Legal Issues for Manager - Hypothetical ILAC Based in AUSTRALIA

atos2888

agency__partnership_2007gir.pptx

Home >Law homework help >Legal Issues for Manager - Hypothetical ILAC Based in AUSTRALIA

Legal Issues for Managers: 2007GIR

Lecture 9

(Week 10)

Module 3 (Part 2):

The Law of Business Associations

Law of Agency &

Law of Partnership

Administration

Ensure that you check the announcements on Learning@Griffith (L@G) and your marks in My Marks.

You should now have your Mid-Semester Exam marks available in My Marks. If you want genuine feedback (not simply checking your grade as they have been scanned), you can see your exam papers this week during the times provided on L@G course site. A time will also be made available for the Deferred Mid-Semester Exams when we have received them back from scanning.

A notice about the time, date & place of the Deferred Mid-Semester Exam is now available on the course website.

IF you want to do well on the FINAL EXAM, in addition to making a genuine effort on the ASSIGNMENT continue practising your ILACs before you attend your seminars, add a few notes to your answers, download the seminar slides and try to attempt the answer again on your own. If you did not have a satisfactory answer, see your tutor in consultation and bring along your ILAC homework attempts. This is the most effective way to prepare for the Final Exam.

Recap of Last Week The Law of Companies/Corporations

Summary

The essential characteristics of a ‘company’ and why they are important.

The different types of business structures available, in particular companies, and when can they be used to meet the needs of business & society.

The main duties imposed upon the directors of a company.

The concepts of insolvency and insider trading.

The way companies can be wound-up.

Quick Question:

The Corporations Act 2001 (Cth) prohibits trading in shares with the advantage of information that is not publicly available. This offence is also known as …………………………… and is prohibited by section ..........

Business Structures

BUSINESS

STRUCTURES

Sole

Trader

Partnership

Joint

Venture

Incorporated

Associations

Trust

Company

Proprietary

Company

Public

Company

Large

Small

Seek the advice of a good accountant & lawyer when considering what form of business structure you may want to set-up. The main consideration should be liability – Not taxation. Thus, this message applies to today’s lecture and next weeks! Strategic planning is the key to business success.

44% of businesses fail in the first 3 years

Failing to plan, is planning to fail!

See separate mind-map on the types of companies in those lecture slides when available

http:// www.business.gov.au/business-topics/business-structures-and-types/Pages/default.aspx

Lecture Objectives

Understand the term ‘sole trader’ and the ensuing advantages, disadvantages and legal obligations.

Understand the nature of agency and the roles of agents and principals.

Understand the legal obligations imposed upon agents and principals.

Understand the nature of a partnership and differentiate a partnership from other business structures  learning to apply the sections of the Partnership Act 1891 (Qld) & the Common Law.

Ask your accountant and Lawyer

Sole Trader

For low risk activities – limit personal liability

Close family only involved

Often short term venture/limited profitability

Little prospect of significant growth – often only returns a ‘wage’ to the owners

Unsure about future of the venture

Partnership

Mum and Dad partnerships

Partnership of family trusts

Essential to have a partnership agreement – for termination, valuation, introduction of capital, payments to partners etc.

Losses can be distributed to partners, but you need to know who you are ‘getting into bed with’

Sole Traders and Partnerships – When to use generally?

Sole Trader

Definition – Sole Trader:

A person who trades alone, without the use of a company structure or partners and who bears alone full responsibility for the activities of the business.

(Butterworths Concise Australian Legal Dictionary)

Person carrying on his or her own business on his/her own.

No formal requirements to create, but if a trading name other than that of the individual is to be used, the sole trader must register that business name (Business Names Registration Act 2011 (Cth)).

No distinction between the person and the business  Person is personally liable for all expenses and losses of the business!

Advantages of being a Sole Trader

Advantages

Simple

Often work from home

Can trade in own name*

* Limited registration requirements (business names if appropriate, and licenses if necessary)

No sharing of profits

Retention of full control

Taxation advantages when profits are low

Business losses can sometimes be written off your PAYG tax from another job

Can close business at any time or be sold, divided or altered without approvals (Consider having a Business Deed of Agreement – contract at this time)

No public disclosure of financial information

Cash in hand – naughty, naughty!

Disadvantages

Unlimited liability - the business is not a separate legal entity from the owner, so the owner is personally liable for all debts!

Finance is difficult to obtain (& Mixed-Money)

Need to pay own ‘employee’ benefits

Needs own insurance, pay own GST, income tax, keep up with inflation (taxation disadvantage when profits are high)

Business generally ceases on death or disability of owner (Consider having a Enduring Power of Attorney document)

Big investment of unpaid time

No sharing of skills and expertise (subject to employee engagement)

Cash in hand – naughty, naughty!

? Bottom line = are you purchasing a job or a business – often working well below what one is worth – some suggest to be better off you need to making a profit of at least 30% above a salary

Disadvantages of being a Sole Trader

Agency: The Law Relating to Agents

Not that type of agent!

Definition & important points about Agency

The law of agency is primarily based on common law principles and is an exception to the law of privity of contract.

Definition - Agency: A relationship existing between two parties whereby one (the principal) authorises the person (the agent) to act on the principal’s behalf to negotiate with a separate third party.

Two important points about Agency in relation to the Law of Contract:

There is a contract between the Principal and the Agent

Creates authority of the Agent to act on the Principal’s behalf

Principal

Agent

Agent deals with Third Party creating agency

Agency creates contract directly between Principal and Third Party

Third Party

Exercise of authority by the Agent with a Third Party leads to creation of PRIVITY (of contract) between the Principal and the Third Party.

Classification (Type) of Agents

Creation of Agency

Expressly

Agency created by agreement by deed, in writing or by word of mouth.

Implied or by conduct (holding out or estoppel)

A reasonable person examining the conduct and actions of the parties would conclude that there was an agency in existence (e.g. partnership).

Ratification

Where Agent has acted without Principal’s authority, Principal may subsequently ratify the transaction.

Ratification is retrospective, and dates back to the time the contract was made.

Keighley, Maxsted & Co v Durant [1901] – not ratified – agent did not disclose & therefore was liable for loss

Operation of Law

Necessity (emergency) - there must be a genuine emergency where the Agent (is entrusted with Principal’s property and acting in their best interests) cannot get in touch with them.

Great Northern Railway v Swaffield (1874) – Necessity

Cohabitation - a presumption that a spouse or de facto has authority to pledge credit for necessaries suitable for their lifestyle.

Authority of the Agent

The basic types of authority that might occur between an agent and a principal:

Actual Express Authority

Actual Implied Authority

Apparent (Ostensible) Authority

------------------------------------------------------------------------------------

Actual Express Authority

The actual authority of an agent arises from the creation of the agency between Principal and agent.

Authority conferred by the Principal in writing or words.

Freeman v Lockyer v Buckhurst Park Properties Ltd [1964] – Actual express authority

Authority of the Agent

2. Actual Implied Authority

Authority is implied from the conduct of the parties.

An agent has authority to do anything that is incidental or necessary for the carrying out the principal’s express instructions (within their actual authority).

Implied authority as agents of that class, but can be limited.

Hely-Hutchinson v Brayhead Ltd [1968] - “They thereby impliedly authorise him to do all such things within the scope of that office.”

3. Apparent (Ostensible) Authority

Where the words and/or conduct of the Principal lead a Third Party to reasonably believe that the Agent has authority.

The appearance of authority as it appears to others

Panorama Developments (Guildford) Ltd v Fidelis Furnishings Fabrics [1971] – apparent authority

Pacific Carriers Ltd v BNP Paribas (2004) – “The question was what a reasonable person would have understood them to mean, based on their wording and the surrounding circumstances.”

Authority [Example] – What type?

My Company, ‘Party On’ appoints Snoop as Company Secretary. ‘Party On’ Company Secretary is written on his business cards below his name. Snoop dressed in his Armani suit goes out and leases a fleet of 7 series BMW’s for use on behalf of the company.

Questions:

Would ‘Party On’ be required to meet the legal obligations of such an agreement? &

What, If any, type of authority does Snoop have to act on behalf of the business?

Answers:

This scenario is based on the common law case of:

Answer:

Authority [Example] – What type?

Jen is my personal business secretary. I tell her to collect a package for the business from the Post Office.

She goes there and when she attempts to pick up the package she finds a $20 surcharge that she has to pay to collect it.

Questions:

What type of authority did I give Jen?

Does Jen have authority to pay the surcharge? If so, what type of authority?

Answers:

Authority [Example] – What type?

Angelina has represented me (agent) in ordering supplies from Brad for my party supply business. She is now in the process of ordering supplies from Brad using my business details.

Brad makes a reasonable assumption that Angelina has the authority to act as an agent for me because she has done so in the past.

Angelina makes a deal to buy 100,000 pink party balloons from Brad (apparently on my behalf). The balloons are manufactured and delivered to my shop.

Question:

Can I deny to Brad that Angelina had the authority to order the pink party balloons or would I have to hope its party season?

Answer:

Duties of an Agent

Every agent owes certain duties to a principal depending on the nature of the agency or according to the express or implied terms of the agreement.

Agents main duties include:

Following principal’s instructions;

Act in person;

Act in the principal’s interest (good faith): Lintrose Nominees Pty Ltd v King [1995];

Making full disclosure of any personal interest

Not making a secret profit: Regal (Hastings) Ltd v Gulliver [1942]

Exercising due care and skill, although the standard will vary according to whether the agency is gratuitous or for reward; Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp [1984];

Maintaining confidentiality of information gained from the agency relationship;

Taking care of property; and

Keeping separate and proper accounts, making available for inspection.

Rights of Agent against Principal

Right to remuneration

Agent is only entitled to remuneration if this is expressly or impliedly agreed to in the contract.

LJ Hooker Ltd v W J Adams Estate Pty Ltd (1977) – not entitled to recover commission

Right to indemnity and reimbursement

Generally, an Agent is entitled to be indemnified against any liabilities and reimbursed for any expenses incurred in the course of carrying out Principal’s instructions.

Right of lien

Agent is entitled to a lien, if the goods are lawfully in Agent’s possession and they have not been paid for by Principal.

Liability of Principals and Agents

As a general rule an Agent cannot sue or be sued on a contract between a Principal and a Third Party where:

the agent discloses the agency relationship.

Agent must ensure that they act within the scope of their actual or apparent authority if they are to avoid liability:

for breach of warranty of authority; or

any Torts they commit.

The remedies available to a principal for breach by an agent include:

rescission;

refusing to pay a commission;

suing for damages; or

suing the agent for recovery of a secret commission.

Termination of Agency

Termination by acts of the parties

Mutual agreement

Revocation of Agent’s authority

Agent withdrawing from the agreement

Secret commission

Completion

Expiry of a time limit

Termination by Operation of Law

Performance

Lapse of time

Death of Principal, although acts done after Principal’s death but before notice has reached Agent are valid and Agent will not be held liable

Insanity

Bankruptcy

Frustration

Types of Agency

Specific types of Agency include:

Mercantile (or factor) agents

Have control or possession of goods on behalf of a principal and can sell them in their own name.

Del Credere Agents

Agent guarantees both sale and payment to principal.

Brokers

A general agent who buys and sells on behalf of the principal but has neither possession or control.

Directors

Directors are agents of their companies.

Partners

Partners are agents of their co-partners.

Auctioneers

Are an agent of the vendor until the fall of the hammer when they become an agent for the purchaser.

Real Estate Agents

Not strictly agents as the relationship is not strictly ‘Principal & Agent’.

Time for a quick break

The Law of Partnership

For the Assignment Partnership ILAC Question you only to apply the partnership sections and cases (i.e. from this slide onwards, but of course you should understand how the concept of agency operates)

The Law of Partnership

The objectives of this part of the lecture are to understand and then apply:

the test for determining the existence of a partnership;

the relationship between partners and outsiders; and

the rights and obligations of partners to each other.

Partnership law is regulated by both statute and common law principles.

The statute is the:

Partnership Act 1891 (Qld) (PA)

You can abbreviate to PA for our purposes.

You do NOT have to look up the sections of the PA and only are required to use the sections and cases from the lecture notes (and text) to answer any partnership questions – although you should refer to the text for details of the facts and to support your understanding of the law of Partnership.

You do Not have to use the cases from the Agency Chapter (or from slides before this point) to answer any ILAC question.

Types of Partnerships

1. General Partnerships

In a general partnership no partner enjoys limited liability in respect of the partnership’s liabilities.

Partnerships, unless otherwise stated, are general partnerships in that all the partners are liable.

2. Outsize Partnerships

The Corporations Act s115(1) sets the maximum number of members permitted to form a partnership at 20.

However s115(2) allows some exceptions to the policy for professional associations:

e.g. Doctors, lawyers, architects, accountants.

Types of Partnerships

3. Limited Liability Partnerships

These types of partnerships need to be registered.

In a limited partnership there are two types of members: general partners who manage the business and limited partners who take no part in the business.

General partners assume unlimited liability, whereas limited partners are only liable for the amount of capital they contribute to the partnership.

4. Incorporated Limited Partnership

Is a body corporate with legal personality separate from that of the partners and has perpetual succession.

Is limited to certain types of venture capital businesses.

Not Partnerships

Associations for the purpose of pleasure (cricket clubs) or charity (benevolent associations) or those not organised for the purpose of making pecuniary profits (religious associations) ≠ partnerships.

These associations may make profits but they reinvest those profits in their primary activities and do not distribute them as dividends to their members.

Other Relationships That Can Look Like Partnerships (but generally are not)

Associations of people which possess some of the features of partnership, but are not partnerships, include:

Joint Tenants

Separate rights between the parties but a single owner against the rest of the world.

Tenants in Common

Participate in co-ownership.

Co-Ownership

Does not necessarily involve carrying on a business with a view to profit - Partnership does;

Not necessarily result of agreement - Partnership is;

Not necessarily agents of each other – Partners are; and

Can transfer share without consent of co-owner – Partner cannot.

Joint Venture

Normally not a partnership, but a one-off commercial activity using shared product, although a single undertaking can amount to a partnership where the parties are engaged in a commercial activity with a view to profit.

Joint Venture or Partnership?

Joint Ventures can be distinguished from Partnerships on the basis that:

It is usually an ad hoc undertaking for a specific task or time;

It is a separate venture for each of the parties;

Liability is individual;

Profits are received individually;

Invoices are usually issued separately and paid individually;

The parties can dispose of their interest in a joint venture without the need to assign; and

The parties are not agents for each other and do not owe a fiduciary duty to each other.

Cox v Coulson [1916] – divided proceeds (profits) between them but had separate liabilities & therefore was a joint Venture not a partnership.

The Advantages and Disadvantages of Partnerships

Advantages

Simple structure

Relatively cheap to set up*

* If trading under another name – must register a business name.

Sharing in skills, economies and overall efficiency

No public disclosure of financial information

Sharing of profits and losses – but you need to know who you are getting into bed with!

Disadvantages

Partners are liable for the debts and actions of the other partner(s) ** - generally do not enjoy benefits of separate legal entity or limited liability!

** Provided the partners are acting within the scope of the partnerships business

Maximum number of members where public company is unlimited

No perpetual succession without prior agreement

Often no general manager, as this person may be considered a partner under some circumstances

Sharing of profits and losses – who you are getting into bed with!

Elements of Partnership - When Does a Partnership Exist? Common Law & Partnership Rules

A partnership may be formed either EXPRESSLY or IMPLIEDLY and in each case all the circumstances must be examined in order to ascertain:

the intention of the parties;

whether there has been a sharing of net profits and losses accompanied by a state of agency; and

whether each party has a voice in the management so that it could be said that an agency exists.

Definition: A partnership is defined as:

“the relationship which subsists between persons carrying on a business in common with a view of profit.”

Section 5 Partnership Act 1891 (Qld) (PA)

Q1. Is there a Partnership?

ONLY if it is not clear from the section 5 and the case law, do we need to look at the rules in Section 6

*HINT* Always determine if there is a partnership first to see if you can follow the Partnership Act, unless you are specifically told that the business is a Partnership.

Q1. Is there a Partnership?

Partnership

- Who is a partner?

- Must they share profit?

- Must they take part in day to day running of business?

Re Ruddock – mutuality of rights and obligations

M Young Legal Associates Zahid – not profit but retainer

Flowchart adapted from Mr. C Cameron, Griffith University

The partnership need not actually make a profit, but a profit must be intended by the parties at the inception of the partnership.

Who is a partner?

It is also possible for a person to be a partner (& liable):

even though they do not take part in the day to day management of the business

Re Ruddock (1879) – mutuality of rights and obligations – not a creditor, but a partner.

even though they do not contribute capital or have a claim to a share of the profits

M Young Legal Associates Ltd v Zahid [2006] – Partnerships do not have to make profits, but must be created with a view to a profit. It is possible for a person to be a partner, even though they do have a claim to a share of the profits; if claiming a retainer.

‘Carrying on a business in common with a view to a profit’

If the Partner had the authority to act, then they have ‘bound’ the partnership…. The partnership will be responsible for the debts.

Q2. Did the Partner have Authority?

Actual Express authority

Section 8 PA A partner has authority to bind the Partnership where they have....

Apparent authority

Implied authority

Business of Partnership is carried out in the usual way Goldberg v Jenkins

Molinas v Smith

Written or oral

(or combination of both)

Powers that all partners would have in those circumstances, unless the agreement says otherwise

Molinas v Smith

Business is of the kind carried out by the Partnership Polkinghorne v Holland; Mercantile Credit Co v Garrod;

Molinas v Smith

Third Party must not know that Partner had no actual authority to act

Construction Engineering Pty Ltd v Hexyl Pty Ltd; Molinas v Smith

Third Party must have known or believed that the person is a Partner

Molinas v Smith

Flowchart adapted from

Mr. C Cameron, Griffith University

Contract Law

; to be read in conjunction with s.12 (PA) – cases apply to both sections

Partnerships are unique in that every partner is both a principal and an agent for their other partners. As such they owe mutual fiduciary duties to each other.

Section 8 Partnership Act 1891 (Qld) (PA) – Power to bind firm

Every partner is an agent of the firm and other partners, for the purpose of the business of the partnership.

Any act of a partner done in the usual course of the partnership business can bind the firm and the other partners.

An exception to this general principle arises where:

the partner had no authority to act for the firm in the particular matter

AND

the other person knew this or had reason to believe the person was not a partner.

- Reminder – 3 types of authority – Actual Express, Actual Implied & Apparent (Ostensible) created through agency relationship of partners to each other

Partnership: Relationship To Outsiders (and each other) Liability of Partnerships and Partners (Agency)

Actual Express Authority: (Summary)

If a partner has actual authority the other partners will be bound by the partner’s acts if done in the usual course of business.

Actual Implied Authority: (Summary)

Provided nothing is stated to the contrary in the partnership agreement, the powers of partners to bind the firm by their acts usually done in the course of business generally includes:

the selling of property & goods of the firm;

purchasing goods usually used by the firm;

Molinas v Smith [1932] – binding on partners

employing suitable staff;

receiving payments and receipts; and

entering into contracts on behalf of the firm.

Molinas v Smith [1932] – binding on partners

Partnership: Relationship To Outsiders (and each other) Liability of Partnerships and Partners (Agency)

Apparent (Ostensible) Authority: (Summary)

third parties need to establish:

the partner was acting in the usual course of the partnership business;

the act was done by the partner as a partner (otherwise the partnership will not be liable even if a benefit to the partnership is derived)

the transaction was carried out in the usual way;

the 3rd party knew or reasonably believed the person was a partner; and

the 3rd party was not aware that the (person) partner had no authority to bind the firm.

Construction Engineering (Aust) Pty Ltd v Hexyl Pty Ltd (1985) – not binding on co-partners, if the third party is not aware of the existence of a partnership

Molinas v Smith [1932] – binding on partnership

Liability of Partnerships and Partners

Liability of partnership and partners arises in contract and tort:

Contract Law

Liability is joint only (collectively):

The creditor has only one right of action.

Best to sue in firm name.

s12 (PA) – Liabilities of partners (Contract)

Note that sections 8 (Agency) & 12 (Contract) are to be read in conjunction with each other

Note: IF a partner holds him/herself out to be a partner in breach of a partnership agreement then the firm (partnership) can sue the partner personally, but the firm and partners can still be liable. Similarly if a person allows oneself to be held out personally to be a partner (identified).

s17 (PA) – Persons liable for holding out

Section 8 & 12 (& s17): Questions to ask …

Did the partner have actual authority?

If yes, the partnership is liable; If yes or no, then ask:

Did the partner have implied authority?

If yes, the partnership is liable – IF action is within ‘scope of business' then normally this would be the case; unless there is a contrary (limiting) agreement or it does not fit into the categories previously listed (i.e. purchasing goods etc.); If yes or no, then ask:

Did the partner have apparent authority?

i.e. was s/he (the partner) acting in the usual way of a business of the kind carried on by the firm.

If no, partnership is not liable to any of the above, then the partnership is not liable but partner/agent might be liable personally.

If yes, the partnership is liable, unless the third party knew:

the partner had no authority to act for the firm in the particular matter &

the person knew this or had reason to believe the person was not a partner.

If partner holding out in breach of partnership, then partners are liable (s17) but can sue partner personally for losses.

If the Partner was:

- acting in the ordinary course of business OR

- acting with authority of the other partners

The partnership and the partners will be responsible for the damages.

Q2. Did the Partner have Authority?

Acting in the ordinary course of the business Polkinghorne v Holland

Section 13 PA A partner causes loss or damage to someone (who is not a partner) by a wrongful act or omission while ...

OR with Authority of the other Partners

Partnership will be jointly and severally liable Section 15 PA

Flowchart adapted from Mr. C Cameron, Griffith University

Tort Law

Liability of partnership and partners also arises under Tort Law

- A partnership & its partners are liable jointly and severally for negligent acts of the firm (partners) that cause damage.

Liability is joint (collectively) and several (individual):

s13 (PA) – Liability of the firm for wrongs

Any partner who causes loss or damage to a person not a partner because of the a wrongful act or omission, so long as they were acting in the ordinary course of the business of the firm, or with authority of the co-partners, then the firm will be liable.

Polkinghorne v Holland (1934) – Partners liable joint and severally

s15 (PA) – Liability for wrongs joint and several

Where a firm is liable under section 13 and cannot pay, partners are each personally liable.

Polkinghorne v Holland (1934) – Partners liable joint and severally

Note: the Partnership Act 1891 (Qld) also deals with crimes: (e.g. ss14 & 16).

Liability of Partnerships and Partners

Liability On Change of Partners

Incoming and outgoing partners

s20 (PA) – Liabilities of incoming and outgoing partners

Incoming partners are generally only liable for future debts, unless they agree to assume liability for past debts.

Outgoing partners remain liable for debts incurred before retirement unless the creditors and other partners agree otherwise.

Outgoing partners may be liable for debts incurred by the partnership after retirement if they have not taken steps to notify former and (possibly) new customers/clients of their retirement.

s29 (PA) - Retiring partner

If there is not a separate agreement then a retiring partner can bring a partnership to an end.

“If no fixed term has been agreed upon for the duration of the partnership, any partner may determine the partnership at any time on giving notice of the partner’s intention so to do to all the other partners.”

(Fiduciary) Duties of Partners

The partners are under a FIDUCIARY DUTY towards each other :

Partners in a firm are bound to render true accounts and full information of all things affecting the partnership to any partner or his or her legal representatives.

s31 (PA) - Duty of partners to render accounts etc.

Every partner must account to the firm for any benefit derived by the partner without the consent of the other partners from any transaction concerning the partnership, or from any use by the partner of the partnership property name or business connection.

Applies also to transactions undertaken after a partnership has been dissolved by the death of a partner, and before the affairs of the partnership have been completely wound up, either by any surviving partner or by the representatives of the deceased partner.

s32 (PA) - Accountability of partners for private profits

Scotts and Momentum Productions Pty Ltd v Lewarne [2009] - liability to account for profit

(Fiduciary) Duties of Partners

The partners are under a FIDUCIARY DUTY towards each other :

If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, the partner must account for and pay over to the firm all profits made by him or her in that business.

s33 - Duty of partner not to compete with firm

Unless the Partnership Agreement states otherwise, the Partnership Act 1891 (Qld) outlines the rights partners will share equally in profits and losses.

s27 - Rules as to interests and duties of partners subject to special agreement (Sharing of profits and loss – equally unless otherwise agreed)

Relationship & Duties of Partners

This scenario is based on Birtchnell v Equity Trustees Ltd (1929) (not in text – you do not have to look up this case (facts are all here)– it has been included to test your learning – you may cite case if it applies to any ILAC or Short Answer etc.)

The plaintiffs discovered that their deceased partner in a real estate business had also been running a profitable land development business on the side with one of the partnership’s clients. The plaintiffs sued the deceased partner’s estate to ………………………..... and …….……..................... as per sections …. and …. of the ………………………….(Qld) (PA). The deceased partner had breached his duties to the firm and other partners by ……………………………... as per …. of the (PA).

Therefore any of the deceased partner’s profits will have to shared equally with the other partners as per .…(PA).

Quick (Short answer) Question Lets write an application …

Dissolution of a Partnership

Methods of Dissolution

Dissolution ENDS the partnership. A partnership may be dissolved (terminated) automatically by: (Not required for ILAC Assignment)

s35 - Action of the parties

By the expiration of a fixed term;

If entered into for a single undertaking, the completion of the undertaking; and

By a partner giving notice where no time is specified.

s36 - Operation of law

By a partner giving notice; and

Death or bankrupt.

s37 - Illegality

By either party.

S38 - A Partner may apply to the court to have the partnership dissolved on the grounds of: Knight v Bell (1887) – dissolution of partnership by court

Insanity of a partner;

Permanent incapacity;

Conduct of a partner detrimental to the interests of the partnership;

Wilful or persistent breach of the partnership agreement;

Where the partnership can only be carried on at a loss; and

Where the court considers it just and equitable.

Each Partner is entitled to a proportionate return of their contribution to capital before distribution.

If the Partnership is being dissolved because of death, insolvency or bankruptcy, it is necessary to distinguish between partnership property and private property to determine the rights of the different groups of creditors.

If the Partnership Agreement is silent on the manner of disposition of assets, the Partnership Act (PA) applies.

Dissolution of a Partnership Methods of Dissolution

Summary of Key Points

Understand the term ‘sole trader’ – advantages/ disadvantages & legal obligations.

Understand agency – in particular how it applies to partnerships. Do not apply the agency chapter or the agency sections of these lecture notes to your assignment (only homework).

Understand the nature of a partnership – in particular  learning to apply the sections of the Partnership Act 1891 (Qld) & the Common Law.

Quick Questions (Short Answers):

Incorporated Limited Partnerships (ILP) can only be used for ……………………… businesses.

According to Section ... of the ………………………………… (Qld), a partnership is “the relationship which subsists between persons ….…………………………………………………………………………………”

Reminders for Assignment:

You must use the ILAC method for answering your assignment.

The assignment is very good practice for the Final Exam.

If you list a section of the law or a case, you must then attempt to apply it in the application to be awarded marks under the law and/or application section. There is NO sense if just copying ever case or section out of the lecture notes or text unless you are able to show how it applies. If in doubt, include the section or case and attempt to apply (i.e. no negative marking).

Think about how you are going to set out the assignment – two page maximum.

Go back over the Model Answers & Tips and Tricks Document to help you..

Quick Questions, Reminders & Next Week

Next Week & the following

Reminders for the next couple of weeks:

Next Week (11):

Assignment Due via Safe Assign

Anti-Discrimination Law Lecture

Seminars: Agency/Partnership

Following Week (12):

Employment Law Lecture

Seminars: Anti-Discrimination Law

Final Week (13):

Brief review and outline of final exam structure in lecture

Seminars: Employment Law etc.

Any questions, please feel free to come and see me now

Review your required readings