Relationship between Jason, Tom and Rupert: Partnership or Not

Topics: Partnership, Corporation, Types of business entity Pages: 5 (1638 words) Published: December 16, 2010
/ To answer the question either the nature of relationship between Jason, Tom and Rupert is the partnership relationship or not ,first we need to define what is the partnership? A partnership is the relationship between persons who carry on a business together in common with the view of making a profit. First of all we should consider, Is there any valid agreement between the parties? In this case, Jason, Tom and Rupert have no partnership agreement. The partnership agreement can be oral but it is recommendable to put the agreement in writing because a partnership is a contractual relationship itself. So the relationship between them may be not a partnership relationship. However, based on the definition of partnership, there are three essential elements that are required for the existence of a partnership. The following factors have to provide in order to conclude that partnership exist among the parties: Carry on a business

In common; and
With a view of profit
Firstly, we consider, Are the parties carrying on a business? According to the Partnership Act define that business includes trade, occupation and profession and carrying on a business implies some continuity or repetition of action. Jason, Tom and Rupert work together and run a Real Estate Agency which is considered to be a carrying on business with a view of continuity. Secondly, is the business carried on in common?

We can say partnership is a branch of agency law because the meaning of partnership means the partners act as agents for each other. Carry on a business in common mean the business must be carry on by, or on behalf of, all the partners. In this case Tom, Jason and Rupert are working together to run a business so they must to take an active role in the affair of business. We can see the case of Checker Taxicab Co Ltd v Stone (1930). The court held that the relationship between the parties was not partnership because it was not a business being carried on by persons in common. The driver hired a taxi car from the owner of a garage so the owner have no control over the driver so that there is no evidence of mutual rights and obligations between owner and driver. Plus working together to form a company is not carry on a business in common, check in case Spicer v Mansell (1970). Come back to the case of Jason, Tom and Rupert, the Real Estate Agency already run a business which is already set up everything and making profit as well. The parties Tom, Jason and Rupert clearly have a common purpose and active role in their company, the proof is company pay them salaries. They involve in the company’s activities such as Jason contact customer and sold the house to Mrs Rogerson and so on. In this circumstance, we can clearly conclude that the parties are carrying on a business in common. Thirdly, are they carrying a business in common with a view of profit? In this rule the business must be established with the intention of making a profit for the partner. Back to the fact, we can see the parties set up everything, open bank account, create trust account. They are running a real estate agency, absolutely with a view of profit. There are another 3 rule to determine when a partnership exists: Co- ownership of property, sharing of gross returns and sharing of profit. However, in this circumstances we should not consider these three rules .

b/ In section 11 Partnership Act 1982-Misapplication of money or property received for or in the custody of the firm: “In the following cases involving general partners in an incorporated limited partnership:

(a) where one general partner acting within the scope of the general partner's apparent authority receives the money or property of a third person and misapplies it,
(b) when an incorporated limited partnership in the course of its business receives money or property of a third person, and the money or property so received is misapplied by one or more of...
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