Business Law

Partnerships

“carrying on a business”

Goudberg v Herniman Associates case: refers to William and Gouldberg wanting to introduce franchises in restaurant hotels, William received architect services (from Herman) and failed to pay.

Decision: Both William and Goudberg were acting as partners with the common view of profit, however they were not carrying on a business and hence were not jointly liable for debt. The judge decided that preliminary steps were undertaken to form a business but no business actually existed.

Significance: This case shows that regardless whether preliminary steps taken to establish a business, which either has no prospect or hasn’t come into existence, doesn’t satisfy the existence of a partnership.

The business must be carried on “in common”

Carrying the business in common refers to assessing whether there is an agency relationship between parties. If there is a agency relationship binding both parties, this makes both parties principals of the agency relationship as a result any transaction entered by one partner makes both partners liable.

Even though one partner may actively engage in management, this simply means the partnership is being carried on, on behalf of other partners.

The test whether there is an agency relationship,

* Lang v James Morrison: The judicial interpretation of “in common” is even though partners may inactively contribute to capital ( known as sleeping partners) they still bear the risk of the partnership ie unlimited liability.

However more than an agency relationship is required, to sastify the statutory definition, partners must have mutual rights and obligations in terms of “carrying the business in common”. For example the case of Smith v Anderson, the judge decided that a partnership failed to exist since there was no mutual rights and obligations between parties.

Two people carrying on a business “ in common” separately doesn’t prove a partnership existed for example Checker Taxicab vs...