Business Entities

Coursework Question

Bill, John and Mary are in partnership in a restaurant business. Bill is the chef, John takes care of the finances and Mary runs the restaurant itself. The partners have agreed amongst themselves that any purchases of equipment for the kitchen costing more than £5,000 need to be agreed by all the partners. Either Bill or John makes the contracts for ordering normal supplies for the restaurant.

The restaurant is financed by a loan from John’s wealthy father, Jim, on the basis that Jim will receive a share of net profits from the business.

One of the cookers needed to be replaced, as it has broken down. Fearing that otherwise the restaurant would have to close, and thinking that action needed to be taken urgently, Bill ordered a top of the range catering-quality cooker costing £10,000, without consulting the other partners, from one of their regular suppliers of kitchen equipment. John and Mary have now found out about this contract and have refused to pay for the cooker.

Also, Mary has many business contacts, one of whom informed her of a suitable restaurant building in a beautiful location that had become available. In order not to lose this opportunity, Mary has made an offer personally to purchase the building, without informing her fellow partners, and the offer has been accepted. Bill and John have now discovered the existence of this contract.

One day Dot, a guest in the restaurant, contracts severe food poisoning from dining there, and has to spend time in hospital, with consequent time off work and loss of income. Dot raises a legal action against the partnership and all its partners, plus Jim. The partners are all of the view that because a partnership in Scotland is a legal person, they are not potentially liable, and Jim protests that he is not a partner and cannot be made liable.

John