Law of Business Organisations

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  • Topic: Partnership, Joint and several liability, Johnny Marr
  • Pages : 13 (4353 words )
  • Download(s) : 222
  • Published : November 21, 2010
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Was there dissolution of Smiths?
2. There was clearly no dissolution. The agreement provided that the partnership may only be terminated “by mutual agreement”. Hence, Morrissey’s unilateral action (resignation) is insufficient to dissolve the partnership: Moss v Elphick. Section 26 of the Partnership Act (“PA”) is applicable only when the partnership was silent on the duration of the partnership. In this instance, the agreement was for the partnership to enure for the joint lives of the parties (unless terminated by mutual agreement). Section 32(1) (c) is also inapplicable since the parties had indicated that the partnership was to be determined by “mutual agreement”, hence subjecting it to a contrary intention. Thus there was no dissolution of the partnership

3. However, should dissolution be ordered, Morrissey would be prima facie entitled to 1/3 of the capital in accordance with s 24.1 of the PA. However the court in Popat v Shonchhatra held that: The slightest indication of an implied agreement between the partners that their shares of capital should correspond with their contributions to it will suffice to displace the provision that they are entitled to share equally.

4. Hence, Morrissey would most likely be awarded 1/5 of the capital as the provision was displaced by the understanding that Morrissey was to have a 1/5 share of the business should dissolution be ordered.

Did Morrissey have authority to bind firm, making Smiths liable for losses caused by the power outage at Manchester Meat(“MM”) and damage to the air-conditioning? Actual Authority
5. Actual authority may be expressed or implied.

Express Authority
6. There is no express authority. The other Smiths partners did not tell Morrissey in unambiguous words to service MM’s air-conditioners and blower units.

Implied Authority
7. It is arguable that there is implied authority.
8. Fixing of air-conditioning and blower units may be considered to be incidental to a general electrician’s trade. The distinction may be a fine one as in ‘duties’ of an engineer in Sigma, but in the present case this was arguably within Morrissey’s job scope as a partner in a general electrician businesses. 9. Morrissey’s previous course of dealings with MM was related to “circuit board upgrades, re-wiring requirements”. The air-conditioning servicing is thus a likely extension of the above and can be safely regarded to be within Morrissey’s authority.

Apparent Authority
10. There was apparent authority of Morrissey to bind the partnership. 11. In Freeman & Lockyer v Buckhurst Park Properties Ltd, Lord Diplock stated: a. The representation which creates ‘apparent’ authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principal’s business with other persons.” 12. This conduct was in the form of Morrissey persuading Fergie to allow him to service MM’s air-conditioning.

Whether Morrissey’s acts bound Smiths by virtue of Section 5 of the PA 13. In order for Smiths to be successfully bound, s 5 must be satisfied. Morrissey’s acts most likely bound the firm as they fell within s 5. 14. As observed in Construction Engineering Proprietary Limited v Hexyl Proprietary Limited, s 5 essentially consists of 2 distinct limbs, with the first dealing with actual authority and the second dealing with apparent authority.

The first limb of s 5 of the PA
15. The firm would not be bound by the first limb. Firstly, there was no evidence that Morrissey has been given the authority to make servicing offers during regular inspection visits. Secondly, his acts were carried out to finance his gambling habit and could not have been said to be for the purpose of the firm.

The second limb of s 5 of the PA
16. However the firm is likely to be bound under the second limb of s 5. 17. As stated in Lim Hsi-Wei...
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