Summary DISTINCTION LEVEL ULAW LPC Business Law Notes 2020/2021 (achieved 92% in exam)
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Business Law And Practice
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University Of Law (ULaw)
DISTINCTION LEVEL LPC Business Law Notes 2021
I achieved 92% in the LPC Bsuiness Law exam (2021) by following these notes.
Most suitable for the University of Law LPC course.
Feel free to message/ enquire. Good luck!
Disclaimer: This was the law as taught at 2021. Please check dates a...
‘Does a partnership exist?’ Question Structure
No formalities required, a partnership comes into existence if the statutory definition is satisfied, even if a
formal agreement doesn’t exist.
Relevant statutory provisions:
S 1 PA 1890 – “Partnership is the relation which subsists between persons carrying on a business in
common with a view of profit”
How many of them are there?
- 2+?
Is there a business in common?
- ‘Business’ includes every trade, occupation or profession (s45)
- 2+ persons are not carrying on business in common if one of those persons is the agent of
the other.
Is there a view to make profit?
- Have they agreed to share profits?
- The receipt by a person of ‘a share of the profits of a business is prima facie evidence that is
a partner’ (s2(3)) – thought does not of itself make him a partner of the business
S 2 PA 1890
s2(1) - Parties who are working together simply because they are JTs or tenants in common of some
joint property does not of itself make them partners
s2(2) - The sharing of gross returns does not of itself create a partnership
On application of Sections 1 and 2, is there a partnership?
o APPLY TO THE FACTS
What further questions do we need to ask? For example:
What is discussed at the meetings? Talk about business separately or as a joint, overarching strategy,
which would imply partnership?
Do the board meetings discuss management? All partners are entitled to be involved in management in a
partnership
Who owns the capital contribution that they have made? Who owns assets – are they owned in common,
or separate (hired etc.)
Agree to share profits but what about losses – if yes, then likely to be partnership as partners are liable to
contribute to lossess and profits in a partnership
Does everyone have the right to examine accounts? If so, would suggest a partnership. If not, suggests not
a partnership
Could one partner veto a proposed new partner? If so, would suggest is a partnership – partnership
requires unanimity unless some agreement to contrary to introduce new partner
Conclude: Overall, it would seem that on the balance of the evidence ….. is a member of a partnership and not
simply a contractual joint venture, which is the other most likely possibility.
,Former partner’s liability for partnership debts - Question Structure
Liability for debts incurred pre-retirement
[NAME] will be liable for the debt to [NAME] under section 17(2) PA 1980 since liability was
incurred on [DATE], whilst [NAME] was still a partner. [The facts provide no indication that an
agreement under s17(3) PA 1980 has been entered into which would discharge [NAME] from
existing liabilities-.
[NAME] will be jointly and severally liable for these debts under section 9 of the PA 1890 and s3
Civil Liability Contribution Act 1978. This means that she may be sued by the creditor for the
whole amount of the debt.
Check for any indemnity clauses/ agreement regarding liability and apply them
- For example:
[Name is entitled to be indemnified by [Partnership] as to [amount] of the debt
because they agreed to share everything equally
The partnership’s creditors may still sue Mary for the entire amount under
s17(2) PA 1890. However, if they do Mary is entitled to an indemnity under
Clause 20.6 of the agreement because her share of the debt has already been
taken into account in the valuation of her shares on retirement.
o NOTE: right to an indemnity is only valuable if the partners actually have any
money – mention this in the exam.
Preventing further future liability
If a 3rd party has not received the appropriate notice of a partner’s retirement and then
subsequently gives credit to the firm, believing that X is still a partner, then X may still be liable
for any debt (s36). To avoid this [name] must:
1. Give actual notice to all parties with whom the firm has previously dealt with (s36(1))
o [Name] can do this themselves or ask [partnership] to give actual notice to
any clients of [partnership], existing prior to [name] retirement, of [name]’s
retirement. Actual notice will require writing to the customer, or telling
them face to face. This should be done as soon as possible.
2. Advertise their retirement in the Gazette (s36(2))
o Client should ensure his retirement is advertised in the Gazette. This will
avoid liability from future clients of [partnership], who otherwise have the
right to assume [name] continues to be a partner under section 36(2) PA
1980.
Finally, if a person knowingly holds themselves out as a partner of the firm (orally, in writing or
by conduct) and this is relied upon by a third party, who subsequently gives credit to the firm,
then that ‘partner’ can be held liable for the debt for ‘holding out’ under s14.
o [Name] should therefore ensure they ask the partnership to remove their name from
the business stationery and website.
o If they have already asked, then they should confirm that their name has been so
removed to avoid liability for holding out.
Exemplar answers
, WS1:
Liability for debts incurred pre-retirement
Mary will remain liable for the debts owed to the firm’s suppliers and to the bank under section
17(2) PA 1980, since this liability was incurred by the partnership whilst she was a partner.
Mary will be jointly and severally liable for these debts under section 9 of the PA 1890 and s3 Civil
Liability Contribution Act 1978. This means that she may be sued by the creditor for the whole
amount of the debt.
However, under Clause 20.3.2 of the partnership agreement, the value of Mary’s share paid to her
on retirement takes account of debts owed to creditors. This means her shares of the debt is
deducted from the amount the other partners pay to buy her shares on retirement.
EXAMPLE: If Mary’s share is worth £100, 000, Mary will receive this less 25% of the total
debts. This will be £90, 850.
The partnership’s creditors may still sue Mary for the entire amount under s17(2) PA 1890. However,
if they do Mary is entitled to an indemnity under Clause 20.6 of the agreement because her share of
the debt has already been taken into account in the valuation of her shares on retirement.
NOTE FOR EXAM: this indemnity is only valuable if other partners actually have any money.
If not, this indemnity will not be worth much.
Liability for debts incurred post-retirement
Mary should ensure that she takes the necessary steps to avoid liability for future debts of the
partnership.
If a third party has not received the appropriate notice of a Mary’s retirement and then
subsequently gives credit to the firm, believing that Mary is still a partner, then Mary may still be
liable for any debt under s36(2). To avoid this, Mary must ensure that she personally gives actual
notice to all parties with whom the firm has previously dealt with (s36(1). Removal of her name and
address from documentation will not be sufficient. Mary must notify previous clients through letters
or emails. Alternatively, she could ask the partnership to do this. This should be done as soon as
possible.
Furthermore, Mary should ensure that her retirement is advertised in the Gazette. This is to avoid
liability from future clients of the partnership, who otherwise have the right to assume Mary
continues to be a partner and therefore pursue her for debts under section 36(2) PA 1980. The facts
tell us that Mary has asked for her retirement to be so announced and she should ensure that she
follows up on this to check it has in fact been removed.
Finally, if a person knowingly holds themselves out as a partner of the firm (orally, in writing or by
conduct) and this is relied upon by a third party, who subsequently gives credit to the firm, then that
‘partner’ can be held liable for the debt for ‘holding out’ under s14. Mary should therefore contact
the partnership to confirm that her request to remove her name from documentation has been
satisfied.
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