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LPC Law Notes Business Law and Practice Notes

Nature Of Partnerships Notes

Updated Nature Of Partnerships Notes

Business Law and Practice Notes

Business Law and Practice

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Partnerships

The Nature of partnerships

Definition of Partnership

  • S.1 Partnership Act 1890

The relation which subsists between

Persons

  • Actual or legal – therefore partnerships can be between 2 companies)

Carrying on a business in common

  • S.45 :A Partnership can include“every trade, occupation or profession”.

Khan v Miah – Indian restaurant getting ready for trading was still considered to be work of a business even though not yet trading

With a view to profit

  • Partners must only intend for business as a WHOLE to make a profit. Not individual partner to make a profit.

Young v Zahid: One Partner did not get fixed share of profit, received a set amount instead. Still intended the partnership to make a profit. Therefore a Partnership existed.

  • Conduct = Davis v Davis [1894]: conduct meant that there was a partnership – the drawing of identical sums of money implied that the 2 sons had agreed to share profits – they were therefore in partnership.

  • Pratt v Strick – no partnership by selling property then seller helping out the buyer in return for payment [i.e. doctor’s were sharing profit whilst doctor 1 helped introduce clients to doctor 2]

  • No requirement that profit is actually obtained

  • Person taking a SHARE of PROFITS – see S.2(3)(a-e) PA: lists 5 situations where it is presumed that a person receiving a share is NOT a partner.

  • Always look at the evidence AS A WHOLE! Does the evidence comply with the definition?

NB. There must be agreement to carry on business in common with view to make a profit. [Written or otherwise]. People can be in partnership without having agreed to a partnership – but they must agree to the definition of a partnership in some form.

Commencement date

  • A partnership is established as soon as S.1 definition is satisfied.

  • S.1 definition is decided when the partnership commenced, not any agreement to the contrary between the parties [Khan v Miah (2000)]

  • S.2: rules for determining existence of partnership. Sets out what does / does not in itself create a partnership e.g. Join owned property does not in itself create a partnership. [David v Davis]

Nature of a partnership

Partnership does NOT have a separate legal existence (it is different from a company)

Every partner is an agent of the firm AND an agent to each partner for the purposes of the business. [S.5 PA].

Each partner acts with an Implied power to bind the partners when acting in the usual course of business. Therefore very important to set out what the nature of the business includes. To limit implied power to bind the partnership.

Partners have statutory rights and duties to each other – provided by the PA 1980:

Rights:

S.24

Rules as to interests and duties of partners (subject to special agreement).

(1) Right to share equally in profits & capital. Duty to contribute to losses

(3) A partner putting forward any payment or advance beyond his capital contribution has a right to interest (5% per annum)

(5) A right to take part in the management of the business

(7)A right to be consulted should a new partner be introduced into the business

(8) A right to be consulted about the change in nature of the business

(9) A right to inspect the books
S.25 Expulsion of a partner – no partner can be expelled save for unanimous agreement of all partners
S.26 Retirement at will – any partner can retire and partnership will end

Duties:

S.28 Duty to render accounts – p under a duty to show accounts and all things effecting the partnership
S.29 Accountability of partners for private...

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