The Legal Solving Problem - Assignment Example

Name: Tutor: Title: The Legal Solving Problem Course: Date: The legal solving problem Question 1 1. Why the judge decided that the partnership had ended by 31 December 1993 This is because the partnership was dissolved through the court and it is on this date that the court found and ruled that the conduct of one of the partners was detrimental to the business and thus dissolution of the partnership was found to be fair and equitable. The partner had not been making required contributions to the business and hence the court found that the partner’s conduct involved partnership neglect (Sawon 2005). Even though a partnership can be dissolved through a written notice, all the letters did not indicate a valid notice of dissolution of an indefinite partnership agreement and there is no accession that all the three partners agreed to have the partnership dissolved. The first letter indicated that the other two partners still treated the claimant as a partner even though he was not making the required contributions to their partnership and more importantly the letter did not sufficiently indicate that it was a notice to partnership dissolution (Sawon 2005). Likewise, the letter dated 20th October 1984 did not indicate in any way that it was a notice of termination basing on a failure before then make contributions to previous losses pursuant to clause 8 of the partnership deed. Basically, all the letters that produced by the defendants as a proof of notice to partnership termination did not fully qualify to be notices of dissolution of a formerly indefinite partnership agreement among the three partners. Therefore, the judge ruled that the partnership was dissolved on 31 December 1993, because none of those notices qualified to be partnership dissolution notices and all the three partners had not agreed on dissolution of the partnership despite the notices. The partnership was thus dissolved through court on 31 December 1993 (Sawon 2005). 2. How the judge applied s20 Partnership Act 1891 (SA) and why he decided that these rights to the tuna quota were not the property of the partnership Application of s20 Partnership Act 1891 (SA)1 in the case was in that the judge considered that the tuna quota was brought into the partnership for the purposes of running the partnership activities and also the property (tuna quota) was brought to the business during the course of the partnership business. The judge also applied this section in determining if the tuna quota was brought to the partnership business and applied by the partners exclusively for the purposes of the partnership and according to the partnership agreement. Here, the judge the judge ruled that there was no evidence indicating that there was any agreement between the partners to perceive the tuna quota as partnership asset (Sawon 2005). The judge decided the rights to the tuna quota were not property of the partnership because there is evidence in the case that shows that the defendants could not adequately differentiate between the personal finances and partnership finances. As a result, even though the defendants were using the tuna quota in their partnership activities, this could have resulted from the fact that they could not clearly differentiate personal affairs and partnership affairs and thus they could have been using the tuna quota in the partnership just because the plaintiff had availed it and not because they considered it as part of the partnership (Sawon 2005). Question 2 1. Explain whether Adam and Zac formed a partnership A partnership was formed between Adam and Zac. This is because Section 6 (1) of the Partnership Act2 provides that for there to be a partnership, there should be a joint ownership. In this case, Zac and Adam had a joint-ownership whereby both of them contributed towards the business capital towards the business. Section 6 (3) of the Act also stipulates that that profit sharing is prima facie evidence that there is existence of a partnership3. Accordingly, Zac and Adam were sharing the business’ profits and this proves that there was a partnership. In a partnership, there are both rights and obligations of the partnership that are governed by a partnership agreement which can be a written or a verbal one or through implication. The Partnership Act also governs a partnership. In this case, there a verbal agreement between Adam and Zac regarding the rights and obligations of the partnership and hence there is a valid partnership (Lloyd 2007). The obligations of Zac included remaining in the area where the explorations were and run most of their business’ operations while Adam’s obligations included returning to the mine regularly while still carrying out his part-time work. Additionally, they both had the obligations of contributing to the business’ capital whereby each mortgaged some personal property to get a bank loan of $60,000 as well as both of them contributing $20,000 each from personal finances. Additionally, both Adam and Zac made verbal agreements regarding the rights of each partner. The agreement was that Zac has the right of 2/3 of the business income while Adam would have 1/3 of the business income. Basically, in partnerships, everything is shared according to every partner’s shareholding within the partnership. There is to legal prerequisite for any partnership party to hold a given number of shares and this depends on the agreement between the partnership parties and the shareholding can be a fixed amount or percentage. Adam and Zac were sharing the profits according to their shareholding, where Zac had the higher proportion of the business profits because he was to do most of the work being full time while Adam had the lower proportion because he was partly involved in the business. 2. Explain who has ownership, entitlements and obligations for the various assets and liabilities The Partnership Act 1891 places joint liability on each and every partnership party for the obligations and debts sustained during the course of the partnership. This means that both Adam and Zac have obligations for the business since it is a partnership. Both Zac and Adam have the ownership of the business assets and liabilities. This is because according to their agreement, it is a joint ownership (Lloyd 2007). In a partnership, everything is shared according to the partners’ shareholding within a partnership. Likewise, the sharing of liabilities and assets is according to every partner’s shareholding. Therefore, the ownership of the business assets is upon both Zac and Adam. In addition, partnerships have unlimited liability which means that if one of the partners fails to do something, all the partners in the entire partnership are personally liable. Therefore, the obligation to pay the remaining one third of the bank loan belonged to both of them. Moreover, due to unlimited liability in partnerships, there is no limit on the potential liability of partners and therefore all the debts and liabilities of Adam and Zac’s partnership ought to be shared between them. In addition, within a partnership, all business partners are jointly and severally liable and this implies that the business liabilities for all partnership debts are shared and also all business partners are individually personally liable for all debts that the business incurs through the partnership (Sawon 2005). As a result, both Adam and Zac are personally liable for the business’ liabilities. For partnership shares, each partner gets the shares in accordance with the partnership agreement. The entitlement for Zac is 2/3 of the profits while Adam’s entitlement is 1/3 of the profits of their partnership business. Their partnership agreement was that they both had an equal say in the business and hence each of them was an equal shareholder in their partnership (Lloyd 2007). 3. Explain whether or not the partnership was dissolved at any stage A partnership was not dissolved at any stage. A partnership can be said to be dissolved, in case of a relationship change among the partnership parties, as a result of a partnership part quitting being associated or being a part of running the business. Circumstances in which the partnership can be said to be dissolved are through various happenings, for instance partners’ action. In this case, a partner can give the other partners a notice that he/she wishes to have the partnership dissolved or all the partners can make an agreement to dissolve the partnership (Sawon 2005). The partnership can also be dissolved through operation of law, whereby dissolution of the partnership can take place in case one of the partners dies or bankrupt, as long as other partners agree to have the partnership dissolved. Another situation that can result to dissolution of partnership is illegality, and in this case a partnership can be dissolved automatically in case an incident of the business renders the purpose of the partnership unlawful. Finally, a partnership can be dissolved through the court. In this case, one of the partnership’ party can apply to have the partnership dissolved by a court (Lloyd 2007). Evidently, in the partnership between Adam and Zac, there is no event that took place to show that the partnership had been dissolved. Neither of them gave the other one notice or informed the other party that they were willing to dissolve their partnership and hence the partnership was not dissolved at any stage (Sawon 2005). Bibliography Books Sawon Krystyna, Companies & Partnership Law, (2005). Lloyd Keith, The Law of Partnership in Australia, (Law book Company, Ed 9, 2007). Legislations Partnership Act 1891 - Sect 20 Partnership Act 1891 Sec 6 Read More