or more persons to subscribe their names to the incorporation document
C
Under the Partnership Act, a partnership agreement may only be varied with the consent of a majority of the partners.
True
False
Under the Partnership Act, a partner can be expelled by the other partners for any reason.
True
False
Under the Partnership Act, a partner can be expelled with a simple majority of partners voting in favour of their expulsion.
True False
true = p’ship agreement can only be varied with unanimous consent
false = expulsion must be in good faith and for a good reason
true = simple majority of partners is req’d to vote in favour to expel a partner
