How Present Case Is Related To the Two Agreements Enacted?
The present case is related to the two agreements enacted by one of the partner (Simon) of the Computer Solution partnership firm with the two respective parties. The main issue is to determine whether the other partners (Mary, Sara, George) of the firm are having the liability towards the legal agreement formed by Simon. Further, it needs to be determined that what the remedies are that would be available for the third parties regarding their rights in the below highlighted cases.
- When Simon has enacted an agreement with Sunstar Ltd with a consideration of $12,000.
- When Simon has enacted an agreement with You Beaut Ute Ltd with a consideration of $9,000.
According to the “Partnership Act 1892 (NSW), the liability of the firm amounts to underlying liability of the associated partners of the firm. It is because a partnership firm does not have a distinct legal identity and hence, it is known by the partners only (Davenport & Parker, 2014). A partnership business structure can be established between two or more individuals with the help of a partnership agreement. A partnership agreement would be formulated either via oral agreement or via formal written agreement. The partners of the firm have to make the necessary decisions regarding the various aspects related to the business of the firm, distribution of the profit share, authorities to form contract with the third parties, liabilities and so forth.In the partnership agreement these are defined in an explicit manner (Harvey, 2009). According to the Section 5 of Partnership Act 1892, it is apparent that every individual partner of the firm is the agent of the partnership firm and has the unstated authority to make decision regarding the formation of various contracts related to the business of the partnership firm. Moreover, the action of one of the partners in relation to enacting the contract with the other parties with respect to the business activities would be held as legally binding on to the rest of the partners even though the respective partners did not hold the adequate authority at the time of contract enactment (Lindgren, 2011). Further, as per the Section 128 of Corporations Act 2001, the outsider parties can make the relevant assumptions regarding the authorization of the respective partner, who is executing the contract on the part of the firm (Latimer, 2016). The rights of the outsider parties in such scenario would be defended according to the Section 129 of Corporation Act 2001. It is true because it has been assumed that the third party does not have the knowledge about the fact that the partner who is functioning as an agent for the firm does not hold the power to enact contract of certain denominations (Pendleton & Vickery, 2005). Therefore, all the partners of the firm have the legal obligation to complete the contractual responsibilities or else the outside party would sue the partners or demand for the damages (Gibson & Fraser, 2014).
Simon along with the three partners George, Sara and Mary has established a partnership firm called Computer Solution. The transaction limit for contract set by the partners is $10,000, it means any partner can act as agent for the Computer Solution but cannot make any transaction higher than the amount of $10,000. Here,Simon has ordered 500TB storage drive from Sunstar Ltd with the price of $12,000. However, the transaction amount is higher than the transaction amount defined at the time of making the partnership agreement. It is witness from the case facts that Sunstar Ltd does not realise that Simon is not authorized for this transaction and hence, created agreement in “good faith”. Therefore, the liabilities would also be applicable on George, Sara and Mary because the contract is relevant to the business and Simon has acted as an agent of firm.
Simon has made another transaction of $9,000 with the You Beaut Ute Ltd for the purchase of used Ute. This amount lies within the authorised limits set in the partnership agreement. However, the contractual obligation would not applicable on George, Sara and Mary because there is no relevancy present between Ute and business activities of Computer Solution. Therefore, the partners would not be bound by the resultant obligations from the transaction. The obligation of the agreement is only applicable on Simon only.
On the account of the first transaction made on behalf of Simon, legal liabilities would be created on the rest of the partners. It is because Simon was representing the firm and the action of purchasing the hard drive was in their business line only and hence, the respective liabilities would be imposed also on Mary, George and Sara.
Further, it can be stated that the transaction made by Simon for the purchasing of the Ute does not have any relation with the existing business line of Computer Solution and hence, it can be concluded that the Mary, George and Sara is not liable for the respective transaction of $9,000. Therefore, You Beaut Ute Ltd cannot sue the partnership firm or Mary, George and Sara on the basis of the agreement enacted by Simon.
Davenport, S. & Parker, D. (2014). Business and Law in Australia (2nd ed.). Sydney: LexisNexis Publications.
Gibson, A. & Fraser, D. (2014). Business Law (8th ed.). Sydney: Pearson Publications.
Harvey, C. (2009). Foundations of Australian law (2nd ed.). Prahran, Vic.: Tilde University Press.
Latimer, P. (2016). Australian Business Law CC (1st ed.). Sydney: LexisNexis Study Guide.
Lindgren, KE. (2011).Vermeesch and Lindgren's Business Law of Australia (12th ed.). Sydney: LexisNexis Publications.
Pendleton, W. & Vickery, N. (2005). Australian business law: principles and applications (5th ed.). Sydney: Pearson Publications