Question

Question 2: Partnerships

In 2008, Dan Baxter and Philip Jones set up a partnership to trade as organic greengrocers under the name Baxter and Co. They frequently purchase organic produce from Yvonne Botica, an elderly farmer. Orders are usually made on the firm’s letterhead, which has the words ‘ D Baxter and P Jones, trading as Baxter & Co’ printed in small type at the bottom.

On 31 August 2017, Philip retires from the partnership and ceases working in the business. Philip’s name is removed from the letterhead but no other notice is given to customers or the public about Philip’s retirement. In October 2017, Dan orders and receives $10,000 worth of goods from Yvonne. However, before the bill is paid Dan becomes insolvent. Yvonne decides to sue Philip as Dan’s partner.

Answer the following questions. Refer to relevant provisions (including subsections) in the Partnerships Act 1908 to support your answers. (a) Is Philip liable to Yvonne for the debt incurred by Dan? In addition to relevant legislation, refer to a case to support your answer.

(b) What steps should Philip have taken when he retired to ensure he would not be liable for post-retirement partnership debts?

(c) Whether Philip could be liable for holding out to Yvonne.

Answer 1

Answer A.

According to Section 32 sub section 3 & 4 of partnership act, if retiring partner or other partner (s) does not give notice of retirement to public, the retiring partner will be held reponsible for act done before and after retirement.

Hence considering above legal provisions Philip will be held responsible fo dealing done by Yonne.

Answer B.

As explained above in provision of Section 32 of partnership act 1908, retiring partner i.e. Philip has to ensure that notice of retirement is given to public, to avoid from libilities of post retirement acts done by Dan.

Answer C. Principal of holding out -

Section 28 of Partnership Act says

(1) Anyone who by words spoken or written or by conduct represent himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm....

Considering above legal provisions Philip has done not acted and not represented as partner to Yvonne, hence Philip cannot be held liable as holding out to Yvonne.