• Internal Code :
  • Subject Code : BLW17
  • University : Univeristy of South Australia
  • Subject Name : Business law

The Partnership Act, 1891

Issue: Who is liable to pay the debt for the furniture?

Law: Section 5(2), section 9 (1) and 6 (1) of Partnership Act of 1891, is being applicable to the present case. 

Application: All the general partners will equally be liable for all partners in the firm. However in the present case, there was an expressed authority granted verbally between Ben and Adam in Best Restaurant Buys, where a maximum dollar limit was set between both Adam and Ben. Here, Ben could not buy furniture at a higher cost without seeking consent from other partners. However, according to apparent authority every partner in a limited or an incorporated firm is agent of the particular firm. 

It must be noted that from BRB’s point of view, Ben was a partner of Gourmet Table as the restaurant was dealing with BRB since a long time. Therefore it is very unlikely that BRB could be unaware with the fact that Ben is a partner in the business. Here BRB has all the reasons to believe Ben as a partner in the business.

As per Goldberg v Jenkins, if the partner of the firm does any activity which is beyond the usual course of firm, the firm will not be held liable. However in the present case, Ben did not do anything that was beyond the usual. He had purchased the furniture in good faith and in usual way of business. Also in Mercantile Credit Co Ltd v Garrod, the court held that the act done within the scope of the business which is not done in an unusual way, will held the other partners be bound by such act.

As per Kendall v. Hamilton if the assets are not sufficient in the business, partners must repay the debt from their personal accounts as the partners have unlimited liability in the partnership firm. As per section 11 of the partnership Act, 1891 all the partners are jointly liable under a contract, if they were a part when the contract was executed.

 Conclusion:  In the present case Adam, Ben and Charlie are the partners in the firm and the act of Ben will falls under apparent authority even though there was an expressed authority according to the facts of the case. Ben acted as an agent of the firm and for all the partners under the Partnership Act, 1891 and BRB has all the reasons to believe Ben as a partner. So here all the partners of the firm will be held liable for paying the debt under section 9 of the Act from their personal accounts due to the insufficiency in business funds.

References

Section 115 of the Corporation Act 2001

Freudenberg, Brett. (2013). Tax on My Mind: Advisors’ Recommendations for Choice of Business Form. Australian Tax Review. 42. 35-52.

Section 5(1) Partnership Act 1891 (SA) (PA)

Goldberg v Jenkins (1889) 15 VLR36; GRAW at 4.2.4

Wang v Rong [2015] NSWSC 1419


 

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