Kinh tế học - Chapter 19: Partnership and joint venture law

This is the prescribed textbook for your course.Available NOW at your campus bookstore!Copyright © 2000 McGraw-Hill AustraliaPartnership and joint venture lawChapter 191Copyright © 2000 McGraw-Hill AustraliaPartnershipA partnership is the carrying on of a business in common, with a view of making a profit.2Copyright © 2000 McGraw-Hill AustraliaDefinitionsCarrying on a businesscontinuity or repetition of action to be carried on in the futureIn commonacting on behalf of each otherView to a profitdistribution of profits results 3Copyright © 2000 McGraw-Hill AustraliaTests for determining the existence of a partnershipCommon Law Rules - Intention - Agency - Sharing of profits and lossesStatutory Rules - Joint ownership of property - Sharing of gross returns - Receiving a share of the profits4Copyright © 2000 McGraw-Hill AustraliaPartnership agreementCan be verbal, written or by conduct.A written partnership agreement is desirable as disputes are easier to resolve.Overrides the provisions of the relevant Partnership Act.5Copyright © 2000 McGraw-Hill AustraliaContents of a standard Partnership AgreementNames and addresses of partnersName of firmPlace or places from which business will operateDuration of the partnershipCapital contribution of each partnerInterest of each partnerShare ratio of profits and lossesWhether salaries will be paid to partners Management duties of each partnerDetails of keeping accountsLimitations in the authority of partnersAppointment of bankersCheque signingRetirement of partnersAdmittance of partnersDissolution of partnersSetting up competing businessResolving disputesValuing of shares for retiring/deceased partners 6Copyright © 2000 McGraw-Hill AustraliaLimitations for partners Capacity  Minors - not liable for partnership debts  Lunatics - limited if lunacy known  Bankrupts - must disclose bankruptcy7Copyright © 2000 McGraw-Hill AustraliaRelationship between partnersPartners are in a Fiduciary Relationship: Partners must render true accounts.Partners must advise full information on all matters affecting the partnership.Partners must account for private profits made without consent of other parties.Partners cannot carry on a business of the same nature in competition with the partnership, without the consent of the other partners.Partners may assign their interest in the partnership to another person.8Copyright © 2000 McGraw-Hill AustraliaRelationship between partnersRules regarding the relationship between partners if no PpartnershipAgreement exists:All partners are entitled to share equally in capital of the business. All partners are entitled to share equally in profits (and losses) of the business.Partners are entitled to be indemnified by the firm in respect of payments made and liabilities incurred.A partner who makes an advance or payment beyond their capital contribution is entitled to interest.A partner is not entitled to interest on capital subscribed until profits have been ascertained.Every partner may take part in the management of the firm.9Copyright © 2000 McGraw-Hill AustraliaRelationship between partners (continued) No partner will be entitled to remuneration for working in the partnership business.No person will be introduced as a partner without the consent of all other partners.Differences regarding ordinary matters related to the business of the partnership can be decided by a majority of partners.No change can be made to the nature of the partnership business unless all partners consent.The partnership books are to be kept at the place of business of the partnership.Partners cannot be expelled from the partnership.10Copyright © 2000 McGraw-Hill AustraliaRelationship of partners to third partiesPartners will be bound by each other’s actions on the basis of an agency relationship, involving actual and apparentauthority, where:transaction is within the scope of the businesstransaction has been affected in the usual waythe third party involved in the transaction must either: - know or believe the partner is acting as a partner, or - be unaware of any lack of authority to act (includes non- partner who is believed to be a partner).11Copyright © 2000 McGraw-Hill AustraliaActual and apparent authorityActual - Authority to do acts specified in Partnership Act or Partnership Agreement. Apparent (implied) - Authority that the partner appears to have to third parties. E.g. - selling goods and chattels of the firm - purchasing on behalf of the firm 12Copyright © 2000 McGraw-Hill AustraliaLiability of PartnersContracts - Each partner is jointly liable.In tort - Each partner is liable jointly and severally.Criminal wrongs - Each partner is liable jointly and severally where there has been a breach of a statute that does not require intent as an element.In bankruptcy - If a partner is bankrupt, partnership may be dissolved.As trustees - No liability for the actions of other partners acting as trustees independent of the partnership.Holding out as partner - Liable as if partner of partnership. Outgoing partner - Continues to be liable for debts of partnership incurred before retirement.13Copyright © 2000 McGraw-Hill AustraliaLiabilityJoint liability  The partners must be sued jointly and not individually. Joint and several liability:  Every partner is liable jointly and individually.14Copyright © 2000 McGraw-Hill AustraliaPartnership propertyIncludes all property brought into thepartnership, or which is afterwardsacquired on account of the partnership.15Copyright © 2000 McGraw-Hill AustraliaDissolution of partnershipBy action of the partnersAt expiry of timeBy giving noticeBy death of a partnerBy insolvency of a partnerWhere partnership property is charged16Copyright © 2000 McGraw-Hill AustraliaDissolution of PartnershipBy court action whenPartner found to be of unsound mindPartner becomes permanently incapable of performing his/her part of the partnership contractPartner is guilty of conduct the court regards as calculated to prejudicially affect the carrying on of the businessPartner persistently breaches the partnership agreementPartnership business can only be carried on at a lossOther circumstances that are just and equitable grounds for dissolving the partnership17Copyright © 2000 McGraw-Hill AustraliaDissolutionNotice of dissolutionPersonal notice to persons who have had dealings with the firmNotification in government gazetteStationery alteredRegistered business names adjusted at Corporate Affairs CommissionDistribution of AssetsLoans from partners Creditors satisfiedProperty on basis of contributions of each partyDebts and liabilities satisfiedSurplus assets divided in proportion, reflecting profit sharing ratio18Copyright © 2000 McGraw-Hill AustraliaJoint venturesAn association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour, with a view to mutual profit. E.g. Mining ventures Property development Entertainment agreements Share farming agreements19Copyright © 2000 McGraw-Hill AustraliaComparison of joint venture and partnership20Copyright © 2000 McGraw-Hill AustraliaAdvantages of a joint ventureParticipants  are not liable for actions of other joint venturers  receive income separately  are able to compete with each other.21Copyright © 2000 McGraw-Hill Australia