LAW OF PARTNERSHIPS

 Introduction to partnerships
 Nature of partnership
 Relationship of partners to each other
 Liability of partners to third parties
 Dissolution of partnership
 Limited partnerships
 Introduction to partnerships
- Created by agreement: oral, written, underseal, inferrence.

- Maximum 20 (except for certain professions or callings)

- Capacity: restrict unsound mind people and minors.

- Name: not use the word “limited”, “Royal” or “Crown”.

 NATURE OF PARTNERSHIP
3 elements:
- Carry on a business;
- In common;
- With a view of profit.
Itself does not create a partnership (rules in Partnership Act)
RELATIONSHIP OF PARTNERS WITH EACH OTHER
RELATIONSHIP OF PARTNERS
TO THIRD PARTIES
RELATIONSHIP OF PARTNERS TO THIRD
PARTIES
Actual express and actual implied authority

•A partner will have express actual authority to engage in

particular activities with third parties (given by agreement).

•There is also implied actual authority but this only extends to all
matters necessary for carrying on the business of the firm “in the
usual way in which businesses of a like kind are carried on”.
Goldberg v Jenkins (1889) 15 VLR 36; Mercantile Credit Co Ltd v Garrod
[1962] 3 All ER 103
RELATIONSHIP OF PARTNERS TO THIRD PARTIES

Apparent authority

• A partner acting within his or her apparent authority will also bind
the firm (similar to the agency situation in Ch 15)

• The apparent authority of a partner will be determined according to

the ordinary rules of principal and agent – that is, it will depend on
what authority the partner is held out to have (from the viewpoint of
a reasonable party dealing with the partner): Construction Engineering Pty
Ltd v Hexyl Pty Ltd (1985) 155 CLR 541
LIABILITY OF PARTNERS TO THIRD PARTIES(CONT)

Partners are :
(a) jointly liable for the debts of the partnership
(b) jointly and severally liable for the wrongful acts of the
partner(s)
and
(c) jointly and severally liable for misapplication of money or
property

ss 9, 11 & 12 Partnership Act 1892 (NSW)

ss 13, 16 & 15 Partnership Act 1958 (Vic)
and similar provisions in similar State laws
DISSOLUTION OF PARTNERSHIP
A partnership may be dissolved in various ways including:

1. Operation of law
2. By agreement of the partners
3. In accordance with the provisions of the partnership agreement
4. By the court upon application by a partner or where it is just and
equitable to do so

Any change in membership effects a dissolution of the existing partnership

since it destroys the identity of the firm, eg addition of a new partner or
retirement of a partner.

The dissolution of a partnership should be followed by a winding up and final

settlement of accounts BUT the partnership agreement can contain
provisions to avoid the need for this and set out the procedures required.
LIMITED PARTNERSHIPS
Partnership Act 1958 (Vic) Pt 3, & Partnership Act 1892 (NSW) Pt 3

• Allows formation of a partnership in • However, if a limited partner does

which there is at least one general
partner with unlimited liability and one
or more limited partners whose liability
for the debts and obligations of the
partnership is limited.
take part in the management of the
business, he or she will be liable as
a general partner (ie unlimited
liability).

• A limited partner must not take part in

the management of the business and does
not have power to bind the firm.

• This allow firms to bring in partners who

provide capital for the firm effectively as
investors in the firm.