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In: Operations Management

Mandy, Peter and Daniel are partners of PDM & Associates. Daniel is entrusted to become the...

Mandy, Peter and Daniel are partners of PDM & Associates. Daniel is entrusted to become the managing partner of the firm. On 1 March, Daniel entered into a contract amounting of RM80,000 with Papa's Company. Papa's Company was to supply furniture to the firm’s new office at Beverly Hills. Part of the furniture, an office set worth RM7000 was ordered by Daniel for his home office use. Daniel had informed Mandy and Peter that he needed to work from home occasionally. However, they did not inform Gabriel who was a sleeping partner. On 1 July, Papa's Company reminded Daniel to make payment but PDM & Associates failed to pay. Now, Papa's Company is threatening to sue all the partners but Mandy and Peter claim that they are not liable because the contract is not signed by them while Gabriel argues that he is not aware of the contract.  

Advise Mandy, Peter and Gabriel under Partnership Act 1961.

This is Malaysia Business Law Essay. (700 words needed)   

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Expert Solution

As per the Partnership Act 1961 Mandy, Peter and Daniel are the active partners of PDM & Associates who would be actively handling the administration and management decisions of the company while Gabriel is the Sleeping Partner, who is more involved in providing capital and gaining on profit, rather than management responsibilities.

As per the Law, an active partner is eligible to take individual decisions for the firm even if the other active partners don't sign the contract and just have verbal communication on the decision.

In this case, Daniel had informed Mandy and Peter, about the purchase he made for his home office, and at that moment had nothing against the decision. Thus all three of them, or rather PDM & Associates, are liable to pay Papa's Company the money they owe. Or else Papa's Company can sue PDM & Associates rightfully.

On the other hand Gabriel, who is the sleeping partner of the company, does not have a say in this, because it is an administrative decision, and the active partners are authorised to take decisions individually as long as they all are informed about it.

Thus, Mandy, Peter and Gabriel would have to pay Papa's Company for the purchase Daniel made on behalf of PDM & Associates. Otherwise the legal action by Papa's company would be against them as well and would fall in favour for Papa's Company.

keosha answered 1 year ago
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