Company Law — Partnership Essay Example

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July 22, 2011.

The article refers to a case where two people decided to enter into partnership with an aim of constructing houses for sale. These partners are Cheers and Mr. and Mrs. Davison. By writing a contract headed ‘Partnership Agreement’, Mr. and Mrs. Davison agreed to enter into an agreement with Mr. Cheers with an aim of constructing and selling four townhouses on certain land of which the Davisons were to become registered proprietors. According to the ‘Partnership Agreement’, Davisons would receive interest on advances to ‘the joint venture’ while on the other hand, Cheers would engage a builder to construct the townhouse for a fee that would be approved by the ‘joint venture’, obtain quotations to present to the ‘joint venture’ for acceptance and manage the site as well as supervising the constructing progress with the builder. At the end of the sale of the houses, the parties would share the profit. In the process, a contractor by the name Whywait Pty Ltd was engaged to do plumbing, drainage and other jobs in the site.

The article means that unless one partner has no authority to act on behalf of the partnership, or the third party dealing with the business understands that the partner he is dealing with has no authority to act on behalf of the business, then any legal action undertaken by this partner is taken to have been approved by the partnership. If this is not stated in the Partnership Agreement, then it can create problems as we see in this case. The problem arose since Cheers, one of the partners, forged a signature in approval of the work that was to be undertaken by Whywait Pty Ltd. In reference to this, we find that the kind of relationship that was between the Davisons and Cheers was more of a joint venture than partnership. However, this was not put clearly in the ‘Partnership Agreement’ and thus according to this document, Cheers had permission to sign any document on behalf of the partnership. This had a dire effect to the Davisons family.

The effect of such an event is that one of the partners can land into jail or pay heavy penalties if one of the partners is not faithful like Cheers. It can create many legal problems where the signatory of the business can be sued for mistakes that he does not know about or cannot account for. It is always important to put all things in writing and make sure that if one of the partners become cunning, then the other partner would not be held liable for actions he cannot account for.


Webb, PRH (1997). Joint venture or Partnership? Emeritus Professor of Law, University of Auckland. New Zealand Law Journal, May, 1997.