Organisations Law - Case Study Example

Organisational Law--- Ben, Jenny and Sue Case Name Course Instructor Date Table of Contents 1.0.Partnership between Ben, Jenny and Sue 3 1.1.Elements of Partnership between Ben, Jenny and Sue 3 1.1.1.The Carrying on of a Business 3 1.1.2.In Common 4 1.1.3.With a View to Profit 5 2.0.Whether the Partnership is Bound by the Contract signed between Ben and PK Bowling 5 Organisational Law--- Ben, Jenny and Sue Case 1.0. Partnership between Ben, Jenny and Sue The baseline of understanding the cases is to ascertain whether Ben, Jenny and Sue are in a partnership. Ben, Jenny and Sue have performed together in different occasions. Secondly, they have a mutually binding agreement to share the proceeds from their performances. Within the confines of section 1 of the Partnership Act, Ben, Jenny and Sue are bound together by a contract to perform either during a limited time or during pleasure. This definition is supported by recent court cases such as Lang v James Morrison & Co Ltd1 that indicate that partnership exist when there are two or more people entering into a legally binding relationship which is contractual in nature. The case presents that ‘the entrance fees and sponsorship money are used to pay the costs associated with running the festival with any amount left over split equally between Ben, Jenny and Sue’ from this understanding there exists an ordinary partnership between the three which is composed of definite individuals who have been bound together by the contract above so that they can continue with the joint ‘CreativFun’ in Western Victoria either during a limited time or pleasure. 1.1. Elements of Partnership between Ben, Jenny and Sue This study relies on Section 1 of the Partnership Act to determine the extent to which activities undertaken by Ben, Jenny and Sue constitute partnership. 1.1.1. The Carrying on of a Business The expression of carrying on in this case implies that Ben, Jenny and Sue must have been engaged in a repeated act of a particular activity that was geared towards making profit. The case provides that ‘Ben, Jenny and Sue operate a creative writing and music festival in Western Victoria each year’ meaning that there are series of acts that constitute what Section 1 of Partnership Act considers as ‘carrying on a business.’ The interpretation of carrying on of a business was explained in the recent case involving Federal Commission of Taxation v. Stone.2 According to the Australian Federal Court, there has to distinct between carrying on of a business and merely pursuing a hobby. According to Otevrel (2016), the Court relied on Section 1 of Partnership Act to ascertain that carrying on of a business can be ascertained if members engage in repeated act of an activity with the aim of making profits. 1.1.2. In Common The aspect of ‘in common’ is interpreted in a specific way. It means that the decision to undertake ‘CreativFun’ was carried by, or on behalf of Ben, Jenny and Sue. As a matter of fact, Section 1 of the Act states that for ‘in common’ to be considered, it is not a must that Ben, Jenny and Sue should be present or consent to the activities instead, some decisions can be made on their behalf provided they are consenting to ‘carrying on of a business.’ The case provides that “Together, they own a business name ‘CreativFun’” meaning that their agreement satisfy the aspect of ‘in common’ as a parameter for qualifying whether there is existent of partnership. The general factor to be considered in this case is that there was a right of one or more members to participate in profits and loss making as one of the mutual agreement to own a business name ‘CreativFun.’ 1.1.3. With a View to Profit The third aspect that qualifies the relationship between the three as partnership is whether it was formed with the view of making a profit. While ‘Profits’ have not been captured in the Partnership Act, this is aspect is looked into in terms of gains made by partners. According to the agreement between the three, ‘the entrance fees and sponsorship money are used to pay the costs associated with running the festival with any amount left over split equally between Ben, Jenny and Sue.’ Basically, there is aspect of ‘partnership profit’ when the three split equally amount left over. According to Otevrel (2016), with a view to make profit is determined when there is any value gain made between people in an association. 2.0. Whether the Partnership is Bound by the Contract signed between Ben and PK Bowling An essential issue to asses in this case is the aspect of ‘carrying on a business in common’ and how that affects involvement of partners. According to Partnership Act, every member of ‘CreativFun’ is entitled to engage in the management of ‘CreativFun’ even if not all of them can take part in every decision made in the day to day running of activities. An understanding on whether a business was carried on behalf of others and whether decisions made bound other members was assessed in the case involving Commissioners of Inland Revenue v Lebus.3 A factor that needs to be determined in this case was whether Ben was carrying on business on behalf of Jenny and Sue. From this case, the interest of Ben contracting PK Bowling was for the benefit of ‘CreativFun’ which was to increase revenue or sales during the festivals. As a result of the existence of such partnership, Carter (2011) noted that partners, in this case Ben, Jenny and Sue, each is regarded as a general agent of each other (Ben is an agent of Sue and Jenny and vice versa) when it comes to matters pertaining to partnership. Secondly, the partnership between Jenny and Sue is bound by Ben as one of the member in the course of their business operations. Therefore the decision made to ‘signed a contract to hire famous and successful author, PK Bowling to attend the Festival’ is regarded as under Partnership Act as an act of agency where Ben acted as agent.4 As the agent, Ben has acted within the confines of his apparent or actual authority and cannot be liable to the expenses incurred to the third party instead; the other two partners will be bound by the contract (Carter 2011). This is further a case of implied authority as enjoyed by Ben. It can be implied that Ben has the authority to undertake all the decisions that would have otherwise been done by Sue and Jenny or one which is for mutual benefit and without the consent of Sue and Jenny. However, as it was the case with Armagas Ltd v Mundogas SA5 the extent of Ben’s authority may be based upon the specific concept of settled or well understood trade. Ben is therefore having an implied authority that should include but not limited to ‘contract to hire famous and successful author, PK Bowling to attend the Festival.’ As far as ‘implied authority’ is concerned, Ben did not have to seek clarification or consent from Sue and Jenny before “contract to hire famous and successful author, PK Bowling to attend the Festival.”6 Additionally, unlike companies, Ben, Jenny and Sue are in partnership and as such, are bound by Partnership Act to have unlimited liability. An understanding of unlimited liability in this case means that if one or more of the partners is found liable for engaging in activity or fails to undertake an activity that causes losses to the business, it means that all partners (Ben, Jenny and Sue) in the business (‘CreativFun’) will be personally liable to the course of action undertaken by the partner. Relating this case with the decision to contract author, PK Bowling Ben, Jenny and Sue are having unlimited liability meaning that they are liable for “a risky decision, given the large fee that Bowling will receive under the contract and it is not clear if the attendance and entrance fee revenue will cover this cost.” In summary, Jenny and Sue should be advised that the contract between them exhibits all the indicia of what it takes to have a partnership except that Ben did not involve Jenny and Sue as partners and did not provide expressly for the sharing of damages resulting in the “signed a contract to hire famous and successful author, PK Bowling to attend the Festival.” However, it is possible for the venture to think that Ben has implied authority and as such Jenny and Sue are obligated to pay their dues to incur losses or expenses that may be accrued as a result of contracting PK Bowling. References Carter, J. W. (2011). Carter's breach of contract. Chatswood, N.S.W: LexisNexis Butterworths. Otevrel, A. (2016). Introduction to Business Law in Australia. Canberra, Australia: Lawbook. Read More