Business Entities

Whether Daniel is a partner of in the partnership firm? If yes, whether the same is liable to make the payment of $5,000.00, which is due in full.

Similar to any other business forms, a partnership firm is also one of them, where 2 or more people join their hands with each other to earn bread. In a general sense, a partnership business can be understood as a venture which consists of at least two people and all of them act for a common purpose. Every state of Australia has different legislation, which provides the provisions related to partnership firms. If the jurisdiction of NSW, Partnership Act 1892 (NSW) is the partnership legislation. To check that whether a business entity is a partnership firm or not, the existence of features of the partnership firm is required to review. Section 1 of Partnership Act 1892 (the act) states these features. As per this section, there must be at least two partners to develop a partnership firm. Further, these people must enter into a contract to carry out the business activities. In addition to these features, the lead objective of this contract must be carried out business and to earn and share the profits generated out of the same (Legislation.nsw.gov.au, 2018).

As a company has a charter to define the rules regulation, powers, and duties of officials, similarly in the partnership, the partnership agreement is there to regulate the internal working environment of firms. Partners can develop this contract in either mode i.e. oral as well as written. As a partnership agreement decides the mutual rights and responsibility of partners, partnership act define the overall powers and nature of responsibility of partners. As per the provisions of subsection 1 of the section, 5 of the act a partner act on behalf of the firm and therefore treated as an agent of the firm. As under agency law, a principle can be held liable for the act of its agent, similarly, a partnership firm is liable for the conduct of its partners (Austlii.edu.au, 2018). Not only the partnership firm but also the other partners can also be held responsible for the conduct of a partner as all of them share a fiduciary relationship in mutual. Partnership firms have no separate legal status and partners of the same carries unlimited liability with respect to the debts of the firm.

As section 24(5) of the act states that every partner takes part in the managerial activities, this is the reason that a third party assumes a person has required authority in the capacity of a partner (Christensen and Duncan, 2009). According to the decision given in the case of Cox v. Coulson [1916] 2 KB 177, in addition to the receipts, partners are also responsible to share liabilities of the business.

In the case provided hereby Madison and Daniel, both were doing their business in the form of sole proprietorship firm. They soon decided to work with each other and on this manner developed a new business entity with the name of Rolling Hill Bikes. Madison and Daniel have entered into a contract with the common object. The lead purpose of the contract was to carry out business together, earn a profit and to share the same in mutual. Applying the provisions of section 1 of the act this new entity is a partnership business as the same consist all the features of the partnership business and therefore Daniel is a partner in the same.

Contracts

Once Madison made an order of 250 tyres for the business from a supplier named Fast Bikes. Here, Madison had right to do so by the virtue of 5(1) of the act. Here, Madison acted as an agent of the firm and therefore firm is liable for her conduct. Further, according to the applicability of section 24 (5) First Bikes has reason to believe about the authority of Madison. The first liability to make the payment of the invoice made by First Bikes is on Firm. Further, if the firm would fall short of funds then it would be the personal liability of Daniel to make this payment as the same is a partner in the firm and has a fiduciary relationship with Madison.

Conclusion

This is to conclude that Daniel is surely a partner of Rolling Hill Bikes and is liable towards First Bikes in respect to the invoice of $5,000.00.

The issue involved in the presented case is to investigate that can Bruce asks for the difference amount from Rupert. If yes, then how? If no, what is the reason behind?

In the situation where a valid contract presents there, all the parties are required to fulfill their promises in order to perform the contract in a legal and valid mode. The aspects decided in a contract are the final one as both of the parties become agree on the same. However, there is an exception to this common rule, which is popularly known as promissory estoppel. The concept says that sometimes parties of a contract make some promises out of the boundaries of the contract and such promises are legally bound on the parties as a term of a contract. This concept is known as the Doctrine of promissory estoppel.  Central London Property Trust Ltd v High Trees House Ltd  [1947] KB 130 is the lead case law, which defines this principle in a detailed manner. In the subjective case, a landlord made a promise to accept the lesser amount of rent from the tenant when it was a period of war. Later on, when the war got over, the owner has asked the balanced amount from the tenant claiming that everything is normal and regulated now. Court has rejected the demand of landlord and held the promise by the same earlier as promissory estoppel (E-lawresources.co.uk, 2018). Justice stated that the tenant in such a situation was an innocent party who acted relying on the promise made by the landlord and for this reason landlord is bound to be on the promise even the same received no consideration for such promise as generally required to receive under Contract Law.

Therefore it is now clear that under the principle of promissory estoppel, a promise is a binding term even in the absence of a consideration for the party who make such a promise. For the success of this principle, a legal contract must be there already. If no contract would be there, no question to make a promise will arise. In addition to the existence of contract, the promise should be there on which other party has reason to believe. Such promise must be free from any kind of confusion. At last, allowing promisor to go back on the promise must be an inequitable situation for the other party.

Terms of a contract

As per the facts of the provided case, Rupert wanted to carry out some landscaping work in the front yard of his house. For this reason, he contacted a contractor named Bruce. Bruce and Rupert developed a contract for the subjective work. According to the terms of the contract, Rupert was required to arrange all the materials for the work and Bruce was required to arrange the labor for the same. When Rupert felt that he brought the material more than the requirement, he let the Bruce to keep the same.

Further, Rupert faced some issues while making the payment as he was falling short of money. The total payment was of $40,000 and fencing work in relation to the landscaping of yard was yet to be done. When he discussed his incapability of making the payment with Bruce, he became ready to accept  $25000 as full payment. As a valid contract was already there, one of the parties of the contract made a promise, another one relied on the same and therefore the position of them became changed, the promise made by Bruce had a nature of promissory estoppel.

Further, in the case, Rupert won a lottery and thanked Bruce for the support and accepting the less amount as final payment. Now, Bruce wanted to ask for the balance amount of $15000. If to apply the provisions of the case of . Central London Property Trust Ltd v High Trees House Ltd, Bruce will not be able to ask for such amount, as he cannot go back to his promise.

Conclusion

In conclusion, this is to mention that Bruce is not entitled to ask for  $15000 irrespective of any other thing as a valid promissory estoppel is there.

3. The nature and consequences of the breach of all three clauses of the presented contract are prescribed hereunder.

Sometimes, time and period is an important term of a contract and therefore such contracts are required to be performed in a time-bound manner. If parties do not consider the time frame prescribed under a contract then the same can be held liable for the breach of a contract.

Clause 4 of the provided contract carries a time frame according to which the acts and payments of funds are required to be done according to the work and payment schedule. It is a term of the contract, which is a significant one, and parties have to consider the same. If the contractor will fail to complete the work according to the construction schedule then the client will be entitled to sue the same for breach of the contractor. Further, if the client will fail to make the payment as per payment schedule then the contractor would be eligible to bring a case of breach of contract in against of the contractor.

Terms of a contract can mainly divide into two categories. One is condition and another one is warranty. As per the decision of the case of Bettini v Gye 1876 QBD 183 warranties are less important. A condition is a very significant term. The significance of the same can be understood by the decision of the case of Poussard v Spiers and Pond [1876] 1 QBD 410, where a breach of a condition is treated as a breach of contract.

Clause 19 of the contract developed between client and contractor is a condition as the same is very significant and takes matter for the parties. Cause of having a nature of the condition, applying the provisions of Poussard v Spiers and Pond breach of this clause will lead an issue of breach of contract.

Similar to any other aspects of a contract, a study of an exclusion clause is also necessary to be done. As the name implies, an exclusion clause in the contract excludes the liability of parties in respect to some of the acts (Marson, 2013). It provides additional security to parties to the contract where they can escape themselves by being responsible for a particular act or situation. However, merely development of an exclusion clause is not enough. Contract law defines some conditions which need to be fulfilled in order to declare a clause as exclusion clause. Firstly, it must be a part of the contract. Further, L’Estrange v Graucob [1934] 2 KB 394 it must come into the notice of another party, no matter that whether the same has read out the same or not. The case of Curtis v Chemical Cleaning [1951] 1 KB 805 also provides one of the conditions of the exclusion clause. According to the same, an exclusion clause must not have any misrepresentation.  

Clause 26 of the contract can be understood as an exclusion clause of the contract. It fulfills all the conditions of an exclusion clause as the same is a part of the contract. Both of the parties are aware of the existence of this clause and no misrepresentation is there. As it is a valid exclusion clause, hence a breach of any of the liabilities mentioned in the same will not lead any issues.

References 

Austlii.edu.au. (2018) Partnership Act 1892. [online] Available from:  https://www8.austlii.edu.au/cgi-bin/viewdb/au/legis/nsw/consol_act/pa1892154/ [Accessed on 29/12/2018]

Bettini v Gye 1876 QBD 183

Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130

Christensen, S, A, and Duncan, W, D. (2009) Sale of Businesses in Australia. Sydney: Federation Press.

Cox v. Coulson [1916] 2 KB 177

Curtis v Chemical Cleaning [1951] 1 KB 805

E-lawresources.co.uk. (2018) Central London Property Trust v High Trees House [1947] KB 130 High Court. [online] Available from: https://www.e-lawresources.co.uk/Central-London-Property-Trust-v-High-Trees-House.php [Accessed on 29/12/2018]

Legislation.nsw.gov.au. (2018) Partnership Act 1892 No 12 [online] Available from: https://legislation.nsw.gov.au/#/view/act/1892/12/historical2004-10-05/full [Accessed on 29/12/2018]

L’Estrange v Graucob [1934] 2 KB 394

Marson, J. (2013). Business Law. UK:OUP Oxford.

Partnership Act 1892 (NSW)

Poussard v Spiers and Pond [1876] 1 QBD 410