Legal Advice For Starting A New Business - Partnership, Violation Of Business Rules, And Liability

Issues and Rules for the Proposed Business

(1). Jack and Mary are university lecturers who have developed a new product they think will dramatically improve university classroom management. Their product is a classroom chair equipped with sensors which detect when students are not concentrating and send a mild electric current through the student sitting on the chair to get them to pay attention. Their friend Will thinks the idea is great and would like to get involved in the business venture. Will has recently been released from jail after being convicted of theft and sees this as an opportunity to start a new life. Their intention is to start small, but they hope to eventually grow the business into a large provider of university and school classroom seating. None of them has much money, although their neighbour, Ken, is prepared to invest most of the money they need to get the business started.

Give Jack, Mary and Will advice on the most appropriate business structure for their proposed business.

(2). Assume the business was set up as a Victorian partnership – ‘Attento–Chair Industries’. Unfortunately, there are some problems:

(a) Jack buys some cheap sensors for the first batch of chairs and uses the savings to buy himself a new expensive suit and watch without telling his business partners.

(b) A number of the chairs malfunction after Jack uses the cheap sensors and cause serious burns to a number of students. The students plan to sue the partnership for compensation. The police are also investigating whether any health and safety laws have been broken;

(c) Ken has heard of the troubles and is demanding access to the business records and accounts and is complaining about not getting a say in the way the business in being run.
 

As per Question 1 both the university lecturers Jack and Mary has adopted a new product, that is the classroom chair which is equipped by electric current sensors and if attention is not paid by any students in the class, they will get mild electric sensation through the chairs. Here one of their friends Will want to be involved in the business venture. But the real issue is they do not have financial stability and another issue is that, Will had a previous criminal record and he was in jail for the offense of theft. As per aspects of contract in partnership the element capacity can be stated in this context because as per contract of partnership, partnership should not be done with the person who has previous criminal record. So in this case it will be risky for Jack and Mary to make Will their partner. Other issues can be raised with the creditor Ken who is providing financial help to John, Mary and Will.

Legal Advice for Jack, Mary, and Will

As per Question 1 if the contractual agreement is taking place between John, Mary and Will, so it is necessary to follow the terms and conditions and also contractual terms should be made between the partners, so that no one can breach the rules of the contract and specific time of returning the debt should also be maintained because breaking the time limitation can be problematic as penalty can be asked by the creditor Ken if any rules are violated or time of returning money is delayed. If the contract rules the breached then the partnership can be cancelled between Jack, Mary and Will that is the amendment of partnership act and if the rules of company law act are breached by not paying debt to the creditor Ken and if the money is not returned to Ken than he can sue Jack, Mary and Will under law. In any case if one partner is liable than other innocent partners should not be the victim but they should sue the liable business partners legally. As their business is not sole trader and comes under partnership so the rules of partnership acts should be thoroughly followed by them. It is simplest form of business structure and is common in the business world. The significant disadvantage of sole trader is individually liable for debt incurred by the business as partnership liability act. As per partnership common joint venture should be done in joint tenancy and if the rules are violated than as per section 46 the business partner will be punished. 

As per question 1 the legal advice can be given that the partners should discuss the matter properly that what terms and conditions they want to make and they should think twice before doing partnership with Will as he has some criminal record. They should take specific time and make agreement with the creditor as per company’s law act because breaching of the act will be punishable for them. Contract rules are breached by any of the partners because if any partner breach the contract than it should be punishable by the other partner under law for breaching the rules of partnership act. They should maintain the legal advice and carry the work of the business avoiding breaching of rules and negligence under law. There business proposal will come under partnership.

Conclusion

At last the conclusion can be drawn in the first case that three partners had made innovative ideas of forming a business by buying the sensational chairs for the student but as partnership rules are followed here so no breach of agreement should takes place which can damage the business. There are certain rules of the business which is based on elements of agreement such as consent and capacity that should be followed in the partnership business between Jack, Mary and Will. 

Problems Encountered in the Attento-Chair Industries

Issue

1. As per question 2, the first problem is Jack breached the partnership act 1958, where the rule of the act is to collaborate meeting between the partners and then decide about the investment but Jack did not decide anything with the partners and invested the finance for his personal need buying the cheap chairs which has harmed the students and by this agreement of the contract is breached by Jack. He is accused for personal investment by spending the money of the company “Attento Chair industries” for personal use without informing it to the other partners Will and Marry. In partnership relationship develops with business partners in join collaboration as per sec 51(3), 54(2), 60(3) and incorporated partnership rules are discussed in section 104(1).

2. The problem of students started with chair. The students were affected by serious burns and even could have died for which the company’s other partners can be liable because of their negligence, Jack can be liable crucially and the university can be liable for breaching health and safety act and human rights act’s article 2 and article 3 by the breach of duty and applying such tortures on the students which can be life hazardous or illegal against human rights act.

3. In this case Jack, Mary and Will is under taboo because there business will be sealed as the students will sue them and the creditor, Ken will ask money from them which they cannot afford because of the loss of the business for that the creditor Ken, who has helped them financially can sue them under law for breaking the rules of Companies act where the money has to be returned to the creditor on time which is a negligence or breach of duty.

As per question 2 the business between Mary, John and Will is not a sole trader business because in sole trader business independent or individually a person carries forward the business. The business venture took place between three persons that is John Marry and Will, so it is considered as partnership. According to section 5 of the Partnership Act 1958, a partnership is the relation which exists between persons carrying on a business in common with a view of profit. Each partner has right to control the business and be bound by the actions of their partners which is called liability of partnership and penalty units can charge penalty against it as per section 54. But as per case Jack bought cheap sensors in low price and the money which was saved he spent it on buying expensive watch and suit without informing it to the partners which is against the law of partnership and as per this rule is violated.

Violation of Business Rules

1. In this case Jack is liable for the main problem which has caused damages to the students. As the chairs were of low price so the electric sensation started malfunctioning and many students faced injury and serious burn. The students can sue Jack, Mary and Will as per Human rights act 1998 under article 2: Right to life and under article 3: Prohibition from torture. These two acts are broken here because students faced torture which can be risky for their life, if any of the students have died because of electric shock or burn of students.

2. As per Companies Act the liability of its owners and directors are limited as it is a separate entity, which is the significant advantage this structure. In company ‘Attento-Chair industries’, where the business is running under partnership between Jack, Marry and Will but because of the negligence of Jack and this can be stated as misapplication of money and property as per sec 3745. The business started running loss because he has breached the company’s law. Here the creditor is the trust of the business who has helped Jack, Mary and Will by providing finance. But after such vital problem as per law the business of the three partners can be cancelled and which can be troublesome for them because they cannot return the debt to the creditor Ken and case can be filed in Consumer creditors act. 

1. As per question 2, according to the case; this business cannot be considered as a sole trader because it is operated by a group of people, which are Jack, Mary, and Will, not individually and it is a partnership business. But the business started running loss because of the negligence done by the business partners. As Jack is totally liable for the damage of the business so he cannot be saved from law. But this has to be proved by Mary and Will legally to the court by cancelling partnership with Jack and sue him.

2. As Jack is personally liable for the damage of the business and injury of the students so in this case he cannot be saved because he is accused in the eye of law. If his partners Mary and Will collect proves against Jack and claim against him in court than the business can be saved by giving remedial order by court against human rights act, under section 10 and schedule 2. So they have to give penalty to the students. But as Jack has done wrong so he will be imprisoned but the partners can get rescue after giving penalty and the organization also has to give penalty to the students as per law.

3. The financial creditor or trustee is Ken who helped Jack, Mary and Will financially. To get remedy against company law of breaching the rules of the company by not returning the debt of the creditor Ken they can use the statement of Bankruptcy act 1966 for asking more time to pay the debt of Ken. As the company is running loss and as per section 24 consumer credit protection act 2009 the rules are breached. They cannot return the money in time and they can urge appeal for some time to pay the debt from court and if they are allowed then Ken has to wait for his money as per law but for that the proves where Jack alone is responsible for the case has to be given to the court. 

Conclusion

The concept of the business which is stated is based on negligence in the business which can be dangerous that occurred in this case of partnership. The lives of the students were threatened which can imprison Jack, Mary and Will under law for breaching human rights act. But lastly if they adopt the legal advice which is given to them then they can save the business. At last conclusion is drawn that Jack is liable for all the damage so no one can save him from the eye of law. By applying the relevant applications in question a, b and c the legal advice has given in the perspectives of the case to solve the case. 

References

John Van der Puil and A. J. van Weele, International Contracting (Imperial College Press 2014).

J. W Carter, Carter's Breach Of Contract (Hart Pub 2012).

Sue Hunter, Sole Trader.

Jane Sheehan, Sole Trader (Jane Sheehan 2009).

Christopher Jones, Principles Of Business Taxation (Elsevier 2007).

 Partnership Act 1958 (Anstat 2003).

A Matter Of Rights (Canadian Human Rights Commission 2005).

James I Reynolds, A Breach Of Duty (Purich Pub 2005).