BTF1010: Commercial Law: Partnerships

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Business Research
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Mark Bender

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Chapter 11: Partnerships Types of organisation: Definition of a partnership:  Partnership is defined in the Partnership Act s5(1): o 5(1) A partnership is the relation which subsists between persons carrying on a business in common with a view of profit and includes an incorporated limited partnership within the meaning of part 5  The 3 elements to a partnership: o Carrying on a business- defined in s3; include any trade/occupation/profession o In common o With a view of profit  Carrying on a business: See difference between carrying on a business and preparing to carry on a business (see Goudberg v Herniman Associates Pty Ltd [2007]  Carrying on a business in common exists if mutuality of rights and obligations exists.  See Checker Taxicab Co Ltd v Stone [1930] Partnership Act 1958 (Vic) s6 – Statutory Rules (p420)  Under 6 (1) co-ownership of property does not of itself indicate partnership.  6 (3) (a) — creditors may take proportion of profit to secure repayment, and may require powers of control and inspection: Cox v Hickman [1860]  6 (3) (b) — offer of share in profits as incentive does not in itself create a partnership: Plummer v Thomas [2002]  6 (3) (c) — payment of annuity to family of deceased partner does not create a partnership.  6 (3) (d) — creditor may finance a project for share in profit. Not a partner but may seek to become a partner Re Megevand; Ex parte Delhasse [1878]  6 (3) (e) — securing payment for a business sale. Monthly repayments does not constitute a partnership. Rules governing partners’ relationship with each other : The rights and liabilities of the partners with respect to each other determined by 3 factors: 1. The contract creating the partnership 2. The Partnership Act 3. The law relating to fiduciary relationships. A fiduciary relationship exists between partners The contract between the partners:  The contract is supreme in determining the rights and liabilities of the partners between themselves: Partnership Act s23 The Partnership Act:  Contains rules that will apply to partnership if the partners have not agreed amongst themselves.  If the partners have no agreement on the matters ss28 and 29 apply: S28: The interest of partners in the partnership property and their rights and duties in relation to the partnership shall be determined subject to any agreement express or implied between the partners by the following rules:  (1) All the partners are entitled to share equally in the capital and profits of the business and must contribute equally towards the losses whether of capital or otherwise sustained by the firm.  (2) The firm must indemnify every partner in respect of payments made and personal liabilities incurred by him- o (a) in the ordinary and proper conduct of the business of the firm; or o (b) in or about anything necessarily done for the preservation of the business or property of the firm  (3) A partner making for the purpose of the partnership any actual payment or advance beyond the amount of capital which he has agreed to subscribe is entitled to interest at the rate of Seven per centum per annum from the date of the payment or advance.  (4) A partner is not entitled before the ascertainment of profits to interest on the capital subscribed by him.  (5) Every partner may take part in the management of the partnership business.  (6) No partner shall be entitled to remuneration for acting in the partnership business  (7) No person may be introduced as a partner without the consent of all existing partners.  (8) Any difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners but no change may be made in the nature of the partnership business without the consent of all existing partners.  (9) The partnership books are to be kept at the place of business of the partnership (or the principal place if there is more than one) and every partner may when he thinks fit have access to and inspect and copy any of them. S29: No majority of the partners can expel any partner unless a power to do so has been conferred by express agreement between the partners Partners’ Duties of good faith :  Partners owe fiduciary duties to each other: under s32, 33 and 34 of the Partnership Act  See Chan v Zacharia [1984]  Duty to make disclosure: s32 sets out duty owed by all partners to make full and frank disclosure of all matters relating to the partnership.  Duty to account for benefits derived from dealings with partnership: s33 prohibits a partner from having dealings with the partnership without disclosing the nature of those dealings to the other partners.  Duty to not compete with partnership: s34 sets out the fiduciary duty not to compete with the partnership Partnership Property: According to s24, partnership property includes:  Items brought into the partnership property as partnership property; consider partners’ intentions as shown by their actions: See Harvey v Harvey [1970]  Items acquired on account of the firm; and  Items acquired for the purposes of and in the course of the partnership business. What right does each partner have to the partnership property?  Partners have no title to specific property owned by the partnership, but they each have a beneficial interest in every asset of the partnership (see Federal
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