Question

Harry, Liam and Zayn have formed a business partnership. They own and manage a winery in the Adelaide Hills called One Direction. Zayn makes the wine. Harry and Liam are responsible for running the business and the cellar door.   They hold a meeting, and all decide to spend some money refurbishing the cellar door with new tables, chairs and lighting.    When they started the winery, they dealt with Niall who gave them a great deal on the original furniture at his business Best Restaurant Buys (BRB) and since then purchased additional lighting from him.
Both Harry and Zayn visit the shop, having all agreed on a maximum dollar amount to be spent on the refurbishments. They choose a particular set of tables and chairs and order the required number. Following this purchase, Harry leaves town for his annual, month long holiday.
Meanwhile when Zayn calls into Best Restaurant Buys the following day, he notices some chairs were upholstered in leather instead of the vinyl which he and Harry had chosen. Even though they cost more than five times the chosen chairs, taking the cost well over the agreed amount, Zayn changes the order and purchases these for the cellar door, as he thinks they would give the cellar a much more ‘up-market’ look. He does not inform Liam and thinks he should not bother Harry on his holiday.
When Harry returns and he and Liam see the amount owing for the new furniture, they are furious with Zayn and claim that Zayn had no authority to change the order and will have to pay the extra amount himself. Liam adds that as he had nothing to do with the choice of chairs, he is not liable. With business being a bit slow, and with the other refurbishment costs, the partnership funds are too low to pay the extra amount.
Zayn argues the furniture is for the partnership and, in any case, he now has no money. Zayn and his wife Gigi were in the process of separating and Zayn reveals that Gigi has taken all their money from their bank accounts. Best Restaurant Buys has threatened to sue all three if payment is not made immediately.
Using the Partnership Act 1891 (SA) and relevant cases, discuss the legal issues relevant to the partnership explaining who is liable for the debt.

Answer 1

According to my own opinion, and section 10 or 11 of the Partnership Act, 1891(SA) every partner will be liable jointly for every work which is done on behalf of the firm. If any act of partner is making a firm liable, then the partners will also be held liable on their behalf. Moreover, Section 28 also says that partners will be held liable equally for the losses of the firm.

So, from above, we can say that Zayn's act will make all the partners liable for the debt to Best Restaurant Buys because Zayn has acted on behalf of the firm and other partners, as an agent of the partnership firm. He has worked Bonafide to the firm, he has no personal interest in the contract.

However, if the partnership deed has limited his powers to act on behalf of other partners or firm, then he can be personally held liable.

However, he must have revealed earlier about his personal financial conditions or contingent liabilities because of his divorce with Gigi.

Thus, if want, other partners can sue Zayn for this, but not on a firm level.

Hence, from the above case, it is concluded that all the partners will be held liable for the debt.

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