Partnership Case

I. PARTNERSHIP

• There must be intention of the parties to form an agreement to partnership.

• There is a sharing of profits and losses accompanied by a state of agency.

• Each person has a voice in the management of the business, so that it could be established whether agency has been created between the parties.

Issues and Relevant Law:

Section 5 (1) of Partnership Act (Qld)

i. Is there a valid agreement?

ii. Did the parties carry on a business?

• An active occupation/profession continuously carried on.

• An isolated transaction or a single venture does not constitute carrying on a business and will not be treated as a partnership (Smith v Anderson).

iii. Did the parties act in common?

• It is not necessary for all partners to take an active part the day-to-day running of a business.

• There must be an agency relationship and mutual rights or obligations.

iv. Did the parties have “a view of profit”?

• Partnerships must be associations formed for making a profit.

• This excludes social and sporting clubs and cultural societies as profits are not shared among the members and they are not liable for debts incurred by the committee in excess of their subscriptions.

(Note: If the Question states that the parties are involved in a partnership subject to an agreement, DO NOT go through the issues and the law under Section 5 above).

II. RELATIONSHIP OF PARTNERS TO OUTSIDERS (THIRD PARTIES)

• Every partner is an agent for the firm and other partners so anything done in the course of the firm’s business binds the firm and the other partners.

Issues and Relevant Law:

Section 8

i. Did the partner have actual authority to bind the partnership?

• If a partner has actual authority, the other partners are bound by the partner’s acts. Every partner is an agent of the firm for the purposes of the partnership business because the partners operate a business in common.

ii. Did the partner have apparent authority to bind the partnership?

• Arises when there is a lack of actual authority.

• The particular partner must act within the scope of the business of the kind carried