Advantages and Disadvantages of Partnership - Assignment Example

Law of Contract Name Course Institution Professor Date Assignment II Question 1 The advantages and disadvantages arising from partnership arrangement in business can be analysed from two paradigms. The first paradigm of analysis is the theoretical academic literatures that points out the disadvantages and advantages in a partnership arrangement depending on which the partners legally settled on. The approach of analysing advantages and disadvantages is from the legal perspective. All the six states in Australia and the two internal territories have formulated Acts governing partnership businesses (Partnership Act). These include Australian Capital Territory Partnership Act 1963, New South Wales Partnership Act 1892 and Victoria Partnership Act 1958 among others. The section will focus on answering advantages and disadvantages of general partnership using Queensland Partnership Act 1891 and Tasmania Partnership Act 1891. Disadvantages of Partnership The first disadvantage from a legal perspective is that partners are collectively and individually responsible for the actions of the other business partners. Section 8 subsection 1 & 2 of Queensland Partnership Act 1891highlights this concern. Section 8 (1) of the act states that “every partner in a partnership, other than a firm that is a limited partnership or incorporated limited partnership is an agent of the firm and his or her other partners for the purpose of the business of the partnership, and the act of every partner who does any act for carrying on in the usual way of business of the kind carried on by the firm of which the partner is member bind the firm and his or her partners.” The same sentiments are echoed in Tasmania Partnership Act 1891 section 10 subsections 1 & 2 and section 11which explains the power of a partner to bind partnership and partners bound by acts on behalf of affirm or partnership. This means that any act conducted by Jackson in the “usual way of business of the kind carried on by the firm” binds Susan. Section 12 of Queensland Partnership Act 1891further affirms the disadvantage of partnership based on liability of the partners. The concept of partner’s liability is a bigger headache especially in issues relating to debts and insolvency of a business partner because of unlimited liability. When a member becomes insolvent, the rest of the partners will bear the cost according to the share they hold in the business and if the partner cannot pay the other one might be called to settle it all. The unlimited liability is affirmed in section 12 (1) that “every partner in a firm, other than an incorporated limited partnership, is liable jointly with the other partners for all debts and obligations of the firm incurred while a partner, and, if the partner is an individual, after the partner’s death the partner’s estate is also severally liable in a due course of administration for those debts and obligations, so far as they remain.” The same is supported by section 14 subsections 1 & 2 of Tasmania Partnership Act 1891 on the liability of partners. This implies that if Jackson acts causes the insolvency, both partners will equally bear the costs. This is disadvantage since Susan has the minority share as compared to Jackson. The next disadvantage is the fact that partnership business structure is not a separate legal entity. Section 13 (1) & (2) and section 15 of Queensland Partnership Act 1891 indicates the liability of the firm for wrongs. “if, by any wrongful act or omission of any partner in a firm, other than an incorporated limited partnership, acting in the ordinary course of the business of the firm, or with the authority of his or her co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable for the loss, injury or penalty to the same extent as the partner so acting or omitting to act.” This implies that both parties upon satisfaction of this section are liable to be charged in court of law as partners and individual as a result of the action of one partner. Advantages of Partnership Madura (2007, p.162 & 163) highlights some of the advantages to be derived by partners in a general business partnership. The first is additional funding and sharing of responsibilities. This is evident in Susan’s case whereby she was having inadequate financing and Jackson came to the rescue. The next advantage is that losses are shared. This means that if the business will not perform well in certain financial years, the partners will bear the losses. This reduces the burden if it would have been sole proprietorship. The last is based on sharing of responsibility and specialisation. For instance, Susan is good at computers, but she lacked adequate funding to spur her business. On the other hand, Jackson has the required start up capital, but he does not have the necessary skills to run computer business. Question 2 Establishment of Breach of Duty by Plaintiff The concept of tort and coming of tortuous acts originate from the fact that one owes the other duty of care. This duty is created by law (Caldwell, 2008:20). For instance, one should not kill another person. As a driver one has to drive safely so as not to commit accidents. As a contractor or engineer, one as to build safe building that is healthy for human occupation or intended service. This means the building has to be strong and be done in context of safe engineering. The ultimate goal of tort law is to protect rights and compensate victim or his/ her next of kin so that they can be restored to their initial position (Caldwell, 2008:20).For court to award damage to the plaintiff (Josephine) based on the tort of negligence, the plaintiff has to prove that the defendant (local council) owes him or her duty of care (Caldwell, 2008:22). The court case of Donohue v Stevenson highlights this concern. In this case the plaintiff bought a wine for his girlfriend from a local shop. After consumption the girlfriend got sick. During refilling, it was recognised there was a dead snail inside. The manufacturer was held to be responsible and thus, found liable to the damages suffered by the plaintiff’s girl friend. In this case it is indeed true that the defendant owes the appellant duty of care in context of securing unsafe areas and providing information. Chances of Plaintiff Succeeding in Her Application The casual look of things before deeper interrogation, Josephine has half chance of succeeding or failing. Moreover, the chances are tied to her ability to prove that there was an act of omission and damages incurred. Apart from mere approval of being owed duty of care, there has to be an act of omission which is tied to negligence (Caldwell, 2008:39). It is actually this that allows one or his/her representatives to seek for legal or actual damages. The act of omission is what the applicant anchors his or her argument as the cause of damages. The essence on this is to ensure people operate within the limits of reasonable behaviours that do not infringe on legal rights of other parties. The case of Dulieu v White & Sons (1901) shows how proof of omission is important in prosecuting negligence. The essence is to show that one’s act is what has caused the damage. The second element then would be presence of damage as a result of the defendant’s fault or negligence (Caldwell, 2008:23). The presence of damage may be actual where one suffers bodily injuries and death or where the omission violates the right of that individual. The omission that Josephine can base her arguments is that the local council did not erect higher fencing. This consequently made her dive so as to enjoy cool waters. She can stress her case by stating that a risky place requires heavy protection and this applies to her case. This is evident in this case where Cittadini the director and engineer of Applied Alloy is convicted on manslaughter. The essence of engineering under the context of safe engineering is to produce products that can withstand extreme conditions without caving in easily. This means that as the director and engineer of the company he had the responsibility to ensure that his company produces Yatch that can withstand extreme conditions on the sea (Herald, 2009). However, this is a weak argument since the council has stronger defence points. One point that the council can use against the plaintiff claims for tortuous act is the presence of warning signs in the bridge. It is clear that the bridge had pictograms indicating no diving and signs stating that diving was prohibited. This means that the plaintiff clearly ignored instruction so that even if the council owes her duty of care, they did not engage in any act of omission. Furthermore, the plaintiff dived which mean she engaged in a deliberate action rather than an accident like slipping. Consequently, the chances of the plaintiff succeeding in her application are very minimal since the council has not engaged in any act of omission. Possible Defences by Local Council In most cases involving tort of negligence, it is the onus of the plaintiff to prove that the defendant owed him/ her legal duty of care, engaged in act of omission and it is these omissions which resulted into the damages sought. On the other hand the defendant can exploit certain provisions in law so that he or she can be acquitted of the charges levelled against him/ her. Apart from using the already mentioned defence that there was warning in the bridge that diving is prohibited there are other possible approaches that can be applied. The possible approach is based on Volenti Non fit Injuria (Goudkamp, 2011:477 and 478). In this context the plaintiff should not seek for redress since he or she was aware of the risk associated with the same. For instance, the weather conditions in see can drastically change within few minutes that even highly engineered vessel can’t with stand. The same concept can be applied in this case. By diving into the water, the applicant was well aware of possible outcomes and risks associated with swimming. References Caldwell, R. (2008). Guide to the Law of Tort. London: Straight Forward Publishing. Goudkamp, J. (2011). A Taxonomy of Tort Law Defences. Retrieved on 26 September, 2012 from: http://www.law.harvard.edu/programs/about/privatelaw/relatedcontent/goudkamp.taxono my-of-tort-law-defences.pdf. Herald (April 3, 2009). Boat Builder Guilty of Manslaughter. Madura, J. (2007). Introduction to Business 4th edition. Mason, OH: Thomson Higher Education. Queensland Consolidated Acts. Partnership Act 1891. Retrieved on 26 September, 2012 from: http://www.austlii.edu.au/cgi- bin/download.cgi/download/au/legis/qld/consol_act/pa1891154.txt. Tasmania Consolidated Acts. Partnership Act 1891. Retrieved on 26 September, 2012 from: http://www.austlii.edu.au/cgi- bin/download.cgi/download/au/legis/tas/consol_act/pa1891154.txt. Read More