LPC Notes - Business Law & Practice
Distinction level notes for Business Law & Practice
The University of Law specific (2022)
WS1 to WS16 - including all the procedural plans
Disclaimer - may contain typos, user is advised to make appropriate and suitable updates.
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✓ Recognise and advise on the existence of a partnership, and the terms that regulate the
running of the partnership business.
✓ Advise on key provisions of the Partnership Act 1890, especially in connection with the
existence and duration of a partnership, profit-sharing, decision-making, retirement,
expulsion, and dissolution.
✓ Identify and explain key provisions typically included in a written partnership agreement,
including those necessary to exclude or vary the terms otherwise implied by the Partnership
Act 1890.
✓ Recognise the professional conduct implications of advising more than one partner on
the terms of a draft partnership agreement.
✓ Advise on whether a former partner will remain liable for partnership debts.
Unit Workshop Tasks
In the Unit Workshop you will:
✓ Analyse whether three businesses are carrying on business in partnership.
✓ Analyse a draft partnership agreement to determine, with reference to the Partnership Act 1890,
the reasons for the inclusion of specific clauses and their effect.
✓ Consider the circumstances in which former partners remain liable for partnership debts and how
they can minimise the risk of being held liable.
Contents
Approach to an exam question 2
Recognising the existence of a partnership 3
Partnership Agreement 4
▪ Varying implied terms 5
Partners responsibilities 10
Dissolution 11
Liability of Partners/Firm 12
Partnership Accounts 18
NOT FOR RESALE OR DISTRIBUTION 1
, Approach to an exam question
1 Is there a partnership?
2 Who are the partners? Are they still partners?
3 What type of partnership is it?
→ Fixed / At will?
→ General Partnership / Limited Partnership / Limited Liability
Partnership?
4 What are the relevant terms?
→ Express by oral/written agreement – s 19 PA 1890
→ Inferred from conduct?
→ Implied by PA 1890, LPA 1907, LLPA 2000
5 Apply to facts
6 Conclude
Watch out for
✓ The time frame – is there a gap? What could have happened in between?
✓ Profit – be careful, have they been deliberately vague? Is it interest? An agreed
payment? Consultancy fee?
✓ Do you need more information? Ask questions!
✓ Restating statute terms? Clarity, contractual remedy.
✓ What will happen to the partnership on dissolution? On the death of a
partner? Try and think of questions that will be asked by the partner in this
scenario…
✓ A partnership – either an express agreement which a solicitor needs to be able
to ascertain the terms of and advise on or an implied agreement by conduct or
PA 1890 which again need to be able to advise on.
✓ Acting as an agent? Do they have a share of the profits?
NOT FOR RESALE OR DISTRIBUTION 2
, Recognising the existence of a partnership
General partnership
Creation
s1 PA 1890: “Partnership is the relation that subsists between persons carrying on a
statutory definition business in common with a view of profit.”
→ When this exists, a partnership has been created regardless of any
agreement, or recognition of the parties.
✓ Two or more persons
Persons may be a company
✓ Carrying on a business (s45 – includes every trade, occupation, or
profession) in common – two or more persons share responsibility for the
business and for the decisions which affect the business.
✓ With a view of profit
• The term “partnership” therefore describes no more than a business relationship
based on an agreement.
▪ Does not have a separate legal existence
s2: guidance ▪ In determining whether partnership exists, regard should be had to:
(1) Joint Tenants, Tenants in Common etc. do not of themselves create a
partnership – where they do or do not share in the profits made from the use
of that property
(2) Sharing of gross returns not of itself create a partnership
(3) Receipt of share of profits = prima facie evidence of partnership, but not
conclusive
May be governed by an agreement but can be oral/in writing/implied by conduct.
Fundamental characteristics
Typical rights and responsibilities include:
✓ To be involved in making decisions
✓ Share in the profits
✓ Examine the accounts
✓ Insist on openness and honesty from fellow partners
✓ Veto the introduction of a new partner
✓ Sharing any losses
Duration
Express/Fixed Until a time, pre-determined by agreement
Implied/At will Forever until dissolved by notice, death, or bankruptcy
Formalities
• There are no necessary formalities.
o However, a written agreement is invaluable as evidence of the relationship and of its terms.
o It may also be useful to have a written constitution to which they may refer.
Advantages Disadvantages
❖ Allows commercial secrecy ❖ Can create fixed charges (but not
❖ Informal in nature, very easy to start up floating)
❖ Flexible – make own arrangement/rules ❖ Each partner is fully liable for all debts of
❖ Tax relief for startup losses can be the business
claimed ❖ Any partner may act in apparent
authority and bind the firm.
The Partnership Agreement
NOT FOR RESALE OR DISTRIBUTION 3
, 14 p263
✓ Terms can be express or implied (for implied see s24 below)
✓ Partnership Act 1890 will imply terms into a partnership in the absence of express/implied agreement.
✓ Certain provisions of the PA 1890 cannot be varied e.g., partners liability and illegal partnerships
✓ However, the majority can be varied by a partnership agreement.
✓ The agreement may be varied by consent of all partners, and such consent may be either express (i.e.,
written/oral agreement) or inferred from a course of dealings (i.e., the way the partners act in the situation)
– s19
Advising on terms implied by the Partnership Act and why partners should consider expressly agreeing to
variation of those implied terms
Terms implied by the Partnership Act 1890
Section 24
ss Title Provision
(1) Rights of All partners are entitled to share equally in capital and profits of the business…
Partners
(1) Duties of …and all Partners must contribute equally to losses
Partners
(2) Indemnification The firm must indemnify every Partner for payments made and liabilities incurred by
him
a) in the ordinary and proper conduct of the business of the firm, or
b) necessarily done for the preservation of business or property of the firm.
(3) Interest The partner making payment or advance for purpose of the business beyond the amount
of capital he agreed to subscribe is entitled to interest of 5% per annum from the date
of payment
(4) Interest on Not entitled to interest on the capital subscribed before profits are ascertained
capital
(5) Management Every partner may take part in the management of the partnership business
(6) Remuneration No partner is entitled to remuneration for acting in the partnership
(7) New Partners No new partner introduced without unanimous consent of existing partners
(8) Disagreements Ordinary matters connected with partnership resolved by MAJORITY
No change to be made to nature of partnership business without UNANIMOUS
CONSENT
(9) Partnership To be kept at the partnership’s place of business and every partner may have access
Books
Section 25
Expulsion → No majority of the partners can expel any other partner unless expressly
provided for in the partnership agreement
→ A UNANIMOUS decision of ALL partners is required
NOT FOR RESALE OR DISTRIBUTION 4
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