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- 8 Marks
Question
Three persons, Booker, Weah, and Makafui agreed to set up a restaurant. The finance was provided almost entirely by one of them, Booker. Before the restaurant opened, furniture and equipment were purchased and a laundry contract was entered into. Advertisements were placed in the newspapers and on television, apart from the fact that premises were acquired by the person who supplied the money. The parties then fell out and the business did not proceed as planned.
Required:
i) Explain whether in the circumstances of the facts, there is a Partnership in terms of the provisions of the Incorporated Private Partnership Act, 1962 (Act 152). (5 marks)
ii) State TWO (2) liabilities of Partnership for action or transaction done in the course of a Partnership business.
(3 marks)
Answer
i) Existence of a Partnership:
Section 1 of the Incorporated Private Partnerships Act, 1962 (Act 152) defines a partnership as the association of two or more individuals carrying on business jointly for the purpose of making profits.
Section 3(1) of Act 152 requires a copy of the partnership agreement to be submitted to the Registrar upon registration of the partnership.
Based on the facts provided, there was an association of two or more individuals who agreed to set up a restaurant. The individuals agreed on the kind of business they intended to carry on. Implied in the facts is that there was a partnership agreement, with each partner contributing financially or in kind. However, from the facts, only one of them, Booker, contributed substantially, and the parties fell out before the business could proceed as planned.
The substantive requirement of a partnership under Section 1 is the carrying on of business jointly for the purpose of profit. Since the business did not proceed as planned, one cannot conclusively say that the parties were in a partnership for business.
(5 marks)
ii) Liabilities of Partnership for Actions or Transactions Done in the Course of Partnership Business:
Section 12 of the Incorporated Private Partnerships Act, 1962 (Act 152) provides that a partner is an agent of the firm for the purposes of the business of the firm. The acts of the partners bind the firm if:
- The acts were authorized, expressly or impliedly, by the other partners or were subsequently ratified by them;
- The acts were done for carrying on in the usual way business of the kind carried by the firm.
Where the acts of a partner are for a purpose apparently not connected with the firm’s ordinary course of business, the firm is not bound unless the partner is in fact authorized by other partners or the act is subsequently ratified by them.
When a tort is committed by a partner in the course of business approved by the partners, all the partners become jointly and severally liable to the person who has suffered a loss as a result.
(Any 2 points @ 1.5 marks each = 3 marks)
- Topic: Types of capital and the financing of companies
- Series: MAR 2024
- Uploader: Dotse