Now I have been online blogging for almost a year and due to lack of time haven’t really tried to monetize or even promote this site; I have researched and experimented and made money here and there in a few Joint Ventures.
In essence a Joint Venture is a not unlike ‘Partnership’ and sometimes it astounds me to see that some people do not actually consider the legal ramifications that occur when participating in a Joint Venture.
Please note that a Joint Venture is actually a contract set out for a a certain business and unlike a partnership ends when the obligations do.
However unless there is an EXPRESS contract dealing with the venture and labelling it as such the business would be seen as a implied partnership if it bears the ‘badges’ (as detailed below).
So for the benefit of a all you JV’ers and in part to help me fully understand it I have below written a summary (as understood by me) of UK partnership law. Though I would here state that this is in no part whole and if you wish to enter into a partnership or are considering some sort of legal action. Independent legal advice should be sought from your local solicitor or Citizen Advice Bureau.
Below I have attempted to cover the main areas:
> Dealings with ‘the firm’
> Liabilities of the partners
> New Partners
> Partners relations (in regards to duties and assets)
> Dissolving or ending the partnership (joint venture)
PARTNERSHIP LAW
The Partnership Act 1890 defines a partnership as ‘the relation which subsists between persons carrying on a business in common with a view of profit’, s .1(1) PA.
A partnership is not a legal entity, it requires at least two persons, is found to exist if the intention of the parties is present and this is implied by evidence of profit sharing.
Firm is the collective noun for partners.
What this means is that the partnership unlike a company cannot buy sell or hold assets or loans in its name, instead every thing is held in the names of the partners.
Authority and dealings of a partnership
The question as to whether the firm is bound by a contract entered into on behalf of the company will depend on the rules of agency.
At common law, any agent of the firm (whether a partner or not) can bind the firm if he enters into a contract for which the (other) partners have given him actual authority. Actual authority can be express or implied.
> Express authority at a partners’ meeting
> Implied authority by course of dealing
> Implied authority as it is incidental to the expressly authorised action
> Implied authority as it is usual to the nature of the position of the person (marketing manager)
If the individual creating the contract is a partner, s .5 PA applies.
A partner’s unauthorised act will bind the firm if
> the act is of the kind carried on by the firm and
> the act is for carrying on such business in the usual way.
However, the firm will not be bound if the other party either
> knew that the partner in question was not authorised to enter into the contract on behalf of the firm or
> did not believe that the partner was a partner.
If the individual creating the contract is not a partner the firm may still be bound at common law if the agent has apparent authority.
Apparent authority = Principal’s representation + Reliance
what this means is that if a partner has EXPRESS or IMPLIED authority to act in matters he will bind ‘the firm’ to any contract he undertakes. This is known as ‘Actual’ Authority.
‘Apparent’ authority comes about if the action taken by the partner is in line to what the firm does and the third party believed that the person doing the contract was partner and he had authority to act.
Nature of Partners Liability:
Contractual liability - s .9 PA every partner in a firm is jointly liable for the debts and obligations incurred by the firm whilst he is a partner. Joint liability is a single liability, hence a claimant has only one chance to obtain judgement against a firm.
HOWEVER
s.3 of the Civil Liability (Contributions) Act changes this. A previous judgement against partners of a firm does not bar any later actions in respect of the same damage/debt.
Tortious liability - s .10 & 12 PA every partner is jointly and severally liable for tortious acts.
Where liability is joint and several, not only do all partners share a joint liability, but also each partner is severally liable for the whole debt as an individual.
Because a partnership is unlimited, if the partnership assets are not sufficient, the partners are personally liable for the debts of the company.
This is essence means any debts, and costs incurred by the partnership as well as legal obligations it has to fulfil are equally shared between all partners. These liabilities have no maximum.
NEW PARTNERS:
s .17(1) PA A new partner is not liable for debts incurred before he became a partner.
FORMER PARTNERS:
s . 17(2) PA A former partner remains liable for debts incurred during his time as a partner.
s . 36(1) PA A former partner remains liable for debts incurred* after his departure until it is apparent that he is no longer a partner. To this end he must:
a) notify all persons that deal with the firm and
b) place an advertisement in the London Gazette of his retirement s . 36(2) PA.
The partner’s liability after retirement is limited to those persons who knew of his position as a partner. s . 36(3) PA.
NON-PARTNERS - HOLDING OUT: s . 14 PA Everyone who represents himself as a partner is liable as a partner to anyone who has, on the faith of any such representation, given credit to the firm.
PARTNERS RELATIONSHIP TO EACH OTHER:
s . 19 PA The rights and duties of partners may be varied by the consent of all the partners either expressly or by the course of dealing.
Subject to any such agreement, express or implied between the partners:
> s . 24(1) PA all partners will share profits and capital equally (regardless of capital injected into the business at outset - to vary this there must be an intention to do so).
> s . 24(6) PA no partner shall be entitled to remuneration
> s . 24(1) PA all partners must agree to a change in the partnership business; any difference arising from the course of business shall be determined by majority.
A partner cannot be sacked unless there is a provision for so doing in the partnership agreement s . 25 PA.
PARTNERSHIP PROPERTY: All property brought into the partnership for the purposes and in the course of the partnership is partnership property s . 20 PA. All property bought with money belonging to the firm is deemed to have been bought on account of the firm unless contrary intention can be proved s . 21 PA.
FIDUCIARY RELATIONSHIP: There is an overriding duty of good faith and utmost trust between partners in a partnership. ss . 28 - 30 PA.
> s . 28 PA Partners must render true accounts and full information to each other.
> s . 29(1) PA Partners must account to the firm for unauthorised profit derived from use of the partnership name, property or business connection.
> s . 30 PA Partners must set up business to compete with the partnership.
PARTNER LEAVING: If there is no partnership agreement or if the agreement is silent on retirement or termination then the partnership is deemed a ‘partnership at will’ and the effect of a partner leaving is that the partnership is dissolved and has to be wound up.
To avoid this, the partners must agree expressly that in the event of the departure of one partner the partnership will continue as between the remaining partners.
DISSOLUTION OF THE PARTNERSHIP:
Every partner has a right to demand the partnership to be wound up s . 39 PA and has a unilateral right to publicise the dissolution of the firm s . 37 PA.
Subject to any agreement between the partners, a partnership is dissolved automatically if:
> Entered for a fixed term, by the expiration of that term or if entered for a single undertaking, on the termination of the same. s . 32 PA.
> Upon the death or bankruptcy of a partner s . 33 PA.
If the partnership business becomes unlawful, then the partnership will be dissolved, this section of the Partnership Act cannot be excluded s . 34 PA.
There are 2 provisions in the partnership act concerning dissolution by notice. Following the decision of Moss v Elphick these are read to mean that a partnership can be dissolved at any time with immediate effect by a partner giving notice to the others.
s . 26(1) PA Where no fixed term has been agreed, any partner may determine [end] the partnership at any time on giving notice so to do to all the other partners.
s . 32(c) PA says effectively the same thing.
The court may order the dissolution of a partnership under s . 35 PA in any of 5 situations including: where a partner is incapable of performing his part of the partnership contract; when a partner is guilty of prejudicing the business; and where the courts think it is just and equitable to dissolve the partnership.
discuss this topic to forum
