Topic 9: Partnership Flashcards
The definition and legal nature of partnerships:
Ordinary Partnership:
partners are jointly and severally liable for all the debts of the partnership.
Extraordinary Partnership:
the liability of certain partners is limited in some way.
1. anonymous partnership
2. partnership en commandite
3. a special partnership registered under the now-repealed Special Partnerships Limited Liability Acts of the Cape Province and Natal.
Essential elements of a partnership agreement:
- Contribution
- Joint benefit of partners
- Profit objective
- Legitimate contract
No formalities are required.
Contract may be in writing, oral or implied by conduct.
Natural consequ
Types of partnerships:
- Universal Partnership
- of all property (marriage)
- of all profits (commercial) - Particular Partnership
- Ordinary Partnership
- Extraordinary Partnership
- Anonymous Partnership
- Partnership en commandite
- Special Partnership
Consequences of partnerships:
- internal relationship between partners
- external relationships between partners and a third party
Dissolution of partnerships:
- effluxion of time
- end of a particular undertaking
- mutual agreement
- change in membership caused by retirement or admission of a new partner.
- notice of dissolution given by a member
- if a court order is granted upon application of one or more of the partners for good cause.
- All payments must be paid before the partnership is dissolved.
- creditor may sure the partners jointly and severally for debts.
- each partner may demand an account from his co-partners.
De Jager v Olifants Tin ‘B’ Syndicate
Principle: Conflict of interest. The relationship between the members of Partnership is one of mutual confidence and the principles of law bearing upon the present controversy are not seriously in dispute.
No partner can acquire benefits just for himself. All such benefits must be shared between partners.
Facts:
Syndicate, which was determined to be a partnership, prospected on a farm for tin. Syndicate were allowed to operate on the farm for two months. Therefore the partner could not obtain the benefits of the discovery for himself, as he is obliged in law to transfer them to the syndicate.
Pezzutto v Dreyer
A partnership is a legal relationship created by way of a contract between two or more persons, in terms of which each of the partners agrees to make some contribution to the partnership business which is carried on for the joint benefit of the parties, the object of which is to make a profit.
Aggregate Theory vs Entity theory
Aggregate theory:
Association of persons which do not possess legal personality and do not exist separately from its members. The rights and obligations of partnership belong the partners in undivided shares.
exception: insolvency and litigation
Entity Theory:
Not like aggregate theory
Anonymous Partnership:
An anonymous party must not be disclosed to the public and are not liable for third-party debts but is liable due to the extent to which partners agree.
Partnership in commandite:
Similar to anonymous but must contribute a fixed sum of money on condition that they receive a certain share but only liable to the extent of the contribution.
Special Partnership:
Registered under the repealed Pre-Union Statute, comprises both of special and general partners. Special partners make a specific contribution in cash and are liable for any amount paid beyond the amount paid.
Internal relationship: common law duties
- make a contribution towards the partnership
- share in the losses
- duty of care and skill
- duty to account
- duty to accept and fulfil the obligation of the partnership agreement.
- duty to guard against conflict of interest
- duty of disclosure
- De Jager v Olifants Tin ‘B’ Syndicate
External Relationships: third party contracts
- When a partner contracts on behalf of the partnership, that partner acts as:
a principal (themselves)
a representative (for the other parties) - in that they act as an agent and binds all remaining partners provided that they act within the scope of authority.
