In June 2014, best friends Kylie and Kendall decided to purchase a small designer clothing boutique called JJJ Designs (JJJ). Kylie and Kendall convince Kendall’s boyfriend, Justin, a former celebrity, to go into business with them. Justin does not contribute any capital and takes no share of the profit. His name is on JJJ’s letterhead and he is paid an annual retainer for his supervisory role in the business.
The business has run at a healthy profit since June 2014. Kendall is in charge of the day-to-day running of the boutique. Kylie performs any cleaning and repairs to the shop, keeps the accounts and orders stock from suppliers. Justin comes in twice a week to oversee the activities of Kylie and Kendall and give advice when required.
In early November 2014, in anticipation of spectacular sales of a newly launched designer clothing label, ‘Kardashion Fashion’, and an increase of Christmas and New Years customers, Kylie made a telephone order of 1 new Versace sofa with matching side table to replace the current sofa, at a cost of $35,000, from Elegant Design Furniture Pty Ltd. (EDFPL). No business cards or company letterheads were exchanged at the time of the purchase. Whilst Kylie identified that she was calling from JJJ’s boutique, at no time during the conversation did Kylie mention her position within the business. Kylie paid a $5,000 deposit using the business credit card after finalising the deal with EDFPL. Neither JJJ nor Kylie has had any dealings with EDFPL before. The sofas and tables were delivered and invoiced to JJJ in mid-November.
Kylie did not consult with Kendall or Justin before placing the order. Unfortunately, a new local boutique opened in November which had exclusive access to the newly launched designer clothing label (Kardashion Fashion). As a result, JJJ’s sales over the November/December period were much lower than expected and Kylie now regrets making the purchase. Justin, furious about Kylie’s lack of communication and the fact that she failed to consult with him before making the purchase, retires from the business in early December 2015. Kendall claims that Kylie was never given the authority to make purchases such as these and that she wants nothing to do with the balance owing to EDFPL. In late December 2014, EDFPL sent a letter to JJJ, demanding payment in full for the outstanding $30,000.
Using ONLY the Partnership Act 1891 (Qld) and the relevant common law from the textbook and partnership lecture slides (do not use sections or cases outside of these materials), discuss whether or not a partnership exists and advise EDFPL whether JJJ or any other parties can be held liable for the outstanding debt.
You should not cover any material from contract or tort law lectures or chapters as it is evident a breach has occurred. You must use the ILAC Method to answer this question.
NOTE: You may use any relevant case from any jurisdiction in the textbook and/or lecture slides. As this is NOT a research assignment, it does not matter whether the cases are persuasive or binding and you do not have to note this in your assignment.