Exam (elaborations)
MRL2601 Assignment 1
- Course
- MRL2601 ASSIGNMENT 1
- Institution
- University Of South Africa
MRL2601 Assignment 1
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A+MRL2601 Assignment 1
, QUESTION 1 Two partners who are practicing as dentists, Susan and Jane,
decide to dissolve their partnership by agreement. The partnership agreement
is silent regarding the goodwill of the partnership. Jane continues practicing as
a dentist and de facto takes the partnership’s clients (valued at R1 million)
over for her own benefit. Susan feels it is unfair that Jane has taken over all of
the clients and wishes to institute a legal action to claim her part of the
goodwill. Explain whether there is a remedy to Susan’s disposal in these
circumstances. (Your answer should not exceed ½ a page) (5)
In the given scenario, since the partnership agreement is silent regarding the
goodwill of the partnership, specific legal principles will likely come into play
to determine whether Susan has a remedy to claim her part of the goodwill.
The concept of "goodwill" in a partnership refers to the intangible value of
the business, which includes its reputation, customer base, and overall
market position. In the absence of a provision in the partnership agreement,
the treatment of goodwill may depend on the governing law in the
jurisdiction where the partnership is located. In some jurisdictions, the law
may imply certain default rules regarding the treatment of goodwill upon the
dissolution of a partnership.
In cases where the partnership agreement is silent on the issue of goodwill, it
is generally the norm that the goodwill is considered an asset of the
partnership itself, and its value should be shared by the partners in
proportion to their respective ownership interests in the partnership. In this
situation, Susan would have a legitimate claim to her share of the goodwill,
which would be valued at a proportionate amount relative to her ownership
in the partnership.
To seek her remedy, Susan could potentially file a legal action against Jane
for an equitable division of the goodwill. The court would likely assess the
value of the goodwill, and depending on the jurisdiction and the evidence
presented, may order Jane to compensate Susan for her rightful share of the
goodwill taken over by Jane for her sole benefit.
However, it's important to note that the outcome of such legal action may
vary based on the specific laws and regulations of the jurisdiction in which
the partnership operates. Therefore, Susan should consult with a legal
professional experienced in partnership and business law to understand her
rights and the best course of action in pursuing her claim to the goodwill.
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