Question

Question B.2

Leyton and Dustin run a service station in a country town, the service station sells petrol and a number of other goods, which are displayed near the cash register and outside the office. Leyton and Dustin are partners in the business, though they have an old written agreement that states that neither will order goods or services over the value of $3,000 unless the contract contains signatures from both partners.

Leyton has been approached by a supplier of magazines who offers the business the delivery of 100 copies of a particular publication each month. Leyton convinced that the magazine is popular and will make some money, signs a contract with a promise to pay $5,000 in instalments for the delivery of the magazines.

The magazines arrive and Dustin is very upset, first because the magazine is quite unsuitable for display in the business and may result in a loss of customers if they see this publication, but he is also upset that Leyton has made an agreement without consulting him. There is an argument between the partners and Leyton takes sick leave and stays at home to recover from the stress of the argument. In the meantime, Dustin communicates with the supplier of the magazines and declares that the agreement to supply the publication is invalid due to a breach of the partnership agreement, and that the magazines will be returned and no payments will be forthcoming from the business.

Explain, with reference to partnership law:

a.     Whether Dustin can cancel the contract with supplier of the magazines?       

[Answer here]

b.     Whether Dustin can be liable for the actions of Leyton?                          

Answer 1

In General a  partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting or all.

The Duties of Partners is to carry on the business of the firm to the greatest common advantage. Good faith requires that a partner shall not obtain a private advantage at the expense of the firm. Where a partner carries on a rival business in competition with the partnership, the other partners are entitled to restrain him.

The restrictions or authorities of partner are governed by the partnership agreement. The Partner should work for the development of business with in the boundaries of Partnership Act and Partnership agreement.

a) The Entering of the Leyton into the contract for supplying of magazines of value more than $3000 is not valid as the leyton is using unauthorised power and hence as this event is not in line with partnership agreement the contract is invalid at the option of Dustin.

  Therefore the Dustin has a power to cancel the contract and also can seek the legal help if required.

b) If it is a partnership firm with unlimited liability then the Dustin can be held laible for the act of Leyton , where as in the case of LLP Dustin being innocent or unconcerned with the act done by Leyton can limit his liability.