Question

(Elena and Natalie were interested in baking cakes and selling them. They formed a
partnership called- ‘Yummy for Tummy Cakes’ and served cakes and biscuits for the
locals in their housing area. As they were lacking capital for their business, they
requested Elena’s cousin, Lina to invest in this business. Lina agreed and gave them
RM30000 on the basis that she gets RM3000 per 3 months as a return for the
investment. Another condition is that Elena and Natalie should update Lina on the
partnership’s transactions annually.
However, Elena and Natalie failed to give Lina the returns and also did not update
Lina on their partnership’s accounts.)

1 (Does a partnership exist between Elena, Natalie, and Lina? Discuss and support
your answer with relevant principles of law.)

2. (If a partnership exists between Elena, Natalie and Lina, discuss the ways in which a
partnership can be dissolved.)

3. (Analyse the characteristics of partnership with appropriate examples and case
laws.)

Answer 1

Answer

1. Elena and Natalie formed a partnership business called "Yummy for Tummy cakes". As they were lacking capital, they requested Lina to invest in this business Lina agreed and gave them RM30000 on the basis that she gets RM 3000 per three months as a return for the investment along with a condition that Elena and Natalie should update Lina on the partnership transactions annually. In the present case Elena and Natalie didn’t offer lina to join in the firm or Lina wa not asked about her share in partnership business. Every partnership business firm should be supported by the partnership deed which was registered at registrar of firms in which the terms and conditions about the partnership was recorded. In the present case the partnership deed was silent about lina as a partner and more over lina asked to pay her RM3000 per three months as a returns from her investment. Hence by observing the above we can say that Lina invested the amount as a Loan to the partnership firm and not a Partner Capital.

Hence a partnership doesn’t exist between Elena, Natalie and Lina.

2. If a partnership was exist between Elena, Natalie and lina then the partnership firm can be dissolved in the following situations.

· When all the partners of the firm were died

· When all the partners of the firm were became insolvent

· If the partnership firm carrying any illegal business

· If Any partner wants to dissolve the partnership firm due to all the other partners ignored and not updating any information about the firm (should be supported with the partnership deed)

· If any statue is required to do so.

3. Characteristics of partnership

Ø Partnership Agreement/Deed : Every partnership was an outcome of an agreement between two or more persons to carry on the business and share profits and lossed in agreed ratio.

Ø Exist of Business: A partnership firm should exist a business which the partners agreed to carry on

Ø Nature of Liablity: The liability of the partnership firm was limited to the partners capital and personal assets on his or her name..

Ø Membership: All the partners will become the members of the partnership firm and they as a agent for partnership business.

Ø Agency Relationship: All the partners in a partnership firm have a Principal agent relationship with the partnership business. All the partners will liable for the events done by one or more partners in the firm.

Ø Sharing of Profits: Partners share the profit or loss on agreed ratio.

Example: Anil and Sunil were decided to start a partnership business by agreeing the terms and conditions mutually with a supported partnership agreement. They share profit or loss equally and they are acting as agent for the partnership business.