In-depth exam style question structure on Partnerships. The structure breaks down all the relevant information and provides a step-by-step application.
Remember to consider ILAC.
What is the ISSUE
State the LAW in relation to the topic (issue)
APPLY the law and issue to the facts
What is the CONCLUSION?
Is there a partnership
Definition of a partnership S1 PA 1890: a partnership exists between two or more persons carrying on a business in
common with a view of profit.
NOTE: ‘Persons’ can run a business together – this can be a company as it is a separate legal person.
Further information to determine a partnership partners have the right to view the accounts, veto the introduction
of a new partner, will share the losses and profits between them, right to be involved in decision making.
It is irrelevant whether profit has been made yet or not.
Partnerships cannot own assets as partnerships ARE NOT a separate legal person – so the partners will have to apply
their own assets / put assets into the partnership.
APPLY:
Are the individuals running a business together – or is one acting as an agent…
Is it just a joint venture / contractual co-operation – this is less formal and does not meet the needs of s1.
ELEMENTS OF A PARTNERSHIP PARTNERSHIP ACT
(The issue on the facts) (The law to apply)
NOTE: NEXT - CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO
THE ACT!
Changes to the Partnership agreement S19 and at Common Law: There can be no change to the partnership agreement
unless all partners agree to it
CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
Starting a partnership* A partnership is created when s1 PA – so use the facts to determine when this
was (the characters of the question may think it is a different date)
CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
LIABILITY What was the action taken by ‘x’ – could this result in liability – was there authority to
act – what are the consequences?
, PARTNERSHIPS
A partnership has no separate legal identity and so unlimited liability exists for all
Liability of partners - debts partners. Remember to determine whether the firm is liable, or it is the individual
partner.
S9 PA: every partner is jointly and severally liable with all other partners for all
the debts of the business.
- Even if a partner has died = their estate will be jointly liable for
unsatisfied debts.
- S9 Civil Liabilities (Contribution) Act: also confirms partners are severally
liable.
o Therefore: all partners can be liable or one individually.
- S17(1): if a new partner joins the firm will not become liable to creditors
of the firm for anything done before they became a partner.
o So – need to establish when ‘x’ joined, and when the debt
occurred.
- S17(2) PA: a partner is still liable for debts incurred when they were a
partner, even if they have since retires. So – need to establish when ‘x’
retires / joined the partnership and when the debt occurred.
CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
Power of a partner to bind the s5 PA: every partner is an agent to the partnership and for the other partners for
partnership (Agency) – when the firm is purposes related to the business. A partners (‘x’) action which is done for the
liable carrying on the usual course of business will bind the partnership & partners
unless the partner (‘x’) had no authority to act and the other party knows the
partner has no authority, or does not believe them to be a partner of the firm.
NOTE: Was there actual authority? Hirst v Etherington: debt incurred not done in ‘usual course of business’
Implied/express = firm liable. CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
Was there apparent authority?
Appear authorised to third party = liable
Partners bound by acts on behalf of S6 PA: an act relating to the partnership and done in the partnerships name, or
the firm – when the firm is liable any act which shows intention to bind the firm, whether ‘x’ is authorised or not, is
binding on the firm and the partners.
NOTE: Was there actual authority?
Implied/express = firm liable. CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
Was there apparent authority?
Appear authorised to third party = liable
Partner using the firm’s credit for S7 PA: when a partner uses credit from the firm for a private purpose, the firm is
private purposes – when the firm is liable not bound unless ‘x’ got authority from all other partners. – but s7 does not affect
any personal liability ‘x’ may incur.
CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
The effect of a notice that the S8 PA: if there is an agreement between partners that there is a restriction on any
partnership will not be bound by the one of the partners to bind the firm, no act done in breach of that agreement is
acts of a partner – when the firm is liable binding on the firm if personas have notice of that agreement.
CHECK THE PARTNERSHIP AGREEMENT FOR AMENDMENTS TO THE ACT!
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