The Legal Process of Establishing Business Partnership - Essay Example

Partnership Step 1 In context to the provided case, the areas of law with which the case is associated is Duty of partner to give accounts, Power of certain partners to bind the firm, Partners bound by acts on behalf of the firm and Liability of partner under the Partnership Act of 19631. Step 2 Partnership can be identified to possess certain features and aspects such as a legitimate agreement for carrying out a trade by having certain interest and rights with an aim to attain profit. Thus, it can be observed that, “Partnership is the relationship which exists between persons carrying on a business in common with a view to profit. It involves an agreement between two or more parties to enter into a legally binding relationship that is essentially contractual in nature”2. Partnership is fundamentally identified as a relation of agency. Agency can be stated to be a person identified as an agent who willingly undertakes to act for any other party. The other party is termed as principal. There is a mutual consent prevalent between both the intended parties in this relationship3. The owners belonging to partnership are generally synchronized by the Partnership Act of every state as well as territory. As identified by the Partnership Act, the meaning of ‘partnership’ and ‘firm’ is identical4. In context to the agreement of partnership the roles, responsibilities, liabilities, power of certain partners to bind the firm, partners bound by acts on behalf of the firm, effect of notice that firm will not be bound by acts of partner and the criteria for dissolution of an agreement of partnership needs to be discussed with regard to the provided case. According to the statement made in Section 9 of the Partnership Act of 1963, a partner belonging to a particular firm excluding an incorporated limited partnership is identified as the agent belonging to the firm together with the other partners existing in the firm, for the functions of the business of the firm1. The act performed by a partner belonging to a firm, except an incorporated limited partnership, for the rationale of enduring method of business of the type sustained by the firm, binds that particular firm and remainder of the partners in the firm except the partner who performs the act has in effect no right to act in relation to the firm in the precise issue and the person along with whom a particular partner is generally dealing either is aware that the partner has actually no right or is unfamiliar about the fact or does deem the particular partner to be a partner belonging to the firm4. According to the statement of Section 10 of the Partnership Act of 1963 a particular act or any particular instrument with regard to the business belonging to a firm except for an incorporated limited partnership is compulsory on the firm and the present partners in the particular firm as well if it is performed by a particular person who has been sanctioned to conduct such an act or carry out the instrument devoid of the fact that if the person is a partner of the firm or not, in the name of the firm or in any further way presenting an intent for binding the firm4. According to proclamation of Sec 12 of the Partnership Act of 1963, if it was decided by the present partners belonging to a firm aside from an incorporated limited partnership that precincts are to be sited on the established power of one or more than one of the obtainable partners to unite the firm, an action defying the agreement is not requisite on the partnership with regard to a person with in view of the notice concerning the agreement. According to Sec 13 of the Partnership Act of 1963 which states about the ‘liability of the partner’ that each individual partner belonging to a firm barring an incorporated limited partnership is accountable together with the other partners for the debts as well as responsibilities of that particular firm which was attained when the specific person was an existing partner as indicated by the contract of partnership which establishes it to be lawful. In case the partner is recognized to be an individual, after the decease of that particular partner the deceased partner’s property is considered to be accountable in the due path of management for the debts as well as obligations of that particular firm invited while the presently dead partner was still a partner that linger dissatisfied, however dependent on the former payment of the deceased partner’s isolated debts4. In relation to the section 33 clause 1 of the Partnership Act 1963, a particular partner of a firm except an incorporated limited partnership is accountable for presenting accurate accounts and complete information concerning all the aspects that could influence the firm to the other partners or partner or the other partners legal representatives4. The causes behind the dissolution of an agreement of partnership are because of actions of the partners, by the judicial law as well as the operation of law and also by notice5. These causes of dissolution fall under section 37, 38, 39 and 401. Dissolution Caused by the Acts of the Partners The actions of the partners can cause dissolution by a number of ways. First of all, any type of partnership may be terminated by the use of a contract between the partners. Secondly, a partnership identified to be at will is an alliance that is deliberate and a partner holds the power to detach himself/herself from the partnership at any stage in the duration of the partnership and probably through notice, can break up the partnership. However, after the suspension if any of the partners together with the withdrawn partner does not intend to discontinue the partnership, in such scenario the other present partners can wish to continue. Thirdly, a partnership can be ended if the disbanding is hold up by at least half of the other present partners in a phase of ninety days of the closure of a partnership that is caused by incapacity, bankruptcy or death6. Dissolution Caused by Operation of Law Dissolution caused by operation of law can crop up due to any occurrence of illegal act by a partner which can lead to dissolution of partnership. Though, if the dissolution emerges due to business partnership illegality then it is probable for the partners to reach a resolution in a phase of ninety days to amend the worth of the business and keep at with the partnership6. Dissolution Caused by Judicial Decree Judicial decree can be utilized by a partner in order to provide an appeal to terminate a partnership in court. If it is established by the court that the existing partnership belonging to the can be barely performed at a loss, then there can be an agreement for the dissolution. If any partner has performed any deception or any scam against the other present partners then also the dissolution scenario is applicable. In a situation, when there is incongruity among the existing partners deteriorating the capability to accomplish the partnership related business in such scenario as well the judicial decree can prevalent6. Dissolution Caused by Notice A partner needs to convey to all present partners the intent to dissolve the business or the leave the firm. This scenario needs to be provided as a notice through the actions of the desiring partner or through the words. Every one of the partners would distribute liability and accountability for the proceedings of a particular partner who is associated with the business for being short of of information about the dissolution. Until the period other partners of the firm serves the notice, the withdrawn partner has to fulfill his/her responsibility as a partner in relation to every contract which was created for the firm6. It is also important to mention that according to the law of agency, it has been said that any third party dealing with an agent is considered to do so at his/her own risk. The act of agent will connect the principal too if only approval for such acts have been made apparent by the principal. Consent can be expressed through actual authority which implies that the principal has articulated his will to the agent or the agent has inferred his consent through prior agreement. Consent can be also expressed through apparent authority which means that the principal states his approval to the third party directly with whom the dealing is being made by the agent. Consent can again be expressed through inherent authority which implies this comes from a wish to defend the rational hopes of the third parties dealing with an agent. This can also be perceived as a term that is understood in the existing contract in between a principal as well as all those dealing with its agents6. In relation to this case, the fiduciary duties of partners as per the Partnership Act of 1963 and the law of agency when binding a partnership in contracts needs to be discussed as well. Fiduciary implies a particular individual on whom extreme assurance and faith has been placed by another to manage and guard finance or possessions. It is referred as an association where an individual is obliged to do something for the advantage of another individual7. It has been further added that there are three most important duties that arise where there is an existence of such an association. The foremost is the responsibility of loyalty which means the responsibility to do something on behalf and in support of the particular individual or body towards whom the responsibility is pending, and not taking benefit of, or damaging, it or him. The second is the responsibility of obedience which implies the obligation as well as responsibility to do something inside the parameter in terms of limit of the power or faith. The third is the obligation of care which means the duty to do something cautiously. At times the obligation of disclosure of complete information that is material is stated to be the fourth duty8. These fiduciary duties fall under the Sec 33, Sec 34 and Sec 335 of the Partnership Act 19631. Step 3 With reference to the above mentioned laws, it can be well assumed that Alan Woods was not aware of the fact that his partner Rolly Barker had entered into a contract of $250 000 with Fields Marketing Services Pty Ltd. for the purpose of marketing the boats that are made by Rolly Barker. With the passage of time, it was realized at a certain point of time that the business was not prospering and that was the time when the marketing company named Fields Marketing Services Pty Ltd. prosecuted the business for the contractual amount that the company was yet to receive. Alan Woods refused to pay as according to him he had not authorized the contract. In this case, although, Alan Woods had not sanctioned the contract but he was still equally liable for the debts incurred by the firm as the contract was entered into by his other partner who had the legal power and authority to act on behalf of the firm and Alan Woods as he was still a legal partner as per the agreement of partnership. Thus, he can not deny his liability and will be responsible to pay for the debt according to section 9, 10 and 13 of the Partnership Act. The marketing company can claim their contractual amount from either Rolly Barker individually or from both the partners. Rolly Barker wanted to terminate the partnership which was possible under the category of dissolution by notice. But, the dissolution will only be possible after the company or the partners have cleared all the debts of the firm. And, as per claiming of profits by Rolly Barker then it needs to be mentioned that the profits will be distributed according to the terms agreed while entering the Partnership Act. If Rolly Barker and Alan Woods were equal partners that is to say in the ratio of fifty-fifty then Rolly Barker is entitled to half of the profit, if any. And, if they are not equal partners then Rolly Barker is entitled to the amount of profit according to the pre-determined ratio at the time of entering the agreement. Step 4 From the provided case and in conjunction with the identified laws it can be stated that it was the responsibility of Rolly Barker to inform his other partner Alan Woods about entering into the contract with the marketing company. Although Alan Woods was not aware of this but he would still be responsible for the losses to Fields Marketing Services Pty Ltd. that was incurred due to the negligence of his partner in failing to inform Alan Woods regarding the contract. The partnership is also possible to be dissolved by notice. And the sharing of profit and losses will be according to the decided ratio. References Australian Capital Territory. 2009. “Partnership Act 1963”. Republication No 7, p.p. 1-87. California State University 2011. Partnerships and Limited Liability Partnerships. http://myweb.csuchico.edu/~evu/Education/bLaw%20Chapter%2036.htm (Accessed August 12, 2011). Farlex Inc. 2011. Financial Dictionary. http://legal-dictionary.thefreedictionary.com/Fiduciary+duties (Accessed August 12, 2011). Hamilton, Charles E. “Identifying Breaches of Fiduciary Duties”. Hamiltonfirm, p.p. 1-6. Latimer, Stephen P. Australian Business Law. Australia: CCH Australia Limited, 2010. Lycos Inc. 1998. “Massachusetts Bar Exam Review: Agency & Partnership”. Agency & Partnership, p.p. 1-10. The University of Sydney. 2006. “Partnership.” Associations, p.p. 1-40. Vantage Media LLC 2008. Corporations Outline. http://www.google.co.in/url?sa=t&source=web&cd=1&ved=0CBgQFjAA&url=http%3A%2F%2Flaw.wustl.edu%2Fsba%2Fupperlevel%2FCorporations%2FParedes%2FCorporations-Paredes4-F03.doc&rct=j&q=Corporations%20Outline.%20%2B%20Paredes%20%2B%20wustl&ei=GJFJTo_0J5GsrAfutdCwBw&usg=AFQjCNGPcM-y-lyGFp2QZFRn7dbzWuzLrQ&sig2=UDSYnBEpEAbGP9RReFefHQ (Accessed August 12, 2011). Bibliography Gillies, Peter. Business Law. Australia: Federation Press, 2004. Nolan, James L. Australia Business: The Portable Encyclopedia For Doing Business With Australia. US: World Trade Press, 1996. Read More