topic 3: partnership Flashcards
What is a partnership?
A legal relationship arising from a contract between two or more persons, where each person agrees to contribute to a business to be carried on in common, aimed at making and sharing profits.
Only for profit gaining entities; NGOs cannot be a partnership.
Does a partnership have legal personality?
No, a partnership does not have legal personality.
It relies on common law and does not exist independently from its partners.
What is required for the establishment of a partnership?
A valid partnership agreement and cooperation of at least two parties.
The partnership must always aim for the acquisition of material or patrimonial benefit.
What are the two primary theories of partnerships?
- Entity theory
- Aggregate theory
Entity theory views the partnership as an independent entity, while aggregate theory sees it as a contractual association of specific persons.
What is an ‘ordinary partnership’?
A partnership where partners contribute to a business with the objective of making a profit.
Includes types like universal partnerships.
What is a ‘universal partnership’?
- All property: partners contribute all property owned and future property.
- All profit: partners share all profits derived from business conducted during the partnership.
Two types of universal partnerships exist.
What is a ‘silent’ or ‘anonymous’ partnership?
A partnership where one partner only gives advice and does not trade under their name, having no liability under third parties.
This partner does not act as a partner in ordinary business.
What is required for a valid partnership agreement?
- Parties must have contractual capacity
- Contract and performance must be legally possible
- No general formalities required; can be oral or written
Intention of the parties must be genuine.
What are the ‘essentialia’ of a partnership?
- Each partner must contribute
- Objective must be profit-making
- Business must be carried out for the joint benefit of partners
Partnership profits are usually shared equally unless otherwise agreed.
What are the internal duties amongst partners?
- Comply with partnership agreement
- Deliver contribution
- Render services
- Regular payment of share in losses
- Promote interests of the partnership
- Avoid conflict of interest
- Disclosure of relevant information
Breach of contract equates to a breach of fiduciary duties.
What is ‘Actio pro socio’?
A general partnership action to enforce mutual rights or personal rights against co-partners.
It is flexible and can be used both proactively and retroactively.
What is ‘specific performance’ in partnership law?
The performance of a contractual duty as ordered by the court when damages would not suffice as a remedy.
It cannot compel a partner to enter or prohibit a partner from retiring.
What is the effect of prescription in partnership claims?
Claims lapse due to time; Section 13(1) of the Prescription Act suspends lapsing for one year after partnership dissolution.
This means claims remain enforceable during that period.
What is the relationship between partners and third parties?
Third parties establish relationships with partners, not the partnership itself, as it is not a legal entity.
Partners bear the rights and obligations arising from these relationships.
What is mutual mandate in partnership?
Each partner has the power to represent the partnership, allowing transactions on behalf of the partnership.
This authority can be explicit or implied.
What is the duty of care in partnerships?
Partners must manage the partnership affairs with reasonable care and expertise as if they were their own.
This duty extends to all operational aspects of the partnership.
How are partnership assets treated?
Partners are co-owners of partnership assets in joint undivided shares.
Assets are jointly entitled to all partners unless otherwise agreed.
What must happen to partnership assets when dissolving a partnership?
After liquidation, all partners have a pro rata claim on any remaining cash.
Assets must be distributed after satisfying partnership creditors.
What is ‘Actio communi dividundo’?
A legal action for the distribution of assets after dissolution of the partnership.
It includes intangible assets like copyrights and trademarks.
What is the primary remedy for enforcing contractual rights in partnerships?
Specific performance, unless deemed contrary to legal or public policy.
This allows a partner to enforce the performance of obligations in the partnership agreement.
What must a deceived person prove in a case of unlawful representation?
An unlawful and culpable representation by the deceiver resulting in their detriment.
What is ratification in the context of partnerships?
Concluded without the necessary authority by conferring legal validity on the act of the partner.
What is vicarious liability?
A form of liability which one person can incur for the acts of another by virtue of the legal relationship which exists between them.
Under what circumstances can partners incur vicarious liability for delicts?
When acting within the scope of a partner’s authority.
