Partnership law Essay Example

  • Category:
    Law
  • Document type:
    Case Study
  • Level:
    Undergraduate
  • Page:
    2
  • Words:
    940

A partnership is defined as a relationship between persons carrying on a business in common with an aim of getting profit1. The rights and obligations of the partnership are governed by the partnership agreement which may be made in writing, verbally or by implication. It is also governed by the partnership Act. Each partner is entitled to participate in managing the partnership business. The business according to the Act must carry on either by or on behalf of the alleged partners. According to Cummings v Lewis2(FCA, NO 668/89, 2 August 1991, unreported), Wilcox J stated that, a partnership must exist when there is a sharing of jointly derived profits. The businesses carried on must not be separate. There must be evidence of carrying on of a single business in common with a view of profit of the said business according to section 2 of the Act3, when the partners share profits of a business is prima facie evidence that the person is a partner in the business. In this case scenario, Jones and Smith had stationary retail shops which they orally agreed to give partnership a try. One outstanding occurrence is the fact that, they never shared the profits generated by the businesses but everyone continued enjoying the net profit of the sales, but in accordance to the agreement they had entered.

The only thing they did together was advertising and bulk buying which was operated by the partnership accounts, which in the long helped them reduce the costs. In section 6(2)4, sharing of the gross returns cannot create partnership. A partnership exists between Jones and Smith even if there were no written agreement. They did run their businesses with the consultation of each other and all the time under the same account. This attributed to the fact that the key issue is the intention to get into a partnership and not the documentation that accompany the same. Partnership is founded under the Partnership Act, (SA) 18915, common law and law of equity. Borrowing from the first section of the Partnership Act, partnership does exist when two people carryon business in a common view to share the profits and losses. According to Smith v Anserson6 it is depicted that carrying on business needs to be a continous process with repetition of action. And according to Ballantyne v
Raphael 7 one important aspect of a partnership is the carrying on of the business. And thus there was a partnership between them. Under the Act, section 24(g)8 no partner can be introduced into the business without the consent of the existing partners. In actual fact, why the business dissolved in the introduction of Smith’s son is because there was a partnership between the two.

All property and rights and even interests in property which are brought into the partnership stock, or acquired, whether by purchase or otherwise, on account of the partnership are called in the Ac partnership property and are exclusive for the purpose of the partnership and in accordance with the agreement, in accordance to section 20 (1)9. According to the Act, all partners are obligated to sharing equally in the capital and profits of the businesses, as well as make equal contributions to the losses. At the same case every partner may take part in the management of the partnership business and most importantly there is no partner who is entitled to remuneration for acting in the partnership of the business. In the case between Rich J in Sharp v Union Trustee Co of Australia Ltd(1944) 69 CLR 539 at 551; 18 ALJR 35310, partners own between themselves the partnership assets and both have proprierty interest in each and every item. The interest is however not a fixed propotion of each item. In Canny Gabriel, at 32711, the partner share in the partnership is not a title to specific property but a right to his proportion of the suplus after the payments of the debts and liabilities.

Under section 24(1)12, all partners are entitled to share equally in the capital and profits of the bsuiness, and must contribute equally towardsthe same. In the case between Smith and Jones, the rule of equity apllies even when the partners have made unequal contribution to the performnace of the company. It is therefore worth stating that, Jones contribution to the online business was for the common good of their bsuiness and therefore both partners are entitled to an even share in the value of each property. This attributed to the fact that, the agreeed to have a partnership orally and before the occurence of the issues,they had not desolved the partnership. They had not even shared the amount in the partnership accounts and therefore a parnership existed which called for equality in the compensation of the property owned by thepartnership.It is worth noting that, the inclusion of Smith’sson has to be an agreement between the two partners and therefore it was within the legal framework for Jones to refuce to have a partnership with him.

1
Fletcher, K, 2007.The Law of Partnership in Australia(9th ed, Lawbook Co, Sydney,

2
Cummings v Lewis (FCA, NO 668/89, 2 August 1991, unreported),

3
The Partnership Act, (SA) 1891, section 2

4
The Partnership Act, (SA) 1891, section 6

5 the Partnership Act, (SA) 1891

6
(1880) 15 CH D 247

7
(1889) 15 VLR 538

8
The Partnership Act, (SA) 1891, section 24

9
The Partnership Act, (SA) 1891, section 20

10
Rich J in Sharp v Union Trustee Co of Australia Ltd(1944) 69 CLR 539 at 551; 18 ALJR 353

11
Canny Gabriel, at 327

12
The Partnership Act, (SA) 1891, section 24