#3359 - Partnership Crib Sheet - Business Law and Practice

Partnership

1. Has an agreement been entered into in the partnership’s name?

   1. Did the partner who entered the agreement have actual authority?

      1. 5 PA 1890 every partner is an agent of the firm

      2. 6 PA 1890 An Act done relating to the firm or executed in the firm’s name by an authorised person is binding on the firm

         1. If yes then the partnership will be bound (& all partners will be bound)

            1. 17 PA 1890 generally someone who left the firm before the obligation incurred or joined since the obligation was incurred is not liable BUT

            2. 14 Holding Out where there was reliance on the representation of a partner, the partner may be held liable even after they have left the partnership

               1. Representation needs to be made with partner’s knowledge

            3. 36 Failure to give appropriate notice of retirement from partnership, either by actual notice or by an advert in the London Gazette, can render the partner still liable

            4. Novation Agreement – if were partners at the time the contract was made and subsequently leave the partnership, need the agreement of the creditor to release the partner from any later liability

         2. 10 PA 1890 firm is liable for any wrongful act or omission of a partner who acts in the ordinary course of the firm’s business or with the authority of the partners

         3. 12 PA 1890 every partner is liable jointly & severally with co-partners

         4. 9 & 17 PA 1890; 3 Civil Liability (Contribution) Act 1978 all those who were partners at the time are jointly liable to satisfy judgment

         5. CPR Pt 7, PD 5A.1 & 5A.3 partners are sued in the firm’s name

   2. Did partner have apparent authority?

      1. A partner will usually have apparent authority to do things which relate to the kind of business carried on by the partnership, as long as he carried on that business in the usual way

         1. 7 PA 1890 where a partner agrees to act not connected with firm’s ordinary course of business the firm will not be bound unless specially authorised by the partners

            1. Objective test

               1. APPLY TO FACTS

            2. Would it be normal for an individual partner to have authority to enter into the transaction alone?

               1. APPLY TO FACTS

                  1. Is more information needed?

         2. If other party did not know or believe person in question was a partner then the firm will not be bound

   3. REMEDIES

      1. 28 PA 1890 partners must render all information affecting the partnership

      2. 29(1) PA 1890 partners must account for any profit derived from a transaction concerning the partnership

      3. 30 PA 1890 partners must account to the firm for profits made from the same business of the firm, without the firm’s consent

      4. If there is no actual or no apparent authority, the partnership will not be bound by the agreement, however the other party will be able to claim damages against the defaulting partner in question if the transaction does no go ahead

         1. Other partners are entitled to an indemnity for any loss they suffer as a result of the unauthorised act

            1. Will only protect other partners if indemnifier is solvent

2. Lack of a partnership agreement?

   1. 1 PA 1890 relation which subsists between person carrying on a business in common with a view of profit

   2. Default provisions of the Partnership Act 1890 will apply

      1. 24(1) income profits/losses of the partnership will be shared equally

         1. Increases & decreases in asset values will be shared equally

      2. 24(5) all partners will be entitled to take part in the management of the business

         1. All partnership decisions will be made on basis of a simple majority

            1. Except decisions on changing nature of business & introduction of new partner require unanimous vote

      3. 32 partnership can be dissolved at any time by any partner giving notice to the others (partnership at will)

         1. Notice of dissolution can have immediate effect & need not be in writing unless any partnership agreement was itself made by deed

      4. 33 death or bankruptcy of a partner will automatically cause the dissolution of the entire partnership

      5. 35 on certain grounds the court can make an order for dissolution

      6. 25 does not provide for the possibility of expelling a partner by the other partners without his consent

         1. Try to reach negotiated agreement with partner others wish to expel

            1. Agree that they will leave partnership & allow others to continue business in return for an agreed payment for their share

         2. Could bring partnership to end by notice, buy-out other partner & reform without them

            1. If cannot reach agreement to reform then business then business would cease trading & assets sold.

               1. May have to wait a long time to realise any money

      7. 42 if a person ceases to be a partner & others continue in partnership but there is a delay in the final payment of the former partner’s shares, the former partner is entitled to receive either interest at 5% on the amount of his share, or such share of profits as is attribute to use of his share

3. Distribution of assets after dissolution – 38 partners all have continuing authority to act on behalf of partnership after its dissolution

   1. Creditors

      1. 39 PA 1890 on dissolution every partner has right to...