Introduction to Business Law

ISSUEThe issues that arise in this case are whether:

  1. The partners Keith and Greg, who are also in the partnership of their firm Auto Spider, are liable to pay for the land which was purchased by Bob, the other partner, for their business purpose?
  2. Bob, one of the partners, has breached any duties regarding the partnership and carrying out the functions for the business purpose?
  3. Bob is liable to pay any amount to the firm for his breach of contractual partnership or what amount of money the firm can recover from Bob for his actions concerning the business and partnership?
  4. Keith and Greg can expel or terminate Bob from being a partner or bring their partnership to an end because of Bob’s actions?

LAWThe Partnership Act, 1891 interprets that the persons are said to be in a partnership when they agree for carrying on a business or business activities with a common view of gaining or earning profit. Partners decide their obligations, duties, rules, or principles regarding the commencement of the business for which they have entered into a contract of partnership.

S 6(3) PA, states that profit-sharing in the commencement of business transactions is the basic principle of a partnership. Where the agreement does not contain any provisions concerning the expulsion of powers, or sharing of profits or losses, duration, or dissolution of the partnership than in such cases partners are said to be in an equal partnership. It means that they all are equally engaged, entitled, and liable for any kind of business activity carried out by all or any of the partners on behalf of others.

S 9 PA of this act states that the person’s actions during business bind all the partners together for such transactions. Each partner will be responsible for both legal and financial decisions taken by the other partners in the general course of business. Hence, a decision taken by a partner in the course of some business activity without discussing with other partners would still bind them together for that decision.

S 32 PA states the accountability of partners concerning the private profits they gained or any benefit derived from any transaction concerning the business or the property in business without the knowledge of others.

S 38 PA clarifies that the dissolution and termination of a partnership when one of the partners' misconducts during the business, or breaches the term of partnerships or take decisions for doing such acts that are beneficial to him personally on account of their business, then the court may consider that dissolution or termination of the partnership as just and equitable.

S 44 PA states out the facts and policies of the rights where the partnership is terminated by misrepresentation or fraud by the acts of any of the partners. It entitles the partners to regain their part of profit or any benefit that may have occurred during action in business by the other partner for his purpose. There are remedies provided for the breach of partnership agreement such as injunction, compensation, and amount on the account of profits gained by the other.

APPLICATION – In this case, the partnership is being created among the partners' Bob, Keith, and Greg for carrying out their business, Auto Spider. Hence they are bound by the s.6 of the Partnership Act as the equitable partners to share this responsibility and have the right of being equally liable for any kind of business activity carried out by all or any of the partners on behalf of others. In the case of Wang v Rong, it was derived that all the Partners were equally responsible for conducting the business decisions or activities and are liable for any kind of payment arising out of those business activities. According to S.9, Bob's act during business binds the other partners (Keith and Greg) together for such transactions.

As per the decided facts, the decisions for the partnership firm were to be taken by all three partners, but Bob took the decision without informing others and kept the profit for his personal use. According to the s.32, Bob will be liable for the actions he performed while being a partner by gaining the profits out of the purchase of the land for the firm. He breached the terms of the agreement because of the misconduct and deceptive actions. In the case of Cypjayne Pty Limited v Babcock and Brown International Pty Ltd, it was held that the deceptive and misconduct of any partner would result in the termination of the partnership and the person responsible for that misconduct would be liable for paying the damages to the plaintiff. Thus, according to s. 44 PA, Keith, and Greg also have the right of terminating the partnership with Bob because of his misconduct and fraudulent actions.

CONCLUSION – In the first scenario, Bob purchased the land for the use of the firm as it was the action that was taken out to grab the opportunity of expanding their business. Bob took the decisions on behalf of other partners. It makes other partners binding in the decision taken out in the course of business. Thus, Keith, Greg, and Bob would be liable to pay for the purchase of land.

In the second case, it is being proved by the facts that Bob has breached his duties concerning the partnership agreement. He has acted in such a way wherein which he breached the term of partnerships and took decisions for buying the land and keeping the profit to himself on account of their business transactions, without informing the other partners of the firm.

In the third scenario, the court may hold that Bob will be entitled to pay the amount which he gained while performing his duties to the firm. The other partners Keith and Greg both have the right to regain the part of profit or the whole amount of money which Bob has profited during business transactions or the amount he had to keep for his personal use. The court can also order remedies to the other partners (Keith and Greg) such as injunction, compensation, and amount of profits gained by Bob.

In the last case, Keith and Greg have the power and rights to terminate the partnership with Bob. Due to the deceptive actions of Bob and his misconduct in the transactions during business transactions, he will be liable to pay the compensations and damages for the loss that may have occurred to the firm. And also, Keith and Greg can end their partnership with Bob.

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