MRL2601 Assignment 1 (COMPLETE ANSWERS) Semester 2 2024
QUESTION 1 Explain, with reference to relevant prescribed case law for this module, how the court determines whether a specific business is a partnership. (10) QUESTION 2 Explain the difference between the two types of trusts envisaged in the...
MRL2601 Assignment 1
QUESTION 1 Explain, with reference to relevant prescribed case law for this module, how
the court determines whether a specific business is a partnership. (10)
To determine whether a specific business is a partnership, South African courts typically refer to
the criteria set out in both statutory law and case law. A partnership is defined as a contract
between two or more persons who agree to combine their resources or efforts for a joint
purpose, with the intention of sharing profits. The key elements that courts consider to identify a
partnership include the following:
1. Agreement: There must be an agreement, whether written, oral, or implied by conduct,
among the partners.
2. Contribution: Each partner must contribute something to the partnership, which could
be money, property, or skills.
3. Profit-sharing: The partners must have an intention to share the profits of the business.
4. Mutual Agency: Each partner must act as an agent of the others, having the authority to
bind the partnership in transactions with third parties.
5. Objective: The partnership must be carried out for a lawful purpose.
Relevant case law helps elucidate these principles:
1. Pezzutto v Dreyer [1992] (3) SA 379 (A)
In this case, the court held that merely sharing profits is not conclusive evidence of a
partnership. The court emphasized the importance of mutual agency and joint control over the
business. The presence of an agreement to share losses is also indicative of a partnership.
2. Joubert v Tarry & Co [1915] AD 1
This case highlighted the importance of intention among the parties to create a partnership. The
court considered the agreement between the parties, their conduct, and how they presented
their business relationship to the outside world.
3. Purdon v Muller [1961] (2) SA 211 (A)
The court in this case analyzed whether the parties had a mutual right to manage and control
the business. The presence of equal control and decision-making power was a strong indicator
of a partnership.
, 4. Bester v Van Niekerk [1960] (2) SA 363 (A)
This case reiterated that the sharing of gross returns does not constitute a partnership. Instead,
the court looked at whether the parties shared net profits and losses, which is a critical aspect of
a partnership.
5. Commissioner of Inland Revenue v Richmond Estates (Pty) Ltd [1956] (1)
SA 602 (A)
In this case, the court examined the conduct of the parties and the substance of their
relationship rather than just the form. The presence of joint control and mutual agency were key
factors considered.
Application to Hypothetical Scenario:
If a dispute arises over whether a particular business arrangement constitutes a partnership, the
court will scrutinize the specific facts of the case in light of these elements and relevant case
law. For instance, if two individuals run a business, contribute capital, share profits, and both
have the authority to enter into contracts on behalf of the business, the court is likely to
determine that they are in a partnership.
Conclusion:
The determination of a partnership is fact-specific and involves a holistic examination of the
parties' intentions, contributions, conduct, and the nature of their business relationship. The
aforementioned cases provide guiding principles for courts to follow in making this
determination.
QUESTION 2 Explain the difference between the two types of trusts envisaged in the
Trust Property Control Act 57 of 1988. (5)
The Trust Property Control Act 57 of 1988 envisages two primary types of trusts: inter vivos
trusts and testamentary trusts. These trusts are distinguished by their formation and the timing
of their establishment.
1. Inter Vivos Trusts
● Definition: An inter vivos trust is established during the lifetime of the founder.
● Creation: It is created through a trust deed, which is a legal document that outlines the
terms and conditions under which the trust operates.
● Purpose: Inter vivos trusts are often used for estate planning, asset protection, and
management of assets for beneficiaries during the founder's lifetime and after their
death.
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