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A matter of partnership law

1a.) As A Matter Of Partnership Law Can Alison And/Or John Block Julia In Appointing Susan To The New Positions In The Firm?

Since the Roman times, a few people or more would run a business together with a view of making profit. That is why creating the Partnership Act of 1890 was a benefit as it stated the relationship between the individuals that they agree to, to provide a framework for the organization. Therefore, Susan being introduced to the organization to join as a partner needs to be approved by the other members. New partners joining usually is a sensitive issue because the new partner will have the power to impose and will have severe financial burdens on the other partners S24.7 states that No person shall be introduced as a partner without the consent of all existing partners. This would make it difficult for Susan to join as a partner because she is not getting Alison's consent.

Alison should take this matter into thoughtful consideration and see what else Susan could bring to the firm other than some capital. Alison should distinguish the nature or liability of partners for debts and obligations to see if Susan would be prepared for the challenge of the job. It would be appropriate to give Alison an interview in which she will be asked about prior jobs and reasons as to why she left them. This will show not only Susan's qualifications, but her character, Alison's ability to trust her and if required a sensible reason to not accept her. It is important to realize that the partners should have trust and faith between one another because as soon as they agree to take Susan as a partner and depend on the contract, they would be at an increasing risk of having the business split. For example, the case of Miah v Khan (2000) an Indian restaurant was planned to be open together in a joint venture but they fought and it didn't matter because they are still partners and need to share the losses or it would be a breach of S24.5 in having the right to management and sharing risk, profit and losses. If this continues then Susan could then take her shares of the business, which will be then split into two businesses.

Julia wants to bring her daughter Susan to join as a partner and needs to elaborate on what type of a partnership she will be contracted to; from there we could establish part of the relationship intended. We know Susan wants to be active in the business and wants a share in the profit as well as losses. Once Susan joins as a partner, she must be aware of the definition of her role by looking through the Partnership Act under S2 the existing partners need to specify all the concerns and place guidance followed by S1, which is a criteria that needs to be satisfied. If not, S19 clearly is there in case they need to voluntarily add a few principles to satisfy and understand the relationship for example AIB plc v Martin in which the mutual rights and duties of partners, whether ascertained by agreement or defined by this Act, may be varied by the consent of all the partners, and such consent may be either express or inferred from a course of dealing. Having actual authority within a partnership may be restricted in various ways in course of dealing or performance.

All the partners need to consider what circumstances the business is in financially because a partnership business is usually a small business and have small concerns in economic term but would always seek to add value. By doing this, the partners can see if there is a need or use for Susan's expertise and if she is able to add value to the business or if the firm would be liable for having an unqualified Representative as a partner. An example of this is seen in the case of Horner v Hasted. Mr. Horner wanted to become a partner of an accounting firm but did not carry an accountant qualification, which would be followed by S13. An option that Alison could consider is found in S24.6, which is to offer the position of being an agent to the firm without the intent to share profit or in S2.3 only pay by salary, of course it needs to be a written agreement. But that would eventually get Susan to not work as effectively and will need to make sure that she wont be classified as an employee.

Susan needs to keep in mind that “salaries are not salaries” in the ordinary sense of the word but apportioning the profit by agreement. The salary given to Susan is provided from the sharing profits of the company rather than it just being a fixed salary. Julia can choose to employ Susan to work for the firm without the need for Alison or Johns vote that is seen in S2.3b where she would be liable to earn interest of capital contributed and be active in the business. She can also work for the company as an employee and get a share of the profit without having to be a partner. As for trust concerns for Alison, the partners can all come and agree on a fixed term contract for a shorter duration than the existing fixed term partners. S19 explains that they are allowed to make their own agreements and whatever terms and conditions they want to make. All of the partners do not have to follow the Partnership Act of 1890; it can be done by word of mouth unless Susan does not approve, in which they can go through the course of performance having Susan be evaluated on her performance every so often. And if she does not comply or problems rose during this matter, it could be dealt by the court by evaluating her performance and the obligations that were set out to her.

1b.) As A Matter Of Partnership Law Can Alison And/Or John Block Julia In Appointing Harry To The New Positions In The Firm?

Having a bookkeeper would be a relief and the partners would worry less when they are on holiday knowing that clients are kept satisfied and handle phone calls and administer needs are fulfilled; but this requires a lot of trust, focus and training from Harry's part. Any business relation with other companies Harry is involved in represents the partners and the entire company. If for any reason, the business deal goes wrong, the partners are the ones who will have to suffer the consequences as stated under Section 15 in which any deals made by representative of any partner will be evidence against the firm. This will show how it affects or could affect the partnership seen in S13, in which the partner who hired the employee is the only one to be held responsible for any mistakes made by that employee. Alison seems to be afraid of manipulation of the accounts or possibility of unintended mistakes that may affect the company negatively. This would be a very big accusation for breaching more than one offence in relation to Harry's and possibly Julia's duties being linked to S29.1, in which each partner must identify any business deals and transactions that are made in representation of the company, this is seen in the cases Boston Deep Sea Fishing & Ice Co. v Ansell and Bentley v Craven. In both cases there was a profit made out of a partnership transaction and was not accounted for. The probably need to agree on how and to what extent Harry will be liable in case of any breach of fiduciary duties. It is understandable for Alison to be concerned for the security and the future of the company; she needs to keep in mind that Harry's future could be at risk and if he ever does breach the fiduciary duties it would be damaging to his career as a professional. In this case Alison can strongly suggest denying Harry a position having Julia support her case by having Johns approval seen in S24.8, in which partners must come to an agreement with the decision made by majority of the partners in the business. There should not be any objections because the main purpose is the well-being of the whole partnership; this could change however, if the company's rivals ever employed Harry, they then can then exclude him. Having a bookkeeper would need a lot of training and understanding of how the business operates. All the partners need to look at Harry's performance and help guide him and demonstrate exactly how they carry out the ordinary course of the business. If all the partners agree to consider offering Harry employment in the future as a partner under, which can be done under S24.6, in which he is paid only by salary. There are advantages and disadvantages to having Harry as a partner. The disadvantage is that they are giving more authority to another partner in decision-making and would be entitled to share in the profit. On the other hand, the advantages for the partners is that Harry will be contributing towards losses of capital and would be risking his finances if anything went wrong in the business. This would solve Alison's concerns as she realizes that there are risks for Harry as well. This is similarly seen in the case of Popat v Schonchhatra; by having a distinction partnership capital, the contribution in skills and partnership asset vary day to day in value and they share equally in Partnership Property. An alternative solution would be that if all the partners do not agree on having another partner, they can make terms and an agreement to make sure Harry does not ever become a partner. Another option is to not get a bookkeeper and not take any chances with revealing the accounts of the company and its transparency to admissions and representations of partners, which is seen under S15. An example of this is seen in the case of Bevan v Webb because partners are to inspect the partnership books and not partner's agents, which is an example that supports Julia wanting to hire Harry under S24.9 where the Court of Appeal allowed an agent to assist the partner in understanding the position of the firm so that when reports and audits are reviewed by partners they would all understand.

2) Can You Advice Maxine Walls Of Her Responsibilities (If Any) In Partnership Law Towards The Two Creditors: Arthur Ray And White Gold Ltd?

Maxine Walls first needs to acknowledge what kind of contract she agreed to letting me know if it was either a single continuing contract where she could be liable for the debt if it happened at the time where she was a partner, or a series of individual contracts where even though the deal with he creditor was made before the date of her retirement, she wont be liable for the debt and the coming partner would be instead. Maxine had to give the creditor an actual notice of her retirement and not depend only on notifying the firm and the change on the letterhead like in the case of Hamerhsaven Pty Ltd. v Ogge. Maxine would suffer if she has assets in the business either if the firm pays or she contributes in payment to both creditors as noted in S6 unless Maxine knowingly allows herself to be represented as a partner by holding out under S14.1 which credits the representative without the knowledge of the apparent partner. Since Arthur Ray and White Gold Ltd most likely can prove that they had reliance on only associating with Maxine and not the new partner, Making it harder for Maxine to be backed with S14.1 also seen in the case of Lynch v Stiff where Lynch's son started handling Mr. Stiff's affairs and the Court of Appeal did not enforce the charges for the work done during the time. The Court of Appeal could have the two creditors hold “Ruby Red” liable under Maxine's name with the firm under S36.1 and S36.2 for not advertising to the public or the whole public on the change of “Ruby Red's” constitution by having London Gazette do so; in this case, Maxine can get contribution from the firm to pay both creditors because you cannot leave a business without informing the current partners; it would cause a problem even when you leave the firm without notifying the public. But since “Ruby Red's” general partners recently agreed on contracts with both creditors under S36.3, they could therefore apply in favour for Maxine and the Court of Appeal can hold the firm under S18 as a subject to contrary intentions. If Maxine was under a single continuing contract she could still avoid liability for the debt by giving the solicitor a clear accurate notice of her retirement like the case of Court v Berlin where the creditors didn't need to set a new instruction every time someone retired and retired partners needed to pay. Maxine would be liable for the debt with Ruby Red for being an apparent partner, which would fall with S14.1 where the firm is receiving credit on behalf of the representative, and the non-active partners and not S36.1 in which they treat all apparent members as still being members of the firm. Though S17.3 includes terms that the retired partner is not liable for partnership debts contracted after the date of Maxine's retirement, she should have made sure that there was a notice in the London Gazette of a change in the firms constitution or either on the letterhead or in the body of the letter. The court could hold the “Ruby Red” liable for the debt even without Maxine under S14.1, which is required by the Business Names Act of 1985 since it was Ruby Reds responsibility to know how to tell others about the ownership of the business.

3) Can You Advise Julia And Alison Whether They Can Expel John From The Firm And, If So, How This Can Be Done? You Can Assume That Susan's Appointment Has Not Yet Been Considered.

If Julia and Alison agree to kick John off then they can provided that they give reasonable evidence of John's performance in which all the partners need to sign the notice to expel John. If they had some special agreements they can hold him for breach of professional misconduct. Technically, he did not commit any flagrant breach of his duties as a partner as S10 clearly states that a partner can be fired for any wrongful act in the ordinary course of the business. John could defend himself by claiming that he was behaving this way outside of work and that he feels like a resource rather than a human being, which is an ethical issue in respect to a good life. Julia and Alison would show that their reason for the dissolution of a partner should be due to John's fiduciary duty of good faith and not allow John to accuse them of terminating him as an act only for their own personal advantage. They should at least give him a 12-month's notice to find a new job, and depending on his contract John could loose all his shares in the business. It would be even worse for Julia and Alison if John withdraws from the business either for the fact he felt he is being used as a resource or for the fact that he doesn't want to carry on due to his son's death. It would affect the other partners because partnership businesses are usually small so any change would largely impact Julia and Alison. There are two types of dissolutions:

  1. John splits from the business with his shares being distributed or liquidating his assets in the business to pay off the creditors.
  2. A continuing partner takes over John's positions and shares.

The dissolution of John would happen either way after his fixed-term contract. It could also still happen if his son's death continues to impact his performance until he is bankrupt, where Julia and Alison could then choose to fire John under S33.1 stating that a partnership could be dissolved due to bankruptcy and the partnership would immediately change completely.


Book Keeping Problems,(2007) Date Accessed: 29-11-09

Salaried Partner Agreement,(2008), Date Accessed: 29-11-09

Fixed Term, (2009) Date Accessed: 1-12-09

Winding up,(2008) Date Accessed:1-12-09

Legal Dictionary,(2009) Date Accessed: 1-12-09

Clause Definition,(2009) Date Accessed: 2-12-09

The Business Name Act Date Accessed: 2-12-09

Explain Partnership,(2005) Date Accessed: 1-12-09

Course of Performance,(2009) Date Accessed: 2-12-2009

Geoffrey Morse, (2001), Partnership Law 5th Edition, USA, Oxford University Press

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