Running a Business as a Partnership Flashcards
(15 cards)
Running a Business as a Partnership
What does s9 PA 1890 say?
1
(liability)
The partners are jointly and severally liable (one or all of them can be sued)
Running a Business as a Partnership
What does s10 PA 1890 say?
1
(liability/tort)
wrongful act/omission in the ordinary course of business with authority of co-partners means the firm is liable to the same extent as the partner acting
Running a Business as a Partnership
What is “Holding Out”
3
A partner who leaves a firm and doesn’t give proper notification to customers and suppliers.
Anyone holdng out is liable to a party that enters into a transaction on that basis.
Retirred partners should ensure all references to them are removed on company stationary etc
Running a Business as a Partnership
Types of Authority
3
(of partner acting on behalf of firm)
- Actual Authority- express agreement to act
- Implied Authority- based on the nature of the relationship (e.g kitchen head orders food stock)
- Apparent Authority- depends on PoV of the other party (are they entitled to believe the acting partner had the authority?)
Running a Business as a Partnership
s5 PA 1890 Rules on Apparent Authority
1
Apparent Authority
The action applies unless the person knew the partner had no authority OR they didn’t know or belive them to be a partner
Business has to be of the kind carried on by the firm (objective test- what is the supplier entitled to believe?)- Mercantile v Garrod (car garage)
Carried on in the usual way (objective test)- so the partnership won’t be bound if the acting partner didn’t usully have the authority to do that act.
Running a Business as a Partnership
When is a partnership not bound by apparent authority?
1
The other partners are not bound if outside partner knew they had no authority (or didn’t know or believe)- reinforced by s8 PA 1890: Not bound if
Partner doesn’t have authority and the outsider is aware of that.
Running a Business as a Partnership
What is a “Breach of warranty of authority”?
Apparent Authority
If acting partner had no authority, they’re still personally bound to contract but others aren’t.
Outsider may be able to bring claim against acting partner for Breach of warranty of Authority.
Running a Business as a Partnership
Leaving a Partnership if no partnership agreement
1
How?
PA 1890 doesn’t provide for retirement- only option is to dissolve.
Running a Business as a Partnership
s17(1) and (2) PA 1890- what does it say?
Liability after leaving
Partners liable for debts whilst they’re partners and also after they leave
Running a Business as a Partnership
Actions Required of a Partner after they Leave re: Notification under PA 1890
2
Retiring Partner needs to send notice to:
1. All firms present and future suppliers
2. Place a notice in Gazette (for anyone who has not yet dealt with firm)
Running a Business as a Partnership
Partners Fiduciary Duties as Expressed in Statute
3
s28- duty to render accounts to the others of all things affecting the partnership
s29- duty to account to others for any private profits
s30- duty not to compete with the partnership
Running a Business as a Partnership
Tann v Herrington
1
Represents common law duty of use of care and skill when a partner
(failed to notify insurers)
Running a Business as a Partnership
Other rights implied into partnership by PA 1890
4
- Right to be indemnified for expenditure incurred
- Right to take part in management of firms business
- Right of veto on unanimous decisions (right of decison making)
- Right to inspect partnership records
Running a Business as a Partnership
Partner in Breach- what happens?
3
Usual remedy is damages but theoretically also specific performance or injunction.
Also:
Expel partner (if agreement allows)
Dissolve partnership (if expulsion not possible and breaching partner refuses to retire)
If dissolution not possible (i.e not partnership at will or no express provision) then apply for court order (not guaranteed)
