Module 7: Law of Partnership

Question 1

What is a partnership according to the 1890 Partnership Act?

Answer 1

The relation which subsists between persons carrying no a business in common with a view of profit

Question 2

When was the Partnership Act?

Answer 2

1890

Question 3

What is the relation which subsists between partners?

Answer 3

Based on contract
Verbal or in writing
May be inferred from circumstances

Question 4

Stewart v Buchanan 1903

Answer 4

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

Question 5

What persons can enter a partnership?

Answer 5

Natural legal person aged 16 Scotland, 18 England
Capacity not restricted
Min. 2 persons
No max

Question 6

Carrying on a business in common involves?

Answer 6

Every ‘trade, occupation or profession’
Lawful
Begins when agree to conduct their business activity together

Question 7

Khan and Another v Miah 2000

Answer 7

At point of agreement that the partnership begins

Not when starts trading

Question 8

What is a joint venture?

Answer 8

Partnership can arise when only a single transaction has been carried out
Partnership dissolved once transaction complete

Question 9

With a view of profit in partnership?

Answer 9

The intention not actually making one

Question 10

What are the rules in Section 2 of the Partnership Act that determine whether a partnership exists?

Answer 10

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

Question 11

Legal Personality of the Firm?

Answer 11

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

Question 12

What is the liability of partners?

Answer 12

Joint and several

Each responsible for the whole amount of the firms debts

Question 13

Authority of a partner to bind the firm and other partners?

Answer 13

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

Question 14

Implied authority in Partnership Act 1890?

Answer 14

Binds provided partner was carrying on the usual business of his firm

Question 15

Generally what will a partner have implied authority to do?

Answer 15

Buy/sell good 
Buy on credit
Make and receive payments
Insure
Employ
Instruct a solicitor

Question 16

Different implied authority for trading partnerships than those providing services?

Answer 16

Can borrow money

Can pledge firms goods as security

Question 17

What is ostensible authority?

Answer 17

Authority a 3rd party reasonably entitled to believe the partner has
If 3rd party actually knows he can’t rely on this

Question 18

Paterson Brothers v Gladstone 1891

Answer 18

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

Question 19

1890 Act, partner causes loss or injury to person who is not a partner?

Answer 19

Firm is liable to the same extent as the partner who caused it
Even if outside of normal business but authorised by partners

Question 20

Who is the liability of the firm under the 1890 Act to?

Answer 20

Persons who are NOT partners

Question 21

Mair v Wood 1948

Answer 21

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

Question 22

Liability for Misappropriation of Property by a partner?

Answer 22

Liable where a partner within scope of authority receives money and misapplies
And where firm receives and is misapplied by a partner

Question 23

Liability for incoming partners?

Answer 23

For debts on after he became a partner

Question 24

Liability for retiring partners?

Answer 24

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

Question 25

Who does a retiring partner need to give notice to?

Answer 25

Those who are not existing customers/clients = newspaper
Existing customers- specific note
Change business docs

Question 26

Liability as a parent by ‘holding out’

Answer 26

If holds himself as if he were a partner

Liability to anyone who has given credit to the firm on this strength

Question 27

What is partnership property?

Answer 27

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

Question 28

What are the 8 statutory rules of the rights of partners?

Answer 28

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)

Question 29

What are the fiduciary duties of partners?

Answer 29

Full disclosure
Account for any secret profit
Duty not to compete

Question 30

Assignment of interest in partnership?

Answer 30

Can’t transfer without consent of all partners

Can give/sell as security to 3rd party his right to receive profits

Question 31

What are the grounds of dissolution of partnership?

Answer 31

By expiry of a fixed term or by notice
By death of bankruptcy
By illegality
By court order

Question 32

What are the grounds on which a court can decree dissolution?

Answer 32

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

Question 33

What are the effects of dissolution of a partnership?

Answer 33

Authority of a partner to enter into new transactions is at an end
Continue as necessary to wind up affairs

Question 34

What are limited partnerships governed by?

Answer 34

Limited Partnerships Act 1907

Question 35

What is a limited partnership?

Answer 35

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

Question 36

What are the key features of a limited partnership?

Answer 36

2 or more persons
1 general partner with unlimited liability
At least 1 limited partner

Question 37

What was the Limited Liability Partnership introduced by?

Answer 37

Limited Liability Partnerships Act 2000

Question 38

Why did unlimited liability partnerships become a concern?

Answer 38

Increase in litigation and size
Growth in size of partnerships
Increase in specialisation
Risk to personal assets

Question 39

What are the key features of an LLP?

Answer 39

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