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TitlePartnership
TagsPartnership Limited Partnership Law Of Agency Common Law Virtue
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Total Pages8
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Page 1

Partnership - structured answer
The Partnership Act (Vic) s5 defines a partnership as “the relation which subsists
between persons carrying on a business in common with a view of profit”.

1. Is a business being carried on in common?
a. Carrying on implies a repetition of acts, and excludes the case of an

association formed for doing one particular act which is never to be
repeated.

i. Goudberg v Henriman Associates (2007). H a firm of architects
entered into contract with G. They incurred costs. Courts held
that although they had a view of profits they did not intend to
carry on with business after. So since they are not partners only
H was liable for the costs.

b. Partnership can arise where people enter into a joint venture in respect
of a single undertaking or endeavour ( Canny Gabriel castle Jackson
Advertising v Volume Sales 1974) partnership occurred because there
was a share of profit and a more integrated business structure than
usual.

2. Is such business carried on with a view to profit?
i. It is possible to be a partner even if you do not have a claim to a

share of the profits but receive a fixed sum M young legal
associates v Zahid 2006)

ii. Charity, cricket club etc
1. Although they make profit, they reinvest those profits in

their primary activities and do not distribute them as
dividends to their members

Determination of existence of partnership

1. To establish whether a partnership exists the following must be
established:

a. Was there agreement?
b. “Carrying on” a business. It must be systematic and continuous –

not just a “one-off” transaction: (Canny Gabriel)
c. The business must be carried on in common (“by and on behalf of

the partners” – ie, they must be agents for one another … there
must be a degree of “mutuality” regarding ownership and control):
Degiorgio v Dunn.

d. Business must be carried out with a view of profit (not necessary to
actually make a profit).

In these circumstances, the agreement is unlikely to be regarded as a
partnership. If a partnership does not exist, they are not legally liable for the
debt under s 13

Most important factors to be taken in account:

1 Intention of the parties (ascertained by the court after viewing the whole of
the facts)

2 Participation in the net profits of a business (accompanied by an agency
relationship)

The Partnership Act provides rules in determining existence of a partnership:
Section 6 Partnership Act (Vic)

Page 2

1 Joint or part ownership or joint tenancy, or tenancy in common does
not create a partnership as to anything held or owned.

2 Sharing of gross returns does not necessarily create a partnership (Cox v
Coulson 1916)

3 The receipt by a person of a share of the profits of a business is prima facie
evidence that they are a partner in the business.

Receipt of such a share or amount of money does not by itself make a person
a partner in these cases:

a Receipt of debt by instalments or otherwise from profits
b Receipt of payment by a servant or agent of a person engaged in

business by a share of that business
c Receipt by a spouse or child of an annuity out of the profits
d Receipt of interest varying with the profits, or of a share of profits in

consideration of an advance
e Receipt of a portion of the profits of a business in consideration of the

sale and goodwill of such business

All these alone do not constitute a partnership, something more needs to
exist.

1 Carrying on business in common
a Degiorgio v Dunn (2004) Cover band disbanded and one of the members (the defendant)

discussed plans to start a new band with the plaintiff. It was established that there was no
partnership though there was a view for profit as the latter ‘partner’ did not partake in any direction and
management of the firm. It was established that plaintiff’s actions did not amount to ‘carrying on a
business in common’ relative to the founding and operation of the business. Even though they
have entered into partnership, there was no partnership due to the lack of this.

b Khan v Miah (2000) Partnership commences at the first step of implementing their business plan.
Joint venture participants do not become partners unless they actually begin embarking on the activity.

c Goudberg v Herniman Associates (2007) CACL 17.55 Defendant may have contributed to the
planning of the activity but have not done anything in furtherance of the plan, hence it was
established that he wasn’t “carrying on business,” and hence was not a partner.

2 View of profit
a A partnership does not need to create profits, but has a view of creating profit. M Young Legal

Associates v Zahid (2006) CACL 17.60
b Possible to be a partner even if they do not have a direct claim or share of profits. E.g charities.
c View to profit does not include pecuniary profits (aka religious associations, charity, sport clubs)

Expulsion of a Partner

Majority of partners cannot expel a partner unless express power to do so was granted. If it was in accordance with the
terms of agreement, then it must be exercised in good faith and for the benefit of the firm.

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Partners must be given:

1 Reasonable notice of the charge
2 Reasonable opportunity of meeting the case against them before receiving notice of expulsion

Fiduciary Obligation

Partnership is a class of contract founded on mutual trust.

1 Gives rise to full disclosure towards each other for all matters concerning the firm
2 Obligation continues throughout the term of the partnership

a Fiduciary Obligation After Dissolution – Does not conclude on dissolution but until final
settlement of accounts on winding up Chan v Zacharia (1984) CACL 17.250 Partner took advantage
of the partnership lease to set up a new business without the consent of the other partners, after
dissolution. This was a breach of the fiduciary relationship of partnership that existed beyond dissolution.

b Fiduciary Obligation Before Settling of Terms – United Dominion Corp v Brian (1985) CACL
17.260 A fiduciary relationship may, and ordinarily will, exist between prospective partners who have
embarked upon the conduct of the partnership business or venture, even before partnership are
terms settled

Retirement of a Partner

When no fixed term has been agreed upon, any partner may determine the partnership at any time by giving notice of
their intention to do so to all the partners. Section 30 Partnership Act (Vic)

Dissolution takes place from the date mentioned in the notice or if none specified, from when notice was
communicated.

If done by deed, written notice by partner must be signed.

Revocation of Guarantee by Change in Firm (change in constitution or construction)

A continuing guarantee given by or to a partnership is revoked as to future transactions by any change in the constitution
of the partnership.

A continuing guarantee made by a partnership for another partnership then the guarantee would be revoked by a change
in the construction of either partnership.

Continuance of Business After Expiration of Term (of the partner)

Whereby a partnership has been entered into for a fixed term is continued after the term has expired, without any new
agreement, rights and duties remain the same prior to the expiration of the term. Partnership becomes a partnership
at will.

Partnership Property (to determine in case of dissolution, who owns the property)

Consists of: Section 24 Partnership Act (Vic)

1 Property originally brought into the partnership
2 Property acquired whether by purchase or otherwise on account of the firm or for the purposes and in the course

of the partnership business
3 Items acquired for the purposes of and in the course of the partnership business.
4 Property acquired with the firm’s money unless the contrary intention of the parties appears from transactions

(s25)
5 Goodwill of the business

Harvey v Harvey (1970) Harvey owned land and allowed his brother to farm on it. Court held that the land was not
partnership property because H intended to keep it for his son in the future.

Separation of Property:

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