Summary Business Law and Practice WS1 Reading Notes
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LPC
Instelling
University Of Law (ULaw)
Thorough detail into how a partnership if formed, who are the key decision makers, how the partners actions bind to the firm, the liability of partners, duration of a partnership, how partners can retire etc.
Define partnership. S1 PA a partnership is legally formed when two or more
Note: sub-partnership is a partnership within a persons carry on a business with a view to making a profit.
partnership. Each partner must register with HMRC for tax purposes.
No separate legal personality.
Decisions Management
S24(5) PA every partner may take part in the management of
the business.
Shares
S24(8) PA Any difference arising to ordinary matters
connected with the partnership business may be decided by a
majority of the partners, but no change may be made to the
nature of the partnership business without the consent of all
existing partners.
Introducing a partner
S24(8) PA no person may be introduced as a partner without
the consent of all existing partners. (this requires a
unanimous decision)
Rights and duties of partners
S19 PA the mutual rights and duties must be varied by
consent of all parties.
all partnership decisions will be made on the basis of a
simple majority (where each partner has one vote), except
that decisions on changing the nature of the business or
on introduction of a new partner require unanimity.
Partners and their actions are bound to the firm S5 PA every partner is an agent of the firm, and his acts as a
partner bind the firm. Hirst v Etherington - the debt incurred
by one partner in a solicitors’ firm was held not to have been
entered into in the usual course of the firm’s business. His
partner was therefore not also liable on the debt.
S6 PA an act or instrument relating to the business or the
firm, done or executed in the firms name, or in any other
manner showing an intention to bind the firm, will be binding
on the firm and all of its partners (except relating to the
execution of deeds or negotiable instruments)
s.7 PA - Partner using credit of firm for private purposes
→ Where one partner pledges the credit of the firm for a
purpose apparently not connected with the firm’s ordinary
course of business, the firm is not bound, unless he is in fact
specially authorized by the other partners; but this section
does not affect any personal liability incurred by an individual
partner.
Duty of partner not to compete with the firm:
S30 PA if a partner without consent of the other partners
conducts business of the same nature that competes with the
firm, he must account for to the firm and pay all the profits
made by him in that business.
Liability of partners Jointly liable
S9 PA every partner in a firm is jointly liable with the other
, partners for all debts and obligations incurred whilst he is a
partner.
S10 PA where the partner has committed a wrongful act in
the course of business, or with the authority of his co-
partners, and loss or injury has been caused to any non-
partner, or a penalty has been incurred, the firm is liable to
the same extent as the partner.
Liability of incoming and outgoing partners (new partner/
retiring partner)
S17 PA
(1) a partner who is admitted into an existing firm does not
become liable to the creditors of the firm for anything
done before he became a partner.
(2) A partner who retires from a firm does not cease to be
liable for a partnerships debts or obligations incurred
before his retirement.
Misapplication of money or property of third party
S11 PA where a partner within scope of his apparent
authority receives money or property of a third party and
misapplies it and (b) when received it is misapplied by one or
more partners whilst in the custody of the firm, the firm is
liable to make good the loss.
Where a partner has died (persons liable for holding out)
(page 278)
S14(1) where a creditor views a person as partner to the firm
(even though he may not be) the creditor can hold that
person liable for the firms debts.
- (2) PA where after a partners death the partnership
business is continued in the old firms name, or of the
deceased partners name, this should not make his
executors or administrators of his estate liable for any
partnership debts contracted after death.
- Every person (whether P or not) who represents
himself, or who knowingly allows himself to be
represented, (orally / in writing / by conduct) as a P, and
there is reasonable reliance on that representation by a
person giving credit to the firm, is liable as a P,
regardless as to whether that person knew that
representation was being made.
- if reason for ceasing to be P is death/bankruptcy, no
notice of the event is required. Estate of deceased partner
cannot be liable.
- BUT if retires/bankrupt/dies – partner/estate NOT liable
for debts contracted after retirement/ death/bankruptcy
s36(3)
What if the partner cannot pay a creditor?
● A creditor can sue the firm as a group of persons or
can sue individually any of the persons who are
liable as partners.
● If the creditor has obtained judgment against a partner
individually and that partner cannot pay, the creditor is
then at liberty to commence fresh proceedings in
order to obtain judgment against the firm.
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