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21 Partnership © Oxford University Press, 2007. All rights reserved.
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Partnership What is a partnership? the relation that subsists between persons carrying on a business in common with a view of profit key word: relation = relationship, essentially contractual.
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Partnership cont … Threshold requirements: a valid agreement business being carried on commonality of purpose a view of profit.
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Partnership cont … Partnership “rules”: co-ownership of assets: not sufficient in itself to create partnership sharing of gross returns: not sufficient in itself to create partnership sharing of net profits: prima facie evidence of partnership, but not conclusive.
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Partnership cont … Partners’ relations to outsiders: concept of agency liability in contract is joint (must be sued in one action) liability in tort is joint (see above) and several (individual – legal actions can be severed) note liability of partners for crimes note liability as partner by “holding out”.
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Partnership cont … Relationship of partners to one another: Fiduciary (good faith) relationship - full disclosure no secret profits must not compete with the partnership.
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Partnership cont … Note: liability of incoming and outgoing partners freedom of contract is preserved special rules regulating partners in the absence of agreement: eg. all partners share equally in capital and profits & contribute equally to losses; all partners may take part in management.
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Partnership cont … Note: special rules governing partnership property eg. property bought on account of the partnership and in the course of the partnership business is called partnership property expulsion of partners: requires express provision.
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Partnership cont … Dissolution: without court order – eg. by notice, by expiration, death or bankruptcy of partner; or illegality by court order – eg. mental illness; permanent incapacity; prejudicial conduct; persistent breaches of agreement; business can only be carried on at loss; or on the just and equitable ground.
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Partnership cont … Consequences of dissolution: public notification rights and obligations of partners continue in order to complete dissolution Distribution after dissolution: note rules that apply subject to any agreement to the contrary.
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