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Partnership and its definition

Question:

Advise Violet and Sonny of their potential liability to Friendly Bank in relation to the Busy Bee Florist Shop.

To provide advice to Violet and Sonny concerning their liability that is owed to the friendly Bank in regard to Busy Bee Florist Shop, it is vital to understand that whether any kind of partnership prevailed between the

  1. Violet and Busy Bee Florist Shop and
  2. Sony and Busy Bee Florist Shop.

The case study brings forward the question whether any partnership existed in the present context between the Sonny, Violet, Rosy and Mary. As defined under the partnership act 1892, sharing of profit represents an existence of the existence of the partnership (Calabretta & May, 2016). An exception to the rule of the partnership defines that creditors are protected from this rule unless there contains any element in the partnership act.

A partnership can be defined as the relationship that prevailed between the persons that performs the activities of business in common with the objective of deriving profit. As held in the case of Green v Beesley (1835) it has been stated that a contract amid two or more persons to engaged in a partnership having a lawfully binding association and possess the necessary character of contractual in nature (Latimer, 2016). In the present context it is evident that Sonny is regarded as the employee and lender for Rose and Mary Busy Bee Florist Shop and Sonny will not be considered as the partner. As held in the study of Smith v Anderson (1880) the members does not make a lawful unit at the time of establishing a partnership (Blackett-Ord & Haren, 2015).


An ordinary partnership can be defined as the partnership of certain persons that are destined together with the agreement amid themselves to endure the object of entering into the contract with one another (Winship, 2015). As defined under the section 1 of the partnership Act of 1982 lays down that are three elements that needs to be satisfied to establish the relationship between the partners. The elements comprise of the following;

  1. Performing the activities of a business
  2. In common
  3. With the objective of earning profit

If any of the above element is absent from the association is not considered to be partnership (Norbury, 2017). Therefore, Sonny is only the lender of the business and cannot be treated as the partners since Sonny does not have any knowledge of the debt from the Friendly Bank therefore he will not be regarded as the partner under the Partnership Act 1892. On the other hand, Violet’s case is identical to the case of Megevand; Ex parte Delhasse (1878) in which the court laid down its judgement by stating that the creditor or the partner of the concerned business is provided with the right of controlling the business (Mukherjee, 2015).

Distinguishing Sonny's Case

Additionally, Violet also held the right of the dormant business partner with the right of sharing profit and loss. as evident from the case of violet it can be stated that she holds the right of the partner a right to share profit, to examine the books of the company and the right of receiving a quarterly business statement together with the right of sharing the partner’s liability of the loss. Violet will be in fact regarded as the partner in addition to the business for being a lender, though it is evidently laid down in the agreement of loan that Violet being the lender will not be treated as the partner of the business. However, the loan taken by Rosy and Mary for busy bee florist shop from Sonny and Violet represents a nature of debt that is owed to them. An assertion can be bought forward by stating that Sonny is not regarded as partner under Section 1 of the Partnership Act 1892 (NSW) (Gretton & Steven, 2017). Therefore, Sonny does not have any liability of paying the debt to the Friendly Bank in regard to the Busy Bee Florist Shop. Additionally, the elements of Section 1 of the partnership Act 1892 (NSW) is also missing from the case of Sonny and did not amounted to perform the activities of business in common for the loan provided to Busy Bee Florist Shop (Fleischer, 2017).

Considering the judgement of the court in the case of Television Broadcasters Ltd v Ashton’s Nominees Pty Ltd (1979) it is being held that joint venture for promoting the tour of a circus did not make the applicants as the partners (Cohen, 2017). The court in its judgements stated that even though the applicants became the joint ventures with the objective of earning profit. The agreement however did not contain any kind of provision for the allocation of loss and most prominently, the corresponding commitments comprised of the contract that were considered as the distinct requirements.


Additional evidences if lack of partnership was laid down by the court in the case of Exparte Coral Investments Pty Ltd [1979] which presented the circumstance that workers were considered as the workers of the respondent and not regarded as the employees of the applicants cooperatively (McMeeking et al., 2017). From the current situation of Sonny, it can be defined that she will not be considered a partner for Busy Bee Florist Shop. Additionally, she will not be held accountable for the debt that is owed to Rosy and Mary since Sonny is not regarded as the partner under the Section 1 of the Partnership Act 1892 (NSW) (Kumar, 2016).

Violet being a partner

On the other hand, in case of the Violet it can be stated that She will be regarded as the partners since she held right of sharing profit, business statement and evaluating the books of the partnerships. Therefore, the debt owed by Rosy and Mary to Friendly Bank will also extend to Violet since is regarded as the partner under Section 1 of the Partnership Act 1892 because the elements of partnership is satisfied by her (Singh, 2015). As defined under the Partnership Act 1892 (NSW) each partner in the business is held equally liable with all the other partners for the all the debts along with the requirements of the entity that is experienced at the time of carrying on of a partnership and following the death of the partner (Moll, 2015). Additionally, after the death of the partner his or her estate will be additionally held liable in the due course of the management of the debt and commitments so far as they continue in the course of the partnership. Therefore, under the circumstances of the Violet will be regarded as the partners of Busy Bee Florist Shop. Citing the reference of Lang v James Morrison & Co Ltd (1911) 13 CLR 1 at 11 the main reason for considering Violet as the partners for Busy Bee Florist Shop at the time of acting as the partners in the course of the partnership business, Violet is in this case acting as the agent for one another (Corkery et al., 2017).

An example for the above stated has been laid down in the case of United Dominions Corporation Ltd v Brian Pty Ltd and others (1985) where a lone activities carried out by the parties were regarded as the partnership under the Partnership Act 1892 (NSW). The court in its judgement stated that the respondent was indulged in the activities of land development which it was purchasing it from Brisbane (Chen et al., 2016). The respondent also shared a profit of 20% in the venture of the hotel and was regarded as the participant of both the ventures however the respondent was regarded as the major participant in each of the proposed venture. Citing the reference of Smith v Anderson (1880) the activities of Violet amounts to partnership and performing the activities of business with the component of steadiness or recurrence in contrast to the isolated transaction which cannot be considered as repeated (Singh, 2015).

Elements of Section 1 of Partnership Act 1892

The conclusion of the court of law in the case of Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) defined that stress will be placed upon the endurance that might not be substantial. This position of Violent was regarded to be consistent with the Ruddock (1879) 5 VLR who performed the activities of business of sole trader and being obligated to his grandmother Mrs Bear and one of his employees (Moll, 2015). The court later provided that even though Mrs Bear did not take participated actively in the regular business management activities of the business, she will be regarded as the partner of the business and could not substantiate against the estate of being considered as the bankrupt debtor in competition with the other creditor.

The general principles of the authorities of the court stated that a right to the participate in the profits will be regarded as the partner and notwithstanding the stipulations of being considered as the dormant partners or not liable to losses. The evidences from the case of Ruddock (1879) 5 VLR represents that the relation of associates is the outcome of their individual considerable rights and the outcome that the partnership liability from the sharing of revenues cannot be avoided in the form of conveyance (Gretton & Steven, 2017). In the succeeding matters of Violet and Busy Bee Florist Shop it can be stated that they will be considered as the partners since violet has been met the elements of Section 1 of the Partnership Act 1892 (NSW).

Section 1 of the Partnership Act 1892 places emphasis on the features of the association among the parties so that it can ascertain that where there existed a partnership. Given the fact that the features provide that evidences that parties carried on the business in common with the objective of earning profit then a relation of partnership will be found to be existing. The parties might for example have made an expression of sharing profits but not the loses and they might have specifically laid down that their relationship cannot be regarded as the partnership relations. This is because one of the parties might be sharing profit as the employee or one of the parties was the provider of the loan who is being reimbursed out of the proceeds generated from the trade.

As defined under the Section 2 of the Partnership Act (1892) it lay down the rules that are valuable pointers in ascertaining whether the specific association is considered as the partnership relations. Nevertheless, it must be noted that these procedures are not entirely considered as the determinative of the issue. As decided in the case of Wiltshire v Kuenzli (1945) the law court will generally have regard to all the situations so that it can reach at the true element of the covenant among the parties (McMeeking et al., 2017). It has been determined that the parties that have planned to do all the things would establish them as the partners under the law and no outcome can be given to the acknowledged intent of not becoming a partners. The relationship between in the present context of Violet and Busy Bee Florist Shop will be treated as the partnership under the partnership act since Violet satisfied definition that has been contained in the Partnership Act 1982. The circumstance that demeanor of the parties namely Violet reflected a partnership that is determined in the Act. The receipt by Violet relating to the share of profits of the business along with the indulgence in the examining the business books and quarterly business statements represents that evidences that Violet will be regarded as the partner of the business. Therefore, Violet along with Rosy and Mary will be held accountable for the loans that is taken from the friendly bank.

Conclusion:

From the above stated discussion it can be evidently put forward that Sonny is not considered to be partner of the Busy Bee Florist Shop and does not have any kind of liability to pay the debt to the Friendly Bank in relation to the Busy Bee Florist Shop. However, Violet will be considered as the partner of Busy Bee Florist Shop and will held accountable for the debts and obligations of the firm to Friendly Bank since Violet satisfies the elements of Section 1 of the Partnership Act 1892 (NSW).     

Reference List:

Blackett-Ord, M., & Haren, S. (2015). Partnership Law. Bloomsbury Publishing.

Calabretta, S., & May, B. (2016). Winding-up companies in a partnership. Australian Restructuring Insolvency & Turnaround Association Journal, 28(4), 30.

Chen, V., Ramsay, I., & Welsh, M. A. (2016). Corporate law reform in Australia: An analysis of the influence of ownership structures and corporate failure.

Cohen, G. M. (2017). Law and Economics of Agency and Partnership. The Oxford Handbook of Law and Economics: Volume 2: Private and Commercial Law, 399.

Corkery, J., Mikalsen, M., & Allan, K. (2017). Corporate social responsibility: The good corporation. Centre for Commercial Law.

Fleischer, H. (2017). The Law of Close Corporations. In General Reports of the XIXth Congress of the International Academy of Comparative Law Rapports Généraux du XIXème Congrès de l'Académie Internationale de Droit Comparé (pp. 319-350). Springer Netherlands.

Gretton, G., & Steven, A. (2017). Property, Trusts and Succession. Bloomsbury Publishing.

Kumar, A. (2016). 39_Textbook on Indian Partnership Act with Limited Liability Partnership Act 2010.

Latimer, P., (2016). Repudiation of Partnership Contracts.

McMeeking, K. P., Baskerville, R., & Sim, D. (2017). Partnership law and its spawn: Did LLP deliver on its promises?.

Moll, D. K. (2015). Shareholder Oppression and the New Louisiana Business Corporation Act. Hous. Bus. & Tax LJ, 15, 206.

Mukherjee, N. K. (2015). The Law of Partnership with Special Reference to British India.

Norbury, M. (2017). Tax cases: The perplexing partnership interest. Taxation in Australia, 51(11), 631.

Singh, A. (2015). Company law.

Winship, P. (2015). Drafting General Partnership Laws on the'Aggregate'or'Entity'Theory.

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My Assignment Help. (2019). Liability Of Violet And Sonny To Friendly Bank In Relation To Busy Bee Florist Shop. Retrieved from https://myassignmenthelp.com/free-samples/potential-liability-violet-and-sonny.

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