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Questions and Answers
What happens to a partnership when a partner dies without a written partnership agreement in place?
What happens to a partnership when a partner dies without a written partnership agreement in place?
- The surviving partners can continue the business without negotiation
- The partnership automatically dissolves (correct)
- The deceased partner's estate takes over the management
- The partnership is put up for sale to the public
What is the only option available to a partner who wants to retire under the 1890 Act?
What is the only option available to a partner who wants to retire under the 1890 Act?
- Take a sabbatical from the partnership
- Transfer their share to another partner
- Negotiate with the other partners to buy out their share
- Dissolve the partnership (correct)
What is the purpose of a carefully drafted partnership agreement?
What is the purpose of a carefully drafted partnership agreement?
- To exclude the rights of the deceased partner's estate
- To dissolve the partnership upon a partner's death
- To determine the rights of the partners
- To ensure the partnership continues upon a partner's death (correct)
What is the default rule under the 1890 Act regarding the management of a partnership business?
What is the default rule under the 1890 Act regarding the management of a partnership business?
What is the benefit of having a partnership agreement in place?
What is the benefit of having a partnership agreement in place?
What may large professional partnerships use to manage the firm?
What may large professional partnerships use to manage the firm?
What is the main purpose of collecting and valuing the assets of a partnership during its dissolution?
What is the main purpose of collecting and valuing the assets of a partnership during its dissolution?
In the absence of a written agreement, how are capital losses and capital profits distributed among partners upon dissolution?
In the absence of a written agreement, how are capital losses and capital profits distributed among partners upon dissolution?
What can an outgoing partner claim in the absence of a final settlement with the continuing partners?
What can an outgoing partner claim in the absence of a final settlement with the continuing partners?
What was the outcome of the Meagher v Meagher case?
What was the outcome of the Meagher v Meagher case?
What is the general rule regarding the liability of a deceased partner's estate for partnership debts incurred after the date of death?
What is the general rule regarding the liability of a deceased partner's estate for partnership debts incurred after the date of death?
What is the requirement for holding and applying partnership property?
What is the requirement for holding and applying partnership property?
What is the main reason for the Company Law Reform Group Report's identification of shortcomings in existing partnership law?
What is the main reason for the Company Law Reform Group Report's identification of shortcomings in existing partnership law?
What is the primary purpose of a partnership agreement?
What is the primary purpose of a partnership agreement?
What happens to the partnership when a partner dies, with respect to the partnership's business?
What happens to the partnership when a partner dies, with respect to the partnership's business?
What is the default rule for sharing profits and losses in a partnership, in the absence of a partnership agreement?
What is the default rule for sharing profits and losses in a partnership, in the absence of a partnership agreement?
What is the term for when a partnership comes to an end and its business is wound up?
What is the term for when a partnership comes to an end and its business is wound up?
What is the liability of a partner who receives money or property while acting within the scope of their authority, in the event of its misapplication?
What is the liability of a partner who receives money or property while acting within the scope of their authority, in the event of its misapplication?
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Study Notes
Dissolution of the Partnership
- In the absence of a written agreement, the distribution of capital profits and losses on dissolution are dealt with under s44(a) and s44(b) of the 1890 Act.
- Capital losses and capital profits are distributed between partners in the proportion they are entitled to share profits.
Post-Dissolution Profits
- If there is no partnership agreement, an outgoing partner may claim either: a share of the profits made since technical dissolution, or interest at a rate of 5% per annum on their share of partnership assets.
Meagher v Meagher
- The Supreme Court ruled that the estate of a deceased brother was entitled to its proportionate share of the increased value of the partnership assets.
Personal Liability of Partners
- A partner receiving money or property while acting within their authority makes the firm liable in the event of misapplication (s. 11).
- In Cleather v Twisden (1884), the firm was held liable for the partner's actions.
Liability on Death
- Generally, the estate of a deceased partner is not liable for partnership debts incurred after the date of death.
Partnership Property
- Partnership property includes all property, rights, and interest in property originally brought into the partnership or subsequently acquired for the partnership's purpose.
- Partners own partnership property as a group, as the partnership lacks separate legal personality.
Partnership Property
- Partnership property must be held and applied exclusively for the partnership's purpose, in accordance with the partnership agreement (s. 21).
Profits
- All partners are entitled to share equally in the capital and profits of the business, and must contribute equally towards losses (s. 24(1)).
General Dissolution v Technical Dissolution
- General dissolution occurs when the partnership comes to an end and its business is wound up.
- Technical dissolution occurs when a partner leaves, but the firm continues to operate.
Retirement
- There is no power to retire under the 1890 Act; a written partnership agreement is crucial to allow retirement.
Partners' Rights
- In the absence of a written partnership agreement, partners' rights are found in the 1890 Act.
- Every partner has the right to take part in the management of the partnership business, subject to contrary agreement (s. 24(5) of the 1890 Act).
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