Company law revision questions pt.1

Q1) Explain the duties owed by the partners of a firm to each other AND                                                                B) the factors which might be construed as indicative or otherwise of the existence of a partnership by implication. And how they exist!

Definition of partnership s1

It can consist of two or more parties. Previously there was an upper limit on membership under s. 716 Companies Act 1985. A partnership must be formed for “business” “every trade, occupation or profession” as per s.45 of the 1890 Act. Partnerships must have “a view to make profit”. Does not need to be an “actual” profit but merely an intention to make a profit. Does not apply to Limited Partnerships, at its root a “partnership” is a contract.

The fundamental problem here is that, in the eyes of the law and in particular s.1 of the 1890 Act, “A partnership is a relationship that is determined by the substance of the interactions between the parties, and not by their conscious wishes or the designation which they choose to apply to that relationship.”

Rules for determining existence of partnerships. Among the different rules in s2, s2(3) is the most important. Despite the confusing words used, s2(3) is believed to mean that the court has to find a partnership if the receipt of profits is the only evidence. In reality, the court has always found other relevant evidences to consider and if so, the assistance of s2(3) would be minimal. Thus, the usefulness of s2(3) is clearly in doubt as shown by case laws and the Law commission has even suggested that the whole s2 be repealed from the Act.

Guidelines to determine if a Partnership exists s2 of 1980 act

Sharpe v  Carswell 1910, Lord  Ardwall:

“In short, joint owners are not partners, but are separate individuals holding definite shares in a common subject, but this does not render them either partners or joint adventurers.”

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