legt 2741 Tutorial 2 business structur
Tutorial 2 Business Structures
Question 1
Advise Violet and Sonny regarding their liability to Friendly Bank in relation to the Busy Bee Florist Shop. Your answer must make reference to relevant provisions of the Partnership Act and precedents.
Introduction
In order to advise Violet and Sonny regarding their liability to Friendly Bank in relation to the Busy Bee Florist Shop, firstly it is necessary to examine whether a partnership relationship exists between (a) Violet and Busy Bee Florist Shop; and (b) Sonny and Busy Bee Florist Shop.
Does a partnership exist?
Sonny
Sonny is an employee and a lender instead of a partner of Rose & Mary/Busy Bee Florist Shop.
The Partnership Act in each jurisdiction (e.g. NSW section 1) states that “partnership is the relation which exists between persons carrying on a business in common with a view to profit”. For the business to be carrying on in common, there should be an agency relationship between the partners with the persons concerned being the principals of the business. Thus Sonny being an employee of Busy Bee Florist Shop cannot satisfy the partnership requirement.
Similar to Smith v Anderson (1880) 15 Ch D 247, there lacks mutual rights and obligations between Sonny and Rose & Mary since Sonny is their employee. Therefore Sonny is not their partner.
Moreover, according to the Act (e.g. NSW section 2(1)(3)(d)), “The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person, that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such: Provided that the contract is in writing and signed by or on behalf of all the parties hereto.” By virtue of the Act, Sonny is not a partner of
Rose & Mary. Instead he is just a lender who requires some
Question 1
Advise Violet and Sonny regarding their liability to Friendly Bank in relation to the Busy Bee Florist Shop. Your answer must make reference to relevant provisions of the Partnership Act and precedents.
Introduction
In order to advise Violet and Sonny regarding their liability to Friendly Bank in relation to the Busy Bee Florist Shop, firstly it is necessary to examine whether a partnership relationship exists between (a) Violet and Busy Bee Florist Shop; and (b) Sonny and Busy Bee Florist Shop.
Does a partnership exist?
Sonny
Sonny is an employee and a lender instead of a partner of Rose & Mary/Busy Bee Florist Shop.
The Partnership Act in each jurisdiction (e.g. NSW section 1) states that “partnership is the relation which exists between persons carrying on a business in common with a view to profit”. For the business to be carrying on in common, there should be an agency relationship between the partners with the persons concerned being the principals of the business. Thus Sonny being an employee of Busy Bee Florist Shop cannot satisfy the partnership requirement.
Similar to Smith v Anderson (1880) 15 Ch D 247, there lacks mutual rights and obligations between Sonny and Rose & Mary since Sonny is their employee. Therefore Sonny is not their partner.
Moreover, according to the Act (e.g. NSW section 2(1)(3)(d)), “The advance of money by way of loan to a person engaged or about to engage in any business on a contract with that person, that the lender shall receive a rate of interest varying with the profits, or shall receive a share of the profits arising from carrying on the business, does not of itself make the lender a partner with the person or persons carrying on the business or liable as such: Provided that the contract is in writing and signed by or on behalf of all the parties hereto.” By virtue of the Act, Sonny is not a partner of
Rose & Mary. Instead he is just a lender who requires some