, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
Question 1
1. Themba, Ndumi and Freddy want to start a partnership with the aim of selling Solar
batteries. Sello intends to contribute R25 000.00 on condition that should the partnership fail,
Ndumi and Freddy will reimburse him. Ndumi intends to contribute his expertise as an
electrician. Freddy intends to contribute the use of his Hilux pickup truck. They come to you for
advice on whether a partnership agreement will be valid based on what each of them wants to
contribute. Advise them fully. (In your advice, define a partnership, deal with each contribution
and conclude.)
Themba, Ndumi, and Freddy are looking to establish a partnership with the goal of selling solar
batteries. They seek advice on whether their proposed contributions will make the partnership
agreement valid. Each of them intends to contribute something different, and it is important to
analyze whether these contributions fulfill the necessary conditions for a valid partnership agreement
under South African law.
Defining a Partnership
A partnership is a legal relationship formed when two or more individuals agree to carry on a
business together for a common purpose and shared benefit. Unlike corporations or other legal
entities, a partnership does not have a separate legal personality. Instead, the partners collectively
own the business, and they are jointly and severally liable for the debts incurred. To form a valid
partnership, certain essential elements must be present. These include: a contribution of some form
of value by each partner, a shared objective to make a profit, and the mutual exposure of the partners
to business risks. A partnership agreement must also be entered into with the intention of
establishing a lawful business (Delport, 2020).
Assessing the Proposed Contributions
Each partner’s intended contribution must be evaluated to determine if it meets the legal
requirements for a valid partnership.
Sello’s Contribution (R25,000 with Conditions)
Sello intends to contribute R25,000 to the partnership, but he specifies that this contribution is
conditional upon Ndumi and Freddy reimbursing him should the business fail. For a contribution to
be considered valid in a partnership, it must be exposed to the risks of the business (MRL2601,
2017). If a partner contributes on the condition of reimbursement, the contribution is effectively
treated as a loan rather than as part of the partnership’s capital. This would not fulfill the requirement
of a true partnership, as the contribution is not exposed to the same risks as the other partners’
investments.
Advice for Sello: To ensure the validity of his contribution, Sello must remove the condition
of reimbursement. The money must be fully exposed to the risks of the business, just as any
other capital investment would be.
Question 1
1. Themba, Ndumi and Freddy want to start a partnership with the aim of selling Solar
batteries. Sello intends to contribute R25 000.00 on condition that should the partnership fail,
Ndumi and Freddy will reimburse him. Ndumi intends to contribute his expertise as an
electrician. Freddy intends to contribute the use of his Hilux pickup truck. They come to you for
advice on whether a partnership agreement will be valid based on what each of them wants to
contribute. Advise them fully. (In your advice, define a partnership, deal with each contribution
and conclude.)
Themba, Ndumi, and Freddy are looking to establish a partnership with the goal of selling solar
batteries. They seek advice on whether their proposed contributions will make the partnership
agreement valid. Each of them intends to contribute something different, and it is important to
analyze whether these contributions fulfill the necessary conditions for a valid partnership agreement
under South African law.
Defining a Partnership
A partnership is a legal relationship formed when two or more individuals agree to carry on a
business together for a common purpose and shared benefit. Unlike corporations or other legal
entities, a partnership does not have a separate legal personality. Instead, the partners collectively
own the business, and they are jointly and severally liable for the debts incurred. To form a valid
partnership, certain essential elements must be present. These include: a contribution of some form
of value by each partner, a shared objective to make a profit, and the mutual exposure of the partners
to business risks. A partnership agreement must also be entered into with the intention of
establishing a lawful business (Delport, 2020).
Assessing the Proposed Contributions
Each partner’s intended contribution must be evaluated to determine if it meets the legal
requirements for a valid partnership.
Sello’s Contribution (R25,000 with Conditions)
Sello intends to contribute R25,000 to the partnership, but he specifies that this contribution is
conditional upon Ndumi and Freddy reimbursing him should the business fail. For a contribution to
be considered valid in a partnership, it must be exposed to the risks of the business (MRL2601,
2017). If a partner contributes on the condition of reimbursement, the contribution is effectively
treated as a loan rather than as part of the partnership’s capital. This would not fulfill the requirement
of a true partnership, as the contribution is not exposed to the same risks as the other partners’
investments.
Advice for Sello: To ensure the validity of his contribution, Sello must remove the condition
of reimbursement. The money must be fully exposed to the risks of the business, just as any
other capital investment would be.
