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LAW OF BUSINESS ORGANISATIONS: Agency and Partnerships - Coggle Diagram
LAW OF BUSINESS ORGANISATIONS: Agency and Partnerships
Agency
Law of agency allows one person to authorise another person to do any act that he or she has the capacity to do themselves
Principal appoints agent, agent deals w third party, contract created between third party and principal
Authority
Actual
Express
Agreement/instructions
Implied
As a matter of necessity or incidental to carrying out acts within express authority - to do everything in the usual course of business to complete the transaction
Apparent
appears to other to have authority to do something
Agent acting outside/exceeding actual authority
Protects third parties, only if third party wasn't aware agent had no actual authority
Partnerships
Formation and Nature
Created by
agreement
arises from agreement between two or more persons who decide to go into business together (contractual relationship)
Express or implied
Pool assets and abilities
Must use full name of all partners or register a business name for trading purposes
Personal Liability
of partners
Not a seperate legal entity, unlimited liability
Does a Partnership exist?
Must meet legal definition:
Section 5 of the Partnership Act 1958 (Vic)
, defines it as the relation that exists between persons
carrying on a business
business = trade, occupation or profession
carrying on = repetetive or regular acts
Khan v Miah
pre-trading activities are carrying on a business
Goudberg v Herniman
Just an idea
in common
mutuality of rights and obligations
has a say in the management of the business
Degiorgio v dunn
didn't share anything, wasn't involved = no partnership
with a view of profit
intend to make a profit
Section 6 - statutory rules
Rule 1: common ownership
doesn't necessarily mean a partnership
Rule 2: sharing of gross returns
doesn't necessarily mean a partnership
Cribb v Korn
just wages that came from profits
Rule 3: profit sharing
creates a strong presumption of a partnership
does not operate when:
s 6(3)(a)
a debt repaid in instalments out of profits
Cox v Hickman
s 6(3)(b)
remuneration paid to an employee on the bases of a share of profits
Plummer v Thomas
s 6(3)(c)
payment of an annuity to widow
s 6(3)(d)
loan with the interest dependent on profits
s 6(3)(e)
annuity for goodwill part of sale of business dependant on profits
Relationship of Partners with each other
Contractural Rights and Duties
Partnership agreement
express
implied by conduct
Terms implied under
Partnership Act s 28
if not in the partnership agreement
SEE EXAMPLES BELOW
Fiduciary
Partnership is founded on mutual trust and confidence
Act in good faith for the benefit of the partnership
Avoid any actual or potential conflict of interest
Make full disclosure towards each other
Chan v Zacharia
Statutory
Set out in
Partnership Act
Partners must render true accounts and full information
s 32
Duty to account for benefits derived (without consent) from dealings concerning the partnership or from use of the partnership property, name or business connection
s 33
Duty not to compete with partnership (without consent) - if do, must account for all profits
s 34
Agency Relationship
partners both principals and agents to each other
Partnership Property
s 24 partnership act
items originally brought into the partnership as partnership property
items acquired on the count of the firm
Items acquired for the purposes of and in the course of the partnership business
Goodwill
s 25
items bought with the partnership money are deemed to have been bought on the account of the firm
No right to specific property e.g. painting but is entitled to proportion of surplus from sale of assets
Personal property
Depends on intentio
Relationships of partners with third parties
Third parties
suppliers
customers
lender/creditors
contracts
Liability for debts and obligations (contracts)
ss 9 & 13 Partnership Act
Each partner is jointly liable for all debts and obligations of firm while they are a partner
Bound by this when partner acted within scope of
actual authority
s 9
Bind co partner where
they does any act or enters into a transaction
that is within the scope of the kind of business carried on by partnership
Transaction is carried out the usual way
UNLESS
partner had no authority and third party knew this OR the third party did no know or believe person was a partner
two steps
what is the kind of business of the partnership, was this wihtin the scope
Mercantile v Garrod
was it done the usual way?
Goldberg v jenkins
check proviso
construction engineering v Hexyl