CFAB: Types of Trade

Humphreys & Co is a partnership involved in the sale of hot tubs. Due to a summer of bad weather, the business fails and the partnership is dissolved. Requirements: Are the following statements true or false?

-Any partner (whatever their share of profits) can insist on the partnership assets being realised and any surplus being distributed (after payment of debts) to the partners.

-In the event of there being a capital deficiency, the remaining partners of the firm will bear the loss equally in the absence of an express agreement to the contrary.

• True

• False

• True

• False

Which of the following is implied into a partnership agreement by the Partnership Act 1890 in the absence of any express provision to the contrary?

• A All partners are entitled to remuneration for carrying out their firm’s business.

• B Every partner is entitled to 5% interest per annum on all capital that they invest in their firm.

• C The admittance of new partners requires the unanimous consent of all existing partners.

• D A majority of partners must consent to any decision to change the nature of the partnership’s business.

All of the following are sources of rights and duties of partners of an ordinary partnership except one. Which is the exception?

• A The Partnership Act 1890

• B A partnership agreement

• C Fiduciary duties arising out of general principles of equity

• D The Limited Partnership Act 1907

Lola and May are in partnership. Their business, Lomays & Co, buys gift products made by local craftsmen and sells them through well-known retail outlets. Lola sometimes receives a commission from the suppliers, supposedly for Lomays & Co, when she places an order for a large number of products. She rarely informs May of the commission nor does she pay the commission into the firm’s bank account. Lola, to May’s knowledge, also purchases homemade cards from Original Greetings Ltd, a company that she owns and runs with another friend, and sells them along with other items through the Lomays business. Which of the following best describes the legal position, in view of the fiduciary duties owed by partners?

• A May is entitled to buy out Lola’s share of the business.

• B Lola must account to Lomays & Co for commission monies received.

• C Lola must account to Lomays & Co for commissions received and profits made by Original Greetings Ltd on cards sold through Lomays & Co.

• D Lola must account for commission monies received and must refrain from selling products of Original Greetings Ltd through Lomays & Co because of the obvious conflict of interest.

Freda, Gaynor and Hilda are in partnership as solicitors. Freda and Gaynor authorise Hilda to appoint a junior solicitor to work in the conveyancing department. Accordingly, Hilda appoints Jane but since Hilda is overworked in the commercial department, she also appoints Julie, another junior solicitor, to help her in the commercial department. Which of the following statements best describes whether Freda, Gaynor and the firm are bound by the appointment of Julie?

• A Freda, Gaynor and the firm are bound because the appointment is within the usual authority of a partner.

• B They are not bound because Hilda has exceeded her authority, which was to appoint a junior solicitor for the conveyancing department.

• C They are bound because Julie knew that Hilda was a partner in the firm.

• D They are bound because Julie did not know that Hilda did not have express authority to appoint her.

Millie, Gemma and James are in partnership running a business organising conferences. Gemma and James nominate Millie to advertise their business and they all agree a total budget of £3,000 for this purpose. Millie feels that they should advertise in some glossy magazines as well as newspapers but knows that Gemma and James will not agree. Nevertheless, Millie places an advertisement with Upmarket Businesses , a high quality monthly glossy magazine. This incurs an additional cost of £2,000 (resulting in a total cost of £5,000), to be paid within 30 days. When Gemma and James hear about it, they are angry that Millie has exceeded the authority that they gave her and refuse to pay the publisher of Upmarket Businesses for the advertisement. Requirement Which of the following best describes whether Upmarket Businesses can enforce the contract? A Millie had no authority to enter into the contract.

• A Millie had no authority to enter into the contract.

• B Millie had implied usual authority to advertise the firm’s business.

• C Millie had no authority, but Upmarket Businesses was not aware of that fact.

• D Millie had no authority, but Upmarket Businesses was not aware of that fact but knew that she was a partner.

Mark, Nathan and Oliver are in partnership together running a cattle market, under the name Cattle Galore & Co. Mark enters into a contract, using the firm’s headed writing paper, to purchase 10 bulls from Farmer Giles for the firm. When Nathan and Oliver hear about it, they refuse to honour the contract because they had all agreed at the previous partnership meeting, that they would not purchase any more livestock for the next six months due to the firm’s financial situation. Mark insists that the contract was too good an opportunity to miss. Which of the following best describes the legal position?

• A Mark alone is liable on the contract because he acted without the other partners’ authority.

• B Mark, Nathan and Oliver are personally liable, since partners are agents of each other.

• C Cattle Galore & Co is liable as it was a contract entered into for the purposes of the partnership business.

• D The firm and, therefore, all of its partners are liable on the contract to purchase 10 bulls from Farmer Giles.

Chad, Digby and Elliott are partners in the Bespoke Catering Co. Elliott joined the firm on 1 June. On 10 May, the firm had entered into a contract for the purchase of a new delivery van but is now refusing to take delivery of it. Requirement Which of the following best describes the legal position?

• A Elliott is liable because every partner is liable for the firm’s contractual commitments.

• B Elliott is not liable because the contract was entered into before he became a partner.

• C Elliott is liable because the law implies that on joining the partnership a partner assumes liability on existing debts unless there is a specific agreement to the contrary.

• D Elliott is not liable because the firm that entered into the contract was dissolved and re-formed when Elliott became a partner.

-An ordinary partnership may only be dissolved by the unanimous consent of the partners.

-Where a partnership becomes insolvent, bankruptcy proceedings can be brought in respect of individual partners.

• True

• False

• True

• False

Pascal and his son Roger are partners in the firm, Smith & Co. After a disastrous year, they have realised that they cannot settle all the debts owed by the partnership. One creditor, with a fixed charge over the main business premises, now wishes to enforce his security.

-Can the secured creditor take action against Pascal and Roger individually or sue them in the name of Smith & Co?

-Can the partnership be wound up?

• Yes

• No

• Yes

• No