- 10 Marks
Question
Jabi is a partner of an Accounting Firm. The firm’s office is located in Accra. In May 2019, Jabi was assigned an approved accounting duty outside Accra with the use of the Firm’s car. During the journey, the car had a burst tyre. The driver of the car, for unexplained reasons, had no spare tyre on the car. He therefore recommended the purchase of a brand new tyre, which Jabi bought with his personal money. He obtained a receipt in the name of the Firm.
Jabi sought for a refund of his money amounting to GH¢1,280 for the tyres bought. The Managing Partner refused the refund, saying it was the sole responsibility of Jabi to bear the expenditure.
Required:
i) Advise the Manager as to why the Firm should bear the full or part of the cost and not only Jabi.
(4 marks)
ii) Advise Jabi why it is not the sole responsibility of the firm to bear the cost.
(6 marks)
Answer
i) Advise the Manager:
- Sections 4, 10, and 14 of the Incorporated Private Partnerships Act, 1962, Act 152 provide the relevant legal framework.
- Section 4: Upon registration, a firm becomes a corporate entity, and the certificate states that the partners’ liability is not limited.
- Section 10: A registered firm has the powers of a natural person and full capacity. While the firm is a corporate entity, each partner is liable for the firm’s debts and obligations, with an entitlement to indemnity from the firm.
- Section 14: Partners are jointly and severally liable with the firm and other partners for the firm’s debts and obligations incurred while they remain partners.
- Therefore, the firm, being a corporate entity with shared responsibilities, should bear the full or part of the cost.
(4 marks)
ii) Advise Jabi:
- Section 10: The firm has a corporate nature and full capacity, making it responsible for the reimbursement of the expenditure on the tyres. However, Jabi, as a partner, shares responsibility with the firm and other partners.
- Under Section 4: Jabi, as a partner, has liability towards the firm’s obligations and is entitled to indemnity from the firm.
- Section 14: Jabi is jointly and severally liable with other partners for the firm’s debts, indicating a shared responsibility for the incurred cost.
(6 marks)
- Tags: Agency, Firm Liability, Partnership Act 1962, Partnership Law, Reimbursement
- Level: Level 1
- Uploader: Dotse