The Business Operation with Partners

1 (a)

A business name can be described as the name under which the business operates. It is obligatory under the law that a business name should be registered if the partners are going to operate under the name other than their own name. In the present case, the name Sally and Barry's All Suburbs Cleaning Services has to be registered.

(b) In case the partnership has been created by the parties, or the partners will be jointly and severally liable for the debts of the business. On the other hand if they decide to incorporate a company, their liability regarding the deaths of the business will be restricted to any unpaid amount on the shares of the company held by them.

(c) The other two differences that are present between the partnership and a company is that first of all in case of partnership, it is easy to establish a partnership while the process of incorporating the company is more complex and costly. In the same become another difference that is present between the two is that in case of a company, it is relatively easy to attract capital for the expansion of the business.[1] But this is not the case with a partnership. The reason is that in the case of a partnership, the partners have during funds from their own resources for investing in the business.

(d) According to the law partnership, when the partners are acting in the course of partnership business, it is considered by the law that they are a thing as the agents for each other. This position was reaffirmed by the court in Lang v James Morrison & Co Ltd.[2] In this regard, it has been provided by section 5, Partnership Act that every partner is considered as an agent of the firm and also of the other partners. Under the partnership law, the partners are principles as well as the agent and in this way, two way fiduciary duties have been created for the partners.[3] Therefore when a partner acts as an agent of the firm, such partner owes duties towards the other partners in the same way, the other partners also owe similar duties towards such a partner.[4] Due to these reasons, it is said that “a state of agency should exist” in case of a partnership.

(e)  A limited partnership provides more flexibility as compared to a general partnership. The reason is that in case of a limited partnership, there are two types of partners, the general partners and the limited partners and different duties and liabilities are imposed on them. The general partners have the responsibility of managing the day-to-day management of the limited partnership and at the same time, their liability towards the debts of the business is also unlimited. On the other end, the limited partners have no role in managing the affairs of the limited partnership and in the same way, the liability of the limited partners is restricted to the amount of money that has been contributed by them in the partnership business.

2 (a)

Regarding the debts and obligations of the partnership business, it has been provided in section 9 of the Partnership Act that each partner of the firm shall be jointly liable, along with other partners, regarding the debts and obligations of the partnership, that have been incurred while the person was a partner and in case of the death of the person, his estate will also be severally liable. In this regard, in view of the use of the term joint liability, although the liabilities incurred by who or more persons, were partners in the partnership business but there is only one right of action against these persons. Therefore, for example if a judgment has been entered against a particular partner or partners, further legal action cannot be taken against the other partners as they will be jointly liable if they have been a part of the action. In the same way, all the partners are jointly liable for the civil wrongs. However in order to establish the liability of the partners, it needs to be shown that the omission or the wrongful act of the partner has taken place in the ordinary course of business of the firm and at the same time it also needs to be established that such an act was authorized by the other partners of the firm.[5] Therefore in the present case also, both Michael and Mandy will be jointly liable for the unpaid rent owed to Big Business Pty Ltd.

(b) In this part it needs to be considered if the partnership or Michael and Mandy are liable to pay the rent for the new premises. Or in other words, if the contract entered by Michael is enforceable against the partnership and Mandy. The law provides in this regard that when anyone partner of the firm has acted, without express authorization, under the circumstances where before the requirements that have been mentioned in section 5 of these have been satisfied. In such a case, as a result of the fact of being a partner, authority is providing to such a partner to find the partnership by its acts. For this purpose, the below mentioned for requirements should be satisfied. The act of the transaction should have been entered into by a partner, the act of the transaction should be within the scope of the kind of business that is carried on by the firm, the act should be effected in the usual way and the other party should have known or believed that the person is a partner and at the same time, the outsider should not be aware of the lack of authority on part of the partner to act. Therefore if these conditions are satisfied, the partnership and the other partners will be bound by the act on the transaction, entered into by the partner, even if such a partner did not have the authority to do so. On these grounds in the present case also, the partnership as well as the partners, Michael and Mandy will be bound to pay the rent for the new premises.

3  (a)

In the present case, John can bring a claim under negligence against the partnership. The wrongful act/omission on part of Michael has taken place in the ordinary course of the business of M & K Medical Practitioners and in the same way, the act was authorized by the other partners. The result is that in this John may bring a claim under negligence against the partnership. The reason is that the act of negligence has taken place in the ordinary course of business of the partnership firm and moreover, the act was authorized by the partners. 

(b) Under the common law and also in view of the provisions of the Partnership Act, the partners are considered to be jointly and severally liable regarding the civil wrongs and crimes.[6] In the present assignment, although Mandy had resigned from the partnership but she continued to work as a partner. 

(c) In case the mistake would have been made by Michael after Mandy had already left for overseas, it can be said that Mandy is no longer a partner in the firm because in this case she had resigned from the partnership and at the same time, she also had stopped working for the partnership. Under these circumstances, Mandy cannot be held liable to share the compensation that was payable to John for negligence of Michael.

4. (a) 

The contracts that are present in an agency situation are the contract between the principal and agent and the contract between the principal and the third-party. In the first case, the parties are the principal and agent and in case of a contract between the principal and a third-party, created by an agent, the parties are the principal and the third-party only.[7]

(b) There are a number of ways in which an agency may be created. The law provides that an agency may be created by necessity or in case of an emergency. Therefore the meaning of the agency of necessity is a person may be considered as an agent of the other person without being appointed as an agent under certain circumstances. For example in Biberfield v. Berens[8], it was stated that a deserted wife or a wife who is justified in leaving her husband and when she's not working, can claim from the husband, the necessities of life, in accordance with the position and the income of the husband even if the husband is not willing to fulfill his pledge.

5.

The law provides that a principle can be held liable for the actions of the agent if the agent has acted within the scope of authority that has been conferred on the agent by the principle. The result is that so long as the actions of the agent have been taken for advancing the interests of the principle and in accordance with agency agreement, in such a case, any legal liability arising out of such action will fall on the principle.[9] In the same way if a person has been wronged by the agent, such person has the option of either suing the principal or the agent. On the other hand, there may be certain situations when the agent may be held directly liable for its actions.[10] Therefore in case of a fraud or gross negligence by the agent, it can be said that the principle is not liable for these acts as they cannot be considered to have been authorized by the principal and in the same way, they cannot be said to be in the furtherance of the interests of the principle. In the present case also, the lawyers of the firm, French, German and Roman cannot be held liable for the fraud committed by Tania.

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