Formation of partnerships Flashcards
When is a partnership formed?
When all the elements within the definition of partnership set on in s1 PA 1890 exist
Dungate v Lee 1967
Partnership is a contractual relationship and so a partnership may come into existence through a course of dealings provided that tit is possible to identify agreement between the parties on the essential elements of the contract
How can a partnership be formed?
By express or implied agreement
Dickenson v Gross 1927
The execution of a partnership agreement did not operate to create a partnership because extrinsic evidence clearly showed that there was no partnership
IRC v Williamson 1928
Any statement in an agreement to the effect that a partnership exists, commenced or shall commence on a specified date is not conclusive and may be rebutted if evidence suggests otherwise
Ilott v Williams and Ors 2013
A mere agreement to form a partnership held to be insufficient as the parties had to commence carrying on the business
Can a minor enter into a partnership agreement?
Yes, but they retain the ability to repudiate the contract throughout his minority and within a reasonable time of attaining his majority
Steinberg v Scala (Leeds) Ltd 1923
A minor who repudiates the agreement is not liable for any of the partnership debts contracted during his minority but equally cannot recover money paid by him in respect of the agreement unless there has been a total failure of consideration
Imperial Loan Co v Stone 1892
A person of unsound mind who does not know what he is doing entering into the agreement is not bound by it, provided that the other partners knew he was incapable of understanding what he was doing
When is a partnership illegal?
When it is formed for a purpose forbidden by law, immoral or against public policy
What happens when a partnership is formed for a legal purpose that subsequently becomes illegal?
The partnership automatically dissolves on the occurrence of the event which makes the business of the firm illegal - s34 PA 1890
s1200-1206 CA 2006
A partnership which uses a business name must state on all letters, orders and demands for payment of business debt the name of each partner and the address within the UK at which service of any documents will be effective
When does a dissolution occur?
A partner leaves or joins or all partners go separate ways
What do partners who wish to reserve the right to continue the business of the partnership need to do?
They must reserve the right to do so and buy out the interest of the departing partner
What happens if that interest is not reserved?
The departing partner can require the property of the partnership to be applied to settle the debts and liabilities of the firm and for any surplus to be distributed between the partners
