Dissolution of partnerships Flashcards
s43 PA - any money due to the outgoing partner from the firm…
Is a debt due to him or his estate if he died
s31(1) PA - partnership automatically dissolves at…
The death or bankruptcy of a partner
s35 PA - any partner may apply to the court…
For an order to dissolve the partnership
What is a common variation to the statutory rule that the death/bankruptcy dissolves the entire partnership?
For the partnership agreement to provide that the death or bankruptcy of a partner will dissolve the partnership but only as regards the partner who died/was made bankrupt
What is the effect of the common variation to the statutory rule hat the death/bankruptcy dissolves the entire partnership?
That other partners are bound to continue in the partnership despite the death or bankruptcy
s34 PA - if an event occurs that makes it unlawful for the business of the firm to be carried on or for the partners to carry on that business in the partnership, the partnership…
Automatically dissolves
s33(2) PA - if a partners allows his share of partnership property to be charged for his separate debt…
The partnership may be dissolved at the option of other partners (variation: only as regards that partner)
Which section defines three types of partnership?
s32 PA
Three types of partnership under s32 PA
- A partnership for a single adventure or undertaking
- A partnership for a fixed term
- A partnership for an undefined time which is dissolved by any partner giving notice to the others
Which section provides for another type of partnership except for those listed in s32?
s26 - a partnership where no fixed term has been agreed upon for the duration
How did the courts reconcile s26 and s32?
The no fixed term partnerships have been limited to only those partnerships where the agreement is silent about the possible duration of the partnership
Moss v Elphick 1910
The agreement didn’t specify duration but did provide that the partnership could only be terminated by mutual agreement, neither s26 nor s32 applied
Walters v Bingham 1988
A partnership agreement whereby when a fixed term partnership deed expired, to continue on the same terms until a new deed has been executed, neither s26 nor s32 applied
James v Lloyd 1874
Once given, a notice cannot be withdrawn, except with the unanimous agreement of all the partners
Trego v Hunt 1896 definition of goodwill
The whole advantage, whatever it might be, of the reputation and connection of the firm which may have been built up by years of honest work or gained by lavish expenditure of money
Churton v Douglas 1859
- The purchaser of goodwill may represent himself as continuing or succeeding to the business of the seller
- The seller may open a competing business provided that he does not use a name which would suggest that he would continuing the old business
Hancock v Smith 1889
There is nothing preventing the seller’s spouse or partner from opening a similar business unless it can be shown that by this action he is deceiving the public
Curl Bros Ltd v Webster 1904
The purchaser has the sole right to solicit the customers of the old firm; however, if the old customers wish to continue to deal with the seller, they’re free to do so
Burchell v Wilde 1900
The purchaser must not use the name of the old firm in such a way as to give impression that the seller is still liable as a partner
Banks v Gibson 1865
Where the goodwill is not sold, each partner is entitled to canvass old customers and to use the firm’s name but none is permitted to hold out the other partner as remaining in the partnership together
Jennings v James 1898
The same rules as the ones relating to goodwill apply where on the dissolution one partner buys the assets from the other partner
Covenants in partnership agreement preventing the dangers relating to goodwill
- He will not open a competing business in the same area
- Undertaking that the partner will not accept orders from customers for some period of time
The guiding principle on enforceability of goodwill clauses
The clause is reasonable between the parties and also in the public interest, especially prevention of monopoly
Bridge v Deacons (a firm) 1984
As the partners are entitled to protect their interests, provided that the restraints imposed do not do more than protecting the interests of the partners, the courts will uphold the covenants
s25 PA - a partner cannot be expelled from a partnership unless…
The right to expel has been expressly agreed by the partners
An expulsion clause should specify what?
That the other partners want to continue trading
What is a common approach to leaving partners clauses?
The clause allowing the continuing partners to acquire the departing partners’ share and, provided that they elect to do so within a specified period of time, the partnership can continue
s36(1) PA - where a person deals with a firm after a change in its constitution…
He is entitled to treat all apparent members of the old firm as still being members of the firm until he has notice of the change
Tower Cabinet Co Ltd v Ingram 1949
Three types of creditors distinguished:
- Person who dealt with the firm before the partner’s retirement - the retiring partner must ensure that individual notice of his retirement is sent
- Persons who didn’t deal with the firm before the partner’s retirement but who know of the firm’s composition - they require a notice in the Gazette
- Persons who are neither - cannot hold a partner who has retired liable
What needs to be done to ensure that a partner’s ostensible authority is limited by s38 PA?
The dissolution of the partnership needs to be notified
Manley v Sartori 1927
In calculating the outgoing partner’s entitlement, some allowance must be made to pay for any services rendered by the continuing partners after the dissolution, e.g. management of the business
Barclays Bank Trust Co v Bluff 1981
There was an increase in business’ value between a partner’s death and distribution of assets, held that that was held by the surviving partner on trust for the benefit of the estate
s39 PA - upon dissolution of a partnership, every partner is entitled as against other partners to…
Have the property of the partnership applied in payment of the firm’s debts and liabilities and to have any surplus remaining divided among the partners according to their respective shares
Equitable lien enforceable by the sale of the assets
This is what the partner has after applying to the court to wind up he business for the purposes of enforcing the right of application of partnership property
Do the costs of winding up rank before or after the debts of the firm?
After
What happens when the assets are insufficient to meet the costs?
The partners must bear them in proportion in which they bear the firm’s losses
Garner v Murray 1904
If a partner is insolvent, the loss must be borne by the solvent partners in the same ration as their last agreed capital contribution
