westernsydney 200183 law of business organisations informal basis

Task:
Short Answer questions
1. Explain what factors are considered in determining whether a partnership exists.
2. Why is agency an important concept in partnership law?
3. Discuss the legal consequences flowing from the legal principle established in Salomon v Salomon & Co Ltd [1987] AC 22 House of Lords (UK) Problem Based Questions
Question 1:
Helen one of two original partners in a printing business that had grown over the years from a two-person partnership in 2001 into a very successful business with 15 partners. The business started on a very informal basis, with no formal partnership agreement ever being drawn up between the partners. Over the years Helena had drawn money from the firm account to pay for her personal debt, claiming she was repaying loans she had incurred for an on behalf of the firm. There is no evidence to suggest that this was the case and the other partners, while they were not happy with what she did, had not publicly complained in partner meetings. However, things came to a head when the partnership suddenly showed a significant decline in 2005 and it was apparent that Helenas drawings were contributing significantly to the profit downturn.
Advise the partnership.
Question 2:
Janice, Grace, and Aly who were fashion designers decide to form a company Fashion Designs Pty Ltd. They decided that they will be the only shareholders and directors of the company. Janice and Grace held 35% of the shares and Aly held the remaining 30% of the shares in the company. Aly is not involved in the process but is promised to get a $30, 000 from the creation of the company. Janice and Grace oversee the registration of the company. Janice oversaw finding a warehouse from which the company is to run the business. Grace gave instructions to Janice not to sign any lease without her approval.

Advise Janice, Grace, and Aly on,

i) their liability if Fashion Designs Pty Ltd decided not to go ahead with the contract after 1 month of the companys creation; and
ii) if the directors ratify the contract.

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