The aggrieved parties including Tom and Edgar may have a few courses of action that are available in the Australian Corporations Act 2001 and the Partnership Act of 1963. These actions will be considered in this discussion and conclusions will be arrived at in the possibility of the success of every action taken. Further, any other alternative process of dispute resolution may e considered as an option. These may include both negotiation and mediation.
Tom’s has not been paid for the accounting journals amounting to a total of $ 15000, as agreed between him and Adrian, one of the 3-member-partnership-accounting firm. Edgar has also not been paid for the $ 8000-worth surveying tools, acquired by the partnership accounting firm owned by Aidan, Adrian, and Peter, as agreed between him and Adrian.
Is it a breach of the contract and/or the contravention of the partnership Act 1963?
The cases of both Tom and Edgar can be considered under the general principles of a contract law and the Australian Partnership Act 1963. In this regard, the contract law stipulates that a contract exists as long as there is an offer, acceptance and consideration by the parties involved (Bailey 2014, p. 34). In this case, Tom and Edgar enter into a contract with Adrian for the sale of accounting journals amounting to a total of $ 15000 and $ 8000-worth surveying tools respectively. The offers have thus been given, accepted, and considered by the parties. Since Adrian is transacting the business on behalf of the accounting firm owned by him in partnership with Aidan and Peter, then, the principles of partnership as set out in Sections 9 and 10 of Australia’s Partnership Act 1963(Qld), must also apply.
More particularly, Section 9(2) of the Partnership Act 1963(Qld) states:
“An act done by a partner in a firm other than an incorporated limited partnership, for carrying on in the usual way business of the kind carried on by the firm, binds the firm and the other partners in the firm unless
The partner who does the act has in fact no authority to act for the firm in the particular matter; and
The person with whom the partner is dealing either knows that the partner has no authority or does not know or believe the partner to be a partner in the firm.”
Adrian having learnt surveying apart from accounting purchased surveying tools, which can be considered as the use of a partnership’s credit on privately considered matters without consideration of the views of partners.
Section 11(1) of the Partnership Act 1963(Qld) states:
“If a partner in a firm other than an incorporated limited partnership pledges the credit of the firm for a purpose apparently not connected with the ordinary course of the firm’s business, the firm is not bound unless the partner is in fact specially authorized by the other partners in the firm.”
Another legislation set out by the accounting firm to be considered in the deliberation on this case is the statement that every of the partners(Aidan, Adrian and Peter) may be allowed to enter into any contract worth a maximum of $ 10000 but for any of such contracts that exit this limit, must be approved by the partners.
Considering the general contract law, it is clear that some elements of a contract are present while others are not for both cases of the transaction between Edgar and Adrian, and that between Adrian and Tom. While there has been an offer of the goods, an acceptance by the two parties to trade and a clear consideration of the terms involved, it is apparent that Adrian has no legal capacity to enter into any of these two contracts (Paterson 2011, P.67). Therefore, Adrian holds undue influence making the two contracts null and void.
In line with Section 9of the Partnership Act 1963(Qld), it is apparent that Adrian had no authority to transact for the accounting firm for any purchases of goods beyond a maximum of $ 10000. It is however not indicated whether both Tom and Edgar were aware that Adrian was transacting on behalf of a partnership. If they were aware, then they should have sought for further information as to whether the rest of the partners could agree or not as indicated in the Section 9 subsection(2b) of the Partnership Act 1963(Qld).
In defining a partnership the House of Lords in the case Khan v Miah (2000) 1 WLR 2123 indicated that the Partnership Act 1891(Qld) does not impose itself on the contract and thus requiring that the individual rights and duties of each party shall be different from those set up in their own terms of the contract. Further in the Beckingham v The Port Jackson &Manly Steamship Company (1957) SR (NSW) 403, 410, the Partnership Act 1891(Qld) allows every partners to agree to vary contract terms of this particular legislation as long as they related to their rights and duties mutually. In this case, Aidan and Peter are right to deny payments to Edgar and Tom.
Considering the Edgar’s case, Adrian purchased surveying tools without considering the views of other partners. Despite the fact that they were worth $ 8000 and thus fell within the limit set up by the partnership, they could be used to carry out a “purpose apparently not connected with the ordinary course of the firm’s business” (Section 11(1). The ordinary business of the partnership firm being accounting, it is thus not bound by the contract, as the partner is apparently not specially authorized by Peter and Aidan.
In Walker v Hirsch (1884) 27Ch D 460, 467?€ђ468, the court ruled that despite the fact that a partnership may be found to exist, the main issue remains to be, what rights as indicated in the contract entered into by the partners, each partner has against the other. The court also indicated that in cases where the agreement does not indicate these rights, then, the Partnership Act 1891(Qld) 40, may apply as default. In this case, the partnership between Aidan, Adrian, and Peter is not silent but deliberates the rights of each partner, setting the maximum transaction for each partner at $ 10000 for any contract entered into without consulting others.
The contracts involving Tom, Edgar and Adrian can be considered null and void. This is because they do not have all the elements of a contract-legal capacity of Adrian to transact business on behalf of the partnership accounting firm, owned by Peter, Aidan and himself. However, other means of problem solving may be used, including mediation and negotiations between the parties involved.
Richard might have several actions to take as stipulated in the in the Australian Partnership Act 1963 and the Commonwealth Consolidated Acts particularly the Corporations Act 2001. These actions will be considered in this discussion and conclusions will be arrived at in the possibility of the success of every action taken. Additionally, any other alternative process of dispute resolution may be considered as an option. These include both negotiation and mediation.
Richard has been served with one letter by the Nu-Slim Pty Ltd in Victoria where he worked from 2008 to 2013 on terms that incase he left the company, he was never to sell any slimming products within Victoria for 3 years. The letter calls upon him to cease the operations of a Fat-Away Ltd, a partnership firm he owns together with his sister Frances. On the other hand, Richard has been served with a letter by the United Bank Ltd, which threatens to sue him for defaulting to pay the monthly loan installment of $ 40,000 of the $ 500, 000 loans taken from this particular bank in 2014, as the start-up capital for Fat-Away Ltd.
Richard v Nu-Slim Pty Ltd
Are there a breach of the contract terms and the principles of partnership businesses?
Considering that the contract entered into between Richard and the Nu-Slim Pty Ltd in the year 2008-2013 is valid, then there are several legislations that can be used to provide courses of action for both parties. The main legislation however includes the Commonwealth Consolidated Acts, particularly the Corporations Act 2001 Section 1043A.
Section 1043A of the Corporations Act states that an insider, whether as principal or as agent must NOT:
Apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products; or
Procure another person to apply for, acquire, or dispose of, relevant Division 3 financial products, or enter into an agreement to apply for, acquire, or dispose of, relevant Division 3 financial products.”
An insider as described in the Corporations Act 2001(Cth) Section 1043A (a&b) includes an individual that possesses the inside information, regarding a firm and/or a corporation. Having worked for the Nu-Slim Pty Ltd from 2008 to 2013, Richard posses a lot of inside information on the company.
The Fat-Away Ltd deals in the sale of slimming powder, similar to the products offered by the Nu-Slim Pty Ltd. The commodity traded the Fat-Away Ltd can be considered as a derivative of those commodities processed and traded by the Nu-slim Pty Ltd in Victoria.
According to Section 761D of the Corporations Act 2001(Cth), subsection 1c defines a derivative as an asset, a rate, an index, and/or a commodity.
To start with, Richard has breached the contract as entered into, between him and the Nu-slim Pty Limited. Applying Section 1043A of the Corporations Act 2001(Cth) that an insider, whether as principal or as agent, Richard has through the Fat-Away Limited decided to apply the expertise he obtained from the former firm to create the slim powder, a derived commodity from the company, for sale within Victoria. Subsection c and of Section 1043A, directly implies that Richard has breached the Corporations Act 2001(Qld), apart from the breaching the contract between him and the Nu-Slim Pty Ltd. Slim powder can be considered as a derivative, under the Division 3 of the financial products, described within the act.
By using Frances to run the major affairs of the Fat-Away Ltd, Richard has contravened Section 1043A (1d) of the Corporations Act 2001(Cth). He has in a way or another, procured another person to apply the expertise acquired from the Nu-slim Pty Ltd to dispose of a derived of the product offered by the company within Victoria, an area within which he had agreed not to trade within, for 3 years after parting ways with the company.
Richard may be found guilty of an offence as indicated by Section 1311 of the Corporations Act 2001(Cth). The general penalty provisions within the section indicate that anyone who contravenes the provisions of this act is guilty for an offence. Thus, Richard may be sued for damages if he does not close down the Fat-Away Ltd within Victoria. Alternatively, Richard needs to convince Frances to move to another area away from Victoria and trade in the same product.
Richard v United Bank Ltd
Is there breach of contract terms? Is Richard Liable to the debts owed by the Fat-Away Ltd?
The Australian contract law indicates that among the elements of a contract include an offer, acceptance of the offer, the legal capacity of the parties involved to transact the business, and the consideration of the offer by both parties (Dewulf et al 2011, p. 45). The Fat-Away Ltd and the United Bank Ltd are bound mutually by this contract and each party has to play its part as agreed as emphasized by Mann & Roberts (2011, p. 58-9).
The Partnership Act 1963(Qld) section 13(3) states:
“Each general partner in an incorporated limited partnership is liable jointly with the incorporated limited partnership for the debts and obligations of the partnership incurred while the general partner is a general partner.”
Apparently, Richard is obliged to pay the sum of $ 40, 000 as an installment for the loan taken from the United Bank Ltd. The partnership Act does not shield him from being sued. Instead, Section 13(3) of the Partnership Act 1963(Qld) indicates that a partner is liable jointly for both debts and obligations of the partnership business. Owning 99% of the shares of the company, he is still under obligation to pay, without defaulting, as this may be rendered an offence and breach of contract.
According to E R Hardy Ivamy and DR Jones (1986), in case the relationship of the partners exist in the law, each of the partners as between the partnership itself and the firm creditors, are each liable to every debts owed by the firm. This does not consider the arrangements that might exist between the partners in terms of how losses are to be shared.
Richard as the major shareholder in the Fat-Away Ltd is obliged to continue paying the sum of $ 40000 as installment on the $ 500000 loan taken by the firm at its initial stages of development. He may need to approach the bank management to solve the issue amicably out of courts and prevent the bank from suing him. This is because the partnership Act allows the bank to sue him and hold him liable to the debts of the partnership company.
Books, Online Modules & Articles
E R Hardy Ivamy and DR Jones. (1986). Underhill??s Principles of the Law of Partnership. 12th Edition. (2)
Bailey, J. (2014). Construction Law. Hoboken: Taylor and Francis.
Dewulf, G., Blanken, A., & Bult-Spiering, M. (2011). Strategic issues in public-private partnerships. Chichester, West Sussex: Wiley.
Mann, R. & Roberts, B. (2011). Smith and Roberson's business law. Mason, Ohio: South-Western.
Pittard, M. & Weeks, P. (2007). Public sector employment in the twenty-first century. The Australian National University, A.C.T.: ANU E Press.
Vermeesch, R. & Lindgren, K. (2005). Business law of Australia. Australia: LexisNexis Butterwort
Khoury, D. & Yamouni, Y. (2009). Understanding contract law. Chatswood, N.S.W.: LexisNexis Butterworths.
Monahan, G. & Carr-Gregg, S. (2007). Essential contract law. New York, NY: Routledge-Cavendish.
Paterson, J. (2011). Unfair contract terms law in Australia. Pyrmont, N.S.W.: Thomson Reuters (Professional) Australia.Walker v Hirsch (1884) 27Ch D 460, 467?€ђ468.
Khan v Miah  1 WLR 2123. (House of Lords)
Beckingham v The Port Jackson &Manly Steamship Company (1957) SR (NSW) 403, 410.