Business Law

PartnershipTutorial

Question 1

Samy and Clare purchased a bakery and incurred additional expenses for purchasing pans and rockeries. The bakery is then leased to Tom and the rental income is divided between them. Are Samy and Clare partners? Discuss the nature of the relationship between them.

(10 marks)

Answer

This question test candidates on the definition and nature of partnerships. The answer must: - Define the meaning and nature of partnerships –

s3(1) Partnership Act 1961; Gulazam v Noorzaman and Sobath (1957)

State the circumstances which are not prima facie partnership – s4 PA 1961

Application of the law to the facts of the question

Question 2

Sal, Mah and Tim are partners in Ball Enterprise. Mah wants to retire as a partner. Advise Mah as the legal requirements and mode of giving notice of dissolution of partnership to old and new customers of Ball Enterprise.

(10 marks)

Answer

This question tests the candidates on the legal requirements, which must be complied with when a partner retires. The answer must: - State the requirements for notice of dissolution – s39 PA

1961 State the requirements for express notice of existing

customers and clients Apply the legal principles to the facts of the question Cases: -

Tower Cabinet Co. Ltd. v Ingram (1949) Kam Hoy Trading v Hup Aik Tin Mining (1967) Barfoot v Goodall (1811)

Question 3

Abe, Ben and Clare are partners in a firm called ABC Enterprise which deals, with car equipment. The firm is doing well and profits have always been shared equally among the three of them.Recently, Abe and Ben discovered that Clare is in partnership with her brother who is a car mechanic in a firm called Good Care. Abe and Ben seek your advice as to whether they could make Clare account for and pay to ABC Enterprise all profits made by her in Good Care.Advise them.

(10 marks)

Answer

Issue – Whether Abe and Ben can sue Clare? Legal principles – s26, 31, 32 of PA 1961 – Rights and duties of

partners in the absence of an agreement which incorporates the principle of ‘utmost good faith’ between partners i.e. fiduciary relationshipApplication of s32 PA which provides – if a partner, without the consent of the other, carries on any business of the same nature as and competing with that of the form, he must account for it and pay over to the firm all profits made by him in that business.

Case – Ass v Benham (1981) Application of the law to the facts of the question and conclusion

Question 4

Dan, Swee and Mogan wish to form a partnership. Define ‘partnership’ as stated in the Partnership Act 1961.

(5 marks)

Answer

State the definition as provided by s3(1) PA 1961 and elaborate on the key words as follows: - Relation Persons – s14(3) CA 1965 and s47(2) PA. Cases – Tan

Teck Hee v Cheng Tian Peng (1915) and Shim Fatt v Leila Bus Road Co (1957)

Business – as defined by s2 PA 1961. Case – Customs & Excise Commissioner v Lord Fisher (1981)

In Common – involvement of partners in the same venture for a common purpose

With a view of profit – ReSpanish Prospecting Co Ltd (1911)

Question 5

State the circumstances under which ‘partnership’ may be dissolved.

(5 marks)

Answer

Circumstances of dissolution of partnership: - Dissolution by expiration or notice (s34 PA) & McLeod v Dowling

(1927) Dissolution by death, bankruptcy or charge (s36 PA) Dissolution under express clause. Carmichael v Evans (1904) Dissolution by order of court (s37 PA)

Mental disorder Permanent incapacity Conduct prejudicial to the business Persistent breaches of partnership agreement and destruction of

mutual confidence e.g. Physical assault – Greenaway v Greenaway (1940) Groundless accusation of fraud – Re Venidge Tobacco Co Ltd (1916) Use of partnership property for private purpose – Smith v Jeyes (1841)

Partnership being carried on at loss – Jennings v Braddeley (1856) The dissolution being just and equitable

Question 6

Ali and Baba wish to form a partnership. Define a partnership agreement as stated in the Partnership Act 1961.

(10 marks)

Question 7

Toby and Sid are partners of a sundry shop, SITMART. Suzy a regular customer of SITMART went to the shop to complain about the error in the price of some of the goods she bought two weeks ago. Sid became very angry when Suzy alleged that he was cheating customers. He hit her so hard that she sustained injuries. Suzy brought a charge against Sid for causing grievous hurt.

Discuss Toby’s criminal and civil liability, if any.

(10 marks)

Question 8

Describe the liability of retiring partners for the following: -

1. For debts incurred by the partnership before the partner’s retirement

2. For debts incurred by the partnership after the partner’s retirement

(16 marks)

Answer (Q8(1))

When a partner retires from the firm, he remains liable for the partnership debts incurred before his retirement (s19(2) PA)

However, a retiring member may be discharged from existing liability by an agreement between himself, the new firm and the creditors. This agreement (the ‘contract of novation’) may either be express or inferred from the course of dealings. It is essential to securer the creditors’ consent to the agreement, otherwise the agreement is not binding on the creditors

Answer (Q8(2))

Debts incurred after a partner’s retirement, the retiring partner is still liable to persons who deal with the firm after a change in its constitution unless he has given express notice to such persons that he is no longer a partner (s38(1) PA)

Any advertisement in the Federal Gazette, Sabah Gazette or Sarawak Gazette as to a firm whose principal place of business is in the respective territories ‘shall be notice as to persons who had no dealings with the firm before the date of dissolution or change so advertised’ (s38(2) PA)

In the case of Re Siew Inn Steamship Co, the court held that actual notice was necessary so far as old customers were concerned

Q & A