The Essential Elements of a Partnership as a Business Entity

Only available on StudyMode
  • Download(s) : 268
  • Published : March 1, 2013
Open Document
Text Preview
TABLE OF CONTENT

1. Introduction..............................3
2. The essential elements of partnership…………………..4 3. Bibliography……………...…..13
4. Table of Cases………………....13

Introduction

The partnership as a form of business enterprise developed from the concept that if two of more individual owners joined forces a stronger entity would develop because they would then have at their disposal their combined resources, financial, skills and others. The South African law of partnership is largely governed by common law principles,[1] which is similar in Namibia.

A partnership may be described as a legal relationship that arises contractually between it is concluded between two or more persons (but normally not more than 20 persons)[2], in terms of which each partner must undertake to contribute the common business, with the objective of making and sharing of profits between each of them.[3]

A partnership is not a corporate entity. It does not have a separate legal persona and this has several important legal consequences: in the relationship between the parties all rights and duties only exist between the partners inter se, the rights and duties of the partnership are the rights and duties of the partners and the continued existence of the partnership depends on the continued participation of partners in the partnership hence it has no perpetual succession.

This paper will look at how the courts have used essentialias of a partnership, formulated by Pothier, in deciding whether or not a partnership had been established.

The essential elements of partnership

Partnerships are created by contract. Thus for a partnership to be validly formed all the general requirements as regards to contractual validity must be met.  Moreover for an agreement to be one of partnership consensus must have been reached on all the essential terms of partnership.

The general principles of contractual capacity accordingly also apply to the contract of partnerships. An un-rehabilitated insolvent may conclude a partnership agreement with the permission of his curator and a minor with the assistance of his natural guardian.  South African as well as Namibian law does not require that only natural persons be members of a partnership, a company as well as another partnership may become a party to a partnership agreement. 

For an agreement between parties to be one of partnership, consensus must have been reached on three essential issues. The parties must agree that: 1. Each of the partners shall bring something into the partnership; 2. The business should be carried on for the joint benefit of the parties; and 3. The object should be to make a profit.

The above are also known as the essentials of a partnership, with the fourth essential being that the contract between the parties be legitimate contract. The fourth essential, viz. that the contract should be a legitimate contract, is not peculiar to contracts of partnership; it is an essential peculiar to all contracts.[4]

The essentials of contracts of partnership were formulated by Pothier and out courts have often used them as a guideline in determining whether or not a partnership had been established. One of the oldest cases, which is also the locus clasicus on partnerships, in which the essentials laid down by Pothier were accepted is Joubert v Tarry & Co[5].

In Joubert v Tarry & Co[6], Joubert and a certain Gascoyne were summoned jointly and severely, carrying on business in partnership under the firm of Bellevue Colliery for the sum of £28 15s. 6d. for work done and material supplied by the plaintiffs. To this claim Joubert denied that he and Gascoyne were partners or carried on business in partnership. The magistrate gave judgment against Joubert and Gascoyne for £28 15s. 6d., jointly and severally with cost. Joubert appealed.

The point to be decided was whether an agreement which was...
tracking img