Partnerships

Topics: Partnership, Joint and several liability, Fiduciary Pages: 5 (1997 words) Published: September 26, 2013
1.
We can assume that by reference to Bentley Physiotherapy’s partnership agreement that Tim, Kathy and Martin are partners and that Bentley Physiotherapy is operating as a partnership so no further analysis into the essential elements of a partnership is necessary. It is stated that Adam made it clear that he didn’t want to be a partner. This does not give us any reason to believe that Adam is not a partner of the business. Whether a partnership exists is a mixed question of fact and law. WA Partnership Act 1895 – S8 sets out some guidelines for determining whether or not a partnership exists. These include co-ownership of property, sharing of gross returns and sharing of gross profits. Adam invested $15,000 into the business which makes a strong case for him being a partner as he is actively involved in the management and decision making. We do not have information on how returns, profits and losses are shared in Bentley Physiotherapy. From the information that we have about Adam, I believe we have to carry on with the presumption that he is in fact a partner of the firm. ‘The acts of every partner who does any act necessary for or usually done in carrying on business of the kind carried on by the firm of which he is a member shall bind his partners to the same extent as if he were their agent duly appointed for that purpose; unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing knows that he has no authority; or does not know or believe him to be a partner’ (S-26, Partnership Act WA 1895) The above section shows three main elements that must be ascertained for all partners to be liable for Adam’s actions. First we will look into whether the transaction completed by Adam is within the scope of the firm’s normal business. Mercantile Credit Co Ltd v Garrod is a leading case for this topic as it shows that even if an action is not allowed by the partnership agreement or agreed to by other partners if it is within the scope of the business’s normal business then all partners will be liable. The fact that Adam purchased exercise bikes can be seen as a very realistic purchase of a physiotherapist. It’s because of this the conclusion can be made that the transaction is in the scope of a physiotherapist’s normal business. For the firm to be liable the transaction must be undertaken in the usual way, so that it wouldn’t arouse the outsider’s suspicion. Adam was away on a business trip which is very normal for a partner at a physiotherapist as they often go to different cities for workshops and conferences. We have no information about how he approached the current creditor in relation to purchasing the bikes, but if it was done in a way which the creditor normally deals then it can be said to be in the usual way. This can be argued both ways as maybe the creditor did have doubts about the purchase but didn’t bring it up which can lead to the partnership not being liable for Adam’s purchase. Goldberg v Jenkins (Vic Supreme court) is a common law example of this situation. This case involves a situation where money was lent at a 60% interest rate. The court held this was not done in the normal way as a 60% loan is extreme and out of the ordinary. We can apply it to Adam’s situation by concluding that if the bikes were $100,000 then it may have been acting out of the usual way. The final two elements are whether the creditor had any suspicions that Adam was not a partner and whether he was exceeding his authority. We don’t have information on how the deal took place but it could be assumed that a purchase of 6 bikes for $9,500 would not arouse suspicion. So even if Adam lacked actual authority for the purchase of the bikes the partnership can still be liable. To conclude, I believe with the facts we have been given it can be confidently said that Tim, Kathy and Martin will be all equally liable for Adam’s purchase.

2.
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