The Rights and Liabilities of the Partners - Assignment Example

28 September Response to Question Partnership is a mutual contract between two or more individuals to employ themselves in a venture in order to gross profits and benefits. It is generally imperative that each individual puts any consideration into the partnership let it me property, skills or time. The discussed case presents a scenario which highlights the rights and liabilities of the partners and the third party concerned in a transaction. The essay specifically highlights the remedial actions likely to be adopted by the third party in a situation where it has been deceived by any of the partner in the firm. As per section 9 of the Partnership Act 1958, a partner is an agent of the firm and all the other partners for the purpose of the business. [1]. In the discussed case Joe is acting as an agent on behalf of the other partners, Harry and Moe, when he enters into a borrowing transaction with Rich. As explicitly provided in the case, the partnership prohibits the incurring of expenditure, which is to be borne by the firm, unless it can be justified that the same was done solely for the purpose of the business of the firm. Disregarding the prohibition clause of the partnership agreement, Mr. Joe scammed both Mr. Rich and the firm by borrowing the money representing as they have to be used for procuring the reference law books for the firm, it being a partnership of solicitors, and escaped to South America along with the money. It can be deduced from the scenario in consideration that Mr. Joe ceased to be a partner in the firm after his getaway. As per section 10 of the Partnership Act 1958, any act performed by any partner from which it can be inferred that the same was done in the ordinary course of the business of the firm, legally binds the firms. [1]. As apparent from the case, purchasing of reference law can be regarded as a transaction done for the purposes of the business thus it is binding on the firm. However, section 12 of the Partnership Act 1958 further explains that if the firm has explicitly given notice ruling out any of the power of any partner, any act in contravention of such notice shall not bind the firm. [1]. Mr. Joe abandoned the firm taking away all the money with him which was borrowed on behalf of firm and committed the non-compliance of the prohibition clause. As apparent from the case, Mr. Rich was not informed about the prohibition clause and so he is eligible to file a suit regarding his stealing of the money. As per section 11 of Partnership Act 1958, a firm is exempt from any liability if it appears that any partner of the firm has promised to utilize the credit of the firm for a purpose other than business and he has been authorized by the other partner of such act. [1]. As depicted in the case, apparently the funds were borrowed by Mr. Joe for business purposes, his scam was subsequently discovered. The fraud conducted by Mr. Joe during the course of the business of the firm constitutes a wrong full act within the domain of Partnership law. As per section 14 of the Partnership Act 1958, where any wrongful act has been conducted by any of the partner in the firm due to which loss has been borne by any other individual, not being partner in the firm, the firm is liable as if the wrongful act has been committed by it in the first place. [1]. Keeping the above provisions of the law into consideration, Mr. Rich can file a suit against the firm regarding the wrongful act of Mr. Joe. Moreover, Mr. Harry and Mr.Moe are also jointly and severally liable for the fraud and thus an action can also be taken against them. Mr. Rich also preserves the right to commence any legal proceeding against Mr. Joe in the capacity of him being an individual. Response to Question 2 A company is an association of two or more persons carrying on business for any lawful purpose. The Corporation Act 2001 provides guidelines and governance in order to streamlines the corporate affairs of a company and thus safeguards the rights and interest of all the stake holders involved. In the presented case, the company under consideration consists of only two directors, Anna and Vronsky, who are also the only two shareholders of the company. Anna decides to borrow a hefty sum of money from a bank which she had already decided to utilize for personal purposes as well. However, Anna had speculated that the other director, Vronsky, would not approve of such transaction. Anna committed a fraudulent act by forging Vronsky signatures and getting the loan sanctioned from the bank. As per Section 184(2) of Corporations Act 2001, a director commits an offence if he uses his title and designation dishonestly and thus derives advantage for himself or someone else. [2]. In the case under consideration, Anna has used her position of a director dishonestly through using falsified signatures of Vronsky. Moreover, Section 192 of Corporations Act 2001 also demands directors to give notice to the other director regarding any interest in any venture relating to the affairs of the company unless exempt from giving any such notice under Section 192(2) of Corporations Act 2001. [2]. Anna had an interest in acquiring loan from the bank but it was not communicated to Vronsky. The primary issue presented in the case is whether the guarantee given by the company against the loan acquired from the bank bounds the company. Firstly, Anna was not given the power of attorney by Vronsky to sign in her place nor it is obvious from the case that she had any knowledge that her signatures are being replicated for the sanctioning of loan facility. Thus Anna did not have any expressed or inferred authority to sign Vronsky name. It is worth observing that although Anna borrows the money in her own name but no personal guarantee was given by her against the loan facility in which case bank would be entitled to recover the loan amount from Anna’s personal assets and not the company. A principal can be held accountable for any falsified act of an agent. In the mentioned case, the company is bound due to the fraudulent act of its director. Thus keeping in consideration all the mentioned analysis, the bank is entitled to impose the repayment of the loan facility on the company if Anna is unable to do the same. Works Cited [1] Partnership Act 1958.v 076. (2010) [2] Corporation Act 2001.v.50. (2010) Read More