Module 7: Law of Partnership Flashcards
What is a partnership according to the 1890 Partnership Act?
The relation which subsists between persons carrying no a business in common with a view of profit
When was the Partnership Act?
1890
What is the relation which subsists between partners?
Based on contract
Verbal or in writing
May be inferred from circumstances
Stewart v Buchanan 1903
B provides S capital, premises and fittings
Stewart alleged B and S were in partnership
Agreement between B and S expressly stated ‘not to be held a partner’
WAS a partnership
Agreement attempt to carry on business without risk of liability
What persons can enter a partnership?
Natural legal person aged 16 Scotland, 18 England
Capacity not restricted
Min. 2 persons
No max
Carrying on a business in common involves?
Every ‘trade, occupation or profession’
Lawful
Begins when agree to conduct their business activity together
Khan and Another v Miah 2000
At point of agreement that the partnership begins
Not when starts trading
What is a joint venture?
Partnership can arise when only a single transaction has been carried out
Partnership dissolved once transaction complete
With a view of profit in partnership?
The intention not actually making one
What are the rules in Section 2 of the Partnership Act that determine whether a partnership exists?
Joint tenancy does not itself create one
Sharing of gross returns doesn’t create one
Net business profits share is prima facie evidence he is a partner
Legal Personality of the Firm?
Scotland- firm is distinct from partners
England- partnership has no legal status separate from that of members
Both face unlimited personal liability for the debts
What is the liability of partners?
Joint and several
Each responsible for the whole amount of the firms debts
Authority of a partner to bind the firm and other partners?
Every partner is an agent of the firm and his other partners for the purpose of the business
May agree to extent of authority- express/implied
Implied authority in Partnership Act 1890?
Binds provided partner was carrying on the usual business of his firm
Generally what will a partner have implied authority to do?
Buy/sell good Buy on credit Make and receive payments Insure Employ Instruct a solicitor
Different implied authority for trading partnerships than those providing services?
Can borrow money
Can pledge firms goods as security
What is ostensible authority?
Authority a 3rd party reasonably entitled to believe the partner has
If 3rd party actually knows he can’t rely on this
Paterson Brothers v Gladstone 1891
Brother acting outwith his express authority when borrowing money
Firm did not have to pay
High interest so not ostensible authority
Should have been put on enquiry and checked with others
1890 Act, partner causes loss or injury to person who is not a partner?
Firm is liable to the same extent as the partner who caused it
Even if outside of normal business but authorised by partners
Who is the liability of the firm under the 1890 Act to?
Persons who are NOT partners
Mair v Wood 1948
5 individuals together as fisherman
One partner lifted floor boards, Mair suffered severe injuries and tried to sue firm
Partnership not liable to a partner injured by negligence of another partner
Only remedy lay against partner who failed to replace boards
Liability for Misappropriation of Property by a partner?
Liable where a partner within scope of authority receives money and misapplies
And where firm receives and is misapplied by a partner
Liability for incoming partners?
For debts on after he became a partner
Liability for retiring partners?
Continue to be liable for debt incurred while they were a partner
May enter agreement covering debts due up to date of retirement
May be liable for debts after retires if don’t give notice
Who does a retiring partner need to give notice to?
Those who are not existing customers/clients = newspaper
Existing customers- specific note
Change business docs
Liability as a parent by ‘holding out’
If holds himself as if he were a partner
Liability to anyone who has given credit to the firm on this strength
What is partnership property?
All property brought into on outset and acquired during
Belongs to the firm
No right to specific item
Right to a share of the value of net assets
What are the 8 statutory rules of the rights of partners?
Equal share in profits and losses No interest on initial capital investment Right to participate in management No remuneration Delectus personae Decision making Access to firms books Expulsion of a partner- only if expressly in agreement, interests of firm (absence of this = dissolution)
What are the fiduciary duties of partners?
Full disclosure
Account for any secret profit
Duty not to compete
Assignment of interest in partnership?
Can’t transfer without consent of all partners
Can give/sell as security to 3rd party his right to receive profits
What are the grounds of dissolution of partnership?
By expiry of a fixed term or by notice
By death of bankruptcy
By illegality
By court order
What are the grounds on which a court can decree dissolution?
Permanent incapacity Prejudicial conduct to business Wilful or persistent breach of agreement Can only carry on at a loss Just and equitable due to circumstances
What are the effects of dissolution of a partnership?
Authority of a partner to enter into new transactions is at an end
Continue as necessary to wind up affairs
What are limited partnerships governed by?
Limited Partnerships Act 1907
What is a limited partnership?
At least one partner, the ‘general partner’ must have unlimited liability for the debts of the firm
The other have limited provided certain conditions are met
What are the key features of a limited partnership?
2 or more persons
1 general partner with unlimited liability
At least 1 limited partner
What was the Limited Liability Partnership introduced by?
Limited Liability Partnerships Act 2000
Why did unlimited liability partnerships become a concern?
Increase in litigation and size
Growth in size of partnerships
Increase in specialisation
Risk to personal assets
What are the key features of an LLP?
Separate legal personality Limited liability of members Min of 2 members on incorporation Incorporation and filing requirements Incorporation document Partnership agreement Penalties for wrongful and fraudulent trading LLP liquidator's powers Taxation- general p
