A Partnership as a Law Relation - Assignment Example

?Proposal 11-20 A partnership is the relation which exists between two or more persons carrying on a business in common with a view of making profit. A partnership is deemed to be in existence where there is joint tenancy in common, common property or part ownership and sharing of profit from the business. A partnership exits and operates under the guidance of the Partnership Act of 1890 and/or any other partnership agreement made by the partners (HM Revenue &Customs, 2011). In the case of Foster, Peart and Hope Architects, there is the existence of joint ownership of the premises as well as the partnership deed. The firm which was formed five years go in the town of Oldchester is therefore, a partnership for a fixed term with written set of partnership articles. The partnership deed is a contractual agreement between the partners in a given partnership. It stipulates guidelines and the relationship between the partners and between the partners and third parties such as the firm. When former their partnership, the three partners, Lindsay Peart, Mary Hope and Janine Foster had drawn a partnership deed. One of the clauses which are in the deed is 18 on the conduct of partners and condition for expulsion of a partner. Of late, the partnership has been parting in the midst of a crisis caused by uncouth conduct of one of the partners, Lindsay Peart. Lindsay has been away from the daily management of the partnership on the pretext of sickness. However, the other two partners have information that she had actually been convicted and fined for criminal offence for damage. To make matters worse, her social behavior has had negative effect on the firm image. It is alleged that she had written some swear words on the wall of a Bank in the town with spray paint while under the influence of alcohol. The behavior of Lindsay has become unbearable prompting the other two partners to consider expelling her from the partnership. The partnership deed that binds the partners together allows for the two partners to expel Lindsay as she has breached certain clauses in the deed and partnership law1. Clause 18 of the partnership deed states that if any of the partners shall by act or default commit or act in any respect contrary to the good faith which ought to be observed between partners; then in such a case the other partners have the legal grounds to expel her from the partnership. The process of expelling Peart from the partnership will be heavily guided by the clause 18 of the partnership deed and the partnership Act of 1890 (HM Revenue &Customs, 2011). The clause 18 advices Mary and Janine to follow the due process; by writing to notify her of their intention to exorcise her from the partnership. The notice can be served to her in person or be left the partnerships’ office (Mesriani Law Group,2011). In the notice, Mary and Janine should quote extensively clause 18 to make Peart aware of the grounds for expulsion. Notifying her of the reason for expulsion will avoid loosing a legal case as happened in Barnes v Young where it was rulwed that the partnes had an obligation to notify the expellee on reasons for expulsion. The apparent absence of Lindsay in the firm has been the major cause of the upheavals resulting in the halting of the extension project and the resulting legal battles with the contractor. Initially, the firm had entered into a contract with standard Construction Ltd to extend the premises by adding a new entrance hallway to their office. Standard Construction Ltd successfully sued Foster, Peart and Hope Architects for damages amounting to ?4,000 for the work completed. Why place the blame on Lindsay, one would ask. As a matter of fact, Foster, Peart and Hope Architects are a partnership where the partners are actively involved in the running of the business on day to day basis. The three partners share duties and other roles within the firm. Apparently, Lindsay Peart was directly responsible for the implementation of the extension project, leaving the other two partners to concentrate on other roles within the partnership. Therefore, failure of the extension of the project can be credited on the partner in charge of the project, and this person happens to be Lindsay Peart. Drawing from the above evidence of misconduct on the art of Lindsay, the other two partners have the right to expel her from the partnership. Their intention is given weight by the Partnership Act of 1890, section 19. In Greenway v Greenway, a clause in the agreement required that a partner acting contrary to the deed be expelled. They are also at liberty to exercise clause 25 which states that a partner can be expelled by other partners on the basis of powers conferred on them by express agreement between the partners (HM Revenue &Customs, 2011). The Foster, Peart and Hope Architects had an agreement which conferred powers on partners to exercise expulsion of a partner who breaches the deed.2 In Carmichael v Evans, a partner was expelled for breach of his duty.. The Partnership Act of 1890 provided other ways of handling the Lindsay issue. The partners may talk it out with her to accept soft expulsion through willful retirement. This will save her the consequences of a forceful eviction from the firm. Section 26, clause 2 provides for a willful retirement by a partner upon submission of a notice in writing, signed by all other partners. However, her exit should be accompanied by payment of her share in the firm, more especially the goodwill. Foster, Peart and Hope Architects has been in operational for five years, thereby creating a good name and reputation among its customers. Continued use of her name in the partnership and the goodwill created while she was an active partner guarantees her entitlement to proceeds made out of goodwill. Section 35c of the act provided for change of partners in a technical dissolution. This involves a change in the composition of the partners, which effectively calls for an end to the original partnership and the start of a new one. This is so with the dismissal of Lindsay Peart from the partnership (Ashley Cohen Solicitors Ltd, 2010). This section will only be applicable if the other two partners succeed in ousting Lindsay Peart from the firm. The partnership can not continue operating under the old terms as there has been a change in the composition. Upon successful expulsion of Lindsay Peart from the partnership, the remaining partners are bound by the Partnership Act to notify persons dealing with the firm of the exit of Lindsay. Section 36 of the Partnership Act (1890) compels the two partners to advertise me the London Gazette of the changes that have taken place in the firm. 2. Can Janine and Mary claim the ?4,000 paid to Standard Construction Ltd., from Lindsay in person? Standard Construction Ltd successfully sued Foster, Peart and Hope Architects for the work completed amounting to ?4,000. The partnership could not contest to the judicial ruling since Lindsay had been mandated by other partners to act on their behalf in the extension project. Section 5 of the Partnership Act of 1890, stipulates that every partner is an agent of the firm and his other partners for the purpose of the business of the partnership. It goes on to state that the acts of every partner who does any act for the carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner acting so has in fact no authority to act for the firm in the particular matter. Lindsay had the authority to act on behalf of her partners in the firm and Standard Construction Ltd were aware of her being one of the partners in the firm, and the legal authority granted to her by the other partners. Therefore, it would be improper for the other two partners to try and claim the ?4,000 paid to Standard Construction Ltd., from Lindsay personally. Apparently, the amount paid to the contractor was for work which had already been completed which still belongs to the partnership. The amount paid can only be termed as a liability or loss on the side of the firm hence, should be shared equally among the partners. Quoting from section 9 of the Partnership Act, 1890, ‘every partner in a firm is liable jointly with the other partner, and in Scotland severally also, for all debts and obligations of the firm incurred while he is a partner. The partners are bound by law, reads the Partnership Act 1890 (HM Revenue &Customs, 2011). There is no separate legal entity. The partners area essentially agents for one another. The act stipulates that the partners have an implied duty of good faith. For instance, they must disclose all information including ones misconduct. However, Lindsay Peart did not act in good faith by not disclosing about her charge in court. This has brought a lot of problems to the firm resulting in the abandonment of the extension project. 3. Can Lindsay and/or Janine block Mary in appointing Susan and Terry to the firm? Despite the problems in Foster, Peart and Hope Architects, one of the partners feels it is for the good of the company to admit a new partner and also employ an office administrator. The partner in question is Mary, and hopes to admit her daughter, Susan as a new partner to the firm. Janine is totally opposed to the move, while Lindsay on the other part is uncertain of her take on the matter. If both Lindsay and Janine feel that Susan admission into the firm is unwarranted, then they have the legal mandate to block the appointment of Susan into the firm as a new partner. In Page v Cox, a son was brought into the partnership prompting a legal battle in court. This was similar to Re Franklin v Swathling where it was held that a patner can be admitted based on consent of all partners. On the other hand, an appointment to the firm as an employment is guided by the agreements made by partners during the formation of the firm (Ackers, Johnstone and Wilkinson, n.d). If Mary is followed the laid down guidelines in appointment of Terry at an office administrator, then, neither Janine nor Lindsay has the legal mandate to block the appointment. If she is mandated to do the appointments, then she can quote section 5 of the Partnership Act to justify her act as an agent of Foster, Peart and Hope Architects. However, should Mary not follow the due course, then either or both Janine or Lindsay can block the appointment of Terry into the firm (Ashley Cohen Solicitors, 2010). This is apparent because she will have flouted section 6 of the Partnership Act 1890 where it states that any act which contravenes the partnership deed or any other general rule of law is not applicable in a partnership. The section is further supported by section 8 of the same Act, where it states, “if it has been agreed between the partners that any restrictions shall be placed on the power of anyone or more off them to bind the firm, no act done in contravention of the agreement is binding o the firm with respect to persons having notice of the agreement.3 Therefore, should Mary go ahead and appoint both Susan and Terry into the firm contrary to the partnership deed, and then her action are not binding on the firm. Admission of new partners into a firm happens only with the consent of all the existing partners unless otherwise agreed upon. The reason for this is that, admission of a new partner calls for reconstitution of the firm with a new agreement (Berr, 2008). Section 24 bar the admission of new partners without the consent of all the existing partners. It states that the interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement express or implied between the partners by the following rules; (HM Revenue &Customs, 2011). Clause 6 states that no person may be introduced to the firm without the consent of all partners. The fact that Janine is against the idea and Lindsay is undecided automatically blocks Mar from admitting Susan into Foster, Peart and Hope Architects. References Ackers P, Johnstone, S, and Wilkinson, A, Applying Budd’s Model to Partnership: Case Studies in the UK Financial Services Sector. Brisbane: Griffin Business School, n.d. Ashley Cohen Solicitors, Partnership under the 1890 Ac,. London: Ashley Cohen Solicitor Ltd, 2010. BERR, Reform of Limited Partnership Law, 2008. Retrieved 10 November 2011 HM Revenue &Customs.BIM7205-Patnership Act 1890.2011. Mesriani Law Group, How to Legally Expel a Partner,2011, Retrieved 10 November 2011 UK Ltd v Leek Developments Ltd [2006] CILL 2357 TCC, [2006] EWHC B8 (TCC) Read More